-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KrAEavFrnRvNSKHo0DhE+5RNImyDVCoqM12YNMGxJbJTnjAk9//T82nGVWU3hSK0 sVm7EMQ1BSC0AAFPZROM6A== 0001047469-98-038774.txt : 19981102 0001047469-98-038774.hdr.sgml : 19981102 ACCESSION NUMBER: 0001047469-98-038774 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981030 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IN FOCUS SYSTEMS INC CENTRAL INDEX KEY: 0000845434 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930932102 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18908 FILM NUMBER: 98734122 BUSINESS ADDRESS: STREET 1: 27700B SW PARKWAY AVE CITY: WILSONVILLE STATE: OR ZIP: 97070 BUSINESS PHONE: 5036858888 MAIL ADDRESS: STREET 1: 27700B SW PARKWAY AVE CITY: WILSONVILLE STATE: OR ZIP: 97070 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES 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 September 30, 1998 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 000-18908 ---------------------------------- IN FOCUS SYSTEMS, INC. (Exact name of registrant as specified in its charter) OREGON 93-0932102 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 27700B SW PARKWAY AVENUE, WILSONVILLE, OREGON 97070 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 503-685-8888 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK WITHOUT PAR VALUE 22,199,158 (Class) (Outstanding at October 19, 1998) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IN FOCUS SYSTEMS, INC. FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Consolidated Balance Sheets -September 30, 1998 and December 31, 1997 2 Consolidated Statements of Operations - Three Month and Nine Month Periods Ended September 30, 1998 and 1997 3 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
1 ITEM 1. FINANCIAL STATEMENTS IN FOCUS SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
September 30, December 31, 1998 1997 ------------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 26,054 $ 37,950 Marketable securities - held to maturity 9,103 7,220 Accounts receivable, net of allowances of $6,142 and $4,835 72,706 87,845 Inventories, net 33,448 32,120 Income taxes receivable 3,804 310 Deferred income taxes 1,156 1,247 Other current assets 3,603 2,589 ------------- ------------ Total Current Assets 149,874 169,281 Marketable securities - held to maturity - 3,500 Property and equipment, net of accumulated depreciation of $28,194 and $21,769 12,930 15,507 Deferred income taxes 1,105 516 Other assets, net 2,013 1,104 ------------- ------------ Total Assets $ 165,922 $ 189,908 ------------- ------------ ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 25,100 $ 47,818 Payroll and related benefits payable 1,966 3,493 Other current liabilities 5,636 5,568 ------------- ------------ Total Current Liabilities 32,702 56,879 Shareholders' Equity: Common stock, 50,000,000 shares authorized; shares issued and outstanding: 22,199,158 and 21,931,728 53,747 51,733 Additional paid-in capital 12,347 11,278 Retained earnings 67,126 70,018 ------------- ------------ Total Shareholders' Equity 133,220 133,029 ------------- ------------ Total Liabilities and Shareholders' Equity $ 165,922 $ 189,908 ------------- ------------ ------------- ------------
The accompanying notes are an intergral part of these balance sheets. 2 IN FOCUS SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share amounts)
Three months ended September 30, Nine months ended September 30, -------------------------------- ------------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenue $ 75,308 $ 79,559 $ 218,128 $ 218,917 Cost of sales 59,646 59,356 173,411 160,344 ----------- ----------- ----------- ----------- Gross profit 15,662 20,203 44,717 58,573 Operating expenses: Marketing and sales 9,057 7,934 30,477 22,110 Engineering 4,500 4,734 15,172 13,187 General and administrative 1,686 1,980 5,490 5,629 ----------- ----------- ----------- ----------- 15,243 14,648 51,139 40,926 ----------- ----------- ----------- ----------- Income (loss) from operations 419 5,555 (6,422) 17,647 Other income (expense): Interest expense (1) (39) (80) (70) Interest income 245 520 827 1,504 Other, net 168 (45) (72) (43) ----------- ----------- ----------- ----------- 412 436 675 1,391 ----------- ----------- ----------- ----------- Income (loss) before income taxes 831 5,991 (5,747) 19,038 (Provision for) benefit from income taxes 877 (1,805) 2,855 (5,603) ----------- ----------- ----------- ----------- Net income (loss) $ 1,708 $ 4,186 $ (2,892) $ 13,435 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Basic net income (loss) per share $ 0.08 $ 0.19 $ (0.13) $ 0.63 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted net income (loss) per share $ 0.08 $ 0.19 $ (0.13) $ 0.61 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these statements. 