<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934
For the Quarter Ended June 26, 1998 Commission File No. 0-23018
________________________________________________________________________________
PLANAR SYSTEMS, INC.
(exact name of registrant as specified in its charter)
Oregon 93-0835396
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1400 NW Compton Dr., Beaverton, Oregon 97006
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (503)690-1100
________________________________________________________________________________
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.
X Yes No
--- ---
Number of common stock outstanding as of August 1, 1998
10,841,279 shares, no par value per share
1
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PLANAR SYSTEMS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations for the Three Months Ended
June 26, 1998 and June 27, 1997 3
Consolidated Statements of Operations for the Nine Months Ended
June 26, 1998 and June 27, 1997 4
Consolidated Balance Sheets at June 26, 1998 and September 26, 1997 5
Consolidated Statements of Cash Flows for the Nine Months Ended June 26,
1998 and June 27, 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
Signatures 15
2
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Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Planar Systems, Inc.
and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 26, 1998 June 27, 1997
------------- -------------
<S> <C> <C>
Sales $32,411 $21,723
Cost of sales 22,044 14,420
------- -------
Gross profit 10,367 7,303
Operating expenses:
Research and development, net 2,140 1,916
Sales and marketing 2,744 1,886
General and administrative 2,013 1,473
Amortization of goodwill and excess fair market value
of acquired net assets over purchase price 46 (112)
------- -------
Total operating expenses 6,943 5,163
------- -------
Income from operations 3,424 2,140
Non-operating income (expense):
Interest, net 256 366
Foreign exchange, net (144) 329
Other, net -- --
------- -------
Net non-operating income 112 695
------- -------
Income before income taxes 3,536 2,835
Provision for income taxes 900 528
------- -------
Net income $ 2,636 $ 2,307
======= =======
Net income per share (basic): $0.24 $0.21
Weighted average number of common shares outstanding 10,855 10,941
Net income per share (diluted): $0.24 $0.21
Weighted average number of common and common
equivalent shares outstanding 11,130 11,227
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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Planar Systems, Inc.
and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 26, 1998 June 27, 1997
------------- -------------
<S> <C> <C>
Sales $95,987 $67,065
Cost of sales 66,062 44,072
-------- --------
Gross profit 29,925 22,993
Operating expenses:
Research and development, net 6,283 5,784
Sales and marketing 8,002 5,817
General and administrative 6,624 4,671
Amortization of goodwill and excess fair market value of
acquired net assets over purchase price 138 (350)
-------- --------
Total operating expenses 21,047 15,922
-------- --------
Income from operations 8,878 7,071
Non-operating income (expense):
Interest, net 593 947
Foreign exchange, net 349 1,025
Other, net -- (2,011)
-------- --------
Net operating income (expense) 942 (39)
-------- --------
Income before income taxes 9,820 7,032
Provision for income taxes 2,502 1,362
-------- --------
Net income $ 7,318 $ 5,670
======== ========
Net income per share (basic): $ 0.68 $ 0.52
Weighted average number of common shares outstanding 10,828 10,944
Net income per share (diluted): $ 0.66 $ 0.50
Weighted average number of common and common
equivalent shares outstanding 11,097 11,241
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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Planar Systems, Inc.
