<PAGE>
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 March 31, 1999
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 March 31, 1999, the aggregate number of outstanding shares of the
Registrant's Class A Common Stock, $.01 par value, was 52,619,147. 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 March 31, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
PART I -- FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements........................................... 2
Consolidated Balance Sheets (unaudited) at March 31, 1999 and
December 31, 1998.............................................. 3
Consolidated Statements of Operations (unaudited) for the
three months ended March 31, 1999 and 1998..................... 4
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1999 and 1998........................... 5
Notes to Unaudited Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk...... 25
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 25
Item 2. Changes in Securities and Use of Proceeds...................... 26
Item 3. Defaults Upon Senior Securities................................ 26
Item 4. Submission of Matters to a Vote of Security Holders............ 26
Item 5. Other Information.............................................. 26
Item 6(a). Exhibits....................................................... 26
Item 6(b). Reports on Form 8-K............................................ 26
Signatures ............................................................... 27
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMPEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,863 $ 23,357
Short term investments 31,608 39,222
Accounts receivable (net of allowances of $1,213 in 1999 and $1,360 in 1998) 12,712 11,789
Inventories 20,634 19,766
Other current assets 1,702 2,510
-------------- --------------
Total current assets 86,519 96,644
Property, plant and equipment, net 10,131 10,546
Intangible assets, net 5,157 5,461
Investment in unconsolidated companies 5,000 -
Other assets 3,299 3,350
-------------- --------------
Total assets $ 110,106 $ 116,001
============== ==============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 174 $ 180
Accounts payable 6,953 6,470
Income taxes payable 2 12
Accrued restructuring costs 1,533 2,135
Other accrued liabilities 15,466 17,889
-------------- --------------
Total current liabilities 24,128 26,686
Long term debt 43,430 43,380
Other liabilities 49,862 51,470
Deferred income taxes 1,213 1,213
Accrued restructuring costs 581 688
-------------- --------------
Total liabilities 119,214 123,437
-------------- --------------
Commitments and contingencies (Note 6)
Mandatorily redeemable junior preferred stock (Note 7) - -
Mandatorily redeemable nonconvertible preferred stock, $1,000 liquidation value:
Authorized: 69,970 shares in 1999 and in 1998
Issued and outstanding - none in 1999 and in 1998 - -
Mandatorily redeemable preferred stock, $2,000 liquidation value:
Authorized: 21,859 shares in 1999 and in 1998
Issued and outstanding - 21,859 shares 1999 and in 1998 43,718 43,718
Convertible preferred stock, $2,000 liquidation value:
Authorized: 10,000 shares in 1999 and in 1998
Issued and outstanding - 4,370 shares in 1999; 10,000 shares in 1998 8,740 20,000
Stockholders' deficit:
Preferred stock, $1.00 par value:
Authorized: 898,171 shares in 1999 and in 1998
Issued and outstanding - none in 1999 and in 1998 - -
Common stock, $.01 par value:
Class A:
Authorized: 125,000,000 shares in 1999 and in 1998
Issued and outstanding - 52,619,147 shares in 1999; 49,782,547 shares in 1998 526 498
Class C:
Authorized: 50,000,000 shares in 1999 and in 1998
Issued and outstanding - none in 1999 and in 1998 - -
Other additional capital 403,112 391,849
Notes receivable from stockholder (4,818) (4,818)
Accumulated deficit (431,577) (429,630)
Accumulated other comprehensive income (28,809) (29,053)
-------------- --------------
Total stockholders' deficit (61,566) (71,154)
-------------- --------------
Total liabilities and stockholders' deficit $ 110,106 $ 116,001
============== ==============
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
(unaudited)
<S> <C> <C>
Three months ended
March 31,
----------------------------------
1999 1998
--------------- ---------------
Net sales $ 15,020 $ 16,826
Cost of sales 9,988 8,896
--------------- ---------------
Gross profit 5,032 7,930
Selling and administrative 6,468 5,007
Research, development and engineering 2,278 3,038
Royalty income (2,662) (1,834)
Restructuring charges - 2,800
--------------- ---------------
Operating loss (1,052) (1,081)
Interest expense 1,370 662
Amortization of debt financing costs 86 37
Interest income (829) (837)
Other expense, net 8 6
--------------- ---------------
Loss before income taxes (1,687) (949)
Provision for (benefit of) income taxes 260 (5,042)
--------------- ---------------
Net income (loss) (1,947) 4,093
Other comprehensive income (loss), net of tax:
Unrealized gain on marketable securities 199 -
Foreign currency translation adjustments 45 70
--------------- ---------------
Comprehensive income (loss) $ (1,703) $ 4,163
=============== ===============
Basic income (loss) per share:
Income (loss) per share $ (0.04) $ 0.09
=============== ===============
Weighted average number of common shares outstanding 50,618,092 46,004,179
=============== ===============
Diluted income (loss) per share:
Income (loss) per share $ (0.04) $ 0.09
=============== ===============
Weighted average number of common shares outstanding 50,618,092 46,452,301
=============== ===============
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<S> <C> <C>
For the three months ended
-----------------------------
March 31, March 31,
1999 1998
------------- -------------
Cash flows from operating activities:
Net income (loss) $ (1,947) $ 4,093
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation, amortization and accretion 943 509
Reversal of prior year's tax accrual - (5,227)
Changes in operating assets and liabilities:
Accounts receivable (982) 320
Inventories (868) (2,046)
Long term receivables - 8
Other assets 735 (130)
Accounts payable 520 1,462
Other accrued liabilities and income taxes payable (2,322) (3,174)
Accrued restructuring costs (1,319) 2,232
Other liabilities (794) 105
------------- -------------
Net cash used in operating activities (6,034) (1,848)
------------- -------------
Cash flows from investing activities:
Purchases of short term investments (29,265) (57,458)
Proceeds received on the maturity of short-term investments 32,854 17,438
Proceeds from the sale of short-term investments 4,224 6,150
Additions to property, plant and equipment (66) (439)
Deferred gain on sale of assets (204) (204)
Investments in unconsolidated companies (5,000) -
------------- -------------
Net cash provided by (used in) investing activities 2,543 (34,513)
------------- -------------
Cash flows from financing activities:
Borrowings under working capital facilities 7,905 8,305
Repayments under working capital facilities (7,893) (8,507)
Repayment of notes payable-affiliates (6) (5)
Issuance of senior notes - 30,000
Debt financing costs (5) (1,099)
Proceeds from issuance of common stock 32 126
------------- -------------
Net cash provided by financing activities 33 28,820
------------- -------------
Effect of exchange rates on cash (36) (16)
Net decrease in cash and cash equivalents (3,494) (7,557)
Cash and cash equivalents, beginning of period 23,357 24,076
------------- -------------
Cash and cash equivalents, end of period $ 19,863 16,519
============= =============
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
5
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Ampex Corporation
Ampex Corporation ("Ampex" or the "Company") is one of the world's leading
providers of technologies for the acquisition, storage and processing of visual
information. Today, Ampex is delivering digital image storage solutions for
large-scale corporate, government, network, entertainment and telecommunications
applications.