3 IN FOCUS SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine months ended September 30, ------------------------------- 1998 1997 ---------- ---------- Cash flows from operating activities: Net income (loss) $ (2,892) $ 13,435 Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: Loss on sale of Genigraphics 51 - Depreciation and amortization 7,356 5,658 Deferred income taxes (498) (636) Other non-cash expenses (16) 258 (Increase) decrease in: Accounts receivable, net 14,862 (11,065) Inventories, net (1,342) 910 Income taxes receivable (3,494) 1,305 Other current assets (387) (1,009) Increase (decrease) in: Income taxes payable - 1,100 Accounts payable (22,718) 10,543 Payroll and related benefits payable (1,527) (186) Other current liabilities 68 (63) ---------- ---------- Net cash provided by (used in) operating activities (10,537) 20,250 Cash flows from investing activities: Purchase of marketable securities-held to maturity (8,105) (5,268) Maturity of marketable securities-held to maturity 9,722 4,261 Payments for purchase of property and equipment (5,242) (5,795) Investment in joint venture 16 (45) Cash received from sale of Genigraphics 230 - Other assets, net (1,047) 289 ---------- ---------- Net cash used in investing activities (4,426) (6,558) Cash flows from financing activities: Principal payments on long-term debt - (951) Proceeds from sale of common stock 2,014 1,856 Income tax benefit of non-qualified stock option exercises and disqualifying dispositions 1,053 476 ---------- ---------- Net cash provided by financing activities 3,067 1,381 Increase (decrease) in cash and cash equivalents (11,896) 15,073 Cash and cash equivalents: Beginning of period 37,950 33,935 ---------- ---------- End of period $ 26,054 $ 49,008 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these statements. 4 IN FOCUS SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (UNAUDITED) NOTE 1: BASIS OF PRESENTATION The financial information included herein for the three-month and nine-month periods ended September 30, 1998 and 1997 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 1997 is derived from In Focus Systems, Inc.'s (the Company's) 1997 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1997 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. NOTE 2: INVENTORIES Inventories are valued at the lower of cost (using average costs, which approximates the first in, first-out (FIFO) method), or market, and include materials, labor and manufacturing overhead.
September 30, 1998 December 31, 1997 ------------------ ----------------- Raw materials and components $ 9,916 $ 11,774 Work-in-process 1,817 2,240 Finished goods 21,715 18,106 --------- --------- $ 33,448 $ 32,120 --------- ---------
NOTE 3: SUPPLEMENTAL CASH FLOW INFORMATION Supplemental disclosure of cash flow information is as follows:
Nine months ended September 30, -------------------------------- 1998 1997 ------------ ------------ Cash paid during the period for income taxes $ 337 $ 3,584 Cash paid during the period for interest 80 70 Note received related to sale of Genigraphics 630 -
5 NOTE 4: EARNINGS PER SHARE Beginning December 31, 1997, basic earnings per share (EPS) and diluted EPS are computed using the methods prescribed by Statement of Financial Accounting Standard No. 128, EARNINGS PER SHARE (SFAS 128). Basic EPS is calculated using the weighted average number of common shares outstanding for the period and diluted EPS is computed using the weighted average number of common shares and dilutive common equivalent shares outstanding. Prior period amounts have been restated to conform with the presentation requirements of SFAS 128. Following is a reconciliation of basic EPS and diluted EPS:
THREE MONTHS ENDED SEPTEMBER 30, 1998 1997 ------------------------------------------ -------------------------------------- Per Share Per Share Loss Shares Amount Income Shares Amount ------------------------------------------ -------------------------------------- BASIC EPS Income available to Common Shareholders $1,708 22,197 $ 0.08 $4,186 21,654 $0.19 ------- -------- DILUTED EPS Effect of dilutive stock options - 23 - 580 -------------------------- --------------------- Income available to Common Shareholders $1,708 22,220 $ 0.08 $4,186 22,234 $0.19 ------- -------- Nine Months Ended September 30, 1998 1997 ------------------------------------------ -------------------------------------- Per Share Per Share Loss Shares Amount Income Shares Amount ------------------------------------------ -------------------------------------- BASIC EPS Income (loss) available to Common Shareholders $(2,892) 22,116 $(0.13) $13,435 21,578 $0.63 -------- --------- DILUTED EPS Effect of dilutive stock options - - - 574 -------------------------- --------------------- Income (loss) available to Common Shareholders $(2,892) 22,116 $(0.13) $13,435 22,152 $0.61 -------- ---------
