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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
AMENDMENT NO. 1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED MARCH 31, 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
11995 FORESTGATE DRIVE, DALLAS, TEXAS 75243
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 644-3048
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.01
PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of May 31,
1996, computed by reference to the closing sales price of the registrant's
Common Stock on the Nasdaq National Market on such date, was approximately
$23,458,015.
The number of shares of the registrant's Common Stock outstanding as of June
17, 1996 was 7,759,730.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof.
AMENDMENT NO. 1
The undersigned registrant hereby amends item 7 -- "Management's Discussion
and Analysis of Financial Condition and Results of Operations," item 8 --
"Financial Statements and Supplementary Data" and item 14 -- "Exhibits,
Financial Statement Schedules, and Reports on Form 8-K" as set forth in the
pages attached hereto.
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ITEM 7. 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.
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; 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 22 exclusive distributors serving 29 countries and over 30 dealers serving an
additional 15 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, and
1996, 71%, 45%, and 56%, 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 resulting 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.
The Company's U. S. dealers pursue a wide variety of projects that can range
from small conference rooms/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
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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 research
and development, customer service and 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 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 is 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. In fiscal 1996,
the Company invested $445,000 in the engineering development of PHAST's
products. The Company believes that the residential market for its products
is significant, and the development of home automation control systems and
products will help increase the Company's penetration of the residential
market.
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, as such amounts are expensed before they
generate any significant revenues.
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RESULTS OF OPERATIONS
The following table contains certain amounts, expressed as a percentage of
net sales, reflected in the Company's consolidated statements of income for each
of the three years in the period ended March 31, 1996:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
System sales................................................. 88.6% 85.7% 92.5%
OEM and custom product sales................................. 11.4 14.3 7.5
--------- --------- ---------
Net sales.................................................. 100.0 100.0 100.0
Cost of sales................................................ 39.0 38.7 37.8
--------- --------- ---------
Gross profit................................................. 61.0 61.3 62.2
Selling and marketing expenses............................... 42.6 37.9 37.9
General and administrative expenses.......................... 8.3 9.2 8.3
--------- --------- ---------
Operating income........................................... 10.1 14.2 16.0
Interest expense............................................. 0.2 0.2 1.6
Other income (expense), net.................................. 0.7 0.5 0.3
--------- --------- ---------
Income before income taxes................................... 10.6 14.5 14.7
Income taxes................................................. 4.1 4.6 5.5
--------- --------- ---------
Net income................................................... 6.5% 9.9% 9.2%
--------- --------- ---------
--------- --------- ---------
</TABLE>
1996 RESULTS COMPARED TO 1995
SYSTEM SALES were $30.3 million for fiscal 1996, up 29.5% over the prior
year and OEM AND CUSTOM PRODUCT SALES were $2.4 million for fiscal 1996, down
37.0% from the prior year. NET SALES for fiscal 1996 were $32.7 million, up
20.0% compared to $27.3 million for the comparable period of the prior year.
System sales and OEM and custom product sales represented 92.5% and 7.5%,
respectively, of net sales for fiscal 1996, and 85.7%, and 14.3%, respectively,
of net sales for fiscal 1995. The increase in System sales in fiscal 1996 over
the prior year represented the Company's continued growth in a wide variety of
markets through its dealers and distributors. The Company's Synergy sales, which
are part of the System sales, almost doubled from $1.4 million in fiscal 1995 to
$2.7 million in fiscal 1996. OEM and custom product sales were down
significantly during fiscal 1996, reflecting the fact that the Company's largest
OEM customer, Compression Labs, Inc., had reduced its orders to the Company over
the same period of the prior year, and that a one-time custom product order that
resulted in sales of $1.2 million during fiscal 1995 only resulted in additional
sales of approximately $100,000 in fiscal 1996.
COST OF SALES consists of material, labor, and manufacturing overhead, and
was $12.4 million or 37.8% of net sales in fiscal 1996 as compared to $10.6
million or 38.7% of net sales in fiscal 1995. The improvement in fiscal 1996 is
due to positive purchase price variances.
GROSS PROFIT for fiscal 1996 was $20.3 million or 62.2% of net sales,
compared to $16.7 million or 61.3% of net sales for fiscal 1995. The increase in
gross profit was due to increased sales and improvements in cost of sales.
SELLING AND MARKETING EXPENSES increased from $10.3 million, or 37.9% of net
sales in fiscal 1995, to $12.4 million, also 37.9% of net sales for fiscal 1996,
an increase of 20.3%. The increase is related to the increased sales volume and
the selling activities and commissions associated with that increase.
Additionally, fiscal 1996 includes $445,000 of research and development expenses
of the Company's PHAST subsidiary which is developing home automation products.
This subsidiary was formed in August 1995.
GENERAL AND ADMINISTRATIVE EXPENSES increased from $2.5 million in fiscal
1995, or 9.2% of net sales to $2.7 million in fiscal 1996, or 8.3% of net sales.
Fiscal 1995 included bonuses and costs
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associated with the venture investment closed on March 31, 1995, which were not
incurred in fiscal 1996. This decrease was offset in fiscal 1996 by increased
legal costs associated with the FAV litigation discussed below.
INTEREST EXPENSE increased from $42,000 in fiscal 1995 to $535,000 in fiscal
1996, which reflects the issuance on March 31, 1995, of $7 million of
subordinated debentures at an interest rate of 12.8%. One-half of the
subordinated debentures was refinanced in June 1995 with a bank term note that
had an interest rate of 8.67%. All of the subordinated debentures and the bank
term note were repaid in November 1995 with the proceeds from the Company's
initial public offering.
OTHER INCOME (EXPENSE), NET is comprised primarily of interest income. In
fiscal 1996, interest income is offset by the write-off of the unamortized
balance of deferred debt charges of $120,000 upon repayment of the subordinated
debentures and bank term note.
The Company's EFFECTIVE TAX RATE was 32.0% in fiscal 1995 as compared to
37.3% in fiscal 1996. The effective tax rate for fiscal 1996 increased over the
effective tax rate for fiscal 1995 because the U.K. subsidiary is in a tax
paying position and the net operating losses of 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.
NET INCOME increased to $3.0 million or 9.2% of net sales for fiscal 1996,
as compared to $2.7 million or 9.9% of net sales for fiscal 1995 as a result of
the above factors.
