<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
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 Number 0-26924
AMX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1815822
(State of Incorporation) (I.R.S. Employer
11995 FORESTGATE DRIVE Identification No.)
DALLAS, TEXAS
(Address of principal executive offices) 75243
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 644-3048
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 [ ]
COMMON STOCK, $0.01 PAR VALUE 7,798,548
(Title of Each Class) (Number of Shares Outstanding at
October 31, 1996)
<PAGE>
AMX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at September 30,
1996 and March 31, 1996 2
Consolidated Statements of Income for the
Three Months Ended and Six Months Ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Six Months ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Reports on Form 8-K and Exhibits 14
SIGNATURES 15
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
September 30, 1996 March 31, 1996
------------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,911 $ 4,859
Receivables - trade and other;
less allowance for doubtful
accounts of $91 at
September 30, 1996 and $125
at March 31, 1996 5,075 4,260
Inventories 3,752 2,866
Prepaid expenses 231 175
Deferred income tax 218 218
Income taxes recoverable -- --
-------- --------
Total current assets 14,187 12,378
Property and equipment, at cost, net 2,504 1,613
Capitalized software 204 123
Goodwill, net 206 177
Deposits and other 1,253 361
-------- --------
Total assets $ 18,354 $ 14,652
-------- --------
-------- --------
2
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except for share and per share amounts)
September 30, 1996 March 31, 1996
------------------ --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,160 $ 1,473
Accrued compensation 881 835
Accrued sales commissions 525 387
Other accrued expenses 641 769
Current portion of long-term debt 6 -
Notes payable 134 -
Income taxes payable 319 350
------- -------
Total current liabilities 4,666 3,814
Long-term debt, less current portion 118 54
Deferred tax liability 69 69
Contingencies - -
Minority interest in subsidiary 715 1
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued shares - 7,798,548 at September 30, 1996
and 7,552,120 at March 31, 1996 78 76
Additional paid-in capital 1,784 131
Retained earnings 10,971 10,507
Less common treasury stock of 5,208
shares (47) -
------- -------
Total shareholders' equity 12,786 10,714
------- -------
Total liabilities and shareholders'
equity $18,354 $14,652
------- -------
------- -------
See accompanying notes
3
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- -----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
System sales $ 9,953 $ 8,310 $ 17,579 $ 14,692
OEM and custom product sales 777 565 1,363 938
--------- --------- --------- ---------
Net sales 10,730 8,875 18,942 15,630
Cost of sales 3,914 3,312 7,332 5,905
--------- --------- --------- ---------
Gross profit 6,816 5,563 11,610 9,725
--------- --------- --------- ---------
Selling and marketing expenses 3,631 2,591 6,943 5,320
General and administrative expenses 1,116 729 1,808 1,275
Acquired research and development - - 1,230 -
Research and development expenses 586 280 1,339 494
--------- --------- --------- ---------
Total Operating Expenses 5,333 3,600 11,320 7,089
--------- --------- --------- ---------
Operating income 1,483 1,963 290 2,636
Interest expense (2) 194 4 423
Other income 68 42 141 78
--------- --------- --------- ---------
Income before income taxes 1,553 1,811 427 2,291
Income tax provision 782 656 201 830
Minority interest (235) - (235) -
--------- --------- --------- ---------
Net income $ 1,006 1,155 $ 461 1,461
--------- ---------
--------- ---------
Preferred stock dividends, including accretion 308 616
--------- ---------
Net income applicable to
common shareholders $ 847 $ 845
--------- ---------
--------- ---------
Earnings per common share $ 0.12 $ 0.15 $ 0.06 $ 0.15
--------- --------- --------- ---------
--------- --------- --------- ---------
Common and common equivalent
shares outstanding 8,277,994 5,434,322 8,266,203 5,720,753
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes
4
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended September 30,
1996 1995
------- -------
OPERATING ACTIVITIES
Net income $ 461 $ 1,461
