<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
---------------
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2000 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
</TABLE>
COMMISSION FILE NUMBER: 0-26844
------------------------
RADISYS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OREGON 93-0945232
(State or other jurisdiction (I.R.S. Employer Identification Number)
of organization or incorporation)
</TABLE>
5445 NE DAWSON CREEK DRIVE
HILLSBORO, OR 97124
(Address of principal executive offices, including zip code)
(503) 615-1100
(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 report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of common stock outstanding as of May 10, 2000 was 16,864,767.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
RADISYS CORPORATION
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet--March 31, 2000 and December 31,
1999...................................................... 3
Consolidated Statement of Operations--Three months ended
March 31, 2000 and 1999................................... 4
Consolidated Statement of Changes In Shareholders' Equity--
December 31, 1999 through March 31, 2000.................. 5
Consolidated Statement of Cash Flows--Three months ended
March 31, 2000 and 1999................................... 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations..................................... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 16
Signatures.......................................................................... 17
</TABLE>
2
<PAGE>
RADISYS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................... $ 36,013 $ 15,708
Accounts receivable, net................................ 61,051 58,619
Inventories, net........................................ 42,024 41,374
Other current assets.................................... 4,204 1,747
Deferred income taxes................................... 3,814 4,723
-------- --------
Total current assets.................................. 147,106 122,171
Property and equipment, net............................. 20,949 21,211
Goodwill and intangible assets, net..................... 33,466 34,177
Other assets............................................ 12,772 10,004
-------- --------
Total assets.......................................... $214,293 $187,563
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable........................................ $ 30,354 $ 19,878
Short term borrowings................................... 13,931 13,931
Income taxes payable.................................... 5,973 3,527
Accrued wages and bonuses............................... 6,254 6,706
Other accrued liabilities............................... 8,842 9,266
-------- --------
Total liabilities..................................... 65,354 53,308
-------- --------
Shareholders' equity
Common stock, 50,000 shares authorized, 16,853 and
16,489 shares issued and outstanding.................. 146,307 141,030
Accumulated other comprehensive income (loss):
Cumulative translation adjustment..................... (1,195) (1,546)
Unrealized gain (loss) on securities available for
sale................................................ 2,076 (349)
Accumulated earnings (deficit).......................... 1,751 (4,880)
-------- --------
Total shareholders' equity............................ 148,939 134,255
-------- --------
Total liabilities and shareholders' equity............ $214,293 $187,563
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, DECEMBER 31,
2000 1999
--------- -------------
(RESTATED)
<S> <C> <C>
Revenues.................................................... $81,293 $52,698
Cost of goods sold.......................................... 52,435 33,859
------- -------
Gross profit................................................ 28,858 18,839
Research and development.................................... 8,981 6,662
Selling, general and administrative......................... 9,542 8,505
Goodwill and intangibles amortization....................... 1,724 299
------- -------
Income from operations...................................... 8,611 3,373
Interest income (expense), net.............................. (56) 438
Other income................................................ 838 38
------- -------
Income before income tax provision.......................... 9,393 3,849
Income tax provision........................................ 2,762 932
------- -------
Net income.................................................. $ 6,631 $ 2,917
======= =======
Net income per share (basic)................................ $ 0.40 $ 0.18
======= =======
Net income per share (diluted).............................. $ 0.36 $ 0.18
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE UNREALIZED ACCUMULATED TOTAL OTHER
------------------- TRANSLATION GAIN/(LOSS) EARNINGS COMPREHENSIVE
SHARES AMOUNT ADJUSTMENT ON SECURITIES (DEFICIT) TOTAL INCOME
-------- -------- ----------- ------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1999...................... 16,489 $141,030 $ (1,546) $ (349) $ (4,880) $134,255
Shares issued pursuant to
benefit plans............. 364 5,277 5,277
Translation adjustment...... 351 351 $ 351
Unrealized gain on
securities................ 2,425 2,425 2,425
Net income for the period... 6,631 6,631 6,631
------ -------- -------- ------- -------- -------- ------
Balances, March 31, 2000.... 16,853 $146,307 $ (1,195) $ 2,076 $ 1,751 $148,939
====== ======== ======== ======= ======== ========
Total other comprehensive
income, three months ended
March 31, 2000............ $9,407
======
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
(RESTATED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 6,631 $ 2,917
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 4,339 2,024
Gain on sale of assets.................................. (856) --
Deferred income taxes................................... 1,090 (609)
Net changes in current assets and current liabilities:
Decrease (increase) in accounts receivable............ (2,432) (4,722)
Decrease (increase) in inventories.................... (650) 107
Decrease (increase) in other current assets........... (2,457) 97
Increase (decrease) in accounts payable............... 10,476 4,268
Increase (decrease) in income taxes payable........... 2,446 1,277
Increase (decrease) in accrued wages and bonuses...... (452) 289
Increase (decrease) in other accrued liabilities...... (377) (170)
------- -------
Net cash provided by operating activities............... 17,758 5,478
------- -------
Cash flows from investing activities:
Business acquisitions..................................... (962) (27,513)
Capital expenditures...................................... (1,597) (1,483)
Capitalized software production costs and other assets.... (825) (903)
Sale of assets............................................ 350 --
------- -------
Net cash used for investing activities.................. (3,034) (29,899)
------- -------
Cash flows from financing activities:
Issuance of common stock, net............................. 5,277 943
Payments on capital lease obligation...................... (47) (84)
------- -------
Net cash provided by financing activities............... 5,230 859
------- -------
Effect of exchange rate changes on cash..................... 351 (115)
------- -------
Net increase/(decrease) in cash and cash equivalents........ 20,305 (23,677)
Cash and cash equivalents, beginning of period.............. 15,708 43,792
------- -------
Cash and cash equivalents, end of period.................... $36,013 $20,115
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, 2000
1. BASIS OF PRESENTATION
RadiSys Corporation (the Company) was incorporated in March 1987 under the
laws of the State of Oregon for the purpose of developing, producing and
marketing computer system (hardware and software) products for embedded computer
applications in manufacturing automation, medical, transportation,
telecommunications and test equipment marketplaces. The accompanying
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, which are located in Western Europe, Israel, and
Japan.
