AMPX Ampex Corp Class A (MM)

Ampex Corporation (Nasdaq:AMPX) today reported net income of $1.8 million ($0.47 per diluted share) on revenues of $8.6 million in the third quarter of 2006 compared to a net loss of $0.2 million ($0.05 loss per diluted share) on revenues of $10.7 million in the third quarter of 2005. Matters affecting the third quarter 2006 financial results included: Quarterly running royalties earned on current period shipments by our licensees totaled $3.2 million in the third quarter of 2006 compared to $2.4 million in the third quarter of 2005. The increase was due to Sony�s first quarterly payment of running royalties on digital camcorders shipped after April 11, 2006 offset, in part, by the decrease in running royalties on digital still cameras due to the expiration of our Rapid Image Retrieval patent (�121� patent). Total licensing revenue included, in the third quarter of 2005, one-time royalty settlements for prior period shipments and prepayment of license obligations covering future periods totaling $2.8 million. There were no such settlements in 2006. Our digital still camera licensees discontinued royalty payments to us on April 11, 2006 upon the expiration of the �121� patent, and we do not expect further payments except to the extent that licensees infringe other digital imaging patents. Presently, our licensing revenue is derived from manufacturers of digital camcorders and DVD recorders which use several other digital imaging patents that are in force through at least 2012. Over the past two years, our results of operations have been adversely affected by litigation costs incurred to defend our patents. Litigation costs incurred in connection with the Kodak lawsuit totaled $1.2 million ($0.31 per diluted share) in the three months ended September 30, 2006, compared to $1.9 million ($0.51 per diluted share) in the three months ended September 30, 2005. As previously reported, on October 31, 2006, the U.S. District Court of Delaware granted Kodak�s motion of summary judgment of non-infringement of our �121� patent. The Company is currently evaluating the next steps with respect to this action, including a possible appeal. The Court�s decision will have no effect on past or future licensing revenues from existing licensees since the �121� patent has expired. In the third quarter of 2006, we initiated an internal technical review of our patent portfolio with the goal to identify additional digital imaging patents that may be infringed by manufacturers of digital still cameras and camera equipped cellular telephones. If our review is successful, we would expect to expand our licensing discussions with such manufacturers and to offer a portfolio of patents for license. To date, we have issued claim charts to ten manufacturers of digital still cameras and to two manufacturers of camera equipped cellular telephones alleging infringement of our Feed Forward Quantization patent. The Recorders segment earned operating income of $0.4 million ($0.11 per diluted share) in the third quarter of 2006 compared to $ 0.4 million ($0.11 per diluted share) in the third quarter of 2005. Recorders segment revenues decreased to $5.4 million in the third quarter of 2006 from $5.6 million in the third quarter of 2005, as the increase in new product sales did not fully offset the decline in legacy, tape-based products and services. Our backlog of firm orders totaled $8.0 million at September 30, 2006. We have other orders which have cancellation options and have received notification of purchase authorizations that are not included in backlog totaling $8.5 million, reflecting a growing acceptance of our new solid state and disk based instrumentation recorders. As a result of the foregoing, operating income (loss) for the Company�s business segments and unallocated corporate expenses were as follows: For the three months ended Sept. 30, 2006� 2005� (in millions) Licensing segment $1.4� $2.7� Recorders segment 0.4� 0.4� Unallocated corporate (1.8) (2.1) Operating income (loss) $(0.0) $1.0� Non-operating income included $2.7 million ($0.70 per diluted share) of non-recurring income resulting from fees realized on investment activities and the sale of securities. As previously announced, the Company will host a conference call on Tuesday, November 7, 2006 at 4:30 p.m. eastern time to discuss its second quarter 2006 financial results. To access the call, please call Genesys Conferencing at (866) 283-8245 by 4:20 p.m. and reference Conference ID 946843 to access the call. Parties interested in asking questions of management are requested to give the moderator their name and telephone contact information. A replay of the conference call will be available on the Ampex website www.ampex.com, Investor Relations, �Third Quarter 2006 Earnings Call�, for approximately one week shortly after the call has been concluded. Ampex Corporation, www.ampex.com, headquartered in Redwood City, California, is one of the