<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 June 30, 1998
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 8,266,908
(Title of Each Class) (Number of Shares Outstanding at July 31, 1998)
1
<PAGE>
AMX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
INDEX
<TABLE>
PAGE NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at June 30, 1998
and March 31, 1998 3
Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
Three Months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK N/A
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
MARCH 31,
JUNE 30, 1998 1998
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 354,752 $ 178,942
Receivables - trade and other, less allowance
for doubtful accounts of $649,000 for
June 30, 1998 and $460,000 for
March 31, 1998 10,910,870 10,276,225
Inventories 10,299,755 9,002,737
Prepaid expenses 725,588 768,492
Deferred income tax 136,905 136,905
----------- -----------
Total current assets 22,427,870 20,363,301
Property and equipment, at cost, net 4,394,415 4,347,791
Capitalized software 143,331 169,274
Deposits and other 386,452 433,442
Deferred income tax 10,058 10,058
Goodwill, less accumulated amortization of
$184,000 for June 30, 1998 and $122,000 for
March 31, 1998 942,116 1,004,049
----------- -----------
Total assets $28,304,242 $26,327,915
----------- -----------
----------- -----------
</TABLE>
3
<PAGE>
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
JUNE 30, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,720,820 $ 3,866,857
Line of credit and notes payable 3,673,384 2,403,437
Current portion of long-term debt 750,000 --
Accrued compensation 1,022,993 1,481,770
Accrued sales commissions 751,187 787,913
Accrued dealer incentives 308,428 329,416
Other accrued expenses 269,184 153,449
Income taxes payable 612,319 743,868
----------- -----------
Total current liabilities 12,108,315 9,766,710
Long-term debt 782,572 45,600
Commitments and contingencies
Minority interest in subsidiary -- 1,652,000
Shareholders' equity:
Preferred stock, $0.01 par value
Authorized shares - 10,000,000
Issued shares - none -- --
Common stock, $0.01 par value:
Authorized shares -- 40,000,000
Issued shares -- 8,266,908 for June 30, 1998
and 8,261,158 for March 31,1998 82,669 82,612
Additional paid-in capital 4,126,604 4,079,682
Retained earnings 11,250,954 10,748,183
Less treasury stock (5,208 shares) (46,872) (46,872)
----------- -----------
Total shareholders' equity 15,413,355 14,863,605
----------- -----------
Total liabilities and shareholders' equity $28,304,242 $26,327,915
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
4
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
System sales $14,880,543 $12,048,972
OEM and custom product sales 396,858 985,314
----------- -----------
Net sales 15,277,401 13,034,286
Cost of sales 6,838,289 5,777,140
----------- -----------
Gross profit 8,439,112 7,257,146
Selling and marketing expenses 5,553,595 5,547,880
Research and development expenses 865,351 1,036,849
General and administrative expenses 1,212,504 1,043,052
----------- -----------
Operating income (loss) 807,662 (370,635)
Interest expense 80,772 9,768
Other income, net 32,228 28,322
----------- -----------
Income (loss) before income taxes 759,118 (352,081)
Income tax provision (benefit) 247,927 (142,382)
----------- -----------
Net income (loss) $ 511,191 $ (209,699)
----------- -----------
----------- -----------
Basic earnings (loss) per share $ 0.06 $ (0.03)
----------- -----------
----------- -----------
Diluted earnings (loss) per share $ 0.06 $ (0.03)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
5
<PAGE>
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 511,191 $ (209,699)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 487,596 515,745
Provision for losses on receivables 188,779 8,941
Provision for inventory obsolescence 15,000 3,000
Changes in operating assets and liabilities:
Receivables (823,424) (102,037)
Inventories (1,312,018) (1,907,549)
Prepaid expenses 42,904 (3,176)
Accounts payable 853,963 695,773
Accrued expenses (400,756) (643,820)
Income taxes payable (131,549) (308,795)
----------- -----------
Net cash used in operating activities (568,314) (1,951,617)
INVESTING ACTIVITIES
Purchase of property and equipment (446,344) (292,558)
Decrease in other assets 46,990 --
Minority interest in PHAST (1,652,000) --
----------- -----------
Net cash used in investing activities (2,051,354) (292,558)
FINANCING ACTIVITIES
Sale of securities -- net of expenses 40,250 --
Disqualifying dispositions 6,730 --
Net increase in line of credit 1,269,947 850,000
Proceeds from long-term debt and notes payable 1,500,000 --
Repayments of long-term debt and notes payable (13,027) (39,296)
----------- -----------
Net cash provided by financing activities 2,803,900 810,704
Effect of exchange rate changes on cash (8,422) (497)
----------- -----------
Net increase (decrease) in cash and cash equivalents 175,810 (1,433,968)
Cash and cash equivalents at beginning of period 178,942 2,091,819
----------- -----------
Cash and cash equivalents at end of period $ 354,752 $ 657,851
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
6
<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, 1998, are unaudited (except for the March 31, 1998 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, 1998 are not necessarily
indicative of the results that may be expected for the entire year ending
March 31, 1999.
2. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 (FAS 128), "Earnings Per Share," which was effective for financial
statements for periods ending after December 15, 1997. The new standard
eliminated primary and fully diluted earnings per share and required
presentation of basic and diluted earnings per share together with disclosure
of how the per share amounts were computed. Earnings per share amounts for all
periods have been restated and presented to conform to the SFAS 128
requirements.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
Numerator:
Net income (loss) $ 511,191 $ (209,699)
----------- -----------
----------- -----------
Denominator:
Denominator for basic earnings per share -
Weighted-average shares outstanding 8,260,046 7,827,583
Effect of dilutive securities:
Employee stock options 614,714 N/A
----------- -----------
Denominator for diluted earnings per share 8,874,760 7,827,583
----------- -----------
----------- -----------
Basic (loss) earnings per share $ 0.06 $ (0.03)
----------- -----------
----------- -----------
Diluted (loss) earnings per share $ 0.06 $ (0.03)
----------- -----------
----------- -----------
</TABLE>
Of the total stock options outstanding at June 30, 1998, options covering
10,100 shares of stock were not included in the computation of diluted earnings
per share because the option exercise price was greater than the average market
price of the common shares for the period, and therefore the effect would have
been anti-dilutive.
3. Inventories
7
<PAGE>
The components of inventories are as follows:
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998
------------- --------------
<S> <C> <C>
Raw materials $ 4,615,079 $4,430,081
Work in progress 1,849,617 722,593
Finished goods 3,980,059 3,980,063
Less reserve for obsolescence (145,000) (130,000)
----------- ----------
Total $10,299,755 $9,002,737
----------- ----------
----------- ----------
</TABLE>
4. Comprehensive Income
As of April 1, 1998, the Company adopted Financial Accounting Standards Board
Statement 130, Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components.
However, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's foreign currency translation adjustments to be included
in other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The components of comprehensive income, net of related tax, for the three-month
periods ended June 30, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net income (loss) $ 511,191 $ (209,609)
Foreign currency translation adjustments (8,428) (505)
---------- ----------
Comprehensive income (loss) $ 502,763 $ (210,204)
---------- ----------
---------- ----------
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included in the
Company's 1998 Annual Report on Form 10-K. 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 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
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 and PHASTlink bus as a control
panel.
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. These factors include seasonal
purchasing of the Company's dealers and distributors, particularly from
international distributors, OEMs, and other large customers; sales and
marketing expenses related to entering new markets; 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 three of the Company's largest trade shows.
The Company's system sales are made through dealers and distributors. The
Company principally relies on over 1,600 specialized third-party dealers of
electronic and audiovisual equipment to sell, install, support and service its
products in the United States. Internationally, the Company relies on a network
of 20 exclusive distributors serving 24 countries and over 92 dealers serving
an additional 21 countries to distribute its products.
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 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.
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.
9
<PAGE>
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 research and development as well as 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
individually responding to customer-expressed needs.
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 the
three month periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
------ ------
<S> <C> <C>
System sales 97.4% 92.4%
OEM and custom product sales 2.6 7.6
------ ------
Net sales 100.0 100.0
Cost of sales 44.8 44.3
------ ------
Gross profit 55.2 55.7
Selling and marketing expenses 36.4 42.6
Research and development expenses 5.7 8.0
General and administrative expenses 7.9 8.0
------ ------
Operating income (loss) 5.2 (2.9)
Interest expense 0.5 0.1
Other income 0.2 0.2
------ ------
Income (loss) before income taxes 4.9 (2.8)
Income taxes 1.6 (1.1)
------ ------
Net income (loss) 3.3 (1.7)
------ ------
------ ------
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 RESULTS COMPARED TO THREE MONTHS ENDED
JUNE 30, 1997
During the first quarter of the 1999 fiscal year, the Company's revenues
continued to increase, realizing an increase of $2.2 million, or 17% over the
first quarter last year. The Company's international sales grew the most during
the quarter, with growth at $1.8 million, or an increase of 61% over the
previous year. The economic turmoil in Asia did not have a material adverse
impact on the Company's revenues. Revenues into the region decreased 10% from
the fourth quarter of the previous fiscal year, and increased 23% over the
first quarter of the previous fiscal year. Revenues from this region were less
than 4% of the Company's combined revenues.
