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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ______________________ to _______________________
Commission File Number: 0-26524
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MACKIE DESIGNS INC.
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(Exact name of registrant as specified in its charter)
Washington 91-1432133
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16220 Wood-Red Road, N.E., Woodinville, Washington 98072
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(Address of principal executive offices) (Zip Code)
(206) 487-4333
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - no par value
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(Title of each class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or 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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 17, 1997, the aggregate market value of the Registrant's
Common Stock held by nonaffiliates of the Registrant was $19,128,750 based on
the closing sales price of the Registrant's Common Stock on the Nasdaq National
Market. On that date, there were 12,885,000 shares of Common Stock
outstanding.
Portions of the Registrant's 1996 Annual Report to Shareholders are
incorporated by reference into Parts II and IV hereof, and portions of the
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Mackie Designs Inc. ("Mackie" or the "Company") develops,
manufactures, sells and supports high quality, reasonably priced professional
audio equipment. The Company's products are used in a wide variety of sound
applications including home and commercial recording studios, multimedia and
video production, compact disc, read-only memory ("CD-ROM") authoring, live
performances, and public address systems. The Company offers a range of
products at suggested retail prices from approximately $400 to $9,000, which
generally represents the mid-range price points within the professional audio
market. Mackie distributes its products through a network of independent
representatives to over 1,000 retail dealers of professional audio equipment in
the U.S. and offers its products through local distributors in over 100 other
countries.
The Company's primary products are mixers and mixer-related products.
A mixer serves as the central component of any professional audio system by
electronically blending, routing and enhancing sound sources, such as voices,
musical instruments, sound effects and audio tape, video tape and other
pre-recorded material. For example, using a mixer, a vocalist may be heard
above the accompaniment, background singers are combined, and individual
instruments are blended into the overall mix. The musician or sound technician
accomplishes this task by using the mixer controls to adjust the relative
volume of each sound source.
Audio mixers are a necessary component of any recording system,
whether the system is being used to produce an audio tape, compact disc ("CD"),
video soundtrack or multimedia CD-ROM. A mixer is used not only to balance
sound inputs when recording initial tracks, but is also often used to further
process and edit the tracks prior to duplication and distribution of the
recording. Mixers are used in recording applications by commercial and home
studios, in film and video post-production, in business presentations and
teleconferencing, in the production of television and radio programming and in
multimedia productions such as CD-ROM and on-line authoring.
Mixers are also used to control relative audio levels in live
presentations at locations such as auditoriums, ballrooms, theaters and sports
arenas. For example, a typical performing group uses from six to 24
microphones and electronic inputs. Large concert tours and musical road
productions often have 60 or more sound inputs, which may include pre-recorded
music and sound effects. Many churches use multiple microphones for spoken
word and music during their services.
In 1996, the Company introduced power amplifiers, its first line of
products that are not directly related to mixers. Power amplifiers are used to
amplify the output signals from mixers to a level sufficient to drive
loudspeakers. Amplifiers are used with mixers and loudspeakers in a variety of
applications, such as private and touring sound reinforcement systems,
permanent industrial and commercial installations, recording studios, and
theatre/cinema and broadcast facilities. The power amplifier line and future
products will be distributed through the same channels as the mixers.
Mackie was incorporated in Washington in 1988. The Company's
executive offices and manufacturing facilities are located at 16220 Wood- Red
Road N.E., Woodinville, Washington 98072, and its telephone number is (206)
487-4333.
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"MACKIE," the running figure and all of the Company's product names
are registered trademarks or trademarks of the Company. This document also
contains names and marks of other companies.
PRODUCTS
The Company currently offers professional audio mixers and related
accessories in four main mixer product lines: compact mixers, 8oBus consoles,
SR series mixers, and automation systems. The Company also began offering its
line of Fast Recovery Series(TM) power amplifiers in December 1996.
Compact Mixers. Compact mixers were the Company's first products and
are designed to be mounted in 19-inch equipment racks, which are the standard
housings for professional audio and video components. The Company offers four
basic compact mixers: the CR1604-VLZ, the MS1402- VLZ, the MS1202-VLZ and the
LM-3204.
