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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended December 31, 2002

or

For the transition period from                  to                     

Commission File Number 0-26924

AMX Corporation

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (469) 624-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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AMX CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002

INDEX

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AMX CORPORATION

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

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AMX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes.

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AMX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes.

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AMX Corporation

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying consolidated financial statements, which should be read in conjunction with the consolidated financial statements and footnotes thereto included in the AMX Corporation (“AMX” or the “Company”) Annual Report on Form 10-K for the fiscal year ended March 31, 2002, are unaudited (except for the March 31, 2002 consolidated balance sheet, which was derived from the Company’s audited financial statements), but have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current year presentation.

Operating results for the three and nine months ended December 31, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year ending March 31, 2003.

2. New Accounting Pronouncements

In December 2002 the Financial Accounting Standards Board (FASB) issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123. The transition provisions of this Statement are effective for fiscal years ending after December 15, 2002, and the disclosure requirements of the Statement are effective for interim periods beginning after December 15, 2002. The Company currently plans to continue to apply the intrinsic-value based method to account for stock options and will comply with the new disclosure requirements beginning with the first quarter of fiscal 2004.

3. Income (Loss) Per Share

The following table sets forth the computation of basic and diluted income (loss) per share:

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The Company excluded stock options outstanding from the computation of income (loss) per share if the option exercise price was greater than the market value of the common stock for the period or the Company incurred a net loss for the applicable period, as the affect would have been anti-dilutive. The stock options excluded from the computation of diluted income (loss) per share were 1,042,575 and 1,650,575 for the three and nine months ended December 31, 2002, respectively and 1,462,586 and 438,585 for the three and nine months ended December 31, 2001, respectively.

4. Inventories

The components of inventories are as follows:

5. 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. A total of 94 employees were impacted by this action, with 26 employees accepting positions in Dallas and 68 employees being terminated. In connection with this restructuring activity, the Company recorded a charge of $2.6 million that represented severance costs, a write-down of assets, and leasehold cancellation charges. All severance payments, severance forfeitures, and asset write-downs were completed prior to March 31, 2001.

The leasehold cancellation charges represented the Company’s estimated costs to fulfill its remaining lease obligations for the Salt Lake City facilities, a portion of which was subleased to a third party. The Company reversed the leasehold cancellation reserve as sublease income was received from the sublessee. The reserve was also reduced for lease payments made to the landlord in excess of the sublease income received. As of December 31, 2002, the Company has a remaining reserve of approximately $112,000 representing a reserve for a potential deficiency of receipts from the sub-lessee that will have to be funded by the Company. The lease obligation is through March 2004.

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The following is a summary of the Salt Lake City restructuring action from inception through December 31, 2002 (in thousands):

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 as well as the reduction of approximately 44 employees or 10% of the Company’s 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 continued 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. As of December 31, 2002, there were no remaining obligations or severance payments.

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The following is a summary of the consumer broadband and corporate-wide restructuring action from inception through December 31, 2002 (in thousands):

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. As of December 31, 2002, the Company has a remaining reserve of approximately $8,000 representing future severance payments.

The following is a summary of the corporate realignment from inception through December 31, 2002 (in thousands):

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6. 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 based on the Company’s choice of the prime lending rate or the London Inter-Bank Offered Rate. The interest rate varies depending on the ratio of funded indebtedness to EBITDA as defined in the loan agreement. The line of credit is collateralized by the assets of the Company and its subsidiaries. At December 31, 2002, $4.0 million was outstanding under the revolving line of credit agreement and $5.9 million was available for future borrowings under the facility’s borrowing base limits. This revolving line of credit expires on September 29, 2003. The Company anticipates that the revolving line of credit will be renewed upon maturity with similar terms and conditions. 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 $1.3 million as of December 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 and the term note contain various restrictive and financial covenants. The Company is in compliance with each of these covenants as of December 31, 2002.

7. Income Taxes

During fiscal years 2001 and 2002, the Company recorded valuation allowances against its deferred tax assets, the effect of which was to fully reserve for its net deferred tax assets as of the second fiscal quarter of 2002. Accordingly, in the third quarter of fiscal 2002, the Company ceased recording a tax provision or benefit on its U.S. operations. As the Company incurs domestic tax expense or benefit, an offsetting decrease or increase is recorded to the valuation allowance. 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.