1995 RESULTS COMPARED TO 1994
SYSTEM SALES were $23.4 million in fiscal 1995, up 34.5% over the prior
year, and OEM AND CUSTOM PRODUCT SALES were $3.9 million in fiscal 1995, up
75.1% over the prior year. NET SALES in 1995 were $27.3 million, up 39.2%
compared with $19.6 million in 1994. System sales and OEM and custom product
sales represented 85.7% and 14.3% of net sales in fiscal 1995, and 88.6% and
11.4%, respectively, of net sales in fiscal 1994. The increase in System sales
over the prior year was the result of increased sales of Synergy of $1 million
and increased sales in the Company's U.K. subsidiary of $1.3 million. Synergy
was introduced in late fiscal 1994 and contributed only $400,000 of sales in
that fiscal year. Synergy sales increased to $1.4 million in fiscal 1995 due to
increased product awareness in the media retrieval marketplace. The Company
established its U.K. distributor in June 1993. The majority of fiscal 1994 was
devoted to rebuilding the business base in the U.K. and researching other
manufacturers' products for distribution. These efforts resulted in the
increased sales in fiscal 1995. The remainder of the Company's increase in
System sales was across all markets.
The increase in OEM and custom product sales in fiscal 1995 over the prior
year was primarily due to a one-time custom product order that resulted in sales
of $1.2 million. The one-time order was for the production of individual control
panels used in listening to compact discs in retail music stores.
COST OF SALES consists of material, labor, and manufacturing overhead, and
was $10.6 million or 38.7% of net sales in fiscal 1995 as compared to $7.7
million or 39.0% of net sales in fiscal 1994.
GROSS PROFIT remained consistent as a percentage of net sales and was $16.7
million or 61.3% of net sales in fiscal 1995 compared to $12.0 million or 61.0%
of net sales in fiscal 1994.
SELLING AND MARKETING EXPENSES increased from $8.4 million in fiscal 1994 to
$10.3 million in fiscal 1995, but decreased as a percent of sales from 42.6% in
1994 to 37.9% in 1995. The absolute dollar increase in selling and marketing
expenses is primarily due to an increased number of employees in all departments
to handle the additional volume of business, increased marketing and personnel
costs to continue the growth in the Synergy system, and increased sales
commissions reflective of the 39% increase in sales.
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GENERAL AND ADMINISTRATIVE EXPENSES increased from $1.6 million, or 8.3% of
net sales for fiscal 1994 to $2.5 million, or 9.2% of net sales for fiscal 1995,
reflecting increased personnel in management information systems and human
resources to further enhance the Company's internal systems. Additionally, the
Company's legal expenses increased $200,000 due to the litigation with FAV.
INTEREST EXPENSE was immaterial in both periods.
OTHER INCOME (EXPENSE), NET is comprised primarily of interest income, and
was immaterial in both periods.
The Company's EFFECTIVE TAX RATE was 32.0% in 1995 as compared to 38.9% in
1994. The significant decrease in the effective tax rate was related to the
Company's formation of a foreign sales corporation in April 1994 and use of the
net operating loss carryforward generated in 1994 by the U.K. subsidiary.
NET INCOME increased to $2.7 million or 9.9% of net sales in 1995, as
compared to $1.3 million or 6.5% of net sales in 1994 as a result of the above
factors.
LIQUIDITY AND CAPITAL RESOURCES
For the past three fiscal years, the Company has satisfied its operating
cash requirements principally through cash flow from operations. In fiscal 1996,
the Company generated $3.3 million of cash flow from operations. Investing
activities used $1.0 million of cash primarily for the purchase of $840,000 of
property and equipment comprised principally of computers, upgraded accounting
and manufacturing software and systems 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 March 31, 1995 and 1996, no
amounts were outstanding under the revolving loan agreement.
The Company expects to spend approximately $1.2 million for capital
expenditures in fiscal 1997. Additionally, the Company has committed $1.12
million to its newly formed, majority-owned subsidiary, PHAST Corporation,
during the 12-15 month period beginning August 1, 1995, for the development of
home automation hardware and software products, of which $585,000 had been
advanced at March 31, 1996.
The Company's inventory grew $941,000 during the 1996 fiscal year. This
growth was primarily due to demand caused by the increase in sales. However,
even though sales for the fiscal year increased, the increase in sales in
the last quarter of 1996 was not as much as was anticipated, which resulted in
inventory at year end being slightly higher than expected. As a result,
inventory turnover decreased from 6.45 times a year in fiscal 1995 to 5.16
times a year in fiscal 1996.
In March 1996, the Company signed a letter of intent to acquire 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 in May 1996 at a purchase price of $1.5
million paid in 181,818 shares of AMX Corporation common stock. The Company has
engaged an independent appraisal company to assist in allocating the purchase
price of AudioEase. Management expects that the majority of the purchase price
will be allocated to in-process research and development projects. In accordance
with generally accepted accounting principles, any purchase price allocated to
in-process research and development projects will be 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
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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 pending in federal district court for
the Western District of Oklahoma with Ford Audio-Video Systems, Inc. ("FAV"), a
privately held company located in Oklahoma in which FAV claims actual damages
"in excess of $10,000" and punitive damages of $20,000,000. On November 22,
1995, the Company was granted a partial summary judgment in litigation
originally filed in August 1994 by FAV. The court, in granting the Motion for
Summary Judgment, ordered that FAV could pursue its claim for actual damages for
breach of contract, but could not pursue punitive damages for breach of
contract. FAV's claim for punitive damages associated with the fraud claim
remains. Additionally, under the Motion for Summary Judgment, the court
dismissed certain other claims, including claims for violation of public policy
regarding right to access to the courts and retaliatory termination, anti-trust
violations for predatory and discriminatory pricing, and tortious interference
with business relations. On February 22, 1996, Ford amended its complaint
dropping its claims against the Company for breach of contract and violations of
the Oklahoma Deceptive Trade Practices Act, but added a claim for
misappropriation of trade secrets. AMX has claimed that the claim for
misappropriation of trade secrets has been brought in bad faith and AMX seeks
recovery of its attorneys' fees and costs. On May 13, 1996, the Court granted a
second partial summary judgment in favor of AMX, dismissing the Plaintiff's
claim for conversion and finding that the Plaintiff cannot assert a claim for
breach of contract. 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. See "Item
3 -- Legal Proceedings."
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NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will
adopt SFAS No. 121 in the first quarter of fiscal year 1997 and, based on
current circumstances, does not believe the effect of adoption on its
financial statements will be material.
The Company accounts for stock-based compensation utilizing the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." SFAS No. 123, "Accounting for Stock-Based
Compensation," was issued by the Financial Accounting Standards Board in
October 1995. The Company is not required to adopt the provisions of SFAS No.
123 until fiscal year 1997. Under SFAS 123, companies are allowed to continue
to apply the provisions of APB Opinion No. 25 to their stock-based
compensation arrangements. As such, the Company will only be required to
supplement its financial statements with additional disclosures in fiscal
year 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information called for by this item is set forth in the Company's
Consolidated Financial Statements and Supplemental Financial Information
contained in this report. The Company's Consolidated Financial Statements and
Supplemental Financial Information begin at page F-1 hereunder.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
The financial statements and supplementary data filed as a part of this
Annual Report on Form 10-K/A are listed in the "Index to Consolidated
Financial Statements, Supplemental Financial Information, and Financial
Statement Schedule" on page F-1 hereof.
(2) Financial Statement Schedule.