On June 30, 1998, Ampex acquired MicroNet Technology, Inc. ("MicroNet").
MicroNet designs and manufactures high-performance disk arrays for use in
digital image applications, primarily digital pre-press and video.
In September 1998, the Company acquired 19.9% of Reiter Associates, Inc.
("Reiter") with options to acquire a majority interest in the future. Reiter is
a provider of turnkey electronic commerce support, web hosting, Internet
consulting and monitoring services for enterprises that use the world wide web.
During the first quarter of 1999, the Company purchased 19.9% of the
capital stock of TV onthe WEB, Inc. ("TV on the WEB"), a provider of services
and content for delivery of compressed video over the world wide web and 19.9%
of the capital stock of Alternative Entertainment Network ,Inc. ("AENTV"), a
producer and aggregator of compressed, streaming video content for delivery over
the world wide web, for $5.0 million. The Company has options to acquire a
majority interest in both TV onthe WEB and AENTV.
At March 31, 1999, the Company's investment in Reiter, TV on the WEB and
AENTV are being accounted for using the cost method.
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, 1998 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-month
period ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS 133 is effective for the
Company in fiscal year 2000 and will not require retroactive restatement of
prior period financial statements. The Company has not yet quantified the impact
of adopting SFAS 133 on its financial statements, but the Company believes there
will not be a significant impact.
6
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 -- Income (Loss) Per Common Share
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):
<TABLE>
<CAPTION>
Three months ended
---------------------
March 31, March 31,
1999 1998
---------- ---------
<S> <C> <C>
Numerator Basic
Net income (loss).................................. $(1,947) $ 4,093
======= =======
Denominator - Basic
Weighted average common stock outstanding.......... 50,618 46,004
------- -------
Basic income (loss) per share........................ $ (0.04) $ 0.09
======= =======
Numerator - Diluted
Net income (loss).................................. $(1,947) $ 4,093
======= =======
Denominator - Diluted
Weighted average common stock outstanding.......... 50,618 46,004
Effect of dilutive securities:
Stock options................................... - 346
Warrants........................................ - 102
------- -------
50,618 46,452
------- -------
Diluted income (loss) per share...................... $ (0.04) $ 0.09
======= =======
</TABLE>
In connection with the acquisition of MicroNet the Company issued 720,000
shares of Common Stock. Such shares are being held in escrow pending the
resolution of certain contingencies and have not been included in the
computation of diluted weighted average common stock outstanding since they are
anti-dilutive.
In connection with the redemption in June 1998 of the 8% Noncumulative
Preferred Stock, the Company issued 3,000,000 shares of Common Stock, $20.0
million face amount of Convertible Preferred Stock and $43.7 million face amount
of Redeemable Preferred Stock. The 3,000,000 shares of Common Stock have been
included in the computation of weighted average common stock outstanding for the
three months ended March 31, 1999. In February 1999, holders of 5,640 shares of
Convertible Preferred Stock converted their holdings into 2,815,000 shares of
Common Stock which are included in the weighted average common stock outstanding
since the date of conversion. The remaining 2,185,000 shares of Common Stock
potentially issuable on conversion of Convertible Preferred Stock have not been
included in the computation of diluted weighted average common stock outstanding
for the period since they are anti-dilutive.
7
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 -- Income (Loss) Per Common Share (cont'd.)
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. In the third quarter of 1998, the
Company adopted a policy on the proportion of redemption payments to be made in
cash and in Common Stock. The number of shares that will be issued to satisfy
future redemption payments is based on the market price of the Common Stock,
subject to a floor price of $2.50 per share. Shares of Common Stock potentially
issuable to satisfy the portion of redemption payments to be made in stock have
not been included in the computation of diluted weighted average common stock
outstanding for the three months ended March 31, 1999 since they are anti-
dilutive.
Stock options to purchase 1,101,739 shares of common stock at prices
ranging from $2.94 to $10.50 per share were outstanding at March 31, 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.
In January 1998, Warrants to purchase 1,020,000 shares of Common Stock at
$2.25 per share were issued in connection with the issuance of the Senior Notes.
The Warrants were included in the computation of diluted weighted average common
stock outstanding for the three months ended March 31, 1998 but excluded from
the computation for the three months ended March 31, 1999 as they and are anti-
dilutive. See Note 10.
Note 4 -- Supplemental Schedule of Cash Flow Information
Cash payments for interest and income taxes (net of refunds received) from
continuing operations were as follows:
<TABLE>
<CAPTION>
Three months ended
------------------------------------
March 31, March 31,
1999 1998
-------------- --------------
(in thousands)
<S> <C> <C>
Interest.................................................... $ 2,652 $ 12
Income taxes paid........................................... 285 260
Non-cash transactions were as follows:
Issuance of common stock on conversion of preferred stock... 28 -
</TABLE>
Note 5 -- Inventories
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
-------------- --------------
(in thousands)
<S> <C> <C>
Raw materials.............................. $ 7,865 $ 7,488
Work in process............................ 5,762 5,824
Finished goods............................. 7,007 6,454
------- -------
Total..................................... $20,634 $19,766
======= =======
</TABLE>
8
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
Certain subsidiaries have been assessed income and value-added taxes
together with penalties and interest. MicroNet was involved in litigation in the
ordinary course of its business that was unresolved at the date the business was
acquired by the Company. The Company has been indemnified against loss by the
former shareholders of MicroNet for such matters. A portion of the purchase
price paid in shares of Common Stock is being held in escrow pending the
ultimate resolution of the litigation and would revert to the Company in the
event the Company incurred any future loss relative to such 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 provided reserves, which have not been
discounted, 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
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 Common Stock, par value $0.01 per share; (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
entitles 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 Common
Stock, subject to adjustment under certain circumstances. In February 1999, the
holders of 5,630 shares of Convertible Preferred Stock converted their holdings
into 2,815,000 shares of Common Stock. Beginning in June 2001, the Company will
become obligated to redeem the remaining 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's redemption obligation
for the twelve months ended March 31, 2000 represents $5.6 million face amount
of the security. The Company has the option to redeem the Redeemable Preferred
Stock at any time and the Convertible Preferred Stock beginning in June 2001,
and has 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 intends to issue shares of Common Stock
to satisfy its redemption obligation on the Redeemable Preferred Stock through
March 31, 2000.
The MicroNet Redeemable Junior Preferred Stock is redeemable out of a
percentage of earnings of MicroNet beginning in fiscal 1999. Due to the
contingent nature of the redemption provision, no value has been ascribed to the
MicroNet Redeemable Junior Preferred Stock in determination of the purchase
price. The shares of the MicroNet Redeemable Junior Preferred Stock are being
held in escrow, pending resolution of certain contingencies for which the
Company has been indemnified by the former shareholders of MicroNet.
9
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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. The provisions
for income taxes in the first quarter of 1999 consist primarily of withholding
taxes on royalty income.
As of December 31, 1997, the Company had net operating loss carryforwards
for income tax purposes of $118.0 million, expiring in the years 2005 through
2013. 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>
Unrealized Minimum Accumulated
Foreign Gain on Pension Other
Currency Marketable Liability Comprehensive
Items Securities Adjustment Income
-------- ---------- ----------- --------------
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1998...... $578 $ - $(29,631) $(29,053)
Current-period change.. 45 199 - 244
---- ---- -------- --------
March 31, 1999......... $623 $199 $(29,631) $(28,809)
==== ==== ======== ========
</TABLE>
Note 10 -- Senior Notes
In January 1998, the Company issued $30.0 million of its 12% Senior Notes
(the "Notes"), together with Warrants to purchase 1.02 million shares of Common
Stock. The Warrants are exercisable at $2.25 per share at any time on or prior
to March 15, 2003. At the time of issuance, the Warrants were valued using the
Black-Scholes model. The value assigned to the Warrants was $765,000, which is
being amortized against interest expense over the term of the Notes. At the end
of June 1998, the Company issued an additional $14.0 million Senior Notes.
Interest on the Notes is payable semi-annually on March 15 and September 15 of
each year, commencing September 15, 1998. The Notes will mature on March 15,
2003. The Company may redeem the Notes, in whole or in part, at any time after
March 15, 2000, at redemption prices expressed as percentages of the principal
amount of the Notes ranging from 100% to 106% depending on the redemption date,
together with accrued and unpaid interest, if any, to the date of redemption.
The Notes are senior unsecured obligations of the Company and rank pari passu in
right of payment with all existing and future subordinated indebtedness of the
Company.
Note 11 -- Segment Reporting
The Company has the following operating segments: high-performance mass
data storage systems, instrumentation recorders and professional video recording
products; high-performance magnetic disk arrays; licensing of intellectual
property and Internet video production and distribution. At March 31, 1999, the
Company had acquired 19.9% of Reiter, TV onthe WEB, and AENTV. Accordingly, the
Company's Internet video production and distribution segment does not meet the
financial parameters for determining a reportable segment. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies.
The Company evaluates segment performance based on return on operating assets
employed. Profitability is measured as income or loss from operations before
income taxes, excluding restructuring charges (credits), foreign exchange gains
and losses and goodwill amortization and related acquisition charges.
10
<PAGE>
AMPEX CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 -- Segment Reporting (cont'd.)
Intersegment sales and transfers are accounted for at current market prices but
they were not significant to revenues.
<TABLE>
<CAPTION>
Three months ended March 31, 1999
-------------------------------------------------------------------
Mass Data
Storage Systems/ Licensing of Eliminations
Instrumentation Intellectual and
Recorders MicroNet Property Corporate Totals
----------------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from external customers.......... $12,254 $ 2,825 $2,662 $ (59) $ 17,682
Interest income........................... 90 - - 739 829
Interest expense.......................... 178 279 - 913 1,370
Depreciation, amortization and accretion.. 502 23 1 115 641
Segment income (loss)..................... (955) (1,377) 2,347 (1,575) (1,386)
Segment assets............................ 32,654 8,761 1 68,689 110,106
Expenditures for segment assets........... 6 - - 60 66
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1999
-------------------------------------------------------------------
Mass Data
Storage Systems/ Licensing of Eliminations
Instrumentation Intellectual and
Recorders MicroNet Property Corporate Totals
---------------- -------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers.......... $16,826 $ - $1,834 $ - $ 18,660
Interest income........................... 238 - - 599 837
Interest expense.......................... 12 - - 650 662
Depreciation, amortization and accretion.. 460 - 1 48 509
Segment income (loss)..................... 950 - 1,556 (655) 1,851
Segment assets............................ 45,034 - 4 65,784 110,822
Expenditures for segment assets........... 63 - - 376 439
</TABLE>
11
<PAGE>
Forward-Looking Statements
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, those described under "Risk Factors", below.
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. 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 the Company and its subsidiaries 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, 1998, as filed with the Securities and
Exchange Commission (file no. 0-20292) (the "1998 Form 10-K").
Results of Operations for the Three Months Ended March 31, 1999 and 1998
Net Sales. Net sales decreased by 10.7% to $15.0 million in the three
months ended March 31, 1999 from $16.8 million for the three months ended March
31, 1998. The sales decline was primarily due to lower sales of Ampex Data
Systems' ("Data Systems") instrumentation products to government customers and a
decline in sales of television aftermarket products. These sales declines were
offset in part by the inclusion of net sales of MicroNet Technology, Inc.
("MicroNet").
In the first quarter of 1999, the Company made two investments in Internet
video producers and distributors. These investments are being accounted for
using the cost method of accounting. Under the cost method of accounting, an
investor carries its investment at cost and does not record its equity interest
in losses or income of the investee. Ampex has options to acquire control of
each of these businesses. At such time Ampex increases its equity interest in
these companies over its initial 19.9% investment, Ampex will include its equity
interest in losses prospectively generated by these companies. Ampex's equity
in the losses of its Internet video affiliates may be material to consolidated
results of operations in future years.
The Company's backlog of firm orders increased to $2.1 million at March 31,
1999 from $1.6 million at December 31, 1998. The Company typically operates
with low levels of backlog, requiring it to obtain the vast majority of each
period's orders in the same period that they must be shipped to the customer.
Historically, a small number of large orders has significantly impacted sales
levels and often orders are received late in the quarter making it difficult to
predict sales levels in future periods.
Data Systems' Mass Data Storage and Instrumentation Recorder Products.
Sales of Data Systems' mass data storage products and instrumentation recorders
and related after-market products totaled $9.8 million in the three months ended
March 31, 1999 compared to $13.5 million in the three months ended March 31,
1998. A significant portion of the Company's 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
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<PAGE>
programs (including defense programs), and seasonal procurement practices of
government agencies. Sales of the Company's DST and DIS products increased
slightly in the three months ended March 31, 1999 compared to the comparable
period of 1998. During 1998, the Company received a limited number of orders
from television broadcasters and cable stations for its mass data storage tape
drives and library systems for use in digital storage archive applications. The
Company believes that this customer base may elect over several years to
reformat their existing videotape libraries to digital standards such as DST in
order to achieve greater operational flexibility and efficiency. The Company has
entered into strategic partnering arrangements with leading video server
hardware and software companies in order to broaden its reach into this market
beyond its in-house sales and marketing resources. Additionally, to preserve
competitiveness, the Company will be required to invest in improving the
capabilities of its products. For example, the maximum capacity per cartridge of
the first generation DST tape drive was 165 gigabytes. The Company is currently
delivering products with a maximum capacity of 330 gigabytes per cartridge
(double-density) and is accepting orders for future delivery of products with a
maximum capacity of 660 gigabytes per cartridge (quadruple-density).
In October 1998, the Company received a memorandum of understanding for the
purchase, subject to the exercise of certain customer options, of up to an
estimated $18.4 million of DST "double-density" and "quadruple-density" storage
systems for a government program on which the Company had previously submitted
proposals. Separately, also in October 1998, the Company received a letter of
intent relating primarily to the purchase of several of the Company's recently
introduced DST 712 automated tape libraries for approximately $7.2 million for
another government program. In both cases, deliveries would occur during the
period 1999-2001. Sales of the above products are subject to the negotiation of
definitive agreements and terms and conditions with the respective customers,
and there can be no assurance that satisfactory contracts will be completed or
that any firm orders will result. Accordingly such amounts have been excluded
from backlog.
