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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2002,
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE
TRANSITION PERIOD FROM __________ TO __________.
Commission file number 0-26924
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AMX Corporation
(Exact name of registrant as specified in its charter)
Texas 75-1815822
(State or other (I.R.S. Employer
jurisdiction of Identification no.)
incorporation or
organization)
3000 Research Drive, 75082
Richardson, Texas
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (469) 624-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of May 31,
2002, computed by reference to the closing sales price of the registrant's
Common Stock on the Nasdaq National Market on such date, was approximately
$25,520,000.
The number of shares of the registrant's Common Stock outstanding as of May
31, 2002 was 11,087,049.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 2002 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof.
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PART I
ITEM 1. BUSINESS.
Overview
AMX Corporation ("AMX", or the "Company"), which was incorporated in Texas
in March 1982, is a leading developer and marketer of systems that control, as
an integrated network, a variety of otherwise incompatible electronic devices.
AMX simplifies the automation and integration of audio/video, environmental and
communications technologies through a variety of intuitive user interfaces. The
Company's systems are used in many different vertical markets such as
Broadcasting, Education, Entertainment, Government, Healthcare, Home Theater,
Hotels, Houses of Worship, Private Transportation, Network Operations Centers,
Presentation Facilities, Retail, and Whole Home Automation. The Company's
systems are able to accommodate evolving technologies, and currently provide
centralized control for over 12,000 different electronic devices including but
not limited to video components, audio components, teleconferencing devices,
lighting equipment, educational media, environmental control systems, and
security systems. The Company's control systems are compatible with the
Internet, which allows the end users to communicate with their control systems,
as well as send and receive commands, content or information from a remote
location.
Applications in the commercial market for the Company's integrated control
systems include: use for presentations in corporate board rooms, business
training centers, and distance learning classrooms; controls for hotels,
meeting and convention facilities; security camera control, video distribution,
and public address systems for stadiums and theme parks; multimedia and
teleconferencing support for government and educational facilities; and
decision support centers for industrial applications. In the residential
market, the Company's products enable individuals to create an integrated home
automation system that can control audio, video and home theater systems,
lighting, motorized drapes, heating and air conditioning units, closed circuit
cameras, security systems, and other home electronic equipment.
The Company's system sales are made through dealers and distributors who are
supported by Company sales and support offices in various geographic areas. In
addition, the Company utilizes independent manufacturers' representatives in
areas not served by Company offices. The Company principally relies on
approximately 1,000 specialized third-party dealers of electronic and
audio-visual equipment to sell, install, support, and service its products in
the United States. In addition to maintaining offices in the United Kingdom,
Canada, Mexico, China and Singapore, the Company relies on an international
network of 18 exclusive distributors and over 200 dealers to serve its
worldwide markets. Dealers and distributors can use the AMX design software to
tailor the Company's control system for the unique requirements of each
installation. The Company also sells various customized products, primarily
user interface devices, to OEMs and other large customers.
The Company believes that the market for its products continues to grow and
diversify due to the increasing functionality, greater affordability, and
widespread use of a diverse array of electronic devices, particularly
sophisticated audio, video, and presentation equipment. Many of these devices
have separate control systems that are incompatible due to the absence of any
one widely accepted control standard. This creates a need for an integrated
control system such as those offered by the Company.
The Company's strategy is to take advantage of the growth in the market for
its products by bringing the power and flexibility of integrated control
technology to a wide variety of settings. Elements of the Company's strategy
include:
. Development of new software to simplify system programming;
. Emphasis on customer support and service;
. International distribution expansion;
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. Flexible systems to accommodate emerging technologies;
. Commitment to dealer training; and
. Development of alliances with key electronic industry companies.
Market and Industry Overview
One of the first widespread uses of wireless remote control technology was
the garage door opener. From this particular application, a number of companies
developed technologies for the wireless operation of slide projectors. In the
last two decades, there has been tremendous growth in the number of electronic
and other programmable devices used in commercial and residential applications,
particularly in telecommunications and audio-visual equipment. This growth has
been fueled by increased affordability and performance of the equipment. The
number and variety of such systems, and the lack of a standardized operating
control, has created a demand for integrated control systems in the commercial
and residential markets. The Company's integrated control systems are used in
many different vertical markets such as Broadcasting, Education, Entertainment,
Government, Healthcare, Home Theater, Hotels, Houses of Worship, Private
Transportation, Network Operations Centers, Presentation Facilities, Retail,
and Whole Home Automation. In the commercial market, the use of networked
control systems in meeting, conference, and training applications is growing
rapidly. There are millions of conference rooms, distance learning classrooms
and similar facilities worldwide, and such facilities are increasingly designed
to support networking technologies with an emphasis on consistent design,
functionality and serviceability. The market for integrated control systems in
the residential sector is also expected to grow rapidly. Increasingly, new
homes are constructed with the infrastructure required to support fully
integrated living in the home environment, taking the concept of the connected
home beyond the traditional personal computer application.
In addition to active marketing and educational efforts by manufacturers,
the industry is supported by several trade associations, most notably ICIA
(International Communications Industries Association), CEDIA (Custom Electronic
Design and Installation Association), NAB (National Association of
Broadcasters), NSCA (National Systems Contractor Association), CEA (Consumer
Electronics Association), CABA (Continental Automated Building Association),
and AIA (American Institute of Architects). The key associations hold trade
shows, provide training programs, and actively develop their respective markets
within the industry.
The Company's products are currently used most commonly in the following
markets and applications:
Commercial
Corporate. In the corporate setting, the Company's systems are used in board
rooms, conference and meeting rooms, convention centers, auditoriums, training
centers, and teleconferencing facilities. Typical applications include
integrated control of a wide variety of audio and visual presentation
equipment, such as video projectors, VCRs, DVD players, computers, sound
systems, lighting and temperature controls, and window coverings. An increasing
portion of the board, conference, meeting, and training rooms constructed or
remodeled are being designed to include integrated control systems. The Company
believes that it is one of the largest providers of integrated control systems
to this market and that this market represents a significant opportunity for
its products. AMX control systems are used in the facilities of many of the
Fortune 100 companies, including AT&T, Coca Cola, EDS, Exxon Mobil, Intel, J.P.
Morgan Chase, Lucent Technologies, Microsoft, Motorola and Proctor & Gamble.
Sports. The Company's systems are currently being used in stadiums and other
sports facilities across the United States, including Pepsi Center, BankOne
Ballpark, Camden Yards, The Ballpark in Arlington, the Georgia Dome, Washington
Wizards Stadium, Cleveland Browns Stadium, the United Center in Chicago, and
MCI Center. Applications typically include controlling audio and video systems,
switchers and routers, and surveillance cameras.
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Entertainment. The Company's systems are used in various museums and
amusement parks across the United States, including Disney World, EPCOT Center,
Sea World, Virginia Air and Space Museum, JFK Museum, Universal Studios, Busch
Gardens, and the Rock and Roll Hall of Fame. Applications typically include
controlling audio and visual systems as well as a variety of other equipment
used for exhibits and special effects.
Industrial. The Company's systems are currently being used in decision
support centers in industrial settings such as the Network Emergency Response
Assistance Center of Bell South Services, Inc., the Decision Command Center of
Burlington Northern Railroad, and the Network Operations Center of EDS. Typical
applications include control of large screen video displays and video routing
equipment.
Government. The Company's systems are being used by federal, state, and
local government entities such as the State of Maryland Intelligent Highway
Vehicle Control System, the California Senate, the Louisiana House of
Representatives, the Library of Congress in Washington, D.C., and war rooms at
the U.S. Army War College. Typical applications include audio visual equipment
control, video routing and distribution, video teleconferencing, and voting and
request-to-speak systems.
Education. In this market, the Company provides audio-visual and multimedia
controls for lecture halls, auditoriums and classrooms. The Company's systems
can be found around the world in such schools as the Harvard School of Public
Health, the Singapore American School, the University of Notre Dame, the
University of Texas at Dallas, the Dallas Independent School District, the
Edina School District of Minnesota located in the Minneapolis metropolitan
area, and New York City Public Schools.
Residential
The residential market remains a very fragmented marketplace with numerous
providers and a wide range of products and services. AMX control systems can be
found in Home Theater, Whole Home Automation, and Private Transportation
applications. The Company's products enable individuals to create an integrated
home automation system which can control such items as home theater systems,
lighting, motorized drapes, heating and air conditioning units, closed circuit
cameras, security systems, and various other home electronic equipment. The
Company has developed standardized control products designed to increase its
penetration of the residential market. The Company believes that the
opportunities in the residential market will continue to expand as fully
integrated automation systems become more widely accepted as an essential
component of the connected home.
Business Strategy
The Company's strategy is to take advantage of the growth in the markets for
its main products by bringing the power and flexibility of integrated control
technology to a wide variety of settings. Elements of the Company's strategy
include:
Development of new software to simplify system programming. The Company
believes that enhanced software investment can increase system sales by
simplifying programming requirements for its dealers. For example, the
Company is constantly developing and improving software tools that enable
dealers to more easily program the Company's systems by employing graphical
user interfaces. The Company believes that these enhancements can provide
its dealers with simplified customization techniques that will reduce
programming time and thus enhance sales of the Company's products.
Emphasis on customer support and service. The Company believes that the
support, service and training it provides to its customers are key
competitive advantages. The Company provides technical support, on-site
repair and support as needed, and on-line software support to its dealers
and end users. The Company's customer support and service originates from
its headquarters in Richardson, Texas. However, in order to provide quality
and timely customer support, the Company has also established offices in
Philadelphia, Costa Mesa, Tampa, Denver, Toronto, York (U.K.), Mexico City,
Shanghai, Brussels and Singapore.
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International distribution expansion. The Company believes that the
international market presents a significant opportunity for the Company, and
continues to expand its distribution presence overseas to take advantage of
this opportunity. The Company currently markets its products outside the
United States through a network of 18 international distributors with
exclusive rights to sell AMX products. In addition, the Company maintains
offices in the United Kingdom, Singapore, Canada, Mexico, Belgium, and China.
Flexible systems to accommodate emerging technologies. The Company believes
that an important competitive advantage is the flexible, modular design of
its systems, which are expandable and which can accommodate a wide variety
of control formats. This design maximizes the ability of the Company's
products to accommodate new technologies in electronic devices as they are
developed. NetLinx, the Company's latest product platform, represents a
significant enhancement increasing both speed and functionality. NetLinx is
compatible with the Company's existing Axcess and Landmark systems and
expands their functionality by allowing them to utilize Internet Control
System Protocol. The Company believes that a single platform system such as
NetLinx that can accommodate the constant changes in system design and
technology is essential relative to the demands of the industry.
Commitment to dealer training. The Company has its primary training facility
at its headquarters in Richardson, Texas, where dealers and distributors are
provided training to program, install, and service the Company's systems.
The Company also provides training at its other regional and international
locations to accommodate clusters of its dealers, thereby reducing the
dealer's cost of travel. The Company believes that its commitment to dealer
training has resulted in a growing, increasingly well-trained group of
dealers who are serving a range of discrete vertical markets. The Company
recently introduced its AMX Certified Expert program, or "ACE" program. The
ACE program allows individuals to attain AMX certifications in system
design, installation, and programming. Once all three certifications have
been achieved, the individual becomes a Certified Expert or an "ACE". In
addition, the Company reviews the capabilities and performance of all its
dealers on a semi-annual basis. Dealer training is a critical process
because the Company's dealers have the relationship with the end user, and a
well-trained and monitored dealer network will provide a quality
installation that will result in a greater level of customer satisfaction.
The success of the dealer network has allowed the Company to minimize the
need to service end users.
Development of alliances with key electronic industry companies. In an
effort to develop and maintain proactive, strategic business relationships
with key manufacturers of electronic equipment, AMX has developed the
Inconcert Program. This continuously growing alliance of companies provides
a consistent, proven programming standard for seamless, fully integrated,
one-touch control automation. This alliance allows AMX and other
manufacturers to work in harmony together. The Company's systems simplify
the automation and integration of audio/video, environmental and
communications technologies through intuitive user interfaces, and are
engineered to communicate with any electronic equipment. The Inconcert
Program is a platform for other manufacturers to provide the protocols for
their latest equipment, to ensure seamless interoperability of their
products within the AMX control system. Inconcert gives designers,
programmers, installers and end users the reassurance that AMX control will
work with the latest product offerings from other manufacturers. From the
initial specification through completion, AMX technology and Inconcert
Alliance equipment communicate together to bring convenience, productivity
and security to any commercial or residential environment.
Product Components
The Company's current systems and products are offered in a variety of
configurations designed to meet the changing needs of individual end users. A
typical AMX integrated system consists of a touch panel or other type of user
interface such as a keypad, a central controller, communication and integration
software, and a series of controlled devices, such as audio visual systems,
computers, lights, HVAC, security systems, and window treatments. Prices for a
complete system vary substantially depending upon the configuration of the
system. The components of a typical AMX system are further described as follows:
User Interfaces are the user's "window" to the system. AMX user interfaces
come in a variety of shapes and sizes to match any system requirement,
including small hand-held wireless remotes, wall mounted keypads, and color
touch panels that can interactively guide the user through an application.
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Central Controllers are components that perform the direct "handshake" to
the various components of a user's system, such as audio-visual systems,
computers, lights, security systems, and window treatments. The controllers tie
together a variety of often dissimilar parts into a unified control network.
Communications and Integration Software runs inside the system, acting as
the central "brain" between the user and the system components, providing the
handshake logic and customized functionality for an installation.
Controlled Devices represent a vast array of otherwise non-compatible
electronic and mechanical appliances that the user wishes to operate from a
centralized location. The Company's systems can be programmed to operate a vast
array of such devices, primarily in three basic segments: communications
devices, such as telephones, intercomm systems, and computers; environmental
devices, such as lights, thermostats, security systems, and window treatments;
and audio-visual devices, such as televisions, VCRs, DVDs, cameras and
satellite systems.
Customer Support and Service
The Company believes that the support and service it provides to its
customers are key competitive advantages and, as part of its strategy, will
continue to focus on the development of such support and service. Examples of
the services the Company provides to domestic and international customers are:
. Tiered levels of support based on the size of the customer;
. Centralized and regional technical support;
. On-site technical support;
. Centralized and regional training;
. System design services;
. Custom programming services; and
. Warranty and non-warranty product repair.
The Company's goal is to continue to reduce the costs associated with
customer support and service, improving the quality of such support and service
and making it easier for customers to do business with AMX.
Sales, Distribution, and Marketing
The Company markets and sells its systems products worldwide through
distribution channels that include manufacturer's representatives in the U. S.,
dealers and distributors internationally, as well as OEM and custom product
arrangements. The Company relies on third parties to sell, install, support,
and service its integrated remote control systems, a strategy that it believes
is best suited for broad domestic and international market coverage.