The accompanying consolidated financial statements are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of results for the interim periods. Certain information and
footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1999. The results of operations for interim periods are
not necessarily indicative of the results for the entire year.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates and judgements made by management of the Company include matters such
as collectibility of accounts receivable, realizability of inventories and
recoverability of capitalized software and deferred tax assets.
NEW PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. Management believes that the impact of
SAB 101 has no material effect on the financial position or results of
operations of the Company.
RECLASSIFICATIONS
Reclassifications have been made to certain amounts in prior years. These
changes had no impact on previously reported results of operations or
shareholders' equity.
CASH FLOWS
Non cash investing and financing activities include an increase in the
market value of the General Automation stock, a net increase of $2.4 million to
both Other long term assets and Unrealized gain on securities available for
sale.
7
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, 2000
2. ACCOUNTS RECEIVABLE
Trade accounts receivable are net of an allowance for doubtful accounts of
$944 and $933 at March 31, 2000 and December 31, 1999, respectively. The
Company's customers are concentrated in the technology industry.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MAR 31, DEC 31,
2000 1999
-------- --------
<S> <C> <C>
Raw materials............................................. $32,503 $30,986
Work in process........................................... 2,614 2,465
Finished goods............................................ 6,907 7,923
------- -------
$42,024 $41,374
======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
MAR 31, DEC 31,
2000 1999
-------- --------
<S> <C> <C>
Land...................................................... $ 1,391 $ 1,391
Manufacturing equipment................................... 18,297 17,950
Office equipment.......................................... 20,733 19,746
Leasehold improvements.................................... 4,855 4,835
------- -------
45,276 43,922
Less: accumulated depreciation............................ 24,327 22,711
------- -------
$20,949 $21,211
======= =======
</TABLE>
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets decreased by $.7 million, net from
$34.2 million at December 31, 1999 to $33.5 million at March 31, 2000. Goodwill
and intangibles increased by $1.0 million resulting from increased purchase
price recorded for the OCP acquisition based upon a formula tied to certain OCP
revenues pursuant to the acquisition agreement. This increase was offset by
$1.7 million in amortization of goodwill and other intangible assets.
Amortization periods range from five to fifteen years.
6. EARNINGS PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents (stock options and warrants)
outstanding during the periods, computed using the treasury stock method for
stock options and warrants.
8
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, 2000
6. EARNINGS PER SHARE (CONTINUED)
Weighted average shares consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MAR 31, MAR 31,
2000 1999
--------- ---------
<S> <C> <C>
Weighted average shares (basic)........................... 16,670 15,903
Effect of dilutive stock options.......................... 1,534 677
------- -------
Weighted average shares (diluted)......................... 18,204 16,580
======= =======
</TABLE>
7. SEGMENT INFORMATION
The Company is organized primarily on the basis of embedded single board
computers and other related support operations. Operations not included in
embedded single board computers are insignificant for presentation.
Information about the Company's geographic operations and sales is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
MAR 31, MAR 31,
2000 1999
REVENUE -------- --------
<S> <C> <C>
COUNTRY
United States............................................. $46,301 $37,144
Europe.................................................... 32,702 14,163
Asia Pacific--Japan....................................... 1,818 664
Other foreign............................................. 472 727
------- -------
$81,293 $52,698
======= =======
</TABLE>
<TABLE>
<CAPTION>
MAR 31, MAR 31,
2000 1999
LONG LIVED ASSETS -------- --------
<S> <C> <C>
COUNTRY
United States............................................. $20,154 $20,537
Europe.................................................... 721 591
Asia Pacific--Japan....................................... 74 83
------- -------
$20,949 $21,211
======= =======
</TABLE>
One customer accounted for $11.7 million, or 14.4%, of total revenue for the
three months ended March 31, 2000. No other customers accounted for more than
10% of total revenue for the three month period ended March 31, 2000.
9
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, 2000
8. MERGER WITH TEXAS MICRO AND RELATED CHARGES
In connection with the merger of Texas Micro, Inc. on August 13, 1999, the
Company recorded a charge to operating expenses of approximately $6.0 million
for merger-related costs during 1999. Merger and related costs are comprised of
the following:
<TABLE>
<CAPTION>
COMBINATION COSTS BALANCE
RECORDED YEAR ACCRUED AS OF
ENDED DEC 31, 1999 MAR 31, 2000
------------------- -------------
<S> <C> <C>
Professional & filing fees...................... $3,251 $ 91
Severance, retention, relocation & benefits
alignment..................................... 1,538 450
Contract termination costs...................... 799 140
Marketing, information systems conversion, and
other miscellaneous costs..................... 383 24
------ ----
Total........................................... $5,971 $705
====== ====
</TABLE>
Accrued combination costs totaling $705 at March 31, 2000 are included in
Other accrued liabilities in the Consolidated Balance Sheet.
9. GAIN ON SALE OF ASSETS
During the first quarter of 2000 the Company sold a total of 367 shares of
General Automation common stock resulting in a recorded net gain of $856. This
gain is reflected in Other income in the Consolidated Statement of Operations.
10. ACQUISITIONS AND MERGERS
ARTIC BUSINESS UNIT ACQUISITION
On March 1, 1999, the Company purchased certain assets of International
Business Machines Corporation ("IBM") dedicated to the design, manufacture and
sale of IBM's ARTIC communications coprocessor adapter hardware and software for
wide area network and other telephony applications ("ARTIC"). The purchase price
aggregated $27.0 million in cash consideration. The acquisition of ARTIC was
accounted for using the purchase method. The results of operations for ARTIC
have been included in the financial statements since the date of acquisition.
The aggregate purchase price of $27.5 million included $.6 million of direct
costs of acquisition and was allocated to fixed assets ($.4 million),
inventories ($6.5 million), patents ($5.0 million) and the remainder to
goodwill.
OCP BUSINESS UNIT ACQUISITION
On December 28, 1999, the Company purchased certain assets of IBM's Open
Computing Platform (OCP) operation. OCP develops and sells integrated
computer-based solutions based on Intel architecture, primarily to OEM's of
telecommunications equipment. The purchase price consisted of an aggregate of
$13.9 million in cash consideration. The acquisition of OCP was accounted for
using the purchase method. The results of operations of OCP have been included
in the financial statements since the date of acquisition. The aggregate
purchase price recorded as of December 31, 1999 of $14.1 million included
$.1 million direct costs of acquisition and $.1 million of contingent
consideration and was allocated to fixed assets ($.2 million), inventories
($.9 million) and the remainder to goodwill.
10
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, 2000
10. ACQUISITIONS AND MERGERS (CONTINUED)
Pursuant to the terms of this agreement, the Company may be required to make
additional future payments in March of 2001, 2002, and 2003 based upon a formula
tied to future OCP revenues. Accordingly, during Q1 of 2000 the Company recorded
an additional $1 million in purchase price resulting from OCP revenues during
the quarter. The additional purchase price has been recorded as goodwill. The
total consideration for the acquisition is limited to $30.0 million.
UNAUDITED PRO FORMA DISCLOSURES OF ACQUISITIONS
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisitions described above had occurred as
of the beginning of 1999, after giving effect to adjustments of amortization of
patents and goodwill, estimated reduction of interest income and the estimated
impact on the income tax provision. The unaudited pro forma financial statements
are not necessarily indicative of what actual results would have been had the
ARTIC and OCP acquisitions occurred at the beginning of the respective period.
The unaudited pro forma information should be read in conjunction with the
Current Report of the Company on Form 8-K dated March 1, 1999 and December 28,
1999 for ARTIC and OCP, respectively, and the Current Reports of the Company on
Form 8-K/A filed April 22, 1999 and March 10, 2000, respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAR 31, 1999
------------------
(UNAUDITED)
<S> <C>
Revenues................................................... $75,407
Net income................................................. 6,229
Net income per share (basic)............................... .39
Net income per share (diluted)............................. .38
</TABLE>
11
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands)
OVERVIEW
Total revenue was $81.3 million for the three months ended March 31, 2000
compared to $52.7 million for the three months ended March 31, 1999. Net income
was $6.6 million for the three months ended March 31, 2000 compared to
$2.9 million for the three months ended March 31, 1999.
During the past year, the Company has merged with one company (Texas Micro
in August 1999) and acquired assets in two other transactions (ARTIC in March
1999 and OCP in late December 1999) in order to expand the expertise the Company
believes it needs to compete effectively in the communications market. These
acquisitions have resulted in increased sales volume as well as increased
operating and manufacturing capacity. Additionally, the merger with Texas Micro
has resulted in certain operating efficiencies. Therefore, total operating
expenses have increased in dollar volume but efficiencies combined with
increased sales volume have resulted in a decrease of operating expenses as a
percentage of revenue. The Company expects to continue to acquire companies and
technologies that are complementary to the Company's business and product
offerings.
REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Revenues.................................................... $81,293 54% $52,698
</TABLE>
Revenues increased by $28.6 million or 54% for the three months ended
March 31, 2000 compared to the three months ended March 31, 1999. The increase
in revenues is due to growth within existing product lines and movement into
higher growth markets, primarily telecommunications. In addition, revenue in the
three months ended March 31, 2000 includes revenues from the Company's 1999
acquisitions (ARTIC in March 1999 and OCP in late December 1999) for the entire
quarter. The Company's top five customers collectively represented approximately
36% of revenue for the three months ended March 31, 2000.
