FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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
December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED] For the transition period from
___________ to ____________
Commission File No. 0-20292
Ampex Corporation
(Exact name of Registrant as specified in its charter)
Delaware 13-3667696
(State of incorporation) (I.R.S. employer identification number)
500 Broadway
Redwood City, California 94063-3199
(Address of principal executive offices, including zip code)
(415) 367-2011
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(g)
of the Act:
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
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 approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant as of January 31, 1997 was $268,697,466, based
on a price of $7.81 per share, which was the closing price of the Registrant's
Class A Common Stock on the American Stock Exchange on that date. The Class A
Common Stock is the only class of voting stock outstanding.
As of January 31, 1997, there were 45,471,647 outstanding shares of Class A
Common Stock and no outstanding shares of Class C Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for its 1997 Annual Meeting of Stockholders is
incorporated by reference into Part III (Items 10, 11, 12 and 13) of this Form
10-K.
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PART I
ITEM 1. BUSINESS
Introduction
Ampex Corporation ("Ampex" or the "Company") is one of the world's
leading innovators in the fields of magnetic recording, digital image processing
and high-performance digital storage for the visual information age. In recent
years, the Company has directed substantial resources to developing products for
the emerging commercial mass data storage market. Ampex provides data storage
solutions that serve a wide range of customer needs, including scientific and
technical applications such as aerospace testing, oil exploration and
entertainment.
The Company's principal products are its DST(R) tape drives and robotic
library systems for computer mass data storage, its DIS(TM) and DCRsi(TM)
instrumentation recorders, and its DCT(R) professional video recorders and image
processing systems. The Company's DST products for the mass data storage market
offer superior data access times, rapid data transfer rates and extremely low
cost per megabyte of storage. Ampex DIS instrumentation recorders allow users to
record instrumentation data on DST tape cartridges, so that the data can be used
in a computer environment as well as in an instrumentation environment. Ampex
DCRsi instrumentation recorders are designed for demanding aeronautical
applications such as commercial and military flight testing, as well as other
applications involving comparable data-gathering challenges in extreme
environments. The Company's DCT video recording products have been developed for
high-end digital component recording applications in entertainment and imaging
markets.
During its 53-year history, Ampex has developed extensive technical
expertise in the storage, processing and retrieval of digital images. The
Company commits substantial resources to the research, development and
engineering of new products that capitalize on its knowledge, experience and
patent portfolio. As an example of this strategy, since the last quarter of 1994
the Company has been seeking to commercialize its patented "keepered media"
technology. This project, which has not yet resulted in any revenues to the
Company, has the potential to significantly increase the capacity of hard disk
drives with nominal incremental cost. In December, 1996, the Company announced
that it had entered into an agreement with a disk drive manufacturer pursuant to
which such manufacturer may acquire keepered media for use in forthcoming hard
disk drive products. See "Keepered Media Development Program."
The Company was incorporated in Delaware in January 1992 as the
successor to a business originally organized in 1944. References to "Ampex" or
the "Company" include subsidiaries and predecessors of Ampex Corporation, unless
the context indicates otherwise. The principal executive offices of the Company
are located at 500 Broadway, Redwood City, California 94063, and its telephone
number is (415) 367-2011. The Company's Class A Common Stock is traded on the
American Stock Exchange under the symbol "AXC."
This Form 10-K contains predictions, projections and other statements
about the future that are intended to be "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(collectively, "Forward-Looking Statements.") Forward-Looking Statements are
included with respect to various aspects of the Company's strategy and
operations, including but not limited to its keepered media development program
and other product development efforts; potential effects of the Company's recent
consolidation of manufacturing operations; possible future market opportunities
for its data storage and video recording products; the development of
application software for its DST products; possible future patent license
agreements and royalty income; possible future product line changes; and the
Company's liquidity. Each Forward-Looking Statement that the Company believes is
material is accompanied by cautionary statements identifying important factors
that could cause actual results to differ materially from those described in the
Forward-Looking Statement. The cautionary statements are set forth following the
Forward-Looking Statement, and/or in other sections of the Form 10-K. IN
ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED
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IN THIS FORM 10-K, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY STATEMENTS
- -- INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THE FORM 10-K.
Company Strategy
The Company has historically developed products which are complete
systems targeted at the extremely high performance segments of the market for
the storage of images and data and for digital image processing and compression.
A relatively high proportion of the content of its products is designed by Ampex
itself, and is specific to the requirements of its system products. Ampex
believes that certain technologies that it currently uses only in its own
products potentially could create additional markets for the Company,
principally in the form of components or subsystems, or through the licensing of
proprietary technologies. The Company also believes that by commercializing
these products, it may potentially be able to gain access to markets which are
larger than those addressed by its complete systems products for which
relatively high prices limit the market potential. For example, certain patented
Ampex technologies are used on consumer video recorders that are priced at a few
hundred dollars, while its professional digital video recorders have list prices
that approach $70,000 per unit. While continuing its practice of licensing such
technology, Ampex determined in 1994 to evaluate employing certain of its
patented technologies as a basis for entering into new business areas as a
supplier of products.
The Company's strategy is to continue to develop high performance
systems, and also to seek opportunities to commercialize existing or newly
developed technologies in the areas of imaging and storage that result from
these developments. The first such technology that Ampex is attempting to
commercialize is its keepered media for use in computer hard disk drives. See
"Keepered Media Development Program". The Company is evaluating additional
possibilities to commercialize its technology, but has not yet determined to
pursue any additional project or projects beyond the research and development
stage. There can be no assurance that keepered media or any other technology
that Ampex may seek to develop will be commercially successful. See "New Product
Development and Industry Conditions."
Products
The Company currently has three principal product groups: mass data
storage products and instrumentation recorders (including its DST tape drives
and robotic library systems, its DIS and DCRsi instrumentation recorders and
related tape and after-market equipment); professional video recording products
(primarily its DCT video recorders and image processing systems and related tape
products); and other products (consisting principally of television after-market
equipment). These product groups are described below. For information concerning
net sales for each product group, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Mass Data Storage Products and Instrumentation Recorders. In 1992,
Ampex entered the high-performance commercial mass data storage market with its
DST series of 19 millimeter data storage products, including tape drives and
robotic library systems. The Company believes its DST mass data storage products
offer a price-performance advantage over alternative magnetic, optical, solid
state or disk-based storage systems now available, providing fast data access
times, rapid data transfer rates and extremely low cost per megabyte of storage.
Access time is one of the most important sustainable advantages of DST
products compared to alternative tape-based storage systems. Older tape-based
storage products achieve low-cost storage but trade off accessibility; since the
data stored is not available for most online or near-online applications, such
systems are generally limited to back-up and archival storage applications. DST
products, in contrast, combine low storage cost per megabyte with fast access to
rapidly transferable information. DST products achieve a level of data-access
performance that is believed to be unique in tape-based storage through the use
of software logic that enables a library or even a single tape drive to organize
information using partitions, much as disk drives do. Individual segments can
then be accessed quickly and updated independently. This patented Ampex
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technology, introduced in 1994, gives DST products the performance of a digital
tape drive and the efficiency and access speed of partitioned memory. DST
systems also provide rapid data transfer rates that exceed the speed of other
mass storage products such as optical disk, allowing a user to download stored
information to a computer at a sustained rate of 15 megabytes per second
("MB/sec").
DST tape drives use core technology developed by Ampex for its digital
video recorders. The drives use high-density metal particle tape cartridges,
which are available in three different sizes providing storage capacities of 25,
75 or 165 gigabytes ("GB") per cartridge. DST robotic library systems
incorporate multiple tape cartridges and tape drives and provide from 1.2
terabytes to 6.4 terabytes of storage capacity while occupying only a fraction
of the floor space required by competing storage systems.
The Company's DST product line currently includes the DST 310 tape
drive, the DST 810 library and the DST 410 library. The DST 310 tape drive is a
single cartridge tape drive that provides convenient and fast backup for
applications such as large databases or disk arrays. The DST 310 accepts any of
the three DST cartridge sizes, and offers a sustained data transfer rate of 15
MB/sec and a search speed in excess of 800 MB/sec. (All transfer rates relate to
raw uncompressed data.)
The DST 810 library is designed to combine from one to four DST tape
drives and has a capacity of 6.4 terabytes of data. It can transfer data at
sustained aggregate rates of up to 60 MB/sec and can access any cartridge stored
in the system within a few seconds. The DST 810 library system is optimized for
large file size applications and, accordingly, is suited for image-based
document storage, medical records, news archives, oil and gas seismic data and
CAD/CAM image data, as well as potential video-on-demand applications. The DST
410 library is an entry-level library with a storage capacity of 1.2 terabytes
of data.
In the fourth quarter of 1996, the Company announced the availability
of new "double-density" versions of its 19 millimeter data storage product line.
The new versions will double the amount of data that can be stored on a single
cartridge with a corresponding reduction in the cost per megabyte of the
Company's mass data storage products. Although the new versions are intended to
enhance the performance of the Company's data storage products, the availability
of new versions could cause a decline in sales of the Company's existing 19
millimeter data storage cartridges. As with any new product, there could be
delays in delivering this new version in commercial quantities, which is
scheduled to occur in the first quarter of 1997. (References to storage capacity
of the Company's mass storage products in this Report refer to existing
single-density versions unless the context otherwise specifies.)
Although the Company believes that its DST drives and library systems
offer significant advantages over competitive systems, there are a variety of
risks involved in this product line. The Company's DST products incorporate a
proprietary magnetic tape format that is not compatible with current industry
standard formats. The Company has not licensed its tape format to other
manufacturers and as such is the sole source of these products. In addition,
other factors relating to the markets for these products and to competition in
these markets may affect future sales of DST products. See "Markets -- Mass Data
Storage Products and Instrumentation Recorders," "Distribution and Customers,"
"Competition," and "New Product Development and Industry Conditions."
Ampex had been well-established for a number of years as a supplier of
instrumentation recorders. Ampex has supplied these recorders primarily to
government agencies for use in data collection, satellite surveillance and
defense-related applications, as well as to defense contractors and aerospace
and other industrial users primarily for test and measurement purposes. Ampex
instrumentation recorders have been used on almost every advanced commercial and
U.S. military aircraft, as well as on many foreign aircraft. The Company
believes they are well-suited to these demanding aeronautical applications, and
other applications involving comparable data-gathering challenges in extreme
environments, because of their unmatched performance and reliability.
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In 1995, the Company expanded its 19 millimeter product line by the
introduction of its DIS instrumentation recorders and library systems. The
Company's principal instrumentation products currently are the DIS 120i and DIS
160i instrumentation/data recorders and the DIS 220i automated
instrumentation/data library, the DCRsi 240, DCRsi 107 and DCRsi 75 digital
instrumentation recorders. The Company's DIS products are designed for mass
storage of instrumentation data. These recorders use the same 19mm helical scan
recording technology used in the Company's DST products. Data from DIS recorders
can be stored on DST cartridges, placed in DST libraries and accessed using DST
tape drives, so that all the benefits of DST mass storage products are
available, including rapid, random access to the data for subsequent processing.
The DIS 120i and 160i drives have capacities of 25, 75 or 165 GB (depending on
the DST cartridge used) and record/reproduce rates of 120 Mb and 160 Mb per
second, respectively. The DIS 220i automated library, which is the
instrumentation version of the DST 410 library, can hold up to 1.2 terabytes of
data. The Company introduced double density versions of each of its DIS
recorders at the time it similarly upgraded its DST product line.
The DCRsi recorders are rugged, highly reliable and compact recorders
that permit uninterrupted data capture over very long periods of time, such as
during test flights of new aircraft. The DCRsi 240 instrumentation recorder has
the capability of storing 48 GB of data at a record/reproduce rate of up to 240
megabits ("Mb") per second. The DCRsi 107 instrumentation recorder has a similar
storage capacity and a record/reproduce rate of 107 Mb per second. During 1995,
the Company introduced the DCRsi 75 recorder, a lower cost DCRsi model with a
record-reproduce rate of 75 Mb per second. Shipments of DCRsi 75 recorders
commenced in 1996.
A significant portion of instrumentation product sales reflect
purchases by the federal government, which can be subject to significant
fluctuations. See "Markets -- Mass Data Storage Products and Instrumentation
Recorders." In addition, other factors relating to the markets for the Company's
instrumentation products and to competition in these markets may affect future
sales of these products. See "Distribution and Customers," "Competition," and
"New Product Development and Industry Conditions."
Professional Video Recording Products. The Company's DCT products,
which employ a 19-millimeter digital component video recorder format, are
designed primarily for use in high-quality post-production applications. DCT
products record in a digital component format compatible with "CCIR-601," a
worldwide signal standard for digital component television equipment. The
Company's DCT 1700d digital tape drive is designed for high-end performance, as
its output is not subject to signal degradation even during complex layering and
special effects sequences. In order to process the higher data volume involved
in digital component recording, DCT recorders employ data compression
techniques.
Ampex also offers a variety of switchers and systems products as part
of the DCT product line, including digital special effects systems and
production switchers, that are used in connection with the production of
television programming. These products focus on the on-line segment of the
professional television industry. On-line operations typically require equipment
to operate at high speeds and require the highest picture quality. In order to
process video signals at the required speeds, Ampex's products employ advanced
proprietary signal processing and other electronic technologies, many of which
are also used in the Company's data storage digital recorder systems. Ampex's
switchers and systems products also incorporate advanced filtering techniques
and incorporate significant special purpose software to manipulate, generate or
combine video signals.
In the period 1992 to 1994, the Company discontinued sales of many
older (primarily analog) recorders, switchers and systems products, which
contributed to the decline in sales for this product group during the past three
years. Sales levels have also been adversely affected by changes in the
traditional markets for the Company's professional video products and by the
reduction in the Company's distribution network for these products. See "Markets
- -- Professional Video Recording Products." In 1995 and 1996, sales of these
products consisted almost exclusively of DCT video recorders and image
processing systems. The Company
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expects that in future years, it will offer only digital video products, which
now consist of its high-performance DCT video recorders, and switchers and
systems products for use in conjunction with DCT recorders.
Other Products. The Company's other products are currently almost
entirely television after-market products (including spare parts) relating to
television products that the Company now manufactures, or that it manufactured
in prior periods and continues to support. Ampex's after-market activities have
declined as a percentage of net sales in recent years as the Company has
narrowed its professional television product line, and many of the products that
have historically generated a significant portion of these net sales (including
Betacam small-format recorder after-market products, turnkey studio facilities,
mobile vans, computer core memory products and refurbished equipment accepted as
trade-ins on new equipment sales) have been discontinued.
Markets
Mass Data Storage Products and Instrumentation Recorders. The Company's
DST mass data storage systems are designed to meet the rapidly changing
requirements of the mass data storage market. The market for mass storage
devices has undergone an evolution in recent years. Historically, mass storage
devices were used to store data off-line as protection against catastrophes
affecting on-line storage, to archive data for record retention purposes or as a
low-cost means of storing infrequently used data. More recently there is a
growing demand for mass storage devices that provide cost-effective storage and
rapid access to data. The demand for storage devices that can store large
amounts of data in a readily accessible manner has grown due to two factors.
First, faster and lower-cost computer processors are generating more data.
Second, a steadily growing percentage of information is created, stored,
accessed and transmitted in visual form (such as drawings, pictures, scanned
documents and other images), and the storage of visual information requires much
greater capacity than the storage of text. For example, while one page of text
requires 2,000 bytes of storage, one second of full-color video requires
30,000,000 bytes.
Ampex's initial target applications for its DST products have been
scientific and technical applications such as digitized design drawings of large
engineering companies, seismic data of oil exploration companies, and data for
large government or commercial models such as weather forecasts or aerodynamic
simulations. While the Company has experienced some success in certain of these
markets, the Company believes that in order for DST product sales to increase
significantly, it will be necessary for the products to gain broader acceptance
in commercial markets. The Company is now seeking to address hierarchical
storage management and database backup applications in commercial markets, and
recently announced that its DST 310 tape drive and DST 410 library are now
supported by certain third party hierarchial storage management and UNIX file
system back up software packages. However, the Company cannot predict the extent
to which such software will result in increased sales of DST products.
Furthermore, at present, most businesses do not have massive databases, and
unless their storage capacity requirements increase significantly, they will not
become potential customers for DST products.
The expanding use of information networks may create additional market
opportunities for DST products beyond the types of commercial applications
described above. Companies are developing local and wide area data networks to
move information (including visual information) more effectively within their
organizations. For example, client/server computer networks are being used by an
increasing number of large organizations to distribute data from a central
storage point along the network to be processed by the remote user. The
information moving over these types of networks needs to be stored and accessed
quickly, cost-effectively and safely. The increasing popularity of these
networks could lead to an increase in demand for high-capacity storage devices
that can connect to networks, such as the Company's DST products. However, there
can be no assurance that this will occur. The use of such networks may not
continue to grow, and even if growth does continue, customers in these markets
may select other storage systems to meet their data storage needs.
The Company has supplied its instrumentation recorders to U.S. and
foreign government agencies for many years, and this continues to be the primary
market for the Company's DCRsi products. Sales to
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government agencies are subject to fluctuation as a result of changes in
government spending programs (including defense programs), and may also be
disrupted by pending budget discussions in Congress. Sales to these markets
could be adversely affected by pressure on government agencies to reduce
spending, and any material decline in the current level of government purchases
of the Company's products could have a material adverse effect on the Company.
The Company's instrumentation recorders are also sold to customers in a variety
of commercial markets, including airplane manufacturers and satellite
down-links.
The Company expects that the primary markets for its new DIS
instrumentation recorders will be the markets in which it currently sells its
DCRsi recorders. While DCRsi recorders are particularly effective for capturing
data in difficult environments, the Company's DIS products will enable these
customers to store and access their instrumentation data more cost-effectively
in less harsh environments that do not require the ruggedness of a DCRsi
recorder.
Professional Video Recording Products. The Company's DCT professional
recording products are designed to provide high-performance capabilities for
customers in entertainment and imaging markets. Historically, Ampex sold its
professional video products to television companies and broadcasters that used
them to produce or edit television commercials or programs for broadcast. More
recently, however, the production and editing of television commercials and
programs is increasingly being performed by independent organizations rather
than by broadcasters or cable television companies themselves. These services
are commonly known as "post-production" services. Most of Ampex's video
recording product sales are to such post-production facilities or to motion
picture studios that use Ampex products for their in-house post-production
needs. Post-production customers whose business reputations are based on high
picture quality and whose needs include rapid editing capabilities currently
represent the major market for the Company's DCT digital component video
recording products. The Company does not serve the lower end of the
post-production market. See "New Product Development and Industry Conditions,"
and "Competition."
Sales of the Company's video recording products have declined in recent
years as a result of changing conditions in the traditional markets for the
Company's products. In response to these changes, the Company has reduced its
product line, marketing expenditures and distribution network for its video
products. These factors have had and will continue to have a negative impact on
sales of the Company's video recording products. Nevertheless, video products
remain a significant business for Ampex for strategic reasons. The Company
believes that its continuing presence in the entertainment market, with its DCT
products, may expand the market for the Company's DST data storage products. In
addition, the Company believes that the emergence of multi-channel compressed
cable, digital satellite delivery, video-on-demand, and other delivery services
that offer alternatives to over-the-air analog television broadcasting, may
provide new market opportunities for its DCT products. If these markets develop,
the Company believes that DCT products would meet the technical requirement for
a virtually flawless signal source for high quality compressed signal
distribution. However, there can be no assurance that these markets will
develop. It is possible that alternative information delivery systems will not
replace traditional methods. Even if these alternative delivery methods become
more established, customers in these markets may select other products or
technologies to meet their signal source requirements.
Distribution and Customers
The Company's distribution strategy with respect to its first
generation of DST products was to rely primarily on OEMs to establish market
acceptance of the DST products. With the introduction of its second-generation,
lower-priced DST products in 1994, these OEM relationships were terminated, and
the Company currently distributes all its 19 millimeter products (including DST
and DIS recorders) directly through its internal sales force, as well as through
independent value-added resellers. The Company's DST products are sold to
customers such as oil and gas companies, imaging companies, information and
entertainment delivery companies and broad-band telecommunications companies.
The Company is also pursuing opportunities in the market for storage of very
large databases maintained by many commercial and government entities.
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The Company's instrumentation recorders (including its DIS recorders)
are sold primarily to government agencies involved in data collection, satellite
surveillance and defense-related activities, as well as to defense contractors
and other industrial users for testing and measurement purposes. Sales of
instrumentation recorders are made through the Company's internal domestic and
international sales forces, as well as through independent sales organizations
in foreign markets.
Ampex's professional video recording products are sold principally to
customers in entertainment markets, including independent post-production
houses, broadcast and cable networks, motion picture studios and independent
television stations. The Company distributes its video products through its
internal sales force and through various independent distributors.
The Company currently operates a total of eight sales offices,
including five in the U.S., two in Germany, one in Japan and one in the United
Kingdom. During 1993 and 1994, the Company closed a number of domestic and
foreign sales offices.
Ampex's sales to U.S. government agencies (either directly or
indirectly, through government contractors) represented 18.0% of net sales in
1996, compared to 14.7% in 1995 and 21.4% in 1994. Products sold for U.S.
government use include primarily instrumentation recording systems. Sales to
government customers are subject to fluctuations as a result of changes in
government spending programs. See "Markets -- Mass Data Storage Products and
Instrumentation Recorders."
No single non-governmental customer accounted for more than 10% of
Ampex's total net sales in 1995 or 1996.
Research, Development and Engineering
Scanning recording systems such as those developed by Ampex involve
extremely complex technology. As a result, over the years Ampex has developed
extensive expertise in a wide area of technical disciplines and has developed
fundamental innovations in magnetic recording technology, channel electronics
and digital image processing. In 1996, the Company spent approximately 17% of
net sales for research and development programs and engineering costs, compared
to 16% in 1995 and 15% in 1994. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 3 of Notes to
Consolidated Financial Statements. These continuous research and development
efforts have resulted in a substantial patent portfolio covering not only
existing products, but also covering technological innovations that may result
in future commercial products. With respect to current products, the Company has
allocated a major portion of its research and development budget in recent years
to the 19 millimeter digital recording technology included in its DST, DIS and
DCT products. The Company will continue to fund future generations of its mass
data storage and instrumentation recorders, but it will also allocate a growing
percentage of its research and development budget to commercializing its
patented keepered media technology (described below) and to researching other
new product opportunities that capitalize on its expertise and patented
technology in magnetic recording, channel electronics and digital image
processing.
Keepered Media Development Program
During 1994, the Company initiated a technology research and
development program to explore the feasibility of commercializing its invention
of a proprietary magnetic media technology referred to as "keepered media." This
invention was patented in 1991, and the Company has pending patent applications
for related inventions. Specifically, the Company's program involves the
development of magnetic disks employing keeper layers for use in the hard disk
drives that are attached to most computers. Keepered magnetic disk media are
designed to improve the capacity of hard disk drives, primarily by reducing
magnetic "spacing losses" resulting from the separation between the magnetic
disk and the read head and by shielding the read head from magnetic signals not
directly under the head. The Company believes that this technology provides
significant capacity
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improvement with only a nominal incremental manufacturing cost. The Company also
believes that this technology may have potential application in flexible
magnetic media, such as floppy disks and magnetic tape.
In December, 1996, Ampex announced that it had entered into an
agreement with Maxtor Corporation ("Maxtor"), a disk drive manufacturer,
pursuant to which Maxtor may acquire keepered media disk platters for use in
Maxtor's hard disk drives. Maxtor has advised Ampex that it is developing a disk
drive program incorporating keepered media, which Maxtor has indicated it
expects to introduce in the later part of 1997. Maxtor is a leading producer of
disk drives, primarily for desktop and mobile computer systems. According to
published sources, its market share in 1995 was approximately 8% of the
worldwide total. Maxtor is an independently operated member of the Hyundai group
of companies, which had worldwide revenues in 1995 exceeding $23 billion.
Maxtor, as the first disk drive manufacturer to invest in a product
program utilizing keepered media, has received favorable economic terms from the
Company. In addition to agreeing to a relatively low profit margin, Ampex has
agreed, for the initial term of the agreement, to ensure that Maxtor's price per
unit for keepered media is lower by a fixed percentage than that charged to any
other customer. Ampex has also committed to co-fund the development of a
preamplifier chip required by Maxtor for use with keepered media, for up to
$250,000. In return, Maxtor agreed that the manufacturer of the preamplifier
chip so funded will be free to sell such product to other disk drive
manufacturers.
The agreement with Maxtor is for an initial term of three years, and is
renewable for an additional three year term at Maxtor's option, subject to
certain conditions, on terms no less favorable than those given any other
manufacturer selling similar quantities in like circumstances. Maxtor is not
bound by the agreement to complete a disk drive program or to purchase any
minimum quantity of keepered media platters. However, unless certain minimum
quantities are purchased by specified dates prior to March 31, 1998, Ampex will
have the right to terminate the agreement or alter its terms.
The agreement also provides that, if Ampex develops the internal
capability to manufacture keepered media for sale in commercial volumes, Maxtor
will use reasonable efforts to include Ampex as a supplier, subject to
negotiation of a purchase agreement and qualification of Ampex as a vendor.
Ampex has not yet decided to commence commercial manufacture of keepered media,
and is unable to forecast when or if it will do so. Accordingly, in order to
enable Maxtor to commence production in accordance with its current schedule,
the agreement permits Maxtor to acquire keepered media from independent media
manufacturers approved by Ampex and/or to manufacture media at Maxtor's own
facilities for sale by it.
The Company is continuing to negotiate with other manufacturers that
could become customers for keepered media. However, Ampex may not continue to
offer the favorable pricing and other terms it had offered prior to the
conclusion of the Maxtor agreement. Accordingly, there is no assurance that any
other manufacturer will agree to purchase keepered media, or that Ampex could
obtain pricing or other terms from other manufactures that Ampex regards as
favorable or acceptable. In addition, there could be unforeseen technical or
economic reasons why manufacturers would not proceed with the technology. Ampex
does not anticipate receipt of significant revenues from its keepered media
program before fiscal 1998, although limited revenues could be generated later
in 1997. In any event, there can be no assurance as to the timing or amount, if
any, of revenues that Ampex may generate from the Maxtor arrangement or from any
agreement which the Company may conclude with other manufacturers with which it
has had discussions.
To date, Ampex has directed the majority of its keepered media
development efforts to potential disk drive programs that employ inductive
heads, which according to published reports are used in the majority of disk
drives currently in production. However, a number of disk drive manufacturers
have expressed an intention to effect a transition to magneto-resistive heads in
all or a substantial portion of their disk drive production in the future. In
early November 1996, Ampex, together with a disk drive manufacturer (other than
Maxtor) and a head manufacturer, participated in tests of keepered media with
magneto-resistive heads. The tests included a demonstration of the activation of
the keeper layer by a magneto-resistive head of a common
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design. While Ampex believes that this is an indication that keepered media may
be able to address the disk drive market for both inductive and
magneto-resistive heads, it has not yet conducted sufficient performance and
other testing to ensure that this will in fact be possible in commercial
production. The agreement with Maxtor permits the use of keepered media with
both inductive or magneto-resistive heads.
It is not possible, at present, to forecast what effect a change in the
mix of drives using inductive versus magneto-resistive heads may have on the
market for keepered media. It is also possible that further analysis by the
Company, or by potential customers, will identify other technical or economic
issues of which Ampex, at present, is unaware. In a high technology industry
such as data storage, other technology may be under development, or may be
developed in the future, that could be technically or economically superior to
keepered media.
The Company does not presently have manufacturing facilities suitable
for producing keepered media in quantity, and the Company does not intend to
license merchant manufacturers of disk drive platters except to the extent
necessary to permit disk drive manufacturers, such as Maxtor, to acquire
keepered disks for incorporation in disk drives produced by such manufacturers.
Although the Company has held discussions with several U.S. and foreign
producers of disk drive platters, no commitments have been obtained by the
Company with respect to availability, price or other terms from such producers.
If the Company commences commercial production, capital requirements could be
significant and the Company would probably be required to issue debt or equity
securities, which would increase the Company's financial leverage or dilute
earnings.
The Company anticipates that further development of its keepered media
technology will require additional expenditures for capital equipment and an
increase in the current rate of its expenditures for research, development and
engineering, which have been relatively constant in recent years.
If the Company's keepered media technology becomes commercially
successful, that portion of the Company's business may be materially dependent
on the Company's patents covering the technology. However, there can be no
assurance that patents currently held by Ampex, or that may be issued pursuant
to pending and future patent applications filed by Ampex, will not be
challenged, or that patent protection, in itself, would ensure the commercial
success of this program or would provide adequate protection against similar or
other technologies independently developed by industry competitors.
While the Company believes that keepered media has the potential to
expand its business significantly, in view of the many uncertainties associated
with its development and commercialization (some of which are described above
and in the Company's prior filings with the Commission), it is impossible to
forecast when, or if, any benefit will be realized by the Company. Since the
prospects for keepered disk media are highly speculative, there is a risk that
the market price of the Company's securities may experience increased
volatility, in addition to the volatility that may result from other factors
affecting the Company, such as changes in financial performance, analysts'
estimates, or product or technology announcements by the Company or its
competitors. See also "Market for Registrant's Common Equity and Related
Stockholder Matters."
Patents, Licenses and Trademarks
As a result of its on-going research and development expenditures, the
Company has developed substantial proprietary technology, certain of which it
has elected to patent or to seek to patent. As of January 31, 1997, Ampex held
approximately 370 patents in the U.S., approximately 530 corresponding patents
in other countries, and had approximately 200 U.S. and foreign patent
applications pending. The majority of these patents and pending patents relate
to the Company's recording technology. The Company continually reviews its
patent portfolio and allows non-strategic patents to lapse, thereby avoiding
substantial renewal fees. Many of the patents held during 1993 and 1994 related
to discontinued television products, technologies that were no longer generating
significant royalty revenues, or other technologies that were no longer
strategically important to the Company. Accordingly, the Company allowed a
significant number of patents to lapse during 1994 and 1995.
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Ampex has granted numerous royalty-bearing patent licenses to, and
holds patent licenses from, third parties. These third parties are primarily
foreign companies engaged in the manufacture and sale of video tape recorders
and media. Ampex has not granted any licenses under its scanning recorder
patents specifically for data storage applications, but it may do so in the
future if it determines that it would support the Company's marketing strategy.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations for the Three Years Ended December 31, 1996
- -- Royalty Income."
During the fourth quarter of 1995, the Company initiated a lawsuit
against a major foreign manufacturer of VHS video recorders and television
receivers, in which the Company alleges patent infringement. In response to the
Company's lawsuit, this manufacturer filed a lawsuit against Ampex alleging
patent infringement. See "Legal Proceedings." The Company is also attempting to
negotiate license agreements with the remaining unlicensed manufacturers of 8mm
camcorders. However, there can be no assurance that such licensing efforts
(including any necessary litigation) will be successful.
It is not possible to predict the amount of royalty income that will be
received in the future. Royalty income has historically fluctuated widely due to
a number of factors that the Company cannot predict, such as the extent of use
of the Company's patented technology by third parties, the extent to which the
Company must pursue litigation in order to enforce its patents, and the ultimate
success of its licensing and litigation activities. Moreover, there can be no
assurance that the Company will continue to develop patentable technology that
will generate significant patent royalties in future years.
U.S. patents are, at present, in force for a period of 20 years from
the date of application and patents granted by foreign jurisdictions are
generally in force for between 14 years to 20 years from the date of
application. Ampex has obtained its present patents over the course of the past
20 years and, accordingly, has patents in force that will expire from time to
time over the next 20 years. Patents are important to the current overall
business of the Company, both as a source of protection of the proprietary
technology used in the Company's current products, and as a source of royalty
income. While results of operations would be adversely affected by the loss of
patents that generate significant royalty income, management believes that none
of Ampex's current product lines is materially dependent upon a single patent or
license or group of related patents or licenses, and that timely introduction of
products incorporating new technologies or particularly suited to meet the needs
of a specific market or customer group is a more important determinant of the
success of Ampex's current business. If the Company's patented keepered media
technology becomes commercially successful, that portion of the Company's
business may be materially dependent on the patents covering the technology. See
"Research, Development and Engineering."
Ampex regards its trademark Ampex(R) and the Ampex logo as valuable to
its businesses. Ampex has registered its trademark and logo in the U.S. and a
number of foreign countries. U.S. trademark registrations are generally valid
for an initial term of 10 years and renewable for subsequent 10-year periods.
The Media Subsidiaries, which were sold by the Company in November 1995, have a
non-exclusive license to use the Ampex trademark on their audio, video and
instrumentation media products through May 2000. Ampex has not granted any other
material rights to use its name or logo to any other third party. Other
trademarks of Ampex include DCT, DST, DCRsi and DIS.
Manufacturing
The Company's products are manufactured at Ampex's facilities in
Redwood City, California and Colorado Springs, Colorado. Products are designed
and engineered primarily in Redwood City, California. Because the Company's mass
data storage products incorporate many of the technologies and components of the
Company's 19mm-based video tape recorders, the manufacturing process of the mass
data storage products has benefited from the existing video recorder production
facilities and techniques.
In January 1996, the Company sold its Redwood City, California
property, and has relocated its manufacturing, administrative and RD&E
operations to smaller facilities located on a portion of the property
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that it leased back at the time of sale. In May 1996, the Company sold a portion
of its Colorado Springs, Colorado facility which was not required for current
operations. See "Properties." The Company believes that its consolidated
manufacturing facilities continue to have sufficient capacity to accommodate
business growth for its present products in the foreseeable future, and that the
relocations will not have a long-term adverse effect on the Company's
manufacturing capacity or on its ability to meet the customer demands for its
products in a timely manner. However, relocation entails the risks of disruption
or delays in operations, which could temporarily adversely impact sales or
profitability.
The Company does not presently have any manufacturing facilities that
would be suitable for manufacturing any products that may result from the
Company's keepered media research and development program. See "Research,
Development and Engineering."
The Company maintains insurance, including business interruption
insurance, that management considers to be adequate and customary under the
circumstances. However, there is no assurance that the Company will not incur
losses beyond the limits of, or outside the coverage of, its insurance.
Sources of Supply
Ampex uses a broad variety of raw materials and components in its
manufacturing operations. While most materials are readily available from
numerous sources, Ampex purchases certain components, such as customized
integrated circuits, from a single domestic or foreign manufacturer. Significant
delays in deliveries of, or defects in the supply of, such components could
adversely affect Ampex's manufacturing operations pending qualification of an
alternative supplier. The Company does not generally enter into long-term raw
material supply contracts. In addition, many of the components of Ampex's
products are designed, developed and manufactured by Ampex itself, and thus are
not readily available from alternative sources.
Order Backlog and Quarterly Fluctuations
A substantial portion of the Company's backlog at a given time is
normally shipped within one or two quarters thereafter. Therefore, sales in any
quarter are heavily dependent upon orders received in that quarter and the
immediately preceding quarter. Ampex's backlog of firm orders at December 31,
1996 was $3.4 million, compared to $13.8 million at December 31, 1995 and $19.1
million at December 31, 1994. The backlog at December 31, 1996 was approximately
14% of average quarterly net sales, based on 1996 sales levels.
Ampex does not generally include foreign orders in backlog until it has
obtained requisite export licenses and other documentation. Orders may be
subject to cancellation in the event shipments are delayed.
Ampex's sales and results of operations are generally subject to
quarterly fluctuations, reflecting customer ordering patterns as well as the
availability of new products. In addition, sales to government customers
(primarily sales of instrumentation products) are subject to fluctuations as a
result of changes in government spending programs. Significant fluctuations in
sales of these products can materially affect the Company's gross margin as well
as its sales. See "Business -- Markets -- Mass Data Storage Products and
Instrumentation Recorders" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Accordingly, results of a given
quarter are not necessarily indicative of results to be expected for a fiscal
year.
Competition
Ampex encounters significant competition in all its product markets.
Although its competitors vary from product to product, many are significantly
larger companies with greater financial resources, broader product lines and
other competitive advantages.
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Ampex competes in the mass data storage market with a number of
well-established competitors, such as IBM, Storage Technology Corporation,
Exabyte Corporation, Sony Corporation and Quantum Corporation, as well as
smaller companies. In 1996, IBM Corporation announced the general availability
of a new high-capacity, high-speed tape storage product designated "Magstar."
Also, Sony Corporation in 1995 introduced its DTF tape drive, which is intended
for the mass data storage industry. In the mass data storage market, the Company
believes that the principal competitive factors are product performance, cost of
equipment and media, product reliability and availability of service and
support. The Company believes its strongest competitive advantage is in the area
of product performance. However, DST products are relatively expensive in
comparison to other competitive products, and are generally cost-effective only
if the customer requires the high level of performance and storage capacity of
DST products. While the Company is working to reduce the cost of its DST
products, the prices of other storage systems, such as disk drives, are also
declining. In addition, although DST products offer faster data access times
than competing tape-based library systems, magnetic disks deliver faster data
access than DST products. There can be no assurance that the Company can compete
successfully on a long-term basis in the mass data storage market.
In the instrumentation market, the Company competes primarily with
companies that depend on government contracts for a major portion of their sales
in this market, including Sony, Loral Data Systems, Datatape Incorporated and
Metrum Incorporated. The number of competitors in this market has decreased in
recent years as the level of government spending in many areas has declined. The
principal competitive factors in this market are cost, product reliability,
product performance and the ability to satisfy applicable government procurement
requirements.
In the professional video recorder market, Sony and Panasonic are the
leading competitors of the Company. Competition in this market is based
principally on design and manufacturing expertise, new product development,
service, reliability and price. In the high end of the market, management
believes that Ampex is competitive in each of these areas. DCT products are not
competitive in the lower end of the market. In addition, sales have been
declining in recent years as the Company has discontinued many of its
professional video products.
If the Company is able to commercialize products based on its keepered
media technology, the Company expects that it will face competition from
companies offering a variety of storage media alternatives, including current
disk manufacturers. The Company will continue to evaluate potential competitive
factors as it proceeds with its efforts to commercialize its keepered media
technology. See "Keepered Media Development Program."
New Product Development and Industry Conditions
The data storage, instrumentation and video recording industries are
characterized by continual technological change and the need to introduce new
products and product upgrades. This requires a high level of expenditure for
research and development. Obsolescence of existing product lines, or the
inability to develop and introduce new products, could have a material adverse
effect on sales and results of operations. Although Ampex has completed
development of its 19 millimeter digital video tape recorders and its
second-generation mass data storage drives and robotic library systems, the
Company must continue to invest in research and development programs to improve
these products and develop new products. No assurance can be given that existing
products will not become obsolete, that any new products will win commercial
acceptance or that Ampex's new products or technology will be competitive. See
"Competition." Furthermore, the introduction of new products or technologies can
be hampered by technical problems in design, manufacturing and test procedures
or the occurrence of other unforeseen events. For example, although the Company
has entered into an initial agreement with a disk drive manufacturer relating to
its keepered media technology, there are still many problems that could arise in
commercializing this technology. See "Keepered Media Development Program."
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Ampex has been manufacturing its 19 millimeter digital video recorders
since 1989, and has been selling its DCT recorders since 1992. However, sales of
all of its video recording products have declined substantially in recent years,
partly as a result of changes in the market for the Company's products, as
lower-cost small format recorders have replaced traditional high-end products
for many applications. The Company expects that the traditional markets for its
video products will continue to decline. Accordingly, any significant increases
in sales of DCT products will depend on the success of the Company's efforts at
identifying and developing new markets for the products, and there can be no
assurance that the Company can do so. See "Markets -- Professional Video
Recording Products."
Sales of the Company's instrumentation products can be significantly
affected by changes in government spending levels. See "Markets -- Mass Data
Storage Products and Instrumentation Recorders" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company significantly restructured its product lines during 1993
and 1994, and the Company has no present plans to discontinue any of its current
principal products. However, like all technology companies, the Company must
continually reassess its products based on their ability to respond to the
changing demands of the marketplace. If, as a result of such a reassessment, the
Company decides to discontinue any significant products, such a decision could
have a material adverse effect on sales and operating results.
International Operations
During the past three years, the Company has derived significant net
sales from its foreign operations. However, sales in international markets
(particularly sales of professional video products) have been declining in
recent years. Sales to foreign customers (including U.S. export sales) accounted
for approximately 34.1% of net sales in 1996, compared to 35.6% in 1995 and
37.5% in 1994. Foreign marketing operations are conducted primarily through
local distributors and agents, with support from Ampex's internal marketing and
sales organization. See "Distribution and Customers."
Foreign operations are subject to the usual risks attendant upon
investments in foreign countries, including limitations on repatriation of
earnings, restrictive actions by local governments, fluctuations in foreign
currency exchange rates and nationalization. Additionally, export sales are
subject to export regulations and restrictions imposed by the U.S. Department of
State and the U.S. Department of Commerce.
In certain prior periods, declines in the value of the U.S. dollar in
relation to certain foreign currencies have favorably affected Ampex's
international operations, and in other periods the strength of the dollar
relative to such currencies has adversely affected its operations. Fluctuations
in the value of international currencies can be expected to continue to affect
Ampex's operations in the future, although the impact will be less significant
than it was in periods with a higher proportion of sales in foreign currencies.
The Company currently does not hedge its assets that are denominated in foreign
currencies. U.S. export sales are denominated in U.S. dollars.
See Note 20 of Notes to Consolidated Financial Statements for
additional information concerning the Company's foreign operations.
Environmental Regulation and Proceedings
The Company's facilities are subject to numerous federal, state and
local laws and regulations designed to protect the environment from waste
emissions and hazardous substances. Ampex is also subject to the federal
Occupational Safety and Health Act and other laws and regulations affecting the
safety and health of employees in its facilities. Management believes that Ampex
is generally in compliance in all material respects with all applicable
environmental and occupational safety laws and regulations or has plans to bring
operations into compliance. Management does not anticipate that capital
expenditures for pollution control equipment for fiscal 1997 will be material.
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Owners and occupiers of sites containing hazardous substances, as well
as generators and transporters of hazardous substances, are subject to broad
liability under various federal and state environmental laws and regulations,
including liability for investigative and cleanup costs and damages arising out
of past disposal activities. Such liability may be joint and several, and may be
imposed regardless of fault or the legality of the original disposal activity.
The Company has been named as a potentially responsible party by the United
States Environmental Protection Agency with respect to four contaminated sites
that have been designated as "Superfund" sites on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980. The Company is engaged in various environmental investigation,
remediation and/or monitoring activities at several sites located off Company
facilities, including the removal of solvent contamination from subsurface
aquifers at a site in Sunnyvale, California, and surface clean-up and
contamination assessment at a third-party treatment, storage and disposal
facility in Jamestown, North Carolina. Some of these activities involve the
participation of state and local government agencies. Five sites involved with
these activities (including the four Superfund sites) are associated with the
operations of its former magnetic tape subsidiaries ("Media"). Although the
Company sold Media in November 1995, the Company may have continuing liability
with respect to environmental contamination at these sites. During 1996, the
Company spent a total of approximately $0.4 million in connection with
environmental investigation, remediation and monitoring activities and expects
to spend from $0.2 to $0.5 million in fiscal 1997 for such activities.
Because of the inherent uncertainty as to various aspects of
environmental matters, including the extent of environmental damage, the most
desirable remediation techniques and the time period during which cleanup costs
may be incurred, it is not possible for the Company to estimate with any degree
of certainty the ultimate costs that it may incur with respect to the currently
pending environmental matters referred to above. Nevertheless, at December 31,
1996, the Company had an accrued liability of $2.2 million for environmental
liabilities. Based on facts currently known to management, management believes
it is only remotely likely that the liability of the Company in connection with
such pending matters, either individually or in the aggregate, will be material
to the Company's financial condition or results of operations or material to
investors, or that the Company's liability will materially exceed the amounts
already accrued.
While the Company believes that it is generally in compliance with all
applicable environmental laws and regulations or has plans to bring operations
into compliance, it is possible that the Company will be named as a potentially
responsible party in the future with respect to additional Superfund or other
sites. Furthermore, the Company conducts its business in foreign countries as
well as in the U.S., and it is not possible to predict the effect that future
domestic or foreign regulation could have on Ampex's business, operating results
or cash flow.
Employees
As of December 31, 1996, Ampex employed 527 people worldwide, compared
to 531 at December 31, 1995 and 565 at December 31, 1994. Approximately 7% of
Ampex's current worldwide workforce is employed in the Company's international
operations, compared to 6% at December 31, 1995 and 7% at December 31, 1994. No
employees are covered by any collective bargaining agreement. The Company is
dependent on the performance of certain key members of management and key
technical personnel. The Company has not entered into employment agreements with
any such individuals. Edward J. Bramson, who has served as the Company's Chief
Executive Officer since 1991, is also engaged in the management of certain
companies affiliated with Sherborne Holdings Incorporated, a privately owned
Delaware holding company and a company stockholder. Mr. Bramson currently
devotes most of his time to the management of the Company. The loss of the
services of Mr. Bramson or other key individuals could have a material adverse
effect on the Company.
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ITEM 2 PROPERTIES
As of January 31, 1997, the Company's principal properties were as
follows:
Approximate
Square Footage
Location Activities Conducted of Facility
- -------- -------------------- ----------------
Redwood City, California Executive offices, RD&E
and manufacturing (1) 196,798
Colorado Springs, Colorado Manufacturing 229,961
Chineham, England Sales and service (2) 7,184
Tokyo, Japan Sales and service (2) 3,886
Sulzbach, Germany Sales and service (2) 13,530
- -------------------
(1) The majority of this property (186,440 square feet) is leased under a ten
year lease entered into in connection with the January 1996 sale of this
property. The remainder (10,358 square feet) is leased on a short term
basis.
(2) These facilities are leased under leases that expire at various times
through 2000.
In addition to the properties and leased facilities listed above, Ampex
leases office space and warehouse facilities from time to time at various
domestic and foreign locations. In addition, the Company has outstanding lease
obligations with respect to various facilities whose functions were terminated
in connection with the Company's prior period restructuring of its business
operations. The Company is subleasing portions of these facilities pending
termination of the underlying leases.
On January 25, 1996, the Company completed the sale of its real
property in Redwood City, California. All of the functions that were located at
the Redwood City site have been relocated to portions of the facility that have
been leased back from the purchaser under two separate leases. One lease covers
approximately 132,150 square feet in buildings leased for a term of 10 to 13
years. The second lease covers a 54,290 square foot building occupied on an
interim basis under similar terms, but the lease contains a provision allowing a
move to a new 60,000 square foot building to be constructed on the property by
the purchaser. The Company has a one-time option to terminate each of these two
leases after five years. At the time of the sale, the Company entered into a
lease for the new building for a term of 8 to 10 years. This lease contains a
provision allowing the Company to cancel its obligations under the lease prior
to the beginning of construction of the new building. The new building is not
expected to be completed for 2 to 5 years after the date of sale.
In May 1996, the Company sold a portion of its property, amounting to
77,000 square feet of facilities and associated property, in Colorado Springs,
Colorado. The Company conducts its Colorado operations in the remaining 229,961
square foot portion of the Colorado Springs property that was retained.
The Company believes that its current facilities, including machinery
and equipment, are generally in good condition, well-maintained and suitable for
their intended uses, and that its facilities have, and will continue to have,
adequate capacity to accommodate the Company's present needs and business growth
for its present products in the foreseeable future. However, the Company does
not presently have any manufacturing facilities that would be suitable for
manufacturing any products that may result from the Company's keepered media
research and development program. See "Business -- Keepered Media Development
Program."
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ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its
businesses. In the opinion of management, no such current or pending lawsuits,
either individually or in the aggregate, are likely to have a material adverse
effect on the Company's financial condition, results of operations or cash
flows. See also "Environmental Regulation and Proceedings" and Note 11 of Notes
to Consolidated Financial Statements.
On September 22, 1995, the Company filed a lawsuit against Mitsubishi
Electric Corporation and Mitsubishi Electric America Inc. in the U.S. District
Court for the District of Delaware, alleging patent infringement and breach of a
license agreement in connection with the manufacturing of VHS video recorders
and television receivers. The Company is seeking damages and injunctive relief.
In response to the Company's lawsuit, on December 12, 1995, Mitsubishi filed a
lawsuit against Ampex in the U.S. District Court for the Central District of
California, alleging patent infringement and seeking unspecified damages and
injunctive relief. Trial of the Mitsubishi lawsuit commenced in March 1997 and
trial of the Company's lawsuit is expected to commence shortly thereafter unless
a negotiated settlement is reached. See also "Business -- Patents, Licenses and
Trademarks."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages are as follows:
<TABLE>
<S> <C> <C>
Name Age Position
---- --- --------
Edward J. Bramson 46 Chairman and Chief Executive Officer
Craig L. McKibben 46 Vice President,Chief Financial Officer and Treasurer
Robert L. Atchison 59 Vice President
Richard J. Jacquet 57 Vice President
Joel D. Talcott 55 Vice President and Secretary
</TABLE>
Each of the executive officers of the Company serves in such capacity
at the discretion of the Board.
Edward J. Bramson is Chairman of the Board, Chief Executive Officer and
a director of the Company. He has been an officer and director of the Company
since 1987, and since January 1991 has been Chief Executive Officer of the
Company. He is also Chairman and Chief Executive Officer of Sherborne Holdings
Incorporated and Sherborne & Company Incorporated, and is a limited partner of
Newhill Partners, L.P. These entities, which are private investment holding
companies, may be deemed to be affiliates of the Company. Mr. Bramson is also a
director of Buffalo Color Corporation, a specialty chemicals manufacturer, and
of Hillside Capital Incorporated, a private industrial holding company with
which he has been associated since 1976.
Craig L. McKibben is Vice President, Treasurer, Chief Financial Officer
and a director of the Company. Mr. McKibben has been an officer and a director
of the Company since 1989. From 1983 to 1989, he was a partner at the firm of
Coopers & Lybrand, independent public accountants. He is also Chairman,
President and Chief Executive Officer of Lanesborough Corporation (which is the
parent of Buffalo Color Corporation) and Vice President and a director of
Sherborne Holdings Incorporated and of Sherborne & Company Incorporated.
Robert L. Atchison is Vice President of the Company. Since January
1994, he has been responsible for all operating activities of the Company, and
recently assumed responsibility for certain of the Company's sales and marketing
activities. From April 1991 to January 1994, he was responsible for engineering
and operations for the Company. Mr. Atchison also serves as President and a
director of Ampex Data Systems
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Corporation, a wholly owned subsidiary of the Company. He has served as an
executive officer of the Company and various subsidiaries since 1987.
Richard J. Jacquet is Vice President of the Company. Since January
1994, he has been responsible for all administrative functions of the Company.
From 1989 to January 1994, he was responsible for personnel and human resources
matters for the Company. Mr. Jacquet has been associated with the Company since
1988, serving as Director of Human Resources prior to his appointment in 1989 as
Vice President.
Joel D. Talcott is Vice President and Secretary of the Company,
positions he has held since 1987. He has served as General Counsel since January
1996, a position he also held from 1987 to January 1994. He is also responsible
for the Company's patent licensing activities (having served as Patent Counsel
from 1981 to 1987), and has supervisory responsibility for investor relations
and corporate communications functions. Mr. Talcott is an officer and director
of Ampex Data Systems Corporation, a wholly-owned subsidiary of the Company.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) The following table sets forth the high and low prices for the
Company's Class A Common Stock for each quarter during fiscal 1995 and 1996.
Prices for 1995 represent high and low quarterly bids on the NASD OTC Bulletin
Board as reported by the National Quotation Bureau. Prices for the fourth
quarter of 1995 represent the highest and lowest daily prices for the quarter on
the NASD OTC Bulletin Board as reported by on-line stock price quotation
services. OTC Bulletin Board prices are interdealer prices and may not represent
actual transactions. Since January 16, 1996, the Class A Common Stock has been
traded on the American Stock Exchange under the symbol "AXC."
The trading price of the Company's Class A Common Stock has been and
can be expected to be subject to significant volatility, reflecting a variety of
factors, including quarterly variations in operating results, analysts'
estimates, the Company's keepered media development program, announcements of
new product introductions by the Company or its competitors and general economic
or market conditions. In addition, the stock market in general and technology
companies in particular have experienced a high degree of price volatility,
which has had a substantial effect on the market prices of many technology
companies for reasons that often are unrelated or disproportionate to operating
performance.
Fiscal Year High Low
----------- ---- ---
1995
First Quarter $2.06 $0.50
Second Quarter 2.63 0.75
Third Quarter 4.75 1.25
Fourth Quarter 4.50 2.88
1996
First Quarter 7.06 3.63
Second Quarter 15.75 5.38
Third Quarter 9.50 5.13
Fourth Quarter 11.38 6.25
As of January 31, 1997, there were 826 holders of record of the
Company's Class A Common Stock and no holders of Class C Common Stock.
The Company has not declared any dividends on its Common Stock since
its incorporation in 1992 and has no present intention of paying dividends. The
Company currently intends to retain any earnings to support the development of
its business. The Company's ability to pay dividends is restricted by certain
contractual agreements (which generally limit dividends to no more than $500,000
per year), as well as by the terms of its outstanding redeemable preferred
stock. In addition, the Company's working capital financing subsidiary is
restricted in its ability to pay dividends or make other cash transfers to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Notes 9 and 12 of
Notes to Consolidated Financial Statements.
(b) The following sets forth information as to securities sold by the
Company during the past three years which were not registered under the
Securities Act of 1933, as amended (the "Securities Act"):
On October 23, 1996, the Company issued 400,000 shares of Class A Stock
to SH Securities Co. LLC ("SH LLC"), a limited liability company controlled by
Edward J. Bramson, chief executive officer of the Company. The shares were sold
for an aggregate price of $2,750,000, of which $550,000 was paid in cash and
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the balance by a promissory note issued by SH LLC. All such shares have been
pledged to the Company as security for the promissory note issued by SH LLC. The
purchaser represented that the acquisition of such securities was made for
investment and not with a view to resale or other distribution absent
registration under the Securities Act or the availability of an exemption
therefrom. The transaction was exempt from registration under the Securities Act
by reason of Section 4(2) thereof as a transaction by an issuer not involving
any public offering.
Information as to additional sales of unregistered securities by the
Company during the past three years is contained in Item 15 of Amendment No. 2
to Registration Statement on Form S-1 of the Company (File No. 33-91312) filed
with the Securities and Exchange Commission and is incorporated herein by
reference. All such sales were made to affiliates of the Company or to
institutional investors who represented that the acquisition of such securities
was made for investment and not with a view to resale or other distribution
absent registration under the Securities Act or the availability of an exemption
therefrom. The transactions were exempt from registration under the Securities
Act by reason of Section 4(2) thereof as transactions by an issuer not involving
any public offering.
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ITEM 6. SELECTED FINANCIAL DATA
The financial data required by Item 6 is included immediately following
Item 14 hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company and its subsidiaries should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
included elsewhere in this Report.
Product Groups
The Company has three principal product groups: computer mass data
storage products and instrumentation recorders (including its DST tape drives
and robotic library systems, its DIS and DCRsi instrumentation products, and
related tape and after-market equipment); professional video recording products
(primarily its DCT video recorders and image processing systems and related tape
products); and other products (consisting principally of television after-market
equipment). No other class of similar products accounted for more than 10% of
net sales during the comparison periods discussed below. During the past three
years, the Company has focused its efforts on high-performance digital data
storage and delivery systems for the emerging commercial mass data storage
market, and has discontinued many older products and businesses. The Company
operates in one industry segment for financial reporting purposes: the design,
development, production and distribution of high-speed, high-capacity magnetic
recording products and systems.
Results of Operations for the Three Years Ended December 31, 1996
Net Sales. Net sales increased slightly to $96.5 million in 1996 from
$95.7 million in 1995 compared to $127.2 million in 1994. During 1996, sales of
the Company's 19 millimeter tape-based mass data storage and instrumentation
products increased significantly from sales levels realized in 1995, offsetting
the decline in sales of its professional video recording products and other
products. The decline in net sales from 1994 to 1995 resulted primarily from
product eliminations and market withdrawals in connection with the restructuring
of the Company's business operations (as illustrated in the table below), as
well as the discontinuance of OEM sales of DST products. Net sales in recent
years have also been impacted by the closing of several international sales
offices as part of the Company's restructuring activities. Sales to foreign
customers (including U.S. export sales) declined to $32.9 million in 1996 (34.1%
of net sales), from $34.0 million in 1995 (35.6% of net sales), and $47.7
million in 1994 (37.5% of net sales).
During the three years ended December 31, 1996, sales backlog has
declined from $19.1 million in 1994, to $13.8 million in 1995 and to $3.4
million in 1996. Accordingly, future periods net sales will be increasingly
dependent upon current order activity. In addition, future results may be
impacted by declines in government procurement of instrumentation products and
the effects of the Company's recent consolidation of its manufacturing
facilities. Accordingly, there can be no assurance that quarterly sales levels
in fiscal 1997 will attain levels realized during the comparable quarters of
fiscal 1996.
The following table shows sales of the Company's continuing products
for the past three years. Sales of products that have been discontinued
(consisting primarily of older video recording equipment, related after- market
products and computer systems products) are shown separately.
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Net Sales
(in millions)
1996 1995 1994
---- ---- ----
Mass data storage/
instrumentation $71.6 $65.6 $66.8
Professional video 9.9 10.6 13.3
Other products 15.0 18.9 21.6
---- ---- ----
Total continuing products 96.5 95.1 101.7
Total discontinued products - 0.6 25.5
---- ---- ----
TOTAL NET SALES $96.5 $95.7 $127.2
Mass Data Storage Products and Instrumentation Recorders. Sales of data
storage products and instrumentation products and related after-market products
experienced a 9.1% increase from 1995 to 1996 and a slight decline from 1994 to
1995. The 1996 results reflect significant increases in sales of 19 millimeter
data storage products, reflecting the introduction of DIS instrumentation
versions of DST products and a high level of sales to customers in the oil and
gas industry in the first quarter of fiscal 1996, partially offset by declines
in sales of DCRsi instrumentation recorders. See "Business -- Distribution and
Customers," above.
Substantially all of the Company's sales of its first-generation DST
products were made in the first half of 1994 to a major OEM customer pursuant to
a non-recurring contract. These sales accounted for 78% of total DST product
sales in 1994. When the Company announced its new line of lower-priced DST tape
drives and robotic libraries in July 1994, its OEM arrangements were terminated
and the Company began to expand its DST direct marketing activities.
As previously disclosed in order for DST product sales to increase
significantly, the Company believes that it will be necessary for the products
to gain broader acceptance in commercial markets, in addition to the specialized
technical markets from which most of the Company's revenue from 19 millimeter
products is currently derived. See "Markets -- Mass Data Storage Products and
Instrumentation Recorders," above.
In the fourth quarter of 1996, the Company announced a new version of
its 19 millimeter mass data storage products that will double the amount of data
that can be stored on a single cartridge. Although the availability of this new
version is intended to enhance the Company's competitive position, it could
cause a decline in sales of the Company's existing 19 millimeter products.
A significant portion of instrumentation product sales reflect
purchases by the federal government. Direct and indirect sales to U.S.
government agencies amounted to $17.4 million, $14.0 million and $27.2 million
in 1996, 1995 and 1994, respectively, representing 18.0%, 14.7% and 21.4% of net
sales in those years. While sales to government agencies have historically
consisted primarily of instrumentation recorders, the Company has recently
experienced an increase in sales of data storage products to these customers.
Sales to government agencies fluctuate as a result of changes in government
spending programs (including defense programs), and may also be impacted by
pending budget discussions in Congress. The Company is unable to forecast the
extent to which sales may be adversely affected in future periods by these
factors. See also "Business -- Distribution and Customers" and "Business --
Markets -- Mass Data Storage Products and Instrumentation Recorders," above.
Professional Video Recording Products. The Company has streamlined its
video product line to concentrate on products that utilize the Company's
proprietary digital compression and image processing technology. Most of the
declines in 1994 and 1995 resulted from the discontinuation of older analog
products.
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Sales of the Company's DCT digital products have also declined during the past
three years, as the Company has closed certain domestic and international sales
offices as part of its restructuring. The reduced distribution network for the
Company's video products is expected to have a continuing negative impact on
sales of these products. However, DCT products accounted for 100% of video
product sales in 1996, compared to 95% in 1995 and 66% in 1994. In future
periods, the Company expects that its sales of professional video recording
products will consist almost exclusively of DCT video recorders and image
processing systems.
Other Products. Net sales from all other products (consisting primarily
of television after-market products) have decreased significantly as the Company
has narrowed its professional television product line. Sales of other products,
such as turnkey studio facilities, mobile vans, computer core memory products,
ceramic materials and refurbished equipment accepted as trade-ins on new
equipment sales, were essentially eliminated by the end of 1995. The Company
expects that in the future, sales of all other products will consist almost
exclusively of television after-market equipment relating to television products
that the Company now manufactures, or that it manufactured in prior periods and
continues to support.
Gross Profit. Gross profit as a percentage of net sales was 45.7% in
1996 and 45.9% in 1995, which represents a significant improvement from 39.1% in
1994. The improved gross margins reflect the effects of the Company's
restructuring activities, which have reduced fixed manufacturing and
administrative costs, as well as an improved sales mix of newer, higher margin
products. If sales of the Company's relatively high- margin instrumentation
recorders are adversely affected by pressure on government agencies to reduce
spending, gross margins in future periods could be adversely affected.
Selling and Administrative Expenses. Selling and administrative
expenses increased to $27.1 million in 1996 from $22.6 million in 1995 and $24.3
million in 1994, representing an increase of 19.7% from 1995 to 1996 and a
decrease of 6.8% from 1994 to 1995. The 1996 increase of $4.5 million was
entirely related to the ongoing patent infringement litigation with a foreign
consumer products manufacturer. The Company did not incur any patent
infringement litigation costs during 1995 or 1994. The Company expects to
continue to incur litigation costs during the first half of 1997 at similar
levels to those incurred in the last half of 1996. See "Legal Proceedings"
above. The Company anticipates that beginning in 1997, it should begin to
realize savings in facilities operating costs from levels incurred in 1996 as a
result of relocating its Redwood City, California operations into smaller
facilities. However, a variety of unanticipated events (such as property tax
increases, uninsured property damage losses, unexpected maintenance problems or
other occurrences) could reduce or eliminate anticipated cost savings.
Research, Development and Engineering Expenses. Research, development
and engineering expenses were $15.9 million in 1996 compared to $15.6 million in
1995 and $18.8 million in 1994. These expenses represented 16.5%, 16.3% and
14.8% of net sales in 1996, 1995 and 1994, respectively. The Company does not
capitalize any material amounts of RD&E expenditures. The majority of RD&E
expenses in 1995 and 1994 were used to enhance the price/performance levels of
the Company's mass storage products, as well as to integrate the Company's mass
storage systems with various computer manufacturers' servers, workstations and
other computer systems. Since the second half of 1994, the Company has also been
investing in the development of its keepered media technology. See "Business --
Research, Development and Engineering," above. The Company is committed to
investing in research, development and engineering programs at levels that can
be supported by current levels of sales, and the Company currently anticipates
that such expenses in 1997 may increase over 1996 levels as a percentage of net
sales. See "Business -- Research, Development and Engineering," above and Note 3
of Notes to Consolidated Financial Statements.
Royalty Income. Royalty income was $10.5 million in 1996 compared to
$15.0 million in 1995 and $7.4 million in 1994. Ampex records patent royalties
when income is earned and receipt is assured. The Company's royalty income
derives from patent licenses, and the Company receives most of its royalty
income from licenses with companies that manufacture consumer video products
(such as VCRs and camcorders) and, in certain cases, professional video tape
recorders. During this period a growing portion of royalty income related to 8mm
video recorders and camcorders.
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Approximately $2.0 million of 1996 royalty income was non-recurring
royalties resulting from negotiated settlements related to prior sales of
products by licensees. This compares to $10.5 million and $5.1 million of
non-recurring royalty income in 1995 and 1994, respectively. Royalty income has
historically fluctuated widely due to a number of factors that the Company
cannot predict, such as the extent of use of the Company's patented technology
by third parties, the extent to which the Company must pursue litigation in
order to enforce its patents, and the ultimate success of its licensing and
litigation activities. During the fourth quarter of 1995, the Company initiated
a lawsuit against a major foreign manufacturer of VHS video recorders and
television receivers in which the Company alleges patent infringement. See
"Legal Proceedings," above. If additional lawsuits are brought against other
manufacturers, litigation costs will increase. The Company is also attempting to
negotiate license agreements with additional manufacturers of 8mm camcorders.
However, there can be no assurance that such licensing efforts (including any
litigation that may be required) will be successful. See "Business -- Patents,
Licenses and Trademarks," above.
Restructuring Charges (Credits). The restructuring charges recorded in
earlier years included accruals for severance costs, estimated vacated lease
obligations including termination costs and the closure of certain foreign
subsidiaries. During 1996 and 1995 the Company entered into transactions that
reduced its anticipated obligations under several vacated leases. In addition,
certain expenses related to the closure of foreign subsidiaries were less than
originally anticipated. These factors resulted in restructuring credits of $0.5
million and $2.5 million during 1996 and 1995, respectively. As of December 31,
1996, the Company had a remaining balance of $7.6 million of accrued
restructuring costs. The Company will continue to evaluate the amount of accrued
restructuring costs on a quarterly basis, and the Company may make additional
adjustments in future periods if it determines that its actual obligations will
differ significantly from the amounts accrued.
Operating Income. The Company generated operating income of $12.0
million in 1996, $23.1 million in 1995 and $14.0 million in 1994. Operating
income was 12.5% of net sales in 1996, 24.2% of net sales in 1995 and 11.0% of
net sales in 1994. Non-recurring royalty income was $2.0 million, $10.5 million
and $5.1 million in 1996, 1995 and 1994, respectively. Selling and
administrative expenses for 1996 includes $4.9 million related to patent
infringement litigation costs. Restructuring charges (credits) were ($0.5)
million in 1996 compared to ($2.5) million in 1995. Excluding the above items,
operating income would have been $14.4 million, $10.1 million and $8.9 million
for 1996, 1995 and 1994, respectively. This year-over-year improvement in
operating income, as adjusted, reflects the effects on gross profit of the
Company's restructuring activities, its improved sales mix of products and
continued controls on recurring selling and administrative expenses.
Interest Expense. Interest expense was $0.8 million in 1996 compared
to $3.8 million in 1995 and $8.3 million in 1994. The decreases from 1994 to
1995 resulted primarily from the April 1994 exchange of 14% senior discount
notes, issued in 1992, for cumulative convertible preferred stock. See Note 9 of
Notes to Consolidated Financial Statements. The decrease from 1995 to 1996
resulted primarily from the conversion of the 8% zero-coupon notes with a
principal amount at maturity of $27.4 million into approximately 8.5 million
shares of Common Stock during the first quarter of 1996. In January 1996, the
mortgage on the real property in Redwood City, California was repaid from the
cash proceeds of the sale. See Note 9 of Notes to Consolidated Financial
Statements.
Amortization of Debt Finance Costs. These amounts reflect periodic
amortization of financing costs over the remaining terms of the debt. Due to the
conversion of the zero-coupon notes and the retirement of the mortgage in 1996,
all remaining deferred financing costs were written off during 1996.
Interest Income. Interest income increased significantly to $3.3
million in 1996 from $1.1 million in 1995 and $0.7 million in 1994. Higher cash
balances and imputed interest on the notes received in connection with the sale
of the Company's Redwood City, California property in January 1996 resulted in
the increase in 1996. See "Properties," above, and Note 7 of Notes to
Consolidated Financial Statements. The slight increase from 1994 to 1995 is a
result of higher cash balances and higher interest rates.
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Other (Income) Expense, Net. In 1996, other income (expense), net
included a gain of $0.9 million on the sale of the smaller of its two
manufacturing facilities in Colorado Springs, Colorado offset by moving- related
expenditures of $0.9 million. In 1994, other (income) expense, net, included a
gain of $7.3 million resulting from the Company's termination of health care
benefits for retirees, as well as gains from the sale of certain real property
and other assets in connection with the Company's restructuring activities. For
1995, other (income) expense, net, consisted primarily of foreign currency
transaction gains and losses resulting from the Company's foreign operations.
Provision for Income Taxes. As a result of timing differences in
December 31, 1995 and December 31, 1994, the Company was not required to include
any provision for U.S. federal tax liabilities in 1995 or 1994. In 1996, the
Company was required to set up a provision for Alternative Minimum Tax (AMT) of
$0.2 million due to the utilization of net operating loss carryforwards to
offset the gain on the sale of the Redwood City, California real property. At
December 31, 1996, the Company had net operating loss carryforwards for income
tax purposes of $95.3 million expiring in the years 2005 through 2009. As a
result of the financing transactions that were completed in April 1994 and
February 1995, the Company is limited in the amount of net operating loss
carryforwards that are available to offset consolidated federal income tax
liabilities of the Company. See Note 19 of Notes to Consolidated Financial
Statements. The Company derives pretax foreign income from its international
operations, which are conducted principally by its foreign subsidiaries. In
addition, the Company's royalty income is subject, in certain cases, to foreign
tax withholding. Such income is taxed by foreign taxing authorities, and the
Company's domestic interest and amortization expenses and operating losses, if
any, are not deductible in computing such foreign taxes. The provisions for
income taxes in 1996, 1995 and 1994 consist primarily of foreign income taxes
and withholding taxes on royalty income.
Gain of Business Held for Disposition. In November 1995, the Company
completed the disposition of its Media subsidiaries, which had been accounted
for as a business held for disposition since the quarter ended June 30, 1993.
The sale did not result in the receipt of any cash proceeds by the Company and
the non-recurring gain of $43.9 million in 1995 represented the elimination of
net liabilities of Media, less taxes and other costs. See Note 2 of Notes to
Consolidated Financial Statements.
Net Income. The Company reported net income of $12.7 million in 1996,
$63.3 million in 1995 and $15.5 million in 1994. Net income benefited from the
non-recurring gain of $43.9 million on the sale of Media in 1995, and from the
factors discussed above in Operating Income.
Liquidity and Capital Resources
Cash Flow. At December 31, 1996, the Company had cash and short-term
investments of $30.7 million, up significantly from $19.7 million at December
31, 1995. Working capital improved to $39.2 million at December 31, 1996, from
$10.7 million at December 31, 1995. The improvement in cash and working capital
was primarily due to proceeds received from the sale of portions of its Redwood
City, California and Colorado Springs, Colorado facilities. See Note 7 to the
Company's Consolidated Financial Statements. The Company's operating activities
used cash of $6.1 million during 1996, and generated cash of $2.9 million in
1995. The decline in operating cash flow for the year ended December 31, 1996,
was primarily attributable to the factors discussed above in "Net Income," to
other moving-related expenditures of $6.9 million, and to a net increase in
inventories resulting from the implementation of the Company's previously
announced strategy to increase inventories in anticipation of increased DST
product sales. While the Company began shipping its DST 810 library system in
the fourth quarter of 1996, it presently has no material backlog of orders for
this product. The increased investment in inventories, particularly with respect
to its DST 810 product, which has limited sales history, may expose the Company
to an increased risk of inventory write-offs. Cash flows from investing
activities and financing activities for 1996 reflect the Company's sale of real
estate in Colorado and California.
The Company has available a working capital facility that allows it to
borrow or obtain letters of credit totaling $7.0 million through May 1998, based
on eligible accounts receivable. At December 31, 1996, the
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Company had no material borrowings outstanding and had letters of credit issued
against the facility totaling $1.5 million.
Financing Transactions. In January 1996, the Company repaid the
balance of the $7.4 million mortgage loan on the Redwood City property from a
portion of the cash proceeds of the sale. Also, during 1996, the Company's
convertible notes with an aggregate face amount at maturity of $27.4 million
were converted into approximately 8.5 million shares of Common Stock, and
warrants to purchase approximately 1.7 million shares were exercised. In
December 1997, the Company is scheduled to redeem the outstanding Noncumulative
Preferred Stock out of funds legally available therefor (generally, the excess
of the value of assets over liabilities). In certain instances the Company may
redeem the Noncumulative Preferred Stock by issuing common stock at 90% of fair
market value. As of December 31, 1996, the Company does not have sufficient
funds legally available to redeem the Noncumulative Preferred Stock. In the
event the Company does not have sufficient funds legally available to redeem the
Noncumulative Preferred Stock in full on the redemption date, the Company would
remain obligated to redeem such shares from time to time thereafter to the
extent funds become legally available for redemption, and would generally be
precluded from declaring any cash dividends on, or repurchasing shares of, its
common stock, until the Noncumulative Preferred Stock has been redeemed in full.
See Note 12 of Notes to Consolidated Financial Statements. There can be no
assurance that the Company will have adequate liquidity or have funds legally
available to redeem the Noncumulative Preferred Stock on the redemption date or
in the future. Although the Company has no current plans for redemption of the
Noncumulative Preferred Stock prior to maturity, it will continue to evaluate
this possibility in light of market conditions, its liquidity and other factors.
Any such redemption could include issuance of additional debt or equity
securities or other actions that might result in dilution of current
stockholders' equity interests in the Company.
In the second quarter of 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission covering 1,150,000 shares
of common stock which may be offered from time to time by the Company, the
proceeds of which would be used for general corporate purposes, including, if
required, the acquisition of specialized production and test equipment for use
in the Company's keepered media development program. See "Keepered Media
Development Program." The sale of common stock covered by the shelf registration
statement could adversely affect the market price for the common stock, and
would dilute current stockholders' interests by approximately 2.5% if all such
shares were to be issued.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 and the financial statement
schedules required by Item 14(d) are included following Item 14 hereof. The
supplementary data called for by Item 8 is not applicable to the Company.
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 COMPANY
The information required by this item is incorporated herein by
reference to the Company's Proxy Statement for its 1997 Annual Meeting of
Stockholders (the "Proxy Statement").
Information regarding executive officers is included in Part I hereof
as Item 4A and is incorporated by reference into this Item 10.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Company's Proxy Statement.
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 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed with this Report
1. Financial Statements (see Item 8 above)
Ampex Corporation Consolidated Financial Statements
as of December 31, 1996, 1995 and 1994 and for each
of the three years in the period ended December 31,
1996
2. Financial Statement Schedules (see Item 8 above)
Schedule II Valuation and Qualifying Accounts
3. Exhibits
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Exhibit
Number Description
- ------- -----------
2.1 Purchase and Sale Agreement dated as of November 29, 1995,
between the Company, as seller, and The Martin Group of
Companies, as buyer, relating to the Company's real property
in Redwood City, California, and First Amendment to Purchase
and Sale Agreement dated January 19, 1996 (filed as Exhibit
2.01 to the Company's Form 8-K dated January 25, 1996 (the
"January 1996 8-K") and incorporated herein by reference)
2.2 Secured Purchase Money Promissory Note in the face amount
of $6.5 million, and Secured Purchase Money Promissory Note
(Phase 2 Land) in the face amount of $11.0 million, each dated
January 24, 1996, made by Martin/Campus Associates, L.P., and
payable to the Company (filed as Exhibit 2.02 to the January
1996 8-K and incorporated herein by reference)
2.3 Stock Purchase Agreement dated as of November 10, 1995,
among the Company, Quantegy Acquisition Corp., Ampex Media
Holdings Incorporated, Ampex Media Corporation and Ampex
Recording Media Corporation (filed as Exhibit 10.1 to the
Company's Form 8-K dated November 13, 1995 and incorporated
herein by reference)
3.1 Restated Certificate of Incorporation of the Company dated
June 1, 1993 (filed as Exhibit 4.01 to the Company's Form 10-Q
for the quarter ended March 31, 1993 and incorporated herein
by reference); Certificate of Amendment of Restated
Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on April 22, 1994 (filed as
Exhibit 3.2 to the Company's Form 8-K filed on May 2, 1994
(the "May 1994 8-K") and incorporated herein by reference);
and Certificate of Amendment of Restated Certificate of
Incorporation of the Company filed with the Secretary of State
of Delaware on April 20, 1995 (filed as Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended March 31, 1995 (the
"First Quarter 1995 10-Q") and incorporated herein by
reference)
3.2 Certificate of Ownership and Merger of Ampex Video Systems
Corporation and Ampex Recording Systems Corporation into Ampex
Systems Corporation (filed as Exhibit 3.2 to the Company's
Form 10-Q for the quarter ended March 31, 1994 (the "First
Quarter 1994 10-Q") and incorporated herein by reference)
3.3 Certificate of Ownership and Merger of Ampex Systems
Corporation into the Company (filed as Exhibit 3.1 to the May
1994 8-K and incorporated herein by reference)
3.4 Certificate of Designations, Preferences and Rights of the
Company's 8% Noncumulative Preferred Stock (filed as Exhibit
3.1 to the Company's Form 8-K filed on February 24, 1995 (the
"February 1995 8-K") and incorporated herein by reference)
3.5 By-Laws of the Company, as amended through April 20, 1995
(filed as Exhibit 4.2 to the First Quarter 1995 10-Q and
incorporated herein by reference)
4.1 Form of Class A Common Stock Certificate (filed as Exhibit
4.4 to the Company's Post-Effective Amendment No. 1 on Form
S-3 to Form S-1 (File No. 33-91312) (the "1996 Form S-3") and
incorporated herein by reference)
4.2 Form of Class C Common Stock Certificate (filed as Exhibit
4.5 to the Form S-3 and incorporated herein by reference)
4.3 Form of 8% Noncumulative Preferred Stock Certificate (filed
as Exhibit 4.6 to the Form S-3 and incorporated herein by
reference)
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4.4 Exchange Agreement for 8% Noncumulative Preferred Stock and
Common Stock, dated as of February 14, 1995, among the
Company and the Initial Holders named therein (filed as
Exhibit 4.1 to the February 1995 8-K and incorporated herein
by reference)
4.5 Exchange Agreement for 8% Step-Up Rate Cumulative Convertible
Preferred Stock, Warrants and Common Stock, dated as of April
22, 1994, among the Company and the Initial Holders named
therein (filed as Exhibit 4.1 to the May 1994 8-K and
incorporated herein by reference)
4.6 Exchange Agreement for Zero-Coupon Convertible Notes,
Warrants and Common Stock, dated as of April 22, 1994, among
the Company and the Initial Holders named therein (filed as
Exhibit 4.2 to the May 1994 8-K and incorporated herein by
reference)
4.11 Registration Rights Agreement for Notes dated as of April 22,
1994 among the Company and the Initial Holders named therein
(filed as Exhibit 4.6 to the May 1994 8-K and incorporated
herein by reference)
4.13 Registration Rights Agreement for 8% Noncumulative Preferred
Stock dated as of February 14, 1995 among the Company and the
Initial Holders named therein (filed as Exhibit 4.2 to the
February 1995 8-K and incorporated herein by reference)
4.14 Registration Rights Agreement for Shares dated as of February
14, 1995 among the Company and the Initial Holders named
therein (filed as Exhibit 4.3 to the February 1995 8-K and
incorporated herein by reference)
4.15 Stock Purchase Agreement, dated February 10, 1995, between
the Company and Edward J. Bramson, and related promissory
note issued to the Company by Sherborne Investments
Corporation (each filed as an Exhibit to Amendment No. 6 to
Schedule 13D, filed on February 23, 1995 by Edward J. Bramson
and the other filing parties named therein, and incorporated
herein by reference)
4.16 Stock Subscription and Debt Exchange Agreement dated as of
January 25, 1993 between the Company and Sherborne Group
Incorporated, and Registration Rights Agreement dated as of
January 25, 1993 between the Company and Sherborne Group
Incorporated, executed in counterpart by Sherborne Holdings
Incorporated (each filed as an Exhibit to Amendment No. 1 to
Schedule 13D, filed on February 3, 1993 by Sherborne Group
Incorporated, Sherborne Holdings Incorporated and the other
filing parties named therein, and incorporated herein by
reference)
4.17 Letter Agreement between the Company and Sherborne Group
Incorporated, dated December 22, 1993, providing for the
issuance of shares of Class A Common Stock to Sherborne Group
Incorporated in exchange for cancellation of debt (filed as
Exhibit 4.24 to the Company's Form 10-K for fiscal 1993 (the
"1993 10-K") and incorporated herein by reference)
4.18 Promissory Note in the amount of $1,754,727, issued by the
Company to NH Holding Incorporated, dated December 22, 1993
(filed as Exhibit 4.25 to the 1993 10-K and incorporated
herein by reference)
10.1 Tax Indemnification Agreement dated as of July 24, 1992 among
Sherborne Group Incorporated, NH Holding Incorporated, the
Company and certain affiliates and former
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affiliates of the Company (filed as Exhibit 10.11 to the
Company's Form 10-Q for the quarter ended September 30, 1992
(the "Third Quarter 1992 10-Q") and incorporated herein by
reference)
10.2 Ampex Corporation 1992 Stock Incentive Plan and related
documents, as amended through August 22, 1996 (filed as
Exhibit 4.03 to the Company's Post-Effective Amendment No. 1
to Registration Statement on Form S-8 (File No. 333-05623)
and incorporated herein by reference)
10.3 Ampex Systems Corporation Savings Plan (1993 Restatement)
(filed as Exhibit 10.13 to the 1993 10-K and incorporated
herein by reference)
10.4 First and Second Amendments to the Ampex Corporation Savings
Plan, dated November 29, 1994 and December 22, 1994,
respectively (amending the plan identified in Exhibit 10.3
above) (filed as Exhibit 4 to the 1994 10-K and incorporated
herein by reference)
10.5 Third and Fourth Amendments to the Ampex Corporation Savings
Plan, dated August 4, 1995 (filed as Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1995 (the
"Second Quarter 1995 10-Q") and incorporated herein by
reference)
10.6 Ampex Systems Corporation Employees' Retirement Plan,
effective generally as of January 1, 1990 (filed as Exhibit
10.5 to the 1994 10-K and incorporated herein by reference)
and an amendment thereto effective as of February 1, 1994
(filed as Exhibit 10.14 to the 1993 10-K and incorporated
herein by reference)
10.7 Amendment No. 2 the Ampex Corporation Employees' Retirement
Plan, dated November 29, 1994 (amending the plan identified
in Exhibit 10.6 above) (filed as Exhibit 10.6 to the 1994
10-K and incorporated herein by reference)
10.8 Third Amendment to the Ampex Corporation Employees'
Retirement Plan, dated August 4, 1995 (filed as Exhibit 10.2
to the Second Quarter 1995 10-Q and incorporated herein by
reference) and Fourth Amendment to the Ampex Corporation
Employees' Retirement Plan, dated February 27, 1996 (filed as
Exhibit 10.8 to the Company's Form 10-K for fiscal 1995 (the
"1995 10-K") and incorporated herein by reference)
10.9 Ampex Corporation Supplemental Retirement Income Plan, as
amended through September 3, 1985 (filed as Exhibit 10.27 to
Amendment No. 3 to the Company's Registration Statement on
Form S-1 (filed No. 33-47660) and incorporated herein by
reference)
10.10 Ampex Corporation Retiree & Disabled Retiree Medical Care
Plan, as amended and restated effective April 22, 1994 (filed
as Exhibit 10.8 to the 1994 10-K and incorporated herein by
reference)
10.11 Form of Indemnification Agreement entered into between the
Company and directors Bramson, McKibben, Slusser and
Stoltzfus (filed as Exhibit 10.16 to the Company's Form 10-Q
for the quarter ended June 30, 1993 (the "Second Quarter 1993
10-Q") and incorporated herein by reference)
10.12 Office Sharing Agreement and Assignment and Assumption of
Lease, each dated as of July 24, 1992 and each between the
Company and Sherborne Group Incorporated (filed as Exhibit
10.20 to the Third Quarter 1992 10-Q and incorporated herein
by reference), and related Sublease dated October 4, 1993 and
Letter Agreement dated October 28, 1993 (filed as Exhibit
10.20 to the 1993 10-K and incorporated herein by reference)
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10.13* Loan and Security Agreement by and between Ampex Finance
Corporation and Congress Financial Corporation dated May 5,
1994 (filed as Exhibit 10.2 to the First Quarter 1994 10-Q
and incorporated herein by reference) and Amendment Agreement
dated as of July 31, 1995, second Amendment Agreement, dated
March 29, 1996 (filed as Exhibit 10.2 to Second Quarter 1996
10-Q and incorporated herein by reference) and third
Amendment Agreement, dated December 26, 1996
10.14 Form of Employment Security Letter entered into between the
Company and Messrs. Atchison, McKibben, Jacquet and Talcott
(executive officers of the Company), dated May 19, 1993, with
addendum dated June 10, 1993 (filed as Exhibit 10.32 to the
Second Quarter 1993 10-Q and incorporated herein by
reference)
10.15* Stock Purchase Agreement, dated October 22, 1996, between the
Company and Edward J. Bramson
10.17* Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 132,150 square feet of premises
located on Douglas Avenue and on Broadway in Redwood City,
California (filed as Exhibit 2.03 to the January 1996 8-K and
incorporated herein by reference) as amended by amendment
dated December 20, 1996.
10.18 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 54,290 square feet of premises
located on Bay Road in Redwood City, California (filed as
Exhibit 2.04 to the January 1996 8-K and incorporated herein
by reference)
10.19 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 359,218 square feet of premises
located on Bay Road and Broadway in Redwood City, California
(filed as Exhibit 2.05 to the January 1996 8-K and
incorporated herein by reference)
10.20 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 60,000 square feet of premises to be
constructed on Broadway in Redwood City, California (filed as
Exhibit 2.06 to the January 1996 8-K and incorporated herein
by reference)
10.21 Trademark License Agreement dated May 31, 1990, by and
between Ampex Corporation (a predecessor of the Company) as
licensor, and certain of the Media Subsidiaries as licensee,
relating to the Ampex trademark; related Trademark License
Agreement dated July 24, 1992, by and between Ampex Systems
Corporation (a former subsidiary that was merged into the
Company) certain of the Media Subsidiaries; Amendment No. 1
to Trademark License Agreement dated March 23, 1993; Amended
and Restated Trademark License Agreement dated June 22, 1993;
and First Amendment to Amended and Restated Trademark License
Agreement dated November 10, 1995 (filed as Exhibit 10.2 to
1995 10-K and incorporated herein by reference)
10.22 Joint Settlement Agreement by and among Pension Benefit
Guaranty Corporation, the Ampex Group (a group of companies
that includes the Company), the Limited Hillside Group and
the Sherborne Group, dated November 22, 1994 (filed as
Exhibit 10.2 to 1995 10-K and incorporated herein by
reference)
10.23 Hillside-Ampex/Sherborne Agreement by and among the Ampex
Group (a group of companies that includes the Company), the
Limited Hillside Group and the Sherborne Group, dated
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December 1, 1994 (effective November 22, 1994) (filed as
Exhibit 10.2 to 1995 10-K and incorporated herein by
reference)
10.24 Real Estate Purchase Agreement dated as of April 16, 1996,
between U.S. Filter/Ionpure Inc. and the Company, together
with amendments thereto dated as of April 29, 1996 and May 3,
1996, relating to the sale of the Company's Colorado Springs,
Colorado facility (filed as Exhibit 10.1 to Second Quarter
1996 10-Q and incorporated herein by reference)
11.1* Statement re Computation of Per Share Earnings
21.1* Subsidiaries of the Company
23.1* Consent of Independent Accountants
25.1* Power of Attorney (included in the signature page of this
Report)
27.1* Financial Data Schedule
- -------------------
* Filed herewith
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
last quarter of 1996.
(c) Exhibits. See Item 14(a)(3) above.
(d) Financial Statement Schedules. See Items 8 and 14(a)(2) above.
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SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data, which
have been derived from and should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto, and with Management's
Discussion and Analysis of Financial Condition and Results of Operations, both
of which are included elsewhere herein. There have been no cash dividends
declared for the periods presented. In November 1995, the Company completed the
divestiture of its Media Subsidiaries, which had been accounted for as a
business held for disposition since the second quarter of 1993. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Note 2 of Notes to Consolidated Financial Statements and Note 1 to
the table below.
Statement of Operations Data (1):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands, except per share and ratio data)
<S> <C> <C> <C> <C> <C>
Net sales $96,485 $95,662 $127,212 $169,711 $237,791
Gross profit 44,078 43,886 49,795 48,523 67,964
Selling and administrative 27,084 22,626 24,279 66,219 84,500
Restructuring charges (credits) (453) (2,480) -- 230,523 1,864
Income (loss) from continuing 14,395 19,407 15,542 (295,261) (70,234)
operations
Net income (loss) 12,741 63,293 15,542 (296,404) (71,451)
Fully diluted income (loss) per 0.28 0.46 0.36 (16.67) (4.56)
share from continuing operations
Fully diluted income (loss) per 0.28 1.39 0.36 (16.74) (4.64)
share
Supplementary fully diluted 0.27 1.46 0.47 -- --
income per share (2) (3)
</TABLE>
Balance Sheet Data (1)
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Working capital $39,277 $ 10,742 $ (3,960) $ (41,429) $ 35,543
Total assets 84,492 88,651 87,459 129,446 530,978
Long-term debt 914 31,585 30,805 90,641 225,807
Redeemable preferred stock 69,970 69,970 83,977 -- --
Total stockholders' equity (86,360) (127,357) (195,240) 210,481) 81,064
(deficit)
</TABLE>
--------------------------
(1) The statement of operations data for all periods presented have been
reclassified to reflect the results of operations of Media as discontinued
operations, with the sale of discontinued operations reflected in the
statement of operations for 1995. The balance sheet data for 1992 have not
been restated; however, the balance sheets for 1993 and 1994 reflect the
assets and liabilities of Media as a single line item, "net liabilities of
business held for disposition." This line item is inapplicable at December
31, 1996 and 1995 as the sale of Media was completed in November 1995.
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(2) Under an Exchange Agreement dated February 14, 1995, 89,192 shares of
Convertible Preferred Stock, originally issued in April 1994, were
exchanged for 69,970 shares of Noncumulative Preferred Stock and 11,006,713
shares of Common Stock. The supplementary income per share above indicates
what the fully diluted income per share would have been, if this exchange
had occurred when the Convertible Preferred Stock was initially issued. See
Note 12 of Notes to Consolidated Financial Statements.
(3) The 1996 Supplementary column above indicates the fully diluted income per
share as if the zero-coupon notes had been converted to Common Stock at the
beginning of the year as opposed to the actual conversions through the
period February 9, 1996 to April 1, 1996.
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AMPEX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets
As of December 31, 1996 and 1995..................................... F-3
Consolidated Statements of Operations
For Each of the Three Years in the Period Ended December 31, 1996.... F-4
Consolidated Statements of Cash Flows
For Each of the Three Years in the Period Ended December 31, 1996.... F-5
Consolidated Statements of Stockholders' Deficit
For Each of the Three Years in the Period Ended December 31, 1996..... F-6
Notes to Consolidated Financial Statements................................. F-7
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Ampex Corporation
We have audited the accompanying consolidated balance sheets of Ampex
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, cash flows and stockholders' deficit for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ampex Corporation as of December 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 7, 1997
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<PAGE>
AMPEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,410 $ 6,765
Short-term investments 17,241 12,885
Notes receivable 7,926 -
Accounts receivable (net of allowances of $2,241 and $2,541) 16,721 15,394
Inventories 14,095 12,512
Other current assets 2,709 2,915
---------- ---------
Total current assets 72,102 50,471
Property, plant and equipment 10,059 37,759
Other assets 2,331 421
---------- ----------
Total assets $ 84,492 $ 88,651
========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 1,075 $ 2,246
Accounts payable 7,148 9,745
Income taxes payable 571 1,334
Accrued restructuring costs 2,002 2,464
Other accrued liabilities 22,029 23,940
---------- ---------
Total current liabilities 32,825 39,729
Long-term debt 914 31,585
Other liabilities 60,233 65,080
Deferred income taxes 1,314 1,379
Accrued restructuring costs 5,596 8,265
--------- ---------
Total liabilities 100,882 146,038
--------- ---------
Commitments and contingencies (Note 11)
Redeemable nonconvertible preferred stock, $1,000 liquidation value:
Authorized: 69,970 shares 1996 and 1995
Issued and outstanding - 69,970 shares 1996 and 1995 69,970 69,970
Stockholders' deficit:
Preferred stock, $1.00 par value:
Authorized: 842,838 shares 1996 and 1995
Issued and outstanding - none 1996 and 1995 - -
Common stock, $.01 par value:
Class A:
Authorized: 125,000,000 shares 1996 and 1995
Issued and outstanding - 45,434,417 shares 1996; 32,309,662 shares 1995 454 323
Class C:
Authorized: 50,000,000 shares 1996 and 1995
Issued and outstanding - none 1996; 2,107,807 shares 1995 - 21
Other additional capital 382,042 355,172
Note receivable from stockholder (3,979) (2,053)
Accumulated deficit (454,871) (467,612)
Cumulative translation adjustments 526 445
Minimum pension liability adjustment (10,532) (13,653)
---------- ----------
Total stockholders' deficit (86,360) (127,357)
---------- ----------
Total liabilities and stockholders' deficit $ 84,492 $ 88,651
========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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AMPEX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 96,485 $ 95,662 $ 127,212
Cost of sales 52,407 51,776 77,417
-------------- ------------- -------------
Gross profit 44,078 43,886 49,795
Selling and administrative 27,084 22,626 24,279
Research, development and engineering 15,930 15,622 18,844
Royalty income (10,497) (15,006) (7,371)
Restructuring charges (credits) (453) (2,480) -
-------------- ------------- ---------------
Operating income 12,014 23,124 14,043
Interest expense 756 3,775 8,346
Amortization of debt financing costs 85 126 240
Interest income (3,257) (1,145) (774)
Other (income) expense, net 35 40 (10,727)
-------------- -------------- --------------
Income from continuing operations
before income taxes 14,395 20,328 16,958
Provision for income taxes 1,654 921 1,416
-------------- -------------- --------------
Income from continuing operations 12,741 19,407 15,542
Gain of business held for disposition (net of taxes of
$1,137 in 1995) - 43,886 -
-------------- -------------- ---------------
Net income $ 12,741 $ 63,293 $ 15,542
============== ============== =============
Primary income per share :
Income per share from continuing operations $ 0.28 $ 0.53 $ 0.42
Income per share from discontinued operations 0.00 1.25 0.00
-------------- --------------- --------------
Income per share $ 0.28 $ 1.78 $ 0.42
============== =============== ==============
Weighted average number of common shares outstanding 44,723,031 35,020,101 22,913,304
=============== ============== =============
Fully diluted income per share :
Income per share from continuing operations $ 0.28 $ 0.46 $ 0.36
Income per share from discontinued operations 0.00 0.93 0.00
------------- ---------------- --------------
Income per share $ 0.28 $ 1.39 $ 0.36
============== =============== ==============
Weighted average number of common shares outstanding 44,887,403 47,243,566 47,995,875
============== ============== =============
Supplementary primary income per share :
Income per share from continuing operations $ 0.28 $ 0.53 $ 0.51
Income per share from discontinued operations 0.00 1.21 0.00
--------------- --------------- ---------------
Income per share $ 0.28 $ 1.74 $ 0.51
=============== =============== ==============
Weighted average number of common shares outstanding 46,227,559 36,441,297 30,563,574
============== ============== =============
Supplementary fully diluted income per share :
Income per share from continuing operations $ 0.27 $ 0.49 $ 0.47
Income per share from discontinued operations 0.00 0.97 0.00
--------------- --------------- --------------
Income per share $ 0.27 $ 1.46 $ 0.47
=============== =============== ==============
Weighted average number of common shares outstanding 46,391,931 45,062,104 36,253,111
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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AMPEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,741 $ 63,293 $ 15,542
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 2,803 6,714 12,019
Net gain (loss) on sale of assets 932 - (1,759)
Net increase in notes receivable (1,519) - -
Deferred income taxes (65) - (360)
(Increase) decrease in accounts receivable (1,848) (2,848) 10,516
(Increase) decrease in inventories (1,583) (2,666) 14,047
Net (increase) decrease in other assets (1,922) 105 1,266
Increase (decrease) in accounts payable (2,492) 2,832 (19,803)
Net decrease in accrued liabilities and
income taxes payable (1,898) (9,515) (10,319)
Net decrease in long-term receivables 26 393 971
Net decrease in accrued restructuring costs (3,131) (7,810) (16,502)
Net decrease in other non-current obligations (8,129) (3,669) (12,082)
Net decrease in net liabilities associated with
business held for disposition - (43,886) -
---------- ---------- ----------
Net cash provided by (used in) operating activities (6,085) 2,943 (6,464)
---------- ---------- ---------
Cash flows from investing activities:
Purchases of short-term investments (72,670) (39,303) (24,672)
Proceeds received on the maturity of short-term investments 64,376 27,392 6,937
Proceeds from the sale of short-term investments 3,938 6,876 9,885
Additions to property, plant and equipment (2,834) (658) (719)
Additions to notes receivable (6,407) - -
Proceeds from the sale of property, plant and equipment 27,485 120 5,697
Deferred gain on sale of assets 5,930 - -
(Increase) decrease in other assets 2 - (425)
---------- ---------- ---------
Net cash provided by (used in) investing activities 19,820 (5,573) (3,297)
---------- --------- ---------
Cash flows from financing activities:
Borrowings under working capital facilities 48,130 50,527 45,211
Repayments under working capital facilities (49,410) (49,905) (49,410)
Repayment of secured note payable (7,333) (3,000) (3,000)
Repayment of notes payable-affiliates (80) (706) (1,285)
Borrowings under bridge notes - - 2,000
Proceeds from issuance of common stock 1,624 394 -
Proceeds from issuance of warrants 17 - -
Debt financing costs - (137) -
---------- ----------
Net cash used in financing activities (7,052) (2,827) (6,484)
--------- ---------- ---------
Effect of exchange rates on cash (38) 164 386
---------- ---------- --------
Net increase (decrease) in cash and cash equivalents 6,645 (5,293) (15,859)
Cash and cash equivalents, beginning of period 6,765 12,058 27,917
--------- ---------- --------
Cash and cash equivalents, end of period $ 13,410 $ 6,765 $ 12,058
========= ========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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<TABLE>
<CAPTION>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For Each of the Three Years in the Period Ended
December 31, 1996
(in thousands)
Note
Common Stock Other R'cvble Cumulative
Class A Class B Class C Additional from Accumulated Translation
Shares Amount Shares Amount Shares Amount Capital Stkhlder Deficit Adjustment
------ ------ ------ ------ ------ ------ ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994 6,276 $ 63 14,275 $ 143 - - $339,756 - $ (546,447) $ 130
Net income - - - - - - - - 15,542 -
Translation adjustments - - - - - - - - - 462
Proceeds from issuance
of warrants - - - - - - 5,142 - - -
Preferred stock accretion - - - - - - (5,905) - - -
Conversion of shares 14,275 143 (14,275) (143) 6 - - - - -
------- ----- ------- ------- ----- ---- ---------- ------- ------ ------
Balances, December 31, 1994 20,551 $ 206 - - 6 - $338,993 - $ (530,905) $ 592
Net income - - - - - - - - 63,293 -
Translation adjustments - - - - - - - - - (147)
Minimum pension liability
adjustment - - - - - - - - - -
Proceeds from exercise
of warrants 1,345 13 - - - - - - - -
Proceeds from issuance
of shares 1,500 15 - - - - 2,400 $(2,053) - -
Preferred stock accretion - - - - - - (783) - - -
Stock options exercised 8 - - - - - 19 - - -
Preferred stock exchange 1,225 12 - - 9,782 $98 14,680 - - -
Expenses on exchange - - - - - - (137) - - -
Conversion of shares 7,681 77 - - (7,681) (77) - - - -
------ ----- ------ ------ ------ --- ------ -------- ---------- -------
Balances, December 31, 1995 32,310 $ 323 - - 2,107 $21 $355,172 $(2,053) $ (467,612) $ 445
Net income - - - - - - - - 12,741 -
Translation adjustments - - - - - - - - - 81
Minimum pension liability
adjustment - - - - - - - - - -
Proceeds from exercise
of warrants 1,699 17 - - - - - - - -
Proceeds from issuance
of shares 400 4 - - - - 2,746 (1,926) - -
Stock options exercised 395 4 - - - - 797 - - -
Conversion of notes 8,523 85 - - - - 23,327 - - -
Conversion of shares 2,107 21 - - (2,107) (21) - - - -
------ ----- ------ ------ ------- ---- --------- ------- ---------- -------
Balances, December 31, 1996 45,434 $ 454 - - - - $382,042 $(3,979) $ (454,871) $ 526
====== ===== ====== ====== ========= ==== ========= ======== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Minimum Total
Pension Stockholders'
Liability Equity
Adjustment (Deficit)
---------- -------------
<S> <C> <C>
Balances, January 1, 1994 $ (4,126) $(210,481)
Net income - 15,542
Translation adjustments - 462
Proceeds from issuance
of warrants - 5,142
Preferred stock accretion - (5,905)
Conversion of shares - -
--------- ---------
Balances, December 31, 1994 $ (4,126) $(195,240)
Net income - 63,293
Translation adjustments - (147)
Minimum pension liability
adjustment (9,527) (9,527)
Proceeds from exercise
of warrants - 13
Proceeds from issuance
of shares - 362
Preferred stock accretion - (783)
Stock options exercised - 19
Preferred stock exchange - 14,790
Expenses on exchange - (137)
Conversion of shares - -
--------- ---------
Balances, December 31, 1995 $ (13,653) $(127,357)
Net income - 12,741
Translation adjustments - 81
Minimum pension liability
adjustment 3,121 3,121
Proceeds from exercise
of warrants - 17
Proceeds from issuance
of shares - 824
Stock options exercised - 801
Conversion of notes - 23,412
Conversion of shares - -
--------- ---------
Balances, December 31, 1996 $ (10,532) $ (86,360)
========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Ampex Corporation
Ampex Corporation ("Ampex" or the "Company") is engaged in the design,
development, production and distribution of high-performance mass data storage
systems, instrumentation recorders and professional video recording products. In
1994, the Company's principal operating subsidiary, Ampex Systems Corporation
("Ampex Systems"), as well as two subsidiaries of Ampex Systems, were merged
into the Company and the Company changed its name from Ampex Incorporated to
Ampex Corporation. The Company is now an operating company conducting the former
business of Ampex Systems and its subsidiaries. In November 1995, the Company
disposed of a subsidiary, Ampex Media Holdings Incorporated ("AMHI" and,
collectively with its subsidiaries, "Media"), which was engaged in the
manufacture and sale of magnetic recording media. See Note 2. All references to
"Ampex" or the "Company" include subsidiaries and predecessors of Ampex
Corporation but exclude Media, unless otherwise indicated.
Until December 1994, the Company was an indirect majority-owned subsidiary
of NH Holding Incorporated ("NHI"), which was an indirect majority-owned
subsidiary of Sherborne Holdings Incorporated.
The Company operates in one industry segment for financial reporting
purposes: the design, development, production and distribution of high-speed,
high-capacity magnetic recording products and systems.
Note 2 - Business Held For Disposition
In November 1995, the Company completed the disposition of Media, which had
been accounted for as a business held for disposition since the second quarter
of 1993. The Company recognized a nonrecurring gain for financial reporting
purposes of $43.9 million in 1995.
The consolidated statements of operations have been reclassified for all
periods presented and the assets and liabilities associated with Media's
business, which consisted principally of accounts receivable, inventory, fixed
assets and debt facilities, were reported as a single line item in the
consolidated balance sheets. Net sales of Media were $128.7 million from January
1, 1995 to November 13, 1995 (the date of disposition), and $144.6 million in
1994. The Company recognized a gain for financial reporting purposes on
disposition of Media because Media's liabilities exceeded its assets.
Costs and expenses reported by the Company for the distribution of tape
products were included in the results of business held for disposition to the
extent not offset by distribution fees received from Media.
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are presented on a
historical cost basis. All intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
to the prior years' financial statements to conform to the current year's
presentation. These reclassifications had no effect on the prior years'
stockholders' deficit or net income.
Use of Estimates
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, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net sales and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of investments with original maturities of 90 days
or less.
Short-term Investments
Investments with a maturity period greater than three months but less than
one year are classified as short-term investments. The Company's short-term
investments consist of highly liquid U.S. Treasury instruments and are
considered "available-for-sale" securities under Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The Company's short term investments, which mature in January
through March 1996, are carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost and is stated net of
accumulated depreciation. Depreciation is provided on a straight-line basis over
estimated useful lives ranging from 6 to 9 years for machinery and equipment and
5 to 50 years for buildings and improvements. When assets are disposed of, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gains or losses are included in the results of operations.
Carrying Value of Long-Lived Assets
The Company writes off the carrying value of long-lived assets to the
extent estimated future undiscounted operating cash flows are not sufficient to
recover the carrying value of these assets over their remaining useful life.
Foreign Currency Translation
Assets and liabilities of subsidiaries located outside the United States
have been translated at rates in effect at year end. Revenues and expenses are
translated at average rates during the year. Local currencies are considered to
be the functional currencies for substantially all of the Company's foreign
subsidiaries. Accordingly, the effects of translating the financial statements
of foreign subsidiaries into
F-8
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
U.S. dollars are reported in the cumulative translation adjustment, a separate
component of stockholders' deficit. Foreign currency transaction gains and
losses, which are included in other expense, were not material in the periods
reported.
Revenue Recognition
Revenue is recognized at the time products are shipped to customers and at
the time services are rendered.
Research, Development and Engineering
Research and development costs are expensed as incurred and amounted to
$14.0 million, $12.3 million and $15.5 million in 1996, 1995 and 1994. Other
engineering costs, principally incurred in connection with product introductions
and process enhancements, amounted to $1.9 million, $3.3 million and $3.4
million in 1996, 1995 and 1994, respectively.
Royalties
Royalty income is recorded when earned and receipt is assured.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109
("SFAS 109"), Accounting for Income Taxes. See Note 19.
Foreign withholding taxes have been provided on the undistributed earnings
of foreign subsidiaries, giving recognition to applicable tax rates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of risk consist principally of temporary cash investments and
trade receivables. The Company invests its temporary cash balances in short-term
U.S. Treasury obligations and with high credit quality financial institutions
and, by policy, limits the investment maturity and the amount of credit exposure
to any one financial institution. The Company performs ongoing credit
evaluations on its customers, and collateral is generally not required for trade
receivables.
Fiscal Year
The Company's fiscal year is the 52 or 53-week period ending on the
Saturday nearest December 31. Fiscal 1996, 1995 and 1994 were 52-week years.
Income Per Common Share
Primary income per common share is calculated by dividing net income as
adjusted for the redeemable convertible preferred stock accretion prior to its
redemption in February 1995, by the weighted average common shares outstanding
during the respective periods. The calculation of weighted average common shares
assumes the exercise of common stock equivalent warrants and options under the
treasury
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
stock method in periods when their exercise would be dilutive. Fully diluted
income per common share is calculated by dividing net income as adjusted for
interest on outstanding convertible notes, by the weighted average common shares
outstanding, including shares issuable upon conversion of the potentially
dilutive convertible notes in periods prior to its conversion to common shares
in the period February 9, 1996 to April 1, 1996, and convertible preferred stock
in periods prior to its redemption in February 1995.
Supplementary income per common share is computed as described above except
the February 1995 financing transaction described in Note 12 is assumed to have
occurred in April 1994, when the redeemable convertible preferred stock was
initially issued, and the conversion of the convertible notes to common shares
occurred on January 1, 1996. Accordingly, accretion on the redeemable
convertible preferred stock and incremental common shares issuable upon
conversion of such preferred stock and convertible notes are excluded in all of
the calculations.
Stock Options
During 1995, the Financial Accounting Standards Board issued Statement No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation," which establishes a
fair value based method of accounting for stock-based compensation plans and
requires additional financial statement footnote disclosures for those companies
that elect not to adopt SFAS 123. The Company will continue to account for
employees stock options under APB No. 25, "Accounting for Stock Issued to
Employees" and has included SFAS 123 disclosures beginning in fiscal 1996. See
Note 14.
Note 4 - Fair Value of Financial Instruments
For certain instruments that are short-term in nature, such as cash and
cash equivalents, short-term investments, working capital facilities and secured
note payable, carrying value approximates fair value. Management has determined
that it is not practicable to estimate fair value for note payable-NHI and
zero-coupon notes, as no market for such instruments currently exists. See Note
9.
Note 5 - Supplemental Schedule of Cash Flow Information
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C> <C>
1996 1995 1994
(in thousands)
Interest paid......................................... $ 265 $ 1,310 $ 2,105
Income taxes paid (refunded).......................... 1,706 1,436 (664)
Note 6 - Inventories
December 31,
1996 1995
(in thousands)
Raw materials........................................................... $ 6,097 $ 6,435
Work in process......................................................... 5,160 4,375
Finished goods.......................................................... 2,838 1,702
------------- --------------
Total.............................................................. $ 14,095 $ 12,512
============= ==============
</TABLE>
F-10
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Inventories (cont'd.)
Inventories are stated net of reserves for obsolete and slow moving items
of $20.1 million and $25.7 million at December 31, 1996 and 1995, respectively.
During 1996, inventory disposals which had previously been fully reserved
totaled $4.4 million.
Note 7 - Property, Plant and Equipment
December 31,
1996 1995
(in thousands)
Land .................................. $ 952 $ 16,930
Buildings and improvements............. 10,943 39,979
Furniture, fixtures and equipment...... 43,381 49,672
Construction in progress............... - 92
------------- --------------
55,276 106,673
Less accumulated depreciation.......... (45,217) (68,914)
-------------- ---------------
Total......................... $ 10,059 $ 37,759
============== ===============
Depreciation charged to operations was $2.1 million, $3.7 million and $3.7
million in 1996, 1995 and 1994, respectively.
In January 1996, the Company completed the sale of its real property in
Redwood City, California for $36.0 million. The net book value of the property
at the time of the sale was $26.2 million. The sale resulted in a gain of
approximately $8.3 million. Of this amount, approximately $2.4 million
represents imputed interest on the secured notes (and will be recognized over
the terms of the notes), and $4.1 million will be recognized over a five-year
period representing the noncancelable portion of two of the Company's leases
relating to the property. The remaining $1.8 million will be deferred for four
years. If, at that time, the Company decides to continue the two leases for an
additional six- to nine-year period, the $1.8 million will be recognized over
the remaining terms of the leases; otherwise, the $1.8 million gain will be
offset by lease cancellation fees of the same amount. At December 31, 1996 the
balance of the deferred gain was $5.2 million.
In May 1996, the Company completed the sale of the smaller of its two
manufacturing facilities in Colorado Springs, Colorado for $3.6 million, and
realized a gain of $0.9 million on the sale. The net book value of the property
at the time of the sale was $2.4 million.
Note 8 - Other Accrued Liabilities
December 31,
1996 1995
(in thousands)
Compensation and employee benefits....... $ 6,552 $ 6,283
Pension.................................. 5,435 5,351
Warranty and other product costs......... 2,337 3,609
Customer deposits........................ - 35
Other.................................... 7,705 8,662
------------- --------------
Total................................ $ 22,029 $ 23,940
============= ==============
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Debt
December 31,
1996 1995
Notes Payable
Working capital facilities......... $ 909 $ 1,000
Secured note payable............... - 1,000
Note payable - NHI................. 166 246
------------- --------------
$ 1,075 $ 2,246
============= ==============
Long-term Debt
Working capital facilities......... $ 914 $ 2,331
Secured note payable............... - 6,333
Zero-coupon notes.................. - 22,921
------------- --------------
$ 914 $ 31,585
============= ==============
Working Capital Facilities
Ampex has a loan from a foreign bank and a revolving credit line with a
domestic financial institution to finance working capital requirements. Average
borrowings under these agreements during 1996 and 1995 were $2.3 million at an
average interest rate of 2.5%, and $4.0 million at an average interest rate of
3.2%, respectively. Maximum borrowings outstanding at any time during 1996 and
1995 were $3.3 million and $4.7 million, respectively. At December 31, 1996 and
1995, under these agreements $1.8 million and $3.3 million were outstanding,
respectively. The Company's domestic revolving credit agreement permits
borrowings up to $7.0 million, based on eligible accounts receivable as defined
in the agreement, less a standby letter of credit facility in the amount of $1.5
million. At December 31, 1996 under the domestic revolving credit agreement
there was $4,669 outstanding and at December 31, 1995 there was $0.3 million
outstanding. The Company pays a monthly commitment fee of 0.5% per annum based
on the average daily unused amount. The borrowings are collateralized by certain
current assets of the Company.
Secured Note Payable
The note bore interest at a per annum rate equal to 4% above the prime rate
(as defined) which was 12.5% at December 31, 1995. In January 1996, the Company
completed the sale of its real property in Redwood City, California and paid the
note in full.
Note Payable - NHI
The note is a non-interest bearing demand promissory note held by NHI. The
remaining balance of $0.2 million at December 31, 1996 is expected to be paid or
converted to shares of Common Stock in 1997.
Zero-Coupon Notes
The 3-year zero-coupon unsecured notes were convertible into shares of
Common Stock at a rate 311.476 shares for each $1,000 principal amount at
maturity. In 1996, holders of the convertible notes converted all such notes
into approximately 8.5 million shares of Common Stock. In addition, all warrants
issued to the holders of the convertible notes were exercised in 1995 and 1996.
See Note 14.
F-12
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Debt (cont'd.)
Noncurrent Maturities of Long-Term Debt
The following table summarizes the scheduled noncurrent maturities of the
Company's long-term debt as of December 31, 1996, for years subsequent to 1997
(amounts include future accretion to principal amounts):
Year (in thousands)
1998...................................... $ 914
Note 10 - Other Liabilities
December 31,
1996 1995
(in thousands)
Pension............................... $ 18,370 $ 26,832
Reserve for contingent liabilities.... 27,015 25,644
Other postemployment benefits......... 6,894 7,609
Other................................. 7,954 4,995
------------- --------------
Total............................. $ 60,233 $ 65,080
============= ==============
The decline in the pension liability was attributable to the gain on the
fair value of the plan assets offset in part by the decrease in the assumed
discount rate from 7.5% in 1995 to 7.25% in 1996. See note 15.
Note 11 - Commitments and Contingencies
Leases
The Company leases certain manufacturing and office facilities and
equipment under operating lease agreements. As of December 31, 1996 future
annual lease obligations under leases with noncancellable lease terms in excess
of one year were as follows:
Year (in thousands)
1997...................................... 4,450
1998...................................... 3,897
1999...................................... 3,756
2000...................................... 3,482
2001...................................... 3,202
Thereafter................................ 327
------------
$ 19,114
Total rent expense for all operating leases was $5.1 million, $2.9 million
and $3.6 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-13
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Commitments and Contingencies (cont'd.)
In January 1996, the Company completed the sale of its real property in
Redwood City, California and leased back a portion of the property from the
purchaser. Future annual lease obligations, included in the above table, under
two lease agreements with noncancellable lease terms until April 2001
approximates $1.8 million per year. An additional $1.8 million representing a
potential lease termination penalty was included in the table above. The Company
funded $3.8 million of leasehold improvements in 1996 which, with interest, will
be refunded by the property owner through rent credits. Rent credits of $0.4
million were used in 1996, leaving a balance including accrued interest of $3.5
million at December 31, 1996. Rent credits are not reflected in the above table.
The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease payments
as of December 31, 1996:
Year (in thousands)
1997...................................... 279
1998...................................... 95
1999...................................... 48
----------
Net minimum lease payments................ 422
Less amount representing interest......... (51)
-----------
Present value of net minimum lease
payments................................ $371
==========
The gross book value and accumulated depreciation of capital leases at
December 31, 1996 were $0.6 million and $0.1 million, respectively.
Legal Proceedings
The Company is currently a defendant in lawsuits that have arisen in the
ordinary course of its business. Management does not believe that any such
lawsuits or unasserted claims will have a material adverse effect on the
Company's financial position, results of operations or cash flows.
In addition, certain subsidiaries have been assessed income and value added
taxes together with penalties and interest by Italian tax authorities. The
Company has been indemnified by its former owner for costs of defending this
action as well as for payments in excess of certain amounts that have been
provided for in the accompanying financial statements.
Environmental Matters
The Company currently is involved in various stages of investigation and
cleanup relative to environmental protection matters, some of which relate to
past disposal practices. Some of these matters are being overseen by state or
federal agencies. Management has recorded certain amounts related to
investigation and cleanup costs and believes that the final disposition of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Commitments and Contingencies (cont'd.)
Guarantees
The Company has certain arrangements with banks primarily to facilitate the
issuance of performance guarantees or letters of credit. At December 31, 1996
and 1995, the Company was contingently liable for $2.0 million and $0.9 million,
respectively, of general performance guarantees and letters of credit. The
Company has not recorded reserves for potential losses for these items at
December 31, 1996 and 1995.
Note 12 - Preferred Stock
In February 1995, the Company completed a refinancing in which all
outstanding Redeemable Convertible Preferred Stock, which had an aggregate value
at January 31, 1995 of approximately $84.8 million, was exchanged for shares of
a new series of 8% Noncumulative Redeemable Preferred Stock with an aggregate
liquidation value of $70.0 million and 11 million shares of Common Stock. The
transaction eliminated the obligation of the Company to accrue dividends on
preferred stock unless dividends are declared on Common Stock and eliminated the
right of the holders of the Redeemable Convertible Preferred Stock to convert
their shares into up to 27.9 million shares of Common Stock.
The Noncumulative Redeemable Preferred Stock is subject to optional
redemption by the Company at any time and mandatory redemption, at the election
of the holders thereof, on December 31, 1997, out of funds legally available
therefor. Mandatory or optional redemption payments are payable in cash or, at
the option of the Company, in shares of Common Stock, provided that, as a
condition to redemption in shares, the average market price of the Company's
Common Stock must have been at least $4 per share during the 10 trading days
preceding the notice of redemption. Common Stock issued to redeem the Preferred
Stock shall be valued at 90% of fair market value. The Company has no current
plans to redeem the Preferred Stock prior to maturity. As at December 31, 1996,
the Company did not have sufficient funds legally available to redeem the
Preferred Stock. In the event the Company has insufficient funds legally
available to redeem the Preferred Stock on the scheduled redemption date, the
Company would be required to redeem such shares thereafter to the extent funds
become legally available therefor, and would be precluded from declaring
dividends on its Common Stock until the Preferred Stock has been redeemed.