Potentially dilutive securities that are not included in the diluted EPS calculations because they would be antidilutive include 3,456 and 3,531 shares, respectively, issuable pursuant to stock options, for the three and nine month periods ended September 30, 1998 and 37 shares of contingently issuable restricted stock. Potentially dilutive securities that are not included in the diluted EPS calculations because they would be antidilutive include 411 and 402 shares, respectively, issuable pursuant to stock options, for the three and nine month periods ended September 30, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS Statements in this Form 10-Q which the Company considers to be forward-looking are denoted with an *, and the following cautionary language applies to all such statements, as well as any other statements in this Form 10-Q which the reader may consider to be forward-looking in nature. Investors are cautioned that all forward-looking statements 6 involve risks and uncertainties and several factors could cause actual results to differ materially from those in the forward-looking statements. The Company, from time to time, may make forward-looking statements relating to anticipated gross margins, availability of products manufactured on behalf of the Company, backlog, new product introductions and future capital expenditures. The following factors, among others, could cause actual results to differ from those indicated in the forward-looking statements: 1) in regard to gross margins, uncertainties associated with market acceptance of and demand for the Company's products, impact of competitive products and their pricing and dependence on third party suppliers; 2) in regard to product availability and backlog, uncertainties associated with manufacturing capabilities and dependence on third party suppliers; 3) in regard to new product introductions, uncertainties associated with the development of technology and the establishment of full manufacturing capabilities, dependence on third party suppliers and intellectual property rights; and 4) in regard to future capital expenditures, uncertainties associated with new product introductions. RESULTS OF OPERATIONS Revenue decreased to $75.3 million in the third quarter of 1998 from $79.6 million in the third quarter of 1997, and to $218.1 million for the nine months ended September 30, 1998 from $218.9 million for the comparable period of 1997. The Company's revenue in the first three quarters of 1998 was derived almost entirely from products manufactured in-house and 86 percent of revenue in the third quarter was derived from products that were introduced within the last six months. The Company's revenues, and financial performance, were adversely affected in the first three quarters of 1998 by strong price competition that has been fueled by a weakened yen to the dollar. Price decreases in the third quarter of 1998 returned to more historical levels of 5 to 6 percent rather than the accelerated rates experienced in the first and second quarters of 1998. SVGA products experienced greater pricing pressure than XGA products due to a slight shift in demand from SVGA to XGA and; a constrained supply of XGA products. The Company's primary competitors are Asian companies. The decrease in average selling prices was partially offset by increases in units sold, with the number of units sold during the third quarter of 1998 increasing 10 percent over the second quarter of 1998 and 24 percent over the third quarter of 1997. During the first three quarters of 1998, International sales represented 42 percent of total revenue, including 9 percent from Asia Pacific countries, compared to 40 percent international revenue in the first three quarters of 1997. The Asian market grew at the same rate as the industry as a whole during 1997 and it is now the third largest market in the Company's industry. The Company has historically had very little market share in the Asian market. Sales to most Asian companies have been, and continue to be, prepaid or guaranteed by letters of credit, thereby reducing receivables risk. The Company has a sales, service and support subsidiary in Singapore. The Company's parts contracts with Asian companies are denoted in U.S. dollars and contain clauses for price adjustments when there are significant fluctuations in currency rates. Accordingly, for purchases beginning the first day of the next quarter, parts costs are adjusted based upon changes in local currencies relative to the U.S. dollar. 