COST OF GOODS SOLD
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Cost of goods sold.......................................... $52,435 55% $33,859
As a percentage of revenues................................. 65% 64%
</TABLE>
Cost of goods sold increased by $18.6 million or 55% for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999 primarily
as a result of increased revenues. The slight increase in cost of goods sold in
the three months ended March 31, 2000 as a percentage of revenues is due to the
impact of product mix.
12
<PAGE>
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Research and development.................................... $8,981 35% $6,662
As a percentage of revenues................................. 11% 13%
</TABLE>
Although overall research and development expenses have increased, they have
declined by almost 2% as a percentage of revenue for the three months ended
March 31, 2000 compared to the three months ended March 31, 1999. This
percentage decline can be attributed to increased efficiencies as a result of
the integration of Texas Micro. In addition, the impact of the OCP acquisition
resulted in lower research and development costs as a percentage of revenues,
because OCP's business model incorporated lower R&D expenses as a percentage of
revenues.
SELLING, GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Selling, general & administrative........................... $9,542 12% $8,505
As a percentage of revenues................................. 12% 16%
</TABLE>
Selling, general and administrative (SG&A) expenses as a percentage of
revenues have declined by 4% for the three months ended March 31, 2000 compared
to the three months ended March 31, 1999. The decline is largely a result of the
integration of Texas Micro into the Company. For example, the Company
experienced significant savings by combining the sales organizations and
eliminating manufacturing representatives in the Texas Micro model. In addition,
the OCP acquisition resulted in lower SG&A expenses, as OCP's business model
incorporated lower SG&A expenses as a percentage of revenues.
GOODWILL AND INTANGIBLES AMORTIZATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Goodwill and intangibles amortization....................... $1,724 477% $299
As a percentage of revenues................................. 2% 1%
</TABLE>
Goodwill amortization expense increased by $1.4 million for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999. This is
a result of the ARTIC acquisition in March 1999 and the OCP acquisition in
December 1999. Amortization of these amounts commenced in the three months ended
March 31, 1999 and the three months ended March 31, 2000, respectively.
Amortization periods for goodwill and intangibles range from five to fifteen
years.
13
<PAGE>
INTEREST INCOME, NET, OTHER INCOME, NET AND INCOME TAX PROVISION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, PERCENTAGE MARCH 31,
2000 CHANGE 1999
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGE
AMOUNTS)
<S> <C> <C> <C>
Interest income, net........................................ $ (56) (113%) $438
Other income, net........................................... $ 838 2,105% $ 38
Income tax provision........................................ $2,762 196% $932
</TABLE>
Interest income, net decreased $494 for the three months ended March 31,
2000 compared to the three months ended March 31, 1999. This decrease is
primarily due to the lower cash and cash equivalents levels resulting from the
funding of the ARTIC Business Unit acquisition on March 1, 1999 and increased
interest expense as a result of the $13.9 million line of credit outstanding
during the three months ended March 31, 2000 at an interest rate of 8.5%.
Other income, net increased by $800 for the three months ended March 31,
2000 compared to the three months ended March 31, 1999. This increase is
primarily due to the sale of 367 shares of General Automation common stock,
which resulted in a recorded gain of $856.
The increase in the income tax provision is attributable to increased net
income before taxes of $5.5 million for the three months ended March 31, 2000
compared to the three months ended March 31, 1999. The effective income tax rate
for Q1 2000 was 29.4% compared to 24.2% for the three months ended March 31,
1999. The 5.2% increase in the effective tax rate is primarily due to
limitations on the usage of the Texas Micro net operating loss for the three
months ended March 31, 2000 as result of the merger with Texas Micro on
August 13, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had $36.0 million in cash and cash
equivalents and working capital of approximately $81.8 million. The Company has
a $20.0 million line of credit with a bank which expires September, 2000. As of
March 31, 2000, $13.9 million was outstanding under this arrangement at an
interest rate of 8.5%. Amounts outstanding under the line of credit accrue
interest at an annual rate equal to the lower of the LIBOR plus 1.25% to 2.0% or
lender's prime rate (9% at March 31, 2000).
Cash and cash equivalents increased by $20.3 million during Q1 2000, and
decreased by $23.7 in Q1 1999. Activities impacting cash and cash equivalents
are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
-------------------
MAR 31, MAR 31,
2000 1999
-------- --------
<S> <C> <C>
Cash provided by operating activities....................... $17.8 $ 5.4
Cash used for investing activities.......................... (3.0) (29.9)
Cash provided by financing activities....................... 5.2 .9
Effect of exchange rate changes on cash..................... .3 (.1)
----- ------
Net increase (decrease)..................................... $20.3 ($23.7)
===== ======
</TABLE>
In addition to net income of $6.6 million plus depreciation and amortization
of $4.3 million, significant changes in balance sheet accounts contributing to
the increase in cash from operations for Q1 of 2000 included an increase in
accounts payable of $10.5 million, partially offset by an increase in accounts
receivable of $2.4 million. Significant investing and financing activities
impacting cash included $2.4 million in capital expenditures and capital
software additions, and $5.3 million in common stock issuances. Capital
expenditures were primarily for the purchase of furniture and office equipment,
14
<PAGE>
computer hardware, manufacturing and engineering equipment, and the
implementation of SAP financial applications. Capital expenditures for 2000 are
expected to range from $7.0 million to $9.0 million, resulting in part from the
Company's plan to continue increasing its manufacturing capacities and
investments in information systems.
