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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/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
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AMX CORPORATION
(Exact name of registrant as specified in its charter)
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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)
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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.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
AMX Corporation, a Texas corporation ("AMX" or the "Company" or the
"Registrant"), which was incorporated in March 1982, is a leading designer,
developer, manufacturer and marketer of 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 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 maintains a proprietary database of control and communication
protocols for over 8,000 different electronic devices containing information
gathered and developed by the Company. The architecture of this database,
together with the Company's experience in gathering this information,
facilitates the integration of new devices as they are introduced. The Company's
systems can readily accommodate evolving technologies because the Company's
AXCESS software allows systems to be customized and upgraded to control new
electronic devices using a broad variety of control formats. Since its
incorporation in March 1982, the Company has sold over 20,000 integrated remote
control systems.
Applications in the COMMERCIAL MARKET for the Company's remote control
systems include: use for presentations in corporate board rooms and business
training centers; audio-visual controls for hotel, meeting and convention
facilities; security camera control, video distribution, and public address
systems for stadiums and theme parks; multimedia and teleconferencing support
for government and military facilities; and decision support centers for
industrial applications. The Company has developed hardware and software
products specifically for the EDUCATION MARKET designed to enhance the
educational experience and improve productivity of teachers and administrators.
These products are used to manage, schedule, and control media retrieval and
distribution, distance learning, and interactive education for schools. In the
RESIDENTIAL MARKET, the Company's products enable individuals to create an
integrated home automation system which can control such items as audio, video
and home theater systems, lighting, motorized drapes, heating and air
conditioning units, closed circuit cameras, security systems, and other home
electronic equipment.
The Company's system sales are made through dealers and distributors who are
supported by a network of independent manufacturers' representatives. The
Company principally relies on over 1,000 specialized third-party dealers of
electronic and audio-visual 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. Dealers and distributors can
use the AMX software to tailor the Company's control system for each
installation. The Company also sells various customized products, primarily user
interface devices, to OEMs and other large customers.
The Company believes that the market for its products has grown due to the
greater affordability, increased functionality, and more widespread use of a
diverse array of electronic devices, particularly sophisticated audio, video,
and presentation equipment, many of which now employ microprocessors and other
electronic features. Many of these devices have separate control systems that
are incompatible due to the absence of any one widely accepted control standard.
In many settings, devices from several manufacturers are used, resulting in the
presence of multiple control units that can be confusing and cumbersome to the
user. This creates a need for products such as those produced by the Company.
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The Company's strategy is to take advantage of the growth in the market for
its products by bringing the power and flexibility of remote control technology
to a wide variety of settings. Elements of the Company's strategy include:
- leveraging distribution channels by introducing new products, entering
into strategic alliances, and acquiring complementary products and
technologies;
- developing new software to target specific vertical markets and to
simplify system programming in order to expand system sales;
- continuing to emphasize customer support and service in order to maintain
and enhance market share;
- expanding international distribution;
- targeting the development of OEM relationships and custom product sales to
large customers; and
- providing flexible systems to accommodate emerging technologies.
MARKET AND INDUSTRY OVERVIEW
One of the first widespread uses of wireless remote control technology was
garage door openers. From this particular application in the 1970s, a number of
companies developed technologies for the wireless operation of slide projectors.
In the 1980s, the widespread adoption of microprocessors enabled the development
of embedded systems that were easier to use and made possible the operation of
sophisticated electronic devices using a control command system. The widespread
adoption of products using microprocessors has also increased the availability
and the use of other electronic and programmable equipment over the past decade.
This growth has been fueled by increased affordability and performance of this
equipment and has created a demand for integrated remote control systems in the
commercial, education, and residential markets.
The Company's products are designed to simplify the user's control of
complex and sophisticated electronic devices. The Company's products are
suitable for use in a wide variety of settings and vertical markets. The
Company's products are currently used most commonly in the following settings:
COMMERCIAL
CORPORATE. In the corporate setting, the Company's systems are used in
board rooms, conference and meeting rooms, convention centers, auditoriums,
training centers, and teleconferencing facilities. Typical applications include
integrated control of a wide variety of audio and visual presentation equipment,
such as video projectors, VCRs, laser disc players, computers, and sound
systems, as well as lighting and temperature controls and window coverings. The
Company believes that an increasing portion of the board, conference, meeting,
and training rooms constructed or remodeled are being designed to include
integrated remote control systems. The Company believes that it is one of the
largest providers of integrated control systems to this market and that this
market represents a significant opportunity for its products. AMX control
systems are used in the facilities of many of the largest corporations in the
United States, including Electronic Data Systems ("EDS"), Intel, Enron, AT&T,
Sony, American Airlines, and Motorola.
SPORTS. The Company's systems are currently being used in stadiums and
other sports facilities across the United States, including Oriole Park at
Camden Yards, The Ballpark in Arlington, the Georgia Dome, and the United Center
in Chicago. Applications typically include controlling audio and video systems,
switchers and routers, and surveillance cameras.
ENTERTAINMENT. The Company's systems are used in various museums and
amusement parks across the United States, including EPCOT Center, Sea World,
Virginia Air and Space Museum, JFK
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Museum, Universal Studios, Busch Gardens, and the Rock and Roll Hall of Fame.
Applications typically include controlling audio and visual systems and
electronic and mechanical equipment used in exhibits and special effects.
INDUSTRIAL. The Company's systems are currently being used in decision
support centers in industrial settings such as the Network Emergency Response
Assistance Center of Bell South Services, Inc., the Decision Command Center of
Burlington Northern Railroad, and the Network Operations Center of EDS. Typical
applications include control of large screen video displays and video routing
equipment.
GOVERNMENT. The Company's systems are being used by federal, state, and
local government entities such as the State of Maryland Intelligent Highway
Vehicle Control System, the California Senate, the Louisiana House of
Representatives, the Library of Congress in Washington, D.C., and war rooms at
the U.S. Army War College. Typical applications include audio visual equipment
control, video routing and distribution, video teleconferencing, and voting and
request-to-speak systems.
EDUCATION
Consistent with its business strategy of developing software for specific
vertical markets, the Company has developed an array of products targeted at
schools, colleges, and universities. In this market, the Company provides a
media retrieval and distance learning system, as well as audio-visual and
multimedia controls for lecture halls and auditoriums. According to a market
research firm, there are over 105,000 primary and secondary schools and 8,900
colleges and universities in the United States. The Company's media retrieval
systems have been installed in over 100 educational institutions, including the
University of Notre Dame, the University of Texas at Dallas, the Dallas
Independent School District, and the Edina School District of Minnesota located
in the Minneapolis metropolitan area. The Company believes that the education
market represents a significant market opportunity.
RESIDENTIAL
The Company interfaces its products with various electronic and programmable
equipment that are currently utilized in luxury homes. The Company's products
enable individuals to create an integrated home automation system which can
control such items as audio, video and home theater systems, lighting, motorized
drapes, heating and air conditioning units, closed circuit cameras, security
systems, and other home electronic equipment. The Company, through one of its
majority owned subsidiaries, is seeking to develop standardized control products
designed to increase its penetration of the residential market. Additionally,
the Company is now designing, manufacturing and marketing additional products
for upscale home systems through its recently acquired subsidiary, AudioEase.
The Company believes that the residential market for its products is
significant. According to Parks Associates, a market research firm, there are
approximately 40,000 new homes constructed in the United States each year having
a value greater than one million dollars. Of these homes, Parks Associates
estimates that approximately 80% are installing some form of intelligent
electronic control system.
BUSINESS STRATEGY
The Company's strategy is to take advantage of the growth in the markets for
its main products by bringing the power and flexibility of remote control
technology to a wide variety of settings. Elements of the Company's strategy
include:
- LEVERAGING DISTRIBUTION CHANNELS BY INTRODUCING NEW PRODUCTS, ENTERING
INTO STRATEGIC ALLIANCES AND ACQUIRING COMPLEMENTARY PRODUCTS AND
TECHNOLOGIES. The Company believes that the AMX brand name and reputation
for quality are well established in its primary distribution channels. The
Company believes that it can take advantage of this strong reputation by
marketing additional products or product applications through its existing
distribution channels. The Company regularly evaluates opportunities to
acquire complementary products and technologies and enter into strategic
alliances, such as the Company's recent acquisition of AudioEase.
