AMPEX CORP /DE/ - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-20292

AMPEX CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware		13-3667696
(State of Incorporation)		(I.R.S. Employer Identification Number)

1228 Douglas Avenue

Redwood City, California 94063-3199

(Address of principal executive offices, including zip code)

(650) 367-2011

(Registrant’s telephone number, including area code)

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 ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 31, 2004, the aggregate number of outstanding shares of our Class A Common Stock, $.01 par value, was 3,642,517, and 85,500 shares were held in treasury. There were no outstanding shares of our Class C Common Stock, $0.01 par value.

AMPEX CORPORATION

FORM 10-Q

Quarter Ended March 31, 2004

INDEX


		Page
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited) at March 31, 2004 and December 31, 2003	3

	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2004 and 2003	4

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2004 and 2003	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	29

Item 4.	Controls and Procedures	30

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Submission of Matters to a Vote of Security Holders	31

Item 5.	Other Information	32

Item 6(a).	Exhibits	32

Item 6(b).	Reports on Form 8-K	32

Signatures		33

AMPEX CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	March 31, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,411		$	14,023
Short-term investments		7,470			—
Accounts receivable (net of allowances of $51 in 2004 and $137 in 2003)		2,184			4,513
Inventories		6,357			6,343
Other current assets		3,873			4,366

Total current assets		27,295			29,245

Property, plant and equipment		4,661			4,825
Other assets		2,333			1,127

Total assets	$	34,289		$	35,197

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable	$	138		$	146
Accounts payable		1,514			1,511
Net liabilities of discontinued operations		1,087			1,076
Accrued restructuring costs		1,300			1,300
Other accrued liabilities		19,194			23,956

Total current liabilities		23,233			27,989
Long-term debt		75,450			74,022
Other liabilities		66,216			63,802
Accrued restructuring costs		3,137			3,450
Net liabilities of discontinued operations		1,844			2,071

Total liabilities		169,880			171,334

Commitments and contingencies (Note 9)

Mandatorily redeemable nonconvertible preferred stock, $1,000 liquidation value: Authorized: 69,970 shares in 2004 and in 2003 Issued and outstanding - none in 2004 and in 2003		—			—

Mandatorily redeemable preferred stock, $2,000 liquidation value: Authorized: 21,859 shares in 2004 and in 2003 Issued and outstanding - none in 2004 and in 2003		—			—

Convertible preferred stock, $2,000 liquidation value: Authorized: 10,000 shares in 2004 and in 2003 Issued and outstanding - none in 2004 and in 2003		—			—

Stockholders’ deficit:
Preferred stock, $1.00 par value: Authorized: 898,171 shares in 2004 and in 2003 Issued and outstanding - none in 2004 and in 2003		—			—
Common stock, $.01 par value:
Class A: Authorized: 175,000,000 shares in 2004 and in 2003 Issued and outstanding - 3,642,517 shares in 2004; 3,728,017 in 2003		36			37
Class C: Authorized: 50,000,000 shares in 2004 and in 2003 Issued and outstanding - none in 2004 and in 2003		—			—
Other additional capital		454,395			454,394
Accumulated deficit		(518,506	)		(518,578	)
Accumulated other comprehensive income		(71,516	)		(71,990	)

Total stockholders’ deficit		(135,591	)		(136,137	)

Total liabilities, redeemable preferred stock and stockholders’ deficit	$	34,289		$	35,197

The accompanying notes are an integral part of these unaudited consolidated financial statements.

AMPEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)


	For the Three Months Ended
	March 31, 2004			March 31, 2003
	(unaudited)
Royalty income	$	1,661		$	386
Product revenue		6,010			5,656
Service revenue		2,218			2,588

Total revenue		9,889			8,630

Intellectual property costs		803			245
Cost of product sales and service		4,043			4,216
Research, development and engineering		889			685
Selling and administrative		2,781			3,082

Total costs and operating expenses		8,516			8,228

Operating income		1,373			402

Equity in net gain of limited partnership		(1,220	)		—
Interest expense		2,359			2,221
Amortization of debt financing costs		14			14
Interest income		(25	)		(13	)
Other (income) expense, net		6			10

Income (loss) before income taxes		239			(1,830	)

Provision for income taxes		167			102

Net income (loss)		72			(1,932	)

Benefit from extinguishment of mandatorily redeemable preferred stock		—			1,036

Net income (loss) applicable to common stockholders		72			(896	)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(2	)		10

Comprehensive income (loss)	$	70		$	(886	)

Basic and diluted income (loss) per share :
Income (loss) per share	$	0.02		$	(0.61	)
Income (loss) per share applicable to common stockholders	$	0.02		$	(0.28	)

Weighted average number of basic and diluted common shares outstanding		3,717,682			3,170,846

The accompanying notes are an integral part of these unaudited consolidated financial statements.

AMPEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Three Months Ended
	March 31, 2004			March 31, 2003
	(unaudited)
Cash flows from operating activities:
Net income (loss)	$	72		$	(1,932	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and warrant accretion		211			302
Accretion of interest expense		2,428			2,418
Equity in net gain of limited partnership		(1,220	)		—
Periodic pension cost		472			118
Net loss on disposal of assets		3			—
Changes in operating assets and liabilities:
Accounts receivable		2,332			(1,803	)
Inventories		(14	)		307
Other assets		493			(667	)
Accounts payable		(4	)		422
Other accrued liabilities and income taxes payable		(4,749	)		(535	)
Accrued restructuring costs		(313	)		(347	)
Other liabilities		2,414			102

Net cash provided by (used in) continuing operations		2,125			(1,615	)
Net cash used in discontinued operations		(216	)		(286	)

Net cash provided by (used in) operating activities		1,909			(1,901	)

Cash flows from investing activities:
Purchases of short-term investments		(7,470	)		—
Deferred gain on sale of assets		(13	)		(13	)
Additions to property, plant and equipment		(36	)		(2	)

Net cash used in continuing operations		(7,519	)		(15	)

Net cash used in investing activities		(7,519	)		(15	)

Cash flows from financing activities:
Repayments under debt agreements		(1,008	)		(153	)

Net cash used in continuing operations		(1,008	)		(153	)

Net cash used in financing activities		(1,008	)		(153	)

Effects of exchange rates on cash		6			(35	)

Net decrease in cash and cash equivalents		(6,612	)		(2,104	)
Cash and cash equivalents, beginning of period		14,023			7,579

Cash and cash equivalents, end of period	$	7,411		$	5,475

The accompanying notes are an integral part of these unaudited consolidated financial statements.

AMPEX CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Ampex Corporation

Ampex Corporation (“Ampex” or the “Company”) is a leading innovator and licensor of visual information technology. During its 59-year history, the Company has developed substantial proprietary technology relating to the electronic storage, processing and retrieval of data, particularly images. The Company currently holds approximately 600 patents and patent applications covering digital image-processing, data compression and recording technologies. The Company, through its wholly-owned subsidiary, Ampex Data Systems Corporation (“Data Systems”), incorporates this technology in the design and manufacture of very high performance tape-based storage products, principally for digital recording, archiving and rapid restore/backup applications. The Company also leverages its investment in technology through its corporate licensing division that licenses Ampex patents to manufacturers of consumer electronics products.

On June 12, 2003, the Company effected a one-for-twenty reverse stock split of its Class A Common Stock. The number of outstanding shares was reduced from approximately 63.4 million to 3.2 million shares. Common share data and per share calculations for all prior periods included in the unaudited Consolidated Financial Statements and the Notes thereto, have been restated to reflect the impact of the one-for-twenty reverse stock split.

Liquidity

The Company has incurred significant losses in recent years, primarily with respect to discontinued operations, and its liquidity has been affected accordingly. The Company has limited liquidity with which to conduct its operations. Cash and short-term investments totaled $14.9 million at March 31, 2004, substantially all of which was generated by Data Systems and is available to be reinvested in that business. Substantially all cash generated by the Company’s licensing activities in excess of operating expenses and certain other expenses is required to be applied to reduce debt.

While the Company has recently restructured its senior debt to extend maturities and modify certain covenants that have improved the Company’s liquidity, it may be required to use substantial funds in litigation to enforce its patents. In addition, as discussed in Note 8, the Company has substantial pension contributions and pension related funding due in future periods that will require the Company to borrow additional funds from a related party, Hillside Capital Incorporated (“Hillside”), to meet these obligations. Our Management believes that the Company’s liquidity, coupled with its ability to borrow pension contributions from Hillside, and our expectation that Hillside has the intent and ability to fund such pension contributions on our behalf, should be sufficient to satisfy the projected cash obligations through March 2005, but there can be no assurance in this regard.

In March 2004, the Company received consent from the holders of its senior debt securities (i) to extend the maturity date of its Senior Discount Notes from January 5, 2005 to January 5, 2006

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents