InFocus® Announces Second Quarter 2006
WILSONVILLE, Ore., July 25, 2006 – InFocus® Corporation (Nasdaq: INFS) today announced its second quarter 2006 financial results. On revenues of $97.6 million, the Company posted a net loss of $12.8 million, or $0.32 per share, compared to a net loss of $16.4 million, or $0.41 per share, for the first quarter of 2006 and a net loss of $19.6 million, or $0.49 per share for the second quarter of 2005.
Included in the second quarter 2006 financial results was a restructuring charge of $0.9 million, non-cash stock-based compensation expense of $0.3 million as a result of implementing the new stock option expensing accounting standard, and non-cash other expense of $3.4 million related to South Mountain Technologies, the company’s Chinese joint venture. In total, these items accounted for $4.6 million, or $0.12 per share, of the net loss recorded for the second quarter.
The Company also reported total cash and marketable securities as of June 30, 2006 of $92.4 million with no debt outstanding, up $14.2 million from the end of the first quarter. In addition, total inventories at the end of the second quarter were $47.5 million, down $2.3 million from the end of March.
Quarterly Revenue, Unit, ASP and Gross Margin Comparisons
Second quarter revenues of $97.6 million were down 13 percent compared with first quarter revenues and down 28 percent from revenues in the second quarter of 2005. Gross margins improved to 15.0 percent in the second quarter of 2006 from 14.9 percent in the first quarter. Overall, average selling prices were down 6 percent quarter to quarter, primarily a result of changes in the mix of products sold as opposed to price reductions across the product portfolio. Projector unit shipments were approximately 84,000 units in the second quarter, down about 11% from the prior quarter.
Operating Expenses Comparison Excluding ChargesOperating expenses, exclusive of restructuring charges and regulatory assessments, were $23.6 million for the second quarter of 2006, down $1.3 million from the first quarter of 2006 and down $4.3 million from the second quarter of 2005. Included in general and administrative operating expenses for the second quarter are approximately $1.1 million of legal and administrative costs associated with the audit committee investigations completed during the quarter.
Other expense, net for the second quarter was $2.8 million compared to other expense of $7.0 million in the first quarter and other income of $3.4 million in the second quarter of 2005. The company recorded $1.3 million of other expense related to its share of operating losses related to SMT and wrote off the remaining original SMT investment of $2.1 million as alternative strategies are sought for the joint venture. These expenses were offset by a $0.6 million gain on the sale of land during the second quarter. The major contributing item to other expense in the first quarter was a $7.5 million non-cash charge associated with writing down the realizable value of cost-based investments in Reflectivity and VST International.
Balance SheetTotal cash and marketable securities as of June 30, 2006 were $92.4 million, an increase of $14.2 million from the end of March. Days sales outstanding for the quarter were 58 days, an increase of 2 days from the prior quarter. Inventory levels declined $2.3 million during the quarter to $47.5 million, resulting in improved inventory turns.
Outlook for Second Half 2006
During the second half of 2006, we expect the following factors to influence revenues and gross margins:
1. Minimal unit growth in the third quarter with an expected seasonal uplift in the fourth quarter and continued aggressive price competition across the front projection industry;
2. Greater revenue contribution from new products introduced in the first half of 2006 providing an improved margin opportunity;
3. Managing additional product transitions as the IN32, IN34 and IN42 products are introduced in the third quarter replacing the LP600, LP640 and LP840 products; and
4. The impact of lower priced plasma and LCD televisions on revenues in consumer electronics retail for the IN72 product during the holiday buying season.
Relative to operating expenses, the company expects to achieve a reduction in reported operating expenses as the benefits of previous restructuring actions are realized, audit committee investigation costs are eliminated, The University Network is successfully sold, and further actions are taken to fine tune the business model to reduce the company’s break even point.
Given the difficulty of predicting the financial results due to major shifts in the business model and markets, the company is not giving specific financial guidance for future periods at this time.
“While I am disappointed in our financial results for the quarter, many of our restructuring activities have been successful, preserving cash, reducing our cost structure, introducing several new products and launching a new brand campaign. However, our revenues and gross margins are not at the level we had anticipated,” stated Kyle Ranson, President and CEO, InFocus. “We remain committed to maximizing shareholder value, leveraging our core strengths and taking further cost actions as necessary to drive our core business to profitability.”