The CR1604-VLZ, introduced in February 1996, is a 16-channel mixer
that has received wide acceptance for its low noise and high headroom (ability
to mix very loud signals without distortion or quiet signals without noise).
Applications include recording in project studios, live presentations by major
touring bands, video post-production and multimedia. The CR1604-VLZ has been
used to produce major label CDs, soundtracks for major motion pictures and
on-stage musical instrument mixing for network television shows. The
CR1604-VLZ features a two- part design that allows the mixer to be rack-mounted
in order to conserve space or to be configured for desk-top use for easy access
to the controls. The Company also offers the MixerMixer, an add-on product
that expands the capabilities of the CR1604-VLZ and other mixers, by allowing
the combination of up to 12 outputs from any three mixers without loss of
channels or functionality.
The MS1402-VLZ is a 14-channel mixer that the Company introduced in
January 1996. It has the same electronic specifications as the CR1604-VLZ but
has two fewer channels. It is designed for many of the same applications as
the CR1604-VLZ as well as the MS1202-VLZ.
The MS1202-VLZ is a 12-channel mixer that occupies less than one
square foot of workspace. Designed to be used alone or as a subcomponent of a
larger mixing system, the MS1202-VLZ has the same electronic specifications as
the CR1604-VLZ and the MS1402-VLZ, but has fewer channels. The success of the
product and its predecessor, the MS1202, has been in part due to its relatively
low price, flexibility and rugged construction (including solid steel chassis,
sealed rotary controls and built-in power supply). This mixer is used for
small home studios, on-stage mixing by small lounge acts, off-line video
production, multimedia authoring, audiophile acoustic recordings and electronic
news gathering and as a supplemental mixer in conjunction with large
non-portable studio recording consoles.
The LM-3204 is a 32-channel mixer with 16 stereo channels in a compact
chassis that occupies just five standard rack spaces. Besides providing all of
the control features of the CR1604-VLZ, it includes additional monitor and
mixing circuitry that optimizes the mixer's utility for both recording and live
presentation applications. The LM-3204 is designed for applications requiring
control of a large number of line level inputs such as keyboard submixing,
computer sequencing and electronic percussion mixing in stage, sound
reinforcement and project studio environments, as well as sound mixing in
auditoriums, exhibit halls and other permanent installations. The LM-3204's
two microphone preamplifiers extend the mixer's applications to small
performing groups such as nightclub single and duo acts and commercial
production work where announcer voiceovers are required. The LM-3204 is
expandable with one or more optional LM-3204Es, each of which adds 16 stereo
channels.
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8oBus Series. The 8oBus is a larger mixer console designed for
multitrack recording and live presentation applications. The Company
introduced 8oBus mixers in 1993. At suggested retail prices from approximately
$3,000 to $5,000, the 8oBus consoles have opened the market to many new users
and replaced many larger systems offered by competitors that typically cost
over $50,000. The console is available in three basic models: the 32-channel
32o8, the 24-channel 24o8 and the 16-channel 16o8. Each version includes eight
submix buses, as well as more elaborate equalization (tone control), signal
routing and monitoring capabilities than are found in compact mixers. The
8oBus console's applications include pre-production and recording of albums for
major artists and groups, on-line video production, movie soundtrack mixdown,
television dialog editing, on-stage mixing and live sound reinforcement used by
touring musical groups, theaters, concert halls, clubs and churches. The 32-
and 24-channel versions of the Company's 8oBus can be expanded with one or more
24-Channel Expander Consoles, each of which adds 24 additional channels. The
Company also offers MBo32, MBo24 and MBo16 meter bridges for the 32-channel,
24-channel and 16-channel 8oBus consoles, respectively; these bridges extend
across the width of the mixer and provide a bar-graph meter for each channel
strip of the console.