Note 13 - Related Party Transactions
During 1995 and 1996, the Company received five-year notes for the purchase
of Common Stock by an affiliated company in the principal amount of $2,052,750
and $2,200,000, respectively. The notes bear annual interest at 7.96% and 6.72%,
respectively, and are collateralized by the purchased shares. A voluntary
prepayment of $273,700 against the initial note was received in 1996.
Note 14 - Common Stock, Stock Options and Warrants
The Company's authorized capital stock consists of Class A Common Stock
("Class A Stock"), Class C Common Stock ("Class C Stock", and collectively with
Class A Stock, the "Common Stock") and Preferred Stock. Shares of Class C Stock
and Preferred Stock are generally nonvoting except in circumstances specified in
the Company's charter documents or as otherwise required by applicable corporate
law. Accordingly, holders of Class A Stock are generally the only stockholders
with voting rights. Each share of Class C Stock converts into one share of Class
A Stock automatically following transfer unless otherwise elected by the
transferee.
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Common Stock, Stock Options and Warrants (cont'd.)
The Company's 1992 Stock Incentive Plan (the "Stock Incentive Plan") for
directors, executive officers and other key employees provides for the granting
of "non-qualified stock options" and "incentive stock options" to acquire Class
A Stock and/or the granting of stock appreciation rights to obtain, in cash or
shares of Class A Stock, the benefit of the appreciation of the value of shares
of Class A Stock after the grant date.
On April 14, 1994 the Stock Incentive Plan Committee of the Board of
Directors ("the Committee") accelerated the vesting of all stock options that
had been granted on June 18, 1993, so that they would become immediately
exercisable in full. On April 25, 1994, the Committee approved the repricing of
all outstanding options under the Stock Incentive Plan (except for options held
by the Chief Executive Officer) to an exercise price of $2.375 per share, which
was the fair value of the Class A Stock on April 25, 1994. Prior to the
repricing, the options had exercise prices of $6.00 and $4.75 per share.
On January 10, 1995 the Committee approved the repricing of 104,000 options
that had been granted on April 14, 1994 and 50,000 options that had been granted
on November 4, 1994 to an exercise price of $1.50 per share, which was the fair
market value of the stock on January 10, 1995. Prior to the repricing, the
options had an exercise price of $2.375 per share.
On May 19, 1995, at the Company's Annual Meeting, stockholders authorized
the issuance of an additional 1,500,000 shares under the 1992 Stock Incentive
Plan, of which 1,100,000 shares had been authorized by the Company's Board of
Directors on June 16, 1994, and 400,000 had been authorized on December 16,
1994.
On June 7, 1996, at the Company 's Annual Meeting, stockholders authorized
the issuance of an additional 2,000,000 shares under the 1992 Stock Incentive
Plan. The Company is currently authorized to issue up to 4,250,000 shares of
Class A Stock under the Stock Incentive Plan.
At December 31, 1996 there were 2,396,900 options outstanding, including
1,085,490 vested options. The exercise prices range from $1.50 to $10.50 per
share and vesting schedules vary from immediate vesting to vesting over a
four-year period.
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<PAGE>
<TABLE>
<CAPTION>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Common Stock, Stock Options and Warrants (cont'd.)
Shares Available Number of Aggregate
for Grant Options Price Per Share Exercise Price
<S> <C> <C> <C> <C>
Balances, December 31, 1993 68,200 681,800 $ 4.75-6.00 $ 3,829,175
Authorized 1,500,000
Granted (1,933,300) 1,933,300 1.50-2.375 3,674,589
Canceled 820,600 (820,600) 2.375-6.00 (4,149,763)
Balances, December 31, 1994 455,500 1,794,500 $ 1.50-6.00 $ 3,354,001
Granted (517,400) 517,400 1.50-3.6875 1,475,825
Canceled 297,560 (297,560) 1.50-2.375 (637,178)
Exercised (7,900) 2.375 (18,763)
Balances, December 31, 1995 235,660 2,006,440 $1.50-3.6875 $ 4,173,885
Authorized 2,000,000
Granted (914,750) 914,750 3.75-10.50 6,781,750
Canceled 129,390 (129,390) 1.50-6.438 (390,054)
Exercised (394,900) 1.50-3.625 (800,350)
Balances, December 31, 1996 1,450,300 2,396,900 $ 1.50-10.50 $ 9,765,231
========= ========= ============ ============
</TABLE>
At December 31, 1996, there were no warrants outstanding. During 1996 and
1995, there were 1,699,499 and 1,344,985 shares, respectively, of Common Stock
at $0.01 per share issued on the exercise of warrants.
The Company has elected to account for employee stock options using the
intrinsic value method prescribed by APB No. 25, "Accounting for Stock Issued to
Employees" and therefore compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock. Had
compensation cost for the Company's stock-based compensation plan been
determined on the fair value of the grant dates for awards under those plans
consistent with the method of Statement of Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation", the Company's net income
and fully diluted income per share would have been reduced to the pro forma
amounts indicated below:
December 31,
1996 1995
(in thousands)
Net income:
As reported............................ $ 12,741 $ 63,293
------------- --------------
Pro forma.............................. $ 11,616 $ 63,118
------------- --------------
Fully diluted income per share:
As reported............................ $ 0.28 $ 1.39
------------- --------------
Pro forma.............................. $ 0.26 $ 1.39
------------- --------------
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Common Stock, Stock Options and Warrants (cont'd.)
The fair values of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
December 31,
1996 1995
Expected life (years)......... 1.67-5.0 1.0-4.0
------------- --------------
Risk-free interest rate....... 5.2-6.7% 5.6-7.9%
------------- --------------
Expected volatility........... 1.38-1.46 1.49-1.61
------------- --------------
Expected dividend yield....... - -
------------- --------------
The options outstanding and currently exercisable by exercise price at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Currently
Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$1.50-$2.38 1,240,650 7.49 $1.71 960,730 $1.78
$3.63-$5.75 705,250 5.58 $4.83 127,260 $3.85
$6.00-$7.25 137,500 3.48 $7.01 2,500 $6.00
$10.50 306,500 2.59 $10.50 S/B S/B
- -
</TABLE>
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Pension Plans
The Company's domestic employees participate in a qualified noncontributory
defined benefit pension plan. Benefits are based on years of service and salary
levels during the highest 60 consecutive months of the last 120 consecutive
months of service. In early 1994, the Company amended the plan to terminate
benefit service and compensation credit accruals as of February 1, 1994. The
impact of this curtailment was not material to the Company's liability accounts
relating to its pension plan. Certain of the Company's employees employed by its
foreign subsidiaries are covered by contributory pension plans maintained and
funded in accordance with local laws.
Pension expense for the domestic plan in 1996, 1995 and 1994 consisted of
the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost........................................... - $ - $ 144
Interest on projected benefit obligation............... $ 11,500 11,723 11,245
Actual return on assets................................ (22,061) (11,313) (11,509)
Amortization of unrecognized prior
service costs........................................ 10,481 - -
-------------- ------------- ----------
Net periodic pension cost (benefit)................ $ (80) $ 410 $ (120)
=============== ============= ===========
</TABLE>
The domestic plan funded status and amounts included in the consolidated
balance sheets are as follows:
December 31,
1996 1995
(in thousands)
Actuarial present value of benefits:
Vested.............................. $ 164,027 $ 151,047
Nonvested........................... 606 7,048
------------- -------------
Total accumulated benefits........ $ 164,633 $ 158,095
============= =============
Projected benefit obligation............ $ (164,633) $ (158,095)
Less: plan assets at fair value......... 144,848 129,790
------------- -------------
(19,785) (28,305)
Unrecognized net loss................... - -
Tax benefit of excess pension liability. - -
------------- -------------
Accrued pension cost.................... $ (19,785) $ (28,305)
============== ==============
In connection with the sale of Media, the Company became the sponsor of the
Media pension plan, and its ultimate liability will remain the same as it was
prior to the sale. Media has agreed to provide continued funding for the plan,
but if it fails to do so, the Company may be required to make funding payments
or to make any required termination liability payments. As of December 31, 1996,
the Company's consolidated balance sheets reflected $1.9 million in "other
liabilities" as an approximation of the Media plan's underfunding status. The
Media plan's projected benefit obligation and plan assets at fair value were
approximately $37.3 million and $35.5 million, respectively.
F-19
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Pension Plans (cont'd.)
Actuarial assumptions as of December 31, 1996 and 1995 are as follows:
December 31,
1996 1995
Assumed discount rate............... 7.25% 7.5%
Rate of compensation increase....... N/A N/A
Expected long-term rate of return... 9.0% 9.0%
Assets of the domestic pension plan are invested in directed trusts. At
December 31, 1996 and 1995, assets of the directed trusts were primarily
invested in U.S. government obligations, corporate stocks and bonds and units of
common investment funds consisting of short-term interest bearing instruments
and common stock.
In accordance with Statement of Financial Accounting Standards No. 87, the
Company has recorded an additional minimum pension liability for the underfunded
plan of $10.5 million at December 31, 1996 and $13.7 million at December 31,
1995, representing the excess of unfunded accumulated benefit obligations over
previously recorded pension cost liabilities. To the extent that these
additional liabilities exceed related unrecognized prior service cost and net
transition obligations, the increase or decrease in liabilities is charged
directly to stockholders' deficit. For 1996 and 1995, ($3.1) and $9.5 million,
respectively, was charged (credited) to shareholders' deficit.
The components of foreign pension expense were as follows:
<TABLE>
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994
----------------- ---------------- ----------------
(in thousands)
<S> <C> <C> <C>
Service Cost.................................................... $ 1,225 $ 88 $ 2
Interest Cost................................................... 136 664 844
Return on assets................................................ - (1,695) 704
Amortization and deferral....................................... 13 969 (1,795)
---------------- ---------------- ----------------
Net periodic pension cost (benefit)........................... $ 1,374 $ 26 $ (245)
================ ================ ================
</TABLE>
F-20
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Pension Plans (cont'd.)
The reconciliation of the funded status of the foreign plans is as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
Plans In Which Plans In Which
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
(in thousands)
Actuarial present value of benefits:
<S> <C> <C> <C> <C>
Vested....................................... $ - $ 1,710 $ 4,539 $ 1,736
Nonvested.................................... - 125 266 108
------------ ----------- ------------ ------------
Total accumulated benefits................. $ - $ 1,835 $ 4,805 $ 1,844
============ =========== ============ ============
Projected benefit obligation................... $ - $ (2,034) $ (5,847) $ (2,054)
Less: plan assets at fair value................ - - 8,741 -
------------ ----------- ------------ ------------
................................... - (2,034) 2,894 (2,054)
Remaining unrecognized transition
net (asset) obligation....................... - (65) (1,721) (25)
------------ ------------ ------------- -------------
Prepaid (accrued) pension cost................. $ - $ (2,099) $ 1,173 $ (2,079)
============ ============ ============ =============
</TABLE>
Effective July 1, 1996, the United Kingdom defined benefit pension plan was
terminated and replaced by a new defined contribution retirement plan. Due to
the termination, there was no accrued or prepaid pension cost remaining at
December 31, 1996 and service cost included the amount which reflects all
components of the prorated net pension cost.
The Company also maintains a 401(k) savings plan available to domestic
employees. The Company matches certain portions of employee contributions after
one year of service. Contributions and expenses in connection with this plan
amounted to $0.8 million, $0.7 million and $1.0 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
Note 16 - Postretirement Benefits Other Than Pensions
Until December 31, 1995, the Company provided retiree health care benefits
to eligible domestic employees and their dependents upon retirement. Effective
January 1, 1993, the Company's contribution to participants' premiums was frozen
at 1992 levels. Effective March 1, 1994, the Company further reduced its
aggregate contributions to participants by modifying the method for determining
subsidy levels. In December 1994, the Company's Board of Directors terminated
the retiree medical plan effective December 31, 1995 and reduced premium subsidy
levels by 50% effective from April 1, 1995 until termination of the plan. These
actions resulted in a one-time curtailment gain of $7.3 million in 1994.
The Company adopted Statement of Financial Accounting Standards No. 106
("SFAS 106"), "Employer's Accounting for Postretirement Benefits Other Than
Pensions," effective January 1, 1993. The impact of adopting SFAS 106 was not
material.
F-21
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - Postretirement Benefits Other Than Pensions (cont'd.)
The following table sets forth the retiree health care plan's combined
funded status reconciled with the amount shown in the Company's financial
statements:
<TABLE>
<CAPTION>
December 31,
1996 1995
(in thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................. $ - $ (101)
Fully eligible active plan participants.............................. - -
Other active plan participants....................................... - -
------------- --------------
Accumulated postretirement benefit obligation........................... - (101)
Plan assets at fair value............................................... - -
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions.............................. - -
Prior service cost not yet recognized in net periodic postretirement
benefit cost......................................................... - -
------------- --------------
Prepaid(accrued) postretirement benefit cost............................ $ - $ (101)
============= ==============
Net period postretirement benefit cost included the following components:
Service cost............................................................ - -
Interest cost........................................................... - -
Net amortization and deferral........................................... - -
------------- --------------
Net periodic postretirement benefit cost............................. - -
------------- --------------
Net postretirement benefit claims for the fiscal year ended............. $ - $ 730
============= ==============
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% as of December 31, 1995.
Note 17 - Royalty Income
In 1996, 1995 and 1994, the Company received and recognized non-recurring
royalty payments attributable to the settlement of patent litigation and other
negotiated settlements related to prior sales of products by licensees. Such
non-recurring royalties amounted to $2.0 million, $10.5 million and $5.1 million
in 1996, 1995 and 1994, respectively. The balance of royalties in these years
are recurring royalty income.
Note 18 - Restructuring Charges (Credits)
In connection with the Company's decision to refocus its business toward
mass data storage products and to narrow its product line in its traditional
television markets, the Company began to restructure operations in 1990. These
efforts were essentially completed by the end of 1994.
F-22
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Restructuring Charges (Credits) (cont'd.)
Restructuring charges (credits) for the years ended December 31, 1996 and
1995 consist of the following (there were no restructuring charges (credits) in
1994):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
(in thousands)
<S> <C> <C>
Provisions for vacated lease obligations..................... $ (200) $ (1,480)
Costs associated with closure of foreign subsidiaries........ (253) (1,000)
-------- ----------
$ (453) $ (2,480)
======== ==========
</TABLE>
In 1996 and 1995, excess accruals of $0.5 and $2.5 million (reflecting
lower than anticipated expenses for the closure of foreign subsidiaries and
lease obligations) were credited to operating income.
Accruals for restructuring costs totaled $7.6 million at December 31, 1996
including $7.0 million relating to vacated or abandoned leases.
Note 19 - Income Taxes
Income from continuing operations before income taxes for domestic and
foreign operations consisted of the following:
Year Ended December 31,
1996 1995 1994
(in thousands)
Domestic ........................ $ 16,016 $ 20,822 $ 14,850
Foreign ........................ (1,621) (494) 2,108
-------- -------- --------
........................ $ 14,395 $ 20,328 $ 16,958
======== ======== ========
The provision for income taxes consisted of the following:
Year Ended December 31,
1996 1995 1994
(in thousands)
Current:
Federal........................ $ 178 $ (500) -
State.......................... 92 50 $ 9
Foreign........................ 312 5 671
Foreign withholding taxes on
royalty income.............. 1,072 1,366 910
-------- -------- ---------
1,654 921 1,590
-------- -------- ---------
Deferred:
Federal........................ - - -
Foreign........................ - - (174)
-------- -------- ---------
$ 1,654 $ 921 $1,416
======== ======== =========
F-23
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19 - Income Taxes (cont'd.)
The difference between taxes computed by applying the statutory federal
corporate income tax rate (effective for 1996, 1995, and 1994) to income from
continuing operations before income taxes and the actual provision for income
taxes was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Federal income tax provision
at statutory rate.................................... $ 5,038 $ 7,114 $ 5,935
Foreign losses not benefitted............................ 879 178 -
Rates in excess of U.S................................... 951 1,605 4,586
Temporary differences not previously benefitted.......... (2,286) (7,534) (9,134)
Net operating losses not previously benefitted........... (3,205) - -
Other, net............................................... 277 (442) 29
----------- ------------- -------------
$ 1,654 $ 921 $ 1,416
=========== ============= =============
</TABLE>
An income tax liability of $1.1 million, representing the alternative
minimum tax due on the disposition of Media, has been recognized against the
gain of business held for disposition in 1995.
The following table shows the major components of the deferred income tax
assets and liabilities as of December 31, 1996 and 1995:
December 31,
1996 1995
(in thousands)
Inventory basis differences...................... $ 5,996 $ 8,086
Restructuring reserves and other
liabilities not yet deductible
for tax purposes............................ 17,910 19,192
Loss carryforwards............................... 33,360 34,957
Foreign withholding taxes on
undistributed earnings of
foreign subsidiaries........................ (1,314) (1,379)
Property, plant and equipment
basis differences........................... 73 (4,703)
Credit from prior
year's minimum tax.......................... 1,315 -
Other............................................ 8,909 10,148
Less valuation allowance......................... (67,563) (67,680)
-------- --------
Deferred tax liability........................... $ (1,314) $ (1,379)
======== ========
A valuation allowance has been established to reduce the deferred tax asset
to the amount expected to be realized.
F-24
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19 - Income Taxes (cont'd.)
As at December 31, 1996, the Company had net operating loss carryforwards
for income tax purposes of $95.3 million expiring in the years 2005 through
2009. As a result of the financing transactions that were completed in April
1994 and February 1995, the Company's ability to utilize its net operating
losses and credit carryforwards as an offset against future consolidated federal
income tax liabilities will be restricted in its application, which will result
in a material amount of the net operating loss never being utilized by the
Company.
Note 20 - Foreign Operations
The following table shows certain financial information relating to the
Company's continuing operations in various geographical areas: Year ended
December 31, 1996 1995 1994
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C> <C>
Net Sales:
United States........................................ $ 92,711 $ 91,908 $ 115,458
Europe, Africa and the Middle East................... 20,744 21,324 27,577
Other foreign........................................ 4,884 5,572 7,378
Eliminations (1)..................................... (21,854) (23,142) (23,201)
-------------- ------------- --------------
Total........................................ $ 96,485 $ 95,662 $ 127,212
============== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
(1) Inter-area sales, primarily from the United States.
Year Ended December 31,
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Income before income taxes:
United States........................................ $ 8,918 $ 9,256 $ 2,866
Europe, Africa and the Middle East................... 1,352 3,704 8,269
Other foreign........................................ 350 1,116 671
Royalties............................................ 10,497 15,006 7,371
Eliminations and corporate expenses.................. (6,722) (8,754) (2,219)
-------------- ------------- --------------
Total........................................ $ 14,395 $ 20,328 $ 16,958
============= ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
(in thousands)
<S> <C> <C>
Identifiable assets:
United States.......................................................... $ 48,521 $ 62,690
Europe, Africa and the Middle East..................................... 6,565 6,031
Other foreign.......................................................... 1,484 1,620
Eliminations and corporate............................................. 27,922 18,310
---------- -----------
Total.......................................................... $ 84,492 $ 88,651
========== ===========
</TABLE>
F-25
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<PAGE>
AMPEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20 - Foreign Operations (cont'd.)
Transfers between geographic areas are at cost plus a reasonable profit.
Sales from the United States include export sales to unaffiliated customers of
$7.3 million, $7.1 million and $12.6 million in 1996, 1995 and 1994,
respectively. Identifiable assets are classified by the location of the
Company's facilities and include cash, accounts receivable, inventory and
property, plant and equipment. Corporate assets consisted principally of cash
and short-term investments at December 31, 1996, 1995 and 1994.
Note 21 - Major Customers
Direct and indirect sales to various U.S. government agencies amounted to
approximately $17.4 million, $14.0 million and $27.2 million for 1996, 1995 and
1994, respectively. In 1994, sales to one customer from the U.S. geographical
area accounted for approximately 16.9% of total net sales. In 1996 and 1995 no
other single customer accounted for more than 10% of total net sales.
Note 22 - Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
(In thousands, except share data)
Fiscal 1996
Quarters ended March 31 June 30 Sept. 30 Dec. 31
- -------------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $24,232 $24,420 $23,604 $24,229
Gross profit 10,861 10,902 11,022 11,293
Net income $ 3,473 $ 3,972 $ 3,103 $ 2,193
Fully diluted income per share $ 0.09 $ 0.09 $ 0.07 $ 0.05
Fiscal 1995
- -----------
Quarters ended March 31 June 30 Sept. 30 Dec. 31
- -------------- -------- ------- -------- -------
Net sales $24,115 $24,043 $23,431 $24,073
Gross profit 10,471 10,598 11,239 11,578
Net income $ 5,629 $ 5,956 $ 3,361 $48,347
Fully diluted income per share $ 0.12 $ 0.15 $ 0.09 $ 1.08
</TABLE>
The net income for the quarter ended December 31, 1995 included an after
tax gain of business held for disposition of $43.9 million. See note 2.
F-26
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<PAGE>
AMPEX CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Accountants on Financial Statement Schedule.....
Schedule II - Valuation and Qualifying Accounts................. S-3
S-1
C/M: 11115.0000 428474.10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Stockholders
Ampex Corporation
Our report on the consolidated financial statements of Ampex Corporation is
included on page F-2 of this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index on page S-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 7, 1997
S-2
C/M: 11115.0000 428474.10
<PAGE>
<TABLE>
<CAPTION>
AMPEX CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Additions Charges to Balance at
beginning of cost and other end of
Description period expenses accounts(1) (Deductions)(2) period
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts and sales returns
December 31, 1994 $ 9,227 $ (928) $ (560) $ (2,335) $ 5,404
- -----------------
December 31, 1995 $ 5,404 $ (858) $ (221) $ (1,784) $ 2,541
- -----------------
December 31, 1996 $ 2,541 $ (192) $ (94) $ (14) $ 2,241
- -----------------
Allowance for obsolete and
slow moving inventory
December 31, 1994 $ 42,008 $ 2,990 $ (58) $ (15,463) $ 29,477
- -----------------
December 31, 1995 $ 29,477 $ 1,930 $ 1,958 $ (7,692) $ 25,673
- -----------------
December 31, 1996 $ 25,673 $ (362) $ - $ (5,234) $ 20,077
- -----------------
- -----------------------------
</TABLE>
(1) Includes transfers and reclassifications to other accounts.
(2) Includes write-offs of accounts receivable and inventories.
C/M: 11115.0000 428474.10
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMPEX CORPORATION
By: /s/ Edward J. Bramson
Edward J. Bramson
Chairman and Chief Executive Officer
Date: March 11, 1997
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Edward J. Bramson and Joel D.
Talcott or either of them, with full power to act, his attorney-in-fact, with
the power of substitution for him in any and all capacities, to sign any or all
amendments to this report, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
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 Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Edward J. Bramson Chairman, Chief Executive Officer March 11, 1997
- -------------------------------
Edward J. Bramson and Director (Principal Executive Officer)
/s/ Craig L. McKibben Vice President, Chief Financial Officer, March 11, 1997
- -------------------------------
Craig L. McKibben Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Douglas T. McClure, Jr. Director March 11, 1997
- -------------------------------
Douglas T. McClure, Jr.
/s/ Peter Slusser Director March 11, 1997
Peter Slusser
/s/ William A. Stoltzfus, Jr. Director March 11, 1997
- -------------------------------
William A. Stoltzfus, Jr.