Domestic Markets
The Company has established relationships with approximately 1,000 of the
leading audio-visual system integrators in the United States. The Company
believes that utilizing the sales force of dealers that are already selling
audio-visual systems integration services to potential purchasers of electronic
presentation equipment is the most effective way to reach a broad range of
customers. The Company believes that the inclusion of an AMX system in the
package of electronic equipment sold to end users enhances the profitability of
the dealer's systems sales. The Company's agreements with its dealers involve
non-exclusive arrangements that may be canceled by either party at will and
contain no minimum purchase requirements on the part of the dealers. Domestic
sales represented approximately $62.6 million, $65.7 million, and $57.3
million, or 71%, 70%, and 73% of the Company's total sales during the fiscal
years ended March 31, 2002, 2001, and 2000, respectively.
International Markets
Outside the United States, independent distributors with exclusive
distribution rights market the Company's custom products. The Company's
agreements with its distributors grant exclusive distribution rights as to a
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specific geographic area. Sales outside of the United States, consisting of
products sold primarily in Europe, Canada, Mexico, Asia, and Australia,
represented approximately $25.0 million, $28.3 million, and $20.9 million, or
29%, 30%, and 27% of the Company's total sales during the fiscal years ended
March 31, 2002, 2001, and 2000, respectively. See Note 11 in the audited
financial statements for additional information.
Technology
AMX product offerings use a unique combination of hardware and proprietary
software, while incorporating the Company's extensive experience of working
with over 12,000 control codes used in a wide range of electronic components.
The Company believes that its products deliver the most comprehensive
functionality in the marketplace while retaining exceptional ease-of-use.
The Company's products include a wide variety of user interface devices
designed to facilitate simple and intuitive operation of controlled devices.
These user interface devices include tabletop touch panels, wireless touch
panels, and wall mounted keypads in a variety of different designs that utilize
bright screens, colorful icons and smart menus for effortless and versatile
navigation.
The Company offers three categories of control hardware used to control a
wide range of electronic components: Axcess Systems used in the commercial and
residential marketplaces; Landmark Systems used in the residential marketplace;
and NetLinx Systems around which existing and future hardware will be unified.
The development of the NetLinx product architecture was completed in fiscal
2000. NetLinx represents a significant enhancement increasing both speed and
functionality. NetLinx is compatible with the Company's Axcess and Landmark
systems and expands their functionality by allowing them to utilize Internet
Control System Protocol, which is the protocol that unifies the three systems,
and is capable of running over any network topology including TCP/IP. The
Company believes that a single platform system such as NetLinx that can
accommodate changes in system design and technology is essential relative to
the demands of the industry.
The Company provides design software, which can be used by dealers of the
Company's products to layout system architecture, provide control logic for the
system, and create application designs for user interfaces. The Company is
constantly developing and improving these software tools to enable dealers to
more easily program the Company's systems by employing graphical user
interfaces. The Company believes that these enhancements can provide its
dealers with simplified customization techniques that will reduce programming
time and thus enhance sales of the Company's products.
In order to extend the life of the Company's installed hardware systems and
to increase the utility and desirability of current and future generations of
products, the Company developed Internet server products, including WebLinx.
WebLinx is a network server application and Hyper Text Transport Protocol
Common Gateway Interface application that provides remote hardware
administration and custom web browser programming interfaces to the Company's
new and previously installed hardware systems. WebLinx permits a user to
securely access the installed AMX system remotely through the Internet and
control the connected devices as if the user were operating such devices
locally.
Research and Development
The timely development and introduction of new products and services is
essential to maintaining the Company's competitive position. Accordingly, the
Company is continually involved in the development, enhancement and expansion
of hardware and operating software capabilities. The Company intends to expand
its research and development efforts in its core product offerings in order to
significantly enhance existing product lines and develop new products. Current
areas of focus in the Company's research and development efforts include:
. Continued refinement the NetLinx architecture, and improvements to
software design tools which will allow for simplified programming and thus
enable additional users of the Company's more traditional platforms to
migrate to the newer NetLinx platform;
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. Development of next generation touch panel interface devices; and
. Development of strategic partnerships that leverage the benefits of
existing technologies.
Research and development expenses were approximately $6,854,000, $9,720,000,
and $7,544,000 in the fiscal years ended March 31, 2002, 2001 and 2000, which
represented 7.8%, 10.3%, and 9.6% of net sales in those periods, respectively.
The Company discontinued research and development related to the consumer
broadband strategy in March 2001. Excluding research and development
expenditures for the consumer broadband strategy, research and development
expenses for the years ended March 31, 2001 and 2000 were $8,413,000 and
$6,493,000, respectively.
Manufacturing
The Company's primary manufacturing strategy is to contract with a small
number of ISO Certified manufacturers, located both domestically and in the
Pacific Rim, in order to take advantage of the manufacturing expertise and
efficiencies these vendors offer. This outsourcing extends from prototyping to
volume manufacturing, and includes activities such as material procurement,
final assembly, test, and quality control. The Company intends to procure over
90% of its products through this outsourcing strategy. This plan is more than
75% complete, and is expected to be fully completed by the end of calendar
2002. This manufacturing strategy will allow the Company to:
. provide consistent product quality;
. improve product availability and lead time;
. realize economies of scale in manufacturing;
. conserve the working capital required to fund inventory;
. adjust manufacturing volumes quickly to meet changes in demand;
. provide access to other product sources; and
. minimize capital expenditures.
The principal components of AMX products are printed circuit boards,
electronic components (including microprocessors), displays and metal or
plastic housings. Substantially all of the Company's products are currently
purchased, or will soon be purchased, as finished products from turnkey
vendors. The Company generally does not have long-term agreements with its
suppliers.
Backlog
The Company generally ships standard products promptly following receipt of
an order. The Company's backlog of orders for standard products has generally
been less than 45 days at any given time. While OEM and other large customers
typically place orders for products several months prior to the scheduled
shipment date, these orders are subject to rescheduling and cancellation. As a
result, the Company does not consider its backlog to be a meaningful indicator
of future sales.
Competition
The Company's principal direct competitor in custom residential control
systems and custom commercial control systems is Crestron. Crestron is a
privately owned manufacturer of control systems for commercial and residential
applications. The residential market is currently extremely diverse in its
product functionality, and as a result there are a variety of manufacturers
that supply products to the residential market. The commercial market also has
several companies that compete in particular sectors of the Company's business,
but with the
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exception of Crestron, no other company competes in all of them. The Company
assumes that there are other companies with substantial financial, technical,
manufacturing, and marketing resources currently engaged in the development and
marketing of products similar to those produced by the Company and that such
companies may enter one or more of the Company's markets at any time.
Intellectual Property
The Company currently relies on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality provisions and other contractual
provisions to protect its intellectual property rights. Despite efforts to
protect these intellectual property rights, unauthorized parties may
misappropriate or infringe on the Company's patents, trade secrets, copyrights,
trademarks, service marks and similar intellectual property rights. The Company
currently has 16 pending United States patent applications and 4 pending
international patent applications. Even if the Company obtains such patents,
the fact that the patent rights are valuable, create a competitive barrier, or
will be free from infringement is not guaranteed. The Company faces additional
risk when conducting business in countries that have poorly developed or
inadequately enforced intellectual property laws. In any event, competitors may
independently develop similar or superior technologies or duplicate the
technologies the Company has developed, which could substantially limit the
value of its intellectual property.
Government Regulation
The Company's domestic business operations are subject to certain federal,
state, and local laws and regulations relating to radio frequency
electromagnetic emissions generated by its products. Certain of its products
must comply with Federal Communications Commission regulations before the
products may be marketed in the United States. There can be no assurance that
the Company's products will comply with such regulations or that Federal
Communications Commission regulations will remain constant with respect to the
Company's current or future products. Failure to comply with Federal
Communications Commission regulations for products under development or a
change in existing regulations by the Federal Communications Commission that
would make products non-compliant could have a material adverse effect on the
Company's results of operations. Because the requirements imposed by such laws
and regulations are frequently changed, the Company is unable to predict its
ability to comply with, or the ultimate cost of compliance with, such
requirements.
European Community regulations relating to electromagnetic emissions and
immunity testing became effective January 1, 1996. Failure to receive EC
approval on new products may limit or eliminate the Company's ability to sell
new products in EC member countries and would have an adverse effect on the
results of operations.
Employees
As of March 31, 2002, the Company employed 408 people of which 54 are
located outside the United States in various international offices. None of the
Company's employees are represented by a labor union or subject to a collective
bargaining agreement. The Company believes that its employee relations are good.
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ITEM 2. PROPERTIES.
The Company occupies buildings that contain approximately 171,000 square
feet of floor space. All of this space is leased under agreements that expire
at various dates. The Company's headquarters in Richardson, Texas are leased
through August 2010. The principal facilities are located as follows:
Approximate
Location Square Feet Description
-------- ----------- -----------
Richardson, Texas 130,000 Offices, engineering, research and
development, and production
Costa Mesa, California 4,000 Offices
Philadelphia, Pennsylvania 13,000 Offices
Tampa, Florida 2,000 Offices
Denver, Colorado 1,000 Offices
York, England 9,000 Offices, engineering, and warehouse
Mexico City, Mexico 2,000 Offices
Belgium 2,000 Offices
Singapore 8,000 Offices and warehouse
All facilities are suitable for the Company's business. Each facility is
fully utilized, with the exception of the headquarters location in Richardson,
which contains approximately 14,000 square feet of additional floorspace which
is available for future expansion. All furniture and equipment owned and leased
by the Company is well maintained and suitable for its operations.
The Company considers its current facilities adequate and believes that
suitable additional space will be available, as needed, to accommodate further
physical expansion of its corporate operations.
ITEM 3. LEGAL PROCEEDINGS.
Litigation
The Company is party to ordinary litigation incidental to its business, none
of which is expected to have a material adverse effect on the results of
operations, financial position or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Stock Prices
In November 1995, the Company's common stock, par value $0.01 per share (the
"Common Stock"), was admitted for trading on the Nasdaq National Market under
the symbol "AMXX." In September 1999, the symbol was changed to "PNJA" in
connection with the Company's name change from AMX Corporation to Panja Inc.
Effective June 11, 2001, the Company once again began doing business as AMX
Corporation. Following approval by the Company's shareholders at its annual
meeting on August 22, 2001, the Company officially changed its corporate name
back to AMX Corporation, and its Nasdaq ticker symbol changed from "PNJA" to
"AMXC".
The following table sets forth, for the periods indicated, the high and low
closing sale prices for the Common Stock for the fiscal years ended March 31,
2001 and 2002.
Fiscal 2001 High Low
----------- ------ ------
First Quarter. $22.13 $10.13
Second Quarter 13.44 7.44
Third Quarter. 9.63 3.06
Fourth Quarter 6.16 2.75
Fiscal 2002
-----------
First Quarter. $4.88 $2.50
Second Quarter 4.00 2.70
Third Quarter. 3.07 1.96
Fourth Quarter 3.50 2.35
As of May 31, 2002, there were approximately 5,400 beneficial holders of the
Common Stock.
Dividend Policy
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends on its Common Stock in the foreseeable future in
order to retain all available earnings generated by operations for the
development and growth of the business. In addition, under the terms of the
debt agreements, the Company may not pay dividends without the prior consent of
the lending bank. Any future determination as to the payment of dividends will
be at the discretion of the Board of Directors and will depend upon the
Company's operating results, financial condition, capital requirements, general
business conditions, and such other factors that the Board of Directors deems
relevant.
Recent Sales of Unregistered Securities
None
11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
(in thousands, except per share amounts)
Fiscal Years Ended March 31,
------------------------------------------
2002 (2) 2001 (2) 2000 1999 1998
-------- -------- ------- ------- -------
Income Statement Data:
Commercial system sales................................... $72,995 $72,520 $59,274 $54,387 $48,116
Residential system sales.................................. 14,612 21,460 18,921 14,886 10,649
------- ------- ------- ------- -------
Net sales................................................. 87,607 93,980 78,195 69,273 58,765
Cost of sales............................................. 46,262 49,280 37,277 32,562 26,401
------- ------- ------- ------- -------
Gross profit.............................................. 41,345 44,700 40,918 36,711 32,364
Selling and marketing expenses............................ 27,792 33,035 30,061 21,823 18,929
Research and development.................................. 6,854 9,720 7,544 5,368 4,724
General and administrative expenses....................... 8,515 8,731 6,637 5,206 5,092
Restructuring costs (1)................................... 298 675 2,961 -- --
Costs associated with acquisition of minority interest and
merger of subsidiary.................................... -- -- -- -- 1,694
------- ------- ------- ------- -------
Operating income (loss)................................... (2,114) (7,461) (6,285) 4,314 1,925
Interest expense.......................................... 727 1,090 547 340 194
Other income (expense), net............................... (96) (168) 64 55 159
------- ------- ------- ------- -------
Income (loss) before income taxes......................... (2,937) (8,719) (6,768) 4,029 1,890
Income tax provision (benefit)............................ 2,347 (494) (2,643) 1,266 1,087
------- ------- ------- ------- -------
Net income (loss)......................................... $(5,284) $(8,225) $(4,125) $ 2,763 $ 803
======= ======= ======= ======= -------
Preferred stock dividends, including accretion and
redemption.............................................. (177)
-------
Net income (loss) applicable to common shareholders....... $ 626
=======
Earnings (loss) per common share--basic................... $ (0.48) $ (0.87) $ (0.47) $ 0.33 $ 0.08
======= ======= ======= ======= =======
Earnings (loss) per common share--diluted................. $ (0.48) $ (0.87) $ (0.47) $ 0.31 $ 0.07
======= ======= ======= ======= =======
Shares used for basic earnings (loss) per share........... 11,006 9,486 8,734 8,386 8,014
======= ======= ======= ======= =======
Shares used for diluted earnings (loss) per share......... 11,006 9,486 8,734 8,988 8,445
======= ======= ======= ======= =======
At March 31,
---------------------------------------
2002 2001 2000 1999 1998
------- ------- ------- ------- -------
Balance Sheet Data:
Working capital........................................... $ 8,154 $ 8,895 $14,981 $15,352 $10,420
Total assets.............................................. 38,014 46,162 37,126 31,509 26,328
Long-term debt; including current portion, line of credit,
and notes payable....................................... 9,634 8,568 3,994 5,593 2,449
Shareholders' equity...................................... 15,789 20,398 22,958 18,535 14,864
- --------
(1)The charge for the fiscal year ended March 31, 2002 represents restructuring
costs recorded for a company-wide severance action in November 2001, offset
by reversals of restructuring actions taken for the fiscal year ended March
31, 2000. The charge for the fiscal year ended March 31, 2001 represents
restructuring costs recorded for the shutdown of the Consumer Broadband
Division and severance actions taken in the fourth quarter, offset by
reversals of restructuring actions taken for the fiscal year ended March 31,
2000. The charge for the fiscal year ended March 31, 2000 represents
restructuring costs recorded for the
12
shutdown of operations in Salt Lake City and disposal of the Synergy
division. See Note 9 in the audited financial statements for further
information.
