Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 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
AMX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1815822
(State of Incorporation) (I.R.S. Employer Identification No.)
3000 Research Drive 75082
Richardson, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (800) 222-0193
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Common Stock, $0.01 Par Value 11,141,213
(Title of Each Class) (Number of Shares Outstanding at July 31, 2002)
1
AMX CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
INDEX
PAGE NUMBER
Part I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Consolidated Balance Sheets at June 30, 2002 and March 31, 2002 3
Consolidated Statements of Operations for the Three Months Ended 5
June 30, 2002 and 2001
Consolidated Statements of Cash Flows for the Three Months ended 6
June 30, 2002 and 2001
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and 11
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
JUNE 30, MARCH 31,
------------- -------------
2002 2002
------------- -------------
Current assets:
Cash and cash equivalents................................................... $ 1,183,928 $ 1,245,452
Receivables, less allowance for doubtful accounts of $857,000 at
June 30, 2002 and $1,130,000 at March 31, 2002............................. 11,738,935 13,579,304
Inventories................................................................. 11,509,210 11,700,211
Income tax receivable....................................................... 302,518 1,981,273
Prepaid expenses............................................................ 1,269,876 859,875
Other current assets........................................................ 171,185 --
------------- -------------
Total current assets........................................................... 26,175,652 29,366,115
Property and equipment, at cost, net........................................... 7,650,907 8,265,011
Deposits and other............................................................. 196,378 312,242
Goodwill, less accumulated amortization of $1,098,000 at June 30, 2002 and
March 31, 2002................................................................ 70,634 70,634
------------- -------------
Total assets................................................................... $ 34,093,571 $ 38,014,002
============= =============
3
AMX CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
JUNE 30, MARCH 31,
------------- -------------
2002 2002
------------- -------------
Current liabilities:
Accounts payable.............................................................$ 6,290,687 $ 7,295,345
Current portion of long-term debt............................................ 1,021,450 1,021,450
Line of credit............................................................... 4,900,000 7,600,000
Accrued compensation......................................................... 1,460,173 1,400,564
Accrued restructuring costs.................................................. 311,154 448,495
Accrued sales commissions.................................................... 550,545 600,056
Other accrued expenses....................................................... 2,514,528 2,846,132
------------- -------------
Total current liabilities....................................................... 17,048,537 21,212,042
Long-term debt ................................................................. 766,088 1,013,002
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value:
Authorized shares - 10,000,000
Issued shares - none.................................................... -- --
Common stock, $0.01 par value:
Authorized shares-- 40,000,000
Issued shares-- 11,583,525 at June 30, 2002 and March 31, 2002.......... 115,835 115,835
Additional paid-in capital................................................... 24,257,894 24,257,894
Retained earnings............................................................ (3,626,499) (4,116,487)
Less treasury stock (496,476 shares)......................................... (4,468,284) (4,468,284)
------------- -------------
Total shareholders' equity...................................................... 16,278,946 15,788,958
------------- -------------
Total liabilities and shareholders' equity......................................$ 34,093,571 $ 38,014,002
============= =============
See accompanying notes.
4
AMX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
2002 2001
--------------- --------------
Commercial system sales............................... $ 17,847,255 $ 17,419,573
Residential system sales.............................. 2,348,023 4,303,412
--------------- --------------
Net sales.......................................... 20,195,278 21,722,985
Cost of sales......................................... 9,969,249 10,597,624
--------------- --------------
Gross profit....................................... 10,226,029 11,125,361
Selling and marketing expenses........................ 5,561,918 7,095,808
Research and development expenses..................... 1,951,762 1,894,963
Restructuring costs................................... -- (43,279)
General and administrative expenses................... 2,030,776 1,691,911
--------------- --------------
Total operating expenses........................... 9,544,456 10,639,403
Operating income................................... 681,573 485,958
Interest expense...................................... 132,517 185,858
Other income, net..................................... 10,982 9,651
--------------- --------------
Income before income taxes............................ 560,038 309,751
Income tax provision.................................. 70,050 108,413
--------------- --------------
Net income............................................ $ 489,988 $ 201,338
=============== ==============
Basic and diluted earnings per share.................. $ 0.04 $ 0.02
=============== ==============
See accompanying notes.