In Q1 1999 investing activities primarily consisted of the ARTIC acquisition
of $27.5 million.
The Company believes its existing cash and cash equivalents and cash from
operations will be sufficient to fund its current operations for at least the
next 12 months. Because the Company's capital requirements cannot be predicted
with certainty, there is no assurance that the Company will not require
additional financing before the expiration of 12 months.
FORWARD-LOOKING STATEMENTS
Statements and information in this Quarterly Report on Form 10-Q and the
statements the Company's management may make, from time to time concerning the
Company's future liquidity, development, business activities, potential
acquisitions and capital expenditures constitute forward-looking statements that
involve a number of risks and uncertainties. The following are among the factors
that could cause actual results to differ materially:
- dependence on the relationship with Intel Corporation and its products;
- lower than expected sales in the communications market;
- lower than expected design wins with key OEMS;
- failure of leading OEMs to incorporate the Company's solutions in
successful products;
- deliveries of products containing errors, defects and bugs;
- dependence on a limited number of suppliers or, in some cases, one
supplier for components and equipment used to manufacture products;
- difficulties in integrating acquired businesses and assets, including
Texas Micro;
- competition in the embedded computer market, which may lead to pricing
pressures;
- political, economic and regulatory risks associated with international
operations;
- technological developments;
- the inability to protect the Company's intellectual property or
successfully to defend against infringement claims by others;
- availability of qualified personnel;
- business conditions in the general economy and in the markets the Company
serves; and
- technological difficulties and resource constraints encountered in
developing new products.
The forward-looking statements should be considered in light of these factors.
15
<PAGE>
PART II
OTHER INFORMATION
<TABLE>
<S> <C> <C> <C>
Item 6. Exhibits
(a) Exhibits
10.1 Executive Severance Agreement dated February 8, 2000
between the Company and Glenford J. Myers.
27 Financial Data Schedule
(b) Reports on Form 8-K On January 11, 2000, the Company filed a Form 8-K dated
December 28, 1999 reporting Item 2. On March 13, 2000,
the Company filed an amendment to such Form 8-K to
provide financial statements in connection with the
business acquired by the Company on December 28, 1999.
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
Date: May 12, 2000 RADISYS CORPORATION
By:
-----------------------------------------
Stephen F. Loughlin
VICE PRESIDENT OF FINANCE AND
ADMINISTRATION
AND CHIEF FINANCIAL OFFICER
(AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
</TABLE>
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<C> <S>
10.1 Executive Severance Agreement dated February 8, 2000 between
the Company and Glenford J. Myers.
27 Financial Data Schedule
</TABLE>
18
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
February 8, 2000
<TABLE>
<S> <C>
Glenford J. Myers
3260 NW 112th Place
Portland, Oregon 97229 EXECUTIVE
RadiSys Corporation
an Oregon corporation
5445 NE Dawson Creek Parkway
Hillsboro, Oregon 97124 THE COMPANY
</TABLE>
1. EMPLOYMENT RELATIONSHIP. Executive is currently employed by the Company
as President and Chief Executive Officer. Executive also is currently Chairman
of the Board of Directors. Executive and the Company acknowledge that either
party may terminate this employment relationship at any time and for any or no
reason, provided that each party complies with the terms of this Agreement.
2. RELEASE OF CLAIMS. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the form attached as EXHIBIT A ("Release of
Claims"). Executive promises to execute and deliver the Release of Claims to the
Company within the later of (a) 45 days from the date Executive receives the
Release of Claims or (b) the last day of Executive's active employment.
3. ADDITIONAL COMPENSATION UPON CERTAIN TERMINATION EVENTS.
3.1 GENERAL. In the event of a Termination of Executive's Employment
(as defined in Section 6.1 of this Agreement) other than for Cause (as
defined in Section 6.2 of this Agreement), death, or Disability (as defined
in Section 6.3 of this Agreement), or in the circumstances described in
Section 3.2, and contingent upon Executive's execution of the Release of
Claims and compliance with Section 8, Executive shall be entitled to the
following benefits:
(a) As severance pay and in lieu of any other compensation for
periods subsequent to the date of termination, the Company shall pay
Executive, in a single payment after employment has ended and eight days have
passed following execution of the Release of Claims without revocation, an
amount in cash equal to 12 months of Executive's annual base pay at the rate
in effect immediately prior to the date of termination.
<PAGE>
(b) Executive is entitled to extend coverage under any group
health plan in which Executive and Executive's dependents are enrolled at the
time of termination of employment under the COBRA continuation laws for the
18-month statutory period, or so long as Executive remains eligible under
COBRA. The Company will pay Executive a lump sum payment in an amount
equivalent to the reasonably estimated cost Executive may incur to extend for
a period of 12 months under the COBRA continuation laws Executive's group
health and dental plan coverage in effect at the time of termination.