The Company continues to propose on additional domestic and foreign
government programs. Typically such proposals are part of larger capital
projects, which involve risks or delays beyond the Company's control. Since
such orders often are relatively large, the receipt or loss of a significant
order can materially affect quarterly sales and results of operations.
Additionally, larger programs frequently schedule deliveries of the Company's
products over an extended period. The Company does not expect that sales to
government customers will return to historical levels throughout the second
quarter of 1999 and perhaps the year as a whole.
Data Systems' 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
decline to $2.5 million in the three months ended March 31, 1999 from $3.3
million in the three months ended March 31, 1998. 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. The Company anticipates that its
professional video product sales will continue to decline pending the
establishment of new standards and until new products can be introduced that are
designed for them. The Company also anticipates a continuing reduction in the
sale of television after-market products for these same reasons. Such sales
declines could have a materially adverse effect on the Company. There can be no
assurance as to when broadcasters will re-equip for the new transmission
standards or whether the Company will be successful in any future efforts it may
undertake to design and sell new products based on such standards.
MicroNet Products. The Company has included the operations of MicroNet in
its consolidated results of operations since its acquisition effective June 30,
1998. Sales of MicroNet products for the three months ended March 31, 1999
totaled $2.8 million. MicroNet sales levels have been adversely impacted by the
decision to withdraw from lower priced product lines and to refocus on higher
performance disk-array products such as the DataDock 7000. The Company has
developed a new generation of disk arrays (the Genesis product line) that offer
substantially improved capacity, performance and features, such as fibre channel
connectivity. These products have shipped in limited quantities in the three-
month period ended March 31, 1999. As a result, revenues for the quarter ended
March 31, 1999 increased over levels recorded for the quarter ended December 31,
1998. The Company expects continued revenue growth during the remainder of 1999.
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<PAGE>
Gross Profit. Gross profit as a percentage of net sales was 33.5% in the
three months ended March 31, 1999 compared to 47.1% in the three month period
ended March 31, 1998. The decline in the gross margin percentage in 1999
compared to 1998 reflects the inclusion of MicroNet products that have lower
margins than Data Systems' product sales, a lower proportion of instrumentation
product sales which have higher gross profit margin than other sales, and an
overall decline in sales volume that resulted in lower absorption of fixed
manufacturing costs. The Company believes that sales of relatively high-margin
instrumentation recorders will continue to be adversely affected by pressure on
government agencies to further reduce spending. Accordingly, gross margins in
future periods will be adversely affected. Also, the Company may elect to use
aggressive pricing as a marketing strategy to enter new markets for its storage
products. While these efforts would be designed ultimately to increase revenues
and profitability, they might reduce the gross margin percentage of net sales in
the future periods.
Selling and Administrative Expenses. Selling and administrative expenses
increased to $6.5 million (43.1% of net sales) in the first quarter of 1999 from
$5.0 million (29.8% of net sales) in the first quarter of 1998. In 1999,
selling and administrative costs include MicroNet expenditures of $1.5 million.
The Company's Internet video activities, exclusive of its investments carried on
the cost method, incurred costs totaling $0.9 million and are included in the
Selling and Administrative expenses for the three months ended March 31, 1999.
The Company anticipates that it will need to increase its sales and marketing
efforts to be successful in penetrating the commercial data markets with its 19-
millimeter storage products, increase sales at MicroNet due to its new product
offerings in early 1999, and bring together the necessary capabilities to build
the Company's presence in Internet video markets.
Research, Development and Engineering Expenses. Research, development and
engineering expenses represented 15.2% and 18.1% of net sales in the three
months ended March 31, 1999 and March 31, 1998, respectively. The Company does
not capitalize any RD&E expenditures. The majority of RD&E expenses in each of
these periods was used to enhance the price/performance levels of Data Systems'
mass data storage products, as well as to integrate its storage systems with
various computer manufacturers' servers, workstations and other computer
systems. The Company is committed to investing in research, development and
engineering programs at levels that can be supported by current levels of sales.
Royalty Income. Royalty income was $2.7 million in the three months ended
March 31, 1999 compared to $1.8 million in the three months ended March 31,1998.
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 8-mm video recorders and camcorders. In
1996, the Company negotiated its first license for use of certain of its patents
in the manufacture of 6-mm digital video recorders. The Company intends to
pursue additional digital video recorder licensees. The Company is also
assessing whether manufacturers of video games, DVD recorders and digital
television receivers are using its patented technology. 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 into
licensing agreements with the Company, the extent 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.
Restructuring Charges. The Company recorded a restructuring charge in the
three months ended March 31, 1998 of $2.8 million. The charge included $3.3
million 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 concurrent workforce reduction, offset
by a credit of $0.8 million related to the termination of the lease of one of
its buildings at its Redwood City, California facility. The Company expects to
implement the relocation in various phases through the first half of 1999 and
may record additional charges in connection with these plans. There were no
restructuring charges in the first quarter of 1999.
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<PAGE>
As of March 31, 1999, the Company had a remaining balance for accrued
restructuring costs of $2.1 million. The Company will continue to evaluate the
amount of accrued restructuring costs on a quarterly basis, and the Company may
make adjustments in future periods if it determines that its actual obligations
will differ significantly from the amounts accrued.
Operating Loss. The Company incurred an operating loss of $1.1 million in
the three months ended March 31, 1999 and March 31, 1998. The first quarter
results for 1999 included an operating loss by MicroNet of $1.4 million and by
its recently established Internet video operations of $0.9 million which were
offset in part by an increase in royalty income. The operating loss in the
first quarter of 1998 was primarily due to the provision for restructuring of
$2.8 million. The Company expects to make strategic acquisitions and build in-
house capabilities relative to its Internet video strategy and expects these
activities to require significant expenditures in 1999 and future periods that
may result in consolidated net losses while the Company is building its presence
in Internet video markets.
Interest Expense. Interest expense primarily due to the issuance of 12%
Senior Notes due 2003 and warrants to purchase approximately 1.02 million shares
of Common Stock in January and July 1998, was $1.4 million and $0.7 million for
the three months ended March 31, 1999 and March 31, 1998, respectively.
Amortization of Debt Financing Costs. These amounts reflect periodic
amortization of financing costs over the remaining terms of the debt. Financing
costs associated with the January and July 1998 issuance of the 12% Senior
Notes are being charged to expense over five years.
Interest Income. Interest income is earned on cash balances and short and
long-term investments. For the three months ended March 31, 1999 and March 31,
1998 interest income was at similar levels of $0.8 million.
Other Expense, Net. Other (income) expense, net consists primarily of
foreign currency transaction gains and losses resulting from the Company's
foreign operations.
Provision for (Benefit of) 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. The Company was not required to include any
material provision for U.S. Federal income tax in the comparable three month
periods due to the utilization of net operating loss carry forwards and timing
differences. The Company's international operations, which are conducted
principally by its foreign subsidiaries, may have pretax foreign income and 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 loss carry
forwards are not deductible in computing such foreign taxes.
Net Income. The Company reported net loss of $1.9 million in 1999 and net
income of $4.1 million in 1998.
Liquidity and Capital Resources.
Cash Flow. At March 31, 1999, the Company had cash and short-term
investments of $51.5 million and working capital of $62.4 million. At December
31, 1998, the Company had cash and short-term investments of $62.6 million and
working capital of $70.0 million. The decrease in cash and short-term
investments and working capital in the 1999 period reflects the payment for the
strategic investments in TV on the WEB, Inc. ("TV on the WEB") and Alternative
Entertainment Network, Inc. ("AENTV") for $5.0 million and additional
investments in working capital for MicroNet and Data Systems of $1.6 million and
$3.6 million, respectively. Overall, the Company's operating activities
utilized cash of $6.0 million during the first three months of 1999 and utilized
cash of $1.8 million during the first three months of 1998.
The Company has previously announced that it is building a national and
global Internet video network. In January 1999, the Company purchased minority
investments in TV on the WEB and AENTV . The Company has options to acquire a
majority interest in each of these businesses that expire at various dates
through 2001. If Ampex elected to exercise its option to acquire control of all
of these Internet video businesses in 1999, together with its initial
investments therein, it will have invested approximately $12.7 million. In
addition, the Company is building in-house Internet video production and
distribution facilities in Los Angeles and New York City which is
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<PAGE>
expected to become operational by the fourth quarter of 1999. There can be no
assurance that the Company will generate any revenues from its internal Internet
activities, and it estimates that while TV onthe WEB and AENTV have historically
generated modest profitability, these businesses will incur significant content
production, distribution and marketing expenses to build content and presence
which will result in losses being incurred by them for the foreseeable future.
The Company believes that it has sufficient working capital resources to fund
the exercise of control options in affiliated companies and capital additions
and operating expenditures of its in-house Internet activities throughout 1999.
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 2002. At March 31, 1999, the
Company had borrowings outstanding of $13,934 and had letters of credit issued
against the facility totaling $0.9 million. At March 31, 1998, the Company had
borrowings outstanding of $403 and had letters of credit issued against the
facility totaling $2.3 million.
Financing Transactions. 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
entitles 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. In February 1999, the
holders of 5,630 shares of Convertible Preferred Stock converted their holdings
into 2,815,000 shares of Common Stock. Beginning in June 2001, the Company will
become obligated to redeem the remaining 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's redemption obligation
for the twelve months ended March 31, 2000 represents $5.6 million face amount
of the security. The Company has the option to redeem the Redeemable Preferred
Stock at any time and the Convertible Preferred Stock beginning in June 2001,
and has 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 the 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 intends to issue shares of Common Stock
to satisfy its redemption obligation on the Redeemable Preferred Stock through
March 31, 2000. See Note 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. At 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 and other investments.
The yield on the Company's investment portfolio is substantially lower than the
interest charges on the 12% Senior Notes. The Company has wide discretion as to
how the debt 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
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<PAGE>
liquidity and cash flow from existing operations. In order to minimize the
difference between the interest the Company currently receives on its
investments and the interest payable on the Senior Notes, the Company has
invested a significant portion of the Senior Note proceeds in securities with
higher yields, longer terms or lower credit quality, and the Company may also
engage in various transactions in derivative securities. Investments in any
securities could expose the Company to a risk of trading losses due to market or
interest rate fluctuations or other factors that are not within the Company's
control. 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 currently installed computer systems, software applications and other
control devices (collectively, "Systems") are coded to accept only two digit
entries in the date code field. As the year 2000 approaches, these code fields
will need to accept four digit entries to distinguish years beginning with "19"
from those beginning with "20". As a result, in just under one year the Systems
used by many companies may need to be modified to comply with year 2000
requirements. Ampex relies on its internal Systems in operating and monitoring
all major aspects of its business, including its manufacturing processes,
engineering management controls, financial systems (such as general ledger,
accounts payable and payroll modules), customer services, infrastructure,
embedded computer chips, networks and telecommunications equipment and products.
Ampex also relies on the external Systems of its suppliers and other
organizations with which it does business.
The Company has nearly completed its review of all of its products, as well
as its internal systems, both IT (information technology) systems and non-IT
(non-information technology) systems, and third party vendors relied on for the
manufacture of the Company's products. To accomplish this the Company, in early
1998, established a Year 2000 Compliance Committee to investigate and determine
the compliance status of the Company, to identify what needs to be done to
achieve compliance if non-compliance issues are identified, the cost of
achieving compliance, and implementation plans to achieve compliance before
January 1, 2000. The Committee is headed by an executive officer of the Company
and membership includes representatives from all functional areas. The
Committee has nearly completed its assessment and has determined that most
systems are compliant and those that are not do not represent major efforts and
are expected to be fully compliant by January 1, 2000. The status of the
investigation is as follows:
<TABLE>
<CAPTION>
System Status
------ ------
<S> <C>
Manufacturing Control and Financial Systems New compliant financial software
has been installed and is currently being tested.
Testing is scheduled to be complete by mid-1999.
The hardware that operates both the financial and
manufacturing systems along with the operating
system has been successfully implemented and is
now compliant.
Engineering Systems Three systems are non-compliant (document control
system, electrical design system and mechanical
design system). The needed corrections are
identified. The systems are expected to be
corrected and fully compliant by mid-1999.
Products Offered For Sale Existing products are compliant. Former
products that are no longer manufactured are
generally compliant but these former products are
not warranted to be Year 2000 compliant.
Production Equipment All production and test equipment relied on by the
Company to manufacture products are either fully
compliant, or in the case of several manufacturing
test machines that are not compliant, do not need
to be compliant to fully function.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Third-Party Vendors The Company has sent questionnaires to third party
vendors upon whom it relies for various parts,
components and other product-related material. To
date no material non-compliance issues have been
identified, but a number of vendors have not yet
responded to our inquiry. If, by June 30,1999 we
have not been able to determine the compliance
status of any critical vendor we plan to develop
contingency plans to find other sources of supply.
</TABLE>
The Company estimates the cost to be Year 2000 compliant is less than
$500,000.
The Company believes that because of the nature of the corrections needed
to make its systems compliant, there is minimal risk that the systems will be
non-compliant on January 1, 2000. Accordingly, the Company does not believe
that it is necessary to expend its financial and other resources to develop
contingency plans for these systems. The Company believes that the most
reasonably likely worse case scenario is that it will not be able to determine
the compliance status of several critical vendors by June 30, 1999. If by mid-
1999 it has not been able to make this determination, the Company will develop
contingency plans to arrange for alternate sources of materials. The Company's
current insurance programs do not specifically exclude losses attributed to Year
2000 non-compliance, but these programs are subject to change as they are
renewed for future periods. Despite the Company's efforts thus far to address
the Year 2000 impact, the Company cannot guarantee that all internal and
external systems will be compliant, or that its business will not be materially
adversely affected by any such non-compliance.
