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Evaluation and Control. Which measures to use to assess performance depends on: the company you are looking at and the objectives to be achieved. Evaluation and Control. In consideration of the company how big is the company? how diversified is the company?

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evaluation and control
Evaluation and Control
  • Which measures to use to assess performance depends on:
    • the company you are looking at and
    • the objectives to be achieved.
evaluation and control2
Evaluation and Control
  • In consideration of the company
    • how big is the company?
    • how diversified is the company?
    • how competitive is the company’s industry?
    • what is the strategic approach of the company?
evaluation and control3
Evaluation and Control
  • In consideration of objectives:
    • focused on cost efficiency in processing, inbound and outbound logistics, etc.
    • focused on maintaining strong brand identity
    • attempting to increase market penetration
    • trying to fill one or two small market niches
    • focused on rapidly introducing new product generations
evaluation and control4
Evaluation and Control

Balanced Scorecard - Some Thoughts

Should the company include non-financial measures to determine overall performance?

    • Market-based: market share, brand identity, etc.
    • Society-based: environmental policies and reporting, human resource policies
  • How important are these factors to the company’s long term viability?
evaluation and control5
Evaluation and Control
  • Triple Bottom Line Performance - Adding Social and Environmental Issues
    • “Measures” of Social Performance:
      • Employee Safety – Injuries
      • Health Care program
      • Hours of Employee Training
      • Day Care
      • Maternity and Paternity Leave
      • Community Engagement activities
evaluation and control6
Evaluation and Control
  • Triple Bottom Line Performance - Adding Social and Environmental Issues
    • “Measures” of Social Performance:
      • HP and Global Citizenship Awards
evaluation and control7
Evaluation and Control
  • Triple Bottom Line Performance - Adding Social and Environmental Issues
    • “Measures” of Environmental Performance:
      • Number of Toxic/Hazardous waste spills and incidents
      • Amount of and changes in pollutants to air, water and land
      • Environmental product design awards
      • Number of manufacturing operations certified according to ISO 14001
evaluation and control8
Evaluation and Control
  • Triple Bottom Line Performance - Adding Social and Environmental Issues
    • “Measures” of Environmental Performance:
      • Dell and Emissions
evaluation and control9
Evaluation and Control

Financial Performance - Profitability Ratios

Margin Ratios

Gross margin = gross profit/sales x 100%

Operating margin = operating income/sales x 100%

Profit margin = net income/sales x 100%

  • changes can be early warning of serious problems (down 1 or 2% can be the difference between healthy profits or a loss in many industries)
evaluation and control10
Evaluation and Control

Financial Performance - Profitability Ratios

Return on Investment Ratios

Return on Assets = Net Income/Total Assets

  • good for evaluating divisional managers (how well did they utilize the assets entrusted to them) but not so good for evaluating overall firm performance

Return on Equity = Net Income/Stockholders’ Equity

  • good for evaluating overall firm performance (how well did the firm’s top management use the resources provided by owners) but not for evaluating divisional managers
evaluation and control11
Evaluation and Control

Financial Performance - Efficiency Ratios

Inventory turnover ratio

= cost of goods sold/average inventory balance

Days to sell inventory= 365/inventory turnover

  • large inventory incurs excessive interest, warehousing, property tax and spoilage costs
  • small inventory risks lost sales or production line stoppage due to stock outs of finished goods or raw materials, respectively
evaluation and control12
Evaluation and Control

Financial Performance - Liquidity Ratios

To little liquidity raises possibility of default & bankruptcy; to much implies long term investments w/ greater profitability have been missed.

Current ratio = current assets/current liabilities

  • varies by industry - airline industry (receivables & inventory are low), manufacturing industry (receivables & inventory fairly high), distillery (inventories quite high)

Quick ratio = (don’t worry about this one)

evaluation and control13
Evaluation and Control
  • How do you find out what financial data you should include in your report.
    • Look at annual reports. What performance measurements do the chairman, president, or other top management often make reference to?
    • Look at industry analyst reports: What performance measurements do industry analysts often make reference to when discussing companies in this industry?
evaluation and control14
Evaluation and Control

Looking at a Company: InFocus

Looking at a Company: Dell Computers

Use Research Insight (Compustat) to find financial information on your company and its competitors. Available on business computing lab PCs.

evaluation and control15
Evaluation and Control
  • Responsibility Centers
    • Standard Cost Centers: primarily manufacturing; efficiency – costs per unit produced; compare expected and actual production costs
    • Revenue Centers: generally sales; effectiveness – sales generated; compare previous year’s/projected to actual sales.
    • Expense Centers: generally administration, service & research; indirect contribution to revenues.
evaluation and control16
Evaluation and Control
  • Responsibility Centers
    • Profit Centers: SBU or division controls expenses and revenues, perhaps based on product line.
    • Investment Centers: generally facility-based; return on investment; revenue generated compared to value of facility
slide17
John V. Harker

Chairman of the Board, President and

Chief Executive Officer

Brian K. Unruh

Vice President, Corporate Controller

income statement q3 2001

Q3-2001

Q2-2001

$180.2

46.0 25.5%

36.6 20.3%

$9.4 5.2%

9.8 5.4%

$7.1 3.9%

$0.18

39.7

Total revenue $ 185.3

Gross margin 48.2 26.0%

Operating Expenses 38.1 20.6%

Operating income $ 10.1 5.4%

Income before tax 13.6 7.3%

Net Income $ 9.4 5.1%

EPS (Fully Diluted) $ 0.24*

Fully Diluted Shares (M)

