SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No. 0-20292
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)
(650) 367-2011
(Registrant's telephone number, including area code)
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
--- ---
As of June 30, 1998, the aggregate number of outstanding shares of the
Registrant's Class A Common Stock, $.01 par value, was 49,782,547. There
were no outstanding shares of the Registrant's Class C Common Stock, $0.01
par value.
<PAGE>
AMPEX CORPORATION
FORM 10-Q
Quarter Ended June 30, 1998
INDEX
Page
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets (unaudited) at June 30, 1998 and
December 31, 1997......................................................................3
Consolidated Statements of Operations and Comprehensive
Income (unaudited) for the three and six months ended
June 30, 1998 and 1997.................................................................4
Consolidated Statements of Cash Flows (unaudited) for the six
months ended June 30, 1998 and 1997....................................................5
Notes to Unaudited Consolidated Financial Statements...................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.....................................................................18
Item 2. Changes in Securities and Use of Proceeds.............................................19
Item 3. Defaults Upon Senior Securities.......................................................19
Item 4. Submission of Matters to a Vote of Security Holders...................................19
Item 5. Other Information.....................................................................19
Item 6(a). Exhibits..............................................................................19
Item 6(b). Reports on Form 8-K...................................................................19
Signatures ......................................................................................21
</TABLE>
2
<PAGE>
AMPEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,983 $ 24,076
Short-term investments 51,063 17,685
Accounts receivable (net of allowances of $2,238 and $1,484) 17,544 13,246
Inventories 22,707 16,380
Other current assets 3,056 1,347
------------- ---------------
Total current assets 103,353 72,734
Property, plant and equipment 9,845 8,892
Intangible assets, net 3,975 -
Other assets 1,108 45
------------- ---------------
Total assets $ 118,281 $ 81,671
============= ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 5,954 $ 933
Accounts payable 8,994 5,173
Income taxes payable 269 373
Accrued restructuring costs 3,318 1,706
Other accrued liabilities 19,257 19,942
------------- ----------------
Total current liabilities 37,792 28,127
Long-term debt 30,050 2
Other liabilities 59,059 70,708
Deferred income taxes 1,236 1,267
Accrued restructuring costs 1,285 1,612
------------- ---------------
Total liabilities 129,422 101,716
------------- ---------------
Commitments and contingencies (Note 6)
Redeemable preferred of subsidiary 1,045 -
Redeemable nonconvertible preferred stock, $1,000 liquidation value:
Authorized: 69,970 shares 1998 and 1997
Issued and outstanding - none 1998; 69,970 shares 1997 - 69,970
Redeemable preferred stock, $2,000 liquidation value:
Authorized: 21,859 shares 1998 and none 1997
Issued and outstanding - 21,859 shares 1998; none 1997 43,718 -
Convertible preferred stock, $2,000 liquidation value:
Authorized: 10,000 shares 1998 and none 1997
Issued and outstanding - 10,000 shares 1998; none 1997 20,000 -
Stockholders' deficit:
Preferred stock, $1.00 par value:
Authorized: 898,171 shares 1998 and 1997
Issued and outstanding - none 1998 and 1997 - -
Common stock, $.01 par value:
Class A:
Authorized: 125,000,000 shares 1998 and 1997
Issued and outstanding - 49,782,547 shares 1998; 45,936,707 shares 498 459
1997
Class C:
Authorized: 50,000,000 shares 1998 and 1997
Issued and outstanding - none 1998 and 1997 - -
Other additional capital 391,962 383,513
Note receivable from stockholder (4,994) (4,818)
Accumulated deficit (434,264) (440,068)
Accumulated other comprehensive income (29,106) (29,101)
------------- ---------------
Total stockholders' deficit (75,904) (90,015)
------------- ---------------
Total liabilities and stockholders' deficit $ 118,281 $ 81,671
============= ===============
The accompanying notes are an integral part of these
unaudited financial statements.
</TABLE>
3
<PAGE>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
-------------------------------- -------------------------------
June 30, June 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 15,194 $ 21,299 $ 32,020 $ 42,380
Cost of sales 8,703 10,681 17,599 21,243
-------------- ------------- ------------- -------------
Gross profit 6,491 10,618 14,421 21,137
Selling and administrative 5,101 6,417 10,108 14,063
Research, development and engineering 3,123 3,890 6,161 7,638
Royalty income (1,670) (1,562) (3,504) (7,344)
Restructuring charges - - 2,800 -
Acquisition of in-process research and development 2,940 - 2,940 -
-------------- ------------- ------------- -------------
Operating income (loss) (3,003) 1,873 (4,084) 6,780
Interest expense 913 23 1,575 54
Amortization of debt financing costs 60 - 97 -
Interest income (899) (735) (1,736) (1,513)
Other (income) expense, net 4 (3) 10 55
-------------- ------------- ------------- -------------
Income (loss) before income taxes (3,081) 2,588 (4,030) 8,184
Provision for (benefit of) income taxes (4,792) 252 (9,834) 904
-------------- ------------- ------------- -------------
Net income 1,711 2,336 5,804 7,280
-------------- ------------- ------------- -------------
Other comprehensive income, net of tax:
Foreign currency translation adjustments (75) 24 (5) (32)
-------------- ------------- ------------- -------------
Comprehensive income $ 1,636 $ 2,360 $ 5,799 $ 7,248
============== ============= ============= =============
Basic income per share:
Income per share $ 0.04 $ 0.05 $ 0.13 $ 0.16
============== ============= ============= =============
Weighted average number of common shares outstanding 46,159,624 45,550,703 46,081,901 46,520,127
============== ============= ============= =============
Diluted income per share:
Income per share $ 0.04 $ 0.05 $ 0.12 $ 0.16
============== ============= ============= =============
Weighted average number of common shares outstanding 47,226,284 46,492,495 46,847,880 46,580,934
============== ============= ============= =============
The accompanying notes are an integral part of these
unaudited financial statements.
