<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ________
Commission File Number 0-26924
AMX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1815822
(State 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: (972) 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 7,823,548
(Title of Each Class) (Number of Shares Outstanding at January 31, 1997)
<PAGE>
AMX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
INDEX
<TABLE>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at December 31, 1996 and March 31, 1996 3
Consolidated Statements of Income for the Three and Nine Months
Ended December 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the Nine Months ended
December 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
<TABLE>
December 31, 1996 March 31, 1996
----------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,348 $ 4,859
Receivables - trade and other; less allowance
for doubtful accounts of $75 at December 31,
1996 and $125 at March 31, 1996 5,691 4,260
Inventories 4,546 2,866
Prepaid expenses 334 175
Deferred income tax 218 218
------- -------
Total current assets 15,137 12,378
Property and equipment, at cost, net 2,585 1,613
Capitalized software 376 123
Goodwill, net 202 177
Deposits and other 1,298 361
------- -------
Total assets $19,598 $14,652
------- -------
------- -------
</TABLE>
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except for share and per share amounts)
<TABLE>
December 31, 1996 March 31, 1996
----------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,905 $ 1,473
Accrued compensation 847 835
Accrued sales commissions 571 387
Other accrued expenses 689 769
Notes payable 125 -
Income taxes payable 852 350
------- -------
Total current liabilities 4,989 3,814
Long-term debt, less current portion 115 54
Deferred tax liability 69 69
Contingencies -
Minority interest in subsidiary 516 1
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued shares - 7,798,548 at December 31, 1996
and 7,552,120 at March 31, 1996 78 76
Additional paid-in capital 1,784 131
Retained earnings 12,094 10,507
Less common treasury stock of 5,208 shares (47) -
------- -------
Total shareholders' equity 13,909 10,714
------- -------
Total liabilities and shareholders' equity $19,598 $14,652
------- -------
------- -------
</TABLE>
See accompanying notes
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except for share and per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
December 31 December 31
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
System sales $ 10,083 $ 7,715 $ 27,661 $ 22,407
OEM and custom product sales 921 882 2,284 1,820
---------- ---------- ---------- ----------
Net sales 11,004 8,597 29,945 24,227
Cost of sales 4,288 3,336 11,620 9,240
---------- ---------- ---------- ----------
Gross profit 6,716 5,261 18,325 14,987
---------- ---------- ---------- ----------
Selling and marketing expenses 3,909 2,881 10,851 8,201
General and administrative expenses 899 745 2,707 2,020
Acquired research and development - - 1,230 -
Research and development expenses 830 431 2,170 925
---------- ---------- ---------- ----------
Total operating expenses 5,638 4,057 16,958 11,146
---------- ---------- ---------- ----------
Operating income 1,078 1,204 1,367 3,841
Interest expense 8 112 12 535
Other income 81 (36) 222 42
---------- ---------- ---------- ----------
Income before income taxes 1,151 1,056 1,577 3,348
Income tax provision 777 428 977 1,259
Minority interest (749) - (984) -
---------- ---------- ---------- ----------
Net income $ 1,123 628 $ 1,584 2,089
---------- ----------
---------- ----------
Preferred stock dividends,
including accretion 181 797
Redemption of preferred stock 2,356 2,356
Net loss applicable to ---------- ----------
common shareholders $ (1,909) $ (1,064)
---------- ----------
---------- ----------
Earnings (loss) per common share $ 0.14 $ (0.27) $ 0.19 $ (0.17)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Common and common equivalent
shares outstanding 8,218,660 6,951,137 8,248,163 6,130,880
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months
Ended December 31,
1996 1995
-------- --------
OPERATING ACTIVITIES
Net income $ 1,584 $ 2,089
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 735 681
Acquired research and development 980 -
Provision for losses on receivables (50) 217
Provision for inventory obsolescence (12) 27
Loss on sale of property and equipment - 2
Changes in operating assets and liabilities:
Receivables (1,043) (982)
Inventories (1,080) (101)
Prepaid expenses (83) 171
Other current assets - 61
Accounts payable (119) 283
Accrued expenses 33 (97)
Income taxes recoverable/payable 477 403
-------- --------
Net cash provided by operating activities 1,422 2,754
INVESTING ACTIVITIES
Purchases of property and equipment (1,488) (589)