The financial statement schedule filed as part of this Annual Report
on Form 10-K/A is listed in the "Index to Consolidated Financial
Statements, Supplemental Financial Information, and Financial Statement
Schedule" on page F-1 hereof. All other schedules for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable and therefore have been omitted.
(3) Exhibits.
The following exhibits are filed as a part of this Annual Report on Form
10-K/A.
<TABLE>
<S> <C>
***2.1 Agreement of Merger and Plan of Reorganization dated as of May 16, 1996, among
Registrant, AMX Acquisition Corporation, SPS International, Inc. (now known as
AudioEase, Inc.), John P. Sundquist and Sandra P. Sundquist, Donald J. Heiskell
and Janice T. Heiskell, Bruce R. Munroe, David A. Daniels, and Thomas J. Gleason.
*3.1 Amended and Restated Articles of Incorporation of the Registrant.
**3.2 Amended and Restated Bylaws of the Registrant, as amended.
**4.1 Specimen Certificate for Common Stock of Registrant.
**4.2 Registration Rights Agreement dated as of March 30, 1995 by and among Registrant,
the persons listed on Schedule 1.1 thereto, Scott D. Miller, Peter D. York, Joe
Hardt and Billie I. Williamson.
**4.3 First Amendment dated September 12, 1995 to Registration Rights Agreement dated as
of March 30, 1995 by and among Registrant, the persons listed on Schedule 1.1
thereto, Scott D. Miller, Peter D. York, Joe Hardt, and Billie I. Williamson.
++4.4 Registration Rights Agreement dated as of May 16, 1996, by and among Registrant,
John P. Sundquist and Sandra P. Sundquist, Donald J. Heiskell and Janice T.
Heiskell, Bruce R. Munroe, David A. Daniels, and Thomas J. Gleason.
**10.1 AMX Corporation 1993 Stock Option Plan, accompanied by forms of Incentive Stock
Option and Non-qualified Stock Option Agreements.
**10.2 AMX Corporation 1995 Stock Option Plan, accompanied by form of Stock Option
Agreement and form of Exercise Notice.
**10.3 1995 Director Stock Option Plan, accompanied by form of Director Stock Option
Agreement and form of Exercise Notice.
**10.4 1996 Employee Stock Purchase Plan, accompanied by forms of Enrollment/Change Form,
Section 16b Participation Form and Stock Purchase Agreement.
**10.5 Commercial Lease Agreement dated January 2, 1992 between Registrant and New
England Mutual Life Insurance Company, as amended.
**10.6 Employment Agreement dated March 30, 1995 between Registrant and Scott D. Miller.
**10.7 Employment Agreement dated March 30, 1995 between Registrant and Joe Hardt.
**10.8 Employment Agreement dated March 30, 1995 between Registrant and Peter D. York.
**10.9 Employment Agreement dated March 30, 1995 between Registrant and Billie I.
Williamson.
</TABLE>
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<TABLE>
<S> <C>
**10.10 First Amendment dated September 12, 1995 to Employment Agreement dated March 30,
1995 between Registrant and Scott D. Miller.
**10.11 First Amendment dated September 12, 1995 to Employment Agreement dated March 30,
1995 between Registrant and Joe Hardt.
**10.12 First Amendment dated September 12, 1995 to Employment Agreement dated March 30,
1995 between Registrant and Peter D. York.
**10.13 First Amendment dated September 12, 1995 to Employment Agreement dated March 30,
1995 between Registrant and Billie I. Williamson.
**10.14 Promissory Note dated June 15, 1995, from Peter D. York to Registrant in the
original principal amount of $77,298.
**10.15 Promissory Note dated May 1, 1995, from Joe Hardt to Registrant in the original
principal amount of $44,500.
**10.16 Promissory Note dated August 15, 1995, from Billie I. Williamson to Registrant in
the original principal amount of $52,250.
++11.1 Computation of Earnings per Share.
+23.1 Consent of Independent Auditors.
++27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Filed herewith.
++ Previously filed with and incorporated by reference from the exhibit of
the same number in the Company's Annual Report on Form 10-K filed June 27,
1996, file no. 0-26924.
* Incorporated by reference from the exhibit of the same number in the
Company's Form S-8 filed March 11, 1996, file no. 333-2202.
** Incorporated by reference from the exhibit of the same number in the
Company's Form S-1 filed September 13, 1995, as amended, file no. 33-96886.
*** Incorporated by reference from the exhibit of the same number in the
Company's Form 8-K, dated as of May 16, 1996, filed May 31, 1996, file no.
0-26924.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the last
quarter of fiscal 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to be
signed on its behalf by the undersigned thereunto duly authorized.
AMX CORPORATION
By: /s/ JOE HARDT
-----------------------------------
Joe Hardt, President
August 29, 1996
11
<PAGE>
AMX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
SUPPLEMENTAL FINANCIAL INFORMATION, AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors............................................................................ F-2
Consolidated Balance Sheets at March 31, 1995 and 1996.................................................... F-3
Consolidated Statements of Income for the years ended March 31, 1994, 1995 and 1996....................... F-5
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended March 31, 1994, 1995 and
1996..................................................................................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1995 and 1996................... F-7
Notes to Consolidated Financial Statements................................................................ F-8
Supplemental Financial Information........................................................................ F-17
Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts........................................................ F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
AMX Corporation
We have audited the accompanying consolidated balance sheets of AMX
Corporation as of March 31, 1995 and 1996, and the related consolidated
statements of income, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended March 31, 1996. Our audits
also included the financial statement schedule referred to in the index at
Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMX Corporation at March 31, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
May 15, 1996
Dallas, Texas
F-2
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1995 1996
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 2,539,851 $ 4,858,759
Receivables--trade and other, less allowance for doubtful accounts of $115,000
for 1995 and $125,000 for 1996 (NOTE 5)....................................... 3,315,882 4,260,090
Inventories (NOTES 3 AND 5).................................................... 1,924,310 2,865,735
Prepaid expenses............................................................... 189,752 175,617
Deferred income tax (NOTE 8)................................................... 184,693 217,922
Income taxes recoverable....................................................... 148,501 --
-------------- --------------
Total current assets............................................................. 8,302,989 12,378,123
Property and equipment, at cost, net (NOTES 4 AND 5)............................. 1,361,087 1,612,863
Other:
Capitalized software........................................................... -- 123,101
Deferred debt expenses (NOTE 10)............................................... 120,250 --
AAirpass....................................................................... 244,164 81,185
Deposits and other............................................................. 86,963 280,483
Deferred income tax (NOTE 8)................................................... 14,876 --
Goodwill, less accumulated amortization of $18,789 for 1995 and $29,073 for
1996 (NOTE 9)................................................................. 186,867 176,583
-------------- --------------
Total assets..................................................................... $ 10,317,196 $ 14,652,338
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
MARCH 31,
1995 1996
--------------- --------------
<S> <C> <C>
Current liabilities:
Accounts payable.............................................................. $ 934,954 $ 1,472,563