SR Series. The SR (Sound Reinforcement) Series are intended as
high-quality, low-cost 24-, 32-, 40-, or 56-channel audio mixers for live music
applications that compete with consoles selling for several times their retail
price. The first product in this line, the SR24o4, was introduced in May 1995,
followed by the SR32o4 in August 1995. These retail for approximately $1,600
to $2,300. In December 1996, Mackie introduced the SR40o8, a 40-channel
large-format sound reinforcement console, with the SR56o8, a 56-channel
console, planned for addition to the line in 1997. The large-format consoles
retail for approximately $9,000 to $12,600. The SR24o4 and SR32o4 are larger
than a compact mixer but significantly smaller than Mackie's 8oBus consoles,
and include features necessary for use with digital multitrack recorders. They
incorporate much of the advanced technology first introduced in the 8oBus
series, including very-low-impedance circuitry, wide-band equalization and
highly sensitive signal presence indicators. The large-format 40o8
incorporates these features plus an UltraMute(TM) computerized system for group
and individual sound muting., a built-in meter bridge, and left, right and
center master faders. The SR24o4 and 32o4 Series mixers are targeted at bands
and other touring musical groups, audio/video rental services and permanent
sound reinforcement venues, including churches, clubs, small theaters and
auditoriums. The SR40o8 and SR56o8 large-format consoles are intended for use
as installed equipment in venues such as churches, auditoriums, or sporting
facilities.
UltraMix(R) Universal Automation System. Because many mixing systems
involve controlling specific audio levels on over 100 channels, there is a need
for an add-on product to automatically retain and recall a particular range of
settings. In September 1995, the Company introduced a digitally controlled
automation system to address this need. The Company's UltraMix(R) Universal
Automation System, which has a suggested retail price of approximately $2,800,
consists of the Ultra-34, a 34-channel external volume control system; the
UltraPilot, an external control surface; and UltraMix(R) Pro automation
software. These components, when used in conjunction with a personal computer
equipped with Microsoft's Windows 95 or with Apple Computer, Inc.'s Macintosh
computer, provide a solution to complex mixing tasks. As with the Company's
other products, the UltraMix(R) is designed to provide much of the
functionality of systems prohibitively expensive to all but a limited group of
users at a price point attractive to a wide range of potential users.
Fast Recovery Series(TM) Power Amplifier. Use of a high-quality,
professional amplifier is necessary to retain sound integrity in audio
production. The Company's FR Series(TM) Power Amplifier is Mackie's first
non-mixer related product and became available in December 1996. The Mo1200
and Mo1400, which are the first models to be released, are designed to keep
sound quality intact when pushed
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to extreme levels. Most power amplifiers use technology that can result in
distortion from internal feedback. The designs of the Mo1200 and Mo1400
minimize feedback while improving delivery through the use of high-speed
digital circuitry. The Mo1200 and Mo1400, at suggested retail prices of
approximately $600 and $700, respectively, are competitively priced and
incorporate the high performance capabilities of the Company's mixer lines.
DISTRIBUTION AND SALES
In the U.S., the Company uses a network of representatives to sell to
over 1,000 retail dealers, some of which have several outlets. In other
countries, the Company sells through approximately 70 local distributors, who
in turn sell to dealers. Until November 1, 1995, the Company used exclusively
the services of MMS, International ("MMS"), a manufacturer's representative, to
sell to distributors outside the U.S. and Canada, for which MMS received a
commission. Since November 1, 1995, the Company has supervised the
international marketing and sales of its products internally. Sales to
customers outside of the United States accounted for approximately 38%, 34% and
36% of the Company's net sales in 1996, 1995 and 1994, respectively. In
consultation with its representatives, the Company is currently evaluating
options to expand its distribution channels beyond musical instrument dealers.
In particular, the Company is reviewing the extent to which its musical
instrument dealers will be able to address the needs of video customers and
installed sound contractors and the extent to which the Company will instead
rely on audio/video supply houses, certain professional audio sales, direct
sales to contractors and broadcast supply houses to meet the needs of such
customers. These other channels currently do not represent a significant
portion of the Company's sales.