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 413 352
Acquired research and development 980 -
Provision for losses on receivables (34) 131
Provision for inventory obsolescence (12) 18
Loss on sale of property and equipment - 2
Changes in operating assets and liabilities:
Receivables (447) (862)
Inventories (286) 151
Prepaid expenses 21 (39)
Other current assets - (125)
Accounts payable 135 (3)
Accrued expenses (27) (168)
Income taxes recoverable/payable (56) 432
------- -------
Net cash provided by operating activities 1,148 1,350
INVESTING ACTIVITIES
Purchases of property and equipment (1,114) (462)
Proceeds from sale of property and equipment - 9
Investment in capitalized software (81) (28)
Payment to former owner of AudioEase (180) -
Minority interest in PHAST 714 1
Increase in other assets (502) (3)
------- -------
Net cash used in investing activities (1,163) (483)
FINANCING ACTIVITIES
Sale of stock 26 -
Exercise of stock options 86 54
Purchase of treasury stock (47) -
Disqualifying disposition of stock options 44 -
Proceeds from long-term debt 125 3,816
Repayments of long-term debt (170) (3,795)
------- -------
Net cash provided by financing activities 64 75
Effect of exchange rate changes on cash 3 (9)
------- -------
Net increase in cash and cash equivalents 52 933
Cash and cash equivalents at beginning of period 4,859 2,540
------- -------
Cash and cash equivalents at end of period $ 4,911 $ 3,473
------- -------
------- -------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of AMX common stock in connection with
AudioEase acquisition $ 1,500 $ -
------- -------
------- -------
See accompanying notes.
5
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements, which should be
read in conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996, are unaudited (except for the March 31, 1996
consolidated balance sheet, which was derived from the Company's audited
financial statements), but have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation
have been included.
Operating results for the three and six months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the entire
year ending March 31, 1997.
2. Asset Acquisition
In March 1996, the Company signed a letter of intent to acquire 100% of the
outstanding stock of SPS International, Inc., dba AudioEase. AudioEase
designs, manufactures, and markets hardware and software products for upscale
home theater systems, whole-home audio/video control and distribution
systems, as well as other electronic home systems. The acquisition was
completed in May 1996 at a purchase price of $1.5 million paid in 181,818
shares of AMX Corporation common stock. The acquisition was accounted for as
a purchase. Of the total purchase price, $980,000 was allocated to acquired
research and development, and therefore immediately expensed.
3. Earnings Per Share
Subsequent to March 31, 1996, earnings per share is based on the weighted
average number of common and common equivalent shares outstanding including
the dilutive effect, if any, of options and warrants.
6
<PAGE>
For periods prior to April 1, 1996, earnings per common share is based on
net income after preferred stock dividend requirements (which began April 1,
1995), accretion of discount on the preferred stock (which also began April
1, 1995) and the one-time write-off of the remaining discount on the
preferred stock which occurred when the preferred stock was redeemed. The
net income applicable to common shareholders is divided by the weighted
average number of common shares outstanding during each year after giving
effect to stock options considered to be dilutive common stock equivalents
(using the treasury stock method for all periods presented). Fully diluted
earnings per common share is not materially different.
The Company has computed common and common equivalent shares in determining
the number of shares used in calculating earnings per share for the first six
months of fiscal 1996 pursuant to the Securities and Exchange Commission
Staff Accounting Bulletin (SAB) No. 83. SAB No. 83 requires the Company to
include all common shares and all common share equivalents issued in the 12
month period preceding the filing date of the initial public offering in its
calculation of the number of shares used to determine earnings per share as
if the shares had been outstanding for all periods presented prior to the
initial public offering.