Accrued compensation.......................................................... 1,133,787 834,580
Accrued sales commissions..................................................... 309,700 386,861
Accrued dealer incentive...................................................... 12,000 298,428
Reserve for litigation........................................................ 100,000 200,000
Other accrued expenses........................................................ 268,969 271,021
Current portion of long-term debt (NOTE 5).................................... 314,758 --
Income taxes payable.......................................................... -- 350,172
--------------- --------------
Total current liabilities....................................................... 3,074,168 3,813,625
Long-term debt, less current portion (NOTES 5 AND 10)........................... 7,019,633 54,489
Deferred income tax (NOTE 8).................................................... -- 69,238
Commitments and contingencies (NOTE 7)
Minority interest in subsidiary................................................. -- 490
Series A Redeemable Preferred Stock, (net of discount), $100 par value (NOTES 10
AND 12):
Authorized shares -- 120,000 for 1995
Issued and outstanding shares -- 120,000 for 1995............................. 9,474,000 --
Common stock subject to redemption (NOTE 10).................................... 2,676,000 --
Shareholders' equity (deficit) (NOTES 10 AND 11):
Common Stock, $.01 par value:
Authorized shares -- 10,000,000 for 1995 and 40,000,000 for 1996
Issued shares -- 8,071,120 for 1995 and 7,552,120 for 1996.................. 80,711 75,521
Additional paid-in capital.................................................... 2,678,203 131,498
Retained earnings............................................................. 8,390,481 10,507,477
Less value of common stock subject to redemption.............................. (2,676,000) --
Less common treasury stock (3,240,000 shares)................................. (20,400,000) --
--------------- --------------
Total shareholders' equity (deficit)............................................ (11,926,605) 10,714,496
--------------- --------------
Total liabilities and shareholders' equity (deficit)............................ $ 10,317,196 $ 14,652,338
--------------- --------------
--------------- --------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
System sales..................................................... $ 17,377,538 $ 23,386,572 $ 30,274,007
OEM and custom product sales..................................... 2,225,412 3,896,645 2,456,507
-------------- -------------- --------------
Net sales...................................................... 19,602,950 27,283,217 32,730,514
Cost of sales.................................................... 7,652,247 10,569,917 12,369,272
-------------- -------------- --------------
Gross profit................................................... 11,950,703 16,713,300 20,361,242
Selling and marketing expenses................................... 8,357,302 10,327,995 12,420,369
General and administrative expenses.............................. 1,619,170 2,512,347 2,716,522
-------------- -------------- --------------
Operating income............................................... 1,974,231 3,872,958 5,224,351
Interest expense................................................. (36,097) (42,184) (534,655)
Other income (expense), net...................................... 133,904 134,354 116,872
-------------- -------------- --------------
Income before income taxes....................................... 2,072,038 3,965,128 4,806,568
Income tax provision (NOTE 8).................................... 805,124 1,269,534 1,792,454
-------------- -------------- --------------
Net income....................................................... $ 1,266,914 $ 2,695,594 3,014,114
-------------- --------------
-------------- --------------
Preferred stock dividends........................................ (626,667)
Accretion of preferred stock..................................... (170,000)
Redemption of preferred stock.................................... (2,356,000)
--------------
Net loss applicable to common shareholders....................... $ (138,553)
--------------
--------------
Earnings (loss) per common share................................. $ .25 $ .50 $ (.02)
-------------- -------------- --------------
-------------- -------------- --------------
Common and common equivalent shares outstanding.................. 5,128,365 5,434,404 6,653,980
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
--------------------- ADDITIONAL COMMON STOCK ---------------------------
NUMBER OF PAID-IN RETAINED SUBJECT TO NUMBER OF
SHARES AMOUNT CAPITAL EARNINGS REDEMPTION SHARES AMOUNT
---------- --------- ------------ ------------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1993... 217,400 $ 2,174 $ 34,896 $ 4,409,791 $ -- -- $ --
Net income.................. -- -- -- 1,266,914 -- -- --
Equity adjustment from
foreign currency
translation (NOTE 1)....... -- -- -- 4,558 -- -- --
Stock dividend (NOTE 11).... 4,130,600 41,306 (20,653) (20,653) -- -- --
---------- --------- ------------ ------------- ------------ ----------- --------------
Balance at March 31, 1994... 4,348,000 43,480 14,243 5,660,610 -- -- --
Net income.................. -- -- -- 2,695,594 -- -- --
Equity adjustment from
foreign currency
translation (NOTE 1)....... -- -- -- 34,277 -- -- --
Exercise of stock options... 483,120 4,831 225,110 -- -- -- --
Sale of stock............... 3,240,000 32,400 2,643,600 -- -- -- --
Value of common stock
subject to redemption...... -- -- -- (2,676,000) -- --
Fees associated with sale of
preferred stock............ -- -- (204,750) -- -- -- --
Purchase of treasury
stock...................... -- -- -- -- -- (3,240,000) (20,400,000)
---------- --------- ------------ ------------- ------------ ----------- --------------
Balance at March 31, 1995... 8,071,120 80,711 2,678,203 8,390,481 (2,676,000) (3,240,000) (20,400,000)
Net income.................. -- -- -- 3,014,114 -- -- --
Equity adjustment from
foreign currency
translation (NOTE 1)....... -- -- -- (28,830) -- -- --
Exercise of stock options
including tax benefit of
$63,000.................... 221,000 2,210 280,788 -- -- -- --
IPO shares issued out of
treasury stock............. -- -- 532,400 -- -- 2,500,000 20,392,600
IPO expenses................ -- -- (833,893) (241,621) -- -- --
Cancellation of remaining
treasury stock............. (740,000) (7,400) -- -- -- 740,000 7,400
Release of redemption
requirement................ -- -- -- -- 2,676,000 -- --
Dividends on preferred stock
(NOTE 12).................. -- -- -- (626,667) -- -- --
Accretion and write-off of
discount on preferred stock
(NOTE 12).................. -- -- (2,526,000) -- -- -- --
---------- --------- ------------ ------------- ------------ ----------- --------------
Balance at March 31, 1996... 7,552,120 $ 75,521 $ 131,498 $ 10,507,477 $ -- -- $ --
---------- --------- ------------ ------------- ------------ ----------- --------------
---------- --------- ------------ ------------- ------------ ----------- --------------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
--------------
<S> <C>
Balance at March 31, 1993... $ 4,446,861
Net income.................. 1,266,914
Equity adjustment from
foreign currency
translation (NOTE 1)....... 4,558
Stock dividend (NOTE 11).... --
--------------
Balance at March 31, 1994... 5,718,333
Net income.................. 2,695,594
Equity adjustment from
foreign currency
translation (NOTE 1)....... 34,277
Exercise of stock options... 229,941
Sale of stock............... 2,676,000
Value of common stock
subject to redemption...... (2,676,000)
Fees associated with sale of
preferred stock............ (204,750)
Purchase of treasury
stock...................... (20,400,000)
--------------
Balance at March 31, 1995... (11,926,605)
Net income.................. 3,014,114
Equity adjustment from
foreign currency
translation (NOTE 1)....... (28,830)
Exercise of stock options
including tax benefit of
$63,000.................... 282,998
IPO shares issued out of
treasury stock............. 20,925,000
IPO expenses................ (1,075,514)
Cancellation of remaining
treasury stock............. --