(2)See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of other one-time charges recorded in fiscal
2002 and 2001.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following commentary should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included in the Company's 2002 Annual
Report to Shareholders.
Certain information included herein contains forward-looking statements (as
defined in the Private Securities Litigation Reform Act of 1995) regarding
future events or the future financial performance of the Company, and is
subject to a number of risks and other factors which could cause the actual
results of the Company to differ materially from those contained in and
anticipated by the forward-looking statements. These risks, assumptions and
uncertainties include: the Company's strategic alliances; the ability to
develop distribution channels for new products; dependence on suppliers,
dealers and distributors; reliance on the functionality of systems or
equipment, whether the Company's systems and equipment or those of its
customers, dealers, distributors, or manufacturers; domestic and international
economic conditions; the financial condition of the Company's key customers and
suppliers; the complexity of new products; ongoing research and development;
reliance on third party manufacturers; the ability to realize operating
efficiencies; dependence on key personnel; the lack of an industry standard;
reliance on others for technology; the ability to protect intellectual
property; the quick product life cycle; the resources necessary to compete; the
possible effect of government regulations; possible liability for copyright
violations on the Internet with the use of the Company's products and other
risks referenced from time to time in the Company's filings with the Securities
and Exchange Commission. The forward-looking statements contained herein are
necessarily dependent upon assumptions, estimates and data that may be
incorrect or imprecise. Accordingly, any forward-looking statements included
herein do not purport to be predictions of future events or circumstances and
may not be realized. Forward-looking statements contained herein include, but
are not limited to, forecasts, projections and statements relating to
inflation, future acquisitions and anticipated capital expenditures. All
forecasts and projections in the report are based on management's current
expectations of the Company's near term results, based on current information
available pertaining to the Company, including the aforementioned risk factors.
Actual results could differ materially.
Critical Accounting Policies and Estimates
AMX's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Management bases its
estimates and assumptions on historical experience and various other factors
that are believed to be reasonable under the circumstances. These estimates and
assumptions are evaluated on an ongoing basis. Actual results could differ from
these estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in preparation of its
consolidated financial statements.
Revenue Recognition
Revenue is recognized upon shipment of the product and transfer of title to
the customer. A provision is made for estimated sales returns and allowances on
product sales in the same period as the related revenues are recorded. These
estimates are based on historical sales returns, analysis of credit memo data
and other known factors.
13
Credit Risk
The Company provides credit in the normal course of business to its dealers
and distributors. The Company generally does not require collateral or a
deposit when providing credit. The Company performs ongoing credit evaluations
of its customers and maintains estimated allowances for possible credit losses.
Inventories
Inventory reserves are recorded for damaged, obsolete, excess and
slow-moving inventory. Management uses estimates to record these reserves.
Slow-moving inventory is reviewed by category and may be partially or fully
reserved depending on the type of product, the length of time the product has
been included in inventory, or other relevant factors.
Income Taxes
The measurement of deferred income tax assets is adjusted by a valuation
allowance, if necessary, to recognize future tax benefits only to the extent,
based on available evidence, that it is more likely than not that such benefits
will be realized. An increase or decrease in the estimated valuation allowance
recorded against the Company's deferred tax asset would increase or decrease
net income in the period such determination was made.
Restructuring
The Company records restructuring charge liabilities in accordance with
Emerging Issues Task Force (EITF) Issue No. 94-3. In some circumstances, the
restructuring liabilities recorded require management to make certain
estimates. Although no significant changes in estimates are anticipated, actual
costs may differ from these estimates.
Company History, Restructuring and One-Time Charges
AMX Corporation was formed in March 1982 and began designing, manufacturing
and marketing integrated control systems. The Company's control systems enabled
the user to automate and integrate a variety of electronic technologies. These
systems were marketed into the commercial market through third-party dealers
specializing in the Company's products. These same systems were also installed
in upscale residential homes. In the late 1980s, the Company began to
distribute its products to international markets. In 1993, in order to further
enhance the distribution of its products in Europe, the Company purchased a
company in the United Kingdom named AXCESS Technology Ltd. to serve the
European market. Subsequently in 1995, the Company established a distribution
subsidiary in Singapore to serve markets in Asia and the Pacific Rim.
As the demand for home installations grew, the Company decided to develop a
complete home automation system that provided a more affordable option to the
end user than those sold in its commercial settings. As a result, in 1995 the
Company formed a subsidiary in Salt Lake City named PHAST (Practical Home
Automation Systems Technology) and began the development of a specialized home
automation system. This home automation system became known as Landmark and
began shipping in 1997.
Ultimately, the Company broadened its product offerings to three principal
platforms: Axcess Systems, the Company's initial product offerings used in the
commercial and residential marketplaces; Landmark Systems, developed by PHAST
and used in the residential marketplace; and NetLinx Systems, developed by the
Company to enhance the networking and Internet capabilities of the Company's
products. The NetLinx system was developed to be a base system around which
existing and future hardware will be unified and will be the primary focus of
future development efforts.
In mid-1999, the Company established the Consumer Broadband Division and
began investing in the development of Internet appliance products designed
specifically for residential use, and began developing a retail distribution
strategy for such products. In conjunction with the expanded product offerings
and the new retail distribution strategy, the Company changed its name to Panja
Inc.
14
During the third quarter of fiscal 2000, the Company announced plans to
relocate its operations in Salt Lake City to its corporate headquarters in
Dallas in order to reduce costs and centralize its operations. The move was
completed during the third quarter of fiscal 2001 and impacted approximately 94
employees. During the third quarter of fiscal 2000, the Company also announced
its intention to dispose of its Synergy division that had served certain of the
Company's educational markets. Approximately 26 employees were terminated by
this action. The Company recorded approximately $3.3 million of restructuring
expense in the fiscal year ended March 31, 2000 as a result of this action, of
which $3.0 million was related to severance and other disposal costs and was
recorded in restructuring, and $0.3 million was recorded in cost of sales for a
write-down of Synergy inventory.
Throughout fiscal 2000 and during the first half of fiscal 2001, the Company
invested significant resources on development and marketing efforts related to
the consumer broadband strategy. The Company introduced two Internet appliance
products during this timeframe: the Panja 1000 and the BMP-100. These efforts
consumed a significant amount of the Company's cash resources. During this same
period, the Company also spent considerable resources on two additional
projects: 1) the implementation of a new enterprise resource planning system,
and 2) the move into the new headquarter facilities in Richardson, Texas.
Certain aspects of the Internet revolution ultimately began to lose momentum
and the Company struggled to implement its new consumer broadband strategy. At
the same time, the Company began to see an erosion of the sales growth of its
core product offerings because marketing and development efforts in fiscal 2000
and 2001 had been diverted to focus on the broadband strategy.
As a result of these developments, the Board of Directors and the Company's
then president, chief executive officer, and chairman decided on a
corporate-wide restructuring plan in the fourth quarter of fiscal 2001 which
included the decision to discontinue the Consumer Broadband Division and its
retail distribution strategy. In conjunction with the Company's return to its
core business strategy, and as a result of customer feedback, the Company
returned to doing business as AMX Corporation and formally changed its name at
the 2001 shareholder meeting.
As a result of the restructuring and other business and economic trends in
the fourth quarter of fiscal 2001, the Company recorded one-time charges of
approximately $5.2 million. These one-time charges included restructuring
charges of $1.2 million which consisted of employee severance reserves of $0.9
million, and $0.3 million recorded to write-off miscellaneous assets and to
reserve non-cancellable commitments of the Consumer Broadband Division. The
severance charge was taken as a result of a reduction in the Company's
workforce. This reduction consisted of 44 employees from across the Company,
but primarily included personnel working in the Company's Consumer Broadband
Division and information systems department. The other one-time charges
included inventory reserves of $2.9 million, receivable reserves of $0.6
million, and reserves against other assets of $0.5 million. Of the inventory
reserves recorded, approximately $0.7 million related to the disposal of all
consumer broadband inventory. The remaining inventory reserves were recorded as
a result of: 1) faster than anticipated demand for new products which reduced
forecasted demand for older products; 2) a change in the Company's sourcing
strategy from make to buy, which reduced the Company's requirements for certain
raw material component parts; and 3) an overall increase in inventory levels
due to difficulties with materials requirement planning which in part prompted
the implementation of the JD Edwards ERP system. The receivable reserves of
$0.6 million related to the write-off of certain uncollectible accounts related
to the consumer broadband strategy and allowances for forecasted returns. The
charge against other assets primarily related to reserves taken against amounts
due from non-customers which were deemed uncollectible. As a result of these
charges, the Company also recorded a valuation allowance of approximately $2.5
million against its deferred tax assets.
This restructuring also included the recruitment of new management in most
key functional areas. This new management team continued to improve the
Company's infrastructure and reposition the Company for the future based on
current market and business trends. As a result, the Company recorded
additional one-time charges of approximately $8.2 million during the second
quarter of fiscal 2002. These one-time charges included reserves
15
for inventory obsolescence of $2.5 million, a charge of $0.7 million taken to
write-off certain assets, additional receivable related reserves of $0.5
million, a write-off of miscellaneous intangibles of $0.3 million, and a
valuation allowance against deferred tax assets of $4.2 million. The inventory
charge was recorded due to several factors, including an adjustment to the
revenue forecast based on existing trends in the market and economy in
September 2001, continued adjustments to demand of older product lines
resulting from faster than anticipated demand for new product offerings,
continued adjustments to usage requirements for certain raw materials as the
Company's sourcing strategy progressed, and implementation issues with the
Company's ERP software which resulted in purchases of the wrong mix or
quantities of certain products during the second quarter of fiscal 2002. The
$0.7 million charge was taken to write off older product demonstration
equipment as a result of increasing demand for the Company's next generation
product offerings. The additional receivable reserves of $0.5 million were
recorded due to deteriorating general economic conditions and resulting
collectibility concerns. The $0.3 million charge to write-off intangibles was
primarily a factor of expensing certain patent related expenses as the related
patent applications were abandoned during the quarter, and the write-off of
goodwill related to the Company's residential product line, which had
experienced a decline in revenue over prior year levels. As a result of the
aforementioned charges and historical operating performance, the Company
recorded a tax provision of approximately $4.2 million during the quarter ended
September 30, 2001 in order to record a valuation allowance against its
remaining deferred tax assets. Although the Company anticipates future
sustained profitability, accounting principles generally accepted in the United
States require that historical operating performance weigh heavily in assessing
the realizability of deferred tax assets. Subsequently, the Company announced
further realignments to its corporate structure resulting in the elimination of
66 Dallas-based positions, and recorded a severance related restructuring
charge of $0.6 million during the quarter ended December 31, 2001.
In the fourth quarter of fiscal 2002, Congress passed the Job Creation and
Worker Assistance Act of 2002, under which the period allowed for carrying back
net operating losses from certain tax years was extended from two to five
years. As a result, the Company recorded a tax benefit of $2.0 million during
the fourth quarter of fiscal 2002 due to the immediate realization of deferred
tax assets for which a valuation allowance had been recorded during the quarter
ended September 30, 2001.
The Company's new management team has implemented strict cost control and
inventory management measures, and has initiated several short-term marketing
and sales initiatives. In fiscal 2003, the Company intends to significantly
expand research and development efforts in its core product groups. The Company
believes these expanded research and development efforts, combined with
continued cost controls and inventory management efforts, will enable the
Company to drive long-term value and sales growth and take advantage of the
vast potential of the integrated control industry.
16
Results of Operations
The following table contains the Company's consolidated statements of
operations for each of the three years in the period ended March 31, 2002, both
as reported and pro-forma results excluding the aforementioned restructuring
and one-time charges (in thousands):
Excluding one-time
and restructuring charges As reported
Fiscal Year Ended March 31 (a) Fiscal Year Ended March 31
----------------------------- -------------------------
2002 (b) 2001 (c) 2000 (d) 2002 2001 2000
-------- -------- -------- ------- ------- -------
Commercial sales................... $72,995 $72,520 $59,274 $72,995 $72,520 $59,274
Residential sales.................. 14,612 22,104 18,921 14,612 21,460 18,921
------- ------- ------- ------- ------- -------
Net sales....................... 87,607 94,624 78,195 87,607 93,980 78,195
Cost of sales...................... 43,885 46,405 36,959 46,262 49,280 37,277
------- ------- ------- ------- ------- -------
Gross profit....................... 43,722 48,219 41,236 41,345 44,700 40,918
------- ------- ------- ------- ------- -------
Selling and marketing expenses..... 26,923 32,873 30,061 27,792 33,035 30,061
Research and development expenses.. 6,854 9,720 7,544 6,854 9,720 7,544
Restructuring costs................ -- -- -- 298 675 2,961
General and administrative expenses 7,923 8,431 6,637 8,515 8,731 6,637
------- ------- ------- ------- ------- -------
Total operating expenses........... 41,700 51,024 44,242 43,459 52,161 47,203
------- ------- ------- ------- ------- -------
Operating income (loss)............ 2,022 (2,805) (3,006) (2,114) (7,461) (6,285)
Interest expense................... 727 1,090 547 727 1,090 547
Other income (expense), net........ 38 (168) 64 (96) (168) 64
------- ------- ------- ------- ------- -------
Income (loss) before income taxes.. 1,333 (4,063) (3,489) (2,937) (8,719) (6,768)
Income tax expense (benefit)....... 176 (494) (2,643) 2,347 (494) (2,643)
------- ------- ------- ------- ------- -------
Net income (loss).................. $ 1,157 $(3,569) $ (846) $(5,284) $(8,225) $(4,125)
======= ======= ======= ======= ======= =======
- --------
(a)Pro-forma results for fiscal years ended March 31, 2002, 2001 and 2000
exclude restructuring charges and restructuring reversals.
(b)Pro-forma results for the fiscal year ended March 31, 2002 exclude $6.2
million of one-time charges and benefits which include inventory reserves of
$3.2 million; accounts receivable and other receivable reserves of $0.5
million; the write-off of miscellaneous intangibles of $0.3 million; and a
valuation allowance against deferred tax assets of $2.2 million which is net
of a one-time tax benefit of $2.0 million recorded in March 2002. These
one-time charges and benefits were recorded in the following financial
statement line items: Cost of sales, $2.4 million; Selling and marketing
expenses, $0.9 million; General and administrative expenses, $0.6 million;
Other expense, $0.1 million; and Income tax expense, $2.2 million.