5
AMX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
2002 2001
------------- -------------
OPERATING ACTIVITIES
Net income............................................................ $ 489,988 $ 201,338
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation....................................................... 872,765 916,946
Amortization....................................................... -- 168,608
Provision for losses on receivables................................ 51,777 75,000
Provision for inventory obsolescence............................... 196,957 90,000
Deferred income taxes.............................................. -- 58,793
Changes in operating assets and liabilities:
Receivables.................................................... 1,788,592 (745,904)
Inventories.................................................... (5,956) 1,168,963
Prepaid expenses and other assets.............................. (465,322) (3,141)
Accounts payable............................................... (1,004,658) (3,404,860)
Accrued expenses............................................... (487,459) (405,138)
Income taxes................................................... 1,707,367 10,855
------------- -------------
Net cash provided by (used in) operating activities................... 3,144,051 (1,868,540)
INVESTING ACTIVITIES
Purchase of property and equipment.................................... (258,661) (1,663,243)
------------- -------------
Net cash used in investing activities................................. (258,661) (1,663,243)
FINANCING ACTIVITIES
Sale of common stock-- net of expenses, and exercise of stock options. -- 410,650
Net increase (decrease) in line of credit............................. (2,700,000) 3,325,000
Repayments of long-term debt.......................................... (246,914) (277,282)
------------- -------------
Net cash provided by (used in) financing activities................... (2,946,914) 3,458,368
Effect of exchange rate changes on cash............................... -- (1,103)
------------- -------------
Net decrease in cash and cash equivalents............................. (61,524) (74,518)
Cash and cash equivalents at beginning of period...................... 1,245,452 1,607,797
------------- -------------
Cash and cash equivalents at end of period............................ $ 1,183,928 $ 1,533,279
============= =============
See accompanying notes.
6
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 quarter
amounts have been reclassified to conform to the current year presentation.
Operating results for the three months ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
March 31, 2003.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
THREE MONTHS ENDED JUNE 30,
2002 2001
------------- -------------
Numerator:
Net income $ 489,988 $ 201,338
============= =============
Denominator:
Denominator for basic earnings per share --
Weighted-average shares outstanding........................ 11,087,049 10,861,601
Effect of dilutive securities:
Employee stock options...................................... 831 127,141
------------- -------------
Denominator for diluted earnings per share.................. 11,087,880 10,988,742
============= =============
Basic earnings per share.................................... $ 0.04 $ 0.02
============= =============
Diluted earnings per share.................................. $ 0.04 $ 0.02
============= =============
Of the total stock options outstanding, 1,840,444 and 1,584,820 shares were
excluded from the computation of diluted earnings per share for the quarters
ended June 30, 2002 and 2001, respectively, because the option exercise price
was greater than the average market price of the common shares for the period,
and therefore the effect would have been anti-dilutive.
7
3. Inventories
The components of inventories are as follows:
JUNE 30, 2002 MARCH 31, 2002
-------------- --------------
Raw materials $ 5,622,376 $ 6,237,584
Work in progress 1,380,965 2,346,446
Finished goods 8,082,841 7,126,905
Less reserve for obsolescence (3,576,972) (4,010,724)
-------------- --------------
Total $ 11,509,210 $ 11,700,211
============== ==============
4. 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 June 30, 2002, the Company has
a remaining reserve of $0.1 million representing the residual leasehold
termination penalty for the Salt Lake City facilities.
The following is a summary of the Salt Lake City restructuring action from
inception through June 30, 2002 (in thousands):
Write down
Leashold of property
cancellation and
Severance charges equipment Total
------------------------------------------------------
Initial Restructuring Reserve $ 1,304 $ 649 $ 655 $ 2,608
Activity through March 31, 2002:
Severance payments (914) - - (914)
Severance forfeitures (390) - - (390)
Payment of lease expenses - (151) - (151)
Reduction of lease obligation through sublease - (268) - (268)
Correction of leasehold cancellation reserve - (118) - (118)
Non-cash write down of property and equipment - - (655) (655)
------------------------------------------------------
Reserve at March 31, 2002 - 112 - 112
Activity through June 30, 2002: - - - -
------------------------------------------------------
Reserve at June 30, 2002 $ - $ 112 $ - $ 112
======================================================
8
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'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 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.