</TABLE>
4
<PAGE>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the six months ended
-------------------------
June 30, June 30,
1998 1997
---------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 5,804 $ 7,280
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation, amortization and accretion 1,017 1,068
Acquisition of in-process research and development 2,940 -
Net increase in notes receivable - (426)
Net increase in accounts receivable (2,577) (10)
Net increase in inventories (5,028) (3,642)
Net decrease in long-term receivable 8 132
Net decrease in other assets 3 430
Net increase in accounts payable 1,126 613
Net decrease in accrued liabilities and
income taxes payable (2,151) (3,474)
Net decrease in other non-current obligations (11,242) (3,076)
Net increase (decrease) in accrued restructuring costs 1,285 (919)
------------- -------------
Net cash used in operating activities (8,815) (2,024)
------------- -------------
Cash flows from investing activities:
Purchase of company, net of cash acquired (331) -
Purchases of short-term investments (61,306) (42,953)
Proceeds received on the maturity of short-term investments 21,239 39,890
Proceeds from sale of short-term investments 6,689 -
Additions to property, plant and equipment (1,472) (719)
Deferred gain on sale of assets (407) (407)
------------- -------------
Net cash used in investing activities (35,588) (4,189)
------------- -------------
Cash flows from financing activities:
Borrowings under working capital facilities 18,132 27,235
Repayments under working capital facilities (17,762) (27,664)
Issuance of senior notes and warrants 30,000 -
Debt financing costs (1,169) -
Proceeds from issuance of common stock 136 359
Net cash provided by (used in) financing activities 29,337 (70)
------------- -------------
Effect of exchange rates on cash (27) (210)
------------- -------------
Net decrease in cash and cash equivalents (15,093) (6,493)
Cash and cash equivalents, beginning of period 24,076 13,410
------------- -------------
Cash and cash equivalents, end of period $ 8,983 $ 6,917
============= =============
The accompanying notes are an integral part of these
unaudited financial statements.
</TABLE>
5
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED 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.
On June 30, 1998 Ampex acquired MicroNet Technology, Inc. ("MicroNet").
MicroNet designs and manufactures high-performance disk arrays for the use in
digital image applications, primarily digital pre-press and video. The
Consolidated Balance Sheet includes the acquired value of assets and liabilities
of MicroNet as more fully described in Note 11. The Consolidated Statements of
Operations and Comprehensive Income include a one-time, $2.9 million charge in
the second quarter of 1998 for acquired in-process research and development
related to MicroNet, but since the acquisition was completed late in the second
quarter, none of MicroNet's operating results for the periods ended June 30,
1998 have been included because they are not material to operations.
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 -- Basis of Presentation
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission for reporting on Form 10-Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In addition,
certain reclassifications have been made to the prior year financial statements
to conform to the current year's presentation. The statements should be read in
conjunction with the Company's report on Form 10-K for the year ended December
31, 1997 and the Audited Consolidated Financial Statements included therein.
In the opinion of management, the financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position, results of operations and cash flows
for the interim periods presented. The results of operations for the three and
six-month periods ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive
Income, which specifies the computation, presentation and disclosure
requirements for comprehensive income. The Company implemented SFAS 130 during
the first quarter of 1998.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosure about
Segments of an Enterprise and Related Information. SFAS 131 requires
publicly-held companies to report financial and other information about
revenue-producing segments of the entity for which such information is available
and is utilized by the chief operating decision maker. Specific information to
be reported for the individual segments includes profit or loss, certain revenue
and expense items and total assets. A reconciliation of segment financial
information to amounts reported in the financial statements would be provided.
SFAS 131 is effective for the Company's fiscal year ending December 31, 1998 and
the impact of its adoption has not been determined.
Note 3 -- Income per Common Share
The Company has adopted the provisions of Statement of Financial
Accounting Standards No.128 ("SFAS 128"), Earnings Per Share. SFAS 128 requires
the presentation of basic and diluted income per common share. Basic income per
common share is computed by dividing net income available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted income per common share is computed giving effect to all potentially
dilutive common shares that were outstanding during the period.
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted income per
common share is provided as follows (in thousands, except per share amounts):
6
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------- ---------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
Numerator - Basic
<S> <C> <C> <C> <C>
Net income............................................... $ 1,711 $ 2,336 $ 5,804 $ 7,280
========= ======== ======== =========
Denominator - Basic
Weighted average common stock outstanding................ 46,160 45,551 46,082 45,520
--------- -------- -------- ---------
Basic income per share........................................ $ 0.04 $ 0.05 $ 0.13 $ 0.16
========= ======== ======== ========
Numerator - Diluted
Net income............................................... $ 1,711 $ 2,336 $ 5,804 $ 7,280
========= ======== ======== =========
Denominator - Diluted
Weighted average common stock outstanding................ 46,160 45,551 46,082 45,520
Contingent shares due to acquisition..................... 40 - 20 -
Effect of dilutive securities:
Stock options........................................ 268 942 307 1,061
Redeemable preferred stock........................... 576 - 288 -
Convertible preferred stock.......................... 164 - 82 -
Warrants............................................. 18 - 69 -
--------- -------- -------- ---------
47,226 46,493 46,848 46,581
--------- -------- -------- ---------
Diluted income per share...................................... $ 0.04 $ 0.05 $ 0.12 $ 0.16
========= ======== ======== ========
</TABLE>
In connection with the acquisition of MicroNet, the Company issued
720,000 shares of Common Stock. Such shares are held in escrow subject to
completion of an audit of the closing balance sheet but have been included in
the computation of diluted weighted average common stock outstanding only from
June 30, 1998. See Note 11.
In connection with the redemption of the 8% Noncumulative Preferred
Stock, the Company issued 3,000,000 shares of Common Stock and $20,000,000 face
amount of Convertible Preferred Stock which may be converted into 5,000,000
shares of Common Stock at a price of $4.00 per share. The 3,000,000 common
shares have been included in the computation of weighted average common stock
outstanding only for three days of the fiscal quarter ended June 30, 1998. The
5,000,000 shares potentially issuable on conversion of Convertible Preferred
Stock have been included in the computation of diluted weighted average common
stock outstanding only for such three day period.