The Company carefully selects and reviews its representatives and
dealers, including mail order outlets. Representatives and domestic dealers
enter into agreements with the Company that govern the terms under which they
may sell the Company's products. Agreements with dealers and distributors
define an approved territory and set forth the products to be sold. These
agreements are reviewed on a six-month basis, and decisions to renew are based
on several factors, including sales performance and adequate representation of
the Company and its products. The Company's representatives are paid on a
commission basis. Dealers retain the difference between their cost and the
sale price of products sold.
International distributors are selected on the basis of criteria
established by the Company. International distributors retain the difference
between their cost and the sale price of products sold.
In the U.S., the Company's products are sold in musical instrument
stores, pro audio outlets and several mail order outlets. Musical instrument
stores range from small operations that sell a variety of instruments and
equipment to large outlets specializing in rock music equipment such as
electric guitars, synthesizers, mixers, drums, amplifiers and speakers. Top
U.S. retail dealers include Guitar Center, Sam Ash Music, Sweetwater Sound,
West LA Music, Washington Music, Manny's Music, Thoroughbred Music, Ace Music,
Musician's Friend and Full Compass Systems. These 10 dealers represented
approximately 32% of the Company's net sales in the U.S. in 1996. Guitar
Center accounted for approximately 11% of domestic net sales in 1996; no other
dealer accounted for more than 10% of domestic net sales in this period.
Internationally, the Company has distribution in over 100 countries.
The top international distributors include Musik & Technik Marbury (Germany),
SF Marketing Inc. (Canada), Key Audio Systems (United Kingdom), Korg Import
Division (Japan), Manny's International (Brazil), Entel s.r.l. (Italy),
Audio-Land Distribution (France), A&T Trade, Inc. (former Soviet Union),
Australian Audio Supplies (Australia) and Hermes International (Mexico). These
10 distributors represented
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approximately 62% of the Company's international net sales in 1996. Musik &
Technik Marbury accounted for approximately 11% of international net sales in
1996; no other distributor accounted for more than 10% of international net
sales in this period.
MARKETING
The Company's marketing strategy is designed to communicate with
end-users directly and to educate them about its products. The Company's
in-house marketing and design department creates all its advertising,
brochures, video, multimedia and trade show materials. Materials are provided
by its marketing department to representatives, distributors and dealers,
worldwide, as part of the Company's overall sales strategy. Owner's manuals
and sales literature are currently produced in five foreign languages. These
materials are provided as a complement to the Company's direct advertising and
customer support follow-up program. To further enhance customer awareness and
understanding of its products, the Company advertises in leading trade
publications, provides ongoing technical training and education for
representatives and distributors, and participates in the primary industry
trade shows for the musical instrument, video, recording studio, permanent
installation and multimedia markets. Mackie has won several national
advertisement awards as a result of this commitment to detail and excellence.
CUSTOMER SUPPORT
The Company's customer support program is designed to enhance loyalty
by building customer understanding of product use and capabilities. The
customer service and support operation also provides the Company with a means
of understanding customer requirements for future product enhancements. This
understanding comes through direct customer contact, as well as through close
analysis of warranty card responses. To encourage return of warranty cards
relating to its compact mixers, the Company has established a policy of
extending the warranty period from one year to three years to customers
returning completed warranty cards.
The Company maintains a staff of product support specialists at its
headquarters to provide direct technical support. Telephone support through a
toll-free number is provided during scheduled business hours. Although most
calls involve troubleshooting with owners of Mackie products, product support
specialists also field calls from inquiring purchasers and thereby may assist
in making sales.
The Company also relies on its international distributors to support
its products in foreign countries. These distributors are responsible for the
costs of carrying inventory required to meet customer needs.
Service and repairs on Mackie's products sold in the U.S., except
8oBus and SR40o8 products, are performed at its headquarters; 8oBus and SR40o8
products, which are larger and heavier than the Company's other mixer models,
are serviced at authorized warranty service centers. There are currently
approximately 100 8oBus and SR40o8 service centers, all of which are located in
the U.S. Multiple locations are necessary to minimize shipping costs for the
8oBus and SR40o8 consoles. All products shipped outside of the U.S. are
serviced by the Company's international distributors.
