-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vb05dZT48EBIztKkrrSLPqEuXTJTlPfbMwgnXt8zusWHj83Jl8uYhxM2fxZCg7Jy jl2e7cGyfSwL3eWqq8QLbQ== 0000898430-97-003025.txt : 19970728 0000898430-97-003025.hdr.sgml : 19970728 ACCESSION NUMBER: 0000898430-97-003025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970627 FILED AS OF DATE: 19970725 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLANAR SYSTEMS INC CENTRAL INDEX KEY: 0000722392 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 930835396 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 005-43683 FILM NUMBER: 97645316 BUSINESS ADDRESS: STREET 1: 1400 NORTHWEST COMPTON DR CITY: BEAVERTON STATE: OR ZIP: 97006-1497 BUSINESS PHONE: 5036901100 MAIL ADDRESS: STREET 1: 1400 N W COMPTON DR CITY: BEAVERTON STATE: OR ZIP: 97006 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 27, 1997 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 27, 1997 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 July 23, 1997 10,936,801 shares, no par value per share PLANAR SYSTEMS, INC. INDEX
Page Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Operations for the Three Months Ended June 27, 1997 3 and June 28, 1996 Consolidated Statements of Operations for the Nine Months Ended June 27, 1997 and June 28, 1996 4 Consolidated Balance Sheets at June 27, 1997 and September 27, 1996 5 Consolidated Statements of Cash Flows for the Nine Months Ended June 27, 1997 and June 28, 1996 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 11 Item 5. Other information 11 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
2 Part 1. FINANCIAL INFORMATION Item 1. Financial Statements Planar Systems, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
Three Months Ended June 27, 1997 June 28, 1996 ------------------------ --------------------- Sales $21,723 $19,519 Cost of sales 14,420 12,383 ------- ------- Gross profit 7,303 7,136 Operating expenses: Research and development, net 1,916 1,839 Sales and marketing 1,886 1,850 General and administrative 1,473 1,297 Amortization of excess fair market value of acquired net assets over purchase price (112) (119) ------- ------- Total operating expenses 5,163 4,867 ------- ------- Income from operations 2,140 2,269 Non-operating income (expense): Interest, net 366 360 Foreign exchange, net 329 (110) Other, net -- -- ------- ------- Net operating income (expense) 695 250 ------- ------- Income before income taxes and extraordinary item 2,835 2,519 Provision for income taxes 528 408 ------- ------- Net income $ 2,307 $ 2,111 ======= ======= Net income per share: $0.21 $0.19 Weighted average number of common and common equivalent shares outstanding 11,229 11,233
See accompanying notes to unaudited consolidated financial statements. 3 Planar Systems, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts)
Nine Months Ended June 27, 1997 June 28, 1996 ----------------------- --------------------- Sales $67,065 $59,950 Cost of sales 44,072 38,142 ------- ------- Gross profit 22,993 21,808 Operating expenses: Research and development, net 5,784 5,264 Sales and marketing 5,817 5,350 General and administrative 4,671 3,971 Amortization of excess fair market value of acquired net assets over purchase price (350) (357) ------- ------- Total operating expenses 15,922 14,228 ------- ------- Income from operations 7,071 7,580 Non-operating income (expense): Interest, net 947 1,225 Foreign exchange, net 1,025 449 Other, net (2,011) -- ------- ------- Net operating income (expense) (39) 1,674 ------- ------- Income before income taxes and extraordinary item 7,032 9,254 Provision for income taxes 1,362 1,792 ------- ------- Net income $ 5,670 $ 7,462 ======= ======= Net income per share: $0.50 $0.67 Weighted average number of common and common equivalent shares outstanding 11,241 11,200
See accompanying notes to unaudited consolidated financial statements. 4 Planar Systems, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands)
ASSETS June 27, September 27, 1997 1996 ----------------------- --------------------- Current assets: Cash and cash equivalents $ 30,316 $23,089 Short-term investments 10,145 7,111 Accounts receivable 16,943 15,267 Inventories 18,696 17,134 Other current assets 7,062 5,634 -------- ------- Total current assets 83,162 68,235 Property, plant and equipment, net 12,376 13,752 Long-term investments 3,571 12,838 Other 5,693 2,470 -------- ------- $104,802 $97,295 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,186 $ 3,900 Accrued compensation 3,007 2,979 Other current liabilities 4,644 2,917 Current portion of long term debt 1,371 1,039 Current portion of excess fair market value of acquired net assets over purchase price 476 476 -------- ------- Total current liabilities 16,684 11,311 Deferred taxes 267 291 Other long term liabilities 90 53 Long term debt, net of current portion 4,381 4,123 Long-term portion of excess fair market value of acquired net assets over purchase price 1,191 1,548 -------- ------- Total liabilities 22,613 17,326 Shareholder's equity: Common stock 72,234 71,867 Unrealized gain (loss) on marketable securities 41 (10) Retained earnings 15,882 10,579 Foreign currency translation adjustment (5,968) (2,467) -------- ------- Total shareholders' equity 82,189 79,969 -------- ------- $104,802 $97,295 ======== =======
See accompanying notes to unaudited consolidated financial statements. 5 Planar Systems, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Nine Months Ended June 27, June 28, 1997 1996 ----------------------- --------------------- Cash flows from operating activities: Net income $ 5,670 $ 7,462 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,326 1,756 Amortization of excess market value of acquired net assets over purchase price (351) (357) Loss on investment 2,011 -- Increase in deferred taxes 8 17 Foreign exchange gain (913) (458) Increase in accounts receivable (1,948) (876) Increase in inventory (2,982) (4,382) Increase in other current assets (2,457) (956) Increase in accounts payable 3,319 1,760 Increase in accrued compensation 228 166 Increase in deferred revenue 1,262 (155) Increase in other current liabilities 664 1,308 ------- ------- Net cash provided by operating activities 6,837 5,285 Cash flows from investing activities Purchase of property, plant and equipment (1,207) (3,554) Increase in other long term assets (2,321) (1,791) Purchase of equity investment -- (2,011) Purchase of a business (1,174) -- Net payment (borrowings) of other long term liabilities 37 (177) Net sales of investments 4,273 4,013 ------- ------- Net cash used by investing activities: (392) (3,520) Cash flows from financing activities Net proceeds under long term debt 590 2,849 Net proceeds under long term accounts receivable 257 -- Stock repurchase (367) -- Net proceeds from issuance of capital stock 367 506 ------- ------- Net cash provided by financing activities: 847 3,355 Effect of change of exchange rate changes on cash and cash equivalents 65 (192) Net increase in cash and cash equivalents 7,227 4,928 Cash and cash equivalents at beginning of period 23,089 26,689 ------- ------- Cash and cash equivalents at end of period $30,316 $31,617 ======= =======
See accompanying notes to unaudited consolidated financial statements. 6 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 27, 1996. Note 2 - INVENTORIES Inventories, stated at the lower of cost or market, consist of:
June 27, 1997 September 27, 1996 ------------------------------ --------------------------- (Unaudited) Raw materials $10,329 $10,616 Work in process 3,242 3,323 Finished goods 5,125 3,195 ------- ------- $18,696 $17,134 ======= =======
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:
Three Months Ended Nine Months Ended June 27, 1997 June 28, 1996 June 27, 1997 June 28, 1996 ------------------- ------------------- ------------------- ------------------ Research and development $ 2,922 $ 2,835 $ 8,309 $ 7,881 Product engineering 1,453 1,371 4,248 4,276 ------- ------- ------- ------- Total expense 4,375 4,206 12,557 12,102 Contract funding (2,459) (2,367) (6,773) (6,838) ------- ------- ------- ------- Research and development, net $ 1,916 $ 1,839 $ 5,784 $ 5,264 ======= ======= ======= =======
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 Planar Systems, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands) (Unaudited) Note 5 - NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net income per common and common equivalent share is computed using the weighted average number of common and dilutive common equivalent shares assumed to be outstanding during the period. Common equivalent shares consist of options to purchase common stock. 8 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 27, 1996. RESULTS OF OPERATIONS Sales The Company's sales increased by 11.3% to $21,723,000 in the fiscal quarter ended June 27, 1997 from $19,519,000 in the same quarter last fiscal year. The Company's sales increased due to increases in transportation and medical segments which offset declines in the end user terminals and monitor segment. International sales, principally sales to Europe, decreased by 13.3% due to the reduction in military sales for one specific customer. For this fiscal quarter, international sales were 27.3% of total sales compared to 35.0% in the same period last fiscal year. For the first nine months of 1997, the Company's sales increased by 11.9% to $67,065,000 from $59,950,000 in the same period last fiscal year. For this period, international sales were 26.4% of total sales as compared to 37.0% in the same period last fiscal year. Gross Profit The Company's gross profit as a percentage of sales decreased to 33.6% in this fiscal quarter from 36.6% in the same quarter last fiscal year and for the nine month period decreased to 34.3% from 36.4% in the same period last fiscal year. These decreases were due to changes in the mix of products sold during the quarter and a one time contract adjustment on federal product sales. Operating Expenses The Company's operating expenses increased by 6.1% this fiscal quarter compared to the same quarter last fiscal year and increased 11.9% for the nine months ended June 27, 1997 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 and the increased cost sharing requirements of the current contracts, (ii) sales and marketing, reflecting increased commissions on the higher sales level and expansion of the direct sales force and (iii) general and administrative, reflecting additional personnel costs. Overall, operating expenses as a percentage of sales decreased to 23.8% in this fiscal quarter compared to 24.9% in the same quarter last fiscal year. For the nine months ended June 27, 1997 operating expenses as a percentage of sales are consistent at 23.7% as compared to the same period last fiscal year. Non-Operating Income and Expense Net interest for this quarter versus the same period last fiscal year is constant with the same period last year. 