See Note 7.
As more fully described in Note 7, the Company is obligated to redeem
the Redeemable Preferred Stock in quarterly installments over a 10-year period
beginning June 1999. The Company at its election may make redemption payments in
shares of Common Stock or in cash, subject to certain statutory requirements.
The computation of diluted weighted average common stock outstanding included
17,487,200 potentially diluted common shares assuming that the Redeemable
Preferred Stock is fully redeemed in Common Stock for three days of the fiscal
quarter ended June 30, 1998. Accordingly, their issuance did not have a material
effect on diluted income per common share for the periods ended June 30, 1998.
The Company intends to adopt a policy on the proportion of redemption payments
to be made in cash and Common Stock effective in the third quarter of 1998.
Stock options to purchase 1,440,050 shares of common stock at prices
ranging from $2.38 to $10.50 per share were outstanding at June 30, 1998, but
were not included in the computation of diluted income per share because the
exercise price was greater than the average market value of the common shares.
7
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Stock options to purchase 432,250 shares of common stock at prices
ranging from $6.44 to $10.50 per share were outstanding at June 30, 1997, but
were not included in the computation of diluted income per share because the
exercise price was greater than the average market value of the common shares.
Note 4 -- Supplemental Schedule of Cash Flow Information
<TABLE>
<CAPTION>
Six months ended
----------------------------------
June 30, June 30,
1998 1997
-------------- --------------
(in thousands)
Cash payments (net of refunds received) were as follows:
<S> <C> <C>
Interest............................................. $ 25 $ 54
Income taxes paid.................................... 477 988
Non-cash transactions were as follows:
Issuance of common stock to acquire MicroNet......... 1,224 -
</TABLE>
<TABLE>
<CAPTION>
Note 5 -- Inventories
June 30, December 31,
1998 1997
--------------- -------------
(in thousands)
<S> <C> <C>
Raw materials........................................ $ 10,136 $ 6,686
Work in process...................................... 6,924 5,424
Finished goods....................................... 5,647 4,270
--------------- -------------
Total............................................ $ 22,707 $ 16,380
=============== =============
</TABLE>
Raw materials at June 30, 1998 include $1.3 million related to
inventory in connection with the MicroNet acquisition.
Note 6 -- Commitments and Contingencies
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.
The Company currently is involved in various stages of monitoring 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 provided reserves for 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.
Note 7 -- Preferred Stock
As of December 31, 1997, the Company became required to redeem the
69,970 outstanding shares of its 8% Noncumulative Preferred Stock with an
aggregate liquidation value of $70.0 million (the "Old Preferred Stock"), to the
extent of funds legally available therefor (generally, the excess of the value
of assets over liabilities) at the redemption price of $1,000 per share.
Effective in the second quarter of 1998, the Company completed the
8
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
redemption of the Old Preferred Stock in exchange for the following securities
(a) 3,000,000 shares of its Class A Common Stock, par value $0.01 per share (the
"Class A Stock"); (b) 10,000 shares of a new series of 8% Noncumulative
Convertible Preferred Stock, par value $1.00, with an aggregate liquidation
value of $20.0 million (the "Convertible Preferred Stock"); and (c) 21,859
shares of a new series of 8% Noncumulative Redeemable Preferred Stock, par value
$1.00 per share, with an aggregate liquidation value of $43.7 million (the
"Redeemable Preferred Stock").
Each share of Convertible Preferred Stock and Redeemable Preferred
Stock (together, the "New Preferred Stock") will entitle the holder thereof to
receive noncumulative dividends at the rate of 8% per annum, if declared by the
Company's Board of Directors. Each share of Convertible Preferred Stock may be
converted, at the option of the holder thereof, into 500 shares of Class A
Stock, at a conversion price of $4.00 per share, subject to adjustment under
certain circumstances. Beginning in June 2001, the Company will become obligated
to redeem the Convertible Preferred Stock in quarterly installments through
March 2008. Beginning in June 1999, the Company will become obligated to redeem
the Redeemable Preferred Stock in quarterly installments through December 2008.
The Company will have the option to redeem the Redeemable Preferred Stock at any
time and the Convertible Preferred Stock beginning in June 2001, and may at its
election make optional or mandatory redemption payments either in cash or in
shares of Common Stock. In the event that the Company does not have sufficient
funds legally available to make any mandatory redemption payment in cash, the
Company will be required to make such redemption payment by issuing shares of
Common Stock. Shares of Common Stock issued to make any optional or mandatory
redemption payments will be valued at the higher of $2.50 or fair market value
per share of Common Stock. The issuance of Common Stock upon conversion or
redemption of the New Preferred Stock could have a significant dilutive effect
on the equity interests of the Common Stockholders in future periods. See Note
3.
Note 8 -- Income Taxes
In the first quarter of 1998, the Company reversed $5.2 million
previously reserved in connection with disputed state income taxes for the prior
years, following the favorable settlement of that dispute in March 1998. In the
second quarter of 1998, the Company reversed $4.9 million previously reserved in
connection with the ongoing liquidation of its subsidiary in Italy. The
provisions for income taxes in the three-month and six-month periods ended June
30,1997 consist primarily of foreign income taxes and withholding taxes on
royalty income. The Company was not required to include any provision for U.S.
federal taxes in the first six months of 1998 and 1997 because of certain timing
differences in the recognition of expense for tax and financial reporting
purposes.
As of December 31, 1997, the Company had net operating loss
carryforwards for income tax purposes of $100.0 million, expiring in the years
2005 through 2009. As a result of certain financing transactions that were
completed in April 1994 and February 1995, the Company's ability to utilize its
net operating losses and credit carryforwards against future consolidated
federal income tax liabilities will be restricted in their application, which
will result in a material amount of the net operating loss never being utilized
by the Company.