4. Inventories
The components of inventories are as follow:
September 30, 1996 March 31, 1996
------------------ --------------
Raw materials $1,168,825 $1,705,108
Work in progress 544,414 229,566
Finished goods 2,091,821 1,030,061
Less reserve for obsolescence (53,196) (99,000)
---------- -----------
$3,751,864 $2,865,735
---------- -----------
---------- -----------
5. Contingencies
The Company is involved in a lawsuit which was filed on August 19, 1994,
pending in federal district court for the Western District of Oklahoma with
Ford Audio-Video Systems, Inc. ("FAV"). FAV is a privately held company
located in Oklahoma. FAV claims actual damages "in excess of $10,000" and
punitive damages of $20,000,000. FAV asserts that it orally contracted with
the Company to manufacture a control panel and that the Company wrongfully
sold the panel to others. After various hearings and motions in which
various claims by FAV were dismissed by the court or dropped by FAV, claims
for fraud and misappropriation of trade secrets remain.
7
<PAGE>
While the ultimate outcome of such litigation is uncertain, the Company
denies the allegations, is vigorously defending the litigation, and believes
that the ultimate outcome thereof will not have a material adverse effect on
the Company's consolidated financial position, results of operations, or
liquidity. An unfavorable outcome in this matter could have a material
adverse effect upon the Company's consolidated financial position and consume
working capital. In addition, even if the ultimate outcome is resolved in
favor of the Company, defending itself against such litigation could entail
considerable cost and the diversion of efforts of management, either of which
could have material adverse effect upon the Company's results of operations.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included in the
Company's 1996 Annual Report to Shareholders. The Company believes that all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the following
quarterly information. Quarterly operating results have varied significantly
in the past and can be expected to vary in the future. Results of operations
for any particular quarter are not necessarily indicative of results of
operations for a full year.
OVERVIEW
AMX designs, develops, manufactures and markets integrated remote
control systems that enable end users to operate as a single system a broad
range of electronic and programmable equipment in a variety of corporate,
educational, industrial, entertainment, governmental, and residential
settings. The Company's hardware and software products provide the operating
system, machine control, and user interface necessary to operate as an
integrated network electronic devices from different manufacturers through
easy-to-use control panels. The Company's systems are available in a variety
of configurations and provide centralized control of a wide range of video
systems, audio systems, teleconferencing equipment, educational media,
lighting equipment, environmental control systems, security systems, and
other electronic devices. The Company has recently introduced several
Windows-Registered Trademark--based software applications that handle design
functions, permit scheduling control, and enable a personal computer to
operate on the Company's AXlink bus as a control panel.
While annual growth rates of the Company's net sales have ranged
from 17% up to as high as 42% since 1991, the Company's quarterly operating
results have varied significantly in the past, and can be expected to vary in
the future. These quarterly fluctuations have been the result of a number of
factors, including the volume and timing of orders received during the
period, particularly from international distributors, OEMs, and other large
customers; sales and marketing expenses related to entering new markets;
research and development expenses related to the development of new products;
the Company's reliance upon dealers and distributors; the timing of new
product introductions by the Company and its competitors; fluctuations in
commercial and residential construction and remodeling activity; and changes
in product or distribution channel mix. In addition, the Company generally
experiences higher selling and marketing expenses during the first fiscal
quarter of each year due to costs associated with the Company's largest trade
show (occurring in June) and experiences higher sales in the education market
during the second fiscal quarter of each year due to the buying cycles of
educational institutions.
The Company's system sales are made through dealers and
distributors. The Company principally relies on over 1,000 specialized
third-party dealers of electronic and audiovisual equipment to sell, install,
support and service its products in the United States. Internationally, the
Company relies on a network of 20 exclusive distributors serving 22 countries
and 37 dealers serving an additional 19 countries to distribute its products.
OEM and custom product sales have been made only to a few customers
and have generally been large and sporadic transactions. During fiscal 1994,
1995, 1996 and six months in 1997, 71%, 45%, 56% and 37%, respectively, of
the Company's OEM and custom product sales have been with one customer whose
orders have fluctuated significantly based on their own sales volumes. While
the Company's OEM customers typically place orders for products several
months prior to the scheduled shipment date, these orders are subject to
rescheduling and cancellation. Also, OEM customers can redesign their
products without the AMX equipment in them which could result in reduced or
eliminated sales to such customers. One of the Company's strategies for
growth is to increase OEM and custom product sales to large customers that
typically carry lower gross margins, but also have lower selling expenses.