Income Statement – Q3 2001

$ = Millions

revenue breakout q3 2001

Canada/Latin America

5%

Asia/Pacific

11%

United States

61%

OEM / Private Label

9%

Europe

23%

Distribution

50%

Value Added Dealers

41%

Revenue Breakout – Q3 2001

By Geography

By Channels

strong balance sheet with opportunities to improve
Strong Balance Sheet---- with Opportunities to Improve
  • Strong historical working capital management
  • Solid Cash and Marketable Securities Position
    • $80M Balance at end of Q3
    • Majority of balance invested in tax-exemptsecurities
  • No Debt
second half of 2001 new product flow is strong

SXGA->720p

720p->XGA

SVGA

XGA

Application-based

Large Room

120” Diag

50 People

Medium Room

80-120 “ Diag

20 - 50 People

Networking &

Remote Collaboration

Small Room

< 80” Diag

<10 People

Digital

Appliances

Mobile

Value

Second Half of 2001----- New Product Flow is Strong!
comprehensive array of critical engineering skills tools
Comprehensive Array of Critical Engineering Skills/tools
  • Optical systems and lens design
  • Multiple display device technology
  • Electrical design and custom ASICs
  • Thermal analysis and system design
  • Embedded control and software interfaces
  • Industrial design
  • Design for reliability, safety and manufacturability
  • Audio systems

Patents - 100 issued and over 20 pending

strategic partners
Strategic Partners

Image Devices / Illumination / Networking

expand the market oem business 9 percent of revenues in q3 2001

Image Engines

Primary “Projection” component

Customized rear projection applications, etc.

Expand the Market: OEM Business---- 9 Percent of Revenues in Q3 2001

Thin Label Products

Minor cosmetic changes

Color, splash screen, labeling, packaging

Customized Products

Major feature/function changes

Industrial Design, Optical, Electronics, Software, Hardware

Business maintains greater than 10% operating margins

expand the market film subtitling

InFocus Projection Enabled Film Subtitling

Expand the Market: Film Subtitling
  • Changes the model for producing, distributing, storing, and recording multiple dialects of the same film
  • Accommodates several language texts on a single CD-ROM
  • Cost savings to film distributors of approximately $500K per film

InFocus and DTS have taken large screen cinema technology to the next step with the DTS-CSS Cinema SubtitlingSystem ….. projecting “overlaid” subtitles directly onto the screen instead of etching them onto the film itself

Note: DTS (Digital Theatre Systems) is a leading provider of Theatre Audio Technology

expand the market video conferencing
Expand the Market: Video conferencing
  • Video capabilities of projectors are improving dramatically
    • All projectors are Digital to start, many are HDTV ready
    • Brightness and resolution actually exceed television
  • Technology has dramatically improved with DLP
    • Lower cost
  • Value added dealers are beginning to report significant increase in demand post Sept. 11 disaster
infocus strategic competitive advantages home entertainment
InFocus Strategic Competitive Advantages---- Home Entertainment
  • Best video image quality
    • Leverage excellence in DLP technology
    • Digital and HDTV is available in projectors today!!
  • Integration and “ease of use” is key to success
    • Elegant, furniture-like solution
    • Small form factor
    • Use projection link / ”one cable” connectivity schemes
  • Best price performance
    • First to offer truly complete, affordable solution
    • Image size from 5’ diagonal, up to 12’
  • Ability to leverage partnerships
home entertainment segmentation

CEDIA

Retail

Home Entertainment Segmentation
  • 3 segments
    • High End
    • Prosumer
    • Retail / Consumer
  • Pro
  • CRT, 3 chip DLP
  • > $20K
  • True 1080i HD
  • Image is key
  • Prosumer
  • $1.5K – 20K
  • Specification is key
  • Consumer
  • Resolution-less
  • <$1.5K
  • Price is key
slide31

2001 – 2005 Unit Forecast

Disruptive low cost product can

drive increased volume

Americas – HTRG, PMA

EMEA – DTC

AsiaPac – Fuji-Kimera, Toshiba data

home entertainment go to market with oem infocus brand
Home Entertainment-- Go To Market with OEM & InFocus Brand
  • OEM relationships established with three partners:
    • Toshiba, the #1 television brand in the world, with world-wide distribution channels
    • Runco, the market leader in state-of-the-art home theater projection systems
    • Gradiente, one of the largest manufacturers of electronic consumer goods in the Brazilian market
  • Additional OEM’s will follow
  • InFocus Branded Products
    • Primary Channels - AV Independent Retailers and Home Theatre Installers
slide33

Expand the Market – - -

All end-user markets have significant growth opportunities for InFocus:

- Corporate(3% attach rate to notebooks)

- Education(Price points are now attractive, professors/teachers more comfortable with computers)

- Government(Larger, high resolution, distance communication required)

- Consumer(Price points, all video sources accepted)

financial goals at infocus longer term target
Financial Goals at InFocus---- Longer Term Target *
  • Revenue growth rate of 15%
  • Operating income at 8-10% of sales
  • World class working capital management:
    • Positive cash flow
    • Inventory turnover at greater than 8 times
    • DSO less than 75 days

* Achievable once global economy recovers

slide35

Summary - Why Invest in INFS?

  • We are the clear, undisputed market leader
  • There is unquestionable market growth opportunity
    • Smaller and brighter projectors will continue
    • Continued lower product pricing/costs with improved performance
    • Trend toward wireless connectivity technology
    • Home entertainment with digital video and HDTV
    • Increasing networking of projectors
    • Untapped growth in education market as prices fall
  • We have a strong patent protected technology base
  • We are aggressively moving toward contract manufacturing
  • We have solid, conservative financial disciplines
  • We have a strong, tested management team