and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
ASSETS
June 26, September 26,
1998 1997
----------- -------------
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 24,815 $ 21,777
Short-term investments -- 8,170
Accounts receivable, net 22,093 21,001
Inventories 26,445 21,517
Other current assets 10,516 8,471
-------- --------
Total current assets 83,869 80,936
Property, plant and equipment, net 16,475 16,584
Long-term investments -- 2,445
Goodwill 5,386 5,878
Other 12,844 8,353
-------- --------
$118,574 $114,196
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of Credit $ 10,000 $ 1,130
Accounts payable 11,923 13,011
Accrued compensation 3,637 5,261
Other current liabilities 5,036 5,083
Current portion of long-term debt 1,477 1,698
Deferred revenue 1,716 1,406
Current portion of excess fair market value of acquired net
assets over purchase price 476 476
-------- --------
Total current liabilities 34,265 28,065
Deferred taxes 184 263
Other long-term liabilities 502 638
Long-term debt, net of current portion 2,940 6,878
Long-term portion of excess fair market value of acquired net
assets over purchase price 715 1,072
-------- --------
Total liabilities 38,606 36,916
Shareholder's equity:
Common stock 73,888 73,190
Unrealized gain on marketable securities -- 7
Retained earnings 13,843 10,486
Foreign currency translation adjustment (7,763) (6,403)
-------- -------
Total shareholders' equity 79,968 77,280
-------- --------
$118,574 $114,196
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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Planar Systems, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 26, 1998 June 27, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,318 $ 5,670
Adjustments to reconcile net income to net cash
provided <used> by operating activities
Depreciation and amortization 2,943 2,326
Amortization of excess market value of acquired net
assets over purchase price (354) (350)
Goodwill 492 --
Loss on investment -- 2,011
Loss on sale of equipment 29 --
Increase <decrease> in deferred taxes (34) 8
Foreign exchange gain (349) (913)
Increase in accounts receivable (1,090) (1,948)
Increase in inventories (5,574) (2,982)
Increase in other current assets (3,821) (2,588)
Increase in accounts payable 3,461 3,319
Increase <decrease> in accrued compensation (1,203) 228
Increase in deferred revenue 362 1,262
Increase <decrease> in other current liabilities (836) 664
------- -------
Net cash provided by operating activities 1,344 6,707
Cash flows from investing activities:
Purchase of property, plant and equipment (3,022) (1,207)
Payment of equipment and rent deposits (7,924) (2,321)
Purchase of a business -- (1,174)
Net increase <decrease> in other long-term liabilities (175) 37
Net sales of short-term investments 8,170 --
Net sales of long-term investments 2,275 4,273
------- -------
Net cash used by investing activities (676) (392)
Cash flows from financing activities:
Net proceeds <payments> under long-term debt (4,159) 590
Net proceeds under short-term debt 8,870 --
Net proceeds under long-term accounts receivable 1,203 257
Net use for stock repurchase (3,961) (367)
Net proceeds from issuance of capital stock 539 367
------- -------
Net cash provided by financing activities 2,492 847
Effect of change of exchange rate changes on cash and cash equivalents (122) 65
Net increase in cash and cash equivalents 3,038 7,227
Cash and cash equivalents at beginning of period 21,777 23,089
------- -------
Cash and cash equivalents at end of period $24,815 $30,316
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
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Planar Systems, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands)
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements include all adjustments
necessary (which are of a normal and recurring nature) for the fair presentation
of the results of the interim periods presented. These financial statements
should be read in connection with the Company's audited financial statements for
the year ended September 26, 1997.
Note 2 - INVENTORIES
Inventories, stated at the lower of cost or market, consist of:
June 26, 1998 September 26, 1997
------------- -----------------
(Unaudited)
Raw materials $14,413 $12,118
Work in process 4,358 4,165
Finished goods 7,674 5,234
------- -------
$26,445 $21,517
======= =======
Note 3 - RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company
periodically enters into research and development contracts with certain
governmental agencies and private sector companies. These contracts generally
provide for reimbursement of costs. Funding from research and development
contracts is recognized as a reduction in operating expenses during the period
in which the services are performed and related direct expenses are incurred, as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 26, 1998 June 27, 1997 June 26, 1998 June 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Research and development $ 3,601 $ 2,922 $ 9,762 $ 8,309
Product engineering 1,734 1,453 4,845 4,248
------- ------- ------- -------
Total expense 5,335 4,375 14,607 12,557
Contract funding (3,195) (2,459) (8,324) (6,773)
------- ------- ------- -------
Research and development, net $ 2,140 $ 1,916 $ 6,283 $ 5,784
======= ======= ======= =======
</TABLE>
Note 4 - INCOME TAXES
The provision for income taxes has been recorded based upon the current
estimate of the Company's annual effective tax rate. This rate differs from the
federal statutory rate primarily because of the provision for state income
taxes, permanent differences resulting from purchase accounting adjustments and
the effects of the Company's foreign tax rates. Additional differences arise
from the limitation on the utilization of net operating loss carryforwards. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations for further discussion of income taxes.