The following is a summary of the consumer broadband and corporate-wide
restructuring action from inception through June 30, 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, 2002:
Severance payments (645) - - - (645)
Write down of inventory - (715) - - (715)
Write down of receivables and intangible assets - - (452) - (452)
Other payments - - - (145) (145)
--------------------------------------------------------------------------
Reserve at March 31,2002 214 - - - 214
Activity through June 30, 2002:
Severance payments (75) - - - (75)
--------------------------------------------------------------------------
Reserve at June 30, 2002 $ 139 $ - $ - $ - $ 139
==========================================================================
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.
9
The following is a summary of the corporate realignment from inception through
June 30, 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
Activity through June 30, 2002:
Severance payments (47)
Other payments (15)
-------------
Reserve at June 30, 2002 $ 60
=============
5. 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 June 30, 2002, $4.9 million was outstanding under the revolving
line of credit agreement and $5.3 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. 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 $1.8 million as of June 30, 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. The Company is in compliance with each of these covenants
as of June 30, 2002.
10
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 quarterly
information. Quarterly operating results have varied significantly in the past
and can be expected to vary in the future. Results of operations for any
particular quarter are not necessarily indicative of results of operations for a
full year.
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.
11
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;
. Flexible systems to accommodate emerging technologies;
. Commitment to dealer training; and
. Development of alliances with key electronic industry companies.
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.
The Company's quarterly operating results have varied significantly in the
past, and can be expected to vary in the future. These quarterly fluctuations
have been the result of a number of factors. These factors include seasonal
purchasing of the Company's dealers and distributors, particularly from
international distributors, OEMs, and other large customers; sales and marketing
expenses related to entering new markets; the timing of new product
introductions by the Company and its competitors; fluctuations in commercial and
residential construction and remodeling activity; and changes in product or
distribution channel mix.
12
RESULTS OF OPERATIONS
The following table contains the Company's consolidated statements of
operations for the three-month periods ended June 30, 2002 and 2001, both as
reported and pro-forma results excluding net restructuring charges:
Pro Forma As reported
----------------------------- ------------------------------
Three Months Ended Three Months Ended
June 30 (Unaudited) June 30 (Unaudited)
----------------------------- ------------------------------
2002 2001 (a) 2002 2001
------------- ------------ ------------- -------------
Commercial system sales $ 17,847 $ 17,420 $ 17,847 $ 17,420
Residential system sales 2,348 4,303 2,348 4,303
------------- ------------ ------------- -------------
Net sales 20,195 21,723 20,195 21,723
Cost of sales 9,969 10,598 9,969 10,598
------------- ------------ ------------- -------------
Gross profit 10,226 11,125 10,226 11,125
------------- ------------ ------------- -------------
Selling and marketing expenses 5,562 7,096 5,562 7,096
Research and development expenses 1,952 1,895 1,952 1,895
Restructuring costs - - - (43)
General and administrative expenses 2,031 1,691 2,031 1,691
------------- ------------ ------------- -------------
Total operating expenses 9,545 10,682 9,545 10,639
------------- ------------ ------------- -------------
Operating income 681 443 681 486
Interest expense 132 186 132 186
Other income, net 11 10 11 10
------------- ------------ -------------- -------------
Income before income taxes 560 267 560 310
Income tax provision 70 109 70 109
------------- ------------ ------------- -------------
Net income $ 490 $ 158 $ 490 $ 201
============= ============ ============= =============
Basic earnings per share $ 0.04 $ 0.01 $ 0.04 $ 0.02
============= ============ ============= =============
Diluted earnings per share $ 0.04 $ 0.01 $ 0.04 $ 0.02
============= ============ ============= =============
Shares outstanding - basic 11,087,049 10,861,601 11,087,049 10,861,601
============= ============ ============= =============
Shares outstanding - diluted 11,087,880 10,988,742 11,087,880 10,988,742
============= ============ ============= =============
(a) Pro-forma results for the three months ended June 30,2001 exclude
restructuring reversals of $43,000 related to lease obligations of the Company's
Salt Lake City facilities.