7 Because there are multiple competitive products for the Company's resellers to choose from, the Company does not operate with a large backlog. Instead, the Company's customers generally order products for immediate delivery and the Company must respond to competitive prices and ship the product quickly or risk losing the order. However, as a result of orders from customers on credit hold and orders for newly introduced XGA products, at September 30, 1998, the Company had backlog of approximately $15.4 million, compared to approximately $11.8 million at September 30, 1997 and $14.9 million at December 31, 1997. Given current supply and demand estimates, it is anticipated that a majority of the current backlog will turn over by the end of 1998.* There is minimal seasonal influence relating to the Company's order backlog. The stated backlog is not necessarily indicative of Company sales for any future period nor is a backlog any assurance that the Company will realize a profit from filling the orders. The Company achieved gross margins of 20.5 percent in the first nine months of 1998, with 20.8 percent achieved in the third quarter of 1998, compared to 26.8 percent in the first nine months of 1997 and 25.4 percent in the third quarter of 1997. The decreases are primarily attributable to an aggressive competitive pricing environment and accelerated price reductions to end of life the LP420, LP720 and LP730, offset in part by a shift in mix in the second and third quarters of 1998 to higher margin products that incorporate engines designed and manufactured by the Company. The Company expects the competitive pricing environment will continue for the foreseeable future.* Accordingly, the Company is continuing its ongoing efforts to reduce manufacturing costs by working closely with its suppliers to reduce direct material costs and designing products with extensible platforms that use new and lower cost technologies. In addition, the Company continues to focus on adding value to projectors that use its own engine designs in order to become less reliant on more expensive out-sourced engines. Marketing and sales expense was $9.1 million and $30.5 million, respectively (12.0 percent and 14.0 percent of revenue, respectively) for the three month and nine month periods ended September 30, 1998 compared to $7.9 million and $22.1 million, respectively (10.0 percent and 10.1 percent of revenue, respectively) for the comparable periods of 1997. The increase is primarily a result of expenditures in the first quarter of 1998 to build demand for the LP420 in two-tier wholesale distribution, restructuring charges in the first and second quarters of 1998 and the addition of sales and service infrastructure around the world, particularly in Europe and Japan, partially offset by lower head count in the third quarter of 1998 as a result of the restructuring and other efforts to bring spending in line with current revenue and margin levels. Engineering expense was $4.5 million and $15.2 million, respectively (6.0 percent and 7.0 percent of revenue, respectively) for the three month and nine month periods ended September 30, 1998 compared to $4.7 million and $13.2 million, respectively (6.0 percent and 6.0 percent of revenue, respectively) for the comparable periods of 1997. This increase is primarily a result of timing for new product releases under development as well as restructuring charges in the first and second quarters of 1998 in order to create a more efficient organization, partially offset by lower head count in the third quarter of 1998 as a result of the restructuring. 8 General and administrative expense was $1.7 million and $5.5 million, respectively (2.2 percent and 2.5 percent of revenue, respectively) for the three month and nine month periods ended September 30, 1998 compared to $2.0 million and $5.6 million, respectively (2.5 percent and 2.6 percent of revenue, respectively) for the comparable periods of 1997. The nine months ended September 30, 1998 amount includes restructuring charges taken during the first and second quarters of 1998. The third quarter of 1998 realized efficiencies with lower head count as a result of the restructuring and other efforts to bring spending in line with current revenue and margin levels. The total restructuring charge in the first and second quarters of 1998 was approximately $1.9 million. Income (loss) from operations was $0.4 million (0.5 percent of revenue) and $(6.4) million, respectively, for the three month and nine month periods ended September 30, 1998 compared to income from operations of $5.6 million and $17.6 million, respectively (7.0 percent and 8.1 percent of revenue, respectively) for the comparable periods of 1997, primarily as a result of relatively flat revenue, decreased gross margins and increased operating expenses as indicated above. Income taxes through September 30, 1998 are based on an estimated rate of 49.7 percent, which increased from 29.4 percent in the first nine months of 1997 and 29.1 percent for the year ended December 31, 1997. The increase in the rate is due to the Company's loss position and magnitude of certain permanent tax benefits related to the amount of the loss. The research and development tax credit expired June 30, 1998. However, it has subsequently been reinstated retroactive to June 30, 1998 through June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998 working capital was $117.2 million, including $26.1 million of cash and cash equivalents and $9.1 million of marketable securities. In the first nine months of 1998, working capital increased by $4.8 million and the current ratio increased to 4.6:1 at September 30, 1998 from 3.0:1 at December 31, 1997. Cash and cash equivalents decreased $11.9 million primarily due to cash used in operations of $10.5 million and $5.2 million for purchases of property and equipment, offset by the net sale of $1.6 million of marketable securities, $2.0 million provided by the sale of common stock through the exercise of employee stock options and $1.1 million provided by the income tax benefit of non-qualified stock option exercises and disqualifying dispositions. Accounts receivable decreased $15.1 million to $72.7 million at September 30, 1998 compared to $87.8 million at December 31, 1997 primarily as a result of greater sales at the end of 1997 that have subsequently been collected and improved collection rates on recent sales. The Company's day's sales outstanding ("DSO") increased to 87 days at September 30, 1998 compared to 81 days at December 31, 1997. DSO decreased, however, from 92 days at the end of the second quarter and 97 days at the end of the first quarter of 1998. At September 30, 1998, 73 percent of the Company's accounts receivable were current, 13 percent were 30 days or less past due and 14 percent were beyond 30 days past due. 9 Inventories increased $1.3 million to $33.4 million at September 30, 1998 from $32.1 million at December 31, 1997. Inventory decreased, however, from $41.2 million at the end of the second quarter and $50.5 million at the end of the first quarter of 1998. All inventory components decreased during the third quarter, with most of the decrease attributable to reduced inventory positions related to products at or near end of life. Annualized inventory turns were approximately 6.4 times for the quarter ended September 30, 1998 compared to approximately 10.4 times for the fourth quarter of 1997 on an annualized basis and 5.0 times for the second quarter of 1998 on an annualized basis. The $5.2 million of purchases of property, plant and equipment during the first nine months of 1998 were primarily for new product tooling, engineering design and test equipment and information systems infrastructure. Total expenditures for property and equipment in 1998 are expected to total approximately $7.0 million, primarily for new product tooling, operations and quality test equipment and information systems infrastructure.* YEAR 2000 PRODUCTS The Company hereby represents and warrants that all past and current products ("Products"), including LitePro and LP projectors, PanelBook, PowerView, SmartView and PC Viewer projection panels, and LiteShow II and LiteShow Pro presentation players are Year 2000-compliant. Accordingly, the Company represents and warrants that all Products are designed to be used prior to, during, and after the calendar year 2000 AD, and that the Products will operate during each such time period without error relating to date data, specifically including any error relating to, or the product of, date data which represents or references different centuries or more than one century. However, with respect to the LiteShow Pro presentation player, notwithstanding the above, the Company does not make any representation or warranty as to Microsoft Windows software installed thereon. INFORMATION SYSTEMS The Company utilizes a packaged application strategy for all critical information systems functions. In the third quarter of 1998 all enterprise information system components were current with all Year 2000 updates and changes required by the manufacturers. This includes enterprise software, operating systems, networking components, application and data servers, PC hardware, and core office automation software. Various component tests have been conducted to verify full Year 2000 operational compliance. This process has uncovered additional year 2000 issues that are being worked jointly with the Company's technology vendors. Additionally, the Company's vendors are revising their updates and recommendations as other companies report issues to them. We expect this process to be ongoing as more companies conduct their testing and provide feedback