9
<PAGE>
The Company's U. S. dealers pursue a wide variety of projects that
can range from small conference rooms or boardrooms to very large projects in
a university, government facility, amusement park, or corporate training
facility. The Company's international distributors tend to order in large
quantities to take advantage of volume discounts the Company offers and to
economize on shipping costs. These international orders are not received at
the same time each year. Notwithstanding the difficulty in forecasting future
sales and the relatively small level of backlog at any given time, the
Company generally must plan production, order components, and undertake its
development, selling and marketing activities, and other commitments months
in advance. Accordingly, any shortfall in revenues in a given quarter may
impact the Company's results of operations because the Company generally does
not plan to adjust expenditure levels in response to fluctuations in
quarterly revenues.
The Company purchases components that comprise approximately 28% to
32% of its cost of sales from foreign vendors. The primary components
purchased are standard power supplies and displays for touch panels.
Historically, the Company has not had any significant cost issues related to
price changes due to purchasing from foreign vendors. However, there can be
no assurance that this will be the case in the future. The Company has
experienced delays of up to three weeks in receiving materials from foreign
vendors. However, the Company takes this issue into consideration when orders
are placed and, therefore, this concern has not, in the past, significantly
impacted the Company's ability to meet production and customer delivery
deadlines. However, a significant shortage of or interruption in the supply
of foreign components could have a material adverse affect on the Company's
results of operations.
The Company's selling and marketing expenses category also includes
customer service, technical support and engineering. The engineering
department of the Company is involved in both research and development as
well as customer support and service. Additionally, the Company has created
sales support teams, focused on specific geographic regions or customer
categories. These teams include sales personnel, system designers, and
technical support personnel, all of whom indirectly participate in research
and development activities by establishing close relationships with the
Company's customers and by individually responding to customer-expressed
needs.
The Company intends to continue to commit resources to develop new
software for specific vertical markets to expand system sales and build for
the future. An example of this is the Synergy Electronic Classroom System
("Synergy"). In fiscal 1994, the Company invested $1,040,000 in engineering
development, marketing, and sales efforts to develop the Synergy
Windows-Registered Trademark--based software and introduce it to the
education market. The Company continues to invest money each year in Synergy
to continue the development and enhancement of the product and the Company's
position in the marketplace. Sales of Synergy are increasing, and the Company
expects the education market to be an opportunity for future growth. A
similar commitment was the Company's investment in PHAST Corporation in
August 1995. This new subsidiary is currently designing and will produce and
distribute control systems and products for home automation. Although
management believes that significant investments such as these are
appropriate, such investments can and have had a negative impact on the
Company's results of operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET SALES for the second quarter were $10.7 million, up 21% over
the net sales in the second quarter of the prior year of $8.9 million.
SYSTEM SALES were $9.9 million, up 20% from the previous year and OEM AND
CUSTOM PRODUCT SALES were $.8 million, up 31% from the previous year. The
increase in sales reflected growth in all product markets and sales regions
for the company. Residential sales increased 163% as a result of the
purchase of AudioEase in May, while international sales increased 15% and
Synergy sales increased 32%.
COST OF SALES consists of material, labor, and manufacturing
overhead, and was $3.9 million or 36.5% of net sales for the second quarter
of 1996, as compared to 37.3% of net sales in the comparable period of the
10
<PAGE>
prior year. The Company maintained its historical cost of sales percentage
because of purchase variances during the quarter which offset the inclusion
of AudioEase and the increase in OEM sales , both of which have historically
experienced higher percentage cost of sales.