Release of redemption
requirement................ 2,676,000
Dividends on preferred stock
(NOTE 12).................. (626,667)
Accretion and write-off of
discount on preferred stock
(NOTE 12).................. (2,526,000)
--------------
Balance at March 31, 1996... $ 10,714,496
--------------
--------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 1,266,914 $ 2,695,594 $ 3,014,114
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization..................................... 599,141 636,742 871,066
Provision for losses on receivables............................... 41,450 -- 10,000
Provision for inventory obsolescence.............................. 51,500 20,500 36,000
(Gain) loss on sale of property and equipment..................... (1,144) (17,835) 1,537
Deferred income tax............................................... (39,000) 111,731 50,885
Changes in operating assets and liabilities:
Receivables..................................................... (890,509) (487,861) (1,110,510)
Inventories..................................................... (313,171) (592,219) (977,425)
Prepaid expenses................................................ (123,349) 6,998 14,135
Other current assets............................................ 20,842 (257,140) 156,302
Accounts payable................................................ 616,124 (41,405) 537,609
Accrued expenses................................................ 262,662 672,728 166,434
Income taxes recoverable/payable................................ (12,153) (322,348) 498,673
------------ -------------- -------------
Net cash provided by operating activities........................... 1,479,307 2,425,485 3,268,820
INVESTING ACTIVITIES
Purchase of property and equipment.................................. (594,105) (575,397) (840,266)
Proceeds from sale of property and equipment........................ 34,005 22,410 9,400
Payments received on note receivable from shareholder............... 51,187 273,934 --
Decrease in note receivable from affiliate.......................... 3,666 203,832 --
Investment in capitalized software.................................. -- -- (123,101)
Decrease (increase) in other assets................................. 3,131 43,042 (65,570)
Acquisition of AXCESS Technology Ltd................................ (205,656) -- --
Minority interest in subsidiary..................................... -- -- 490
------------ -------------- -------------
Net cash used in investing activities............................... (707,772) (32,179) (1,019,047)
FINANCING ACTIVITIES
Sale of securities -- net of expenses............................... -- 18,825,000 19,849,486
Exercise of stock options........................................... -- 229,941 155,048
Purchase of treasury stock.......................................... -- (20,400,000) --
Proceeds from long-term debt........................................ 17,582 26,500 3,815,402
Repayments of long-term debt........................................ (170,938) (175,201) (11,095,304)
Redemption of preferred stock....................................... -- -- (12,000,000)
Preferred stock dividends........................................... -- -- (626,667)
------------ -------------- -------------
Net cash (used in) provided by financing activities................. (153,356) (1,493,760) 97,965
Effect of exchange rate changes on cash............................. 4,558 34,277 (28,830)
------------ -------------- -------------
Net increase in cash and cash equivalents........................... 622,737 933,823 2,318,908
Cash and cash equivalents at beginning of period.................... 983,291 1,606,028 2,539,851
------------ -------------- -------------
Cash and cash equivalents at end of period.......................... $ 1,606,028 $ 2,539,851 $ 4,858,759
------------ -------------- -------------
------------ -------------- -------------
</TABLE>
See accompanying notes.
F-7
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
AMX Corporation (the "Company") was organized in March 1982 and operates in
a single industry. The Company designs and manufactures integrated remote
control systems found in corporate boardrooms, business training centers,
teleconferencing centers, educational institutions, the television and
communications industry, amusement parks, theme parks, stadiums, and luxury
residences. The Company sells primarily to dealers and distributors in the
United States, Europe, Australia and the Far East.
PRINCIPLES OF CONSOLIDATION
The Company's financial statements include the accounts of AXCESS Technology
Ltd., a wholly owned foreign subsidiary, AMX International Sales Corporation, a
wholly owned foreign sales corporation, PHAST Corporation, a 51% owned software
development company, and AMX Control Systems PTE, Ltd., a wholly owned foreign
subsidiary. All significant intercompany balances have been eliminated.
CASH EQUIVALENTS
Cash equivalents include any temporary investments with an initial maturity
of less than three months. Cash equivalents currently include bank repurchase
obligations with maturities generally of seven days or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
DEPRECIATION
Depreciation of property and equipment is provided in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated service
lives, principally using an accelerated depreciation method in early years and
switching to the straight-line method in later years. The estimated lives used
in determining depreciation range from 5 to 10 years for equipment and 31.5
years for leasehold improvements.
CONCENTRATION OF CREDIT RISK
During the years ended March 31, 1994, 1995, and 1996, the Company realized
approximately 26%, 24%, and 27%, respectively, of total revenues from foreign
sales and had approximately 33% and 35%, respectively, of trade receivables due
from foreign customers at March 31, 1995 and 1996.
The Company provides credit in the normal course of business to its dealers
and distributors. The Company performs ongoing credit evaluations of its
customers and maintains allowances for possible credit losses, which, when
realized, have been within the range of management's expectations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized upon shipment of the product.
F-8
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to income as incurred.
Research and development costs for the years ended March 31, 1994, 1995, and
1996 were $645,000, $730,000, and $1,475,000, respectively.
CAPITALIZED SOFTWARE
The cost (including coding and testing) of producing software is capitalized
once technological feasibility is established. Capitalized software costs will
be amortized on a product-by-product basis using the greater of the amounts
computed on the straight-line method over the remaining estimated economic life
of the product or using the ratio that current gross revenues bear to the total
of current and anticipated future gross revenues for the product. Amortization
of capitalized software will begin when the products are available for general
release to customers.
FOREIGN CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," the assets and liabilities denominated in
foreign currency are translated into U.S. dollars at the current rate of
exchange existing at year-end and historical rates, as applicable, and revenues
and expenses are translated at the average monthly exchange rates. The
functional currency has been determined as the U.S. dollar.
The following are the cumulative foreign currency translation adjustments
(recorded through retained earnings) which represent the effect of translating
the original intercompany advances made to the Company's foreign subsidiary, as
these advances are of a long-term nature:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Balance at beginning of period............................. $ -- $ 4,558 $ 38,835
Gain (loss) on translation of intercompany advances........ 4,558 34,277 (28,830)
--------- --------- ----------
Balance at end of period included in retained earnings..... $ 4,558 $ 38,835 $ 10,005
--------- --------- ----------
--------- --------- ----------
</TABLE>
The translation gains and losses included in income are immaterial and
result from translating all accounts other than the original intercompany
advances to U.S. dollars.