Proceeds from sale of property and equipment 9
Investment in capitalized software (253) (74)
Payment to former owner of AudioEase (180) -
Minority interest in PHAST 516 1
Increase in other assets (576) (58)
-------- --------
Net cash used in investing activities (1,981) (711)
FINANCING ACTIVITIES
Sale of stock 26 19,854
Exercise of stock options 86 77
Purchase of treasury stock (47) -
Disqualifying disposition of stock options 44 -
Preferred stock dividends (627)
Redemption of preferred stock (12,000)
Proceeds from long-term debt 125 3,815
Repayments of long-term debt (189) (11,109)
-------- --------
Net cash provided by financing activities 45 10
Effect of exchange rate changes on cash 3 (20)
-------- --------
Net increase (decrease) in cash and cash equivalents (511) 2,033
Cash and cash equivalents at beginning of period 4,859 2,540
-------- --------
Cash and cash equivalents at end of period $ 4,348 $ 4,573
-------- --------
-------- --------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of AMX common stock in connection with
AudioEase acquisition $ 1,500 $ -
-------- --------
-------- --------
See accompanying notes.
<PAGE>
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements, which should be
read in conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996, are unaudited (except for the March 31, 1996 consolidated
balance sheet, which was derived from the Company's audited financial
statements), but have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ending March 31, 1997.
2. Asset Acquisition
In March 1996, the Company signed a letter of intent to acquire 100% of the
outstanding stock of SPS International, Inc., dba AudioEase. AudioEase designs,
manufactures, and markets hardware and software products for upscale home
theater systems, whole-home audio/video control and distribution systems, as
well as other electronic home systems. The acquisition was completed in May
1996 at a purchase price of $1.5 million paid in 181,818 shares of AMX
Corporation common stock. The acquisition was accounted for as a purchase. Of
the total purchase price, $980,000 was allocated to acquired research and
development, and therefore immediately expensed.
3. Earnings Per Share
Subsequent to March 31, 1996, earnings per share is based on the weighted
average number of common and common equivalent shares outstanding including the
dilutive effect, if any, of options and warrants.
<PAGE>
For periods prior to April 1, 1996, earnings per common share is based on net
income after preferred stock dividend requirements (which began April 1, 1995),
accretion of discount on the preferred stock (which also began April 1, 1995)
and the one-time write-off of the remaining discount on the preferred stock
which occurred when the preferred stock was redeemed. The net income applicable
to common shareholders is divided by the weighted average number of common
shares outstanding during each year after giving effect to stock options
considered to be dilutive common stock equivalents (using the treasury stock
method for all periods presented). Fully diluted earnings per common share is
not materially different.
The Company has computed common and common equivalent shares in determining the
number of shares used in calculating earnings per share for the first six months
of fiscal 1996 pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83. SAB No. 83 requires the Company to include
all common shares and all common share equivalents issued in the 12 month period
preceding the filing date of the initial public offering in its calculation of
the number of shares used to determine earnings per share as if the shares had
been outstanding for all periods presented prior to the initial public offering.
4. Inventories
The components of inventories are as follow:
December 31, 1996 March 31, 1996
----------------- --------------
Raw materials $1,356,318 $1,705,108
Work in progress 587,058 229,566
Finished goods 2,664,375 1,030,061
Less reserve for obsolescence (62,196) (99,000)
---------- ----------
Total $4,545,555 $2,865,735
---------- ----------
---------- ----------
5. Contingencies
The Company is involved in a lawsuit which was filed on August 19, 1994, pending
in federal district court for the Western District of Oklahoma with Ford Audio-
Video Systems, Inc. ("FAV"). FAV is a privately held company located in
Oklahoma. FAV claims actual damages "in excess of $10,000" and punitive damages
of $20,000,000. FAV asserts that it orally contracted with the Company to
manufacture a control panel and that the Company wrongfully sold the panel to
others. After various hearings and motions in which various claims by FAV were
dismissed by the court or dropped by FAV, claims for fraud and misappropriation
of trade secrets remain.
<PAGE>
While the ultimate outcome of such litigation is uncertain, the Company denies
the allegations, is vigorously defending the litigation, and believes that the
ultimate outcome thereof will not have a material adverse effect on the
Company's consolidated financial position, results of operations, or liquidity.
An unfavorable outcome in this matter could have a material adverse effect upon
the Company's consolidated financial position and consume working capital. In
addition, even if the ultimate outcome is resolved in favor of the Company,
defending itself against such litigation could entail considerable cost and the
diversion of efforts of management, either of which could have material adverse
effect upon the Company's results of operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included in the
Company's 1996 Annual Report to Shareholders. The Company believes that all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the following
quarterly information. Quarterly operating results have varied significantly
in the past and can be expected to vary in the future. Results of operations
for any particular quarter are not necessarily indicative of results of
operations for a full year.
OVERVIEW
AMX designs, develops, manufactures and markets integrated remote
control systems that enable end users to operate as a single system a broad
range of electronic and programmable equipment in a variety of corporate,
educational, industrial, entertainment, governmental, and residential
settings. The Company's hardware and software products provide the operating
system, machine control, and user interface necessary to operate as an
integrated network electronic devices from different manufacturers through
easy-to-use control panels. The Company's systems are available in a variety
of configurations and provide centralized control of a wide range of video
systems, audio systems, teleconferencing equipment, educational media,
lighting equipment, environmental control systems, security systems, and
other electronic devices. The Company has recently introduced several
Windows-Registered Trademark--based software applications that handle design
functions, permit scheduling control, and enable a personal computer to
operate on the Company's AXlink bus as a control panel.
While annual growth rates of the Company's net sales have ranged from
17% up to as high as 42% since 1991, the Company's quarterly operating
results have varied significantly in the past, and can be expected to vary in
the future. These quarterly fluctuations have been the result of a number of
factors, including the volume and timing of orders received during the
period, particularly from international distributors, OEMs, and other large
customers; sales and marketing expenses related to entering new markets;
research and development expenses related to the development of new products;
the Company's reliance upon dealers and distributors; the timing of new
product introductions by the Company and its competitors; fluctuations in
commercial and residential construction and remodeling activity; and changes
in product or distribution channel mix. In addition, the Company generally
experiences higher selling and marketing expenses during the first fiscal
quarter of each year due to costs associated with the Company's largest trade
show (occurring in June) and experiences higher sales in the education market
during the second fiscal quarter of each year due to the buying cycles of
educational institutions.
The Company's system sales are made through dealers and distributors.
The Company principally relies on over 1,000 specialized third-party dealers
of electronic and audiovisual equipment to sell, install, support and service
its products in the United States. Internationally, the Company relies on a
network of 21 exclusive distributors serving 23 countries and 44 dealers
serving an additional 20 countries to distribute its products.
OEM and custom product sales have been made only to a few customers
and have generally been large and sporadic transactions. During fiscal 1994,
1995, 1996 and nine months in 1997, 71%, 45%, 56% and 45%, respectively, of
the Company's OEM and custom product sales have been with one customer whose
orders have fluctuated significantly based on their own sales volumes. While
the Company's OEM customers typically place orders for products several
months prior to the scheduled shipment date, these orders are subject to
rescheduling and cancellation. Also, OEM customers can redesign their
products without the AMX equipment in them which could result in reduced or
eliminated sales to such customers. One of the Company's strategies for
growth is to increase OEM and custom product sales to large customers that
typically carry lower gross margins, but also have lower selling expenses.
The Company's U. S. dealers pursue a wide variety of projects that
can range from small conference rooms or boardrooms to very large projects in
a university, government facility, amusement park, or corporate training
facility. The Company's international distributors tend to order in large
quantities to take advantage of
<PAGE>
volume discounts the Company offers and to economize on shipping costs. These
international orders are not received at the same time each year.
Notwithstanding the difficulty in forecasting future sales and the relatively
small level of backlog at any given time, the Company generally must plan
production, order components, and undertake its development, selling and
marketing activities, and other commitments months in advance. Accordingly,
any shortfall in revenues in a given quarter may impact the Company's results
of operations because the Company generally does not plan to adjust
expenditure levels in response to fluctuations in quarterly revenues.
The Company purchases components that comprise approximately 28% to
32% of its cost of sales from foreign vendors. The primary components
purchased are standard power supplies and displays for touch panels.
Historically, the Company has not had any significant cost issues related to
price changes due to purchasing from foreign vendors. However, there can be
no assurance that this will be the case in the future. The Company has
experienced delays of up to three weeks in receiving materials from foreign
vendors. However, the Company takes this issue into consideration when orders
are placed and, therefore, this concern has not, in the past, significantly
impacted the Company's ability to meet production and customer delivery
deadlines. However, a significant shortage of or interruption in the supply
of foreign components could have a material adverse affect on the Company's
results of operations.
The Company's selling and marketing expenses category also includes
customer service, technical support and engineering. The engineering
department of the Company is involved in both research and development as
well as customer support and service. Additionally, the Company has created
sales support teams, focused on specific geographic regions or customer
categories. These teams include sales personnel, system designers, and
technical support personnel, all of whom indirectly participate in research
and development activities by establishing close relationships with the
Company's customers and by individually responding to customer-expressed
needs.
The Company intends to continue to commit resources to develop new
software for specific vertical markets to expand system sales and build for
the future. An example of this is the Synergy Electronic Classroom System
("Synergy"). In fiscal 1994, the Company invested $1,040,000 in engineering
development, marketing, and sales efforts to develop the Synergy
Windows-Registered Trademark--based software and introduce it to the
education market. The Company continues to invest money each year in Synergy
to continue the development and enhancement of the product and the Company's
position in the marketplace. Sales of Synergy are increasing, and the Company
expects the education market to be an opportunity for future growth. A
similar commitment was the Company's investment in PHAST Corporation in
August 1995. This new subsidiary is currently designing and will produce and
distribute control systems and products for home automation. Although
management believes that significant investments such as these are
appropriate, such investments can and have had a negative impact on the
Company's results of operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
NET SALES for the third quarter were $11.0 million, up 28% over the
net sales in the third quarter of the prior year of $8.6 million. SYSTEM
SALES were $10.1 million, up 31% from the previous year and OEM AND CUSTOM
PRODUCT SALES were $.9 million, up 4% from the previous year. The increase
in sales reflected growth in all product markets and sales regions for the
company. Residential sales increased 99% over the same period last year
primarily due to the purchase of AudioEase in May, while international sales
increased 37% and Synergy sales increased 9% over the same period last year.
COST OF SALES consists of material, labor, and manufacturing
overhead, and was $4.3 million or 39% of net sales for the third quarter of
1996, as compared to 38.8% of net sales in the comparable period of the prior
year. The Company maintained its historical cost of sales percentage because
of favorable purchasing variances during the quarter which offset the
inclusion of AudioEase, which has historically experienced higher percentage
cost of sales.
<PAGE>
SELLING AND MARKETING EXPENSES increased from $2.9 million, or 33.5%
of net sales for the third quarter last year to $3.9 million or 35.5% of
sales for the third quarter this year. Both the increase in dollars and the
percentage increase were driven by the addition of AudioEase and the
emergence of PHAST. AudioEase was acquired in May of 1996, and therefore not
included in last year's quarter. PHAST, which began operations during the
second quarter last year, initiated its sales and marketing efforts during
the second quarter of this year. These companies accounted for $523,534 the
total increase of $1,027,892 for the quarter.
GENERAL AND ADMINISTRATIVE EXPENSES were $.9 million during the third
quarter of 1996 compared to $.7 million for the third quarter last year. As
a percentage of sales, expenses decreased from 8.7% to 8.2%.
RESEARCH AND DEVELOPMENT EXPENSES were $.8 million in the third
quarter of 1996 compared to $.4 million last year. This represents 7.5% of
net sales for the current year compared to 5.0% last year. The increase in
spending is a result of the emergence PHAST, which was formed and had just
begun operation during the second quarter last year, and a result of AMX's
commitment to the development of new products to maintain its competitive
position.
INTEREST EXPENSE decreased from $111,750 in the third quarter last
year to $8,072 in the third quarter this year which reflects the repayment in
November of 1995 of the subordinated debentures and the bank term note with
the proceeds from the Company's initial public offering.
The Company's EFFECTIVE TAX RATE was 67.5% in the third quarter of
this year compared to 40.5% in the third quarter last year. The effective
tax rate has been impacted adversely due to the fact that the losses incurred
by PHAST cannot be included in the Company's consolidated tax return. The
PHAST losses will be carried forward against any future profits of PHAST
before any tax expense will be incurred by this subsidiary. At that time,
the company's taxes will be favorably affected.
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
NET SALES were $29.9 million for the nine months ended December 31,
1996, up 24% over the comparable period in the prior year. SYSTEM SALES were
$27.6 million and OEM AND CUSTOM PRODUCT SALES were $2.3 million respectively
for the nine months ended December 31, 1996, up 23% and 25% respectively from
the comparable period of the prior year. The increase in sales reflected
growth in all product markets and sales regions for the Company. Residential
sales increased 151%, primarily due to the inclusion of AudioEase this year,
Synergy sales increased 18%, and international sales increased 22%.
COST OF SALES was $11.6 million or 38.8% of net sales in the nine
months ended December 31, 1996, as compared to $9.2 million or 38.1% of net
sales in the comparable period of the prior year. The slight increase for the
nine months ended December 31, 1996 is due to the acquisition of AudioEase,
which experiences higher cost of sales than the company has historically
experienced.
SELLING AND MARKETING EXPENSES increased from $8.2 million, or 33.9%
of net sales for the nine months ended December 31, 1995 to $10.9 million or
36.2% of sales for the same period of the current year. Expenses increased as
a result of the addition of AudioEase and the emergence of PHAST. These two
companies accounted for $1.2 million of the $2.6 million in increased costs.
The remaining sales and marketing expenses remained consistent as a
percentage of net sales.
GENERAL AND ADMINISTRATIVE EXPENSES were $2.7 million for the nine
months ending December 31, 1996, up from $2.0 million for the same period
last year. This represents an increase from 8.3% of net sales to 9.0% of net
sales. Legal expenses associated with the FAV litigation discussed below,
governmental compliance costs, and the addition of AudioEase contributed to
the increase.
ACQUIRED RESEARCH AND DEVELOPMENT was $1.2 million for the nine
months ended December 31, 1996, compared to none for the same period last
year. This amount consists of the allocation of costs associated with the
acquisitions of AudioEase and Camrobotics, which occurred in May and June
respectively.
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES were $2.2 million for the nine
months ending December 31, 1996 compared to $.9 million for the same period
last year. This represents 7.2% and 3.8% of net sales respectively. The
increase is a result of emergence of PHAST, which began operations during the
second quarter of last year. This accounted for $.7 million of the increase.
Additionally, AMX's increased costs reflect its continued commitment to the
development of its WAVE products.
INTEREST EXPENSE decreased from $535,085 for the nine months ended
December 31, 1995, to $11,663 in the nine months ended December 31, 1996,
which reflects the repayment in November of 1995 of the subordinated
debentures and the bank term note with the proceeds from the Company's
initial public offering.