(c)Pro-forma results for the fiscal year ended March 31, 2001 exclude one-time
charges of $4.0 million which included inventory related reserves of $2.9
million; receivable related reserves of $0.6 million; reserves against other
assets of $0.3 million; and charges for non-cancelable commitments of $0.1
million. These charges were recorded in the following financial statement
line items: Revenue, $0.6 million; Cost of sales, $2.9 million; Selling and
marketing expenses, $0.2 million; and General and administrative expenses,
$0.3 million.
(d)Pro-forma results for the fiscal year ended March 31, 2000 excludes $0.3
million of one-time charges to write-down Synergy inventory. This charge was
recorded in cost of sales.
17
THE FOLLOWING DISCUSSIONS OF FISCAL 2002 RESULTS COMPARED TO FISCAL 2001 AND
FISCAL 2001 RESULTS COMPARED TO FISCAL 2000 ARE PRESENTED ON A PRO-FORMA BASIS
EXCLUDING THE ONE TIME AND RESTRUCTURING CHARGES NOTED ABOVE.
Fiscal 2002 Results Compared to Fiscal 2001
The Company recorded sales during the fiscal years ended March 31, 2002 and
2001 as follows:
Market March 31, 2002 March 31, 2001 Change
------ -------------- -------------- ------
Commercial:
Domestic...... $48,021,332 $44,246,328 8.5%
International. 24,974,024 28,273,719 (11.7)%
----------- ----------- -----
Total Commercial. 72,995,356 72,520,047 0.7%
----------- ----------- -----
Residential...... 14,611,855 22,103,634 (33.9)%
----------- ----------- -----
Total Sales...... $87,607,211 $94,623,681 (7.4)%
=========== =========== =====
Domestic commercial revenue growth reflects continued support for the
Company's Netlinx product offering in the commercial market, although this
growth rate has slowed somewhat from fiscal 2001. The Company believes the
decrease in the domestic commercial growth rate from the previous fiscal year
is due to the residual impact of the Company's focus in prior years on its now
discontinued consumer broadband strategy, and the general economic downturn.
Revenue of the Company's subsidiaries in the U.K. and Singapore declined 29%
and 21%, respectively, versus fiscal 2001. The decline in revenues in the U.K.
is primarily related to the fact that the Company's wholly-owned distributor in
the U.K. ceased distribution of all non-AMX product lines in fiscal 2002. In
addition, U.K. revenues for fiscal 2001 included shipments of approximately
$0.7 million for a large non-recurring project. The decline in revenues in
Singapore reflects severe economic challenges in Singapore and certain other
Asian markets. Revenue in all other international markets declined 1% compared
to fiscal 2001. The decline in residential sales is related to the Company's
focus on the consumer broadband market in fiscal 2000 and 2001. In addition,
the Company's relocation of its Salt Lake City operations to Dallas in
September 2000 further diluted its focus on the residential channel. The
Company's product development and sales and marketing strategies are now
focused on its core business, advanced control technology, for both the
residential and commercial markets.
Gross profit for the year ended March 31, 2002 was 50% compared to 51% for
the year ended March 31, 2001. The deterioration of margins is primarily a
result of incremental costs incurred related to the Company's manufacturing
outsourcing program which was initiated in the first quarter of fiscal 2002.
Under this program, the Company plans to outsource over 90% of its products to
a small number of key vendors. As of March 31, 2002, the program is more than
75% complete. Completion of the program is expected by the end of calendar
2002. The Company expects both margins and product availability to improve as
the Company completes this sourcing strategy.
Selling and marketing expenses were $26.9 million or 31% of net sales for
the year ended March 31, 2002 compared to $32.9 million or 35% of net sales in
fiscal 2001. This decrease is primarily related to savings achieved by the
elimination of the Company's consumer broadband division in March 2001 and cost
reduction initiatives implemented in the third quarter of fiscal 2002 which
included a workforce reduction.
Research and development expenses were $6.9 million or 8% of net sales for
the fiscal year ended March 31, 2002 compared to $9.7 million or 10% of net
sales in fiscal 2001. The decline in research and development expense is
primarily related to savings generated from the elimination of consumer
broadband research and development activities in March 2001 and savings related
to the consolidation of the research and development activities from Salt Lake
City to Dallas. In fiscal 2003, the Company intends to expand its research
18
and development efforts in order to significantly enhance existing product
lines and develop new products in its core product lines. The Company expects
an increase in research and development spending as a percent of revenue in
fiscal 2003 as a result of the increased emphasis on research and development.
General and administrative expenses were $7.9 million or 9% of net sales
compared to $8.4 million or 9% of net sales for fiscal 2001. The decline in
general and administrative expenses from fiscal 2001 is related to charges
incurred in fiscal 2001 as a result of a customer that filed bankruptcy,
savings created by the elimination of the Company's Salt Lake City facilities
which were closed in the third quarter of fiscal 2001, and overall cost control
initiatives implemented during the latter half of fiscal 2002.
Interest expense decreased from $1.1 million in fiscal 2001 to $0.7 million
in fiscal 2002. This decline is primarily a result of lower average outstanding
balances on the line of credit during fiscal 2002. Additionally, interest rates
were somewhat lower in the current fiscal year. Excluding fiscal 2002 one-time
charges, the Company reported other income of $38,000 in fiscal 2002 versus
other expense of $168,000 in fiscal 2001. This change is primarily a factor of
a loss of $247,000 incurred on the sale of furniture from the Company's
previous facilities that was incurred in fiscal 2001.
The Company's effective tax rate was approximately 13% for the year ended
March 31, 2002. The tax provision of $176,000 recorded in fiscal 2002
principally represents foreign taxes on its U.K. and Singapore subsidiaries.
The Company does not currently record a tax provision or benefit on its U.S.
operations because the Company has recorded a full valuation allowance on its
deferred tax assets. As a result, as the Company incurs domestic tax expense or
benefit, an offsetting decrease or increase is recorded to the valuation
allowance.
Fiscal 2001 Results Compared to Fiscal 2000
The Company recorded sales during the fiscal years ended March 31, 2001 and
2000 as follows:
Market March 31, 2001 March 31, 2000 Change
------ -------------- -------------- ------
Commercial:
Domestic...... $44,246,328 $38,415,424 15.2%
International. 28,273,719 20,858,306 35.6%
----------- ----------- ----
Total Commercial. 72,520,047 59,273,730 22.3%
----------- ----------- ----
Residential...... 22,103,634 18,920,671 16.8%
----------- ----------- ----
Total Sales...... $94,623,681 $78,194,401 21.0%
=========== =========== ====
The growth in domestic commercial revenue in fiscal 2001 was primarily
attributable to the continued expansion of complex commercial systems and the
need for integrated control of these systems. The growth in the international
market reflects the Company's continued focus on international distributor and
dealer network development, and improved market acceptance of the Company's
products in international markets. Residential sales continued to benefit from
the expansion of the market for home automation.
Gross profit for the year ended March 31, 2001 was 51% compared to 53% for
the year ended March 31, 2000. Gross margins in fiscal 2001 were impacted by
component shortages in the industry.
Selling and marketing expenses were $32.9 million or 35% of net sales for
fiscal 2001 compared to $30.1 million or 38% of net sales in fiscal 2000. The
increase in selling and marketing expense is primarily related to increased
headcount and spending in various selling and marketing departments, including
increased spending of approximately $1.8 million related to the broadband
consumer product division.
Research and development expenses were $9.7 million in fiscal 2001 compared
to $7.5 million in fiscal 2000, or approximately 10% of net sales for both
fiscal years. The increase in research and development is related to increased
spending and headcount in various research and development departments,
including additional spending in the broadband consumer product division.
19
General and administrative expenses were $8.4 million or 9% of net sales
compared to $6.6 million or 8% of net sales for fiscal 2000. The increase in
general and administrative expenses in fiscal 2001 is related to charges
incurred as a result of a customer that filed bankruptcy, an increase in
headcount in the finance and information systems functions, and an increase in
legal and other professional fees.
Interest expense increased from $0.5 million or 0.7% of total revenue in
fiscal 2000 to $1.1 million or 1.2% of total revenue in fiscal 2001. This
increase is primarily a result of higher average outstanding balances on the
Company's revolving line of credit throughout fiscal 2001.
The Company's effective tax rate declined to 6% for fiscal 2001 from 39% for
fiscal 2000. This decline is a result of recording a valuation allowance of
approximately $2.5 million against net deferred tax assets during the fourth
quarter of fiscal 2001.
Liquidity and Capital Resources
In the twelve months ended March 31, 2002, the Company generated $0.4
million of cash from operations, including net income of $1.2 million before
the aforementioned restructuring and one-time charges. Excluding the
restructuring and other one-time charges, other significant components of
operating cash flows included non-cash depreciation and amortization expense of
$4.4 million, offset by net receivables growth of $1.3 million and from a
decline in accounts payable of $4.1 million. In the twelve months ended March
31, 2001, the Company used $1.7 million of cash in operations, including a net
loss of $3.6 million before restructuring and one-time charges. Other
significant components of operating cash flows before restructuring and
one-time charges included non-cash depreciation and amortization of $4.5
million, uses of cash in operations from net inventory growth of $5.6 million
and net receivables growth of $3.7 million, offset by payables growth of $6.6
million. Days sales outstanding were 57 and 50 as of March 31, 2002 and 2001,
respectively, while inventory turns were 3.70 and 3.45 for the same periods.
The increase in days sales outstanding is due principally to the downturn in
overall economic conditions, as well as a slow-down in collection efforts as a
result of conversion and reporting issues related to the implementation of the
Company's ERP system in fiscal 2002. The increase in inventory turns is related
to better inventory management and the Company's move toward outsourced
manufacturing. Capital expenditures for the twelve months ended March 31, 2002
were $2.5 million as compared to $8.0 million in the twelve months ended March
31, 2001. This decline is primarily a result of high expenditures in fiscal
2001 related to the Company's ERP system and the Company's move into its
current headquarters in Richardson, Texas in September 2000. Capital
expenditures related to the Company's ERP implementation decreased
significantly following the "go-live" date in June 2001.
The Company has a $12.5 million revolving line of credit from Bank One,
Texas, N.A. ("Bank One"). The line of credit provides for interest at varying
rates of the Company's choice based on the prime lending rate or the London
Inter-Bank Offered Rate. The line of credit is secured by receivables and
inventory. At March 31, 2002, $7.6 million was outstanding under the revolving
line of credit agreement and $4.3 million was available for future borrowings
under the facility's borrowing base limits. This revolving line of credit
expires on September 1, 2002, and is expected to be renewed at that time. The
Company also has an unsecured term note with Bank One. The term note provides
for quarterly payments of principal and interest through April 30, 2004, and
has an outstanding principal balance of approximately $2.0 million as of March
31, 2002.
The line of credit contains various restrictive and financial covenants. As
of March 31, 2002, the Company was in violation of the quarterly financial
operating covenants in effect at that date solely as a result of the one-time
charges recorded during the quarter ended September 30, 2001. However, Bank One
waived such non-compliance with these covenants for the March 31, 2002
reporting period and eliminated all other financial covenants in favor of a
tangible net worth requirement of $13.4 million and monthly consolidated EBITDA
requirements for the remaining term of the agreement.
The Company believes that cash flow from operations and the funding
available under existing and future credit facilities will be adequate to fund
working capital and capital expenditure requirements for at least the next 12
months.
20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company had outstanding debt of $9.6 million and $8.6 million at March
31, 2002 and 2001, respectively. This debt represents 25.3% and 18.6% of total
assets at those respective dates. In Fiscal 2002, the average interest rate on
the Company's revolving debt was 6.3%. The Company's long-term debt currently
has an average maturity of 2 years and interest rates averaging 6.3% in fiscal
2002.
Interest Rate Risk
The Company does have an exposure to changing interest rates as the interest
rates on its debt instruments are variable. A hypothetical 10% increase or
decrease in market interest rates would have impacted the Company's interest
expense approximately $54,000 and $93,000 in fiscal 2002 and 2001,
respectively. However, changing interest rates do not materially impact the
fair value of the Company's debt instruments due to the variability of the
interest rates on these instruments.
Additionally, the Company does not have significant exposure to changing
interest rates on invested cash, which was approximately $1.2 million and $1.6
million at March 31, 2002 and 2001 respectively. The Company invests its cash
mainly in short term investments with an initial maturity of three months or
less.
To date, the Company has not entered into any derivative financial
instruments to manage interest rate risk and is currently not evaluating the
future use of any such financial instruments.
Foreign Currency Exchange Rate Risk
The Company transacts business in various foreign currencies through its
wholly owned subsidiaries in York, England and Singapore. Accordingly, the
Company is subject to exposure from adverse movements in foreign currency
exchange rates. The Company generally mitigates this risk by transacting
business in the functional currency of each of its subsidiaries, thus creating
a natural hedge by paying expenses incurred in the local currency. To date, the
Company has not entered into any derivative financial instruments to manage
foreign currency risk and is currently not evaluating the future use of any
such financial instruments. A hypothetical 10% plus or minus fluctuation in
non-U.S. exchange rates would have an earnings impact of approximately $145,000
and $175,000 for fiscal 2002 and 2001, respectively, based on fiscal year end
balances and rates.
ITEM 8. FINANCIAL STATEMENTS.
Information called for by this item is set forth in the Company's
Consolidated Financial Statements contained in this report. The Company's
Consolidated Financial Statements begin at page F-1 hereunder.
ITEM 9. CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers
The following persons are Executive Officers of AMX Corporation:
Robert J. Carroll, 54, was appointed President and Chief Executive Officer
of the Company in November 2001. Prior to his appointment as President and
Chief Executive Officer, Mr. Carroll served as a consultant to the Company
commencing in March 2001 and has served as a director of the Company since
January 2001. Mr. Carroll served as Chairman and CEO of BEI Holding Corporation
from August 1998 to March 2001. BEI
21
subsidiary companies are global leaders in the design, manufacture, and sales
of broadcast automation systems, transmitters, and remote broadcasting
equipment. BEI is responsible for the acquisition, integration, divestiture,
and overall general management of the portfolio businesses. From April 1994
through October 2001, Mr. Carroll was a Principal in Roscommon Limited, a
technology investment and consulting practice providing specialized support in
turnarounds, acquisitions, and divestitures. Mr. Carroll has over twenty-five
years operational experience with technology companies engaged in software and
hardware manufacturing. Mr. Carroll graduated from American Institute, attended
graduate school at American University, and completed MBA graduate courses at
the University of Dallas Graduate School of Management.