EARNINGS PER COMMON SHARE
Earnings (loss) per common share is based on net income after preferred
stock dividend requirements and accretion of preferred stock discount determined
by the interest yield method at 13% 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 all periods
presented 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 its 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.
F-9
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUPPLEMENTAL EARNINGS PER COMMON SHARE
Supplemental earnings per common share for the year ended March 31, 1996,
are $.41, assuming (i) the issuance of the Common Stock offered by the Company
in its initial public offering, receipt by the Company of net proceeds from this
offering and use of the proceeds to repay the bank term note and subordinated
debentures and redeem the preferred stock as of April 1, 1995, and (ii) weighted
average common shares outstanding were 8,229,393 for the year ended March 31,
1996.
COMMON STOCK SPLIT
In September 1995, the Company effected a two-for-one split of its common
stock. Share and per share amounts for all periods presented have been adjusted
to reflect this stock split.
ADVERTISING
The Company expenses the costs of all advertising when incurred. Advertising
costs were $362,000, $354,000, and $174,000 for the years ended March 31, 1994,
1995, and 1996, respectively.
2. INITIAL PUBLIC OFFERING
On November 21, 1995, the Company closed its initial public offering under
the Securities Act of 1933 under which the Company registered and sold 2,500,000
shares of its common stock for $9 per share. The net proceeds (net of
underwriters' commissions) of $20,925,000 were used to repay the Company's
subordinated debentures of $3,500,000 and accrued interest thereon, the Bank One
Texas NA bank debt of $3,815,402 and accrued interest thereon, and redeem the
Series A Redeemable Preferred Stock for $12,000,000 and pay accrued dividends
thereon.
3. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Raw materials................................................... $ 1,083,071 $ 1,705,108
Work in progress................................................ 169,090 229,566
Finished goods.................................................. 744,149 1,030,061
Reserve for obsolescence........................................ (72,000) (99,000)
------------- -------------
$ 1,924,310 $ 2,865,735
------------- -------------
------------- -------------
</TABLE>
4. PROPERTY AND EQUIPMENT
The general classes of property and equipment are as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Equipment, including computers.................................. $ 1,867,132 $ 2,590,987
Furniture and fixtures.......................................... 853,954 917,607
Leasehold improvements.......................................... 102,389 102,389
Vehicles........................................................ 42,601 71,673
------------- -------------
2,866,076 3,682,656
Less accumulated depreciation................................... 1,504,989 2,069,793
------------- -------------
$ 1,361,087 $ 1,612,863
------------- -------------
------------- -------------
</TABLE>
F-10
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
5. DEBT
The Company has a revolving loan agreement for $5,000,000 expiring March 1,
1997. At March 31, 1995 and 1996, no amounts were outstanding under the loan
agreement. The loan agreement provides for a borrowing base computation based on
accounts receivable and inventories. Interest on the loan will be at the bank's
contract rate set at the time of the borrowing, which is expected to be
comparable to prime. Collateral for the loan consists of a security interest in
accounts receivable, inventories, and property and equipment. The agreement
requires the maintenance of certain financial ratios and equity levels and
restricts payment of dividends.
As more fully described in Note 10, on March 31, 1995, the Company issued
$7,000,000 of subordinated debentures to the New Shareholders. In June 1995, the
Company refinanced $3,500,000 of its subordinated debentures and $315,000 of its
notes payable with a bank term loan that provided for interest at 8.67%. All of
the subordinated debentures and the bank debt was repaid in November 1995 upon
completion of the Company's initial public offering.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1995 1996
------------- ---------
<S> <C> <C>
Subordinated debentures due March 31, 2000, with interest paid
quarterly at 12.8%................................................ $ 7,000,000 $ --
Note payable due September 1, 1995, with interest at .5% over
prime............................................................. 306,538 --
Other.............................................................. 27,853 54,489
------------- ---------
7,334,391 54,489
Less current portion............................................... 314,758 --
------------- ---------
$ 7,019,633 $ 54,489
------------- ---------
------------- ---------
</TABLE>
Interest paid on long-term debt amounted to approximately $36,000, $37,000,
and $535,000 for the years ended March 31, 1994, 1995, and 1996, respectively.
6. EMPLOYEE BENEFIT PLANS
The Company has a noncontributory profit sharing plan that is available to
all U.S. employees who are at least 21 years old and meet certain service
requirements. The amount of any contributions to the plan is determined by the
Board of Directors and is based on the level of Company earnings before income
taxes. Contributions to the plan are allocated among the eligible participants
based on the percentage each participant's salary bears to total salaries of all
participants. Contributions to the plan for the years ended March 31, 1994,
1995, and 1996, were $144,000, $228,000, and $240,000, respectively.
The Company provides long-term disability benefits equal to 60% of
pre-disability compensation up to $9,000 per month for all of its employees who
have met certain service requirements. The benefits begin after 180 days of
disability and are fully insured.
The Company also enacted a 401(k) plan effective January 1, 1995, that is
available to all U.S. employees who are at least 21 years old and meet certain
service requirements. Employees can contribute up to 15% of their salary to a
maximum of $9,240. The Company matches the employees' contributions at 25 CENTS
on every dollar to a maximum of 1% of compensation. Company contributions for
the year ended March 31, 1995 and 1996, respectively, were $5,800 and $32,200.
F-11
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
6. EMPLOYEE BENEFIT PLANS (CONTINUED)
In September 1995, the Company approved the 1996 Employee Stock Purchase
Plan which permits eligible employees to purchase common stock through payroll
deductions. The price of the common stock purchased under the 1996 Employee
Stock Purchase Plan is 85% of the lower of the fair market value of the common
stock at the beginning or at the end of each offering period. The Plan provides
for two six-month offering periods each year beginning on the first trading day
on or after January 1 and July 1, respectively.
7. COMMITMENTS AND CONTINGENCIES
The Company leases various real property and equipment. Under certain
leases, the Company is required to pay costs, such as taxes, insurance, and
operating expenses in addition to the rental payments. Rental expense under
these operating leases for the years ended March 31, 1994, 1995, and 1996, was
$226,000, $234,000, and $287,000, respectively.
At March 31, 1996, future minimum payments for noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
Year ended March 31:
1997........................................................... $ 255,519
1998........................................................... 125,908
1999........................................................... 1,010
---------
$ 382,437
---------
---------
</TABLE>
In August of 1994, a dealer instituted a lawsuit against the Company for,
among other claims, fraud, violation of the Oklahoma Deceptive Trade
Practices Act and breach of contract. The suit, which is currently in the
federal district court for the Western District of Oklahoma, was brought for
actual and punitive damages. The dealer is claiming actual damages "in
excess of $10,000" and punitive damages of $20,000,000. The Company has
reserved $200,000 with respect to this claim. While the ultimate outcome of
such litigation is uncertain, the Company 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.