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- DEVELOPING NEW SOFTWARE TO TARGET SPECIFIC VERTICAL MARKETS AND TO
SIMPLIFY SYSTEM PROGRAMMING IN ORDER TO EXPAND SALES. The Company believes
that many of its sales in certain end markets, such as lighting controls
for the industrial market, have been made on an accommodation basis,
without specific targeting of the application involved or of the end
market itself. In contrast, the Company has dedicated substantial
engineering resources to the development of proprietary software
applications specifically tailored to the requirements of the education
market. The Company believes that by investing in the development of
software for certain targeted markets for which it does not now offer
specific solutions, it can expand its penetration of these markets. In
addition, the Company believes that enhanced software investment can
increase system sales by simplifying programming requirements for its
dealers. For example, the Company recently began distributing tools to
enable dealers to more easily program the Company's systems by employing
graphical user interfaces. The Company believes that these enhancements
can provide its dealers with simplified customization techniques, reduce
programming time, and enhance sales of the Company's products.
- CONTINUING TO EMPHASIZE CUSTOMER SUPPORT AND SERVICE IN ORDER TO MAINTAIN
AND ENHANCE MARKET SHARE. The Company believes that the support and
service it provides to its customers are key competitive advantages. The
Company provides technical support, on-site repair and support, as needed,
and on-line software support to its dealers and end users, as well as
extensive training for its dealers and distributors. The Company intends
to continue its emphasis in this key area of competitive strength.
- EXPANDING INTERNATIONAL DISTRIBUTION. The Company currently markets its
products outside the United States through a network of international
distributors with exclusive rights to sell AMX products. The Company
believes that the international market is relatively underpenetrated and
that, by expanding its distribution presence overseas, it can expand
international sales. In June 1993, the Company purchased AXCESS
Technology, Ltd., a distributor of electronic equipment based in the
United Kingdom, and it maintains offices in Singapore and Canada.
- TARGETING THE DEVELOPMENT OF OEM RELATIONSHIPS AND CUSTOM PRODUCT SALES TO
LARGE CUSTOMERS. The Company currently manufactures products on a private
label basis and designs specific solutions for certain OEMs such as
Compression Labs, VTEL, and Bang & Olufsen. In addition, the Company
designs custom products for large customers such as Blockbuster Music and
the Ritz-Carlton hotels. The Company believes that by targeting the
further development of similar opportunities, it can increase the universe
of applications for and sales of its products.
- PROVIDING FLEXIBLE SYSTEMS TO ACCOMMODATE EMERGING TECHNOLOGIES. The
Company believes that an important competitive advantage is the flexible,
modular design of its systems, which are expandable and which can
accommodate a wide variety of control formats. This design maximizes the
ability of the Company's products to accommodate new technologies in
electronic devices as they are developed. The Company intends to expand
this flexibility in order to continue to take advantage of the evolution
and development of new and innovative technologies in the devices which
its products control.
PRODUCT BENEFITS
The Company believes that its products provide several key benefits that
have led to their adoption and use:
EASE OF USE
The Company's control panels enable users who do not have prior computer or
technical training to control a variety of complex and sophisticated electronic
devices. For example, the Company's TiltScreen and other touch panels facilitate
use of the Company's systems by providing a convenient, intuitive user
interface. The Company's system enables users to efficiently and easily control
a number of audio-visual devices with the touch of a finger, facilitating
corporate presentations in the board room or training center.
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FLEXIBLE AND SCALABLE ARCHITECTURE
The software and hardware components of the Company's systems are designed
to provide users with the flexibility and scalability to modify and expand their
systems as needs change. The Company's software allows the control panels to be
easily adapted to control additional products. The Company's hardware has a
modular design that enables users to install additional control cards or modules
as their systems expand or controlled devices are replaced. The Company's
systems are capable of communicating among devices using standard control
formats, including relays, IR, serial, RS-232/422/485, Musical Instrument
Digital Interface ("MIDI"), audio volume, Society of Motion Picture and
Television Engineers ("SMPTE"), and others. The Company has developed a
proprietary database of control and communication protocols for over 8,000
different electronic devices that contains information gathered and developed by
the Company to facilitate efficient system configuration. The Company has
recently introduced the AXB-PSC, Philips SmartCard Television Controller that
plugs directly into all Philips SmartCard television sets, which allows the sets
to sit directly on the Company's AXlink bus. No assurance can be given, however,
that it will receive market acceptance in a timely manner, or at all, or that
prices and demand will be at levels sufficient to support the product.
CURRENT PRODUCTS
The Company's current systems and products are offered in a variety of
configurations designed to meet the changing needs of individual end users. A
typical AMX system consists of a central controller, a series of device
interfaces, and one or more control panels or other user interfaces that enable
the user to manipulate those devices. Prices for a complete system vary
substantially depending upon the configuration of the system. The Company also
develops software to operate its systems, to serve as dealer development tools,
to simplify system design and programming, and to provide specific applications
for maintenance needs the Company has identified.
CENTRAL CONTROLLERS
Each AMX system is driven by a central controller that employs a 32 bit
Motorola 68340 microprocessor. The Company offers four types of controllers
depending on system requirements.
AXCESS CARDFRAME. The AXCESS CardFrame is the Company's primary central
controller, which allows the highest degree of functionality and expandability
within the AXCESS family. Utilizing plug-in control cards, the AXCESS CardFrame
is fully modular in design and can be configured to meet the precise
specifications of a particular system. The AXCESS CardFrame system can control
virtually any electrical or programmable equipment, regardless of the control
format. The AXCESS CardFrame has slots for one or two enhanced master cards
(which control system operation), one server card (which manages communication
within the AXCESS CardFrame), and 16 control cards (which communicate with the
devices being controlled). By linking multiple AXCESS CardFrames, each system
can incorporate up to 255 device interfaces (and, if necessary, multiple systems
can be combined).
AXCENT(2). AXCENT(2) is an integrated controller that incorporates the most
popular features of the Company's full-sized AXCESS CardFrame but is
specifically designed for small to mid-sized control applications (typically
installations with 12 or fewer devices). This system offers all the power,
programmability, and reliability of the larger AXCESS CardFrame within a smaller
enclosure. AXCENT(2) includes eight IR/serial ports, two RS-232 ports, two
RS-232/422 ports, 12 relays, and six solid-state input/output ports. The
AXCENT(2) system can be expanded by additional CardFrames and AXlink bus
devices.
MINI CARDFRAME. The AXCESS Mini CardFrame is used when control of only a
small number of devices is required (typically three or less). With a built-in
server card and slots for an enhanced master card and three control cards, the
Mini CardFrame can act as a self-contained control system or be used to expand
the capabilities of the Company's other central controllers.
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AXB-EM232. The AXB-EM232 controller contains the processing and memory
capability of an Enhanced Master Card combined with one RS-232 port and one
RS-232/422/485 port in a single compact package. Fully compatible with the
Company's AXCESS programming language, the AXB-EM232 can also be expanded with
additional CardFrames and AXlink bus devices. The AXB-EM232 is designed
primarily to be used to connect one or more of the Company's control panels to
an RS-232 controlled device.
USER INTERFACES
The Company provides a wide variety of user interfaces as described below:
TOUCH PANELS
TILTSCREEN. The Company's TiltScreen Touch Panels are table-top consoles
with touch sensitive displays. Their angle-adjustable displays provide personal
viewing convenience and help eliminate glare from overhead lights. Simple
commands and pull-down menus allow screens to be customized for any application.
Each model includes options for button shapes and borders, text size with
standard, outline, and shadow fonts, typewriter-style text editor, and multiple
text and symbol layers for each button. The following three display options are
currently available: color LCD (256 color display, 640x480 pixels);
electroluminescent (amber on black display, 640x400 pixels); and monochrome LCD
(black on white display, 640x480 pixels).
UNIMOUNT. The UniMount Touch Panels are generally mounted in lecterns,
walls, and countertops and offer the same menu-driven software features as the
Company's TiltScreen Touch Panels. In addition, up to 16 external buttons may be
added to the panels. UniMount Touch Panels are also available in standard
19-inch rack-mount panels.
MINITILT. The Company has recently introduced a MiniTilt Touch Panel that
offers the same functionality as the larger TiltScreen. The following two
display options are currently available: color LCD (256 color display, 320x240
pixels) and monochrome LCD (black on white display, 320x240 pixels). No
assurance can be given, however, as to the date of its final release or that it
will receive market acceptance in a timely manner, or at all, or that prices and
demand will be at levels sufficient to support the product.
VIDEO WINDOWING
The TiltScreen, the UniMount and the MiniTilt Touch Panels are now being
ordered in models that support display of television quality video directly on
the control panel. This new feature, which is called video windowing, displays
on the touch panel the image being viewed by the audience on the screen
controlled by the touch panel. Video windowing, however, is not available in the
Company's wireless touch panels. No assurance can be given, however, as to the
date of its final release or that this feature will receive market acceptance in
a timely manner, or at all, or that prices and demand will be at levels
sufficient to support the feature.