C. Chris Apple, 38, has served as Vice President, Corporate Development from
December 2001 to the present. From May 2001 to November 2001, Mr. Apple served
as Vice President and Chief Financial Officer of Ellipsus Systems where his
responsibilities included all financial and administrative functions for the
U.S. corporation and its Swedish subsidiary. From February 1999 to March 2001,
Mr. Apple served as Vice President and Chief Financial Officer for BEI Holding
Corporation where his responsibilities included acquisitions, integration,
divestments and overall general management of several portfolio businesses.
From February 1997 to February 1999, Mr. Apple served as Director of Corporate
Finance and Special Projects for Alcatel USA (formerly DSC Corporation). He
also held prior senior executive positions with AnswerSoft and Sevin Rosen
Funds and professional audit positions with Ernst & Young. Mr. Apple holds a
BBA degree from Oklahoma State University and is a Certified Public Accountant.
Steve H. Byars, 48, has served as Vice President, Administration of the
Company from April 2001 to present. From April 1995 to April 2001, Mr. Byars
led the administrative functions for Hollywood Casino Corporation. Previously
Mr. Byars served Fidelity Investments from October 1989 to April 1995 as Vice
President of Administration. He has also prior senior level experience with a
variety of companies, including Trammell Crow Company, Amdahl Computer
Corporation, and Texas Instruments. Mr. Byars holds a MBA and a BA degree from
the University of North Texas.
Carl D. Evans, 53, has served as Vice President, Operations of the Company
from July 2001 to the present. Prior to joining the Company, Mr. Evans served
as Vice President of Operations and Customer Service for Samsung
Telecommunications from 1998 to June 2001. From 1996 to 1998, Mr. Evans served
as Director of Distribution and Customer Service for Siemens
Telecommunications, Americas. Mr. Evans brings 25-plus years of high-tech
manufacturing and customer service experience to the Company. He has held
senior management positions at companies such as Network Access Corporation,
Intellicall and Nortel.
Patrick W. Gallagher, 52, has served as Vice President, U.S. Sales of the
Company from January 2002 to the present. From 1997 until 2001, Mr. Gallagher
was employed by the Town of Addison, Texas. From 1994 until 1997, Mr. Gallagher
served as Vice President, Sales and Marketing for Prism Technologies/Axcess
Inc. Prior to this period, Mr. Gallagher served as Senior Vice President, Sales
and Marketing for Applied Engineering and Vice President, Sales and Marketing
for Computrac, Inc. Mr. Gallagher holds a BA degree from the University of New
Mexico and attended Texas Wesleyan School of Law.
Jean M. Nelson, 42, has served as Vice President and Chief Financial Officer
of the Company from August 2001 to the present. From May 2000 to July 2001, Ms.
Nelson served as Vice President and Controller of Brinks Home Security. Prior
to May 2000, Ms. Nelson was Vice President and Treasurer at Sensormatic
Electronics Corporation and held senior finance positions at W.R. Grace & Co.
Ms. Nelson held professional audit positions at Arthur Andersen from 1984
through 1988. Ms. Nelson holds a BS degree from Fairfield University and is a
Certified Public Accountant.
Peter C. Nohren, 41, has served as Vice President, Engineering for the
Company from January 2002 to the present. From July 2000 to July 2001, Mr.
Nohren was Chief Operating Officer of Paratek Microwave, and was responsible
for all product lines and distribution channels in the mobile and fixed
wireless markets. Prior to this time, Mr. Nohren spent 18 years at Ericsson in
various capacities, most recently as Vice President of Optical
22
Networks, Cross Connect and Wireless Broadband Access, where he implemented
global product strategies and directed product development efforts. Mr. Nohren
holds a Bachelor's of Electrical Engineering from Berzelius Sweden.
Michael L. Olinger, 55, serves as Vice President, International Sales. Mr.
Olinger has served the Company as the Vice President of International Sales
from May 1994 to May 2001, and from December 2001 to the present. From June
2001 to December 2001, Mr. Olinger served the Company as Vice President, Sales.
Prior to joining the Company, Mr. Olinger served as Vice President,
International Sales of Telex Communications Inc., a professional audio products
company, from 1978 through 1994. Mr. Olinger holds a BA degree from the Central
University of Iowa.
Rashid M. Skaf, 32, has served as Vice President, Marketing from December
2001 to the present. Prior to joining the Company, Mr. Skaf served as Vice
President Global Sales and Marketing for Broadband Gateways Inc. from January
2000 to July 2001. Mr. Skaf was Vice President and General Manager of Nortel
Networks Broadband Wireless Access from 1998 to 1999, overseeing business
development, sales and marketing in North America, global marketing, and
product and program management. From 1997 to 1998, Mr. Skaf served as Executive
Director of Business Development and Marketing for Broadband Networks, Inc.
Prior to this period, Mr. Skaf held technical and management positions within
Ericsson Inc. Mr. Skaf holds a MBA from the American Graduate School of
International Management, Thunderbird and a BS from the University of Tampa.
Directors
The presentation of Directors of the Registrant appears in the Registrant's
Proxy Statement for the 2002 Annual Meeting of Shareholders ("Proxy
Statement"), which is incorporated by reference herein.
Section 16(a) Beneficial Ownership Reporting Compliance
The presentation of Section 16(a) Beneficial Ownership Reporting Compliance
of the Registrant appears in the Proxy Statement, which is incorporated by
reference herein.
ITEM 11. EXECUTIVE COMPENSATION.
The presentation of Executive Compensation of the Registrant appears in the
Proxy Statement, which is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The presentation of the Security Ownership of Certain Beneficial Owners and
Management of the Registrant appears in the Proxy Statement, which is
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The presentation of Certain Relationships and Related Transactions of the
Registrant appears in the Proxy Statement, which is incorporated by reference
herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
The financial statements filed as a part of this Annual Report on Form
10-K are listed in the "Index to Consolidated Financial Statements" on
page F-1 hereof.
(2) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts has been included on
page F-20 of this annual report. All other schedules for which
provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.
23
(3) Exhibits.
The following exhibits are filed as a part of this Annual Report on
Form 10-K.
2.1 Agreement and Plan of Merger dated March 31, 2000 between PHAST Corporation and the Registrant
(Incorporated by reference from Exhibit 2.1 to the Registrant's Form 10-K for the fiscal year ending
March 31, 2000, filed June 22, 2000, File no. 0-26924).
3.1 Amended and Restated Articles of Incorporation of the Registrant (Incorporated by reference from
Exhibit 3.1 to the Company's Form S-8 filed March 11, 1996, File no. 333-2202).
3.2 Articles of Amendment to the Articles of Incorporation of the Company (incorporated by reference
from Exhibit 99.1 to the Registrant's Current Report on Form 8-K, filed September 10, 1999, File
No. 0-026924).
3.3 Articles of Amendment to the Articles of Incorporation of the Company (incorporated by reference
from Exhibit 3.1 to the Registrant's Form 10-Q for the period ended September 30, 2001, File
No. 0-026924).
+3.4 Amended and Restated Bylaws of the Registrant.
4.1 Specimen Certificate for Common Stock of Registrant (Incorporated by reference from Exhibit 4.1 to
the Company's Form S-1 filed September 13, 1995, as amended, File no. 33-96886).
4.2 Registration Rights Agreement dated as of March 30, 1995 by and among Registrant, the persons
listed on Schedule 1.1 thereto, Scott D. Miller, Peter D. York, Joe Hardt and Billie I. Williamson
(Incorporated by reference from Exhibit 4.2 to the Company's Form S-1 filed September 13, 1995, as
amended, File no. 33-96886).
4.3 First Amendment dated September 12, 1995 to Registration Rights Agreement dated as of March 30,
1995 by and among Registrant, the persons listed on Schedule 1.1 thereto, Scott D. Miller, Peter D.
York, Joe Hardt, and Billie I. Williamson (Incorporated by reference from Exhibit 4.3 to the
Company's Form S-1 filed September 13, 1995, as amended, File no. 33-96886).
4.4 Second Amendment dated February 22, 2001 to Registration Rights Agreement dated as of March 30,
1995 by and among Registrant, J. Joseph Hardt, Scott D. Miller and Peter D. York. (Incorporated by
reference from Exhibit 4.4 to the Registrant's Form 10-K for the fiscal year ended March 31, 2001,
File no. 0-26924).
4.5 Declaration of Registration Rights made October 14, 1997, by the Registrant for the benefit of certain
shareholders and employees of PHAST Corporation pursuant to the Stock Purchase Agreement, as
hereinafter defined (Incorporated by reference from Exhibit 4.2 to the Registrant's Form 10-Q, for the
period ending December 31, 1997, File no. 0-26924).
4.6 Registration Rights Agreement dated February 22, 2001 between the Registrant and Scott Miller
(Incorporated by reference from Exhibit 4.6 to the Registrant's Form 10-K for the fiscal year ended
March 31, 2001, File no. 0-26924).
4.7 Common Stock Warrant No. 001 issued to Intel Corporation to purchase 238,057 shares of Common
Stock (Incorporated by reference from Exhibit 4.2 to the Registrant's Form 10-Q, for the period
ending December 31, 1999, File no. 0-26924).
4.8 Common Stock Warrant No. 002 issued to Intel Corporation to purchase 79,352 shares of Common
Stock (Incorporated by reference from Exhibit 4.2 to the Registrant's Form 10-Q, for the period
ending December 31, 1999, File no. 0-26924).
4.9 Securities Purchase and Investor Rights Agreement dated December 15, 1999 (Incorporated by
reference from Exhibit 4.2 to the Registrant's Form 10-Q, for the period ending December 31, 1999,
File no. 0-26924).
10.1 AMX Corporation 1993 Stock Option Plan, accompanied by forms of Incentive Stock Option and
Non-qualified Stock Option Agreements (Incorporated by reference from Exhibit 10.1 to the
Registrant's Form S-1 filed September 13, 1995, as amended, File no. 33-96886).
24
10.2 AMX Corporation 1995 Stock Option Plan, accompanied by form of Stock Option Agreement and
form of Exercise Notice (Incorporated by reference from Exhibit 10.2 to the Registrant's Form S-1
filed September 13, 1995, as amended, File no. 33-96886).
10.3 1995 Director Stock Option Plan, accompanied by form of Director Stock Option Agreement and form
of Exercise Notice (Incorporated by reference from Exhibit 10.3 to the Registrant's Form S-1 filed
September 13, 1995, as amended, File no. 33-96886).
10.4 1996 Employee Stock Purchase Plan, accompanied by forms of Enrollment/Change Form, Section 16b
Participation Form and Stock Purchase Agreement (Incorporated by reference from Exhibit 10.4 to the
Registrant's Form S-1 filed September 13, 1995, as amended, File no. 33-96886).
10.5 First Amendment to AMX Corporation 1996 Employee Stock Purchase Plan (Incorporated by
reference from Exhibit 10.5 to the Registrant's Form 10-Q for the period ended September 30, 2001,
File no. 0-26924).
10.6 Second Amendment to AMX Corporation 1996 Employee Stock Purchase Plan (Incorporated by
reference from Exhibit 10.6 to the Registrant's Form 10-Q for the period ended September 30, 2001,
File no. 0-26924).
10.7 AMX Corporation 1999 Equity Incentive Plan (Incorporated by reference from Exhibit 10.25 to the
Registrant's Form 10-K for the fiscal year ending March 31, 1999, File no. 0-26924).
10.8 Promissory Note dated January 5, 2000, from Peter York to Registrant in the original principal amount
of $100,000 (Incorporated by reference from Exhibit 10.17 to the Registrant's Form 10-K for the fiscal
year ending March 31, 2000, File no. 0-26924).
10.9 Fourth Amended and Restated Loan Agreement dated September 1, 2000 by and between the
Registrant and Bank One, Texas, National Association (Incorporated by reference from Exhibit 10.1 to
the Registrant's Form 10-Q, for the period ending September 30, 2000, File no. 0-26924).
10.10 Amendment to Fourth Amended and Restated Loan Agreement dated January 5, 2001 by and between
the Registrant and Bank One, Texas, National Association (Incorporated by reference from Exhibit
10.1 to the Registrant's Form 10-Q, for the period ending December 31, 2000, File no. 0-26924).
10.11 Second Amendment to Fourth Amended and Restated Loan Agreement dated March 31, 2001 by and
between the Registrant and Bank One, NA (Incorporated by reference from Exhibit 10.9 to the
Registrant's Form 10-K for the fiscal year ended March 31, 2001, File no. 0-26924).
10.12 Lease Agreement dated November 22, 1999 by and between the Registrant and DalMac/GoldCor Real
Estate Venture, Ltd. (Incorporated by reference from Exhibit 10.10 to the Registrant's Form 10-K for
the fiscal year ended March 31, 2001, File no. 0-26924).
10.13 First Amendment to Lease Agreement dated January 10, 2000 by and between the Registrant and
DalMac/GoldCor Real Estate Venture, Ltd. (Incorporated by reference from Exhibit 10.11 to the
Registrant's Form 10-K for the fiscal year ended March 31, 2001, File no. 0-26924).
10.14 Option Agreement dated October 1, 2000 by and between the Registrant and DalMac/GoldCor Real
Estate Venture, Ltd. (Incorporated by reference from Exhibit 10.12 to the Registrant's Form 10-K for
the fiscal year ended March 31, 2001, File no. 0-26924).
10.15 Second Amendment to Lease Agreement dated May 1, 2001 by and between the Registrant and
DalMac/GoldCor Real Estate Venture, Ltd. (Incorporated by reference from Exhibit 10.13 to the
Registrant's Form 10-K for the fiscal year ended March 31, 2001, File no. 0-26924).
10.16 Employment Agreement dated March 20, 2001 between the Registrant and Joe Hardt (Incorporated by
reference from Exhibit 10.14 to the Registrant's Form 10-K for the fiscal year ended March 31, 2001,
File no. 0-26924).
10.17 Promissory Note dated June 15, 1999, from Michael Olinger to Registrant in the original principal
amount of $20,000 (Incorporated by reference from Exhibit 10.16 to the Registrant's Form 10-K for
the fiscal year ended March 31, 2001, File no. 0-26924).
25
10.18 Third Amendment to Fourth Amended and Restated Loan Agreement dated as of September 1, 2001
(Incorporated by reference from Exhibit 10.1 to the Registrant's Form 10-Q, for the period ending
September 30, 2001, File no. 0-26924).
10.19 Fourth Amendment to Fourth Amended and Restated Loan Agreement dated as of September 14, 2001
(Incorporated by reference from Exhibit 10.2 to the Registrant's Form 10-Q, for the period ending
September 30, 2001, File no. 0-26924).