Executive may use this payment, as well as any payment made under Section
3.1(a), for such COBRA continuation coverage or for any other purpose.
(c) Executive will be entitled to receive an amount equal to a
prorated portion of the Executive's target bonus amount under any cash
incentive plans in effect at the time of a Termination of Executive's
Employment. For example, if there is a target annual bonus amount and a
target semi-annual bonus amount in place, the Executive will be entitled to
receive a pro rata portion of the annual target bonus amount for the year in
which the Termination occurred and a pro rata portion of the semi-annual
target bonus amount for the six-month period in which the Termination
occurred. The proration will be calculated based on the number of days in the
applicable period divided by the number of days the Executive was employed in
the applicable period up to and including the date of the Termination of
Executive's Employment. The amount payable pursuant to this section shall be
paid on the same date that the Section 3.1(a) payment is payable.
(d) All stock options granted to the Executive under the
Company's 1995 Stock Incentive Plan or any other equity plan that would vest
during the 12-month period following the date of Termination shall become
immediately exercisable in full in accordance with the applicable provisions
of the relevant option agreement and plan.
3.2. CHANGE OF CONTROL. In the event of a Termination of Executive's
Employment (including solely for this Section 3.2 a termination by the
Executive for Good Reason as defined in Section 6.1) other than for Cause,
death or Disability, within 18 months following a Change of Control (as
defined in Section 6.4 of this Agreement) and contingent upon Executive's
execution of the Release of Claims and compliance with Section 8, Executive
shall be entitled to the following benefits in lieu of and not in addition to
the benefits described in Section 3.1:
(a) As severance pay and in lieu of any other compensation for
periods subsequent to the date of termination, the Company shall pay
Executive, in a single payment after employment has ended and eight days have
passed following execution of the Release of Claims without revocation, an
amount in cash equal to 24 months of Executive's annual base pay at the rate
in effect immediately prior to the date of termination.
(b) Executive is entitled to extend coverage under any group
health plan in which Executive and Executive "s dependents are enrolled at
the time of termination of employment under the COBRA continuation laws for
the 18-month statutory period, or so long as Executive remains eligible under
COBRA. The Company will pay Executive a lump sum
2
<PAGE>
payment in an amount equivalent to the reasonably estimated cost Executive
may incur to extend for a period of 24 months under the COBRA continuation
laws Executive's group health and dental plan coverage in effect at the time
of termination. Executive may use this payment, as well as any payment made
under Section 3.2(a), for such COBRA continuation coverage or for any other
purpose.
Executive will be entitled to receive an amount equal to the Executive's full
target bonus amount for the year and any partial year period in which the
Termination occurred under any cash incentive plans in effect at the time of
a Termination of Executive's Employment. For example, if there is a target
annual bonus amount and a target semi-annual bonus amount in place, the
Executive will be entitled to receive the full annual target bonus amount for
the year in which the Termination occurred and the full semi-annual target
bonus amount for the six-month period in which the Termination occurred. The
amount payable pursuant to this section shall be paid on the same date that
the Section 3.2(a) payment is payable.
(d) All stock options granted to the Executive under the
Company's 1995 Stock Incentive Plan or any other equity plan shall become
immediately exercisable in full in accordance with the applicable provisions
of the relevant option agreement and plan.
3.3 Notwithstanding the foregoing, if the total payments and benefits
to be paid to or for the benefit of Executive under this Agreement would
cause any portion of those payments and benefits to be "parachute payments"
as defined in section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended, or any successor provision, the total payments and benefits to be
paid to or for the benefit of Executive under this Agreement shall be reduced
to an amount that would not cause any portion of those payments and benefits
to constitute "parachute payments."
4. WITHHOLDING; SUBSEQUENT EMPLOYMENT.
4.1 WITHHOLDING. All payments provided for in this Agreement are
subject to applicable withholding obligations imposed by federal, state and
local laws and regulations.
4.2 OFFSET. The amount of any payment provided for in this Agreement
shall not be reduced, offset or subject to recovery by the Company by reason
of any compensation earned by Executive as the result of employment by
another employer after termination.
5. OTHER AGREEMENTS. If that severance benefits are payable to Executive
under any other agreement with the Company in effect at the time of
termination (including but not limited to any employment agreement, but
excluding for this purpose any stock option agreement that may provide for
accelerated vesting or related benefits upon the occurrence of a change in
control), the benefits provided in this Agreement shall not be payable to
Executive. Executive may, however, elect to receive all of the benefits
provided for in this Agreement in lieu of all of the benefits provided in all
such other agreements. Any such election shall be
3
<PAGE>
made with respect to the agreements as a whole, and Executive cannot select
some benefits from one agreement and other benefits from this Agreement.