WIRELESS TOUCH PANELS
The Company has recently introduced its WAVE (Wireless AXlink Virtual
Emulation) technology that allows the Company's touch panels to have
interactive, two-way communications with AXCESS systems via a wireless spread
spectrum radio frequency connection. The Company believes this technology, by
eliminating the need for the AXlink cable and power at the touch panel, offers a
significant advantage over previously available technology. The Company believes
that its WAVE technology will make the installation process substantially easier
and create sales opportunities in applications previously not available to the
Company. No assurance can be given, however, as to the date of its final release
or that the Company's WAVE technology will receive market acceptance in a timely
manner, or at all, or that prices and demand will be at levels sufficient to
support this technology.
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WIRELESS TRANSMITTERS
RF AND IR TRANSMITTERS. The Company's wireless transmitters feature a
microprocessor-based design for responsive, reliable transmission of either RF
or IR signals. The TX series of wireless transmitters offers a cost-effective
approach to system operation and is available in 16-, 32-, 48- and 64-button
configurations to meet virtually any remote control requirement. The Mini-LCD
wireless transmitter incorporates a programmable two-line, 16-character LCD
display with 20 pushbuttons. The SoftKey wireless transmitter has a
programmable, back-lit LCD display with multiple control screens, ten
user-defined function keys, and a rechargeable battery pack.
WALL PANELS
WIRED LCD PANELS. The Company's wired LCD panels generally feature
easy-to-read text displays and well-defined pushbutton layouts within a single,
convenient package. System status and control options are clearly delineated on
the programmable two-line, 16-character back-lit LCD display. The key pads of
the mini-LCD panels incorporate a matrix of 20 buttons beneath a protective
faceplate. Three wired LCD panels are available: the mini-LCD panel, the
UniMount mini-LCD panel, and the four button UniMount softwire LCD panel.
SOFTWIRE PANELS. The Company's softwire series of wired panels may be
configured to suit any type of installation. The standard softwire panel
includes up to 64 pushbuttons with light-emitting diodes ("LEDs") to provide
feedback to the user and up to three bargraphs for display of volume or lighting
levels. Mini-softwire panels are smaller but offer a full range of custom
options for simple pushbutton control of any electronic environment. The
softwire panels are available in either UniMount or rack-mount versions.
PERSONAL COMPUTERS
PCTOUCH AND PCCOM. The Company's PCTouch Software, used in conjunction with
its PCCOM hardware interface, allows a personal computer to serve as the user
interface in an AMX system. When used with other Windows-Registered
Trademark--based programs, PCTouch can integrate and control full motion video,
audio, and other multimedia applications and equipment. PCTouch control screens
can be operated using the computer's mouse or a touch-sensitive monitor. The
Company recently introduced its client/server version of this application, which
provides transparent connection to an AXCESS system from anywhere on a computer
network. No assurance can be given, however, as to the date of its final release
or that it will receive market acceptance in a timely manner, or at all, or that
prices and demand will be at levels sufficient to support the feature.
DEVICE INTERFACES
The Company makes a wide variety of control cards and AXlink bus devices to
communicate with the controlled equipment. Control cards are device interfaces
that reside within the AXCESS CardFrame or Mini CardFrame whereas bus devices
are stand alone device interfaces that can be remotely located. The following
are the principal device interfaces manufactured by the Company:
CONTROL CARDS. The Company currently manufactures 28 different control
cards. Each card is designed to interface with a specific type of equipment or
protocol, including relays, infrared, serial, RS-232/422, MIDI, audio volume,
SMPTE, and others.
AXLINK BUS DEVICES. The Company currently manufactures ten different bus
devices. Each bus device is designed to interface with a specific type of
equipment or protocol, including relays, infrared, serial, RS-232/422/485, audio
volume, and others.
OTHER PRODUCTS
The Company offers a variety of other products as described below:
SYNERGY ELECTRONIC CLASSROOM SYSTEM. The Company's Synergy Electronic
Classroom System provides media management and scheduling, primarily in
education facilities. The Synergy Windows-Registered Trademark--based software,
when used with an AXCESS system, allows all electronic media to be centrally
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located and distributed via broadband or baseband video to individual classroom
television monitors as required. A wireless remote gives teachers control of the
media selected. Client/Server software design permits remote scheduling and
media control over the school's (or the entire school district's) computer
network. Built-in distance learning capabilities broaden Synergy's applications
so that it can be used for corporate training facilities.
SOFTWARE. The Company is engaged in a range of software development
activities. The Company continually updates and enhances its AXCESS operating
system. Additionally, the Company's tools such as TPDesign (for the Company's
Touch Panels), OLDesign (for the Company's Softwire panels and wireless
transmitters), SKDesign (for the Company's SoftKey wireless transmitters), and
PCDesign (for implementation of a personal computer as a user interface),
facilitate design and programming of the Company's systems. Finally, the Company
develops and sells application software for specific market needs.
The Company recently began distributing its new AXDesign software product,
which will allow the Company's dealers to configure and program the Company's
systems using simplified graphical interfaces, such as the Windows-Registered
Trademark- "drag and drop" technique. The Company intends to make this available
on a subscription basis (on an annual basis with quarterly updates during the
course of the year). No assurance can be given, however, as to the date of its
final release or that it will receive market acceptance in a timely manner, or
at all, or that prices and demand will be at levels sufficient to support the
product.
LIGHTING SYSTEMS. The Company's Radia Lighting System is a fully automated
digital lighting system designed for intelligent control and maximum user
flexibility. Designed for use in corporate, commercial, or residential lighting
applications, the Radia Lighting System can accommodate a wide variety of
dimming loads, including incandescent, low-voltage, neon, cold cathode, most
fluorescent ballasts, and switched loads up to 277 VAC. The Radia Lighting
System can be an integrated part of the Company's AXCESS Control System or
operated as a stand-alone dimming system.
SLIDE PROJECTOR CONTROLLERS. The Company's MX series of radio-frequency
wireless slide projector controllers includes nine different models, ranging
from simple forward/reverse control of a single projector to complete control of
two projectors. The Company has recently introduced a wireless transmitter that
incorporates a laser pointer. No assurance can be given, however, as to the date
of its final release or that it will receive market acceptance in a timely
manner, or at all, or that prices and demand will be at levels sufficient to
support the product.
CUSTOMER SUPPORT AND SERVICE
The Company believes that the support and service it provides to its
customers are key competitive advantages and, as part of its strategy, will
continue to focus on the development of such support and service. The Company
has established a customer service and support organization that provides order
processing, technical and engineering support, and hardware repair to dealers,
distributors, and end users of its products. Within this organization, the
Company has created sales support teams focused on specific geographic regions
or customer categories and supported by dedicated, trained technicians at the
Company's facilities in Dallas, Texas. The Company believes that the
establishment of sales support teams with specific geographic responsibility
enhances the development of personal relationships between the Company's dealers
and distributors and specific sales and support personnel. The Company's
customer technical support team is staffed twelve hours a day, Monday through
Friday, with emergency service available at all other times as needed. The
Company will, if necessary, send technical support to a job site to provide
individual attention as such needs arise. The Company's sales support teams can
provide operating software updates, modifications, and new device interface
codes online through the use of modems. In addition, the Company provides
technical support to customers in Calgary, Canada and Singapore through an
individual on site at each location.
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The Company has a fully-staffed training facility in Dallas, Texas, where
dealers and distributors are trained to program, install, and service the
Company's systems. The Company's international distributors provide customer
service, support, and training to their resellers and end users.
The Company provides either a one-year or three-year warranty on all of its
products, both software and hardware. Although the Company has experienced
limited product warranty claims in the past, there can be no assurance that such
claims will not increase in the future.
SALES, DISTRIBUTION, AND MARKETING
The Company markets and sells its systems products worldwide through various
distribution channels that include dealers, manufacturers' representatives, and
distributors, as well as OEM and custom product arrangements. Since the market
for integrated remote control systems products is relatively new, the Company
believes that market awareness of the capabilities and features of such products
is currently low. The Company relies primarily on third parties to sell,
install, support, and service its integrated remote control systems, a strategy
that it believes is best suited for broad market coverage, including
international coverage.