In the second fiscal quarter of 2002, the Company recorded a tax provision of approximately $4.2 million against its net deferred tax assets. The valuation allowance was recorded as a result of the one-time charges and operating performance of the Company in fiscal years 2000, 2001, and through the quarter ended September 30, 2001. The effect of recording this valuation allowance was to write-down the Company’s net deferred tax assets to zero. 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

8. Purchase Commitments with Contract Manufacturers and Suppliers

The Company uses several contract manufacturers and suppliers to provide raw materials and manufacturing services for its products. During the normal course of business, the Company enters into agreements with contract manufacturers and suppliers that allow them to procure material based upon estimated material usage requirements and forecasted demand for our products. As of December 31, 2002, the Company has outstanding purchase commitments of approximately $8.9 million, compared with $13.7 million as of December 31, 2001. The Company has entered into certain purchase agreements relating to inventory items that are currently classified by the Company as either slow moving or obsolete inventory. The Company anticipates incurring cancellation or restocking charges associated with these purchase agreements and has established a reserve of $150,000 in the third quarter of fiscal 2003.

9. One-Time Charges

The Company recorded one-time charges of approximately $8.2 million during the nine months ended December 31, 2001. These one-time charges included reserves 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.

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The charge of $0.7 million was taken to write off certain product demonstration equipment assets as a result of increasing demand for the Company’s next generation product offerings and the resulting downward revision to the forecast for certain of the Company’s existing 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 has seen 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 nine months ended December 31, 2001 in order to record a valuation allowance against its deferred tax assets. Although the Company anticipates future sustained profitability, generally accepted accounting principles require that historical operating performance weigh heavily in assessing the realizability of deferred tax assets.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in the AMX Corporation (“AMX” or the “Company”) Annual Report on Form 10-K. The Company believes that all necessary adjustments (consisting only of normal recurring adjustments) have been included in the amounts stated below to present fairly the following information. Quarterly operating results have varied significantly in the past and can be expected to vary in the future. Results of operations for any particular period are not necessarily indicative of results of operations for a full year.

Forward-Looking Information

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; foreign exchange risks; 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 product development and acceptance, 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.

OVERVIEW

AMX Corporation 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

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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 an office in the United Kingdom and directly supporting 122 dealers, the Company relies on an international network of 22 exclusive distributors, which offer our products in 69 countries and support approximately 1,100 dealers in those countries. 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:

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 currently outsources over 85% of its products.

The Company’s quarterly operating results have varied significantly in the past, and can be expected to vary in the future. These quarterly fluctuations have been the result of a number of factors. These factors include seasonal purchasing by the Company’s dealers and distributors, particularly from international distributors, OEMs, and other large customers; the timing of new product introductions by the Company and its competitors; fluctuations in commercial and residential construction and remodeling activity; and changes in product or distribution channel mix.

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FISCAL 2001 RESTRUCTURING AND ONE-TIME CHARGES

During the quarter ended September 30, 2001, the Company recorded one-time charges of approximately $4.0 million. These one-time charges included reserves 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, and a write off of miscellaneous intangibles of $0.3 million.

As a result of the aforementioned charges and historical operating performance, the Company also recorded a tax provision of approximately $4.2 million for the quarter ended September 30, 2001 in order to record a valuation allowance against its deferred tax assets. Although the Company anticipated returning to profitability, generally accepted accounting principles require that historical operating performance weigh heavily in assessing the realizability of deferred tax assets.

During the year-ago quarter ended December 31, 2001, the Company announced a restructuring program that included the realignment of its corporate structure and a reduction of its workforce. In conjunction with this corporate realignment, the Company recorded a charge of $0.6 million, all of which was included in restructuring costs.

The results of operations located at Table 1.1 include the operating results for the three and nine months ended December 31, 2001 excluding the aforementioned one-time and restructuring costs. Due to the nature and/or magnitude of these one-time and restructuring charges, management believes that these charges are not indicative of on-going operations. Accordingly, management has also presented the results of operations excluding these one-time and restructuring charges so that a reader is able to view the Company’s operations in a similar manner to how management views the Company’s operations.

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Table 1.1 - Results of Operations

The following table contains the Company’s consolidated statements of operations for the three and nine month periods ended December 31, 2002 and 2001, both as reported and excluding the aforementioned one-time charges and net restructuring costs (in thousands):

(In thousands, except for share and per share amounts)

(b) The non-GAAP results for the nine months ended December 31, 2001 excludes $8.2 million of one-time charges, which include inventory related reserves of $3.2 million; additional accounts 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 $4.2 million. These charges 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 income, net, $0.1 million; and Income tax expense (benefit), $4.2 million.

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THE FOLLOWING DISCUSSIONS OF THE RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2001 AND THE RESULTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2001 EXCLUDE THE ONE TIME AND RESTRUCTURING CHARGES NOTED ABOVE.

Three Months Ended December 31, 2002 Results Compared to Three Months Ended December 31, 2001

The Company recorded sales during the quarters ended December 31, 2002 and 2001 as follows: