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Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ________
Commission File Number 0-26924
AMX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1815822
(State of Incorporation) (I.R.S. Employer Identification No.)
11995 FORESTGATE DRIVE
DALLAS, TEXAS 75243
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 644-3048
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
COMMON STOCK, $0.01 PAR VALUE 7,794,730
(Title of Each Class) (Number of Shares Outstanding at July 31, 1996)
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AMX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Consolidated Balance Sheets at June 30, 1996 and March 31, 1996 2
Consolidated Statements of Operations for the Three Months Ended
June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Three Months
ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
June 30, 1996 March 31, 1996
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,812 $ 4,859
Receivables - trade and other; less allowance
for doubtful accounts of $91 at June 30,
1996 and $125 at March 31, 1996 4,747 4,260
Inventories 3,107 2,866
Prepaid expenses 184 175
Deferred income tax 218 218
Income taxes recoverable 325 -
------- -------
Total current assets 12,393 12,378
Property and equipment, at cost, net 2,120 1,613
Capitalized software 130 123
Goodwill, net 212 177
Deposits and other 976 361
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Total assets $ 15,831 $14,652
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------- -------
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AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
June 30, 1996 March 31, 1996
------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,040 $1,473
Accrued compensation 528 835
Accrued sales commissions 406 387
Other accrued expenses 731 769
Current portion of long-term debt 96 -
Notes payable 125 -
Income taxes payable - 350
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Total current liabilities 3,926 3,814
Long-term debt, less current portion 103 54
Deferred tax liability 69 69
Contingencies
Minority interest in subsidiary 1 1
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued shares - 7,769,730 at June 30, 1996
and 7,552,120 at March 31, 1996 78 76
Additional paid-in capital 1,737 131
Retained earnings 9,964 10,507
Less common treasury stock of 5,208 shares (47) -
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Total shareholders' equity 11,732 10,714
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Total liabilities and shareholders' equity $15,831 $14,652
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See accompanying notes
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AMX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share amounts)
Three Months Ended
June 30,
---------------------
1996 1995
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System sales $ 7,625 $ 6,382
OEM and custom product sales 586 373
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Net sales 8,211 6,755
Cost of sales 3,417 2,592
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Gross profit 4,794 4,163
Selling and marketing expenses 3,312 2,730
General and administrative expenses 692 546
Acquired research and development 1,230 -
Research and development expenses 754 213
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Operating income (loss) (1,194) 674
Interest expense 5 229
Other income 72 36
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Income (loss) before income taxes (1,127) 481
Income tax provision (benefit) (582) 175
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Net income (loss) $ (545) 306
-------
-------
Preferred stock dividends, including accretion (308)
-------
Net loss applicable to
common shareholders $ (2)
-------
-------
Loss per common share $(0.07) $(0.00)
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Common and common equivalent
shares outstanding 7,656,359 5,434,322
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See accompanying notes
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AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended June 30,
1996 1995
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OPERATING ACTIVITIES
Net income (loss) $ (545) $ 306
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 184 167
Acquired research and development 980 -
Provision for losses on receivables (34) 67
Provision for inventory obsolescence 9 9
Gain on sale of property and equipment - (2)
Changes in operating assets and liabilities:
Receivables (108) 2
Inventories 338 (340)
Prepaid expenses 68 (13)
Other current assets 10 -
Accounts payable (21) 383
Accrued expenses (408) (521)
Income taxes recoverable/payable (700) 80
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Net cash provided by (used in) operating activities (227) 138
INVESTING ACTIVITIES
Purchases of property and equipment (525) (139)
Proceeds from sale of property and equipment - 9
Investment in capitalized software (8) -
Payment to former owner of AudioEase (180) -
Increase in other assets (190) (64)
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Net cash used in investing activities (903) (194)
FINANCING ACTIVITIES
Exercise of stock options 64 -
Purchase of treasury stock (47) -
Disqualifying disposition of stock options 44 -
Proceeds from long-term debt 125 3,816
Repayments of long-term debt (105) (3,824)
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Net cash provided by (used in) financing activities 81 (8)
Effect of exchange rate changes on cash 2 (3)
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Net decrease in cash and cash equivalents (1,047) (67)
Cash and cash equivalents at beginning of period 4,859 2,540
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Cash and cash equivalents at end of period $ 3,812 $ 2,473
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SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of AMX common stock in connection with
AudioEase acquisition $ 1,500 $ -
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See accompanying notes.
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AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements, which should be
read in conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996, are unaudited (except for the March 31, 1996
consolidated balance sheet which was derived from the Company's audited
financial statements), but have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation
have been included.
Operating results for the three months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the entire
year ending March 31, 1997.
2. Asset Acquisition
In March 1996, the Company signed a letter of intent to acquire 100% of the
outstanding stock of SPS International, Inc., dba AudioEase. AudioEase
designs, manufactures, and markets hardware and software products for upscale
home theater systems, whole-home audio/video control and distribution
systems, as well as other electronic home systems. The acquisition was
completed in May 1996 at a purchase price of $1.5 million paid in 181,818
shares of AMX Corporation common stock. The acquisition was accounted for as
a purchase.
3. Earnings (Loss) Per Share
Subsequent to March 31, 1996, earnings (loss) per share is based on the
weighted average number of common and common equivalent shares outstanding
including the dilutive effect, if any, of options and warrants.
For periods prior to April 1, 1996, earnings (loss) per common share is based
on net income after preferred stock dividend requirements (which began April
1, 1995), accretion of discount on the preferred stock (which also began
April 1, 1995) and the one-time write-off of the remaining discount on the
preferred stock which occurred when the preferred stock was redeemed. The
net income (loss) applicable to common shareholders is divided by the
weighted average number of common shares outstanding during each year after
giving effect to stock options considered to be dilutive common stock
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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 (loss) per share for the
first three months of fiscal 1996 pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin (SAB) No. 83. SAB No. 83 requires the
Company to include all common shares and all common share equivalents issued
in the 12 month period preceding the filing date of the initial public
offering in its calculation of the number of shares used to determine
earnings per share as if the shares had been outstanding for all periods
presented prior to the initial public offering.
4. Inventories
The components of inventories are as follow:
June 30, 1996 March 31, 1996
------------- --------------
Raw materials $ 1,154,451 $ 1,705,108
Work in progress 286,304 229,566
Finished goods 1,740,321 1,030,061
Less reserve for obsolescence (74,196) (99,000)
---------------------------------
$ 3,106,880 $ 2,865,735
---------------------------------
5. 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 tortuous 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
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of its attorney's 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 material adverse effect
upon the Company's results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included in the
Company's 1996 Annual Report on Form 10-K. The Company believes that all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation have been included in its quarterly information. Quarterly
operating results have varied significantly in the past and can be expected
to vary in the future. Results of operations for any particular quarter are
not necessarily indicative of results of operations for a full year.
OVERVIEW
AMX designs, develops, manufactures and markets integrated remote
control systems that enable end users to operate as a single system a broad
range of electronic and programmable equipment in a variety of corporate,
educational, industrial, entertainment, governmental, and residential
settings. The Company's hardware and software products provide the operating
system, machine control, and user interface necessary to operate as an
integrated network electronic devices from different manufacturers through
easy-to-use control panels. The Company's systems are available in a variety
of configurations and provide centralized control of a wide range of video
systems, audio systems, teleconferencing equipment, educational media,
lighting equipment, environmental control systems, security systems, and
other electronic devices. The Company has recently introduced several
Windows-Registered Trademark--based software applications that handle design
functions, permit scheduling control, and enable a personal computer to
operate on the Company's AXlink bus as a control panel.
While annual growth rates of the Company's net sales have ranged from
17% up to as high as 42% since 1991, the Company's quarterly operating
results have varied significantly in the past, and can be expected to vary in
the future. These quarterly fluctuations have been the result of a number of
factors, including the volume and timing of orders received during the
period, particularly from international distributors, OEMs, and other large
customers; sales and marketing expenses related to entering new markets; 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
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training facility. The Company's international distributors tend to order in
large quantities to take advantage of volume discounts the Company offers and
to economize on shipping costs. These international orders are not received
at the same time each year. Notwithstanding the difficulty in forecasting
future sales and the relatively small level of backlog at any given time, the
Company generally must plan production, order components, and undertake its
development, selling and marketing activities, and other commitments months
in advance. Accordingly, any shortfall in revenues in a given quarter may
impact the Company's results of operations because the Company generally does
not plan to adjust expenditure levels in response to fluctuations in
quarterly revenues.
The Company purchases components that comprise approximately 28% to 32%
of its cost of sales from foreign vendors. The primary components purchased
are standard power supplies and displays for touch panels. Historically, the
Company has not had any significant cost issues related to price changes due
to purchasing from foreign vendors. However, there can be no assurance that
this will be the case in the future. The Company has experienced delays of up
to three weeks in receiving materials from foreign vendors. However, the
Company takes this issue into consideration when orders are placed and,
therefore, this concern has not, in the past, significantly impacted the
Company's ability to meet production and customer delivery deadlines.
However, a significant shortage of or interruption in the supply of foreign
components could have a material adverse affect on the Company's results of
operations.
The Company's selling and marketing expenses category also includes
customer service 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.
RESULTS OF OPERATIONS
The following table contains certain amounts, expressed as a percentage
of net sales, reflected in the Company's consolidated statements of operations
for the three month periods ended June 30, 1996 and 1995:
THREE MONTHS ENDED
------------------
JUNE 30
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1996 1995
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System sales. . . . . . . . . . . . . . 92.9% 94.5%
OEM and custom product sales. . . . . . 7.1 5.5
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Net sales. . . . . . . . . . . . . . . 100.0 100.0
Cost of sales . . . . . . . . . . . . . 41.6 38.4
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Gross profit. . . . . . . . . . . . . . 58.4 61.6
Selling and marketing expenses. . . . . 40.3 40.3
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General and administrative expenses . . 8.4 8.1
Acquired research and development . . . 15.0 -
Research and development expenses . . . 9.2 3.2
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Operating income (loss). . . . . . . . (14.5) 10.0
Interest expense. . . . . . . . . . . . 0.1 3.4
Other income . . . . . . . . . . . . . 0.9 0.5
----- -----
Income (loss) before income taxes . . . (13.7) 7.1
Income tax provision (benefit). . . . . (7.1) 2.6
----- -----
Net income (loss) . . . . . . . . . . . (6.6%) 4.5%
----- -----
THREE MONTHS ENDED JUNE 30, 1996 RESULTS COMPARED TO THREE MONTHS ENDED
JUNE 30, 1995
SYSTEM SALES were $7.6 million for the three months ended June 30,
1996, up 19.5% over the same period last year and OEM AND CUSTOM PRODUCT
SALES were $.6 million for the three months ended June 30, 1996, up 57.1%
from the same period last year. NET SALES for the three months ended June 30,
1996, were $8.2 million, up 21.6% compared to $6.8 million for the comparable
period of the prior year. System sales and OEM and custom product sales
represented 92.9% and 7.1%, respectively, of net sales for the three months
ended June 30, 1996, and 94.5%, and 5.5%, respectively, of net sales for the
three months ended June 30, 1995. The increase in System sales in the three
months ended June 30, 1996, over the prior year represented the Company's
continued growth in a wide variety of markets through its dealers and
distributors, and its recent acquisition of AudioEase.
COST OF SALES consists of material, labor, and manufacturing overhead,
and was $3.4 million or 41.6% of net sales in the three months ended June 30,
1996, as compared to $2.6 million or 38.4% of net sales in the comparable
period of the prior year. The increase for the three months ended June 30,
1996 is due to the acquisition of AudioEase, which historically has
experienced higher cost of sales, and the increase in OEM sales, which
likewise, experienced higher cost of sales.
GROSS PROFIT for the three months ended June 30, 1996 was $4.8 million
or 58.4% of net sales, compared to $4.2 million or 61.6% of net sales for the
same period of the prior year. The decrease in gross profit as a percentage
of net sales was due to increases in cost of sales as stated above.
SELLING AND MARKETING EXPENSES increased to $3.3 million, or 40.3% of
net sales for the three months ended June 30, 1996, compared to $2.7 million
or 40.3% of sales for the same period of the prior year. Selling and
marketing as previously reported had included research and development
expenses, which are now shown separately.
GENERAL AND ADMINISTRATIVE EXPENSES increased from $.5 million in the
three months ended June 30, 1995, or 8.1% of net sales to $.7 million in the
three months ended June 30, 1996, or 8.4% of net sales. The increase was due
primarily to legal expenses associated with the FAV litigation discussed
below.
ACQUIRED RESEARCH AND DEVELOPMENT was $1.2 million for the three months
ended June 30, 1996, compared to none for the same period last year. This
amount consists of the allocation of the purchase price of research
development in progress associated with the acquisitions of AudioEase and
Camrobotics, which occurred in May and June, respectively.
RESEARCH AND DEVELOPMENT EXPENSES, which are separately stated in this
report for the first time, increased from $213,000 in the three months ended
June 30, 1995 to $754,000 in the same period this year. The increase, as
well as the separate line item distinction, is associated with expenses
generated by our subsidiary, PHAST, which was not yet formed at this time
last year, and the increased emphasis on the development of new products at
AMX Corporation.
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INTEREST EXPENSE decreased from $229,000 in the three months ended June 30,
1995, to $5,000 in the three months ended June 30, 1996, which reflects
the repayment of the subordinated debentures and the bank term note in
November 1995 with the proceeds from the Company's initial public offering.
OTHER INCOME is comprised primarily of interest income, which increased
by 100% for the three months ended June 30, 1996 from the same period last
year due to income generated by the cash proceeds remaining from the initial
public offering.
The Company's EFFECTIVE TAX RATE was 36.4% in the three months ended
June 30, 1995, as compared to 51.6% in the three months ended June 30, 1996.
The effective tax rate for the three months ended June 30, 1996, increased
over the effective tax rate for the three months ended June 30, 1995 because
the net operating losses of PHAST cannot be included in the Company's
consolidated tax return due to the ownership position of the Company, and the
acquired research and development costs, which cannot be deducted for income
tax purposes. 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(LOSS) decreased from income of $306,000 or 4.5% of net sales
for the three months ended June 30, 1995 as compared to a loss of $545,000 or
6.6% of net sales for the three months ended June 30, 1996, 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 the three
months ended June 30, 1996, the Company used $.2 million of cash flow from
operations. Investing activities used $.9 million of cash, primarily for the
purchase of $525,000 of property and equipment and for the $180,000 payment to
a former shareholder of AudioEase. Financing activities provided $.1 million
in cash.
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 June 30,
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 $844,000 had been
advanced at June 30, 1996.
In May 1996, the Company acquired 100% of SPS International, Inc. dba
AudioEase. AudioEase designs, manufactures, and markets hardware and software
products for upscale home theater systems, whole-home audio/video control and
distribution systems, as well as other electronic home systems. The
acquisition was completed at a purchase price of $1.5 million paid in 181,818
shares of AMX Corporation common stock. The Company engaged an independent
appraisal company to assist in allocating the purchase price of AudioEase.
The majority of the purchase price was allocated to in-process research and
development projects. In accordance with generally accepted accounting
principles, the purchase price allocated to in-process research and
development projects was expensed in a one-time charge to the Company's
consolidated earnings as of the date of the consummation of the combination.
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In June 1996, the Company acquired 100% of the assets of the Camrobotics
Systems division of the M.S. Russin Group, Inc., a designer and developer of
pan and tilt cameras, for a purchase price of $250,000. Payment was made
with $125,000 in cash and the delivery of a $125,000 note bearing interest at
the rate of 8% per annum and due in February 1997. The majority of the
purchase price was allocated to in-process research and development projects.
In accordance with generally accepted accounting principles, the purchase
price allocated to in-process research and development projects was expensed
in a one-time charge to the Company's consolidated earnings as of the date of
the consummation of the combination.
The Company believes that cash flow from operations, the Company's
existing cash resources and funds available under its revolving loan facility
will be adequate to fund its working capital and capital expenditure
requirements for at least the next 12 months. An important element of the
Company's business strategy has been, and continues to be, the acquisition of
similar businesses and complementary products and technology and the
integration of such businesses and products and technology into the Company's
existing operations. Such future acquisitions, if they occur, may require
that the Company seek additional funds.
CONTINGENCIES
The Company is involved in a lawsuit 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 tortuous 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.
13
<PAGE>
AMX CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information pertaining to this item is incorporated from Part I. Financial
Information (Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Contingencies).
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
2.1 Agreement of Merger and Plan of Reorganization ("Agreement"), dated as
of May 16, 1996, among AMX Corporation, 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.
The schedules and exhibits to the Agreement are omitted in reliance on
item 601(b)(2) of Regulation S-K. The registrant hereby agrees to
furnish supplementally a copy of any omitted schedule or exhibit to
the Securities and Exchange Commission upon request. (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).
3.1 Amended and Restated Articles of the Company. (Incorporated by
reference from Exhibit 4.1 in the Company's Form S-8 filed March 11,
1996, File No. 333-2202).
3.2 Amended and Restated Bylaws of the Company, as amended. (Incorporated
by reference from Exhibit 3.4 in the Company's Registration Statement
on Form S-1 filed September 13, 1995, as amended, File No. 33-96886).
4.1 Amendment to Amended and Restated Bylaws of the Company.
(Incorporated by reference from Exhibit 3.5 in the Company's
Registration Statement on Form S-1 filed September 13, 1995, as
amended, File No. 33-96886).
*27 Financial Data Schedule.
b. Reports on Form 8-K
Current report on Form 8-K dated as of May 16, 1996 and filed May 31, 1996
regarding the Company's Acquisition of SPS International, Inc. (now known as
AudioEase, Inc. ("AudioEase")) which included Financial Statements (Balance
Sheet, Statement of Income and Retained Earnings, and Statement of Cash
Flows) for SPS International, Inc. d/b/a AudioEase, Inc. for the year ended
August 31, 1995 and Pro Forma Condensed Consolidated Financial Information
(Pro Forma Condensed Consolidated Balance Sheet and Pro Forma Condensed
Consolidated Statement of Income) for the Company and AudioEase for the year
ended March 31, 1996.
- ---------------------
*Filed herewith.
14
<PAGE>
AMX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMX Corporation
Date: August 14, 1996 By: /s/ David E. Chisum
------------------------------------
David E. Chisum
Chief Financial Officer (Duly Authorized
Officer and Principal Financial Officer)
15
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