DOMESTIC MARKETS
U.S. Dealers. The Company has established relationships with many of the
leading United States audio-visual system integraters and has over 1,000 dealers
in the United States alone. Of these, approximately 500 are systems dealers that
sell a wide range of the Company's products, approximately 206 are dealers
authorized by the Company to sell only AMX slide projector controllers,
approximately 51 dealers are authorized to sell the Company's Synergy electronic
classroom systems, and approximately 178 are dealers primarily focused on the
residential market.
The Company's dealers generally sell a wide range of electronic products,
including those of competitors of the Company. The Company believes that
utilizing the sales force of dealers that are already selling audio-visual
systems integration services to potential purchasers of electronic presentation
equipment is the most effective way to reach a broad range of customers. The
Company believes that the inclusion of an AMX system in the package of
electronic equipment sold to customers of electronic dealers enhances the
profitability of systems sales to dealers. The Company's agreements with its
dealers involve non-exclusive arrangements that may be canceled by either party
at will and contain no minimum purchase requirements on the part of the dealers.
The Company's agreements with its distributors grant exclusive distribution
rights as to a specific geographic area. The distributorship agreements can be
terminated by the Company or the distributors under certain circumstances, and
there can be no assurance that any of such dealers and distributors will
continue to offer the Company's products. Furthermore, while the Company's
international distributors generally assume certain support and minimum
performance obligations, there are no obligations on the part of the Company's
dealers, distributors, or manufacturers' representatives to provide any
specified level of support to the Company's products or to devote any specific
time, resources, or efforts in marketing of the Company's products. The
Company's dealers, distributors and manufacturers' representatives generally
offer products of several different companies, including products competitive
with the Company's products. Accordingly, there is a risk that these dealers,
distributors and manufacturers' representatives of the Company may give higher
priority to products of other suppliers and may reduce their efforts to sell the
Company's products. A reduction in the sales efforts by certain of the Company's
current dealers, distributors, or manufacturers' representatives or the loss of
certain or all of such relationships could have a material adverse effect on the
Company's results of operations.
The Company provides training at the Company's facilities in Dallas, Texas,
to educate dealers on the necessary programming and other service techniques
required to install and service the Company's systems. The Company believes that
its commitment to dealer training has resulted in a growing, increasingly
well-trained group of dealers who are serving a range of discrete vertical
markets. In addition, the Company reviews the capabilities and performance of
its dealers on an annual basis.
10
<PAGE>
MANUFACTURERS' REPRESENTATIVES. The management of the Company's dealers is
supported by a network of ten independent manufacturers' representative
organizations serving specific geographic regions. The Company believes that by
utilizing representatives that carry other lines of audio-visual electronic
equipment, the Company and its dealers are made aware of systems sales of which
they would not have otherwise known. These representative organizations are paid
on a commission basis for all systems sales shipped into their region regardless
of whether the order was placed by or through the representative.
OEM AND CUSTOM PRODUCTS ARRANGEMENTS. The Company currently makes and
custom designs systems for OEMs and other large customers such as Compression
Labs, VTEL, and Bang & Olufsen. The Company believes that its expertise in
simplifying user interfaces and integration of disparate electronic equipment
will enable it to forge additional OEM relationships, and intends to seek such
relationships. In the fiscal years ended March 31, 1994, 1995, and 1996, OEM and
Custom Products Sales represented approximately 11%, 14% and 8% of total sales,
respectively. The failure of OEM and custom product customers to purchase
products as anticipated may result in the Company holding inventories that are
not salable to other customers, and inventory writedowns may result. The loss
of, or reduction in sales to, any of the Company's key customers could have a
material adverse effect on the Company's results of operations.
INTERNATIONAL MARKETS
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 product internationally. Outside the United States, independent distributors
with exclusive distribution rights market the Company's custom products. In June
1993 the Company purchased AXCESS Technology, Ltd., a distributor of electronic
equipment based in the United Kingdom. Sales outside of the United States,
consisting substantially of products sold in the United Kingdom, Europe, Canada,
and Australia, represented approximately $5.1 million, $6.6 million, and $8.9
million, or 26%, 24%, and 27% of the Company's total sales during the fiscal
years ended March 31, 1994, 1995, and 1996, respectively. See Note 13 to the
Company's Consolidated Financial Statements. Since the Company's international
sales are primarily denominated in U.S. dollars, the Company does not currently
engage in hedging activities with respect to fluctuations in currency values but
may elect to do so in the future. These sales are subject to a number of risks
generally associated with international sales, including: the effect of a
strengthening or weakening U.S. dollar on demand for the Company's products in
international markets; other currency fluctuation risks; greater difficulty in
accounts receivable collections and increased credit risk; logistical
difficulties of managing international operations; unexpected restrictions on
the repatriation of funds; and unpredicted changes in regulatory requirements,
tariffs, and other trade barriers. The loss of, or reduction in, international
sales would have a material adverse effect on the Company's results of
operations.
The Company believes that the international market represents a significant
opportunity with the increased adoption of sophisticated electronic equipment
and as the Company establishes distribution in markets currently not served by
the Company's distribution network. The Company maintains an office in Singapore
and is increasing its efforts to establish distribution in new international
markets.
RESEARCH AND DEVELOPMENT
The Company believes that timely development and introduction of new
products are essential to maintaining its competitive position. The Company
devotes most of its internal research and development resources to making
advances in audio/video software and controller technology, firmware and
software, and mechanical design. The Company is committed to soliciting and
understanding customer requirements. Accordingly, its dealers and distributors
are a principal source of ideas for new products, product refinement ideas, and
new market applications for the Company's products. The Company also works with
component suppliers to keep abreast of technological advances and to incorporate
new features as they are developed.
11
<PAGE>
The Company is continuously involved in the refinement, enhancement, and
expansion of its operating and application software capabilities. With the
continued improvement of microprocessor capability, the Company believes that
this ongoing software research and development is a key means of increasing the
number of applications for its products and of extending the life of its
hardware systems. As a result, the Company is investing an increasing proportion
of its research and development effort in software development activities.
When an order is placed, dealers describe the specifications for the system
and the Company or its dealers program the system to meet the user's
requirements. On average, this typically requires five to 50 hours of
programming for each order placed and requires the programmers to use AXCESS,
the Company's DOS-based text editor, which is similar in structure to the "C"
programming language. The Company has recently begun to distribute AXDesign,
which is a Windows-Registered Trademark--based graphical user interface
programming environment for the Company's systems. The Company believes that the
key benefit of AXDesign is that it will reduce the technical skill required to
program the Company's systems, speed programming time, and thereby simplify the
process of customizing the Company's systems to meet the end user's
requirements. The Company believes that the streamlining of the programming
process resulting from AXDesign will expand the universe of dealers capable of
programming the Company's systems, and will increase the number of systems
capable of being sold by any given dealer.
In August 1995, the Company, together with several individual shareholders
(including two former employees of the Company), organized PHAST Corporation
("PHAST"). PHAST has its principal place of business in Salt Lake City, Utah and
has been organized to design, manufacture, market, and distribute automation
control systems and products for the residential market. The Company owns 51% of
the outstanding capital stock of PHAST and has a commitment to loan up to
$1,115,000 to PHAST for the 12-15 month period beginning August 1, 1995, for the
development of home automation hardware and software products, of which $585,000
has been advanced at March 31, 1996.
Research and development expenses were approximately $645,000, $730,000, and
$1,475,000 in the fiscal years ended March 31, 1994, 1995 and 1996, which
represented 3.3%, 2.7%, and 4.5% of net sales in those periods, respectively.
Research and development expenses are included in selling and marketing expenses
in the Company's statements of income. The engineering department of the Company
is involved in both research and development and customer support and service.
Additionally, the Company has created sales support teams, which are 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 creatively responding to
customer-expressed needs.
In March 1996, the Company signed a letter of intent to acquire 100% of SPS
International, Inc., doing business as AudioEase ("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 the Company's
common stock. The Company has engaged an independent appraisal company to assist
in allocating the purchase price of AudioEase. A 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. See "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operation."
MANUFACTURING
The Company's manufacturing and assembly operations for its systems and
related products are conducted in Dallas, Texas. The Company's manufacturing
operations consist primarily of design,
12
<PAGE>
final assembly and testing of products, quality control, and materials
procurement functions. In order to reduce problems with component supply, the
Company retains responsibility for component sourcing. The Company establishes
relationships with qualified component vendors and distributors, receives and
inspects all components directly, and packages necessary components for assembly
by third parties. Products go through several levels of testing prior to
shipment.