7
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Planar Systems, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands)
(Unaudited)
Note 5 - NET INCOME PER COMMON SHARE
In the first quarter of the fiscal year beginning September 27, 1997, the
Company adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
supersedes APB Opinion No. 15 and specifies the computation, presentation and
disclosure requirements for earnings per share for entities with publicly held
common stock or potential common stock.
Under SFAS 128, basic earnings per common share is computed using the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per common share is computed using the weighted average number
of shares of common stock and dilutive common equivalent shares outstanding
during the period. Incremental shares of 275,000 and 286,000 for the quarters
ended June 26, 1998 and June 27, 1997, respectively, and 269,000 and 297,000 for
the nine-months ended June 26, 1998 and June 27, 1997, respectively, were used
in the calculations of diluted earnings per share.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
consolidated interim financial statements and the notes thereto in Part I, Item
1 of this Quarterly Report and with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report on Form 10-K for the year ended September 26, 1997.
RESULTS OF OPERATIONS
Sales
The Company's sales increased by 49.2% to $32,411,000 in the fiscal quarter
ended June 26, 1998 from $21,723,000 in the same quarter last fiscal year. The
increase in sales was principally due to the additional sales attributable to
Planar Standish, which was acquired in September 1997. International sales,
principally sales to Europe, increased by 17.1% due to increased sales in the
Company's target markets and the addition of Planar Standish sales. For this
fiscal quarter, international sales were 21.4% of total sales compared to 27.3%
in the same period last fiscal year.
For the nine months ended June 26, 1998, the Company's sales increased by
43.1% to $95,987,000 from $67,065,000 in the same period last fiscal year. The
increase in sales was principally due to the additional sales attributable to
Planar Standish. For this period, international sales were 21.2% of total sales
as compared to 26.4% in the same period last fiscal year.
Gross Profit
The Company's gross profit as a percentage of sales decreased to 32.0% in
this fiscal quarter from 33.6% in the same quarter last fiscal year and for the
nine month period decreased to 31.2% from 34.3% in the same period last fiscal
year. These decreases reflect the increase in sales of LCD products in 1998,
which historically are at a lower margin.
Operating Expenses
The Company's operating expenses increased by 34.5% this fiscal quarter
compared to the same quarter last fiscal year and increased 32.2% for the nine
months ended June 26, 1998 over the same period last fiscal year. The increase
was primarily in three areas: (i) research and development, reflecting
additional expenses related to the development of new technologies, (ii) sales
and marketing, reflecting additional marketing and sales resources and increased
commissions on the higher sales level and (iii) general and administrative,
where additional costs were incurred associated with Planar Standish. Overall,
operating expenses as a percentage of sales decreased to 21.4% in this fiscal
quarter compared to 23.8% in the same quarter last fiscal year. For the nine
months ended June 26, 1998, operating expenses as a percentage of sales
decreased to 21.9% as compared to 23.7% in the same period last fiscal year.
Non-Operating Income and Expense
Net interest for the three months and nine months ended June 26, 1998,
compared to the same periods last fiscal year, decreased due to investment and
financing strategies implemented by the Company. The other expense recognized in
the nine month results of 1997 reflects the write off of an equity investment in
a virtual reality headset manufacturing company.
The Company experienced a net loss from foreign currency transactions of
$144,000 during the third quarter of fiscal 1998 compared to a net gain of
$329,000 during the third quarter of fiscal 1997 and a gain of $349,000 for the
nine months ended June 26, 1998 compared to a gain of $1,025,000 for the same
period last fiscal year. These amounts are comprised of realized gains and
losses on cash transactions involving various currencies and unrealized gains
and losses related to receivables and payables denominated in foreign currencies
resulting from exchange rate fluctuations between the various currencies in
which the Company operates. Foreign currency gains and losses are included as a
component of other income.
9
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From September 26, 1997 to June 26, 1998, the U.S. dollar strengthened
approximately 5% against the Finnish markka. This strengthening of the U.S.
dollar resulted in lower reported revenues and operating expenses due to
translation of the Finnish markka to U.S. dollars for consolidated financial
reporting.
The Company generally realizes about one fifth of its revenue outside the
United States and expects this to continue in the future. Additionally, the
functional currency of the Company's subsidiary, Planar International, is the
Finnish markka which must be translated to U.S. dollars for consolidation. As
such, the effects of future foreign currency fluctuations will impact the
Company's business and operating results.
Provision for Income Taxes
The effective income tax rate for the quarter ended June 26, 1998 was 25.5%
versus 18.6% in the same quarter in the prior year. For the nine months ended
June 26, 1998, the effective income tax rate was 25.5% versus 19.4% in the same
period last fiscal year. This change in effective rates is due to the relative
profitability of the U.S. and foreign taxable entities.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended June 26, 1998, the Company generated $1.3 million
in cash from operating activities compared to $6.7 million in the same period
last fiscal year.
At June 26, 1998, the Company had a bank line of credit agreement with a
borrowing capacity available of $10.0 million and credit facilities for
financing equipment of $15.5 million. At September 26, 1997, a similar bank line
of credit and credit facilities were in place with borrowing capacities of $8
million and $19.5 million, respectively. As of June 26, 1998 and September 26,
1997, borrowings outstanding under the credit line were $10 million and $0,
respectively. Borrowings outstanding under the equipment financing lines were
$4.4 million and $5.4 million as of June 26, 1998 and September 26, 1997,
respectively.
For the nine month period ended June 26, 1998, additions to property and
equipment were $3.0 million compared to $1.2 million for the same period last
fiscal year. The principal acquisitions during both periods were related to
upgrading the production facility and equipment at Planar America. In addition,
the Company anticipates further upgrades of production facilities over the next
12 months costing $15 to $17 million, of which approximately $12 million has
already been incurred through equipment deposits.
On April 23, 1997, the Company announced its intention to repurchase up to
400,000 shares of the Company's currently outstanding common stock from time to
time over the next twelve month period in open market and negotiated
transactions. On May 13, 1998, the Company announced that it intends to
repurchase up to an additional $5 million of the Company's currently outstanding
common stock from time to time over the next twelve months in open market and
negotiated transactions. During the nine months ended June 26, 1998, the
Company repurchased approximately 332,000 shares of its own common stock for
$3,961,000. At June 26, 1998, there still remains approximately $4,600,000 of
common stock, which the Company intends to repurchase.
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure that its systems, applications
and hardware will recognize and process transactions for the year 2000 and
beyond. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues with respect to its
internal systems and does not believe that the cost of such actions will have a
material adverse effect on its results of operations or financial condition.
The Company also has initiated discussions with its significant suppliers,
customers and financial institutions to ensure that those parties have
appropriate plans to remediate year 2000 issues when their systems interface
with the Company's systems or may otherwise impact operations. Although the
Company is not aware of any material operational issues or costs associated with
preparing its internal systems for the year 2000, there can be no assurance that
there will not be a delay in, or increased costs associated with, the
implementation of the necessary systems and changes to address the year 2000
issues. The Company and its significant suppliers,
10
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customer and financial institutions' inability to implement such systems and
changes could have an adverse effect on future results of operations.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Opertions and other sections of this Report contain forward-looking
statements within the meaning of the Securities Litigation Reform Act of 1995
that are based on current expectations, estimates and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements due to numerous factors, including, but not limited to those
discussed in this discussion and analysis of financial condition and results of
operations, as well as those discussed elsewhere in this Report and from time to
time in the Company's other Securities and Exchange Commission filings and
reports. In addition, such statements could be affected by general industry and
market conditions and growth rates, and general domestic and international
economic conditions.