6. DEFINITIONS.
6.1 TERMINATION OF EXECUTIVE'S EMPLOYMENT. For the purposes of
Section 3.1, Termination of Executive's Employment means that the Company has
terminated Executive's employment with the Company (including any subsidiary
of the Company). Solely for purposes of Section 3.2, Termination of
Executive's Employment shall include termination by Executive by written
notice to the Company also for "Good Reason" based on:
(a) a significant reduction by the Company or the surviving company
in Executive's base pay as in effect immediately prior to the Change of
Control, other than a salary reduction that is part of a general salary
reduction affecting employees generally:
(b) a significant reduction by the Company or the surviving company
in total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to the
Change of Control;
(c) The Company or the surviving company requires Executive to be
based more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel on
company business to an extent substantially consistent with the business
travel obligations which Executive undertook on behalf of the Company
prior to the Change of Control; or
(d) The assignment of Executive to a different title, job or
responsibilities that results in a material decrease in the level of
responsibility of Executive with respect to the surviving company after
the Change of Control when compared to Executive's level of
responsibility for the Company's operations prior to the Change of
Control; PROVIDED, that Good Reason shall not exist if Executive
continues to have substantially the same or a greater general level of
responsibility with respect to the former operations of the Company after
the Change of Control as Executive had prior to the Change of Control
even if the former such operations are a subsidiary or division of the
surviving company.
4
<PAGE>
6.2 CAUSE. Termination of Executive's Employment for "Cause" shall mean
termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with the Company
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to Executive by the Board of Directors, the Chief Executive Officer
or the President of the Company which specifically identifies the manner in
which the Board of Directors or the Company believes that Executive has not
substantially performed Executive's duties or (b) the willful engaging by
Executive in illegal conduct which is materially and demonstrably injurious
to the Company. No act, or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done, by Executive without
reasonable belief that Executive's action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board of
Directors shall be conclusively presumed to be done, or omitted to be done,
by Executive in the best interests of the Company.
6.3 CHANGE OF CONTROL. A Change of Control shall mean that one of the
following events has taken place:
(a) The shareholders of the Company approve one of the following:
(i) Any merger or statutory plan of exchange involving the
Company ("Merger") in which the Company is not the continuing or
surviving corporation or pursuant to which Common Stock would be
converted into cash, securities or other property, other than a
Merger involving the Company in which the holders of Common Stock
immediately prior to the Merger continue to represent more than
50 percent of the voting securities of the surviving corporation
after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company.
(b) A tender or exchange offer, other than one made by the Company,
is made for Common Stock (or securities convertible into Common Stock)
and such offer results in a portion of those securities being purchased
and the offer or after the consummation of the offer is the beneficial
owner (as determined pursuant to Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of
securities representing more than 50 percent of the voting power of
outstanding securities of the Company.
5
<PAGE>
(c) The Company receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person of securities
representing more than 50 percent of the voting power of outstanding
securities of the Company, except that if such receipt shall occur during
a tender offer or exchange offer described in (b) above, a Change of
Control shall not take place until the conclusion of such offer.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing
20 percent or more of the voting power of outstanding securities of the Company.
6.4 DISABILITY. "Disability" means Executive's absence from
Executive's full-time duties with the Company for 180 consecutive days as a
result of Executive's incapacity due to physical or mental illness, unless
within 30 days after notice of termination by the Company following such
absence Executive shall have returned to the full-time performance of
Executive's duties. This Agreement does not apply if the Executive is
terminated due to Disability.
7. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding on and
inure to the benefit of the Company and its successors and assigns. This
Agreement shall inure to the benefit of and be enforceable by Executive and
Executive's legal representatives, executors, administrators and heirs.
8. RESIGNATION OF CORPORATE OFFICES; REASONABLE ASSISTANCE. Executive will
resign Executive's office, if any, as a director, officer or trustee of the
Company, its subsidiaries or affiliates and of any other corporation or trust of
which Executive serves as such at the request of the Company, effective as of
the date of termination of employment. Executive further agrees that, if
requested by the Company or the surviving company following a Change of Control,
Executive will continue his employment with the Company or the surviving company
for a period of up to six months following the Change of Control in any capacity
requested, consistent with Executive's area of expertise, provided that the
Executive receives the same salary and substantially the same benefits as in
effect prior to the Change of Control. Executive agrees to provide the Company
such written resignation(s) and assistance upon request and that no severance
will be paid until after such resignation(s) or services are provided.
9. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Oregon
10. AMENDMENT. No provision of this Agreement may be modified unless
such modification is agreed to in a writing signed by Executive and the
Company.
6
<PAGE>
11. SEVERABILITY. If any of the provisions or terms of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
<TABLE>
<S> <C>
RADISYS CORPORATION
By: /s/ DIANE M. WILLIAMS GLENFORD J. MYERS 2-24-2000
--------------------------- ------------------------------------
Diane Williams 2-28-00 Glenford J. Myers
VICE PRESIDENT
</TABLE>
7
<PAGE>
EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are Glenford J.
Myers and RadiSys Corporation, an Oregon corporation, as hereinafter defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" Glenford J. Myers and
his or her attorneys, heirs, executors, administrators, assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means RadiSys
Corporation, an Oregon corporation, its predecessors and successors,
corporate affiliates, and all of each corporation's officers, directors,
employees, insurers, agents, or assigns, in their individual and
representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ under the conditions described in Section [3.1] [3.2] of
the Executive Severance Agreement ("Agreement").