RESEARCH AND DEVELOPMENT
The Company's research and development strategy is to develop
affordable, high-quality products and related accessories for its targeted
markets. In 1996, Mackie created specific Acoustic, Analog and Digital
Engineering groups for product development. On December 31, 1996, the
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Company's research and development staff consisted of 28 individuals, in
addition to Mr. Mackie, who engineer and design all aspects of the Company's
new products. The Company's research and development expenses were
approximately $3.6 million in 1996, $1.2 million in 1995 and $1.1 million in
1994.
COMPETITION
The market for professional audio systems in general is highly
competitive. The Company must compete with several professional audio
manufacturers who have significantly greater development, sales and financial
resources than the Company. The Company's major competitors in the mixer
market are subsidiaries of Harman International (including Soundcraft Ltd.,
Allen & Heath Brenell Ltd. and DOD Electronics Corp.), Sony Corporation, Yamaha
Corporation, Peavey Electronics Corporation, Teac America, Inc. (Tascam),
SoundTracs PLC and Behringer Spezielle Studiotechnik GmbH. Competitors in the
amplifier market include Peavey Electronics Corporation, Crown International,
QSC Audio Products, Inc. and Crest Audio Inc. Competing speaker manufacturers
include Genelec, Inc., Event Electronics, Inc. and Alesis Corporation. The
Company competes primarily on the basis of product quality and reliability,
price, ease of use, brand name recognition and reputation, ability to meet
customers' changing requirements and customer service and support.
In order to remain competitive, the Company substantially increased
its research and development expenditures in 1996. The Company is currently
developing new products incorporating digital technology, new power amplifier
products, and new live-sound and recording studio speaker products. However,
there can be no assurance that the Company will be successful in developing and
marketing, on a timely basis, product modifications or enhancements or new
products that respond effectively to technological advances by others.
PROPRIETARY TECHNOLOGY
The Company does not generally rely on proprietary rights associated
with its technology. However, the Company has filed for patent protection on
the design of the FR Series(TM) Mo1200, the 24o8, the 32o8, the SR40o8, the
SR24o4, the CR1604-VLZ, the MS1402-VLZ, the MS1202- VLZ and a new digital mixer
in the U.S. and in certain foreign countries where the Company's products are
distributed. Substantially all of the technology incorporated in the Company's
products is available to third parties, making replication by competitors
possible. However, the Company believes that its manufacturing capabilities,
affordable, high-quality products, brand name recognition, ability to quickly
introduce new products, and direct marketing efforts will continue to be
factors in the Company's ability to compete.
The Company has trademark protection on various marks including
"MACKIE(R)," the running man, "VLZ(R)" and "UltraMix(R)" in the U.S. and in
certain foreign countries where the Company's products are distributed.
Registered trademark status has been obtained for these marks in the United
States, and trademark status obtained in certain countries. However, there can
be no assurance that trademark protection will be granted in all of the
countries in which applications are currently pending, or granted on the
breadth of the current description of goods or use of the marks.
The Company has never conducted a comprehensive patent search relating
to the technology used in its products. The Company believes that its products
do not infringe the proprietary rights of others. There can be no assurance,
however, that others will not assert infringement claims against the Company in
the future or that claims will not be successful.
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MANUFACTURING
The Company manufactures its mixer and power amplifier products in its
facility near Seattle, Washington. Nearly all of the Company's products share
many components, which allows for integrated manufacturing of several distinct
products and in certain cases significant part purchase volume discounts. Much
of the Company's mixer console and power amplifier assembly work is performed
on automated component-insertion machines. Currently, the assembly of most of
the parts in a circuit board is automated.
The Company relies on several vendors to support its product
manufacturing and attempts, if possible, to purchase certain materials from
multiple sources to allow for competitive pricing and to avoid reliance on one
or only a few vendors. The Company relies almost exclusively on one vendor for
its potentiometers, but is in contact with other potentiometer manufacturers
regularly. Interruption in, or cessation of, the supply of potentiometers from
this supplier could adversely affect the Company's production capability, as
the qualification process for another manufacturer, from sample submission to
production quality and quantity delivery, could take several months.