</TABLE>
-35-
C/M: 11115.0000 428474.10
<PAGE>
AMPEX CORPORATION
1995 FORM 10-K
EXHIBIT INDEX
Exhibit
Number Description
10.13 Loan and Security Agreement by and between Ampex Finance
Corporation and Congress Financial Corporation dated May 5,
1994 (filed as Exhibit 10.2 to the First Quarter 1994 10-Q
and incorporated herein by reference) and Amendment Agreement
dated as of July 31, 1995, second Amendment Agreement, dated
March 29, 1996 (filed as Exhibit 10.2 to Second Quarter 1996
10-Q and incorporated herein by reference) and third Amendment
Agreement, dated December 26, 1996
10.15 Stock Purchase Agreement, dated October 22, 1996, between the
Company and Edward J. Bramson
10.17 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 132,150 square feet of premises
located on Douglas Avenue and on Broadway in Redwood City,
California (filed as Exhibit 2.03 to the January 1996 8-K and
incorporated herein by reference) as amended by amendment
dated December 20, 1996.
11.1 Statement re Computation of Per Share Earnings
21.1 Subsidiaries of the Company
23.1 Consent of Independent Accountants
25.1 Power of Attorney (included in the signature page of this
Report)
27.1 Financial Data Schedule
C/M: 11115.0000 428474.10
<PAGE>
Exhibit 10.13
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of December 26, 1996 (the "Amendment"),
between Ampex Finance Corporation (the "Borrower") and Congress Financial
Corporation (Western) (the "Lender").
WHEREAS, the Borrower and Congress Financial Corporation are parties to
that certain Loan and Security Agreement dated as of May 5, 1994, as amended
(the "Loan Agreement"); and
WHEREAS, Congress Financial Corporation (Western) has succeeded to the
interests of Congress Financial Corporation by assignment and is for all
purposes the Lender under the Loan Agreement, as the same may be amended from
time to time; and
WHEREAS, Borrower has requested a standby letter of credit facility and
Lender has agreed to provide such a facility as a $1,510,000 sublimit to the
current revolving line of credit facility; and
WHEREAS, Borrower is to be the joint applicant on one or more letters of
credit and the parent of Borrower, Ampex Corporation, is to be the other
co-applicant; and
WHEREAS, Borrower has agreed to guarantee in favor of the Lender the
obligations of Ampex Corporation in the event the Lender or its affiliates
including Core States Bank, N.A. suffers a loss under any letter of credit or
letter of credit guaranty made to an issuing bank on behalf of Ampex
Corporation and Ampex Corporation has agreed to guarantee in favor of the
Lender any obligations of the Borrower incurred in connection with such a
guarantee, such guarantee to be in consideration for the direct benefit
obtained by Ampex Corporation in connection with such letters of credit.
WHEREAS, Lender has agreed to eliminate the $750,000 availability reserve.
WHEREAS, Borrower and Lender have agreed to amend the Loan Agreement on
the terms and subject to the conditions herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and subject to the fulfillment of the conditions
set forth below, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT
1.1 The definition of "Availability Reserve" shall be amended to insert
after the words "the amount of the Revolving Loans" and before the words "which
would otherwise be available to the Borrower" the words "and the Letter of
Credit Accommodations."
1.2 A new definition shall be added as follows:
"Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer.
C/M: 11115.0000 428474.10
<PAGE>
1.3 The definition of "Obligations" shall be amended to add after the
words "Revolving Loans" and before the words "and all other" the words ",
Letter of Credit Accommodations".
1.4 Section 2.1(c) shall be amended in its entirety to read as follows:
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans
and Letter of Credit Accommodations, exceed the amounts available under
the lending formulas, the sublimits for Letter of Credit Accommodations
set forth in Section 2.2(c) or the Maximum Credit, as applicable, such
event shall not limit, waive or otherwise affect any rights of Lender on
any future occasions and Borrower shall, upon demand by Lender, which may
be made at any time or from time to time, immediately repay to Lender the
entire amount of any such excess(es) for which payment is demanded.
1.5 There shall be added a new Section 2.2 which shall read in its
entirety as follows (and the current Section 2.2 shall be renumbered Section
2.3).
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter
of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made
by Lender to any issuer thereof and/or related parties in connection with
the Letter of Credit Accommodations shall constitute additional Revolving
Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, so long
as any of the Obligations are outstanding, Borrower shall pay to Lender a
letter of credit fee at a rate equal to one and one-half (1 1/2%) percent
per annum for each calendar month (or part thereof), payable in arrears as
of the first day of each succeeding month, upon the daily outstanding
balance of the Letter of Credit Accommodations for such month (or part
thereof) provided, that, if any of the Letter of Credit Accommodations
have expired with any amount due and remaining unpaid thereunder, such
Letter of Credit Accommodation shall continue to be included in the daily
outstanding balance of the Letter of Credit Accommodations for purposes of
calculating such letter of credit fee until the earlier of (i) the payment
under the Letter of Credit Accommodation of all amounts which were due and
unpaid upon its expiration or (ii) a period of thirty (30) days after the
stated expiration date of such Letter of Credit Accommodation. Such letter
of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrower to
pay such fee shall survive the termination or non-renewal of this
Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations,
the Revolving Loans available to Borrower (subject to the Maximum Credit
and any Availability Reserves) are equal to or greater than an amount
equal to one hundred (100%) percent of the face amount of such proposed
Letter of Credit Accommodations and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the issuance
of each Letter of Credit Accommodation, the amount of Revolving Loans
which might otherwise be available to Borrower shall be reduced as set
forth in this Section 2.2(c).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations
made or incurred by Lender in connection therewith, shall not at any time
exceed $1,510,000. Borrower shall execute, deliver and perform
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additional agreements relating to the Letter of Credit Accommodations in
form and substance acceptable to Lender and the issuer of any Letter of
Credit Accommodations. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower will either
furnish cash collateral to secure the reimbursement obligations to the
issuing bank in connection with any Letter of Credit Accommodations or
furnish cash collateral to Lender for the Letter of Credit Accommodations,
and in either case, the Revolving Loans otherwise available to Borrower
shall not be reduced as provided in Section 2.2(c) to the extent of such
cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including, but not limited to, any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation. Borrower
assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed Borrower's agent.
Borrower assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods subject to
any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless
from and against any acts, waivers, errors, delays or omissions, whether
caused by Borrower, by any issuer or correspondent or otherwise, other
than those caused by the gross negligence or wilful misconduct of Lender,
with respect to or relating to any Letter of Credit Accommodation. The
provisions of this Section 2.2(e) shall survive the payment of Obligations
and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any
Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. Borrower shall be bound by any
interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right
and authority to, and Borrower shall not at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any
questions of non-compliance of documents, (B) give any instructions as to
acceptance or rejection of any documents or goods or (C) execute any and
all applications for steamship or airway guaranties, indemnities or
delivery orders. Borrower shall not without the prior written consent of
Lender (A) grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents, or (B)
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the
Collateral. In connection with this subsection (f), Lender may take such
actions either in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation,
shall be deemed to have been granted or undertaken by Borrower to Lender.
Any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation,
or any other agreement by Lender in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to have
been undertaken by Borrower to Lender and to apply in all respects to
Borrower.
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1.5A The current Section 2.2 (which is now re-numbered Section 2.3 hereby)
shall have deleted from it the following sentence, "As of the date hereof, and
until otherwise determined by the Lender, the Availability Reserve shall be
maintained at $750,000."
1.6 Section 3.4 shall be amended to add after the words "outstanding
Revolving Loans" and before the words "during the immediately preceding month"
the words "and Letter of Credit Accommodations".
1.7 Section 4.2 shall be amended to (x) amend the heading to "Conditions
Precedent to All Loans and Letter of Credit Accommodations", (y) amend the lead
in language after the words "making Loans" to read "and providing Letter of
Credit Accommodations to Borrower, including the initial Loans and the Letter
of Credit Accommodations and any future Loans and Letter of Credit Obligations"
and (z) to amend subsection (a) after the words "each such Loan" and before the
words "and after giving" the words "or providing such Letter of Credit
Accommodations".
1.8 Section 6.1 shall be amended to add after the words "(a) all Loans"
and before the words "and other Obligations", the words ", Letter of Credit
Accommodations"
1.9 Section 6.5 shall be amended in its entirety as follows:
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall
specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a business day) and
the amount of the requested Loan or Letter of Credit Accommodations.
Requests received after 10:30 a.m. California time on any day shall be
deemed to have been made as of the opening of business on the immediately
following business day. All Loans and Letter of Credit Accommodations
under this Agreement shall be conclusively presumed to have been made to,
and at the request of and for the benefit of, Borrower when deposited to
the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and
conditions of this Agreement.
1.10 Section 6.6 shall be amended to add after the words "All other Loans
made" and before the words "by Lender" the words "or Letter of Credit
Accommodations provided"
1.11 Section 8 is amended by adding after the word "Loans" in the lead in
language and before the words "by Lender to Borrower" in the lead in language
the words "and the providing of Letter of Credit Accommodations"
1.12 Section 9.10(d) is amended by inserting at the end of thereof the
words, "and guarantees of Ampex's obligations in connection with any Letter of
Credit Accommodations or guarantees by Ampex thereof".
1.13 Section 9.12 is amended by adding after the words "pursuant to the
RSSA," and before the words "Borrower shall not enter into" the words "and
except for transactions with Ampex involving any Letter of Credit
Accommodations or guarantees thereof,"
1.14 Section 9.17 is amended by inserting the following lead in language
before subparagraph (a) thereof: "Except with respect to any Letter of Credit
Accommodations and any related guarantees thereof:".
1.15 Section 9.14(f) shall be amended to remove after the words "and
office;" and before "(g)" the word "and"
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Section 9.14(g) shall be amended to remove the period after the words "the
foregoing" and inserting a semi-colon
There shall be a new subsection (h) which shall read in its entirety:
(h) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations.
1.16 Section 9.21 shall be amended (x) by adding after the words "making
of loans" and before the words "contained herein" the words "and providing
Letter of Credit Accommodations" and (y) by adding after the words "make any
further Loans" and before the words "until Lender" the words "or provide any
further Letter of Credit Accommodations"
1.17 Section 10.2(d)(i) and (ii) shall be amended in its entirety as
follows:
(i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving
Loans and Letter of Credit Accommodations available to Borrower and/or
(ii) terminate any provision of this Agreement providing for any future
Loans or Letter of Credit Accommodations to be made by Lender to Borrower.
1.18 Section 12.1(a) shall be amended by inserting after the words
"contingent Obligations," and before the words "including checks or other" the
words "and issued and outstanding Letter of Credit Accommodations,"
1.19 Section 12.4 shall be amended by inserting after the words "all or
any part of the Loans" and before the words "or any other interest herein" the
words ",the Letter of Credit Accommodations"
SECTION 2. MISCELLANEOUS
2.1 The Borrower reaffirms and restates that representations and
warranties set forth in Section 8 of the Loan Agreement and confirms that each
such representation and warranty shall be true and correct on the date hereof
with the same force and effect as if made on such date. In addition, the
Borrower represents and warrants (which representations and warranties shall
survive the execution and delivery hereof) that (a) no Defaults or Events of
Default exist as of the date hereof, (b) the Borrower has taken or caused to be
taken all necessary corporate action to authorize the execution and delivery of
this Amendment, and (c) no consent of any other person (including, without
limitation, shareholders or creditors of the Borrower), and no action of, or
filing with any governmental or public body or authority is required to
authorize, or is otherwise required in connection with the execution and
performance of this Amendment other than such that have been obtained.
2.2 Except as herein expressly amended, each of the Loan Agreement and
Loan Documents is hereby ratified and confirmed in all respects and shall
remain in full force and effect in accordance with its terms.
2.3 All references to the Loan Agreement in various Loan Documents shall
mean the Loan Agreement as amended hereby and as the same may in the future be
amended, restated, supplemented or modified from time to time. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Loan Agreement.
2.4 This Amendment may be executed by the parties hereto individually or
in combination, in one or more counterparts, each of which shall be an original
and all of which shall constitute one and the same agreement.
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2.5 THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
AMPEX FINANCE CORPORATION
By: /s/Ramon Venema
Name: Ramon Venema
Title: Vice President
CONGRESS FINANCIAL CORPORATION
(WESTERN)
By: /s/Christine Metchikian
Name: Christine Metchikian
Title:
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Exhibit 10.15
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of October 22, 1996, between Ampex Corporation, a
Delaware corporation (the "Corporation") and Edward J. Bramson, Chairman and
Chief Executive of the Corporation (the "Executive").
Preliminary Statement.
2.6 The Board of Directors of the Corporation has authorized the
Corporation to sell to the Executive or his permitted designee up to 400,000
shares of the Class A Common Stock, par value $0.01 ("Common Stock") of the
Corporation, as an inducement to the Executive to remain as an officer and
director of the Corporation, all on the terms set forth in this Agreement; and
2.7 The Corporation and the Executive are entering into this Agreement in
order to evidence the terms of sale to the Executive, and set forth the terms
and conditions thereof.
(a) Agreement of Sale. The Corporation hereby agrees to sell to the
Executive up to 400,000 shares (the "Shares") of Common Stock, at a price of
$6.875 per share, upon and subject to the terms and conditions set forth
hereinbelow.
(b) Purchase Procedure and Payment.
(i) Purchase Procedure.
(i) Subject to the conditions set forth in this Agreement, (1) the
Executive may purchase the Shares at any time prior to October 31, 1996 by
the delivery of written notice (the "Purchase Notice") to the Corporation,
and (2) the Purchase Notice shall specify the number of Shares to be
purchased and the name of any Permitted Designee (as defined below) in
which the Shares being purchased shall be registered, and shall contain
the following representations and warranties of the Executive: (u) the
Executive is acquiring the Shares directly or through his Permitted
Designee (as the case may be) for his own account and not with a view to,
or present intention of, distribution thereof in violation of the
Securities Act of 1933 (the "1933 Act") or any applicable state securities
laws and will not sell or permit his Permitted Designee to sell or
otherwise transfer the Shares unless registered or exempt from
registration under the 1933 Act and such state laws, (v) the Executive is
able to bear the economic risks of his investment in the Shares for an
indefinite period of time, (w) the Executive is familiar with the
business, financial or other condition, assets, liabilities, properties,
operations, management and prospects of the Corporation, (x) the Executive
has had full access to such information concerning the Corporation as he
has requested and is satisfied that there is no material information
concerning the Corporation of which he is unaware, (y) the Executive has
knowledge, skill and experience in business, financial and investment
matters so as to enable the Executive to understand and evaluate the
merits and risks of an investment in the Shares and form an investment
decision with respect thereto and (z) acknowledges that a portion of the
Shares is subject to repurchase by the Corporation under certain
circumstances as provided below.
(ii) Upon receipt of the Purchase Notice and of the payment therefor
specified below, the Corporation shall deliver to the Executive or his
Permitted Designee a certificate or certificates representing the Shares
being purchased, at the Corporation's sole cost and expense. Unless
registered under the 1933 Act, such certificate or certificates
representing the Shares sold to the Executive pursuant to this Agreement
shall bear the following legend:
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"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND ACCORDINGLY MAY NOT BE OFFERED, SOLD OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT EXCEPT PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
(ii) Payment. Subject to the provisions of paragraph 3 below, the
Executive shall pay for the Shares purchased pursuant to this Agreement by
delivery of (i) cash, or a check in good funds payable to the Corporation, in
an amount equal to twenty percent (20%) of the purchase price, and (ii) a
promissory note (the "Note") of the Executive for the balance, and a related
pledge agreement (the "Pledge Agreement"), in form and substance reasonably
satisfactory to counsel to the Corporation. The Note shall bear interest,
payable annually on each December 31 during the term thereof and at maturity,
at the Applicable Federal Rate (as defined in the Internal Revenue Code); shall
be due and payable in a single installment on the fifth anniversary date
thereof; shall be secured by a pledge of all the Shares under the Pledge
Agreement; and shall otherwise conform to the terms specified in the
resolutions of the Board of Directors of the Corporation which authorized the
sale.
(c) Non-Assignability. The Executive shall not assign, transfer, or
otherwise dispose of his rights under this Agreement, except that Executive may
cause a "Permitted Designee", as defined below, to purchase, pay for and hold
the Shares in its name and for its own account. At the Executive's election,
specified in any Purchase Notice, the Corporation shall issue and deliver the
certificate or certificates representing the Shares being purchased by the
Executive or his Permitted Designee, against receipt by the Corporation from
the Permitted Designee of the cash and a Note and Pledge Agreement containing
terms specified in paragraph 2(b) above, duly executed and delivered by the
Permitted Designee (in lieu of the Executive), in payment of the purchase price
specified above. The term "Permitted Designee" shall mean a corporation,
limited liability company, partnership or other entity which, at the time of
purchase, is controlled solely by the Executive.
(d) Registration Rights. The Corporation hereby grants to the Executive or
his Permitted Designee (as the case may be) the right to cause the Corporation
to register the Shares purchased hereunder for sale under the 1993 Act, on
terms comparable to those contained in the Registration Rights Agreement, dated
as of February 10, 1995, between the Corporation and Sherborne Investments
Corporation, as currently in effect.
(e) Repurchase Rights. The Corporation shall have the right to repurchase
from the Executive or his Permitted Designee (as the case may be) up to 200,000
Shares purchased by the Executive pursuant to this Agreement, at $6.875 per
share, if the Executive shall voluntarily resign as both an officer and a
director of the Corporation or shall be terminated for Cause (as defined
below), prior to the second anniversary of the date of this Agreement, or to
repurchase up to 100,000 of such shares, at $6.875 per share, if the Executive
shall so resign or shall be terminated for Cause on or after the second
anniversary of the date of this Agreement and before the third anniversary of
the date of this Agreement, in either case by delivery to the Executive of
written notice of repurchase within 30 days after the effective date of his
resignation or termination. In the event of any such repurchase, the
Corporation shall refund to the Executive (or his Permitted Designee, as the
case may be) the amount of cash paid for such Shares (including any principal
or interest payments on the Note) and return the Note to the obligor against
receipt by the Corporation of the certificate representing the Shares so
repurchased and a new Note in the appropriate principal amount. The Executive
shall take all actions reasonably required in order to cause his Permitted
Designee to comply with the terms of this paragraph 5. The term "Cause" shall
mean conviction of a felony involving acts injurious to the Corporation.
(f) Miscellaneous.
(i) This Agreement may not be modified or amended unless evidenced in
writing and signed by the Corporation and the Executive.
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(ii) All notices under this Agreement shall be mailed (registered or
certified) or delivered by hand or facsimile transmission addressed, if to the
Corporation, at 500 Broadway, Redwood City, California 94063, attention,
General Counsel, and, if to the Executive, at his office at 65 East 55th
Street, New York, New York 10022, or at such other address as may be designated
in writing by either of them to the other.
(iii) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
(iv) This Agreement shall be binding upon and inure to the benefit of the
heirs, successors and assigns of the parties, subject to the limitations set
forth in paragraph 3.
[End of Text]
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IN WITNESS WHEREOF the parties have executed this Agreement on the date
first set forth above.
AMPEX CORPORATION
By: /s/ Craig L. McKibben
Name: Craig L. McKibben
Title: Vice President
/s/ Edward J. Bramson
Name: Edward J. Bramson
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Exhibit 10.17
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment") is entered into this 20th day
of December, 1996, by and between MARTIN/CAMPUS ASSOCIATES, L.P., a Delaware
limited partnership ("Landlord") and AMPEX CORPORATION, a Delaware corporation
("Tenant").
RECITALS
This Amendment is based upon the following facts, understandings and
intentions of the parties.
A. Tenant and Landlord entered into that certain Lease dated January 19,
1996 (the "Lease") of certain premises located at 1220 Douglas Avenue
("Building 8"), 1250 Douglas Avenue ("Building 20") and 550 Broadway ("Building
10"), Redwood City, California, more particularly described in the Lease.
Tenant and Landlord also entered into that certain lease dated January 19, 1996
(the "Temporary Lease") of certain premises (the "Temporary Premises") located
at 2755 Bay Road ("Building 1"), 2655 Bay Road ("Building 2"), 401 Broadway
("Building 3"), 411 Broadway ("Building 3A"), 565 Broadway ("Building 11") and
595 Broadway ("Building 14"), Redwood City, California, more particularly
described in the Temporary Lease.
B. Landlord and Tenant have had certain disputes regarding the
construction of the Tenant Improvements and the Capital Improvements.
C. Landlord and Tenant now desire to amend the Lease to clarify and revise
the obligations of Landlord and Tenant with respect to the construction of the
Tenant Improvements and the Capital Improvements. Landlord and Tenant also
desire to amend the Temporary Lease to clarify and revise certain provisions
with respect to the payment of rent under the Temporary Lease.
NOW, therefore, in consideration of the mutual covenants and promises set
forth in this Amendment and other valuable consideration, receipt of which is
hereby acknowledged, the parties do hereby agree as follows:
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1. Definitions. Terms defined in the Lease shall have the same meanings
when used in this Amendment.
2. Capital Improvements. Section 3(B) of the Lease is hereby deleted in
its entirety and the following is hereby substituted in its place:
B. Capital Improvements.
(i) The term "Capital Improvements" shall mean the Initial Capital
Improvements and the Deferred Capital Improvements, collectively.
(ii) The term "Initial Capital Improvements" shall mean only the
following improvements to be made to the Premises by Landlord: (aa)
installation of a new roof on Buildings 8, 10 and Building 20, as shown on (and
with warranties described in) the Final Plans and Specifications; (bb) purchase
and installation of all components of the HVAC system for the Premises, in
accordance with the Final Plans and Specifications, including all HVAC
mechanical equipment to be located on, in or around the Buildings, the main air
distribution system, and all HVAC duct work, distribution, related electrical
and structural work and controls (only as expressly shown on Exhibit A attached
to the Amendment); (cc) installation of new landscaping on the Premises; (dd)
repair, resurfacing and restriping the parking lots located on the Premises;
(ee) completion of structural repairs to the Premises in accordance with the
report prepared by Cecil Wells dated December 27, 1995; (ff) painting the
exterior of each Building; and (gg) completion of the certain work required to
bring the Premises into compliance with laws, codes, ordinances and regulations
(the "Code Compliance Work"); provided, however, that the Initial Capital
Improvements shall not include the following work or expenses (all of which
shall be included in the Tenant Improvement Work, defined below): (A) all
electrical work in Building 8 shown on the Final Plans and Specifications; (B)
installation of the acoustical ceiling in Building 20 as shown on the Final
Plans and Specifications; (c) interior painting and VWC in Building 20; (D)
installation of fire sprinklers in Building 20 as shown on the Final Plans and
Specifications; and (E) process piping in the Premises associated with Tenant's
manufacturing activities in the Premises. The Initial Capital Improvements and
Tenant Improvements line item breakdown is shown on Exhibit A attached to the
Amendment, provided that such breakdown does not contain separate line items
for the Code Compliance Work, which is included in some of the line items shown
on Exhibit A attached to the Amendment under the column for Initial Capital
Improvements. Notwithstanding the breakdown contained in Exhibit A, if the cost
of the Initial Capital Improvements exceeds the amount set forth on Exhibit A
in the aggregate, plus the applicable portion of the contingency line item,
then Landlord shall be responsible for any such excess costs, subject only to
the provisions of Section 6 of the Work Letter.
(iii) There shall be no "Deferred Capital Improvements" as such term
is used in the Lease.
(iv) The term "Amendment" shall mean that certain First Amendment to
Lease, dated December 20 1996, between Landlord and Tenant.
(v) The term "Final Plans and Specifications" shall mean those
certain plans and specifications described on Exhibit B attached to the
Amendment, as such plans and specifications may be modified by change orders
approved in writing by Landlord and Tenant pursuant to the terms of Section 6
of the Work Letter Agreement attached to the Lease as Exhibit B (the "Work
Letter").