SELLING AND MARKETING EXPENSES increased from $2.6 million, or
29.2% of net sales for the second quarter last year to $3.6 million or 33.8%
of sales for the second quarter this year. Both the increase in dollars and
the percentage increase were driven by the addition of AudioEase and the
emergence of PHAST. AudioEase was acquired in May of 1996, and therefore not
included in last year's quarter. PHAST which began operations during the
second quarter last year, initiated its sales and marketing efforts during
the second quarter of this year. Both companies participated in the
residential market's largest trade show during the quarter, thus incurring
slightly higher than normal quarterly expenses. These companies accounted
for $496,834 of the total increase of $1,050,362 for the quarter.
GENERAL AND ADMINISTRATIVE EXPENSES were $1.1 million during the
second quarter of 1996 compared to $.7 million for the second quarter last
year. As a percentage of sales, expenses increased from 8.2% to 10.4%. The
increase was a result of the addition of AudioEase and the cost of
governmental compliance which was not incurred last year.
RESEARCH AND DEVELOPMENT EXPENSES were $585,372 in the second
quarter of 1996 compared to $280,029 last year. This represents 5.5% of net
sales for the current year compared to 3.2% last year. The increase in
spending is a result of the emergence PHAST, which was formed and had just
begun operation during the second quarter last year, and a result of AMX's
commitment to the development of new products to maintain its competitive
position.
INTEREST EXPENSE decreased from $194,338 in the second quarter last
year to zero in the second quarter this year which reflects the repayment in
November of 1995 of the subordinated debentures and the bank term note with
the proceeds from the Company's initial public offering.
The Company's EFFECTIVE TAX RATE was 50.4% in the second quarter of
this year compared to 36.2% in the second quarter last year. The effective
tax rate has been impacted adversely due to the fact that the losses incurred
by PHAST cannot be included in the Company's consolidated tax return. The
PHAST losses will be carried forward against any future profits of PHAST
before any tax expense will be incurred by this subsidiary.
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET SALES were $18.9 million for the six months ended September 30,
1996, up 21.2% over the comparable period in the prior year. SYSTEM SALES
were $17.6 million and OEM AND CUSTOM PRODUCT SALES were $1.4 million
respectively for the six months ended September 30, 1996, up 19.7% and 45.3%
respectively from the comparable period of the prior year. The increase in
sales reflected growth in all product markets and sales regions for the
Company. Residential sales increased 204%, primarily due to the inclusion of
AudioEase this year, Synergy sales increased 23%, and international sales
increased 14%.
COST OF SALES was $7.3 million or 38.7% of net sales in the six
months ended September 30, 1996, as compared to $5.9 million or 37.8% of net
sales in the comparable period of the prior year. The slight increase for the
six months ended September 30, 1996 is due to the acquisition of AudioEase,
which historically has experienced higher cost of sales, and the increase in
OEM sales, which likewise, experience higher cost of sales.
SELLING AND MARKETING EXPENSES increased from $5.3 million, or
34.0% of net sales for the six months ended September 30, 1995 to $6.9
million or 36.7% of sales for the same period of the current year. Expenses
increased as a result of the addition of AudioEase and the emergence of
PHAST. These two companies
11
<PAGE>
accounted for $647,324 of the $1,632,321 in increased costs. The remaining
sales and marketing expenses remained consistent as a percentage of net sales.
GENERAL AND ADMINISTRATIVE EXPENSES were $1.8 million for the six
months ending September 30, 1996, up from $1.3 million for the same period
last year. This represents an increase from 8.1% of net sales to 9.5% of net
sales. Legal expenses associated with the FAV litigation discussed below,
governmental compliance costs, and the addition of AudioEase contributed to
the increase.
ACQUIRED RESEARCH AND DEVELOPMENT was $1.2 million for the six
months ended September 30, 1996, compared to none for the same period last
year. This amount consists of the allocation of costs associated with the
acquisitions of AudioEase and Camrobotics, which occurred in May and June
respectively.
RESEARCH AND DEVELOPMENT EXPENSES were $1.3 million for the six
months ending September 30, 1996 compared to $.5 million for the same period
last year. This represents 7.1% and 3.2% of net sales respectively. The
increase is a result of emergence of PHAST, which began operations during the
second quarter of last year. This accounted for $.7 million of the increase.