The Company's EFFECTIVE TAX RATE was 62.0% for the nine months ended
December 31, 1996 and 37.6% for the same period last year. The effective tax
rate has been impacted adversely due to the fact that the losses incurred by
PHAST cannot be included in the Company's consolidated tax return. The PHAST
losses will be carried forward against any future profits of PHAST before any
tax expense will be incurred by this subsidiary. At that time the company's
tax rate will be favorably affected. The effective tax rate has also been
impacted adversely by the acquired research and development expenses which
can not be deducted for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
For the past three years, the Company has satisfied its operating
cash requirements principally through cash flow from operations. In the nine
months ended December 31, 1996, the Company provided $1.4 million of cash
flow from operations. Investing activities used $2.0 million of cash,
primarily for the purchase of $1.5 million of property and equipment
comprised principally of computers, a telephone system, a trade show booth,
and engineering development and testing equipment.
In June 1995, the Company refinanced $3.5 million of its subordinated
debentures and $315,000 of its notes payable with a bank term loan which
provided for interest at 8.67%. The Company raised net proceeds of $20
million from its initial public offering in November 1995. These proceeds
were used to retire $3.5 million of subordinated debentures, $3.8 million of
a bank term loan and redeem the $12.6 million of Series A Preferred Stock
(including accrued dividends).
Additionally, the Company has a revolving loan agreement for $5.0
million which expires on March 31, 1997, and provides for interest at the
bank's contract rate which is expected to approximate prime. At December 31,
1996, no amounts were outstanding under the revolving loan agreement.
The Company expects to spend approximately $1.5 million for capital
expenditures in fiscal 1997. In August of 1995, the Company committed $1.12
million to its newly formed, majority-owned subsidiary, PHAST Corporation,
for the development of home automation hardware and software products. By
August 31, 1996 the entire amount of this commitment had been funded to
PHAST. In August of 1996, PHAST received a commitment from Scott Miller,
Chairman of the Company, acting in his individual capacity, for an
additional $1.5 million to continue funding its development. This
commitment has been fully funded as of December 31, 1996. In December 1996,
the Company committed to fund an additional $1.5 million to PHAST. As of
December 31, 1996, $400,000 of this commitment had been advanced to PHAST.
It is expected that this commitment will be fully funded by March 31, 1997.
After March 31, 1997, it is expected that PHAST will require additional
financing before it can generate its own working capital from its operations.
There is no assurance that PHAST will be able to generate its working capital
or attain profits. Results of operations and cash flow in the future will be
influenced by numerous factors, including, among others, market acceptance of
the products, technological advances and the ability of PHAST to implement
its plans. The Company is considering various alternative methods of
financing, including another commitment of its own funds, for continuing
PHAST's development.
<PAGE>
The Company's resources are limited as described above, and there can be no
assurance that additional capital will be available on acceptable terms from
sources other than the Company.
In May 1996, the Company acquired 100% of SPS International, Inc. dba
AudioEase. AudioEase designs, manufactures, and markets hardware and software
products for upscale home theater systems, whole-home audio/video control and
distribution systems, as well as other electronic home systems. The
acquisition was completed at a purchase price of $1.5 million paid in 181,818
shares of AMX Corporation common stock. The Company engaged an independent
appraisal company to assist in allocating the purchase price of AudioEase.
The majority of the purchase price was allocated to in-process research and
development projects. In accordance with generally accepted accounting
principles, the purchase price allocated to in-process research and
development projects was expensed in a one-time charge to the Company's
consolidated earnings as of the date of the consummation of the combination.
In June 1996, the Company acquired 100% of the assets of Camrobotics,
Inc. a designer and developer of pan and tilt cameras for a purchase price of
$250,000. Payment was made with $125,000 in cash and the delivery of a
$125,000 note payable due in February 1997. The majority of the purchase
price was allocated to in-process research and development projects. In
accordance with generally accepted accounting principles, the purchase price
allocated to in-process research and development projects was expensed in a
one-time charge to the Company's consolidated earnings as of the date of the
consummation of the combination.