Note 9 -- Accumulated Other Comprehensive Income
The balances of each classification within accumulated other
comprehensive income are as follows:
<TABLE>
<CAPTION>
Minimum Accumulated
Foreign Pension Other
Currency Liability Comprehensive
Items Adjustment Income
-------------- ------------- --------------
(in thousands)
<S> <C> <C> <C>
December 31, 1997......................... $ 507 $ (29,608) $ (29,101)
Year-to-date change....................... (5) - (5)
-------------- ------------- --------------
June 30, 1998............................. $ 502 $ (29,608) $ (29,106)
============== ============= ==============
</TABLE>
Note 10 -- Senior Notes
In January 1998, the Company issued $30.0 million 12% Senior Notes due
March 15, 2003, together with warrants to purchase 1,020,000 Common Shares. The
warrants are exercisable at $2.25 per share at any time on or prior to March 15,
2003. The warrants have been assigned a value of $0.8 million and charged to
other additional capital and will be amortized to long-term debt over the term
of the Notes. The indenture under which the Notes were issued contains customary
affirmative and negative restrictive covenants that limit, among other things,
the incurrence of additional senior debt, the payment of dividends, the sale of
assets and other actions by the Company and certain restricted subsidiaries.
9
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - MicroNet Acquisition
During the second quarter of 1998, the Company completed the
acquisition of MicroNet, (the "MicroNet Acquisition"). The MicroNet Acquisition
has been accounted for as a purchase, effective as of June 30, 1998, and the
Company has been managing the affairs of MicroNet since that date. In connection
with the MicroNet Acquisition, the Company has issued 720,000 shares of its
Common Stock to MicroNet's shareholders, and has acquired MicroNet subject to
MicroNet preferred stock valued at approximately $1.0 million, notes payable of
$5.4 million and other liabilities estimated at approximately $4.1 million.
Assets acquired consisted of $3.8 million of current assets, $0.4 million of
plant and equipment and $2.9 million of in-process research and development and
other intangibles of $4.0 million. The Company has charged operations in the
second quarter of 1998 with the acquired in-process research and development and
intends to amortize intangibles on a straight-line basis over 8 years. The
shares of Common Stock and MicroNet preferred stock are being held in escrow
pending completion of the closing date balance sheet and the resolution of other
contingencies.
Pro forma combined results of operations of the Company and MicroNet
as if the acquisition had been completed at the beginning of the periods
presented are as follows:
<TABLE>
<CAPTION>
Year ended Six months ended
December 31, 1997 June 30, 1998
----------------- -------------------
<S> <C> <C>
Net sales......................................... $ 112,537 $ 43,373
Income (loss) before income taxes................. $ 2,463 $ (5,422)
Net income........................................ $ 956 $ 4,412
Income per share
Basic......................................... $ 0.02 $ 0.10
Diluted....................................... $ 0.02 $ 0.09
</TABLE>
Pro forma operating results for the year ended December 31, 1997
exclude the one-time charge to operations for acquired in-process research and
development which was charged against historical operating results for the six
months ended June 30, 1998. Pro forma operating results for all periods include
an adjustment to record goodwill amortization.
Note 12 -- Subsequent Event
On July 17, 1998, the Company issued $14.0 million additional 12%
Senior Notes due March 15, 2003 pursuant to the terms of the indenture. See Note
10.
10
<PAGE>
This Form 10-Q contains predictions, projections and other statements
about the future that are intended to be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: potential inaccuracy of future sales and expense
forecasts; effects of increased inventories; potential inability of the Company
to execute its acquisition, investment, licensing and other strategies;
potential inability of the Company to integrate acquired businesses, including
the business of MicroNet Technology, Inc.; industry conditions; declining sales
to the government; declining sales of professional video products; the
development of application software for its 19-millimeter products; effects of
the Company's relocation of its DCRsi? manufacturing facilities to its Colorado
Springs facility; possible future issuances of debt or equity securities; and
potential dilution of current stockholders' equity; and the Company's liquidity
and anticipated interest expenses. These forward-looking statements speak only
as of the date of this Report. The Company disclaims any obligation or
undertaking to disseminate updates or revisions of any forward-looking
statements contained or incorporated herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based. Each forward-looking
statement that the Company believes is material is accompanied by one or more
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, in other sections of this Form 10-Q, and/or in the Company's other
documents filed with the Securities and Exchange Commission, whether or not such
documents are incorporated herein by reference. IN ASSESSING FORWARD- LOOKING
STATEMENTS CONTAINED IN THIS FORM 10-Q, READERS ARE URGED TO READ CAREFULLY ALL
SUCH CAUTIONARY STATEMENTS.
Item 2. 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 Ampex Corporation and its subsidiaries (collectively,
"Ampex" or the "Company") should be read in conjunction with the unaudited
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Report, and the Consolidated Financial Statements and the Notes thereto,
and Management's Discussion and Analysis of Financial Condition and Results of
Operations, included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as filed with the Securities and Exchange Commission
(file no. 0-20292) (the "1997 Form 10-K"), and its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.
Results of Operations for the Three Months and Six Months Ended
June 30, 1998 and 1997
Net Sales. Net sales declined by 28.7% to $15.2 million in the second
quarter of 1998 from $21.3 million in the second quarter of 1997, and by 24.4%
to $32.0 million in the first six months of 1998 from $42.4 million in the first
six months of 1997. This decrease was due to a decline in shipments of
instrumentation recorders and television products, offset by increased sales of
19-millimeter data storage products. See "Mass Data Storage Products and
Instrumentation Recorders," below. The Company's backlog of firm orders was $6.9
million at December 31, 1997, declined to $4.8 million at March 31, 1998 and
increased to $5.8 million at June 30, 1998. The Company typically operates with
12
<PAGE>
low levels of backlog, requiring it to obtain most of each period's orders in
the same period that they must be shipped to customers. Historically, a small
number of large orders, particularly for instrumentation products, have
significantly impacted sales levels. In the first six months of 1998, the
Company responded to proposals for such products on several large programs that
have not yet been awarded. Any increase in sales of instrumentation products in
future periods will depend to a large extent on whether such programs actually
proceed and, if so, in which periods. As previously reported, the Company
intends to increase net sales by introducing new products and by acquiring new
businesses and making investments in companies. As of June 30, 1998, the Company
completed the acquisition of MicroNet Technology, Inc. ("MicroNet"), a
manufacturer of disk arrays and network attached storage products for
image-based markets, including the video and commercial pre-press markets.
Because of the risks and uncertainties inherent in making acquisitions and
investments, there can be no assurance that the Company will successfully be
able to integrate MicroNet's business or complete any other acquisitions or
investments or that the Company will realize any financial benefit therefrom.
Management believes that sales in the second half of the year, excluding sales
of MicroNet, will continue to be negatively affected by the factors discussed
below. Accordingly, the Company intends to control expenses to minimize the
impact on the Company's results of operations.
Mass Data Storage Products and Instrumentation Recorders. Sales of mass
data storage products and instrumentation recorders and related after-market
products totaled $12.3 million for the second quarter of 1998 and $25.8 million
for the first half of 1998, and declined from the comparable periods in 1997
when sales of such products totaled $17.5 million and $34.4 million,
respectively. This is due to a decline in sales of instrumentation products. A
significant portion of the Company's instrumentation product sales reflects
purchases by government agencies and defense contractors pursuant to federal
government procurement programs. These sales fluctuate as a result of changes in
government spending programs (including defense programs), and seasonal
procurement practices of government agencies. Sales of the Company's DST? and
DIS? products increased slightly in the first six-month period of 1998, compared
to the comparable period of 1997. Broader acceptance of the Company's DST
products in its target markets will depend significantly on the integration and
vendor support of third party application software, factors which are not within
the Company's control and which, if delayed, may adversely affect DST product
sales in future quarters.
Professional Video Recording and Other Products. As anticipated, sales
of professional video recording products and all other products (consisting
primarily of television after-market products) continued to decrease to $2.9
million in the second quarter of 1998 from $3.8 million in the second quarter of
1997, and to $6.2 million in the first half of 1998 from $7.9 million in the
first half of 1997. The Company's DCT? digital products were designed for
existing broadcast transmission standards, which are expected to become obsolete
upon the adoption of new digital transmission standards that were recently
announced. Accordingly, the Company anticipates that sales of its professional
video products and related after-market products will continue to decline
pending the establishment of new standards and until new products can be
introduced that are designed for them.
Gross Profit. Gross profit as a percentage of net sales decreased to
42.7% in the second quarter of 1998 from 49.9% in the second quarter of 1997,
and to 45.0% in the first six months of 1998 from 49.9% in the first six months
of 1997. The decline in gross profit margin results from lower percentage of
sales of the Company's instrumentation products, and overall decline in sales
volume that resulted in lower absorption of fixed manufacturing costs.
Selling and Administrative Expenses. Selling and administrative expenses
decreased to $5.1 million in the second quarter of 1998 from $6.4 million in the
second quarter of 1997, and to $10.1
13
<PAGE>
million in the first half of 1998 from $14.1 million in the first half of 1997.
This decline is a result of reduced patent infringement litigation expenses, as
well as continued implementation of cost controls. The Company incurred $0.3
million of patent infringement litigation expenses in the first and second
quarter of 1998, compared to $1.9 million and $1.7 million of such expenses in
the first and second quarters of 1997.
Research, Development and Engineering Expenses. Research, development
and engineering expenses decreased to $3.1 million in the second quarter of 1998
from $3.9 million in the second quarter of 1997, and decreased to $6.2 million
in the first half of 1998 from $7.6 million in the first half of 1997. Reduced
expense levels are largely attributable to the Company's keepered media
development program, which was substantially completed in 1997. The Company is
committed to investing in research, development and engineering programs at
levels that management believes can be supported by current sales levels.
Acquisition of In-process Research and Development. In connection with
the acquisition of MicroNet, the independent appraisal of the in-process
research and development resulted in the recording of a one-time $2.9 million
charge in the second quarter of 1998.
Royalty Income. Royalty income was $1.7 million and $1.6 million in the
second quarters of 1998 and 1997, respectively and $3.5 million and $7.3 million
in the first half of 1998 and 1997, respectively. The decline in royalty income
of $3.8 million resulted from Company receipts of approximately $3.7 million in
the first half of 1997 from nonrecurring royalties resulting from a negotiated
settlement related to sales of products by the manufacturer prior to the
negotiation of a license from the Company. The Company did not receive any
nonrecurring royalty payments in the first half of 1998. The Company is
currently assessing whether its patented technology is being used by
manufacturers of video games, DVD recorders and digital television receivers.
There can be no assurance that the manufacturers of these products are utilizing
the Company's technology or, if used, whether the Company will be able to
negotiate license agreements with the manufacturers.
Royalty income has historically fluctuated widely due to a number of
factors that the Company cannot predict or control, such as the extent of use of
the Company's patented technology by third parties, the materiality of any
nonrecurring royalties received as the result of negotiated settlements for
products sold by manufacturers prior to entering licensing agreements with the
Company, 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. The costs of patent litigation can be material, and the institution
of patent enforcement litigation may also increase the risk of counterclaims
alleging infringement by the Company of patents held by third parties or seeking
to invalidate patents held by the Company. See "Legal Proceedings," below.
Restructuring Charges (Credits). The Company did not record any
restructuring charges or credits in the second quarter of 1998 and recorded a
restructuring charge of $2.8 million in the first quarter of 1998. The Company
did not record any restructuring charges or credits in the first half of 1997.
The charge of $2.8 million in the first six months of 1998 was incurred in
connection with the Company's relocation of a portion of its DCRsi manufacturing
operations from its Redwood City, California facility to its Colorado Springs,
Colorado facility, and from a concurrent workforce reduction. The relocation is
expected to reduce operating costs by up to $5.0 million annually. These savings
may be offset in whole or in part by increases in marketing expenses or other
factors. The Company expects to implement the relocation in various phases
throughout the remainder of 1998.
14
<PAGE>
Operating Income (Loss). The Company incurred an operating loss of $3.0
million in the second quarter of 1998, and reported operating income of $1.9
million in the second quarter of 1997. The operating loss was primarily due to a
charge of $2.9 million for acquired in-process research and development
pertaining to the MicroNet acquisition and to the decline in sales which was
offset, in part, by expense reductions. The Company generated an operating loss
of $4.1 million in the first half of 1998, and reported operating income of $6.8
million in the first half of 1997. The decline in operating income in the first
six months of 1998 resulted from a reduction in nonrecurring royalty income of
$3.7 million, a charge of $2.9 million for acquired in-process research and
development and a provision for restructuring of $2.8 million. In addition, in
the first six months of 1998, operating income was negatively affected by a
decline in net sales, offset by reduced patent infringement litigation and other
operating expenses from 1997 levels.
Interest Expense. Interest expense increased between the comparison
periods due to the issuance of the Company's outstanding 12% Senior Notes due
2003 (the "12% Senior Notes"), the first of which were issued in January 1998.
See "Liquidity and Capital Resources -- Financing Transactions" and Note 10 of
Notes to Unaudited Consolidated Financial Statements.
Interest Income. Interest income increased slightly between the
comparison periods, resulting primarily from higher cash balances due to the
proceeds of the 12% Senior Notes in the first half of 1998, offset in part by
the prepayment of notes issued to the Company in connection with the 1996 sale
of the Company's Redwood City property.
Other Expense, Net. Other expense, net, in both periods consisted
primarily of foreign currency transaction gains and losses.
Provision for Income Taxes. In the first quarter of 1998, the Company
reversed $5.2 million previously reserved in connection with disputed state
income taxes for the prior years, following the favorable settlement of that
dispute in March 1998. In the second quarter of 1998, the Company reversed $4.9
million previously reserved in connection with the ongoing liquidation of its
subsidiary in Italy. 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 tax timing differences and operating
losses, if any, are not deductible in computing such foreign taxes. The
provision for income taxes in the first half of 1997 consisted primarily of
foreign income taxes and withholding taxes on royalty income.
Net Income. The Company reported net income of $5.8 million in the first
half of 1998 compared to $7.3 million in the first half of 1997, primarily as a
result of the factors discussed above under "Operating Income (Loss)" and
"Provision for Income Taxes."
Liquidity and Capital Resources
Cash Flow. At June 30, 1998, the Company had cash and short-term
investments of $60.0 million and working capital of $65.6 million. At December
31, 1997, the Company had cash and short-term investments of $41.8 million and
working capital of $44.6 million. The increases in the 1998 period reflect the
receipt of approximately $28.8 million of net proceeds from the Company's
January 1998 issuance of its 12% Senior Notes. Major items impacting net income
in 1998, which did not generate or use cash included a $5.2 million favorable
settlement of disputed state income taxes, $4.9 million favorable resolution of
prior years' foreign contingencies and the recording of $2.9 million for
15
<PAGE>
acquired in-process research and development as a result of the acquisition of
MicroNet. The Company's operating activities utilized cash of $8.8 million
during the first half of 1998 and utilized cash of $2.0 million during the first
half of 1997. The Company has increased its inventories by $5.0 million,
excluding the inventory of $1.3 million acquired through the MicroNet purchase,
over year-end 1997 levels, primarily in anticipation of disruptions that may
result from the phased relocation during 1998 of a portion of its DCRsi
manufacturing operations to its Colorado Springs facility. The Company expects
that 1998 inventory levels will remain higher than in 1997 periods until this
relocation has been completed. Any increased investment in inventories may
expose the Company to an increased risk of inventory write-offs in future
periods. In addition, the Company's accounts receivable balance, excluding the
receivable balance of $1.8 million acquired through the MicroNet purchase,
increased by $2.6 million during the first half of 1998, due primarily to sales
to government agencies in the United Kingdom and Germany, which are not due for
payment until the third and fourth quarter of 1998.
The Company has available, through a subsidiary, a working capital
facility that allows it to borrow or obtain letters of credit totaling $7.0
million, based on eligible accounts receivable, through May 2000. At June 30,
1998, the Company had borrowings outstanding of 0.8 million and had letters of
credit issued against the facility totaling $2.3 million.
Financing Transactions. As at December 31, 1997, the Company became
required to redeem the 69,970 outstanding shares of its 8% Noncumulative
Preferred Stock with an aggregate liquidation value of $70.0 million (the "Old
Preferred Stock"), to the extent of funds legally available therefor (generally,
the excess of the value of assets over liabilities) at the redemption price of
$1,000 per share. Pursuant to an agreement in the second quarter of 1998, the
Company completed the redemption of the Old Preferred Stock in exchange for the
following securities (a) 3,000,000 shares of its Class A Common Stock, par value
$0.01 per share (the "Class A Stock"); (b) 10,000 shares of a new series of 8%
Noncumulative Convertible Preferred Stock, par value $1.00, with an aggregate
liquidation value of $20.0 million (the "Convertible Preferred Stock"); and (c)
21,859 shares of a new series of 8% Noncumulative Redeemable Preferred Stock,
par value $1.00 per share, with an aggregate liquidation value of $43.7 million
(the "Redeemable Preferred Stock").