Additionally, AMX's increased costs reflect its continued commitment to the
development of its WAVE products.
INTEREST EXPENSE decreased from $423,335 for the six months ended
September 30, 1995, to $3,591 in the six months ended September 30, 1996,
which reflects the repayment in November of 1995 of the subordinated
debentures and the bank term note with the proceeds from the Company's
initial public offering.
The Company's EFFECTIVE TAX RATE was 47.1% for the six months ended
September 30, 1996 and 36.2% for the same period last year. The effective
tax rate has been impacted adversely due to the fact that the losses incurred
by PHAST cannot be included in the Company's consolidated tax return. The
PHAST losses will be carried forward against any future profits of PHAST
before any tax expense will be incurred by this subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
For the past three years, the Company has satisfied its operating
cash requirements principally through cash flow from operations. In the six
months ended September 30, 1996, the Company provided $1.1 million of cash
flow from operations. Investing activities used $1.2 million of cash,
primarily for the purchase of $1.1 million of property and equipment
comprised principally of computers, a telephone system, a trade show booth,
and engineering development and testing equipment.
In June 1995, the Company refinanced $3.5 million of its
subordinated debentures and $315,000 of its notes payable with a bank term
loan which provided for interest at 8.67%. The Company raised net proceeds of
$20 million from its initial public offering in November 1995. These proceeds
were used to retire $3.5 million of subordinated debentures, $3.8 million of
a bank term loan and redeem the $12.6 million of Series A Preferred Stock
(including accrued dividends).
Additionally, the Company has a revolving loan agreement for $5.0
million which expires on March 1, 1997, and provides for interest at the
bank's contract rate which is expected to approximate prime. At September 30,
1996, no amounts were outstanding under the revolving loan agreement.
The Company expects to spend approximately $1.4 million for capital
expenditures in fiscal 1997. In August of 1995, the Company committed $1.12
million to its newly formed, majority-owned subsidiary, PHAST Corporation,
for the development of home automation hardware and software products. As of
September 30, 1996 the entire amount of this commitment had been funded to
PHAST. In August of 1996, PHAST received a commitment from Scott Miller,
Chairman of the Company, acting in his individual capacity, for an
additional $1.5 million to continue funding its development. The Company
expects that
12
<PAGE>
additional financing will be required for PHAST in the quarter ending March
31, 1997. Financing sources outside the Company will be considered to
provide this round of financing.
In May 1996, the Company acquired 100% of SPS International, Inc.
dba AudioEase. AudioEase designs, manufactures, and markets hardware and
software products for upscale home theater systems, whole-home audio/video
control and distribution systems, as well as other electronic home systems.
The acquisition was completed at a purchase price of $1.5 million paid in
181,818 shares of AMX Corporation common stock. The Company engaged an
independent appraisal company to assist in allocating the purchase price of
AudioEase. The majority of the purchase price was allocated to in-process
research and development projects. In accordance with generally accepted
accounting principles, the purchase price allocated to in-process research
and development projects was expensed in a one-time charge to the Company's
consolidated earnings as of the date of the consummation of the combination.
In June 1996, the Company acquired 100% of the assets of
Camrobotics, Inc. a designer and developer of pan and tilt cameras for a
purchase price of $250,000. Payment was made with $125,000 in cash and the
delivery of a $125,000 note payable due in February 1997. The majority of the
purchase price was allocated to in-process research and development projects.
In accordance with generally accepted accounting principles, the purchase
price allocated to in-process research and development projects was expensed
in a one-time charge to the Company's consolidated earnings as of the date of
the consummation of the combination
The Company believes that cash flow from operations, the Company's
existing cash resources and funds available under its revolving loan facility
will be adequate to fund its working capital and capital expenditure
requirements for at least the next 12 months. An important element of the
Company's business strategy has been, and continues to be, the acquisition of
similar businesses and complementary products and technology and the
integration of such businesses and products and technology into the Company's
existing operations. Such future acquisitions, if they occur, may require
that the Company seek additional funds.