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS 133 is effective for the
Company in fiscal year 2000 and will not require retroactive restatement of
prior period financial statements. The Company has not yet quantified the impact
of adopting SFAS 133 on its financial statements, but the Company believes there
will not be a significant impact.
Risk Factors
Risk of Increased Leverage
In January and July of 1998, Ampex issued a total of $44 million principal
amount of 12% Senior Notes due 2003 which is material to the Company's total
capitalization. Pending utilization of the net proceeds of the Senior Notes,
the Company has temporarily invested these proceeds in cash equivalents,
including government securities, High Yield mutual funds and U.S. corporate
securities. The interest received on these investments has been, and is
expected to continue to be, substantially less than the interest payable on the
Notes. In order to minimize the difference between the interest currently
received on these investments and the interest payable on the Senior Notes,
Ampex has invested a significant portion of the Senior Notes proceeds in
securities with higher yields, longer terms and lower credit quality than U.S.
government securities. The Company may also engage in various transactions in
derivative securities although it has not done so to date.
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<PAGE>
As of March 31, 1999, Ampex had outstanding approximately $44.0 million of
total borrowings. The degree to which Ampex is leveraged, and the types of
investments it selects, could have important consequences to investors,
including the following:
. a substantial portion of Ampex's consolidated cash flow from
operations must be dedicated to the payment of the principal of and
interest on outstanding indebtedness, and will not be available for
other purposes;
. Ampex's ability to obtain additional financing in the future for
working capital needs, capital expenditures, acquisitions and general
corporate purposes may be materially limited or impaired, or such
financing may not be available on terms favorable to Ampex;
. Ampex may be more highly leveraged than its competitors, which may
place it at a competitive disadvantage;
. Ampex's leverage may make it more vulnerable to a downturn in its
business or the economy in general;
. investments in securities with lower credit quality or longer
maturities could subject Ampex to potential losses due to nonpayment
or changes in market value of those securities, and transactions in
derivative securities could expose Ampex to losses caused by stock
market fluctuations; and
. the financial covenants and other restrictions contained in the Senior
Note indenture and other agreements relating to Ampex's indebtedness
will restrict Ampex's ability to borrow additional funds, to dispose
of assets or to pay dividends on or repurchase preferred or common
stock.
Ampex expects that cash balances and cash flow from operations will be
sufficient to fund anticipated operating expenses, capital expenditures and debt
service requirements as they become due, at least through the current fiscal
year. There can be no assurance, however, that the amounts available from these
sources will be sufficient for such purposes. No assurance can be given that
additional sources of funding will be available if required or, if available,
will be on satisfactory terms. If Ampex cannot service its indebtedness, it
will be forced to adopt alternative strategies. These strategies may include
reducing or delaying capital expenditures, selling assets, restructuring or
refinancing Ampex's indebtedness, or seeking additional equity capital. There
can be no assurance that any of these strategies will be successful or that they
will be permitted under the Senior Note Indenture.
Ampex derives a substantial portion of its operating income from
subsidiaries. Accordingly, Ampex will be dependent on dividends and other
distributions from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Senior
Notes. The ability of Ampex's subsidiaries to pay such dividends will be
subject to, among other things, the terms of any debt instruments of the
subsidiaries then in effect and applicable law.
Risk of Continuing Sales Decline; Anticipation of Future Losses
In recent years, Ampex's net sales have declined materially. These declines
primarily reflect declines in sales to U.S. and foreign government agencies and
defense contractors of Data Systems' products, which are material to operating
results. These government agencies and contractors have experienced continued
pressure to reduce spending, which has particularly affected Data Systems' sales
to government contractors of its DCRsi instrumentation recorders, which have
generally been more profitable than its data storage and video recording
products. Sales of professional television and after-market products are also
expected to decline as a result of the announcement of new digital television
transmission standards.
In response to declining sales of these products, Ampex has been seeking to
expand its products and services, including through acquisitions. Ampex has
also instituted, and will continue to implement, cost reduction programs.
However, there can be no assurance that any of these strategies will be
successful, or that Ampex will be able to reverse recent sales declines.
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<PAGE>
Ampex currently anticipates that it is likely to report losses in the first
half of 1999 and depending on the results and timing of its acquisition and cost
reduction strategies, such losses could be incurred for subsequent periods and
for 1999 as a whole.
Risks Associated with Acquisition Strategy
In order to expand Ampex's products and services, Ampex has made, and is
considering making, acquisitions of, and/or investments in, other business
entities, including businesses not related to its historical lines of business.
Ampex may not be able to identify or acquire additional acquisition candidates
in the future, or complete any further acquisitions or investments on
satisfactory terms. In order to pay for future acquisitions, Ampex may have to:
. issue additional equity securities, which would dilute the ownership
interest of existing Ampex shareholders;
. incur additional debt; and/or
. amortize goodwill and other intangibles or incur other acquisition-
related charges, which could materially impact earnings.
Acquisitions and investments involve numerous additional risks, including
difficulties in the management of operations, services and personnel of the
acquired companies, and of integrating acquired companies with Ampex and/or each
other's operations. Ampex may also encounter problems in entering markets and
businesses in which it has limited or no experience. Acquisitions can also
divert management's attention from other business concerns. Ampex may make
investments in companies in which it has less than a 100% interest. Such
investments involve additional risks, including the risk that Ampex may not be
in a position to control the management or policies of such entities, and risks
of potential conflicts with other investors. Ampex has invested in companies
that are in the early stage of development and may be expected to incur
substantial losses. Ampex's financial resources may not be sufficient to fund
the operations of such companies. Accordingly, there can be no assurance that
any acquisitions or investments that Ampex has made, or may make in the future,
will result in any return, or as to the timing of any return, Ampex could lose
all or a substantial portion of its investments.
Risks Associated with Internet Video Strategy
Ampex's strategy to expand its Internet video businesses involves special
risks in addition to the risks of acquisitions generally described above. Such
risks include, but are not limited to:
. future demand for the services of Ampex's Internet affiliates and
their ability to obtain and manage resources for growth from their
present size and to become profitable;
. Ampex's ability to transfer audio or video technology to Internet-
based applications;
. future demand for Internet-based audio, video and e-commerce services;
. uncertainties as to the future availability of high-speed Internet
access;
. the introduction of new or enhanced Internet video products or
services by competitors; and
. the ability of Ampex or its Internet affiliates to obtain the
managerial, technical and other resources necessary to provide such
services or to do so while generating a profit.
If Ampex's strategy for the development of Internet-based activities is
implemented, it is likely that significant expenses would be incurred which
would cause the Company to report material losses in the future. Such losses
could negatively affect the price of the Company's securities in future periods,
and could require it to seek additional capital, which may not be available on
satisfactory terms or at all.
20
<PAGE>
Fluctuations in Royalty Income
Ampex's results of operations in certain prior periods reflect the receipt
of significant royalty income, including material non-recurring payments
resulting from negotiated settlements primarily related to sales of products by
manufacturers before negotiating licenses from Ampex. Although Ampex has a
substantial number of outstanding and pending patents, and its patents have
generated substantial royalties in the past, it is not possible to predict the
amount of royalty income Ampex will receive in the future. Royalty income has
historically fluctuated widely due to a number of factors that Ampex cannot
predict, such as the extent to which third parties use its patented technology,
the extent to which it 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. The institution of patent
enforcement litigation may also increase the risk of counterclaims alleging
infringement by Ampex of patents held by third parties or seeking to invalidate
patents held by Ampex. Moreover, there is no assurance that Ampex will continue
to develop patentable technology that will be able to generate significant
patent royalties in future years to replace patents as they expire. Ampex's
royalty income fluctuates significantly from quarter to quarter and from year to
year, and there can be no assurance as to the level of royalty income that will
be realized in future periods.
Fluctuations in Operating Results
Ampex's sales and results of operations are generally subject to quarterly
and annual fluctuations. Various factors affect Ampex's operating results, some
of which are outside of the Company's control, including:
. customer ordering patterns;
. availability and market acceptance of new products;
. timing of significant orders and new product announcements;
. order cancellations; and
. receipt of royalty income.
Data Systems' revenues are typically dependent upon receipt of a limited
number of customer orders involving relatively large dollar volumes and are
difficult to forecast in any given fiscal period. Results can also be
significantly affected by any acquisitions or material investments that Ampex
may elect to make in a given quarter. Therefore, its results may fluctuate
significantly from quarter to quarter and from year to year. Results of a given
quarter or year may not necessarily be indicative of results to be expected for
future periods. In addition, fluctuations in operating results may negatively
affect Ampex's debt service coverage, or its ability to issue debt or equity
securities should it wish to do so, in any given fiscal period. Material
fluctuations in Ampex's results in future periods could have a material adverse
effect on the price of the Company's Common Stock.
Seasonality and Backlog
Sales of most of Ampex's products have historically declined during the
first and third quarters of the fiscal year, due to the seasonal procurement
practices of Ampex's customers. A substantial portion of Ampex's backlog at a
given time is normally shipped within one or two quarters thereafter.
Therefore, sales in any quarter are heavily dependent on orders received in that
quarter and the immediately preceding quarter.
Rapid Technological Change and Risks of New Product Development
All the industries and markets from which Ampex derives revenues, directly
or through its licensing program, are characterized by continual technological
change and the need to introduce new products, product upgrades and patentable
technology. This has required, and will continue to require, that Ampex spend
substantial amounts for the research, development and engineering of new
products and advances to existing products. No assurance can be given that
Ampex's existing products and technologies will not become obsolete or that any
new
21
<PAGE>
products or technologies will win commercial acceptance. Obsolescence of
existing product lines, or inability to develop and introduce new products,
could have a material and adverse effect on its sales and results of operations
in the future. The development and introduction of new technologies and
products are subject to inherent technical and market risks, and there can be no
assurance that we will be successful in this regard.
Competition
Ampex encounters significant competition in all its product markets. Many
of its competitors have greater resources and access to capital than the
Company. In the mass data storage market, Ampex competes with a number of well-
established competitors such as IBM Corporation, Storage Technology Corporation,
Exabyte Corporation and Quantum Corporation, as well as smaller companies. In
addition, other manufacturers of scanning video recorders may seek to enter the
mass data storage market in competition with us. For example, Sony Corporation
has entered this market with storage products based on its video recording
technology. In addition, price declines in competitive storage systems, such as
magnetic or optical disk drives, can negatively impact sales of Ampex's DST
products.
In the instrumentation market, Ampex 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.
MicroNet's competitors include both large companies such as EMC
Corporation, Data General Corporation and IBM and other small system
integrators. There is no assurance that MicroNet will be able to compete
successfully in these markets in the future.
The market for Internet products and services is highly competitive and
characterized by multiple competitors and low barriers to entry. Although Ampex
believes that its Internet video strategy is differentiated from its
competitors, Ampex holds no proprietary technology and is not in a position to
achieve dominance in any market segment of the Internet. In addition, the
market for Internet advertising and electronic commerce, upon which Ampex's
Internet operations will be partially dependent to achieve ultimate
profitability, is intensely competitive and Ampex believes that competition in
this field will intensify.
Dependence on Certain Suppliers
Ampex purchases certain components from a single domestic or foreign
manufacturer. Significant delays in deliveries or defects in such components
could adversely affect Ampex's manufacturing operations, pending qualification
of an alternative supplier. In addition, Ampex produces highly engineered
products in relatively small quantities. As a result, Ampex's ability to cause
suppliers to continue production of certain products on which it may depend may
be limited. Ampex does not generally enter into long-term raw materials or
components supply contracts.
Risks Related to International Operations
Although Ampex significantly curtailed its international operations in
connection with the restructuring of its operations in 1993, sales to foreign
customers (including U.S. export sales) continue to be significant to Ampex's
results of operations. International operations are subject to a number of
special risks, including limitations on repatriation of earnings, restrictive
actions by local governments, and fluctuations in foreign currency exchange
rates and nationalization. Additionally, export sales are subject to export
regulation and restrictions imposed by U.S. government agencies. Fluctuations
in the value of foreign currencies can affect Ampex's results of operations.
Ampex does not normally seek to mitigate its exposure to exchange rate
fluctuations by hedging its foreign currency positions.
In January 1999, the new "Euro" currency was introduced in certain European
countries that are part of the European Monetary Union. Beginning in 2003, all
EMU countries are expected to be operating with the Euro as their single
currency. A significant amount of uncertainty exists as to the effect the Euro
will have on the marketplace generally. Some of the rules and regulations
relating to the governance of the currency have not yet
22
<PAGE>
been defined and finalized. As a result, companies operating or conducting
business in Europe will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling the Euro.
Ampex is currently assessing the effect the introduction of the Euro will have
on its internal accounting systems and the potential sales of its products.
Ampex will take appropriate corrective actions based on the results of such
assessment. Ampex has not yet determined the costs related to addressing this
issue. This issue and its related costs could materially and adversely affect
Ampex's business.
Volatility of Stock Price
The trading price of Ampex's Common Stock has been and can be expected to
be subject to significant volatility, reflecting a variety of factors,
including:
. quarterly fluctuations in operating results;
. announcements of new product introductions by Ampex or its
competitors;
. reports and predictions concerning the Company by analysts and other
members of the media;
. issuances of substantial amounts of Common Stock in order to redeem
outstanding shares of its Preferred Stock; and
. general economic or market conditions.
The stock market in general, and Internet companies in particular, have
experienced a high degree of price volatility, which has had a substantial
effect on the market prices of many such companies for reasons that often are
unrelated or disproportionate to operating performance. These broad market and
industry fluctuations may adversely affect the price of Ampex's Common Stock,
regardless of its operating performance.
Dependence on Key Personnel
Ampex is highly dependent on its management. Ampex's success depends upon
the availability and performance of key executive officers and directors. The
loss of the services of key persons could have a material adverse effect upon
Ampex. Ampex does not maintain key man life insurance on any of these
individuals.
Anti-Takeover Consequences of Certain Governing Instruments
Ampex's Certificate of Incorporation provides for a classified Board of
Directors, with members of each class elected for a three-year term. The
Certificate of Incorporation provides for nullification of voting rights of
certain foreign stockholders in certain circumstances involving possible
violations of security regulations of the United States Department of Defense.
The instrument governing Ampex's outstanding Preferred Stock, which had an
aggregate liquidation value of approximately $52.5 million at March 31, 1999,
requires that Ampex make mandatory offers to redeem those securities out of
legally available funds in the event of a change of control. For this purpose, a
change of control includes the following events: a person or group of people
acting together acquires 30% or more of Ampex's voting securities; Ampex merges,
consolidates or transfers all or substantially all of its assets; or the
dissolution of Ampex. The Certificate of Incorporation authorizes the Board of
Directors to issue additional shares of Preferred Stock without the vote of
stockholders. The indenture governing Ampex's outstanding Senior Notes, in the
total principal amount of $44 million, requires Ampex to offer to repurchase the
Senior Notes at a purchase price equal to 101% of the outstanding principal
amount thereof together with accrued and unpaid interest in the event of a
change of control. Under the indenture, a change of control includes the
following events: a person or group of people acting together acquires 50% or
more of the Company's voting stock; or the transfer of substantially all of the
Company's assets to any such person or group, other than to certain subsidiaries
and affiliates of Ampex. These provisions could have anti-takeover effects by
making an acquisition of Ampex by a third party more difficult or expensive in
certain circumstances.
23
<PAGE>
Nonpayment of Dividends
Ampex has not declared dividends on its Common Stock since its
incorporation in 1992 and Ampex has no present intention of paying dividends on
its Common Stock. Ampex is also restricted by the terms of certain agreements
and of the outstanding Preferred Stock as to the declaration of dividends.
Dependence on Licensed Patent Applications and Proprietary Technology
Ampex's success depends, in part, upon its ability to establish and
maintain the proprietary nature of its technology through the patent process.
There can be no assurance that one or more of Ampex's patents will not be
successfully challenged, invalidated or circumvented or that it will otherwise
be able to rely on such patents for any reason. In addition, there can be no
assurance that competitors, many of whom have substantial resources and have
made substantial investments in competing technologies, will not seek to apply
for and obtain patents that prevent, limit or interfere with Ampex's ability to
make, use and sell its products either in the United States or in foreign
markets. If any of Ampex's patents are successfully challenged, invalidated or
circumvented or its right or ability to manufacture products were to be
proscribed or limited, Ampex's ability to continue to manufacture and market its
products could be adversely affected, which would likely have a material adverse
effect upon Ampex's business, financial condition and results of operations.
Litigation may be necessary to enforce Ampex's patents, to protect trade
secrets or know-how owned by the Company or to determine the enforceability,
scope and validity of the proprietary rights of others. Any litigation or
interference proceedings brought against, initiated by or otherwise involving
Ampex may require Ampex to incur substantial legal and other fees and expenses
and may require some of its employees to devote all or a substantial portion of
their time to the prosecution or defense of such litigation or proceedings.
Environmental Issues
Ampex's facilities are subject to numerous federal, state and local laws
and regulations designed to protect the environment from waste emissions and
hazardous substances. 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. Ampex has been named from time
to time as a potentially responsible party by the United States Environmental
Protection Agency with respect to contaminated sites that have been designated
as "Superfund" sites, and are currently engaged in various environmental
investigation, remediation and/or monitoring activities at several sites located
off Company facilities. There can be no assurance Ampex 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 Ampex in the future.
Readiness for Year 2000
Many currently installed computer systems, software applications and other
control devices (collectively, "Systems") are coded to accept only two digit
entries in the date code field. As the year 2000 approaches, these code fields
will need to accept four digit entries to distinguish years beginning with "19"
from those beginning with "20". As a result, in just under one year the Systems
used by many companies may need to be modified to comply with year 2000
requirements. Ampex relies on its internal Systems in operating and monitoring
all major aspects of its business, including its manufacturing processes,
engineering management controls, financial systems (such as general ledger,
accounts payable and payroll modules), customer services, infrastructure,
embedded computer chips, networks and telecommunications equipment and products.
Ampex also relies on the external Systems of its suppliers and other
organizations with which it does business. Based on a review of its Systems and
the nature of the corrections needed to make the Systems compliant, the Company
believes there is minimal risk that the Systems will be non-compliant on January
1, 2000. However, despite the efforts thus far to address the year 2000 impact,
the Company cannot guarantee that all internal and external systems will be
compliant, or that its business will not be materially adversely affected by any
such non-compliance.
24
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no change to the disclosure made in the 1998 Form10-K.
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.
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 1999 or 2000 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 six
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. 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 Media subsidiaries formerly owned by the Company.
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 March 31,
1999, the Company had an accrued liability of $1.9 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 any
liability for contingent liabilities it may incur with respect to former Media
sites discussed above. 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.
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, 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 Ampex'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
25
<PAGE>
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
During the quarter ended March 31, 1999, the holders of 5,630 shares of the
Company's outstanding 8% Noncumulative Convertible Preferred Stock (the
"Convertible Preferred Stock") converted such shares into a total of 2,815,000
shares of the Company's Class A Common Stock pursuant to the conversion right
contained in the Convertible Preferred Stock. No cash or other consideration
was paid by the Company, directly or indirectly, in connection with such
conversion. The shares of Class A Common Stock were issued in reliance upon the
exemption from registration contained in Section 3(a)(9) of the Securities Act
of 1933, as amended, for the issuance of securities exchanged by the issuer with
the existing security holders exclusively where no commission or other
remuneration is paid or given directly or indirectly for soliciting such
exchange.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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
The Company did not file any Current Reports on Form 8-K during its fiscal
quarter ended March 31, 1999.
26
<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: May 13, 1999 /s/ EDWARD J. BRAMSON
------------------------------------
Edward J. Bramson
Chairman and Chief Executive Officer
Date: May 13, 1999 /s/ CRAIG L. McKIBBEN
------------------------------------
Craig L. McKibben
Vice President, Chief Financial Officer
and Treasurer
27
<PAGE>
AMPEX CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1999
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27.1* Financial Data Schedule.
* Filed Herewith.
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MAR. 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 19,863
<SECURITIES> 31,608
<RECEIVABLES> 13,925
<ALLOWANCES> (1,213)
<INVENTORY> 20,634
<CURRENT-ASSETS> 88,519
<PP&E> 41,637
<DEPRECIATION> 31,506
<TOTAL-ASSETS> 110,106
<CURRENT-LIABILITIES> 24,128
<BONDS> 43,430
52,458
0
<COMMON> 526
<OTHER-SE> (62,092)
<TOTAL-LIABILITY-AND-EQUITY> 110,106
<SALES> 15,020
<TOTAL-REVENUES> 15,020
<CGS> 9,988
<TOTAL-COSTS> 18,734<F1>
<OTHER-EXPENSES> (2,654)<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,370
<INCOME-PRETAX> (1,687)
<INCOME-TAX> 260
<INCOME-CONTINUING> (1,947)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,947)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>INCLUDES S&A AND RD&E OF 6,468 AND 2,278 RESPECTIVELY
<F2>INCLUDES ROYALTY INCOME OF 2,662
</FN>
</TABLE>