Each share of Convertible Preferred Stock and Redeemable Preferred
Stock (together, the "New Stock") will entitle the holder thereof to receive
noncumulative dividends at the rate of 8% per annum, if declared by the
Company's Board of Directors. Each share of Convertible Preferred Stock may be
converted, at the option of the holder thereof, at a conversion price of $4.00
per share, into 500 shares of Class A Stock, subject to adjustment under certain
circumstances. Beginning in June 2001, the Company will become obligated to
redeem the Convertible Preferred Stock in quarterly installments through
December 2008. Beginning in June 1999, the Company will become obligated to
redeem the Redeemable Preferred Stock in quarterly installments through March
2008. The Company will have the option to redeem the Redeemable Preferred Stock
at any time and the Convertible Preferred Stock beginning in June 2001, and will
have the option to make mandatory redemption payments either in cash or in
shares of Common Stock. In the event that the Company does not have sufficient
funds legally available to make any mandatory redemption payment in cash, the
Company will be required to make such redemption payment by issuing shares of
Common Stock. Shares of Common Stock issued to make any optional or mandatory
redemption payments will be valued at the higher of $2.50 or fair market value
per share of Common Stock. The Company has not adopted a policy with respect to
the proportion of the Redeemable Preferred Stock that may be redeemed in shares
or in cash. Pending adoption of such a policy, the Company has included 17.5
million shares of Common Stock in the calculation of its diluted income per
common share on an "if converted" basis in accordance with SFAS 128. However,
such shares were included only for a three-day period in the fiscal quarter
ended June 30, 1998 and their effect
16
<PAGE>
on diluted income per share was not material. At present, management believes
that the Company may redeem a significant portion of the Redeemable Preferred
Stock for cash, and the balance for Common Stock at future market prices (but
not less than $2.50 per share). The Company expects to adopt a policy with
respect to such redemption in the third quarter of 1998. Diluted income per
share will be calculated on the basis of this policy and the current market
price of the Company's common stock, which could have a material effect on
diluted income per share in future periods. See Note 3 and 7 of Notes to
Unaudited Consolidated Financial Statements.
In January 1998, the Company issued $30.0 million of its 12% Senior
Notes, together with Warrants to purchase 1.02 million shares of its Class A
Common Stock (the "Class A Stock"). The Warrants are exercisable at $2.25 per
share at any time on or prior to March 15, 2003. Subsequent to the end of the
second quarter of 1998, the Company issued an additional $14.0 million of 12%
Senior Notes. As a result of the issuance of the 12% Senior Notes, the Company's
total indebtedness and future debt service obligations have increased
significantly from prior levels. A portion of the net proceeds of the offering
have been invested to repay short-term debt and trade accounts payable of
MicroNet, and the balance has been invested in short-term government securities.
The yield on short-term investments is substantially lower than the interest
charges on the 12% Senior Notes. The Company has wide discretion as to how the
proceeds may be invested, including for acquisitions of and investments in new
businesses. Any such investments or acquisitions, if made, are not expected to
pay a current return, which could require the Company to fund debt service
obligations on the 12% Senior Notes out of its liquidity and cash flow from
existing operations. The Indenture under which the 12% Senior Notes were issued
contains customary affirmative and negative restrictive covenants that limit,
among other things, the incurrence of additional senior debt, the payment of
dividends, the sale of assets and other actions by the Company and certain
restricted subsidiaries.
Readiness for Year 2000
Many existing computer systems, applications and other control devices
(collectively, "Systems") use only two digits to identify a year in the date
field, and will therefore be unable to reflect accurately the change from the
year 1999 to the years 2000 and beyond. Unless corrected, these Systems could
fail or create erroneous results, rendering them unable to process data related
to the year 2000. The Company relies on its Systems in operating and monitoring
all major aspects of its business, including financial systems (such as general
ledger, accounts payable and payroll modules), customer services,
infrastructure, embedded computer chips, networks and telecommunications
equipment and products. The Company also relies on the external Systems of its
suppliers and other organizations with which it does business.
The Company has established a Year 2000 Compliance Committee that is
investigating the impact of the year 2000 on the Company's business. The
Committee membership includes representatives involved in all major functions of
the Company. Its charter is to identify all Systems that, if not in compliance,
could adversely affect the Company's business. For critical Systems that are
found not to be in compliance, the Committee will develop a plan, including a
budget for associated costs, to ensure compliance before the year 2000. It has
already been determined that many of the Company's Systems, such as its
manufacturing Systems, are in compliance. Other Systems, such as its financial
Systems, currently do not comply but are expected to do so this year pursuant to
vendor maintenance agreements. To date, no material issue has been identified in
any of the other Systems used or relied upon by the Company. However, despite
the Company's efforts thus far to address the Year 2000 impact, the Company
cannot guarantee that all internal or external Systems will be compliant, or
that its business will not be materially adversely affected by any such
non-compliance.
17
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to routine litigation incidental to its business.
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.
Ampex has previously reported that it has been engaged since late 1995
in patent infringement litigation with Mitsubishi Electric Corporation and
Mitsubishi Electric America Inc. regarding the manufacture of certain video and
data recording products and television receivers. A description of this
litigation is included under the caption "Legal Proceedings" in the 1997 Form
10-K, and there have been no material changes in the status of this litigation
since the filing of that report.
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. The Company 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 the
Company 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 1998 or 1999 will be
material.
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. 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 seven
environmental investigation, remediation and/or monitoring activities at sites
located off Company facilities, including the removal of solvent contamination
from subsurface aquifers at a site in Sunnyvale, California, and surface cleanup
and the closure of a former site in El Segundo, California. Some of these
activities involve the participation of state and local government agencies. The
other five sites (including the four Superfund sites) are associated with the
operations of the Company's former magnetic tape subsidiaries (collectively,
"Media"). Although the Company sold Media in November 1995, the Company may have
continuing liability with respect to environmental contamination at these sites
if Media fails to discharge its responsibilities with respect to such sites.
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 June 30, 1998,
the Company had an accrued liability of $2.0 million for pending environmental
liabilities associated with the Sunnyvale site and certain other sites currently
owned or leased by the Company. The Company has not accrued for any contingent
liabilities it may incur with respect to the former Media sites discussed above.