BACKLOG
The Company does not generally track backlog. Generally, orders are
shipped within two weeks after receipt. In the case of new product
introductions or periods where product demand exceeds production capacity, the
Company allocates products to customers on a monthly basis until demand is met.
EMPLOYEES
At December 31, 1996, the Company had 337 full-time equivalent
employees, including 37 in marketing, sales and customer support, 28 in
research and development, 250 in manufacturing and manufacturing support (which
includes manufacturing engineering) and 22 in administration and finance. None
of the Company's employees is represented by a labor union, and the Company has
never experienced a work stoppage.
ITEM 2. PROPERTIES
The Company's headquarters near Seattle, Washington house its
manufacturing, administrative, sales and marketing, research and development
and customer support operations. The building, which is occupied pursuant to a
lease through December 31, 2004, is a 89,000 square foot manufacturing and
office facility, the construction of which was substantially completed in
December 1994. The monthly rent, based in part on an analysis by an
independent appraiser, is $56,613, adjusted annually for changes in the
consumer price index. The Company leases its facility from Mackie Holdings,
LLC, an entity owned by three significant shareholders and directors of the
Company, on terms the Company believes are at least as favorable to the Company
as might have been obtained from unaffiliated parties.
In November 1995, the Company entered into a 10-year lease, with an
option to extend for an additional 10 years, covering property that is adjacent
to the Company's existing facility. The building is approximately 81,250
square feet. The Company is using the building for product shipping,
additional vertical integration of manufacturing processes, and products under
development from the Company's
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new Acoustic Product Group. Initial base monthly rent for the entire building
is $43,063; after five years, the base rent increases to $49,563 per month.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is included on page 30 of the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996 under the heading "Common Stock Information and Dividend Policy" and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included on the inside of the
front cover of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1996 under the heading "Financial Highlights" and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is included on pages 17 to 20 of
the Company's Annual Report to Shareholders for the fiscal year ended December
31, 1996 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and is incorporated herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors, consolidated financial statements
and other information required by this Item are included on pages 21 to 29 of
the Company's Annual Report to Shareholders for the fiscal year ended December
31, 1996 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is included in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders under
the heading "Proposal 1: Election of Directors" and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders under
the heading "Executive Compensation" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders under
the heading "Principal Shareholders" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in the Company's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders under
the heading "Certain Transactions" and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Consolidated Financial Statements: Annual Report
Page Number
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A. Consolidated Balance Sheets as of December 31, 1996 and
December 31, 1995................................................... 21
B. Consolidated Statements of Income for each of the years ended
December 31, 1996, December 31, 1995 and December 31,
1994................................................................ 22
C. Consolidated Statements of Shareholders' Equity for each of the
years ended December 31, 1996, December 31, 1995 and
December 31, 1994................................................... 23
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D. Consolidated Statements of Cash Flows for each of the years ended
December 31, 1996, December 31, 1995 and December 31,
1994................................................................ 24
E. Notes to Consolidated Financial Statements............................ 25-28
F. Report of Independent Auditors........................................ 29
2. Financial Statement Schedules: Form 10-K
Page Number
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Schedule II - Valuation and Qualifying Accounts............................ 13
The independent auditor's report with respect to the
financial statement schedule appears in the exhibits
to this report (Exhibit 23.1). All other financial
statement schedules not listed are omitted either
because they are not applicable, not required, or the
required information is included in the consolidated
financial statements or notes thereto.
3. Exhibits: See Index to Exhibits on page 14.
(b) Reports on Form 8-K: None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MACKIE DESIGNS INC.
By: /s/ Greg C. Mackie
------------------------------------
Greg C. Mackie
Chairman of the Board, President
and Chief Executive Officer
Date: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1997.
SIGNATURE TITLE
- --------- -----
/s/ Greg C. Mackie Chairman of the Board, President and Chief
- --------------------------------- Executive Officer
Greg C. Mackie (Principal Executive Officer)
/s/ Thomas M. Elliott Vice President - Finance and Chief Financial Officer
- --------------------------------- (Principal Financial and Accounting Officer)
Thomas M. Elliott
/s/ David M. Tully Treasurer and Director
- ---------------------------------
David M. Tully
/s/ Raymond B. Ferguson Director
- ---------------------------------
Raymond B. Ferguson
/s/ Walter Goodman Director
- ---------------------------------
Walter Goodman
/s/ C. Marcus Sorenson Director
- ---------------------------------
C. Marcus Sorenson
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
MACKIE DESIGNS INC.