In addition, the Company is involved in certain legal activities and
disputes arising in the ordinary course of business. The Company believes
that it has adequate legal defenses and that the ultimate outcome of these
matters will not have a material adverse effect on the Company's consolidated
financial position.
8. INCOME TAXES
The Company accounts for income taxes under the liability method prescribed
by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109).
The components of the Company's income tax provision were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------
1994 1995 1996
----------- ------------- -------------
<S> <C> <C> <C>
Federal income taxes:
Current provision................................ $ 768,124 $ 1,038,534 $ 1,450,400
Deferred (benefit) provision..................... (39,000) 125,000 92,000
State income taxes................................. 76,000 106,000 153,000
Foreign income taxes............................... -- -- 97,054
----------- ------------- -------------
$ 805,124 $ 1,269,534 $ 1,792,454
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
The income before income taxes for AXCESS Technology Ltd. is $373,000 for
the year ended March 31, 1996.
F-12
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
8. INCOME TAXES (CONTINUED)
Income tax expense differs from amounts computed by applying the U.S.
federal statutory tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------
1994 1995 1996
----------- ------------- -------------
<S> <C> <C> <C>
Federal income tax at statutory rate............... $ 704,493 $ 1,348,143 $ 1,634,233
State income tax, net of federal tax benefit....... 46,998 80,095 108,439
Benefit of income reported through Foreign Sales
Corporation....................................... -- (172,818) (183,079)
Unbenefited/(benefited) losses of foreign
subsidiary and rate differences................... 48,464 (39,728) (29,654)
Unbenefited losses of 51% owned subsidiary......... -- -- 151,314
Other.............................................. 5,169 53,842 111,201
----------- ------------- -------------
$ 805,124 $ 1,269,534 $ 1,792,454
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
Significant components of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1995 1996
----------- ------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation............................................ $ 84,185 $ --
Inventories...................................................... 96,193 98,987
Bad debts........................................................ 42,550 46,250
Accrued expenses................................................. 79,491 46,858
Other, net....................................................... 2,412 76,412
----------- ------------
304,831 268,507
Deferred tax liabilities:
Transaction fees................................................. (70,300) (70,300)
Prepaid insurance................................................ (16,831) (17,134)
Other, net....................................................... (18,131) (32,389)
----------- ------------
(105,262) (119,823)
----------- ------------
Net deferred tax asset............................................. $ 199,569 $ 148,684
----------- ------------
----------- ------------
</TABLE>
Net operating losses of $445,000 for the Company's 51% owned PHAST
Corporation subsidiary can be carried forward to 2011.
Cash paid for federal income taxes was approximately $780,000, $1,393,000,
and $1,086,000 for the years ended March 31, 1994, 1995, and 1996, respectively.
9. ASSET ACQUISITION
In June 1993, the Company purchased all of the outstanding stock of AXCESS
Technology Ltd. (AXCESS), a U.K. Company, for a de minimis amount of cash.
Concurrently, the Company advanced additional capital to AXCESS, so that AXCESS
could purchase certain assets of AMX's U.K. distributor. The purchase price of
these assets was approximately $267,000, payable $156,000 in cash, $100,000 in
purchase credits available to the seller, and fees of $11,000. The goodwill
generated by this
F-13
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
9. ASSET ACQUISITION (CONTINUED)
transaction is being amortized on a straight-line basis over 20 years. The
accounts of AXCESS have been consolidated since the date of purchase. The effect
of the transaction is not significant to the Company's consolidated financial
statements.
10. EQUITY TRANSACTIONS
Effective March 31, 1995, a group of venture capital firms and an individual
(the "New Shareholders") invested $19,150,000 in the Company by purchasing (i)
120,000 shares of $100 par value Series A Redeemable Preferred Stock for
$12,000,000, (ii) 3,240,000 shares of common stock for $150,000, and (iii)
$7,000,000 of subordinated debentures. For financial reporting purposes, the
proceeds of $19,150,000 from the sale of the debentures, the Series A Preferred
Stock and the common stock to the New Shareholders were allocated based on the
relative fair market values of such securities as determined by an independent
valuation commissioned by the Company. Such fair market values were: debentures,
$7,000,000 million (effective yield of 12.8%); Series A Preferred Stock,
$9,474,000 (effective yield of 13%); and common stock, $2,676,000 (or $.83 per
share). The expenses associated with this transaction were $325,000 and were
allocated between the subordinated debentures and redeemable preferred stock.
Under certain conditions, as defined, or at March 31, 2002, the New Shareholders
could have required the Company to redeem their common stock at its then fair
market value. Accordingly, $2,676,000 was reclassified from shareholders' equity
at March 31, 1995. This right expired upon consummation of the Company's initial
public offering. Additionally, upon consummation of the Company's initial public
offering, the Company was required to redeem the preferred stock and retire the
subordinated debentures.
Also, on March 31, 1995, the Company purchased 3,240,000 shares of the
existing shareholders' (the "Existing Shareholders") common stock for
$20,400,000. As part of this transaction, one of the Existing Shareholders
repaid his $273,934 note to the Company. Additionally, one of the Existing
Shareholders purchased the Company's interest in a note receivable from an
affiliate, which had a remaining balance of $96,000 by executing a note back to
the Company that provides for interest at 8% and payment on March 31, 1996. This
note was included in current receivables -- trade and other at March 31, 1995.
11. STOCK OPTIONS AND OTHER STOCK TRANSACTIONS
In 1991, the Company granted an option for 483,120 shares of common stock to
an officer when his company was purchased by AMX. This option was fully
exercised on March 3, 1995, for an aggregate exercise price of $2,416. The
difference between fair market value and the exercise price was expensed over
the vesting period of the option.
On April 1, 1993, the Company effected a 20-for-1 stock split in the form of
a stock dividend. Per share amounts for all periods presented have been adjusted
to reflect this stock dividend.
In September 1995, the Company approved the increase in authorized common
stock, par value $.01 per share, to 40,000,000 shares from 10,000,000 shares.