13
THREE MONTHS ENDED JUNE 30, 2002 RESULTS COMPARED TO THREE MONTHS ENDED JUNE 30,
2001
We recorded sales during the quarters ended June 30, 2002 and 2001 as follows:
Market June 30, 2002 June 30, 2001 Change
------ ------------- ------------- ---------
Commercial:
Domestic $ 11,904,046 $ 11,607,357 2.6%
International 5,943,209 5,812,216 2.3%
------------- ------------- ---------
Total Commercial 17,847,255 17,419,573 2.5%
------------- ------------- ---------
Residential 2,348,023 4,303,412 (45.4)%
------------- ------------- ---------
Total Sales $ 20,195,278 $ 21,722,985 (7.0)%
============= ============= =========
Domestic and international commercial sales grew 2.5% to $17.8 million from
$17.4 million for the quarter ended June 30, 2001. Domestic commercial revenue
grew 8.2% from the trailing quarter ended March 31, 2002. This growth reflects
broad market support for the Company's NetLinx product offering as a control
solution in an increasing number of networked environments. Residential sales
declined 45% compared to the same quarter of last year. The Company's
residential sales have been adversely affected by 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 margins of 51% for the quarter ended June 30, 2002 were comparable to
the same quarter last year, and were up from 50% for the trailing quarter ended
March 31, 2002. The improvement over the trailing quarter is a reflection of
lower costs in the Company's manufacturing operations as a result of the
continued implementation the Company's outsourcing strategy, as the costs of
implementing the strategy are beginning to diminish. The plan is expected to be
completed by the end of calendar 2002, at which time approximately 92% of the
Company's products will be turnkey manufactured.
Selling and marketing expenses declined significantly to $5.6 million or
28% of net sales compared to $7.1 million or 33% of net sales for the first
quarter of fiscal 2002. The decrease in selling and marketing expenses is
directly attributable to the improved operations management and cost control
initiatives launched in the latter half of fiscal 2002. Research and development
expenses were $2.0 million or 10% of net sales compared to $1.9 million or 9% of
net sales for the first quarter of fiscal 2002. The Company has committed to an
aggressive research and development plan for fiscal 2003, and expects research
and development expenditures to continue to increase over fiscal 2002 levels as
this plan progresses. General and administrative expenses increased to $2.0
million or 10% of net sales compared to $1.7 million or 8% of net sales for the
first quarter of fiscal 2002. This increase is primarily a result of increased
headcount in certain functional support areas of the Company.
Interest expense was $0.1 million or 0.7% of net sales compared to $0.2
million or 0.9% of net sales for the first quarter of fiscal 2002. This decline
is primarily attributable to lower average outstanding balances on the Company's
revolving line of credit during the first quarter of fiscal 2003.
The Company's effective tax rate was approximately 13% for the quarter
ended June 30, 2002. The tax provision of $70,000 recorded for the quarter
principally represents foreign taxes on its U.K. and Singapore
14
subsidiaries. The Company does not currently record a tax provision or benefit
on its U.S. operations because the Company recorded a full valuation allowance
on its deferred tax assets in the quarter ended September 30, 2001. As a result,
as the Company incurs domestic tax expense or benefit, an offsetting decrease or
increase is recorded to the valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended June 30, 2002, cash provided by operations was $3.1
million, consisting of earnings before depreciation and amortization of $1.4
million, a reduction of accounts receivable of $1.8 million, and income tax
refunds of approximately $1.7 million, offset by a decline in accounts payable
of $1.0 million and changes in other operating assets and liabilities of $0.9
million. Capital expenditures amounted to $0.3 million, consisting of
expenditures for tooling equipment located at the Company's manufacturing
partners' facilities, and other normal recurring capital expenditures. The
Company used the cash provided by operations to reduce outstanding debt by $2.9
million.
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. The line of credit contains various restrictive and financial
covenants. The Company is in compliance with each of these covenants as of June
30, 2002. At June 30, 2002, $4.9 million was outstanding under the revolving
line of credit agreement and $5.3 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. 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 $1.8 million as of June 30, 2002. Based on
prevailing market rates, the carrying value of the Company's short and long term
debt approximates market.
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.
CONTINGENCIES
The Company is party from time to time 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
From March 31, 2002 until June 30, 2002, there were no material changes
from the information concerning market risk contained in the Company's Annual
Report on Form 10-K for the year ended March 31, 2002, as filed with the
Securities and Exchange Commision on June 28, 2002 (file no. 0-26924).
15
AMX CORPORATION
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
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 (incorporated by
reference from Exhibit 3.4 to the Registrant's Form 10-K for the
fiscal year ended March 31, 2002, File No. 0-026924).
+99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
+99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
+ 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.
16
AMX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMX CORPORATION
Date: August 14, 2002 By: /s/ Jean M. Nelson
--------------------------------------
Jean M. Nelson
Vice President and Chief Financial
Officer (Duly Authorized Officer
and Principal Financial Officer)
17