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 gain from foreign currency transactions of $329,000 during the third quarter of fiscal 1997 compared to a net loss of $110,000 during the third quarter of fiscal 1996 and a gain of $1,025,000 for the nine months ended June 27, 1997 compared to a gain of $449,000 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 foreign currency denominated 9 receivables and payables 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. From September 27, 1996 to June 27, 1997, the U.S. dollar strengthened over 12% 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 third 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 Company's business and operating results will be impacted by the effects of future foreign currency fluctuations. Provision for Income Taxes The effective income tax rate for the quarter ended June 27, 1997 was 18.6% versus 16.2% in the same quarter in the prior year. For the nine months ended June 27, 1997, the effective income tax rate was 19.3% 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 27, 1997, the Company generated $6.8 million in cash from operating activities compared to $5.3 million in the same period last fiscal year. At June 27, 1997, the Company had a bank line of credit agreement with a borrowing capacity available to $2.0 million and a credit facility for financing equipment of $19.5 million. A similar bank line of credit was in place as of September 27, 1996. As of June 27, 1997 and September 27, 1996, no borrowings were outstanding under the credit line and $5.8 million was outstanding under the equipment financing lines at June 27, 1997 and $5.2 million at September 27, 1996. For the nine month period ended June 27, 1997, additions to property and equipment were $1.2 million compared to $3.5 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 $10 to $12 million. On April 23, 1997, the Company announced that it intends to repurchase up to 400,000 shares 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 27, 1997, the Company repurchase $367,000 in it's own stock. 10 PART II. OTHER INFORMATION Item 2. Changes in Securities (c) During the third fiscal quarter of 1997, 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 3,008 shares of Common Stock were issued at exercises 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 27, 1996. 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 successfully develop, manufacture and market new products. 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. The Company's flat panel products rely significantly on electroluminescent (EL) technology, which currently constitutes only a small portion of the information display market. The Company's future success will depend in part upon increasing acceptance of EL technology in the marketplace and development or acquisition of other display technologies by the Company. 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. The Company's military product sales are principally 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 11 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, headmounted 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. As Congress has become more serious about balancing the federal budget, 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 Over one third of the Company's sales in fiscal 1996 were made to customers that manufacture and sell medical equipment to health care providers worldwide, and the Company believes that sales in this market will continue to be important to the Company. As a result, developments that adversely impact the market for medical 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 37.1%, 34.5% and 26.4% of the Company's sales in fiscal 1996, fiscal 1995 and fiscal 1994, 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 assurance can be given that military sales will continue at current levels. 12 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 Financial Data Schedule 13 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: July 25, 1997 /s/ Jack Raiton ----------------- Jack Raiton Vice President and Chief Financial Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-26-1997 SEP-28-1996 JUN-27-1997 30,316 10,145 16,943 0 18,696 83,162 26,914 14,538 104,802 16,684 0 0 0 72,234 9,955 104,802 67,065 67,065 44,072 59,994 2,011 0 0 7,032 1,362 5,670 0 0 0 5,670 .50 0
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