COL. A COL. B COL. C COL. D COL. E
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Additions
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Description of Period Expenses Describe(1) Period
----------- --------- --------- --------- ---------
YEAR ENDED DECEMBER 31, 1996:
Reserve and allowances deducted from asset accounts
Allowance for uncollectible accounts $ 514,000 $ 471,000 $ 177,000 $ 808,000
Reserve for inventories $ 154,000 $ 478,000 $ - $ 632,000
Reserve and allowances added to liability accounts
Reserve for warranty expenses $ 60,000 $ 120,000 $ - $ 180,000
YEAR ENDED DECEMBER 31, 1995:
Reserve and allowances deducted from asset accounts
Allowance for uncollectible accounts $ 367,000 $ 196,000 $ 49,000 $ 514,000
Reserve for inventories $ - $ 154,000 $ - $ 154,000
Reserve and allowances added to liability accounts
Reserve for warranty expenses $ 50,000 $ 10,000 $ - $ 60,000
YEAR ENDED DECEMBER 31, 1994:
Reserve and allowances deducted from asset accounts
Allowance for uncollectible accounts $ 68,000 $ 304,850 $ 5,850 $ 367,000
Reserve for inventories $ - $ - $ - $ -
Reserve and allowances added to liability accounts
Reserve for warranty expenses $ - $ 50,000 $ - $ 50,000
(1) Uncollectible accounts written off, net of recoveries
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBITS DESCRIPTION NUMBERED PAGE
- -------- ----------- -------------
3.1 Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 to
Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Restated Bylaws. Incorporated by reference to Exhibit 3.2 to Registrant's Registration
Statement filed under the Securities Act of 1933 on Form S-1, as amended,
Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1 See Articles II, III and IV of Exhibit 3.1 and Sections 1, 5 and 9 of Exhibit 3.2
confirming the rights of the holders of Common Stock . . . . . . . . . . . . . . . . . . . . . . .
*10.1 Mackie Designs Inc. Amended and Revised 1995 Stock Option Plan, as amended on March 11, 1997 . . .
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10.2 Employment Agreement dated April 1, 1995 between Mackie Designs Inc. and Thomas M. Elliott.
Incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement filed under
the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . .
10.3 Industrial Lease, dated December 15, 1994, by and between Mackie Holdings, L.L.C. and Mackie
Designs Inc. Incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement
filed under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . .
10.4 Industrial Real Estate Lease, dated April 28, 1995, by and between Intrawest Properties
Partnership U.S. and Mackie Designs Inc. Incorporated by reference to Exhibit 10.4
to Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.5 Exhibit C to Industrial Real Estate Lease, dated April 28, 1995, by and between Intrawest
Properties Partnership U.S. and Mackie Designs Inc. Incorporated by reference to
Exhibit 10.4A to Registrant's Registration Statement filed under the Securities Act of 1933
on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . .
10.6 Mackie Sales Representative Agreement, dated January 24, 1994, by and between Mackie Designs
Inc. and C.M. Sorenson Co. dba Calwest Marketing So. Incorporated by reference to Exhibit 10.5
to Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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10.7 Exhibit C to Mackie Sales Representative Agreement, dated January 24, 1994, by and
between Mackie Designs Inc. and C. M. Sorenson Co. dba Calwest Marketing So. Incorporated
by reference to Exhibit 10.5A to Registrant's Registration Statement filed under the
Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . . . .
10.8 Business Loan Agreement, dated April 30, 1995, by and between U.S. Bank of Washington,
National Association, and Mackie Designs Inc. Incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.9 First Amendment, dated June 8, 1995 to Business Loan Agreement, dated April 30, 1995, by and
between U.S. Bank of Washington, National Association, and Mackie Designs Inc. Incorporated
by reference to Exhibit 10.6A to Registrant's Registration Statement filed under the
Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . . . .
10.10 Promissory Note made by Mackie Designs Inc. to the order of U.S. Bank of Washington,
National Association, in the principal amount of $4,000,000.00 dated April 25, 1995.
Incorporated by reference to Exhibit 10.7 to Registrant's Registration Statement filed
under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . .
10.11 Promissory Note made by Mackie Designs Inc. to the order of U.S. Bank of Washington,
National Association, in the principal amount of $5,000,000.00 dated April 30, 1995.
Incorporated by reference to Exhibit 10.8 to Registrant's Registration Statement filed
under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . .
10.12 Promissory Note made by Mackie Designs Inc. to the order of U.S. Bank of Washington,
National Association, in the principal amount of $544,582.23 dated April 30, 1995.
Incorporated by reference to Exhibit 10.9 to Registrant's Registration Statement filed
under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . .
10.13 Business Loan Agreement, dated November 3, 1995, by and between U.S. Bank of Washington,
National Association, and Mackie Designs Inc. Incorporated by reference to Exhibit 10.13 to
Registrant's Annual Report on Form 10-K for the Year Ended December 31, 1995 . . . . . . . . . . .
10.14 Promissory Note made by Mackie Designs Inc. to the order of U.S. Bank of Washington,
National Association, in the principal amount of $5,000,000.00 dated November 3, 1995.
Incorporated by reference to
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Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.15 Demand Promissory Note made by Mackie Designs Inc. to the order of Greg C. Mackie in the
principal amount of $4,319,348.00 dated April 3, 1995. Incorporated by reference to
Exhibit 10.10 to Registrant's Registration Statement filed under the Securities Act of 1933
on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . .
10.16 Demand Promissory Note made by Mackie Designs Inc. to the order of David M. Tully in the
principal amount of $2,032,634.00 dated April 3, 1995. Incorporated by reference to
Exhibit 10.11 to Registrant's Registration Statement filed under the Securities Act of 1933
on Form S-1, as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . .
10.17 Demand Promissory Note made by Mackie Designs Inc. to the order of C. Marcus Sorenson and
Judith B. Sorenson in the principal amount of $2,117,327.00 dated April 3, 1995.
Incorporated by reference to Exhibit 10.12 to Registrant's Registration Statement filed
under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514 . . . . . . .
10.18 Form of Authorized Dealer Agreement. Incorporated by reference to Exhibit 10.13 to
Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.19 Form of Sales Representative Agreement. Incorporated by reference to Exhibit 10.14 to
Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.20 Mackie Designs Inc. 401(k) Profit Sharing Plan dated December 20, 1993. Incorporated by
reference to Exhibit 10.15 to Registrant's Registration Statement filed under the
Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514. . . . . . . . . . . . .
10.21 Agreement between A&R Technology and Mackie Designs Inc. for the Development and Publishing
of MIDI Mix Automation Software dated December 5, 1993, as amended on August 16, 1994 and
June 14, 1995. Incorporated by reference to Exhibit 10.16 to Registrant's Registration
Statement filed under the Securities Act of 1933 on Form S-1, as amended, Registration
No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.22 Software License Agreement among Alexander Hopmann, Robert Tudor and Mackie Designs Inc.
dated February 9, 1996. Incorporated by reference to Exhibit 10.22 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 . . . . . . . . . . . . . . . . .
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10.23 Mackie Designs Inc. Management Incentive Plan. Incorporated by reference to Exhibit 10.17
to Registrant's Registration Statement filed under the Securities Act of 1933 on Form S-1,
as amended, Registration No. 33-93514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.24 Amendment to Mackie Designs Inc. Management Incentive Plan, dated January 1, 1996.
Incorporated by reference to Exhibit 10.24 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . .
*11.1 Computation of net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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*13.1 Annual Report to Shareholders of Mackie Designs Inc. for the fiscal year ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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*21.1 Subsidiaries of Mackie Designs Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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*23.1 Consent of Ernst & Young LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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*27.1 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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______________________________
* Filed herewith
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