The principal components of the Company's products are printed circuit
boards, electronic components (including microprocessors), displays, and metal,
plastic, or wood housings, substantially all of which are purchased from outside
vendors. The Company generally buys components under purchase orders and does
not have long-term agreements with its suppliers. Although alternate suppliers
are available for most of these components, qualifying a replacement supplier
and receiving components for certain other products could take up to several
months. Certain components, including the microprocessors manufactured by
Motorola, are currently available only from sole sources and embody such
parties' proprietary technology. There can be no assurance that Motorola or any
other sole source supplier will continue to provide required components in
sufficient quantities or at acceptable prices. In addition, no back-up tooling
exists for many of the Company's molded plastic components. Should a mold break
or become unusable, repair or replacement could take several months. The Company
does not always maintain sufficient inventory to allow it to fill customer
orders without interruption during the time that would be required to obtain an
adequate supply of replacement components. Any shortage or discontinuation of
supply in these components would materially adversely affect the Company's
results of operations. The Company also depends on its suppliers to deliver
products that are free from defects, competitive in functionality and cost, and
in compliance with the Company's specifications and delivery schedules.
Disruption in supply, a significant increase in cost of one or more components,
failure of a third party supplier to remain competitive in functionality or
price, or the failure of a supplier to comply with any of the Company's
procurement needs could delay or interrupt the Company's manufacture and
delivery of products and thereby materially adversely affect the Company's
results of operations.
Many of the components used in the Company's products are procured from
outside the United States. There is no assurance that trading policies adopted
by the United States or foreign governments will not restrict the availability
of components or increase the Company's cost of obtaining components. Any
significant increase in component prices, whether due to fluctuations in
currency exchange rates or other foreign disruptions, would have a material
adverse effect on the Company's results of operations.
BACKLOG
The Company generally ships its standard products promptly following receipt
of an order. The Company's backlog of orders for its standard products has
generally been less than 45 days at any given time. While the Company's OEM and
other large customers typically place orders for products several months prior
to the scheduled shipment date, these orders are subject to rescheduling and
cancellation. As a result, the Company does not consider its backlog to be a
meaningful indicator of future sales.
COMPETITION
The markets for the Company's remote control systems are highly competitive.
The Company's principal direct competitors based in North America include
Crestron in all its markets and Dynacom Inc., Dukane Corp., and Rauland-Borg
Corp. in the education market. Of these competitors, Crestron is the Company's
principal competitor. In addition, the Company assumes that there are other
companies with substantial financial, technical, manufacturing, and marketing
resources currently engaged in the development and marketing of products similar
to those of the Company and that such companies may enter one or more of the
Company's markets at any time. Although some of the Company's competitors are
smaller in annual revenues and in capitalization, most of the Company's
competitors are focused on a single vertical market and may therefore devote
more resources to
13
<PAGE>
products that may be directly competitive with, and that may adversely impact
sales of, the Company's products in such markets. Moreover, as the Company
pursues new markets, it is likely that AMX will encounter new competitors.
The Company believes its ability to compete depends on such factors as
reputation, quality, customer support and service, price, features and functions
of products, ease of use, software and hardware innovation, reliability, and
marketing and distribution channels. Although the Company believes that it
competes favorably with respect to these factors, there can be no assurance that
the Company will be able to compete successfully in the future.
The Company's products fill a need created by the absence of' industry-wide
standard communication and control protocols and formats for electronic devices.
In the event manufacturers were to adopt such standards for various electronic
devices, the Company's results of operations could be adversely affected. There
can be no assurance that standard communication and control protocols will not
be adopted in the future.
PROPRIETARY RIGHTS
The Company has no patents for its products and relies primarily on a
combination of copyright and trade secret protection to establish and protect
its proprietary rights. There can be no assurance that the Company's measures to
protect its proprietary rights will deter or prevent unauthorized use of the
Company's technology. In addition, the laws of certain foreign countries may not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. If the Company is unable to protect its proprietary rights in
its intellectual property, it could have a material adverse effect upon the
Company's results of operations.
From time to time, certain companies have asserted patent, copyright, and
other intellectual property rights relevant to the Company's business, and the
Company expects that this will continue. The Company evaluates each claim
relating to its products and, if appropriate, would seek a license. If the
Company or its suppliers were unable to license from others protected technology
used in the Company's products, the Company could be prohibited from marketing
such products. The Company could also incur substantial costs to redesign its
products or defend any legal action taken against the Company. If, in any legal
action that might arise, the Company's products should be found to infringe upon
intellectual proprietary rights, the Company could be enjoined from further
infringement and required to pay damages. In the event a third party were to
sustain a valid claim against the Company and in the event any required license
were not available on commercially reasonable terms, the Company's results of
operations could be materially and adversely affected. Litigation, which could
result in substantial cost to and diversion of resources of the Company, may
also be necessary to enforce intellectual property rights of the Company or to
defend the Company against claimed infringement of the rights of others.
GOVERNMENT REGULATION
The Company's domestic business operations are subject to certain federal,
state, and local laws and regulations relating to RF and IR emissions generated
by the Company's products. Certain of the Company's products must comply with
FCC regulations before the products may be marketed in the United States. There
can be no assurance that its products will comply with such regulations or that
FCC regulations will remain constant with respect to the Company's current or
future products. Failure to comply with FCC regulations for products under
development or a change in existing regulations by the FCC that would make
products noncompliant could have a material adverse effect on the Company's
results of operations. Because the requirements imposed by such laws and
regulations are frequently changed, the Company is unable to predict its ability
to comply with, or the ultimate cost of compliance with, such requirements.
European Community ("EC") regulations relating to electromagnetic emissions
and immunity testing became effective January 1, 1996. There can be no assurance
that the Company will be able to meet the requirements set forth in the EC
regulations in a timely manner, and the Company is unable
14
<PAGE>
to predict the ultimate cost of compliance with these regulations. Many of the
Company's products comply with applicable EC regulations; however, some of the
Company's products do not yet comply with applicable EC regulations and will not
be sold in EC member countries until they comply. Accordingly, failure to comply
with applicable EC regulations may limit or eliminate the Company's ability to
sell its products in EC member countries and would have a material adverse
effect on the Company's results of operations.
The Company has recently introduced a wireless transmitter that incorporates
a laser pointer. The utilization of the laser pointer requires approval from the
Food and Drug Administration, although the Company believes that the laser
components have previously been approved in other devices.
EMPLOYEES
As of March 31, 1996, the Company employed 186 people, including 46 in
manufacturing, 96 in selling and marketing activities, 28 in engineering and
programming, and 16 in management, administration and finance. None of the
Company's employees is represented by a labor union or is subject to a
collective bargaining agreement. The Company believes that its relations with
its employees are good.
The Company is dependent in large part on its ability to attract and retain
management, engineering, marketing, and other technical personnel. Competition
for engineering and other technical personnel is intense, and the inability to
attract and retain highly qualified technical personnel to coordinate the
Company's operations could adversely affect the Company's results of operation.
There can be no assurance that the Company will be able to attract and retain
the qualified personnel necessary for its business.
15
<PAGE>
ITEM 2. PROPERTIES
The Company occupies buildings that contain approximately 48,500 square feet
of floor space. All of this space is leased under agreements that expire at
various dates through July 1998. The principal facilities are located as
follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET DESCRIPTION
- ------------------------- ------------ -------------------------------------------------------------------------
<S> <C> <C>
Dallas, Texas 38,300 Offices, engineering, research and development, and production
Englewood, Colorado 6,240 Offices, engineering, research and development, and production
York, England 2,000 Offices, engineering, and research and development
United Kingdom
</TABLE>
Subsequent to March 31, 1996, the Company's subsidiary, PHAST Corporation,
entered into a new lease in Salt Lake City, Utah for 16,400 square feet with a
term of June 1, 1996 through May 31, 1999. This new lease will replace the
current lease for 2,000 square feet.
All facilities are suitable for the Company's business and are fully
utilized. All furniture and equipment owned and leased by the Company is well
maintained and suitable for the Company's operations.
The Company considers its current needs adequate and believes that suitable
additional space will be available, as needed, to accommodate further physical
expansion of corporate operations and for additional sales and service.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION
On August 19, 1994, Ford Audio-Video Systems, Inc. ("FAV"), a privately-held
company located in Oklahoma, filed suit in state district court in Oklahoma
County, Oklahoma against the Company. FAV asserted claims against the Company
for fraud, tortious interference with business relations, fraudulent inducement,
retaliation for exercise of constitutional right to access to the court and
retaliatory termination, tortious breach of an oral contract, anti-trust
violations for predatory and discriminatory pricing, violation of the Oklahoma
Deceptive Trade Practices Act and tortious conversion. FAV asserts that it
orally contracted with the Company to manufacture a control panel and that the
Company agreed that the control panel would be owned by and sold exclusively to
FAV. FAV claims that the Company wrongfully sold the control panel to others.
FAV's Amended Petition claims actual damages "in excess of $10,000" and punitive
damages of $20,000,000. In February 1995 the case was removed to federal
district court for the Western District of Oklahoma, and FAV named as
co-defendant AEI Music Network, Inc. ("AEI"). In August 1995, FAV also named as
co-defendants various entities associated with Blockbuster. Blockbuster has
asserted a counterclaim alleging fraud against FAV.
On November 22, 1995, the Company was granted a partial summary judgment.
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 the 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, FAV amended its complaint,
dropping its claims against the Company for breach of contract and violations of
the Oklahoma Deceptive Trade Practices Act, but adding a claim for
misappropriation of trade secrets. The Company has asserted that the claim for
misappropriation of trade secrets has been brought in bad faith, and the Company
seeks recovery of its attorney's fees and costs. On or about May 7, 1996, FAV
reached an agreement with Blockbuster and AEI to settle FAV's claims. On May 13,
1996, the
16
<PAGE>
court granted a second partial summary judgment in favor of the Company
dismissing FAV's claim of conversion and finding that FAV can not assert a claim
for breach of contact because it did not plead such a claim in its final trial
pleading. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
STOCK PRICES
In November 1995, the Company's common stock, par value $0.01 per share (the
"Common Stock"), was admitted for trading on the Nasdaq National Market under
the symbol "AMXX."
The following table sets forth, for the periods indicated, the high and low
closing sale prices for the Common Stock for the fiscal year ended March 31,
1996.
<TABLE>
<CAPTION>
1996 HIGH LOW
- --------------------------------------------------------------------------------- ----- ---
<S> <C> <C>
Third Quarter (from November 1995)............................................... 93/4 61/2
Fourth Quarter................................................................... 93/4 73/4
</TABLE>
As of June 17, 1996, there were approximately 1,580 holders of the Common
Stock.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends on the Common Stock in the foreseeable future in
order to retain all available earnings generated by the Company's operations for
the development and growth of its business. In addition, under the terms of the
Company's $5.0 million line of credit, the Company may not pay dividends without
the prior consent of the lending bank. Any future determination as to the
payment of dividends will be at the discretion of the Board of Directors of the
Company and will depend upon the Company's operating results, financial
condition, capital requirements, general business conditions, and such other
factors that the Board of Directors deems relevant.
18
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(TABLE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
-----------------------------------------------------
1992 1993 1994 1995(1) 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
System sales........................................... $ 13,947 $ 17,378 $ 23,387 $ 30,274
OEM and custom product sales........................... 2,876 2,225 3,896 2,457
--------- --------- --------- ---------
Net sales(2)......................................... $ 11,932 16,823 19,603 27,283 32,731
Cost of sales.......................................... 4,698 6,463 7,652 10,570 12,370
--------- --------- --------- --------- ---------
Gross profit........................................... 7,234 10,360 11,951 16,713 20,361
Selling and marketing expenses......................... 3,984 6,251 8,357 10,328 12,420
General and administrative expenses.................... 1,304 1,571 1,620 2,512 2,717
--------- --------- --------- --------- ---------
Operating income 1,946 2,538 1,974 3,873 5,224
Interest expense....................................... 38 58 36 42 535
Other income (expense), net............................ 57 (237) 134 134 117
--------- --------- --------- --------- ---------
Income before income taxes............................. 1,965 2,243 2,072 3,965 4,806
Income tax provision................................... 715 778 805 1,269 1,792
--------- --------- --------- --------- ---------
Net income............................................. $ 1,250 $ 1,465 $ 1,267 $ 2,696 3,014
--------- --------- --------- ---------
--------- --------- --------- ---------
Preferred stock dividends, including accretion and
redemption(1)......................................... (3,153)
---------
Net loss applicable to common
shareholders(1)....................................... $ (139)
---------
---------
Earnings (loss) per common share....................... $ .25 $ .29 $ .25 $ .50 $ (.02)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Common and common equivalent shares outstanding........ 4,954 5,021 5,128 5,434 6,654
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
AT MARCH 31,
-----------------------------------------------------
1992 1993 1994 1995(1) 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 1,989 $ 2,424 $ 3,390 $ 5,229 $ 8,564
Total assets........................................... 4,594 6,519 8,503 10,317 14,652
Long term debt, including current portion.............. 304 636 483 7,334 54
Redeemable preferred stock, net of discount(1)......... -- -- -- 9,474 --
Shareholders' equity (deficit)(1)...................... 2,981 4,447 5,718 (11,927) 10,714
</TABLE>
- ------------------------
(1) On March 31, 1995, an individual and entities including certain investment
funds affiliated with the Venture Investors, purchased $7.0 million of
Debentures, 120,000 shares of Series A Preferred Stock for $12.0 million,
and 3,240,000 shares of Common Stock for $150,000. These proceeds, along
with $1.25 million of the Company's cash, were used to redeem 3,240,000
shares of Common Stock from the Company's co-founder and Chairman of the
Board and from a charitable remainder trust established by him. 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
Venture Investors 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, $7.0 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). This
transaction did not affect the Company's income statement for the year ended
March 31, 1995. Earnings per common share is based on net income after
Series A Preferred Stock dividend requirements, accretion of the discount,
and redemption of Series A Preferred Stock.
(2) The breakdown of net sales between System sales and OEM and custom product
sales for fiscal year 1992 is not available.
19
<PAGE>
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
20
<PAGE>
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. 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.
21
<PAGE>
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
22
<PAGE>
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.
23
<PAGE>
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.
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
24
<PAGE>
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."
25
<PAGE>
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
26
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The presentation of Directors and Executive Officers of the Registrant
appears in the Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders ("Proxy Statement") and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION.
The presentation of Executive Compensation of the Registrant appears in the
Proxy Statement and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The presentation of the Security Ownership of Certain Beneficial Owners and
Management of the Registrant appears in the Proxy Statement and is incorporated
by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The presentation of Certain Relationships and Related Transactions of the
Registrant appears in the Proxy Statement and is incorporated by reference
herein.
27
<PAGE>
PART IV
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 are listed in the "Index to Consolidated
Financial Statements and Supplemental Financial Information" on page F-1
hereof.
(2) Financial Statement Schedules.
The financial statement 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.
<TABLE>
<C> <S>
***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>
28
<PAGE>
<TABLE>
<C> <S>
**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.
* 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.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ JOE HARDT
-----------------------------------
Joe Hardt, President
June 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated below.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ SCOTT D. MILLER
- ----------------------------------- Chairman of the Board and June 27, 1996
Scott D. Miller Director
/s/ JOE HARDT President and Director
- ----------------------------------- (Principal Executive June 27, 1996
Joe Hardt Officer)
/s/ PETER D. YORK
- ----------------------------------- Senior Vice President, June 27, 1996
Peter D. York Secretary, and Director
Chief Financial Officer
/s/ DAVID E. CHISUM and Treasurer (Principal
- ----------------------------------- Financial and Accounting June 27, 1996
David E. Chisum Officer)
/s/ THOMAS S. ROBERTS
- ----------------------------------- Director June 27, 1996
Thomas S. Roberts
/s/ HARVEY B. CASH
- ----------------------------------- Director June 27, 1996
Harvey B. Cash
/s/ S. WAYNE BAZZLE
- ----------------------------------- Director June 27, 1996
S. Wayne Bazzle
/s/ F. H. Moeller
- ----------------------------------- Director June 27, 1996
F. H. Moeller
<PAGE>
AMX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTAL FINANCIAL INFORMATION
<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
</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. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
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.
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
Other accrued expenses........................................................ 380,969 769,449
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>
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>
Exhibit 4.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of the 16th day of May, 1996 by and among AMX Corporation, a Texas
corporation (the "Company"), and John P. Sundquist and Sandra P. Sundquist
(collectively, "Sundquist"), Donald J. Heiskell and Janice T. Heiskell, Bruce R.
Munroe, David A. Daniels and Thomas J. Gleason (collectively, the
"Shareholders").
WHEREAS, pursuant to the terms of a certain Agreement of Merger and Plan of
Reorganization, dated as of the date hereof (the "Merger Agreement"), among the
Company, the Shareholders, and certain other parties thereto named therein, the
Shareholders are, on the date hereof, acquiring an aggregate of 181,818 shares
of the Common Stock, par value $.01 per share, of the Company (the "Common
Stock") pursuant to a merger being effected pursuant to the Merger Agreement;
and
WHEREAS, execution by the Company of this Agreement is a condition
precedent to performance by the Shareholders of their obligations under the
Merger Agreement.
NOW THEREFORE, in consideration of the mutual provisions contained herein,
the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Commission" means the Securities and Exchange Commission.
"Current Holders" means the Purchasers and the Current Shareholders, as
those terms are defined in the Investor Registration Rights Agreement.
"Effective Time" has the meaning set forth in the Merger Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Act as in effect on the date hereof or
any registration form under the Act subsequently adopted by the Commission which
similarly permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the Commission.
"Holdback Period" has the meaning set forth in the Merger Agreement.
<PAGE>
"Holdback Shares" has the meaning set forth in the Merger Agreement.
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Investor Registrable Securities" shall have the same meaning as the term
"Registrable Securities" has in the Investor Registration Rights Agreement as
that term is defined therein.
"Investor Registration Rights Agreement" means that certain Registration
Rights Agreement, dated as of March 30, 1995, among the Company, the persons set
forth in SCHEDULE 1 attached thereto, and certain other parties thereto who are
named therein, as amended by that certain First Amendment to Registration Rights
Agreement entered into as of September 12, 1995.
"Registrable Securities" means (i) all of the shares of Common Stock issued
to the Shareholders pursuant to the Merger Agreement, and (ii) any Common Stock
issued in respect of the shares described in clause (i) upon any stock split,
stock dividend, recapitalization or other similar event, but does not include
any other shares of Common Stock acquired by the Shareholders; provided,
however, that (A) with respect to the Shareholders' demand rights under Section
2 hereof, the term "Registrable Securities" shall include only Holdback Shares
that are released from holdback by the Company prior to the expiration of the
Holdback Period in accordance with the provisions of Section 7.2(b) of the
Merger Agreement and shall not include any other Holdback Shares and (B) with
respect to the Shareholders' "piggy-back" rights under Section 3 hereof, the
term "Registrable Securities" shall include only Holdback Shares that are
released from holdback by the Company prior to the expiration of the Holdback
Period in accordance with the provisions of Section 7.2(b) of the Merger
Agreement and shall not include any other Holdback Shares until expiration of
the Holdback Period and then only to the extent such other Holdback Shares are
released by the Company back to Sundquist and are not retained by the Company in
accordance with the terms of the Merger Agreement.
The terms "register" means to register under the Act and applicable state
securities laws for the purpose of effecting a public sale of securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Section 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders (in the case
of Section 2) and all selling Holders and other security holders (in the case of
Section 3), and the expense of any special audits incident to or required by any
such registration.
"Selling Expenses" means all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities.
2
<PAGE>
2. FORM S-3 REGISTRATION.
(a) The Company shall use its commercially reasonable efforts to cause the
Registrable Securities held by each Holder to be registered under the Act so as
to permit the sale thereof, and in connection therewith shall, within 30 days
following the first date on which the Company becomes eligible to register
securities on Form S-3 under the Act, prepare and file with the Commission a
registration statement on Form S-3 or such other form as is then available under
the Act covering the Registrable Securities and shall use its best efforts to
cause such registration statement to become effective as promptly as practicable
after filing and to keep such registration statement effective for a period of
forty-five (45) days after its effective date; provided, however, that each
Holder shall provide all such information and materials and take all such action
as may be required under the Act to be provided or taken by such Holder in order
to permit the Company to comply with all applicable requirements of the
Commission and to obtain any desired acceleration of the effective date of such
registration statement, such provision of information and materials to be a
condition precedent to the obligations of the Company pursuant to this
Agreement. The Company shall not be required to effect more than one (1)
registration under this Section 2 of this Agreement. The offerings made
pursuant to such registrations shall not be underwritten.
(b) Notwithstanding Section 2(a) above, the Company shall be entitled to
postpone the declaration of effectiveness of the registration statement prepared
and filed pursuant to Section 2(a) for a reasonable period of time, but not in
excess of forty-five (45) calendar days after the expiration of the 30-day
period referred to in Section 2(a), if the Board of Directors of the Company,
acting in good faith, determines that there exists material non-public
information about the Company.
3. "PIGGY BACK" REGISTRATIONS.
(a) If the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders
exercising their registration rights (other than pursuant to Section 2(a) hereof
or pursuant to Sections 2 or 5 of the Investor Registration Rights Agreement,
and other than a registration relating solely to employee benefit plans, a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, or a registration relating solely to shares to be sold in a
transaction under Rule 145 of the Act), the Company will:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and
(ii) Use its commercially reasonable efforts to include in such
registration all of the Registrable Securities specified in a written
request or requests made by any Holder within fifteen (15) days after the
date of delivery of the written notice from the Company
3
<PAGE>
described in clause (i) above; provided that the term "Registrable
Securities" shall not, for purposes of this Section 3, include those
Registrable Securities the resale of which is at that time then covered by
a currently effective registration statement pursuant to Section 2(a). If
the underwriter, if any, advises the Company that marketing considerations
require a limitation on the number of shares offered pursuant to any
registration statement, then the Company may offer all of the securities it
proposes to register for its own account or the maximum amount that the
underwriter considers saleable and such limitation on any remaining
securities that may, in the opinion of the underwriter, be sold will,
subject to Section 3(b), be imposed PRO RATA among all shareholders who are
entitled to include shares in such registration statement according to the
number of securities each such shareholder requested to be included in such
registration statement.
(b) In the event that the Company determines to register its securities
for the account of any security holder or holders exercising their demand
registration rights pursuant to (i) the Investor Registration Rights Agreement
in a demand registration to be effected under Section 2 or Section 5 of the
Investor Registration Rights Agreement or (ii) pursuant to any other
registration rights agreement to which the Company is a party from time to time
that provides for demand registration rights thereunder (including any such
agreement entered into after the date hereof) (the registration rights
agreements referred to in this clause (ii) being referred to herein as the
"Other Registration Rights Agreements"), then, notwithstanding anything to the
contrary contained in this Agreement, no Shareholder will be entitled or
permitted to include Registrable Securities in any such registration pursuant to
the piggy-back rights granted in this Section 3 unless (A) in the case of a
registration being effected under Section 3 of the Investor Registration Rights
Agreement, such Shareholder shall have first obtained the prior written consent
of the Current Holders holding a majority or more of the Investor Registrable
Securities sought to be included in such registration and (B) in the case of a
registration being effected under any Other Registration Rights Agreement, such
Shareholder shall have first obtained any consents required to be obtained under
the applicable Other Registration Rights Agreement.
(c) The underwriter, if any, for an offering made pursuant to this Section
3 shall be selected by the Company (or, in the event of a demand registration
being effected by the Company pursuant to the Investor Registration Rights
Agreement or an Other Registration Rights Agreement, by the selling security
holders pursuant to and in accordance with the terms thereof).
4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2 and 3 shall be paid by the Company. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the holders of the securities registered, pro rata on the basis of the
number of their shares so registered.
5. REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each selling
Holder of Registrable Securities included in such registration advised in
writing as to the initiation of each registration and as to the
4
<PAGE>
completion thereof. At its expense, the Company will do the following for the
benefit of such selling Holders:
(a) Use its commercially reasonable efforts to keep such registration
effective for a period of forty-five (45) days or until the selling Holder or
Holders have completed the distribution described in the registration statement
relating thereto, whichever first occurs, and amend or supplement such
registration statement and the prospectus contained therein during such time
period to the extent necessary to comply with the Act and applicable state
securities laws;
(b) Use its commercially reasonable efforts to register or qualify the
Registrable Securities covered by such registration under the applicable
securities or "blue sky" laws of such jurisdictions as the selling Holders may
reasonably request; provided, that the Company shall not be obligated to qualify
to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to the service of process in suits other than those arising out of such
registration;
(c) Furnish to each selling Holder such number of copies of any prospectus
in conformity with the requirements of the Act, and such other documents, as
such selling Holder may reasonably request in order to effect the offering and
sale of the shares of the Registrable Securities to be offered and sold, but
only while the Company shall be required under the provisions hereof to cause
the registration statement to remain current;
(d) Notify each selling Holder upon the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and, so
long as the registration statement remains effective, promptly prepare, file and
furnish to each selling Holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;
(e) Notify each selling Holder, promptly after it shall receive notice
thereof, of the date and time the registration statement and each post-effective
amendment thereto has become effective or a supplement to any prospectus forming
a part of such registration statement has been filed; and
(f) Advise each selling Holder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of the registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
5
<PAGE>
(g) Each selling Holder shall enter into such agreements (including
underwriting agreements and lock-up agreements) as the managing underwriter of
any offering made by the Company and/or made by any selling shareholders, in
each case of the Company's equity securities registered under the Act, shall
reasonably request; provided that the indemnification provisions thereof shall
be no more burdensome on such selling Holder than those contained herein and
that any holdback shall not exceed a period of sixty (60) days before the filing
date of such registration and ninety (90) days after the effective date thereof.
6. INDEMNIFICATION.
(a) The Company will indemnify each selling Holder, and such selling
Holder's legal counsel and independent accountants, and each person controlling
such selling Holder within the meaning of Section 15 of the Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact maintained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Act, or state securities laws, or common law, applicable to the Company in
connection with any such registration, qualification or compliance, and will
reimburse each selling Holder, each of its officers, directors and partners and
such selling Holder's legal counsel and independent accountants, and each person
controlling such selling Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based in any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by any selling Holder or underwriter and stated to be specifically
for use therein.
(b) Each selling Holder will, if Registrable Securities held by such
selling Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) or a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or
6
<PAGE>
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, legal counsel, independent accountants,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company in an instrument duly executed by such selling Holder
and stated to be specifically for use therein; provided, however, that the
obligations of such selling Holders hereunder shall be limited to an amount
equal to the net proceeds, after deduction of expenses and commissions, to each
such selling Holder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has written notice of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that if a selling Holder is the
Indemnified Party and the defendants in any such action shall include both
selling Holder, as the Indemnified Party, and the Indemnifying Party and the
Indemnifying Party shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party
and the fees and expenses of such counsel shall be paid by the Indemnifying
Party. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, except to the extent, but only to the extent, that the Indemnifying
Party's ability to defend against such claim or litigation is materially
prejudiced as a result of such failure to give notice. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) The obligations of the Company and each selling Holder under this
Section 6 shall survive the completion of any offering of stock in a
registration statement under this Agreement and otherwise.
(e) No selling Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 3 which imposes
indemnification or contribution obligations on such selling Holder more onerous
that those imposed hereunder; provided, however, that the Company shall not be
7
<PAGE>
deemed to breach the provisions of Section 3 if a selling Holder is not
permitted to participate in a registration on account of his or her refusal to
execute an underwriting agreement on the basis of this Section 6(e).
7. INFORMATION BY HOLDER. Each Holder of Registrable Securities to be
included in any registration shall furnish to the Company, reasonably promptly
upon request of the Company, such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement or otherwise required
by applicable state or federal securities laws.
8. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. The Company agrees to:
(a) Use its commercially reasonable efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Act and the Exchange Act;
(b) Furnish to each Holder, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of the Act
and the Exchange Act, or that it qualifies as a registrant whose securities may
be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy
of the most recent annual or quarterly report of the Company and (iii) such
other information as may be reasonably requested in availing each Holder of any
rule or regulation of the Commission which permits the selling of any such
securities pursuant to Form S-3; and
(c) Use its commercially reasonable efforts to avoid any event that makes
Parent ineligible to use Form S-3 in accordance with Section 2 of this
Agreement.
9. EXCEPTION TO REGISTRATION; TERMINATION. The Company shall not be
required to effect a registration under this Agreement if (i) in the written
opinion of counsel for the Company, which counsel and the opinion so rendered
shall be reasonably acceptable to the Holders of Registrable Securities
requesting registration, such Holders may sell without registration under the
Act all Registrable Securities for which they requested registration under the
provisions of the Act and in the quantity in which the Registrable Securities
were proposed to be sold, or (ii) the Company shall have obtained from the
Commission a "no-action" letter to that effect. The registration rights set
forth in this Agreement shall terminate with respect to a Holder at such time as
such Holder has sold all Registrable Securities.
10. MISCELLANEOUS.
(a) All provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and shall not be assignable without the prior
written consent of the Company.
8
<PAGE>
(b) This Agreement may be amended or modified only by writing signed by or
on behalf of the Company and by Holders of a majority in number of the
Registrable Securities then outstanding.
(c) All notices, requests, consents, reports and demands shall be in
writing and shall be delivered as provided, and to the addresses, set forth in
the Merger Agreement.
(d) This Agreement may be executed in multiple counterparts, each of which
shall constitute an original, but all of which shall constitute but one and the
same instrument. One or more counterparts to this Agreement or any exhibit
hereto may be delivered via telecopier, with the intention that they shall have
the same effect as an original counterpart hereof.
(e) This Agreement shall be deemed a contract made under the laws of the
State of Texas and together with the rights and obligations of the parties
hereunder, shall be construed under and governed by the laws of such State.
(f) In the event of any conflict between the terms and provisions of this
Agreement and those of the Investor Registration Rights Agreement, the terms and
provisions of the Investor Registration Rights Agreement shall control.
(g) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, including the applicability of this paragraph and
paragraph (h) below, shall be settled by binding arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof, except that the arbitration procedures outlined in paragraphs
7.2(g)(ii) and 7.2(g)(iii) of the Merger Agreement shall govern any arbitration
proceeding. Notwithstanding the foregoing to the contrary, any such arbitration
shall be held in either Dallas, Texas or Denver, Colorado.
(h) Subject to the provisions of Section 7.2(g)(iii) of the Merger
Agreement, which shall govern the awarding of attorneys' fees in any arbitration
conducted pursuant to paragraph (g) above and Section 7.2(g) of the Merger
Agreement, if any party to this Agreement brings an action against another party
to this Agreement to enforce its rights under this Agreement, the prevailing
party shall be entitled to recover its reasonable costs and expenses, including
reasonable attorneys' fees and costs, incurred in connection with such action,
including any appeal of such action.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the Company and the Shareholders have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
AMX CORPORATION
By: /s/ Joe Hardt
---------------------------------------------
Its: PRESIDENT
---------------------------------------------
AMX ACQUISITION CORPORATION
By: /s/ Joe Hardt
---------------------------------------------
Its: PRESIDENT
---------------------------------------------
SPS INTERNATIONAL, INC.
By: /s/ John P. Sundquist
---------------------------------------------
Its: PRESIDENT
---------------------------------------------
/s/ John P. Sundquist
-------------------------------------------------
JOHN P. SUNDQUIST
/s/ Sandra P. Sundquist
-------------------------------------------------
SANDRA P. SUNDQUIST
/s/ Donald J. Heiskell
-------------------------------------------------
DONALD J. HEISKELL
/s/ Janice T. Heiskell
-------------------------------------------------
JANICE T. HEISKELL
10
<PAGE>
/s/ Bruce R. Munroe
-------------------------------------------------
BRUCE R. MUNROE
/s/ David A. Daniels
-------------------------------------------------
DAVID A. DANIELS
/s/ Thomas J. Gleason
-------------------------------------------------
THOMAS J. GLEASON
11
<PAGE>
EXHIBIT 11.1
AMX CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average shares outstanding...................................... 4,348,000 4,348,000 5,880,300
Effect of dilutive stock options-based on the treasury stock method...... 334,068 640,107 492,452
Effect of dilutive stock options granted within one year of the initial
public offering computed in accordance with the treasury stock method as
required by the SEC (1) 446,297 446,297 281,228
----------- ----------- -----------
Total common and common equivalent shares outstanding.................... 5,128,365 5,434,404 6,653,980
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------------
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common Stock issued and stock options granted at prices below the
initial public offering price of $10 per share during the twelve-month
period immediately preceding the initial filing date of the Company's
Registration Statement for its initial public offering have been included as
outstanding for all periods presented using the treasury stock method.
<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 of AMX Corporation included in this Annual Report (Form 10-K) for the
year ended March 31, 1996.
ERNST & YOUNG LLP
Dallas, Texas
June 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1996 AUDITED FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,858,759
<SECURITIES> 0
<RECEIVABLES> 4,385,090
<ALLOWANCES> 125,000
<INVENTORY> 2,865,735
<CURRENT-ASSETS> 12,378,123
<PP&E> 3,682,656
<DEPRECIATION> 2,069,793
<TOTAL-ASSETS> 14,652,338
<CURRENT-LIABILITIES> 3,813,625
<BONDS> 54,489
0
0
<COMMON> 75,521
<OTHER-SE> 10,638,975
<TOTAL-LIABILITY-AND-EQUITY> 14,652,338
<SALES> 32,730,514
<TOTAL-REVENUES> 32,730,514
<CGS> 12,369,272
<TOTAL-COSTS> 27,506,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 534,655
<INCOME-PRETAX> 4,806,568
<INCOME-TAX> 1,792,454
<INCOME-CONTINUING> 3,014,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,014,114
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