world�s leading innovators and licensors of technologies for the visual information age. This news release contains predictions, projections and other statements about the future that are intended to be �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of l995 (collectively, �forward-looking statements�). Forward-looking statements relate to various aspects of the Company�s operations and strategies, including but not limited to the effects of having recently and in the past experienced losses and the risk that the Company may incur losses in the future; the Company�s limited liquidity and significant indebtedness and interest expense; its sales and royalty revenues declining in future periods, and the risk that the Company will not conclude additional royalty-bearing license agreements covering its digital technologies; delays that might be experienced in the receipt of anticipated royalties from license agreements presently in effect; the Company�s marketing, product development, acquisition, investment, licensing and other strategies not being successful; possible future issuances of debt or equity securities; the possible incurrence of significant patent litigation expenses or adverse legal determinations finding the Company�s patents not be valid or not to have been infringed; new business development and industry trends; the possible need to raise additional capital in order to meet the Company�s obligations; reliance on a former affiliate to make contributions to the Company�s pension plans which are substantially underfunded and most other statements that are not historical in nature. Important factors that could cause actual results to differ materially from those described in the forward-looking statements are described in cautionary statements included in this news release and/or in the Company�s 2005 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the first fiscal quarter ended March 31, 2006 and Form 10-Q for the second quarter ended June 30, 2006 which have been filed with the SEC and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2006, which is expected to be filed with the SEC shortly. In assessing forward-looking statements, readers are urged to consider carefully these cautionary statements. Forward-looking statements speak only as of the date of this news release, and the Company disclaims any obligations to update such statements. AMPEX CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) � September 30,2006 December 31,2005 ASSETS Current assets: Cash and cash equivalents $ 9,376� $ 13,070� Accounts receivable (net of allowances of $83 in 2006 and $78 in 2005) 2,914� 3,091� Inventories 6,725� 5,862� Royalties receivable 592� 735� Cash collateral on letter of credit 1,485� 1,483� Other current assets � 1,251� � 873� Total current assets 22,343� 25,114� � Property, plant and equipment 1,000� 1,215� Other assets � 373� � 373� Total assets $ 23,716� $ 26,702� � LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT Current liabilities: Notes payable $ 1,156� $ 113� Accounts payable 3,428� 3,802� Net liabilities of discontinued operations 1,288� 1,413� Accrued restructuring costs 598� 610� Pension and other retirement plans 867� 864� Other accrued liabilities � 5,888� � 7,935� Total current liabilities 13,225� 14,737� Long-term debt 32,039� 25,725� Pension and other retirement plans 88,686� 95,948� Other liabilities 1,913� 1,929� Accrued restructuring costs 582� 1,030� Net liabilities of discontinued operations � 1,440� � 1,679� Total liabilities � 137,885� � 141,048� � Commitments and contingencies � Mandatorily redeemable nonconvertible preferred stock, $1,000 liquidation value per share: Authorized: 69,970 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 -� -� � Mandatorily redeemable preferred stock, $2,000 liquidation value per share: Authorized: 21,859 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 -� -� � Convertible preferred stock, $2,000 liquidation value per share: Authorized: 10,000 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 -� -� � Stockholders' deficit: Preferred stock, $1.00 par value: Authorized: 898,171 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 -� -� Common stock, $.01 par value: Class A: Authorized: 175,000,000 shares in 2006 and in 2005 Issued and outstanding - 3,820,473 shares in 2006; 3,789,773 in 2005 38� 38� Class C: Authorized: 50,000,000 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 -� -� Other additional capital 455,182� 454,789� Accumulated deficit (460,138) (456,953) Accumulated other comprehensive loss � (109,251) � (112,220) Total stockholders' deficit � (114,169) � (114,346) Total liabilities, redeemable preferred stock and stockholders' deficit $ 23,716� $ 26,702� AMPEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except share and per share data) (unaudited) � For the Three Months Ended September 30, For the Nine Months Ended September 30, � 2006� � 2005� � 2006� � 2005� � Licensing revenue $ 3,246� $ 5,150� $ 7,391� $ 26,450� Product revenue 3,213� 3,379� 10,900� 11,449� Service revenue � 2,167� � 2,199� � 6,276� � 6,581� Total revenue � 8,626� � 10,728� � 24,567� � 44,480� � Intellectual property costs 1,820� 2,432� 8,367� 9,701� Cost of product revenue 1,946� 2,277� 5,877� 7,264� Cost of service revenue 582� 670� 1,767� 2,121� Research, development and engineering 1,014� 1,100� 3,229� 3,212� Selling and administrative � 3,241� � 3,208� � 9,358� � 11,126� Total costs and operating expenses � 8,603� � 9,687� � 28,598� � 33,424� � Operating income (loss) 23� 1,041� (4,031) 11,056� � Media pension costs 185� 193� 556� 580� Interest expense 768� 471� 2,082� 1,881� Amortization of debt financing costs 1� 1� 3� 194� Interest income (67) (70) (244) (184) Other (income) expense, net � (2,713) � (1) � (3,478) � (545) Income (loss) from continuing operations before income taxes 1,849� 447� (2,950) 9,130� � Provision for income taxes � 10� � 620� � 40� � 880� Net income (loss) from continuing operations 1,839� (173) (2,990) 8,250� � Loss from discontinued operations (net of taxes of nil in 2006) � -� � -� � (195) � -� Net income (loss) 1,839� (173) (3,185) 8,250� � Other comprehensive income (loss), net of tax: Foreign currency translation adjustments � 25� � 51� � (22) � 103� Comprehensive income (loss) $ 1,864� $ (122) $ (3,207) $ 8,353� � � Basic income (loss) per share from continuing operations $ 0.48� $ (0.05) $ (0.78) $ 2.22� Basic loss per share from discontinued operations $ 0.00� $ 0.00� $ (0.05) $ 0.00� Basic income (loss) per share $ 0.48� $ (0.05) $ (0.83) $ 2.22� Weighted average number of basic common shares outstanding � 3,819,268� � 3,752,701� � 3,816,547� � 3,718,760� � Diluted income (loss) per share from continuing operations $ 0.47� $ (0.05) $ (0.78) $ 2.14� Diluted loss per share from discontinued operations $ 0.00� $ 0.00� $ (0.05) $ 0.00� Diluted income (loss) per share $ 0.47� $ (0.05) $ (0.83) $ 2.14� Weighted average number of diluted common shares outstanding � 3,875,505� � 3,752,701� � 3,816,547� � 3,853,663� Ampex Corporation (Nasdaq:AMPX) today reported net income of $1.8 million ($0.47 per diluted share) on revenues of $8.6 million in the third quarter of 2006 compared to a net loss of $0.2 million ($0.05 loss per diluted share) on revenues of $10.7 million in the third quarter of 2005. Matters affecting the third quarter 2006 financial results included: -- Quarterly running royalties earned on current period shipments by our licensees totaled $3.2 million in the third quarter of 2006 compared to $2.4 million in the third quarter of 2005. The increase was due to Sony's first quarterly payment of running royalties on digital camcorders shipped after April 11, 2006 offset, in part, by the decrease in running royalties on digital still cameras due to the expiration of our Rapid Image Retrieval patent ("121" patent). Total licensing revenue included, in the third quarter of 2005, one-time royalty settlements for prior period shipments and prepayment of license obligations covering future periods totaling $2.8 million. There were no such settlements in 2006. -- Our digital still camera licensees discontinued royalty payments to us on April 11, 2006 upon the expiration of the "121" patent, and we do not expect further payments except to the extent that licensees infringe other digital imaging patents. Presently, our licensing revenue is derived from manufacturers of digital camcorders and DVD recorders which use several other digital imaging patents that are in force through at least 2012. -- Over the past two years, our results of operations have been adversely affected by litigation costs incurred to defend our patents. Litigation costs incurred in connection with the Kodak lawsuit totaled $1.2 million ($0.31 per diluted share) in the three months ended September 30, 2006, compared to $1.9 million ($0.51 per diluted share) in the three months ended September 30, 2005. As previously reported, on October 31, 2006, the U.S. District Court of Delaware granted Kodak's motion of summary judgment of non-infringement of our "121" patent. The Company is currently evaluating the next steps with respect to this action, including a possible appeal. The Court's decision will have no effect on past or future licensing revenues from existing licensees since the "121" patent has expired. -- In the third quarter of 2006, we initiated an internal technical review of our patent portfolio with the goal to identify additional digital imaging patents that may be infringed by manufacturers of digital still cameras and camera equipped cellular telephones. If our review is successful, we would expect to expand our licensing discussions with such manufacturers and to offer a portfolio of patents for license. To date, we have issued claim charts to ten manufacturers of digital still cameras and to two manufacturers of camera equipped cellular telephones alleging infringement of our Feed Forward Quantization patent. -- The Recorders segment earned operating income of $0.4 million ($0.11 per diluted share) in the third quarter of 2006 compared to $ 0.4 million ($0.11 per diluted share) in the third quarter of 2005. Recorders segment revenues decreased to $5.4 million in the third quarter of 2006 from $5.6 million in the third quarter of 2005, as the increase in new product sales did not fully offset the decline in legacy, tape-based products and services. Our backlog of firm orders totaled $8.0 million at September 30, 2006. We have other orders which have cancellation options and have received notification of purchase authorizations that are not included in backlog totaling $8.5 million, reflecting a growing acceptance of our new solid state and disk based instrumentation recorders. As a result of the foregoing, operating income (loss) for the Company's business segments and unallocated corporate expenses were as follows: -0- *T For the three months ended Sept. 30, ------------------------------------ 2006 2005 ------------------- ---------------- (in millions) Licensing segment $1.4 $2.7 Recorders segment 0.4 0.4 Unallocated corporate (1.8) (2.1) ------------------- ---------------- Operating income (loss) $(0.0) $1.0 ------------------- ---------------- *T -- Non-operating income included $2.7 million ($0.70 per diluted share) of non-recurring income resulting from fees realized on investment activities and the sale of securities. As previously announced, the Company will host a conference call on Tuesday, November 7, 2006 at 4:30 p.m. eastern time to discuss its second quarter 2006 financial results. To access the call, please call Genesys Conferencing at (866) 283-8245 by 4:20 p.m. and reference Conference ID 946843 to access the call. Parties interested in asking questions of management are requested to give the moderator their name and telephone contact information. A replay of the conference call will be available on the Ampex website www.ampex.com, Investor Relations, "Third Quarter 2006 Earnings Call", for approximately one week shortly after the call has been concluded. Ampex Corporation, www.ampex.com, headquartered in Redwood City, California, is one of the world's leading innovators and licensors of technologies for the visual information age. This news release contains predictions, projections and other statements about the future that are intended to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of l995 (collectively, "forward-looking statements"). Forward-looking statements relate to various aspects of the Company's operations and strategies, including but not limited to the effects of having recently and in the past experienced losses and the risk that the Company may incur losses in the future; the Company's limited liquidity and significant indebtedness and interest expense; its sales and royalty revenues declining in future periods, and the risk that the Company will not conclude additional royalty-bearing license agreements covering its digital technologies; delays that might be experienced in the receipt of anticipated royalties from license agreements presently in effect; the Company's marketing, product development, acquisition, investment, licensing and other strategies not being successful; possible future issuances of debt or equity securities; the possible incurrence of significant patent litigation expenses or adverse legal determinations finding the Company's patents not be valid or not to have been infringed; new business development and industry trends; the possible need to raise additional capital in order to meet the Company's obligations; reliance on a former affiliate to make contributions to the Company's pension plans which are substantially underfunded and most other statements that are not historical in nature. Important factors that could cause actual results to differ materially from those described in the forward-looking statements are described in cautionary statements included in this news release and/or in the Company's 2005 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the first fiscal quarter ended March 31, 2006 and Form 10-Q for the second quarter ended June 30, 2006 which have been filed with the SEC and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2006, which is expected to be filed with the SEC shortly. In assessing forward-looking statements, readers are urged to consider carefully these cautionary statements. Forward-looking statements speak only as of the date of this news release, and the Company disclaims any obligations to update such statements. -0- *T AMPEX CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) September 30, December 31, 2006 2005 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 9,376 $ 13,070 Accounts receivable (net of allowances of $83 in 2006 and $78 in 2005) 2,914 3,091 Inventories 6,725 5,862 Royalties receivable 592 735 Cash collateral on letter of credit 1,485 1,483 Other current assets 1,251 873 ------------- ------------ Total current assets 22,343 25,114 Property, plant and equipment 1,000 1,215 Other assets 373 373 ------------- ------------ Total assets $ 23,716 $ 26,702 ============= ============ LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT Current liabilities: Notes payable $ 1,156 $ 113 Accounts payable 3,428 3,802 Net liabilities of discontinued operations 1,288 1,413 Accrued restructuring costs 598 610 Pension and other retirement plans 867 864 Other accrued liabilities 5,888 7,935 ------------- ------------ Total current liabilities 13,225 14,737 Long-term debt 32,039 25,725 Pension and other retirement plans 88,686 95,948 Other liabilities 1,913 1,929 Accrued restructuring costs 582 1,030 Net liabilities of discontinued operations 1,440 1,679 ------------- ------------ Total liabilities 137,885 141,048 ------------- ------------ Commitments and contingencies Mandatorily redeemable nonconvertible preferred stock, $1,000 liquidation value per share: Authorized: 69,970 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 - - Mandatorily redeemable preferred stock, $2,000 liquidation value per share: Authorized: 21,859 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 - - Convertible preferred stock, $2,000 liquidation value per share: Authorized: 10,000 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 - - Stockholders' deficit: Preferred stock, $1.00 par value: Authorized: 898,171 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 - - Common stock, $.01 par value: Class A: Authorized: 175,000,000 shares in 2006 and in 2005 Issued and outstanding - 3,820,473 shares in 2006; 3,789,773 in 2005 38 38 Class C: Authorized: 50,000,000 shares in 2006 and in 2005 Issued and outstanding - none in 2006 and in 2005 - - Other additional capital 455,182 454,789 Accumulated deficit (460,138) (456,953) Accumulated other comprehensive loss (109,251) (112,220) ------------- ------------ Total stockholders' deficit (114,169) (114,346) ------------- ------------ Total liabilities, redeemable preferred stock and stockholders' deficit $ 23,716 $ 26,702 ============= ============ *T -0- *T AMPEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except share and per share data) (unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Licensing revenue $ 3,246 $ 5,150 $ 7,391 $ 26,450 Product revenue 3,213 3,379 10,900 11,449 Service revenue 2,167 2,199 6,276 6,581 ----------- ----------- ----------- ----------- Total revenue 8,626 10,728 24,567 44,480 ----------- ----------- ----------- ----------- Intellectual property costs 1,820 2,432 8,367 9,701 Cost of product revenue 1,946 2,277 5,877 7,264 Cost of service revenue 582 670 1,767 2,121 Research, development and engineering 1,014 1,100 3,229 3,212 Selling and administrative 3,241 3,208 9,358 11,126 ----------- ----------- ----------- ----------- Total costs and operating expenses 8,603 9,687 28,598 33,424 ----------- ----------- ----------- ----------- Operating income (loss) 23 1,041 (4,031) 11,056 Media pension costs 185 193 556 580 Interest expense 768 471 2,082 1,881 Amortization of debt financing costs 1 1 3 194 Interest income (67) (70) (244) (184) Other (income) expense, net (2,713) (1) (3,478) (545) ----------- ----------- ----------- ----------- Income (loss) from continuing operations before income taxes 1,849 447 (2,950) 9,130 Provision for income taxes 10 620 40 880 ----------- ----------- ----------- ----------- Net income (loss) from continuing operations 1,839 (173) (2,990) 8,250 Loss from discontinued operations (net of taxes of nil in 2006) - - (195) - ----------- ----------- ----------- ----------- Net income (loss) 1,839 (173) (3,185) 8,250 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 25 51 (22) 103 ----------- ----------- ----------- ----------- Comprehensive income (loss) $ 1,864 $ (122) $ (3,207) $ 8,353 =========== =========== =========== =========== Basic income (loss) per share from continuing operations $ 0.48 $ (0.05) $ (0.78) $ 2.22 ----------- ----------- ----------- ----------- Basic loss per share from discontinued operations $ 0.00 $ 0.00 $ (0.05) $ 0.00 ----------- ----------- ----------- ----------- Basic income (loss) per share $ 0.48 $ (0.05) $ (0.83) $ 2.22 ----------- ----------- ----------- ----------- Weighted average number of basic common shares outstanding 3,819,268 3,752,701 3,816,547 3,718,760 =========== =========== =========== =========== Diluted income (loss) per share from continuing operations $ 0.47 $ (0.05) $ (0.78) $ 2.14 ----------- ----------- ----------- ----------- Diluted loss per share from discontinued operations $ 0.00 $ 0.00 $ (0.05) $ 0.00 ----------- ----------- ----------- ----------- Diluted income (loss) per share $ 0.47 $ (0.05) $ (0.83) $ 2.14 ----------- ----------- ----------- ----------- Weighted average number of diluted common shares outstanding 3,875,505 3,752,701 3,816,547 3,853,663 =========== =========== =========== =========== *T