Reconciliation of GAAP and Pro Forma InformationThe Company has recorded charges that are excluded from operating expenses and earnings for comparative purposes. In accordance with SEC FR-59, we have attached a Statement of Reconciliation of GAAP Earnings.
Conference Call InformationThe Company will hold a conference call today at 11:00 a.m. eastern time. The session will include brief remarks and a question and answer period. The conference can be accessed by calling (866) 904-2211 (U.S. participants) or (416) 641-2145 (outside U.S. participants), or via live audio Web cast at www.infocus.com. Upon completion of the call, the Web cast will be archived and accessible on our website for individuals unable to listen to the live telecast. The conference call replay will also be available through August 1, 2006 by calling (888) 509-0081 (U.S.) or (416) 695-5275 (outside U.S.). A Pin # is not required.
Forward-Looking Statements
This press release includes forward-looking statements, including statements related to anticipated revenues, gross margins, expenses, earnings, availability of components and projectors manufactured for the Company, inventory, backlog, and new product introductions. Also included are forward-looking statements regarding the results and charges associated with restructuring of the Company’s business to reduce its overall cost structure. Investors are cautioned that all forward-looking statements involve risks and uncertainties and several factors could cause actual results to differ materially from those in the forward-looking statements. The following factors, among others, could cause actual results to differ from those indicated in the forward-looking statements: 1) in regard to revenues, gross margins, inventory and earnings, uncertainties associated with market acceptance of and demand for the Company's products, the impact competitive and economic factors have on business buying decisions, dependence on third party suppliers, the impact of regulatory actions by authorities in the markets we serve, the impact of potential fines and/or sanctions imposed as a result of our self disclosure regarding infractions of U.S export law; 2) in regard to product availability and backlog, uncertainties associated with manufacturing capabilities, uncertainties associated with our recent transition to two new contract manufacturing partners, availability of critical components, and dependence on third party suppliers; 3) in regard to new product introductions, ability of the Company to make timely delivery of new platforms, uncertainties associated with the development of technology, uncertainties with product quality and availability with the reliance on off-shore contract manufacturing, dependence on third party suppliers and intellectual property rights; and 4) in regard to the Company’s restructuring plan, uncertainties associated with the impact on revenues and gross margins of plans to focus efforts on certain geographies and sales channels and the ability to execute the transitions planned in the desired time frames based on the scale of actions initiated. Investors are directed to the Company's filings with the Securities and Exchange Commission, including the Company's 2005 Form 10-K and 2006 Form 10-Q’s, which are available from the Company without charge, for a more complete description of the risks and uncertainties relating to forward-looking statements made by the Company as well as to other aspects of the Company's business. The forward-looking statements contained in this press release speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward looking statements to reflect events or circumstances after the date of this press release.
About InFocus CorporationInFocus® Corporation (Nasdaq: INFS) is the industry pioneer and worldwide leader in the projection market today. Nearly twenty years of experience and engineering breakthroughs are at work here, constantly improving what you see in the marketplace, and delivering immersive audio visual impact in home entertainment, business and education environments. Being the inventor and leader is simply a great bonus of making the presentation of ideas, information, and entertainment a vivid, unforgettable experience.
InFocus Corporation's global headquarters are located in Wilsonville, Oregon, USA, with regional offices in Europe and Asia. For more information, visit the InFocus Corporation web site at www.infocus.com or contact the Company toll-free at 800.294.6400 (U.S. and Canada) or 503.685.8888 worldwide.
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InFocus, IN, Proxima, LiteShow, LP, ASK, ScreenPlay, Play Big, Work Big, Learn Big and The Big Picture are either registered trademarks or trademarks of InFocus Corporation in the U.S. and abroad. “Digital Light Processing” and “DLP” are trademarks of Texas Instruments.
Investor Relations Contacts:
Kyle Ranson
Chief Executive Officer
InFocus Corporation
(503) 685-8576
Roger Rowe
Chief Financial Officer
InFocus Corporation
(503) 685-8609
Public Relations Contact:
Scott Ballantyne
Chief Marketing Officer
InFocus Corporation
(503) 685-8923