In the past two fiscal years, the Company has had its gross margins diluted by
the increase in revenues of PHAST and Axcess Technology, a subsidiary located
in the U.K. which is a distributor of the Company's products. Both of these
companies have consistently achieved lower gross margins than the Company's
10
<PAGE>
historical rate of 60%. PHAST has lower margins due to the fact that it has
been in a start up stage, and it has been unable to absorb its overhead.
Axcess experiences lower margins due to the fact that it is a distributor of
the Company's products, as well as a distributor of five other manufacturer's
products. However, during the first quarter of fiscal 1999, the gross margins
increased slightly from the first quarter last year. The increase in revenues
at PHAST allowed the absorption of more manufacturing overhead, and resulted in
higher margins. Also, margins improved slightly at the parent company.
Over the last four fiscal quarters, the Company has aggressively attempted to
reduce its operating costs. As a result, operating expenses were 8.6% less as
a percentage of revenue than the same quarter last year. While the Company has
had an increase of 21% in its headcount, other discretionary spending has been
reduced, including the amount the Company spends on its largest trade show,
which occurs during the first quarter each year.
The Company's effective tax rate has returned to normalcy during the current
year. This is due to two factors. The Company does not have any large non-
deductible expenses as it has in the past, and the Company continues to realize
the favorable tax impact of the increase of its international business.
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 three months
ended June 30, 1998, the Company used $570,000 of cash in operations. The
Company spent $450,000 primarily for the purchase of tooling.
Additionally, the Company has a $5.0 million revolving line of credit
agreement that expires on September 30, 1998. It is expected that this line of
credit will be renewed at that time. The line of credit provides for interest
at the bank's contract rate, which is expected to approximate prime. At June
30, 1998, $3.6 million was outstanding under the revolving loan agreement.
The Company expects to spend approximately $2.7 million for capital
expenditures in fiscal 1999.
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 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.
YEAR 2000
The Company has taken action to understand the nature and extent of the
work required to make its products, systems, and infrastructure Year 2000
compliant. The Company has initiated discussions with all of its significant
vendors to determine the extent to which the Company's systems and
infrastructures are vulnerable to those third parties which fail to remedy
their own Year 2000 issues. The Company has also initiated a review of its
internal operational systems to determine their vulnerability to the Year 2000
issues. It is the Company's belief that its products are Year 2000 compliant.
While the Company does not believe the Year 2000 issue will pose significant
operational problems, if the Year 2000 compliance modifications are not made,
or completed in a timely manner, the Year 2000 issue could have a material
adverse impact on the Company's business. The Year 2000 compliance activities
will be performed as a part of the Company's normal sustaining activity and are
not expected to result in significant incremental costs to the Company.
11
<PAGE>
AMX CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information pertaining to this item is incorporated herein 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 Incorporation the Company.
(Incorporated by reference from Exhibit 4.1 to 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 to 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 to 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 to 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.
12
<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 13, 1998 By: /s/ David E. Chisum
------------------------------------
David E. Chisum
Chief Financial Officer (Duly
Authorized Officer and Principal
Financial Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 354,752
<SECURITIES> 0
<RECEIVABLES> 11,560,008
<ALLOWANCES> (649,138)
<INVENTORY> 10,299,755
<CURRENT-ASSETS> 22,427,870
<PP&E> 9,181,771
<DEPRECIATION> 4,787,355
<TOTAL-ASSETS> 28,304,242
<CURRENT-LIABILITIES> 12,108,315
<BONDS> 782,573
0
0
<COMMON> 82,669
<OTHER-SE> 15,330,686
<TOTAL-LIABILITY-AND-EQUITY> 28,304,242
<SALES> 15,277,401
<TOTAL-REVENUES> 15,277,401
<CGS> 6,838,289
<TOTAL-COSTS> 6,838,289
<OTHER-EXPENSES> 7,631,451
<LOSS-PROVISION> 188,779
<INTEREST-EXPENSE> 80,772
<INCOME-PRETAX> 759,118
<INCOME-TAX> 247,927
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511,191
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