11
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) During the third fiscal quarter of 1998, the Company sold securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act") upon the exercise of certain stock options granted under
the Company's stock option plans. An aggregate of 12,550 shares of Common
Stock were issued at exercise prices ranging from $2.25 to $6.50. These
transactions were effected in reliance upon the exemption from registration
under the Securities Act provided by Rule 701 promulgated by the Securities
and Exchange Commission pursuant to authority granted under Section 3 (b)
of the Securities Act.
ITEM 5. OTHER INFORMATION
Planar does not provide forecasts of future financial performance. While
Planar's management is optimistic about the Company's long-term prospects, the
following issues and uncertainties, among others, should be considered in
evaluating its growth outlook. The following information should be read in
conjunction with Management's Discussion and Analysis (Item 7) contained in the
Company's 10-K for the year ended September 26, 1997.
COMPETITION
The market for information displays is highly competitive, and the Company
expects this to continue. The Company believes that over time this competition
will have the effect of reducing average selling prices of flat panel displays.
Certain of the Company's competitors have substantially greater name recognition
and financial, technical, marketing and other resources than the Company, and
competitors of the Company have made and continue to make significant
investments in the construction of manufacturing facilities for active matrix
liquid crystal displays (AMLCDs) and other advanced displays. There can be no
assurance that the Company's competitors will not succeed in developing or
marketing products that would render the Company's products obsolete or
noncompetitive. To the extent the Company is unable to compete effectively
against its competitors, whether due to such practices or otherwise, its
financial condition and results of operations would be materially adversely
affected.
DEVELOPMENT OF NEW PRODUCTS AND RISKS OF TECHNOLOGICAL CHANGE
The Company's future results of operations will depend upon its ability to
improve and market its existing products, and to penetrate new product and
market opportunities through development, acquisition, or other business
relationships and arrangements. There can be no assurance that the Company will
be able to continue to improve and market its existing products or develop and
market new products, or that technological developments will not cause the
Company's products or technology to become obsolete or noncompetitive. Even
successful new product introductions typically result in pressure on gross
margins during the initial phases as costs of manufacturing start-up activities
are spread over lower initial sales volumes.
A portion of the Company's flat panel products relies on electroluminescent
(EL) technology, which currently constitutes only a small portion of the
information display market. Through the acquisition of Planar Standish, the
Company has diversified its display products and expanded its addressable market
significantly to include flat panel passive liquid crystal displays (LCD)
applications. The Company's future success will depend in part upon increased
market acceptance of existing EL and passive LCD technologies, and other future
technological developments. In that respect, the Company's competitors are
investing substantial resources in the development and manufacture of displays
using a number of alternative technologies. In the event these efforts result in
the development of products that offer significant advantages over the Company's
products, and the Company is unable to improve its technology or develop or
acquire alternative technology that is more competitive, the Company's business
and results of operations will be adversely affected.
12
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The Company's military product sales are significantly based on cathode ray
tube (CRT) technology. Military avionics contractors are increasingly focused on
incorporating displays, primarily AMLCDs, into cockpit applications that have
traditionally used CRTs. The Company's ability to transition the military
product line to flat panel displays over the next few years will be important to
the long term success of Planar's military avionics business. The Company
entered into an agreement with dpiX (a Xerox company) to jointly develop,
manufacture and market AMLCDs into military applications. However, there can be
no assurance that this business arrangement will be successful.