10.20 Amended and Restated Term Note dated as of September 14, 2001 (Incorporated by reference from
Exhibit 10.3 to the Registrant's Form 10-Q, for the period ending September 30, 2001, File
no. 0-26924).
10.21 Waiver and Fifth Amendment to Fourth Amended and Restated Loan Agreement and Related
Promissory Notes dated as of November 14, 2001 (Incorporated by reference from Exhibit 10.4 to the
Registrant's Form 10-Q, for the period ending September 30, 2001, File no. 0-26924).
10.22 Waiver and Sixth Amendment to Fourth Amended and Restated Loan Agreement and Related
Promissory Notes dated as of February 13, 2001 (Incorporated by reference from Exhibit 10.2 to the
Registrant's Form 10-Q, for the period ending December 31, 2001, File no. 0-26924).
+10.23 Waiver and Seventh Amendment to Fourth Amended and Restated Loan Agreement and Related
Promissory Notes dated as of June 6, 2002.
+10.24 Employment Agreement dated February 8, 2002 between the Registrant and Robert J. Carroll.
+21.1 Schedule of Subsidiaries.
+23.1 Consent of Independent Auditors.
- --------
+ Filed herewith.
(b) Reports on Form 8-K.
Current report on Form 8-K dated as of April 26, 2002, and filed on
April 26, 2002, regarding the resignation of Peter D. York as an
officer and member of the Registrant's board of directors.
Current report on Form 8-K dated as of May 15, 2002, and filed on May
15, 2002, regarding the appointment of Larry N. Goldstein as a member
of the Registrant's board of directors.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AMX Corporation
By: /S/ JEAN M. NELSON
------------------------------
Jean M. Nelson,
Vice-President and Chief
Financial Officer
June 28, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated below.
Signature Title Date
--------- ----- ----
/S/ ROBERT J. CARROLL Chairman of the Board, Chief June 28, 2002
- ----------------------------- Executive Officer, President
Robert J. Carroll and Director (Principal
Executive Officer)
/S/ JEAN M. NELSON Vice-President and Chief June 28, 2002
- ----------------------------- Financial Officer (Principal
Jean M. Nelson Financial and Accounting
Officer)
/S/ JOHN E. WILSON Director June 28, 2002
- -----------------------------
John E. Wilson
/S/ THOMAS L. HARRISON Director June 28, 2002
- -----------------------------
Thomas L. Harrison
/S/ LARRY N. GOLDSTEIN Director June 28, 2002
- -----------------------------
Larry N. Goldstein
/S/ RICHARD L. SMITH Director June 28, 2002
- -----------------------------
Richard L. Smith
/S/ J. OTIS WINTERS Director June 28, 2002
- -----------------------------
J. Otis Winters
/S/ PAT SUMMERALL Director June 28, 2002
- -----------------------------
Pat Summerall
27
AMX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors................................................................... F-2
Consolidated Balance Sheets at March 31, 2002 and 2001........................................... F-3
Consolidated Statements of Operations for the years ended March 31, 2002, 2001 and 2000.......... F-4
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2002, 2001 and 2000 F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2002, 2001 and 2000.......... F-6
Notes to Consolidated Financial Statements....................................................... F-7
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
AMX Corporation
We have audited the accompanying consolidated balance sheets of AMX
Corporation as of March 31, 2002 and 2001, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended March 31, 2002. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AMX
Corporation at March 31, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2002, in conformity with accounting principles generally accepted in
the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
April 18, 2002
Dallas, Texas
F-2
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
------------------------
2002 2001
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 1,245,452 $ 1,607,797
Receivables, less allowance for doubtful accounts of $1,130,000 for 2002
and $363,000 for 2001.................................................. 13,579,304 12,604,052
Inventories.............................................................. 11,700,211 14,310,802
Income tax receivable.................................................... 1,981,273 --
Prepaid expenses......................................................... 859,875 1,250,449
Other current assets..................................................... -- 533,080
Deferred income taxes.................................................... -- 2,387,611
----------- -----------
Total current assets.............................................. 29,366,115 32,693,791
Property and equipment, at cost, net........................................ 8,265,011 10,386,937
Capitalized software, less accumulated amortization of $448,000 for 2001.... -- 370,166
Deposits and other.......................................................... 312,242 466,556
Deferred income taxes....................................................... -- 1,944,021
Goodwill, less accumulated amortization of $1,098,000 for 2002 and
$868,000 for 2001......................................................... 70,634 300,589
----------- -----------
Total assets...................................................... $38,014,002 $46,162,060
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 7,295,345 $11,422,458
Current portion of long-term debt........................................ 1,021,450 1,053,604
Line of credit........................................................... 7,600,000 5,550,000
Accrued compensation..................................................... 1,400,564 1,343,862
Accrued restructuring costs.............................................. 448,495 1,077,917
Accrued sales commissions................................................ 600,056 708,347
Other accrued expenses................................................... 2,846,132 2,643,051
----------- -----------
Total current liabilities......................................... 21,212,042 23,799,239
Long-term debt.............................................................. 1,013,002 1,964,845
Commitments and contingencies
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--11,583,525 for 2002 and 11,258,718 for 2001........... 115,835 112,587
Additional paid-in capital............................................... 24,257,894 23,585,287
Accumulated other comprehensive income................................... -- 1,103
Retained earnings (deficit).............................................. (4,116,487) 1,167,283
Less treasury stock (496,476 shares for 2002 and 2001)................... (4,468,284) (4,468,284)
----------- -----------
Total shareholders' equity........................................ 15,788,958 20,397,976
----------- -----------
Total liabilities and shareholders' equity........................ $38,014,002 $46,162,060
=========== ===========
See accompanying notes.
F-3
AMX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended March 31,
-------------------------------------
2002 2001 2000
----------- ----------- -----------
Commercial system sales............. $72,995,356 $72,520,047 $59,273,730
Residential system sales............ 14,611,855 21,459,480 18,920,671
----------- ----------- -----------
Net sales.................... 87,607,211 93,979,527 78,194,401
Cost of sales....................... 46,262,061 49,279,368 37,276,680
----------- ----------- -----------
Gross profit................. 41,345,150 44,700,159 40,917,721
Selling and marketing expenses...... 27,791,907 33,035,289 30,061,093
Research and development expenses... 6,854,273 9,720,275 7,543,617
Restructuring costs................. 298,529 674,613 2,960,667
General and administrative expenses. 8,514,615 8,731,060 6,636,925
----------- ----------- -----------
Total operating expenses..... 43,459,324 52,161,237 47,202,302
----------- ----------- -----------
Operating loss............... (2,114,174) (7,461,078) (6,284,581)
Interest expense.................... 727,152 1,090,142 547,524
Other income (expense), net......... (95,817) (168,362) 63,842
----------- ----------- -----------
Loss before income taxes............ (2,937,143) (8,719,582) (6,768,263)
Income tax provision (benefit)...... 2,346,627 (494,332) (2,642,800)
----------- ----------- -----------
Net loss............................ $(5,283,770) $(8,225,250) $(4,125,463)
=========== =========== ===========
Basic and diluted loss per share.... $ (0.48) $ (0.87) $ (0.47)
=========== =========== ===========
See accompanying notes.
F-4
AMX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock Treasury Stock
------------------- -------------------
Accumulated
Additional Retained Number Other Total
Number Paid-in Earnings of Comprehensive Shareholders'
of Shares Amount Capital (Deficit) Shares Amount Income (Loss) Equity
---------- -------- ----------- ----------- ------- ----------- ------------- -------------
Balance at March 31, 1999.... 8,961,974 $ 89,620 $ 9,419,066 $13,517,996 496,476 $(4,468,284) $(23,333) $18,535,065
Net loss..................... -- -- -- (4,125,463) -- -- -- (4,125,463)
Equity adjustment from
foreign currency translation -- -- -- -- -- -- 38,132 38,132
-----------
Total comprehensive loss..... (4,087,331)
Exercise of stock options,
including tax benefit of
$1,132,905, and purchases
under employee stock
purchase plan............... 475,464 4,755 3,576,847 -- -- -- -- 3,581,602
Sale of common stock......... 423,212 4,232 4,924,199 -- -- -- -- 4,928,431
---------- -------- ----------- ----------- ------- ----------- -------- -----------
Balance at March 31, 2000.... 9,860,650 98,607 17,920,112 9,392,533 496,476 (4,468,284) 14,799 22,957,767
Net loss..................... -- -- -- (8,225,250) -- -- -- (8,225,250)
Equity adjustment from
foreign currency translation -- -- -- -- -- -- (13,696) (13,696)
-----------
Total comprehensive loss..... (8,238,946)
Exercise of stock options,
including tax benefit of
$45,771, and purchases
under employee stock
purchase plan............... 162,717 1,627 424,813 -- -- -- -- 426,440
Sale of common stock......... 1,235,351 12,353 5,240,362 -- -- -- -- 5,252,715
---------- -------- ----------- ----------- ------- ----------- -------- -----------
Balance at March 31, 2001.... 11,258,718 112,587 23,585,287 1,167,283 496,476 (4,468,284) 1,103 20,397,976
Net loss..................... -- -- -- (5,283,770) -- -- -- (5,283,770)
Equity adjustment from
foreign currency translation -- -- -- -- -- -- (1,103) (1,103)
-----------
Total comprehensive loss..... (5,284,873)
Exercise of stock options and
purchases under employee
stock purchase plan......... 324,807 3,248 672,607 -- -- -- -- 675,855
---------- -------- ----------- ----------- ------- ----------- -------- -----------
Balance at March 31, 2002.... 11,583,525 $115,835 $24,257,894 $(4,116,487) 496,476 $(4,468,284) $ -- $15,788,958
========== ======== =========== =========== ======= =========== ======== ===========
See accompanying notes.
F-5
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
-------------------------------------
2002 2001 2000
----------- ----------- -----------
Operating Activities
Net loss.................................................. $(5,283,770) $(8,225,250) $(4,125,463)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation.......................................... 3,927,411 3,805,711 3,038,924
Amortization.......................................... 509,924 659,427 286,607
Write-down of demonstration equipment................. 708,813 -- --
Write-down of goodwill................................ 90,197 -- --
Provision for losses on receivables................... 735,322 1,074,000 294,330
Provision for inventory obsolescence.................. 3,083,792 2,956,598 43,698
Loss on sale of property and equipment................ -- 247,556 --
Deferred income taxes................................. 4,331,632 (913,358) (1,621,756)
Changes in operating assets and liabilities:
Receivables........................................ (1,710,574) (4,149,474) (26,647)
Inventories........................................ (473,201) (5,650,742) (1,040,261)
Prepaid expenses and other assets.................. 1,077,968 515,313 (1,046,186)
Accounts payable................................... (4,127,113) 6,629,665 715,994
Accrued expenses................................... (311,707) 152,129 2,555,693
Income taxes....................................... (2,147,496) 1,187,819 (1,335,182)
----------- ----------- -----------
Net cash provided by (used in) operating activities.......... 411,198 (1,710,606) (2,260,249)
Investing Activities
Purchase of property and equipment........................... (2,514,298) (7,962,587) (3,552,538)
Proceeds from sale of property and equipment................. -- 100,000 --
Investment in capitalized software........................... -- -- (818,092)
----------- ----------- -----------
Net cash used in investing activities........................ (2,514,298) (7,862,587) (4,370,630)
Financing Activities
Sale of common stock--net of expenses, and exercise of stock
options.................................................... 675,855 5,633,384 7,377,128
Net increase in line of credit............................... 2,050,000 5,550,000 --
Repayments of long-term debt................................. (983,997) (975,346) (1,599,489)
----------- ----------- -----------
Net cash provided by financing activities.................... 1,741,858 10,208,038 5,777,639
Effect of exchange rate changes on cash...................... (1,103) (13,696) 38,132
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents......... (362,345) 621,149 (815,108)
Cash and cash equivalents at beginning of year............... 1,607,797 986,648 1,801,756
----------- ----------- -----------
Cash and cash equivalents at end of year..................... $ 1,245,452 $ 1,607,797 $ 986,648
=========== =========== ===========
See accompanying notes.
F-6
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
AMX Corporation ("AMX" or the "Company") was organized in March 1982. The
Company designs, develops, and markets advanced integrated control systems. The
Company sells primarily to dealers and distributors in the United States,
Canada, Mexico, Latin America, Europe, Australia, the Middle East, and the Far
East.
Principles of Consolidation
The Company's financial statements include the accounts of all wholly-owned
subsidiaries. All significant inter-company balances have been eliminated.
Cash Equivalents
Cash equivalents include short term investments with an initial maturity of
three months or less.
Inventories
Inventories are stated at the lower of cost or market and are relieved on
the basis of average cost. Inventories are categorized as raw materials,
work-in-progress or finished goods. Inventory reserves are recorded for
damaged, obsolete, excess and slow-moving inventory. Management uses estimates
to record these reserves. Slow-moving inventory is reviewed by category and may
be partially or fully reserved depending on the type of product, the length of
time the product has been included in inventory, or other relevant factors.
Depreciation
Depreciation of property and equipment is provided in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated
service lives using the straight-line depreciation method. The estimated lives
used in determining depreciation range from 3 to 10 years.
Concentration of Credit Risk
During the years ended March 31, 2002, 2001, and 2000, the Company realized
approximately 29%, 30%, and 27%, respectively, of total revenues from foreign
sales and had approximately 40% and 42%, respectively, of trade receivables due
from foreign customers at March 31, 2002 and 2001. Of the total receivables
outstanding, approximately 12% of such receivables are denominated in foreign
currencies and are thus subject to foreign exchange rate risk. The Company has
subsidiaries outside the U.S. in the United Kingdom and Singapore. The net
assets of these locations represented 12% and 14% of consolidated net assets at
March 31, 2002 and 2001, respectively.
The Company provides credit in the normal course of business to its dealers
and distributors. The Company generally does not require collateral or a
deposit when providing credit. The Company performs ongoing credit evaluations
of its customers and maintains estimated allowances for possible credit losses.
Recent Accounting Pronouncements
In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 is effective for financial statements issued for fiscal
F-7
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
years beginning after December 15, 2001. The Company believes the provisions of
SFAS No. 144 will not have a material impact on its consolidated operating
results or financial position.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated or completed after
June 30, 2001. Under the provisions of SFAS No. 142, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets with finite useful
lives will continue to be amortized over their useful lives. The Company will
adopt these provisions in the first quarter of fiscal 2003. Application of the
non-amortization provisions of SFAS No. 142 in fiscal 2002 would have resulted
in a reduction of $140,000 of the net loss incurred, or approximately $0.01 per
basic and diluted share for fiscal 2002. As of March 31, 2002, the remaining
unamortized balance of goodwill was $71,000. Therefore, the adoption of the
provisions of SFAS No. 141 and No. 142 will not have a material impact on the
operating results or financial position of the Company.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
Revenue is recognized upon shipment of the product and transfer of title to
the customer. A provision is made for estimated sales returns and allowances on
product sales in the same period as the related revenues are recorded. These
estimates are based on historical sales returns, analysis of credit memo data
and other known factors.