Effective April 1, 1993, the Company approved an incentive stock option plan
(the 1993 Stock Option Plan) which authorized the granting of options for
852,544 shares of common stock. During 1995, the Company increased the number of
option shares available for grant by 600,000 shares for a total of 1,452,544
shares authorized for grant. Options have been granted at exercise prices
determined by the Board of Directors at least equal to the fair market value of
the shares of common stock
F-14
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
11. STOCK OPTIONS AND OTHER STOCK TRANSACTIONS (CONTINUED)
subject to such option at date of grant (and in certain instances at prices in
excess of the fair market value of such shares) with vesting periods of four
years. The information on the 1993 Stock Option Plan is in the table that
follows:
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE TOTAL
-------- ------------- ----------
<S> <C> <C> <C>
Outstanding at March 31, 1994....... 448,180 $ .895-$1.05 $ 426,541
Options granted................... 141,700 1.11-2.07 238,756
Options canceled.................. (1,000) 1.05 (1,050)
-------- ------------- ----------
Outstanding at March 31, 1995....... 588,880 .895-2.07 664,247
Options granted................... 580,000 1.875-7.00 2,010,000
Options exercised................. (221,000) .895-1.05 (220,425)
Options canceled.................. (10,800) 7.00 (75,600)
-------- ------------- ----------
Outstanding at March 31, 1996....... 937,080 $ .895-$7.00 $2,378,222
-------- ------------- ----------
-------- ------------- ----------
Exercisable at March 31, 1996....... 367,880 $ .895-$2.07 $ 443,823
-------- ------------- ----------
-------- ------------- ----------
</TABLE>
In September 1995, the Company approved two new stock option plans. The 1995
Stock Option Plan authorizes the granting of stock options to employees. An
aggregate of 1 million shares of common stock has been reserved for issuance
under this plan. No grants have been made under the 1995 Stock Option Plan as of
March 31, 1996. The 1995 Director Stock Option Plan authorizes the granting of
stock options to nonemployee directors. An aggregate of 250,000 shares of common
stock has been reserved for issuance under this plan. Option grants for 20,000
shares at exercise prices of $8.25 to $8.75 have been made under the 1995
Director Stock Option Plan and these options are exercisable at March 31, 1996.
12. PREFERRED STOCK
In addition to its authorized common stock, the Company had 120,000 shares
of Series A Redeemable Preferred Stock, par value $100 per share, authorized,
all of which were issued on March 31, 1995. Prior to March 31, 1995, the Company
had 10,000 shares of preferred stock, par value $.01 per share, authorized, of
which none were issued. The number of preferred shares authorized and the par
value were amended in connection with the equity transactions more fully
discussed in Note 10. The preferred stock was redeemed in November 1995 with
proceeds from the Company's initial public offering. Cash dividends were paid at
an annual rate of 8% on the preferred stock from the date of original issue
until the date of redemption. For financial reporting purposes the Series A
Redeemable Preferred Stock was recorded at amounts to provide an effective yield
of 13% and was presented in the consolidated balance sheet net of discount of
$2,526,000 as of March 31, 1995.
In September 1995, the Company authorized 10,000,000 additional shares of
preferred stock, par value $.01 per share, of which none are issued. The Board
of Directors has the authority, without further action by the stockholders, to
issue these 10,000,000 shares in one or more series and to fix and determine as
to any series any and all of the relative rights and preferences of shares in
such series, including voting rights.
F-15
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
13. EXPORT SALES
Export sales from the Company's U.S. operations to unaffiliated customers
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Asia............................................. $ 632,000 $ 629,000 $ 951,000
Australia........................................ 691,000 1,122,000 1,346,000
Canada........................................... 620,000 604,000 880,000
Europe........................................... 2,315,000 2,039,000 2,705,000
Other............................................ 156,000 113,000 273,000
------------- ------------- -------------
$ 4,414,000 $ 4,507,000 $ 6,155,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
14. SUBSEQUENT EVENT
In March 1996, the Company signed a letter of intent to acquire 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 in May 1996 at a purchase price of $1.5
millon paid in 181,818 shares of AMX Corporation common stock. The acquisition
will be accounted for as a purchase.
F-16
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
-----------------------------------------------------
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
System sales................................................ $ 6,382 $ 8,310 $ 7,715 $ 7,867 $ 30,274
OEM and custom product sales................................ 373 565 882 637 2,457
--------- --------- --------- --------- ---------
Net sales................................................. 6,755 8,875 8,597 8,504 32,731
Gross profit................................................ 4,163 5,563 5,261 5,374 20,361
Operating income............................................ 674 1,963 1,204 1,383 5,224
Income before income taxes.................................. 481 1,811 1,056 1,458 4,806
Net income.................................................. 306 1,155 628 925 3,014
Net income (loss) applicable to common shareholders......... (2) 847 (1,909) 925 (139)
Earnings (loss) per common share(1)......................... -- .15 (.27) .11 (.02)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995
-----------------------------------------------------
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
System sales................................................ $ 5,280 $ 5,872 $ 6,225 $ 6,010 $ 23,387
OEM and custom product sales................................ 969 1,510 922 495 3,896
--------- --------- --------- --------- ---------
Net sales................................................. 6,249 7,382 7,147 6,505 27,283
Gross profit................................................ 3,846 4,505 4,267 4,095 16,713
Operating income............................................ 788 1,539 931 615 3,873
Income before income taxes.................................. 828 1,571 985 581 3,965
Net income.................................................. 512 1,077 654 453 2,696
Earnings per common share(1)................................ .09 .20 .12 .08 .50
</TABLE>
- ------------------------
(1) The sum of the earnings per share for the four quarters differs from the
annual earnings per share due to the required method of computing the
weighted average number of shares in interim periods.
F-17
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
AMX CORPORATION
MARCH 31, 1996
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------- ------------ ----------------------------------- ------------- -------------
ADDITIONS
-----------------------------------
BALANCE AT CHARGED TO OTHER
BEGINNING OF CHARGED TO COSTS ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD AND EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------------------------------- ------------ ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1994:
Deducted from assets
Allowance for Doubtful
Accounts........................ $ 73,550 $ 68,470 $27,020(1) $115,000
Reserve for Obsolescence......... -- 51,500 -- 51,500
------------ ---------------- ------------- -------------
Total.......................... $ 73,550 $119,970 $27,020 $166,500
------------ ---------------- ------------- -------------
------------ ---------------- ------------- -------------
Year Ended March 31, 1995:
Deducted from assets
Allowance for Doubtful
Accounts........................ $115,000 $ 10,577 $10,577(1) $115,000
Reserve for Obsolescence......... 51,500 20,500 -- 72,000
------------ ---------------- ------------- -------------
Total.......................... $166,500 $ 31,077 $10,577 $187,000
------------ ---------------- ------------- -------------
------------ ---------------- ------------- -------------
Year Ended March 31, 1996:
Deducted from assets
Allowance for Doubtful
Accounts........................ $115,000 $ 27,100 $17,100(1) $125,000
Reserve for Obsolescence......... 72,000 36,000 9,000(2) 99,000
------------ ---------------- ------------- -------------
Total.......................... $187,000 $ 63,100 $26,100 $224,000
------------ ---------------- ------------- -------------
------------ ---------------- ------------- -------------
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Inventory written off.
F-18
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-2202) pertaining to the AMX Corporation 1996 Employee Stock
Purchase Plan, the AMX Corporation 1995 Director Stock Option Plan, the AMX
Corporation 1995 Stock Option Plan, and the AMX Corporation 1993 Stock Option
Plan of our report dated May 15, 1996 with respect to the consolidated financial
statements and financial statement schedule of AMX Corporation included in this
Annual Report (Form 10-K/A), as amended, for the year ended March 31, 1996.
ERNST & YOUNG LLP
Dallas, Texas
August 29, 1996