LEVEL OF ADVANCED RESEARCH AND DEVELOPMENT FUNDING
The Company's advanced research and development activities have
significantly been funded by outside sources, including agencies of the United
States and Finnish governments and private sector companies. The Company's
recently funded research and development activities have principally focused on
multi-color and full color displays, miniature displays, low power displays,
advanced packaging and other applications. The actual funding that will be
recognized in future periods is subject to wide fluctuation due to a variety of
factors including government appropriation of the necessary funds and the level
of effort spent on contracts by the Company.
Within Congress, there has been significant debate on the level of funding
to be made available to programs that have historically supported the Company's
research activities. Additionally, government research and development funding
has been gradually shifting to a more commercial approach, and contractors are
increasingly required to share in the development costs. This trend is likely to
continue, which could increase the Company's net research and development
expenses. While the Company has historically not experienced any loss or decline
of external research funding, the loss or substantial reduction of such funding
could adversely affect the Company's results of operations and its ability to
continue research and development activities at current levels.
RELIANCE ON MEDICAL EQUIPMENT MARKET AND GAS PUMP MARKETS
Over one third of the Company's sales in fiscal 1997 were made to customers
that manufacture and sell medical equipment to health care providers worldwide.
Associated with the acquisition of Planar Standish, over 10% of the Company's
revenues for the first three quarters of fiscal 1998, were from customers in the
gas pump industry. The Company believes that sales in these markets will
continue to be important to the Company. As a result, developments that
adversely impact the markets for medical and gas pump equipment produced by the
Company's customers could, in turn, adversely affect the Company's business and
results of operations. In addition, the Company's sales have been and may in
future periods be adversely affected due to delays in approvals by foreign or
domestic government regulatory agencies which prevent a customer of the Company
from introducing, producing or marketing products.
INTERNATIONAL OPERATIONS AND CURRENCY EXCHANGE RATE FLUCTUATIONS
Shipments to customers outside of North America accounted for approximately
26.6%, 37.1% and 34.5% of the Company's sales in fiscal 1997, fiscal 1996 and
fiscal 1995, respectively. The Company anticipates that international shipments
will continue to account for a significant portion of its sales. As a result,
the Company is subject to risks associated with international operations,
including trade restrictions, overlapping or differing tax structures, changes
in tariffs, export license requirements and difficulties in staffing and
managing international operations (including, in Finland, relations with
national labor unions).
DECLINING MILITARY EXPENDITURES
As a result of the Company's acquisition of Planar Advance, the Company's
sales for military applications have increased. Military capital expenditure
levels have been declining for several years and depend largely on factors
outside of the Company's control. Although the Company believes that its
dependence on military sales will decrease as the Company continues to expand
its customer base, no
13
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assurance can be given that military sales will continue at current levels. In
addition, as a result of the reduction in military CRT sales, several key CRT
suppliers have threatened to halt production of critical components. Although
the Company believes it has reached agreement with each of its critical vendors,
no assurance can be given that critical material supply will be available when
needed.
EFFECTS OF QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
Results of operations have fluctuated significantly from quarter to quarter
in the past, and may continue to fluctuate in the future. Various factors,
including timing of new product introductions by the Company or its competitors,
foreign currency exchange rate fluctuations, disruption in the supply of
components for the Company's products, changes in product mix, capacity
utilization, the timing of orders from major customers, production delays or
inefficiencies, seasonality, the timing of expenses and other factors affect
results of operations. Quarterly fluctuations may adversely affect the market
price of the Common Stock.
The Company's backlog at the beginning of each quarter does not normally
include all orders needed to achieve expected sales for the quarter.
Consequently, the Company is dependent upon obtaining orders for shipment in a
particular quarter to achieve its sales objectives for that quarter. The
Company's expense levels are based, in part, on expected future sales. If sales
levels in a particular quarter do not meet expectations, operating results may
be adversely affected.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: 27.1 Financial Data Schedule
(b) Reports on 8-K: none
14
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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.
PLANAR SYSTEMS, INC.
(Registrant)
DATE: August 10, 1998 /s/ Jack Raiton
---------------
Jack Raiton
Vice President and Chief
Financial Officer
15
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