CONTINGENCIES
The Company is involved in a lawsuit which was filed on August 19,
1994, pending in federal district court for the Western District of Oklahoma
with Ford Audio-Video Systems, Inc. ("FAV"). FAV is a privately held company
located in Oklahoma. FAV claims actual damages "in excess of $10,000" and
punitive damages of $20,000,000. FAV asserts that it orally contracted with
the Company to manufacture a control panel and that the Company wrongfully
sold the panel to others. After various hearings and motions in which
various claims by FAV were dismissed by the court or dropped by FAV, claims
for fraud and misappropriation of trade secrets remain.
While the ultimate outcome of such litigation is uncertain, the
Company denies the allegations, is vigorously defending the litigation, and
believes that the ultimate outcome thereof will not have a material adverse
effect on the Company's consolidated financial position, results of
operations, or liquidity. An unfavorable outcome in this matter could have a
material adverse effect upon the Company's consolidated financial position
and consume working capital. In addition, even if the ultimate outcome is
resolved in favor of the Company, defending itself against such litigation
could entail considerable cost and the diversion of efforts of management,
either of which could have a material adverse effect upon the Company's
results of operations.
In addition, the Company is party to ordinary litigation incidental
to its business, none of which is expected to have a material adverse effect
on the results of operations, financial position or liquidity of the Company.
13
<PAGE>
AMX CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information pertaining to this item is incorporated from Part 1. Financial
Information (Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Contingencies).
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Amended and Restated Articles of the Company.
(Incorporated by reference from Exhibit 4.1 in the
Company's Form S-8 filed March 11, 1996, File
No. 333-2202).
3.2 Amended and Restated Bylaws of the Company, as amended.
(Incorporated by reference from Exhibit 3.4 in the
Company's Registration Statement on Form S-1 filed
September 13, 1995, as amended, File No. 33-96886).
3.3 Amendment to Amended and Restated Bylaws of the Company.
(Incorporated by reference from Exhibit 3.5 in the
Company's Registration Statement on Form S-1 filed
September 13, 1995, as amended, File No. 33-96886).
4.1 Specimen certificate for the Common Stock of the Company
(Incorporated by reference from Exhibit 4.1 in the
Company's Registration Statement on Form S-1 filed
September 13, 1995, as amended, File No. 33-96886).
+27.1 Financial Data Schedule.
b. Reports on Form 8-K
Current report on Form 8-K dated as of September 5, 1996 and filed
September 5, 1996 regarding the financing for PHAST Corporation and
the resignation of S. Wayne Bazzle as a member of the Company's board
of directors.
- -----------------------------
+ Filed herewith.
14
<PAGE>
AMX CORPORATION
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.
AMX Corporation
Date: November 12, 1996 By: /s/ DAVID E. CHISUM
----------------------------------------
David E. Chisum
Chief Financial Officer (Duly Authorized
Officer and Principal Financial Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,910,707
<SECURITIES> 0
<RECEIVABLES> 5,070,707
<ALLOWANCES> (90,769)
<INVENTORY> 3,751,864
<CURRENT-ASSETS> 449,278
<PP&E> 4,922,365
<DEPRECIATION> 2,418,580
<TOTAL-ASSETS> 18,354,012
<CURRENT-LIABILITIES> 4,665,614
<BONDS> 118,098
0
0
<COMMON> 75,038
<OTHER-SE> 12,707,935
<TOTAL-LIABILITY-AND-EQUITY> 18,354,012
<SALES> 10,730,405
<TOTAL-REVENUES> 10,730,405
<CGS> 6,914,263
<TOTAL-COSTS> 5,332,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,827)
<INCOME-PRETAX> 1,553,443
<INCOME-TAX> 782,587
<INCOME-CONTINUING> 1,006,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006,257
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