3. Tenant Improvements. Section 3(R) of the Lease is hereby deleted in its
entirety and the following is hereby substituted in its place:
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R. Tenant Improvements. All improvements and personal property shown
on the Final Plans and Specifications, but the Tenant Improvements shall not
include the Capital Improvements. The Cost of Tenant Improvements shall also
include the cost of removal of the friable asbestos in Building 10 described in
the work order attached as Exhibit C to the Amendment. The foregoing sentence
shall not expand or limit any obligations regarding asbestos abatement under
the Purchase and Sale Agreement dated November 29, 1995 (as amended) between
Landlord's predecessor in interest and Tenant.
4. Capital Improvement Work. The first six (6) sentences of Section 10(A)
of the Lease are hereby deleted in their entirety and the following is hereby
substituted in their place:
A. Capital Improvements. Except for the parking lot, landscaping and
punch list items, Landlord has completed the Initial Capital Improvements
required for the Commencement Date to occur. The cost of $2,498,500.00 shall be
paid by Tenant ("Tenant's Share of Initial Capital Improvements Costs"), and
the cost of any Initial Capital Improvements in excess of $2,498,500.00 shall
be paid by Landlord without reimbursement by Tenant; provided, however, that
Tenant shall also pay the net increased cost of Initial Capital Improvements
resulting from any change orders requested by Tenant pursuant to Section 6 of
the Work Letter.
5. Capital Improvement Costs. The following is hereby inserted at the end
of Section 10(A) of the Lease:
The parties agree that the costs of the Initial Capital Improvements
and the "Tenant Improvement Cost", as defined in the Work Letter, may
not be separately allocated or segregated in Landlord's contracts
with its general contractor. The parties have agreed to the
allocation of all hard and soft costs, permit fees and other costs
and expenses incurred in connection with the Tenant Improvements and
the Capital Improvements as set forth in Exhibit A, subject to the
provisions of Section 6 of the Work Letter.
6. Note Credit. The following is hereby added to the Lease as a new
Section 10 (C) :
C. Note Credit. In consideration for Landlord's construction of the
Capital Improvements and payment of all Initial Capital Improvement Costs in
excess of Tenant's Share of Initial Capital Improvement Costs, upon substantial
completion of the Initial Capital Improvements, Landlord shall receive a credit
in an amount equal to $705,973.00 (the "Note Credit") against payment of that
certain promissory note in the original principal amount of $6,500,000.00,
dated January 19, 1996, executed by Landlord in favor of Tenant. A form of
amendment to the Note is attached to the Amendment as Exhibit D (the "Note
Amendment"). The Note Credit shall be reduced by an amount equal to the net
cost savings, if any, resulting from any approved change orders requested by
Tenant after the date of the Amendment, and approved by Landlord, for the
Initial Capital Improvements work described in Section 3 (B) (ii) (bb) and
(gg), but in no event shall the Note Credit be reduced below zero.
7. Work Letter. The first sentence of the Work Letter is hereby deleted in
its entirety and the following is substituted in its place: "In connection with
the Tenant Improvements to be installed in the Premises, the parties hereby
agree as follows:"
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8. Final Plans and Specifications. Landlord and Tenant hereby approve the
plans and specifications described on Exhibit B attached to this Amendment
(other than the parking lot plan and the landscaping plan). Landlord and Tenant
hereby agree that the plans and specifications described on Exhibit B attached
to this Amendment (other than the parking lot plan and the landscaping plan)
shall constitute the "Final Plans and Specifications" for all purposes under
the Lease and the Work Letter.
9. Budget. Landlord and Tenant hereby approve the cost estimate for Tenant
Improvement costs shown on Exhibit A attached to this Amendment. Landlord and
Tenant hereby agree that the cost estimate attached to this Amendment as
Exhibit A shall constitute the cost estimate described in Section 2 of the Work
Letter. Moreover, Landlord shall cause the Tenant Improvements to be
constructed by Devcon Construction Company ("Devcon") pursuant to a guaranteed
maximum cost contract (the "Devcon Contract") having such estimate as the
guaranteed maximum cost for the Tenant Improvements, subject to the provisions
of Section 6 of the Work Letter; provided, however, if the actual cost of any
Tenant Improvement line item that is identified as an allowance item on Exhibit
A attached to the Amendment ("Allowance Item") exceeds the amount set forth on
Exhibit A for such Allowance Item, then Tenant shall pay such excess amount.
Prior to using any amount from the contingency line item, approval from Ampex
shall be requested by Devcon or Landlord, but if Tenant's representative is not
available, delay in obtaining such approval would delay completion of the
Tenant Improvement Work and no more than $5,000 from the contingency line item
(in the aggregate) will have been used after using the requested amount from
such contingency line item, such amount may be utilized. Tenant shall be made a
beneficiary to the Devcon Contract, and the Devcon Contract shall include a
provision that Devcon's response to all change order requests shall be
reasonable.
10. Tenant Improvement Costs. The first three lines of Section 5 of the
Work Letter are hereby deleted in their entirety, and the following are
substituted in their place:
Tenant shall pay all actual costs and expenses incurred in connection with
the design, governmental approval, purchase, construction and installation of
the Tenant Improvements (the "Tenant Improvement Costs"), which shall include,
without limitation, the following:
11. HVAC Cost. The following phrase shall be deleted from Section 5 (d) of
the Work Letter: "and the cost of relocating all HVAC within the Buildings to
accommodate Tenant's space plan".
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12. Change Requests. The third, fourth and last sentences of Section 6 of
the Work Letter are hereby deleted in their entirety. The following is hereby
substituted in place of the last sentence of Section 6 of the Work Letter.
For any change order requested by Tenant which does not require
significant changes in the Capital Improvements or the Tenant Improvements
(collectively, the "Work") , Landlord shall respond within three (3)
business days by providing Tenant with a written response (a "Change Order
Response") setting forth whether Landlord disapproves the requested change
order (in which case Landlord shall set forth with specificity the reasons
for such disapproval, which must be reasonable) or, if such change order
is acceptable to Landlord, the net increase or decrease in cost resulting
from the implementation of the requested change order, together with a
reasonably detailed calculation of such changes in cost and the delay. For
change orders requested by Tenant which require significant changes in the
Work the Change Order Response shall be submitted by Landlord as soon as
reasonably possible. Amounts attributable to contractor's and
subcontractor's profit and overhead shall not exceed the percentage
charged for the same category in the applicable construction contract or
subcontract. Tenant may request additional information from Landlord
regarding the Change Order Response. Tenant may thereafter instruct
Landlord to implement the requested change order or may request Landlord
to modify the requested change order. No requested change order shall be
implemented without Tenant's express written instruction, nor shall any
Work be delayed nor shall Landlord be obligated to delay any Work, unless
and until Tenant gives much express written instruction. The net change in
cost of the Work and the delay (if any) set forth in the Change Order
Response which Tenant elects to implement shall be binding on the parties
and shall be paid by Tenant as set forth in Paragraph 4 of this Work
Letter. Landlord shall have no obligation to approve any Letter. Landlord
shall have no obligation to approve any change orders requested and
implemented by Tenant which would extend the substantial completion of the
Work by more than fifteen (15) calendar days, in the aggregate, beyond the
date such substantial completion would otherwise take place. The parties
hereby agree that it shall be reasonable for Landlord to disapprove any
requested changes if such changes: (i) do not conform to applicable
governmental rules and regulations, (ii) have a material adverse effect on
the structural integrity or systems of the Buildings, or (iii) Landlord
reasonably determines that the changes are of lesser quality than the
overall quality of the Premises. The net increased cost of any changes to
the Plans and Specifications requested by Landlord or required for any
reason other than a request by Tenant shall be paid by Landlord.
13. Tenant Delays. The Lease is hereby amended to add the following
Section 7 of the Work Letter. In addition, to the extent applicable, the
Temporary Lease is hereby amended by the following:
7. Tenant Delays. Notwithstanding any provision of the Temporary
Lease to the contrary, in addition to the provisions of Section 6 of this
Work Letter, if at any time after the date of the Amendment (except as set
forth in the following sentence) a Tenant Delay, defined below, occurs,
the Commencement Date (and the Rent Commencement Date for the Building or
Buildings affected by such Tenant Delay) shall be deemed to occur on the
date that such Commencement Date (and Rent Commencement Date) would have
occurred without such delay. The parties agree that, as of the date
hereof, there has been no Tenant Delay and that Tenant owes no rent under
the Temporary Lease. The term "Tenant Delay" shall mean any delay that
Landlord may encounter in the performance of Landlord's obligations under
the Lease because of any act or omission of any nature by Tenant or its
agents or contractors, including any delay attributable to Tenant or its
contractors or subcontractors interfering with
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Landlord's contractor. Tenant shall pay all actual, reasonable costs and
expenses incurred by Landlord which result from any Tenant Delay,
including, without limitation, any actual costs and expenses attributable
to increases in the cost of labor or materials. Tenant Delay shall not
include time taken by Landlord or its contractor to provide reasonable
amounts of back up information requested in writing by Tenant.
No Tenant Delay shall be deemed to have occurred under this Section 7
unless and until Landlord has given written notice to Tenant specifying
the action or inaction which Landlord contends constitutes a Tenant Delay.
If such action or inaction in not cured within two (2) business days after
Tenant's receipt of such notice, then a Tenant Delay, as set forth in such
notice, shall be deemed to have occurred commencing as of the date Tenant
received such notice and continuing for the number of days the substantial
completion of the Capital Improvements or the Tenant Improvements was in
fact delayed as a direct result of such action or inaction.
14. Representations and Warranties of Tenant. As a material inducement to
Landlord to enter into this Amendment, Tenant represents and warrants to
Landlord that, as of the date of this Amendment:
14.1. No Defaults. The Lease is in full force and effect. There are
no defaults by Landlord or Tenant under the Lease, and no circumstance has
occurred which, but for the expiration of an applicable grace period, would
constitute an event of default by Landlord or Tenant under the Lease. Tenant
has no defenses or rights of offset under the Lease except as expressly
provided therein.
14.2 Authority. Tenant has full right, power and authority to enter
into this Amendment, and has obtained all necessary consents and resolutions
from its board of directors required (if any) under the documents governing its
affairs in order to consummate this transaction, and the persons executing this
Amendment have been duly authorized to do so. The Amendment and the Lease are
binding obligations of Tenant, enforceable in accordance with their terms.
14.3. No Assignments. Tenant is the sole lawful tenant under the
Lease, and Tenant has not sublet, assigned or otherwise transferred any of the
right, title or interest of Tenant under the Lease or arising from its use or
occupancy of the Premises, and no other person, partnership, unrelated
corporation or other entity has any right, title or interest in the Lease or
the Premises, or the right to occupy or use all or any part of the Premises.
15. Representations and Warranties of Landlord. As a material inducement
to Tenant to enter into this Amendment, Landlord represents and warrants to
Tenant that, as of the date of this Amendment:
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15.1. No Defaults. The Lease is in full force and effect. There are
no defaults by Landlord or Tenant under the Lease, and no circumstance has
occurred which, but for the expiration of an applicable grace period, would
constitute an event of default by Landlord or Tenant under the Lease. Landlord
has no defenses under the Lease or the Note except as expressly provided
therein.
15.2. Authority. Landlord has full right, power and authority to
enter into this Amendment, and has obtained all necessary consents and
resolutions from its members required under the documents governing its affairs
in order to consummate this transaction, and the persons executing this
Amendment have been duly authorized to do so. The Amendment and the Lease are
binding obligations of Landlord, enforceable in accordance with their terms.
15.3. No Assignments. Landlord is the sole and lawful landlord under
the Lease, and Landlord has not assigned or otherwise transferred, other than
for security purposes, any of the right, title or interest of Landlord under
the Lease or arising from its ownership of the Premises, and no other person,
partnership, corporation or other entity has any right, title or interest in
the Premises.
16. Building Term. Item (i) set forth in the first paragraph of Section 4
of the Temporary Lease is hereby deleted in its entirety, and the following is
submitted in its place:
(i) with respect to Building 1, the Term of this Lease shall expire
on October 17, 1996;
17. Rent. Section 5(A) of the Temporary Lease is hereby amended to add the
following at the end of the section:
In addition to the foregoing, with respect to Building 1, Tenant shall pay
Monthly Rent of $32,600.00 for the eighth (8th) month of the Term and
$35,000.00 for the ninth (9th) month of the Term, prorated on the basis of
a thirty (30) day month for any partial month.
18. Execution of Documents. Concurrent with the execution of this
Amendment, Landlord and Tenant shall execute the Note Amendment and a
memorandum confirming that March 22, 1996 is the commencement date of the
Building 22 Lease.
19. Execution of Documents. This Amendment is and shall constitute an
amendment to the Lease and shall be effective as of the date of this Amendment.
Except as modified hereby, all of the terms and conditions of the Lease shall
remain in full force and effect. This Amendment is and shall also constitute
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an amendment to the Temporary Lease and shall be effective as of the date of
this Amendment. Except as modified hereby, all of the terms and conditions of
the Temporary Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
day and year first above written.
LANDLORD: MARTIN/CAMPUS ASSOCIATES, L.P., a
Delaware limited partnership
By: Martin/Redwood Partners, L.P.,
a California limited partnership
General Partner
By: The Martin Group of Companies, Inc.,
a California corporation
By:----------------------------------------
Its:-----------------------------------
TENANT: AMPEX CORPORATION,
a Delaware corporation
By:----------------------------------------
Its:-----------------------------------
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EXHIBIT D
FIRST AMENDMENT TO SECURED PURCHASE MONEY PROMISSORY NOTE
THIS FIRST AMENDMENT TO SECURED PURCHASE MONEY PROMISSORY NOTE is entered
into this 20th day of December, 1996 by and between MARTIN/CAMPUS ASSOCIATES,
L.P., a Delaware limited partnership ("Debtor"), and AMPEX CORPORATION, a
Delaware corporation ("Creditor").
RECITALS
This Amendment is based an the following facts, understandings and
intentions of the parties.
A. Debtor and Creditor entered into that certain Secured Purchase Money
Promissory Note in the principal amount of $6,500,000 on January 24, 1996 (the
"Note") in connection with their entrance into a purchase and sale agreement
dated January 19, 1996 (the "Purchase Agreement"). Debtor and Creditor entered
into a lease dated as of January 19, 1996 and amended as of December 20, 1996
(collectively, the "Lease").
B. Pursuant to the Lease, Debtor has agreed to perform certain tenant
improvements and capital improvements in return for which Creditor has agreed
to grant Debtor a credit of up to $705,973 towards the principal amount due
under the Note, which amount is subject to reduction if Creditor achieves cost
savings through approved change orders (the "Note Credit")
C. Landlord and Tenant now desire to amend the Note to provide for an
offset in the amount of the Note Credit.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Amendment to Note. This Amendment is and shall constitute an amendment
to the Note and shall be effective as of the date of this Amendment. The Note
is hereby amended by adding the following paragraph to the Note so that it is
the first full paragraph on page 9:
"3. The amount credited to Debtor as a Note Credit up to $705,973.00,
pursuant to Section 10(c) of that certain lease between Creditor and
Debtor dated January 19, 1996, as amended by the First Amendment to Lease
dated December 20, 1996."
Except as modified hereby, all the terms and conditions of the Note shall
remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this amendment the day
hereinabove written.
CREDITOR: AMPEX CORPORATION,
a Delaware corporation
By:--------------------------------
Its:---------------------------
DEBTOR: MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners, L.P.,
a California limited partnership
General Partner
By: THE MARTIN GROUP OF COMPANIES, INC.,
a California corporation
General Partner
By:-------------------------------
Its:-------------------------
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<TABLE>
<CAPTION>
Exhibit 11.1
Ampex Corporation
Computation of Per Share Earnings
For the Year Ended December 31,
------------------------------------------------------------------------------------
1996 1996 1995 1995 1994 1994
Supplementary(2) Supplementary(1) Supplementary(1)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average common stock 43,307,645 44,812,173 31,964,682 33,385,878 20,555,928 28,206,198
Plus: Common stock equivalent warrants 184,173 184,173 2,545,905 2,545,905 2,357,376 2,357,376
Plus: Common stock equivalent stock options 1,231,213 1,231,213 509,514 509,514 - -
----------- ----------- ----------- ------------ ------------ -----------
Adjusted weighted average common stock 44,723,031 46,227,559 35,020,101 36,441,297 22,913,304 30,563,574
----------- ----------- ----------- ------------ ------------ -----------
Income from continuing operations 12,741,000 12,741,000 19,407,000 19,407,000 15,542,000 15,542,000
Less: Redeemable convertible preferred
stock accretion - - (783,248) - (5,905,185) -
----------- ----------- ----------- ------------ ------------ -----------
Adjusted income from continuing operations 12,741,000 12,741,000 18,623,752 19,407,000 9,636,815 15,542,000
----------- ----------- ----------- ------------ ------------ -----------
Primary income per share from
continuing operations $0.28 $0.28 $0.53 $0.53 $0.42 $0.51
=========== =========== =========== ============ ============ ===========
Net income 12,741,000 12,741,000 63,293,000 63,293,000 15,542,000 15,542,000
Less: Redeemable convertible preferred
stock accretion - - (783,248) - (5,905,185) -
----------- ----------- ----------- ------------ ------------ -----------
Adjusted net income 12,741,000 12,741,000 62,509,752 63,293,000 9,636,815 15,542,000
----------- ----------- ----------- ------------ ------------ -----------
Primary income per share $0.28 $0.28 $1.78 $1.74 $0.42 $0.51
=========== =========== =========== ============ ============ ===========
Weighted average common stock 43,307,645 44,812,173 31,964,682 33,385,878 20,555,928 28,206,198
Plus: Common stock equivalent warrants 184,420 184,420 2,551,561 2,551,561 2,357,376 2,357,376
Plus: Common stock equivalent stock options 1,395,338 1,395,338 602,067 602,067 - -
Plus: Weighted average shares on
conversion of notes - - 8,522,598 8,522,598 5,689,537 5,689,537
Plus: Weighted average shares on
conversion of preferred stock - - 3,602,658 - 19,393,034 -
----------- ----------- ----------- ------------ ------------ -----------
Adjusted weighted average common stock 44,887,403 46,391,931 47,243,566 45,062,104 47,995,875 36,253,111
----------- ----------- ----------- ------------ ------------ -----------
Income from continuing operations 12,741,000 12,741,000 19,407,000 19,407,000 15,542,000 15,542,000
Plus: Interest on notes - - 2,550,210 2,550,210 1,597,485 1,597,485
----------- ----------- ----------- ------------ ------------ -----------
Adjusted income from continuing operations 12,741,000 12,741,000 21,957,210 21,957,210 17,139,485 17,139,485
----------- ----------- ----------- ------------ ------------ -----------
Fully diluted income per share
from continuing operations $0.28 $0.27 $0.46 $0.49 $0.36 $0.47
=========== =========== =========== ============ ============ ===========
Net income 12,741,000 12,741,000 63,293,000 63,293,000 15,542,000 15,542,000
Plus: Interest on notes - - 2,550,210 2,550,210 1,597,485 1,597,485
----------- ----------- ----------- ------------ ------------ -----------
Adjusted net income 12,741,000 12,741,000 65,843,210 65,843,210 17,139,485 17,139,485
----------- ----------- ----------- ------------ ------------ -----------
Fully diluted income per share $0.28 $0.27 $1.39 $1.46 $0.36 $0.47
=========== =========== =========== ============ ============ ===========
</TABLE>
Note: In 1994, the stock options are anti-dilutive.
Note: In 1996, the conversion of notes are anti-dilutive.
(1) Under an Exchange Agreement dated February 14, 1995, 89,192 shares of 8%
Cumulative Redeemable Convertible Preferred Stock originally issued in
April 1994 were exchanged for 69,970 shares of 8% Noncumulative Redeemable
Preferred Stock and 11,006,713 shares of Common Stock. The Supplementary
column above indicates the primary and fully diluted income per share, if
this exchange had occurred when the 8% Cumulative Redeemable Convertible
Preferred Stock was initially issued. See Note 3 of Notes to Consolidated
Financial Statements.
(2) The 1996 Supplementary column above indicates the primary and fully
diluted income per share. If the zero-coupon notes had been converted to
Common Stock at the beginning of the year as opposed to the actual
conversions through the period February 9, 1996 to April 1, 1996.
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Exhibit 21.1
AMPEX CORPORATION
LIST OF SUBSIDIARIES
Jurisdiction of
Name Incorporation
Ampex Data Systems Corporation .................. Delaware
Ampex Finance Corporation ....................... Delaware
Ampex International Credit Corporation........... Delaware
Ampex International Sales Corporation ........... California
Ampex Canada Inc. ............................... Canada
Ampex Cintas Magneticas, S.A. ................... Mexico
Ampex de Colombia, S.A. ......................... Colombia
Ampex de Mexico, S.A. de C.V. ................... Mexico
Ampex do Brasil Electronica Ltd. ................ Brazil
Ampex Europa GmbH ............................... Germany
Ampex International S.A. ........................ Switzerland
Ampex Italiana SRL .............................. Italy
Ampex Japan Ltd.................................. Japan
Ampex S.A. (1) .................................. Belgium
Ampex S.A.R.L. .................................. France
Ampex Scandinavia AB (1) ........................ Sweden
Electronica Ampex S.A.C.I. (1) .................. Argentina
Xepma Great Britain Limited (1) ................. United Kingdom
(1) Dissolution pending
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (i) the registration
statement of Ampex Corporation on Form S-8 (File No. 33-77664), (ii) the
registration statement of Ampex Corporation on Form S-8 (File No. 33-92640),
(iii) the Post-Effective Amendment No. 1 on Form S-3 to Form S-1 registration
statement of Ampex Corporation (File No. 33-91312) and (iv) the registration
statement of Ampex Corporation on Form S-3 (File No. 333-5115), of our report
dated March 7, 1997, on our audits of the consolidated financial statements and
financial statement schedules of Ampex Corporation as of December 31, 1996 and
1995 and for the years ended December 31, 1996, 1995 and 1994, which report is
included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 7, 1997
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AMPEX CORPORATION
FORM 10-K
Year Ended December 31, 1996
INDEX Page
PART I 3
ITEM 1. BUSINESS 3
ITEM 2 PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 18
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT 18
PART II 20
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 20
ITEM 6. SELECTED FINANCIAL DATA 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 28
PART III 28
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY 28
ITEM 11. EXECUTIVE COMPENSATION 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 28
PART IV 28
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 28
SIGNATURES AND POWER OF ATTORNEY 35
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-30-1996
<CASH> 13,410
<SECURITIES> 17,241
<RECEIVABLES> 26,888
<ALLOWANCES> (2,241)
<INVENTORY> 14,095
<CURRENT-ASSETS> 72,102
<PP&E> 55,276
<DEPRECIATION> 45,217
<TOTAL-ASSETS> 84,492
<CURRENT-LIABILITIES> 32,825
<BONDS> 0
69,970
0
<COMMON> 454
<OTHER-SE> (86,814)
<TOTAL-LIABILITY-AND-EQUITY> 84,492
<SALES> 96,485
<TOTAL-REVENUES> 96,485
<CGS> 52,407
<TOTAL-COSTS> 95,421 <F1>
<OTHER-EXPENSES> (10,830)<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 756
<INCOME-PRETAX> 14,395
<INCOME-TAX> 1,654
<INCOME-CONTINUING> 12,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,741
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
<FN>
<F1> INCLUDES S&A AND RD&E OF 27,084 AND 15,930 RESPECTIVELY
<F2> INCLUDES ROYALTY INCOME OF 10,497 AND RESTRUCTURING CREDITS OF 453
</FN>
</TABLE>