The purpose of this Release is to settle, and the parties hereby settle,
fully and finally, any and all claims Executive may have against Company,
whether asserted or not, known or unknown, including, but not limited to, claims
arising out of or related to Executive's employment, any claim for reemployment,
or any other claims whether asserted or not, known or unknown, past or future,
that relate to Executive's employment, reemployment, or application for
reemployment.
3. RELEASE.
Executive waives, acquits and forever discharges Company from any
obligations Company has and all claims Executive may have including but not
limited to obligations and/or claims arising from the Agreement or any other
document or oral agreement relating to employment compensation, benefits
severance or post-employment issues. Executive hereby releases Company from any
and all claims, demands, actions, or causes of action, whether known or unknown,
arising from or related in any way to any employment of or past or future
failure or refusal to employ Executive by Company, or any other past or future
claim (except
A-1
<PAGE>
as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This
release includes any and all claims, direct or indirect, which might
otherwise be made under any applicable local, state or federal authority,
including but not limited to any claim arising under the Oregon statutes
dealing with employment, discrimination in employment, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Americans With
Disabilities Act, the Family and Medical Leave Act of 1993, the Equal Pay Act
of 1963, Executive Order 11246, the Rehabilitation Act of 1973, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, Oregon wage
and hour statutes, all as amended, any regulations under such authorities,
and any applicable contract, tort, or common law theories.
3.1 RESERVATIONS OF RIGHTS.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 NO ADMISSION OF LIABILITY.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the
part of Executive or Company, by whom liability has been and is expressly
denied.
4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release signed by Executive, and the
expiration of the seven-day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay the
Executive the severance benefits as provided in Section [3.1] [3.2] of the
Agreement.
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or
make false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent
with breach of this Release should it determine that Executive has disparaged
or made false or adverse statements about Company. The Company agrees to
follow the applicable policy(ies) regarding release of employment reference
information.
A-2
<PAGE>
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret
information learned as an employee about Company, its products, customers and
suppliers, and covenants not to breach that duty. Moreover, Executive
acknowledges that, subject to the enforcement limitations of applicable law,
the Company reserves the right to enforce the terms of Executive's Employee
Agreement with Company and any paragraph(s) therein. Should Executive,
Executive's attorney or agents be requested in any judicial, administrative,
or other proceeding to disclose confidential, proprietary or trade secret
information Executive learned as an employee of Company, Executive shall
promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to
limit such disclosure.
7. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend
to, and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
8. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to
do so.
9. ENTIRE RELEASE.
This Release and the Agreement signed by Executive contain the
entire agreement and understanding between the parties and, except as
reserved in paragraph 3, supersede and replace all prior agreements, written
or oral, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney
of any other party, has made any promise, representation, or warranty,
express or implied, not contained in this Release concerning the subject
matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any
such promise, representation, or warranty not contained in this Release.
10. SEVERABILITY.
A-3
<PAGE>
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or
invalid for any reason whatsoever by a court of competent jurisdiction or by
final and unappealed order of an administrative agency of competent
jurisdiction, such illegality or invalidity should not affect the balance of
the terms and provisions of this Release, which terms and provisions shall
remain binding and enforceable.
11. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any
party contained in this Release.
12. COSTS AND ATTORNEY'S FEES.
In the event of any administrative or civil action to enforce the
provisions of this Release, the Company shall pay Executive's reasonable
attorneys' fees through trial and/or on appeal.
13. ACKNOWLEDGMENT.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
14. REVOCATION.
As provided by the Older Workers Benefit Protection Act,
Executive's is entitled to have forty-five (45) days to consider this
Release. For a period of seven (7) days from execution of this Release,
Executive may revoke this Release. Upon receipt of Executive's signed Release
and the end of the revocation period, payment by Company as described in
paragraph 4 above will be forwarded by mail in a timely manner as provided
herein.
<TABLE>
<S> <C>
____________________________ Dated:__________________ _____, ____
[Name of Executive]
</TABLE>
A-4
<PAGE>
STATE OF OREGON - )
) ss.
County of_________)
Personally appeared the above named _____________________________ and
acknowledged the foregoing instrument to be his or her voluntary act and deed.
<TABLE>
<S> <C>
Before me: _______________________________________
Notary Public for______________________
My commission expires:_________________
COMPANY
By:________________________________ Dated:_________________________________
Its:_______________________________
On Behalf of "Company"
</TABLE>
A-5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 36,013
<SECURITIES> 0
<RECEIVABLES> 61,051
<ALLOWANCES> 944
<INVENTORY> 42,024
<CURRENT-ASSETS> 147,106
<PP&E> 20,949
<DEPRECIATION> 24,327
<TOTAL-ASSETS> 214,293
<CURRENT-LIABILITIES> 65,354
<BONDS> 0
0
0
<COMMON> 146,307
<OTHER-SE> 2,632
<TOTAL-LIABILITY-AND-EQUITY> 214,293
<SALES> 81,293
<TOTAL-REVENUES> 81,293
<CGS> 52,435
<TOTAL-COSTS> 20,247
<OTHER-EXPENSES> 838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (56)
<INCOME-PRETAX> 9,393
<INCOME-TAX> 2,762
<INCOME-CONTINUING> 6,631
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,631
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.36
</TABLE>