to the technology vendors. In addition to the information system component testing, the Company will conduct a system wide test, to include all components from the desktop to the data center, to ensure 10 that all of the compliant components can function properly as a whole. This full integration test will be conducted within the next two quarters. The focus of these tests will be to ensure that the Company's business processes run end-to-end with no Year 2000 errors or issues. The Company's packaged application strategy has allowed it to keep its technology on maintenance contracts with its suppliers. Year 2000 upgrades to these technologies are covered under the maintenance contracts and represent no additional spending. Application upgrade and technology retirement intervals are not accelerated as a result of the Year 2000 issue. The packaged application strategy, maintenance contracts, upgrade and technology retirement intervals have been in place for the past four years. At this time the Company foresees no incremental spending for the Year 2000 issue*. Like all US businesses, the Company will be at risk from external infrastructure failures that could arise from Year 2000 failures. It is not clear that electrical power, telephone and computer networks, for example, will be fully functional across the nation in the Year 2000. Investigation and assessment of infrastructures, like the nations power grid, is beyond the scope and resources of the Company. Investors should use their own awareness of the issues in the nations' infrastructure to make ongoing infrastructure risk assessments and their potential impact to a company's performance. SUPPLIER BASE The Company has begun a year 2000 supplier audit program. It has contacted all of its critical suppliers to inform them of the Company's year 2000 expectations, and a request has been made for each vendor's compliance program. The supplier audit program is in its early stages and does not have a return rate useful for projecting overall Company impact from its supplier base at this time. It should be noted that there have been predictions of failures of key components in the transportation infrastructure due to the year 2000 problem. It is possible that there could be delays in rail, over-the-road and air shipments due to failure in transportation control systems. Investigation and validation of the world's transportation infrastructure is beyond the scope and the resources of the Company. Investors should use their own awareness of the issues in the transportation infrastructure to make ongoing infrastructure risk assessments and their potential impact to a company's performance. The Company has not yet developed any contingency plans in regard to its internal systems, supplier issues or any of the more global infrastructure issues. FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS During the first half of 1998, the Company made organizational changes that included the sale of Company's slides and transparency imaging and projector rental business (formerly provided by the Genigraphics business unit) and several other cost containment measures. These actions resulted in the Company laying off 18 percent of its workforce, thereby reducing annual compensation by approximately $4.8 million. 11 NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for all derivative instruments. SFAS 133 is effective for fiscal years beginning after June 15, 1999. The Company does not have any derivative instruments and, accordingly, the adoption of SFAS 133 will have no impact on the Company's financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibits filed as part of this report are listed below:
Exhibit Number and Description ------------------------------ 3 1990 Restated Articles of Incorporation (1) 10 In Focus Systems, Inc. 1998 Stock Incentive Plan (1) 27 Financial Data Schedule
(1) Previously filed as exhibit 3 and 10, respectively, to Form 10-Q for the quarter ended March 31, 1998 and filed with the Securities and Exchange Commission on May 12, 1998. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended September 30, 1998. 12 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. Date: October 28, 1998 IN FOCUS SYSTEMS, INC. By: /s/ JOHN V. HARKER ----------------------------------------- John V. Harker Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer and Secretary (Duly authorized Principal Executive Officer and Principal Financial and Accounting Officer) 13 EX-27 2 EXHIBIT 27
5 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 26,054 9,103 78,848 6,142 33,448 149,874 41,124 28,194 165,922 32,702 0 0 0 53,747 79,473 165,922 218,128 218,128 173,411 173,411 51,139 378 80 (5,747) (2,855) (2,892) 0 0 0 (2,892) (0.13) (0.13)
-----END PRIVACY-ENHANCED MESSAGE-----