The Company believes that cash flow from operations, the Company's
existing cash resources and funds available under its revolving loan facility
will be adequate to fund its working capital and capital expenditure
requirements for at least the next 12 months. An important element of the
Company's business strategy has been, and continues to be, the acquisition of
similar businesses and complementary products and technology and the
integration of such businesses and products and technology into the Company's
existing operations. Such future acquisitions, if they occur, may require
that the Company seek additional funds.
CONTINGENCIES
The Company is involved in a lawsuit which was filed on August 19,
1994, pending in federal district court for the Western District of Oklahoma
with Ford Audio-Video Systems, Inc. ("FAV"). FAV is a privately held company
located in Oklahoma. FAV claims actual damages "in excess of $10,000" and
punitive damages of $20,000,000. FAV asserts that it orally contracted with
the Company to manufacture a control panel and that the Company wrongfully
sold the panel to others. After various hearings and motions in which
various claims by FAV were dismissed by the court or dropped by FAV, claims
for fraud and misappropriation of trade secrets remain.
While the ultimate outcome of such litigation is uncertain, the Company
denies the allegations, is vigorously defending the litigation, and believes
that the ultimate outcome thereof will not have a material adverse effect on
the Company's consolidated financial position, results of operations, or
liquidity. An unfavorable outcome in this matter could have a material
adverse effect upon the Company's consolidated financial position and consume
working capital. In addition, even if the ultimate outcome is resolved in
favor of the Company, defending itself against such litigation could entail
considerable cost and the diversion of efforts of management, either of which
could have a material adverse effect upon the Company's results of
operations.
In addition, the Company is party to ordinary litigation incidental
to its business, none of which is expected to have a material adverse effect
on the results of operations, financial position or liquidity of the Company.
<PAGE>
AMX CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information pertaining to this item is incorporated from Part 1. Financial
Information (Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Contingencies).
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Amended and Restated Articles of the Company. (Incorporated by
reference from Exhibit 4.1 in the Company's Form S-8 filed
March 11, 1996, File No. 333-2202).
3.2 Amended and Restated Bylaws of the Company, as amended.
(Incorporated by reference from Exhibit 3.4 in the Company's
Registration Statement on Form S-1 filed September 13, 1995, as
amended, File No. 33-96886).
3.3 Amendment to Amended and Restated Bylaws of the Company.
(Incorporated by reference from Exhibit 3.5 in the Company's
Registration Statement on Form S-1 filed September 13, 1995, as
amended, File No. 33-96886).
4.1 Specimen certificate for the Common Stock of the Company
(Incorporated by reference from Exhibit 4.1 in the Company's
Registration Statement on Form S-1 filed September 13, 1995, as
amended, File No. 33-96886).
+27.1 Financial Data Schedule.
b. Reports on Form 8-K
None
- ---------------------
+ Filed herewith.
<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: February 11, 1997 By: /s/ David E. Chisum
----------------------------------
David E. Chisum
Chief Financial Officer (Duly
Authorized Officer and Principal
Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,347,724
<SECURITIES> 0
<RECEIVABLES> 5,647,830
<ALLOWANCES> (75,000)
<INVENTORY> 4,545,555
<CURRENT-ASSETS> 552,381
<PP&E> 5,295,900
<DEPRECIATION> 2,711,082
<TOTAL-ASSETS> 19,598,049
<CURRENT-LIABILITIES> 4,988,464
<BONDS> 114,851
0
0
<COMMON> 78,038
<OTHER-SE> 13,831,426
<TOTAL-LIABILITY-AND-EQUITY> 19,598,048
<SALES> 11,003,526
<TOTAL-REVENUES> 11,003,526
<CGS> 4,288,399
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,072
<INCOME-PRETAX> 1,150,441
<INCOME-TAX> 786,795
<INCOME-CONTINUING> 1,122,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,122,703
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