Based on facts currently known to
18
<PAGE>
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.
Although 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, because the Company conducts its business in
foreign countries as well as in the U.S., it is not possible to predict the
effect that future domestic or foreign regulation could have on the Company's
business, operating results or cash flow. There can be no assurance that the
Company will not ultimately incur liability in excess of amounts currently
reserved for pending environmental matters, or that additional liabilities with
respect to environmental matters will not be asserted. In addition, changes in
environmental regulations could impose the need for additional capital equipment
or other requirements. Such liabilities or regulations could have a material
adverse effect on the Company in the future.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On May 15, 1998, the Company held its Annual Meeting of Stockholders.
The stockholders elected Edward J. Bramson and William A. Stoltzfus, Jr. as the
Class I directors. Mr. Bramson received 39,182,780 votes in favor of his
election, with 1,135,067 votes withheld and no broker nonvotes. Mr. Stoltzfus
received 39,209,784 votes in favor of his election, with 1,108,063 votes
withheld and no broker nonvotes. The stockholders also ratified the appointment
of PricewaterhouseCoopers L.L.P. as the Company's independent public accountants
for the fiscal 1998 with 39,842,409 votes in favor, 324,033 votes opposed,
151,405 votes abstaining, and no broker nonvotes.
Item 5. Other Information
Not applicable.
Item 6(a). Exhibits
The Exhibits to this Quarterly Report on Form 10-Q are listed in the
Exhibit Index which appears elsewhere herein and is incorporated herein by
reference.
Item 6(b). Reports on Form 8-K
19
<PAGE>
1. The Company filed a Current Report on Form 8-K on or about July 15,
1998 to report, pursuant to Item 5 of Form 8-K, the redemption of its 8%
Noncumulative Preferred Stock in exchange for securities of the Company.
2. The Company filed a Current Report on Form 8-K on or about July 30,
1998 to report, pursuant to Items 2 and 5, respectively, of Form 8-K, the
acquisition of MicroNet Technology, Inc. and the issuance of $14,000,000
principal amount of additional 12% Senior Notes due 2003.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMPEX CORPORATION
Date: August 14, 1998 /s/ EDWARD J. BRAMSON
Edward J. Bramson
Chairman and Chief Executive Officer
Date: August 14, 1998 /s/ CRAIG L. McKIBBEN
Craig L. McKibben
Vice President, Chief Financial Officer and
Treasurer
21
<PAGE>
AMPEX CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1998
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
1.1 Purchase Agreement, dated July 17, 1998, between the Registrant and
First Albany Corporation, as Initial Purchaser, relating to the
Company's 12% Senior Notes due 2003 (filed as Exhibit 1.1 to the
Company's Form 8-K filed on July 30, 1998 and incorporated herein by
reference).
3.1 Certificate of Designations, Preferences and Rights of the
Registrant's 8% Noncumulative Convertible Preferred Stock and 8%
Noncumulative Redeemable Preferred Stock, as filed with the Secretary
of Delaware on July 2, 1998. (filed as Exhibit 3.1 to the Company's
Form 8-K filed on July 15, 1998 and incorporated herein by reference).
4.1 Exchange Agreement for 8% Noncumulative Preferred Stock, dated as of
June 22, 1998, among the Registrant and Holders named therein (filed
as Exhibit 4.1 to the Company's Form 8-K filed on July 15, 1998 and
incorporated herein by reference).
4.2 First Amendment to Indenture, dated as of July 2, 1998, between the
Registrant and IBJ Schroder Bank & Trust Company, as trustee (filed as
Exhibit 4.1 to the Company's Form 8-K filed on July 30, 1998 and
incorporated herein by reference).
4.3 Exchange and Registration Rights Agreement, dated as of July 2, 1998,
between the Registrant and the Initial Purchaser (filed as Exhibit 4.2
to the Company's Form 8-K filed on July 30, 1998 and incorporated
herein by reference).
4.4 Acquisition Agreement, dated as of June 24, 1998, among the Registrant
Ampex Holdings Corporation ("Holdings") and the several selling
shareholders named therein ("Sellers") (filed as Exhibit 4.3 to the
Company's Form 8-K filed on July 30, 1998 and incorporated herein by
reference).
4.5 Supplement to Acquisition Agreement, dated June 30, 1998, among the
Registrant, Holdings and the Sellers (filed as Exhibit 4.4 to the
Company's Form 8-K filed on July 30, 1998 and incorporated herein by
reference).
4.6 Second Supplement to Acquisition Agreement, dated July 16, 1998, among
the Registrant, Holdings and the Sellers (filed as Exhibit 4.5 to
23
<PAGE>
the Company's Form 8-K filed on July 30, 1998 and incorporated herein
by reference).
27.1* Financial Data Schedule.
*Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,983
<SECURITIES> 51,063
<RECEIVABLES> 19,782
<ALLOWANCES> (2,238)
<INVENTORY> 22,707
<CURRENT-ASSETS> 103,353
<PP&E> 41,183
<DEPRECIATION> 31,338
<TOTAL-ASSETS> 118,281
<CURRENT-LIABILITIES> 37,792
<BONDS> 29,301
63,718
1,045
<COMMON> 498
<OTHER-SE> (76,402)
<TOTAL-LIABILITY-AND-EQUITY> 118,281
<SALES> 15,194
<TOTAL-REVENUES> 15,194
<CGS> 8,703
<TOTAL-COSTS> 16,927 <F1>
<OTHER-EXPENSES> 1,274 <F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 913
<INCOME-PRETAX> (3,081)
<INCOME-TAX> (4,792)
<INCOME-CONTINUING> 1,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,711
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<FN>
<F1> INCLUDES S&A AND RD&E OF 5,101 AND 3,123 RESPECTIVELY
<F2> INCLUDES ROYALTY INCOME OF 1,670 AND ACQUIRED IN-PROCESS R&D OF 2,940
</FN>
</TABLE>