Income Taxes
The Company's income taxes are computed using the asset and liability method
of accounting. Under the asset and liability method, a deferred tax asset or
liability is recognized for estimated future tax effects attributable to
temporary differences and carryforwards. The measurement of deferred income tax
assets is adjusted by a valuation allowance, if necessary, to recognize future
tax benefits only to the extent, based on available evidence, that it is more
likely than not that such benefits will be realized.
Capitalized Software
The cost (including coding and testing) of producing software to be held for
sale is capitalized once technological feasibility is established.
Technological feasibility is established either upon the completion of a
detailed program design or the completion of a working model. The establishment
of technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future revenues, estimated economic life and changes in software and hardware
technologies. Capitalized software costs are amortized on a product-by-product
basis using the greater of the amounts computed on the straight-line method
over the remaining estimated economic life of the product or using the ratio
that current gross revenues bear to the total of current and anticipated future
gross revenues for the product. Amortization of capitalized software begins
when the products are available for general release to customers.
F-8
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restructuring
The Company records restructuring charge liabilities in accordance with
Emerging Issues Task Force (EITF) Issue No. 94-3. In some circumstances, the
restructuring liabilities recorded require management to make certain
estimates. Although no significant changes in estimates are anticipated, actual
costs may differ from these estimates.
Foreign Currency Translation
Assets and liabilities denominated in foreign currency are translated into
U.S. dollars at the current rate of exchange existing at year-end and
historical rates, as applicable, and revenues and expenses are translated at
the average monthly exchange rates.
Translation gains and losses included in income are immaterial and result
from translating all accounts into U.S. dollars.
Shipping and Handling Costs
Shipping and handling costs that the Company incurs related to product
shipments to customers are included in cost of sales.
Stock Based Employee Compensation
The Company accounts for stock-based compensation utilizing the provisions
of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock
Issued to Employees, and related interpretations. The Company accounts for
stock-based compensation for non-employees under the fair value method
prescribed by Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation.
Advertising
The Company expenses the costs of advertising when incurred. Advertising
costs were $482,000, $457,000 and $469,000 for the years ended March 31, 2002,
2001, and 2000, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. Inventories
The components of inventories are as follows:
March 31,
------------------------
2002 2001
----------- -----------
Raw materials........... $ 6,237,584 $ 7,948,025
Work in progress........ 2,346,446 1,154,669
Finished goods.......... 7,126,905 8,306,562
Reserve for obsolescence (4,010,724) (3,098,454)
----------- -----------
$11,700,211 $14,310,802
=========== ===========
F-9
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Property and Equipment
The general classes of property and equipment are as follows:
March 31,
-------------------------
2002 2001
------------ -----------
Equipment, including computers $ 16,133,907 $16,716,172
Furniture and fixtures........ 3,204,716 1,970,698
Leasehold improvements........ 1,427,279 1,099,045
------------ -----------
20,765,902 19,785,915
Less accumulated depreciation. (12,500,891) (9,398,978)
------------ -----------
$ 8,265,011 $10,386,937
============ ===========
4. Debt
The Company has a $12.5 million revolving line of credit from Bank One,
Texas, N.A. ("Bank One"). The line of credit provides for interest at varying
rates of the Company's choice based on the prime lending rate or the London
Inter-Bank Offered Rate. The line of credit is collateralized by receivables
and inventory. At March 31, 2002, $7.6 million was outstanding under the
revolving line of credit agreement and $4.3 million was available for future
borrowings under the facility's borrowing base limits. This revolving line of
credit expires on September 1, 2002, and is expected to be renewed at that
time. The Company also has an unsecured term note with Bank One. The term note
provides for quarterly payments of principal and interest through April 30,
2004 and has an outstanding principal balance of approximately $2.0 million as
of March 31, 2002. Based on prevailing market rates, the carrying value of the
Company's short and long term debt approximates market.
The line of credit contains various restrictive and financial covenants. As
of March 31, 2002, the Company was in violation of the quarterly financial
operating covenants in effect at that date solely as a result of the one-time
charges recorded during the quarter ended September 30, 2001. However, Bank One
waived such non-compliance with these covenants for the March 31, 2002
reporting period and eliminated all other financial covenants in favor of a
tangible net worth requirement of $13.4 million and monthly consolidated EBITDA
requirements for the remaining term of the agreement.
Interest paid amounted to approximately $708,000, $923,000, and $548,000 for
the years ended March 31, 2002, 2001, and 2000, respectively.
5. Employee Benefit Plans
The Company has a 401(k) plan available to all U.S. employees who are at
least 21 years of age and meet certain service requirements. Employees can
contribute up to 15% of their salary subject to statutory limitations. Prior to
December 31, 1999, the Company matched the employees' contributions at $0.25 on
every dollar to a maximum of 4% of compensation. Effective January 1, 2000, the
Company matched the employees' contributions at $0.50 on every dollar to a
maximum of 8% of compensation. In November 2001, the Company match was
suspended. Company contributions for the years ended March 31, 2002, 2001 and
2000, were $271,000, $515,000, and $252,000 respectively.
The Company's 1996 Employee Stock Purchase Plan permits eligible employees
to purchase common stock through payroll deductions. The price of the common
stock purchased under the 1996 Employee Stock Purchase Plan is 85% of the lower
of the fair market value of the common stock at the beginning or at the end of
each
F-10
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
offering period. The Plan provides for two six-month offering periods each year
beginning on the first trading day on or after January 1 and July 1. For the
years ended March 31, 2002, 2001 and 2000, 87,773, 74,235, and 35,728 shares
were issued under this plan. As of March 31, 2002, there were 250,000 shares
available for future issuance under the Plan.
6. Income Taxes
The components of the Company's income tax provision (benefit) were as
follows:
Year ended March 31,
-----------------------------------
2002 2001 2000
----------- --------- -----------
Federal income taxes:
Current........... $(2,102,034) $ 36,211 $ (670,849)
Deferred.......... 4,201,682 (553,925) (1,802,230)
State income taxes... 178,392 (404,906) (349,992)
Foreign income taxes. 68,587 428,288 180,271
----------- --------- -----------
$ 2,346,627 $(494,332) $(2,642,800)
=========== ========= ===========
Foreign operations incurred a loss before tax of approximately $198,000 for
the year ended March 31, 2002. Foreign operations reported income before income
taxes for the years ended March 31, 2001 and 2000 of $956,000, and $547,000,
respectively. Undistributed earnings (approximately $2.0 million at March 31,
2002) of non-U.S. subsidiaries have been indefinitely reinvested and,
accordingly, no provision has been made for taxes due upon repatriation of
these earnings.
The income tax provision (benefit) differs from amounts computed by applying
the U.S. federal statutory tax rate to income (loss) before income taxes as
follows:
Year ended March 31,
------------------------------------
2002 2001 2000
---------- ----------- -----------
Federal income tax (benefit) at statutory rate $ (998,629) $(2,964,658) $(2,301,209)
State income tax (benefit), net of federal tax 117,739 (267,238) (230,995)
Benefit of income reported through Foreign
Sales Corporation and Extra Territorial
Income benefit.............................. (254,931) (137,005) (335,111)
Effect of non-U.S. tax rates.................. 61,015 (15,748) (5,849)
Change in valuation allowance................. 3,737,380 2,518,560 --
Effect of non-deductible goodwill and other
intangibles amortization.................... 58,672 78,227 78,226
Effect of non-deductible meals and
entertainment expenses...................... 100,022 165,428 168,457
Recognition of research and development
credit...................................... (541,857) (428,000) --
Provision for potential assessments........... 91,694 370,000 --
Other......................................... (24,478) 186,102 (16,319)
---------- ----------- -----------
$2,346,627 $ (494,332) $(2,642,800)
========== =========== ===========
The Company recorded a tax provision of approximately $4.2 million during
the quarter ended ended September 30, 2001 in order to record a full valuation
allowance against its deferred tax assets. This valuation allowance was
recorded as a result of the one-time charges and operating performance of the
Company in fiscal
F-11
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
years 2000, 2001, and through the quarter ended September 30, 2001. Although
the Company anticipates future sustained profitability, generally accepted
accounting principles required that historical operating performance weigh
heavily in assessing the realizability of deferred tax assets. In the fourth
quarter of fiscal 2002, Congress passed the Job Creation and Worker Assistance
Act of 2002, under which the period allowed for carrying back net operating
losses from certain tax years was extended from two to five years. As a result,
the Company was able to immediately realize $2.0 million of the deferred tax
assets for which a valuation allowance had previously been recorded.
Accordingly, the Company recorded a tax benefit of $2.0 million during the
fourth quarter of fiscal 2002. The Company will assess the realizability of its
deferred tax assets on an ongoing basis and will eliminate the valuation
allowance when warranted based on sustained profitable operating results.
Significant components of deferred tax assets and liabilities are as follows:
March 31,
------------------------
2002 2001
----------- -----------
Deferred tax assets:
Net operating loss carryforwards.. $ 4,098,945 $ 5,809,462
Inventories....................... 1,950,127 1,856,244
Bad debts......................... 326,794 220,518
Accrued restructuring charge...... 165,809 398,506
Tax credit carryforwards.......... 961,666 375,000
Other accrued expenses............ 549,947 377,713
Inter-company profit in inventory. 140,925 100,290
Intangible assets................. 76,229 69,189
----------- -----------
8,270,442 9,206,922
Valuation allowance............... (7,608,299) (3,870,910)
----------- -----------
662,143 5,336,012
Deferred tax liabilities:
Prepaid expenses.................. (348,412) (688,393)
Capitalized software.............. -- (136,850)
Depreciation...................... (243,488) (108,894)
Transaction fees.................. (70,243) (70,243)
----------- -----------
(662,143) (1,004,380)
----------- -----------
Net deferred tax asset............... $ -- $ 4,331,632
=========== ===========
Net income tax payments of approximately $162,000 were made in the year
ended March 31, 2002, consisting of foreign and state income tax payments
offset by federal tax refunds. Net income tax refunds of $662,000 were received
in the year ended March 31, 2001. Net income tax payments of approximately
$963,000 were made in the year ended March 31, 2000.
At March 31, 2002, the Company has approximately $10.9 million of federal
net operating loss carryforwards, which begin to expire in 2012. Of this
amount, $3.6 million is subject to certain limitations under the Internal
Revenue Code. The Company has approximately $10.9 million of state net
operating loss carryforwards which expire at various dates. The Company also
has approximately $0.4 million of net operating losses generated by its
subsidiary in Singapore. Research and development credit carryforwards amount
to $0.9 million and begin to expire in 2019.
7. Commitments and Contingencies
The Company leases real property and equipment. Under certain leases, the
Company is required to pay costs such as taxes, insurance, and operating
expenses in addition to the rental payments. Rental expense under
F-12
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
operating leases for the years ended March 31, 2002, 2001, and 2000, was $2.3
million, $1.4 million, and $1.1 million, respectively.
At March 31, 2002 future minimum payments for non-cancelable operating
leases are as follows:
Year ending March 31:
---------------------
2003................ $ 1,861,872
2004................ 1,715,177
2005................ 1,548,777
2006................ 1,584,425
2007................ 1,645,929
2008 and thereafter. 5,623,591
-----------
$13,979,771
===========
The Company is involved in certain legal activities and disputes arising in
the ordinary course of business. The Company believes that it has adequate
legal defenses and that the ultimate outcome of these matters will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.
8. Earnings per Share
The following table sets forth the computation of basic and diluted earnings
per share:
Year ended March 31,
-------------------------------------
2002 2001 2000
----------- ----------- -----------
Numerator:
Net income (loss)......................... $(5,283,770) $(8,225,250) $(4,125,463)
Denominator:
Denominator for basic earnings per share--
Weighted-average shares outstanding..... 11,006,372 9,486,476 8,734,243
Effect of dilutive securities:
Employee stock options.................... -- -- --
----------- ----------- -----------
Denominator for diluted earnings per share 11,006,372 9,486,476 8,734,243
=========== =========== ===========
Basic earnings (loss) per share........... $ (0.48) $ (0.87) $ (0.47)
=========== =========== ===========
Diluted earnings (loss) per share......... $ (0.48) $ (0.87) $ (0.47)
=========== =========== ===========
Had the Company reported net income for fiscal 2002, 2001 and 2000, 566,886,
1,576,537 and 2,163,381 potentially dilutive shares would have been included in
the computation of diluted earnings per share, respectively.
9. Restructuring Costs
Salt Lake City Relocation
During the third quarter of 2000, the Company announced plans to shutdown
its operations located in Salt Lake City and move those operations to its
corporate headquarters in Dallas. The Salt Lake City location included a
majority of the Company's residential operations. Approximately 94 employees,
all of whom worked
F-13
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
at the Company's Salt Lake City location, were impacted by this shutdown. Of
the 94 employees, 82 were expected to be terminated or decline the Company's
offer to move to Dallas and thus receive severance, and 12 were expected to
accept positions with the Company in Dallas. Employees that ended their
employment prior to their termination date and employees that opted to move to
Dallas, as offered under the plan, forfeited their termination benefits. Of the
94 employees, approximately 57 employees received severance benefits totaling
$914,000. Of the remaining employees, 11 employees forfeited their severance
benefit by leaving the Company prior to vesting in the severance benefit, and
26 employees forfeited their severance by accepting positions with the Company
in Dallas. Total forfeitures were $390,000. An asset impairment charge was
recorded to write-down the carrying value of the property and equipment to its
estimated fair market value. Leasehold cancellation charges represented
estimated costs to terminate leasehold agreements for the Company's Salt Lake
City facilities. The move was completed in the third quarter of fiscal year
2001. However, the Company continues to hold a lease on certain property in
Salt Lake City, a portion of which is subleased to a third party. The Company
is reversing the leasehold cancellation reserve as sublease income is received
from the sublessee. The reserve is also reduced for lease payments made to the
landlord in excess of the sublease income received.
The following is a summary of the Salt Lake City restructuring action from
inception through March 31, 2002 (in thousands):
Write down
Leasehold of property
cancellation and
Severance charges equipment Total
--------- ------------ ----------- ------
Initial Restructuring Reserve..................... $1,304 $ 649 $ 655 $2,608
Activity through March 31, 2001:
Severance payments............................. (914) -- -- (914)
Severance forfeitures.......................... (390) -- -- (390)
Payment of lease expenses...................... -- (117) -- (117)
Reduction of lease obligation through sublease. -- (86) -- (86)
Correction of leasehold cancellation reserve... -- (118) -- (118)
Non-cash write down of property and equipment.. -- (655) (655)
------ ----- ----- ------
Reserve at March 31, 2001......................... -- 328 -- 328
Activity through March 31, 2002:
Payment of lease expenses...................... -- (34) -- (34)
Reduction of lease obligation through sublease. -- (182) -- (182)
------ ----- ----- ------
Reserve at March 31, 2002......................... $ -- $ 112 $ -- $ 112
====== ===== ===== ======
Consumer Broadband Division
In the fourth quarter of fiscal 2001, the Company initiated a corporate-wide
restructuring plan that included the discontinuation of its Consumer Broadband
Division and retail distribution strategy and a reduction of approximately 44
employees or 10% of the Company workforce. This severance action affected
employees across the Company, although many of the terminated employees were
from either the Company's Consumer Broadband Division or information systems
department. The severance of the 44 employees and discontinuance of the
Consumer Broadband Division was completed prior to March 31, 2001, although
certain commitments continued into fiscal 2002, and certain severance payments
will continue through December 2002. In conjunction with this plan, the Company
recorded a charge of $2.2 million, of which $1.2 million was included in
restructuring costs, $0.7 million was included in cost of sales, and $0.2
million was included as a reversal to revenue.
F-14
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a summary of the consumer broadband and corporate-wide
restructuring action from inception through March 31, 2002 (in thousands):
Inventory Write down of Non-cancelable
related receivables and commitments
Severance charges intangible assets and other Total
--------- --------- ----------------- -------------- ------
Initial Restructuring Reserve.... $ 859 $ 715 $ 452 $ 145 $2,171
Activity through March 31, 2001:
Severance payments............ (315) -- -- -- (315)
Write down of inventory....... -- (654) -- -- (654)
Write down of receivables and
intangible assets........... -- -- (452) -- (452)
----- ----- ----- ----- ------
Reserve at March 31, 2001........ 544 61 -- 145 750
Activity through March 31, 2002:
Severance payments............ (330) -- -- -- (330)
Inventory conversion costs.... -- (61) -- -- (61)
Other payments................ -- -- -- (145) (145)
----- ----- ----- ----- ------
Reserve at March 31, 2002........ $ 214 $ -- $ -- $ -- $ 214
===== ===== ===== ===== ======
Corporate Structure Realignment
In the third quarter of fiscal 2002, the Company announced a restructuring
program that included the realignment of its corporate structure and a
reduction of its workforce. The personnel reductions included 66 positions,
which were primarily Dallas-based personnel. The reduction in workforce was
completed prior to December 31, 2001, although certain severance and other
payments continued into the fourth quarter of fiscal 2002 and beyond. In
conjunction with this corporate realignment, the Company recorded a charge of
$0.6 million, all of which was included in restructuring costs.
The following is a summary of the corporate realignment from inception
through March 31, 2002 (in thousands):
Severance
---------
Initial Restructuring Reserve... $ 600
Activity through March 31, 2002:
Severance payments........... (359)
Other payments............... (29)
Reversals.................... (90)
-----
Reserve at March 31, 2002....... $ 122
=====
10. Shareholders' Equity and Stock Options
On December 15, 1999, the Company and Intel Corporation ("Intel") entered
into an agreement pursuant to which, among other things, the Company issued to
Intel, in consideration of services provided by Intel under such agreement, a
warrant to purchase 79,352 shares of Common Stock ("Business Warrant") which
was to vest upon the occurrence of certain co-development and co-marketing
efforts between the Company and Intel related to the Company's former consumer
broadband market strategy. On December 15, 1999, the Company and Intel also
entered into a Securities Purchase and Investor Rights Agreement ("Purchase
Agreement") pursuant to which Intel purchased 423,212 shares of Common Stock
and was issued a vested warrant to purchase 238,057
F-15
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
shares of Common Stock ("Equity Warrant"). The aggregate purchase price under
the Purchase Agreement for the Common Stock and the Equity Warrant was
$5,000,000. The Business Warrant and the Equity Warrant each have an exercise
price of $21.54 per share ("Exercise Price") and a term of five years. The
Company performed a valuation to determine the estimated fair value of the
common stock and Equity Warrant issued in this transaction. The common stock
issued was valued using the Company's average share price for the twenty day
period preceding the closing of the transaction on December 15, 1999, and the
Equity Warrant was valued using the Black-Scholes option valuation model. The
estimated values applicable to the common stock and Equity Warrant issued were
discounted due to the low trading volume of the Company's common stock and the
selling restrictions on the common stock and Equity Warrant issued. The
resulting valuation yielded an estimated fair value of $5 million for the
common stock and the Equity Warrant.
Subsequent to this transaction, the Company discontinued the Consumer
Broadband Division and all related product and marketing activity. As a result,
the events under which the Business Warrant was to vest have not occurred and
are not expected to occur in the future. Additionally, Intel has divested its
shares of Common Stock and is not expected to exercise the Equity Warrant.
On March 20, 2001, the Company issued 1,161,116 shares of its common stock
for an aggregate purchase price of approximately $5,000,000 to an investor
group, led by Scott Miller, the Company's then president, chief executive
officer and chairman.
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends on its Common Stock in the foreseeable future in
order to retain all available earnings generated by operations for the
development and growth of the business. In addition, under the terms of the
Company's current debt agreements, the Company may not pay dividends without
the prior consent of the lending bank.
The Company has four stock-based compensation plans outstanding, which are
described below. No compensation cost is recognized for its fixed option plans
because the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of the grant. The
1993 Stock Option Plan, as amended, authorized the granting of options for up
to 1,452,544 shares of common stock. All options have a term of ten years and
vest over a four year period. There are no options available for grant under
this plan.
In September 1995, the Company approved the 1995 Stock Option Plan and the
1995 Director Stock Option Plan. Under the 1995 Stock Option Plan, the Company
may grant options for up to 1,000,000 shares of common stock. All options have
a term of ten years and vest over a four-year period. The 1995 Director Stock
Option Plan authorized the granting of stock options for up to 250,000 shares
to non-employee directors. All options granted under this plan are fully vested
and have a term of ten years.
In April 1999, the Company and its shareholders approved the 1999 Equity
Incentive Plan. Under this plan, the Company may grant options for up to
3,000,000 shares of common stock. These options have a term of ten years and
generally vest over periods ranging from three to four years.
F-16
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the status of the Company's plans is presented below:
Weighted
Average
Shares Exercise Price
---------- --------------
Outstanding at March 31, 1999........................... 1,514,435 $ 4.63
Options granted...................................... 1,285,600 11.38
Options exercised.................................... (433,844) 4.77
Options canceled..................................... (131,864) 6.78
----------
Outstanding at March 31, 2000........................... 2,234,327 8.36
Options granted...................................... 938,700 4.06
Options exercised.................................... (162,817) 2.34
Options canceled..................................... (606,458) 9.06
----------
Outstanding at March 31, 2001........................... 2,403,752 6.87
Options granted...................................... 888,000 2.75
Options exercised.................................... (232,211) 1.77
Options canceled..................................... (1,202,590) 7.68
----------
Outstanding at March 31, 2002........................... 1,856,951 $ 5.01
==========
Available for grants in future periods at March 31, 2002 2,067,688
==========
The following table summarizes information about stock options outstanding
under the plans as of March 31, 2002:
Options Outstanding Options Exercisable
----------------------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Exercise
Range of Exercise Prices Options Contractual Life Price Options Price
------------------------ --------- ---------------- -------- ------- --------
$2.07 to $3.00...... 691,000 9.6 years $ 2.54 121,000 $ 2.50
$3.06 to $5.50...... 638,428 8.5 years 3.79 192,429 4.48
$5.75 to $13.13..... 513,023 6.1 years 9.42 359,333 8.71
$17.50 to $39.63.... 14,500 5.1 years 20.55 13,500 19.14
--------- -------
1,856,951 8.2 years $ 5.01 686,262 $ 6.63
========= =======
There were 931,982 and 631,781 exercisable options at March 31, 2001 and
2000, respectively, and the weighted-average exercise price of those options
was $5.59 and $3.90, respectively.
Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock purchase plan and other stock options under
the fair value method of that SFAS. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model.
The following weighted-average assumptions were used for grants under the fixed
option plans in 2002, 2001 and 2000, respectively: dividend yield of 0% for all
periods; expected volatility of 94.8%, 89.6%, and 66.4%; risk-free interest
rate of 4.5%, 5.15% and 5.94%; and expected lives of 6 years for all periods.
F-17
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For purposes of pro forma disclosures the estimated fair value of
stock-based compensation and other options is amortized to expense over the
vesting period. The Company's pro forma net loss and net loss per share is as
follows:
Year ended March 31,
--------------------------------------
2002 2001 2000
----------- ------------ -----------
Net loss........................ As reported $(5,283,770) $ (8,225,250) $(4,125,463)
Pro forma $(6,228,770) $(10,991,844) $(6,494,857)
Basic and diluted loss per share As reported $ (0.48) $ (0.87) $ (0.47)
Pro forma $ (0.57) $ (1.16) $ (0.74)
The weighted-average fair value of options granted under the option plans
during 2002, 2001, and 2000 was $2.16, $3.03, and $7.31, respectively.
11. Certain Geographic Information
The Company is engaged in one line of business: the design, manufacture, and
distribution of systems that allow control of electronic equipment and the
distribution of information from the Internet to these devices. International
sales which include export sales and sales from foreign operations account for
a significant portion of the Company's revenues. Domestic sales represented
approximately $62.6 million, $65.7 million, and $57.3 million, or 71%, 70%, and
73% of the Company's total sales during the fiscal years ended March 31, 2002,
2001, and 2000, respectively. Sales outside of the United States, consisting of
products sold primarily in Europe, Canada, Mexico, Asia, and Australia,
represented approximately $25.0 million, $28.3 million, and $20.9 million, or
29%, 30%, and 27% of the Company's total sales during the fiscal years ended
March 31, 2002, 2001, and 2000, respectively. Approximately 10%, 12%, and 10%
of net sales for the years ended March 31, 2002, 2001 and 2000, respectively,
were from the Company's international locations, consisting of 7%, 9%, and 8%
in Europe and 3%, 3%, and 2% in other foreign locations. Approximately 12%,
14%, and 13% of identifiable assets for the years ended March 31, 2002, 2001
and 2000, respectively, were located outside of the U.S., with 10%, 11%, and
11% located in Europe. U.S. export sales totaled $16.5 million, $16.7 million,
and $12.9 million for the years ended March 31, 2002, 2001, and 2000,
respectively. Of such export sales, 38%, 49%, and 55%, respectively, were to
Europe.
Export sales from the Company's U.S. operations to unaffiliated customers
were as follows:
Year ended March 31,
-----------------------------------
2002 2001 2000
----------- ----------- -----------
Europe.................. $ 6,342,000 $ 8,233,000 $ 7,091,000
Asia and the Pacific Rim 5,267,000 4,787,000 3,621,000
Canada and Latin America 3,750,000 2,798,000 1,603,000
Middle East and Africa.. 1,187,000 901,000 628,000
----------- ----------- -----------
$16,546,000 $16,719,000 $12,943,000
=========== =========== ===========
F-18
AMX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
12. Unaudited Quarterly Financial Data
The following table sets forth certain unaudited quarterly data for the
eight quarters ended March 31, 2002 (in thousands, except per share amounts):
Three Months Ended
-------------------------------------------------------------------------
June 30, Sept 30, Dec 31, March 31, June 30, Sept 30, Dec 31, March 31,
2000 2000 (1) 2000 2001 (2) 2001 2001 (3) 2001 (4) 2002 (5)
-------- -------- ------- --------- -------- -------- -------- ---------
Net sales.................. $21,204 $25,864 $24,230 $22,682 $21,723 $23,006 $21,285 $21,593
Gross profit............... 11,391 13,118 12,357 7,834 11,125 9,132 10,320 10,768
Operating income (loss).... (895) 760 (317) (7,009) 486 (3,576) 445 531
Net income (loss).......... (666) 201 (385) (7,375) 201 (8,133) 299 2,349
Basic earnings (loss) per
share.................... $ (0.07) $ 0.02 $ (0.04) $ (0.76) $ 0.02 $ (0.74) $ 0.03 $ 0.21
Diluted earnings (loss) per
share.................... $ (0.07) $ 0.02 $ (0.04) $ (0.76) $ 0.02 $ (0.74) $ 0.03 $ 0.21
- --------
(1)Includes approximately $0.7 million increase in the allowance for doubtful
accounts due to a customer who filed for bankruptcy.
(2)Includes approximately $5.2 million in restructuring costs and other
one-time charges which included severance and non-cancellable commitment
charges of $1.2 million; inventory related reserves of $2.9 million;
receivable related reserves of $0.6 million; reserves against other assets
of $0.3 million; and charges for non-cancelable commitments of $0.2 million.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations and Note 9 for further information.
(3)Includes approximately $8.2 million of one-time charges, including inventory
related reserves of $3.2 million, accounts receivable reserves of $0.5
million, write-offs of miscellaneous intangibles of $0.3 million, and a
valuation allowance against deferred tax assets of $4.2 million. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations for further information.
(4)Includes restructuring charges of $0.6 million recorded related to a
realignment of the Company's corporate structure. See Note 9 for further
information.
(5)Includes a $2.0 million tax benefit recorded as a result of tax legislation
passed by Congress in March 2002 which resulted in the immediate recognition
of deferred tax assets for which a valuation allowance had previously been
recorded. See Note 6 for further information.
F-19
Schedule II
AMX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended March 31, 2000, 2001 and 2002
(in thousands)
Balance at Deductions, Balance
beginning Recoveries at end
of period Additions & Other of period
---------- --------- ----------- ---------
Allowance for Doubtful Accounts:
Fiscal 2000.................. $ 420 $ 294 $ (332) $ 382
Fiscal 2001.................. $ 382 $1,074 $(1,093) $ 363
Fiscal 2002.................. $ 363 $ 735 $ 32 $1,130
Inventory Reserve:
Fiscal 2000.................. $ 714 $ 44 $ -- $ 758
Fiscal 2001.................. $ 758 $2,957 $ (617) $3,098
Fiscal 2002.................. $3,098 $3,084 $(2,171) $4,011
Tax Valuation Allowance:
Fiscal 2000.................. $1,352 $ -- $ -- $1,352
Fiscal 2001.................. $1,352 $2,519 $ -- $3,871
Fiscal 2002.................. $3,871 $4,211 $ (474) $7,608
F-20