Back to GetFilings.com
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 29, 2000 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 (I.R.S. employer
incorporation or organization) identification number)
1400 NW Compton Drive
Beaverton, OR 97006
(Address of principle executive offices,
including zip code)
(503) 690-1100
(Registrants telephone number, including area code)
----------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 proceeding 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. YES X NO ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K _____
As of December 14, 2000
Aggregate market value of the voting stock held
by non-affiliates of the Registrant based upon
the closing bid price of such stock: $299,826,000
11,053,482
----------
Number of shares of Common Stock outstanding
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be used in connection with the Annual Meeting
of Shareholders to be held on February 1, 2001, are incorporated by reference
into Part III of this report.
===========================================================================
1
Part I
- ------
Item 1.
BUSINESS
Planar Systems, Inc. (Planar) is a leading developer, manufacturer and
marketer of high performance electronic display products. The Company's products
include its proprietary electroluminescent (EL) flat panel displays, cathode ray
tubes (CRTs), active matrix liquid crystal displays (AMLCDs), passive matrix
liquid crystal display (PMLCD) products, and backlights. These products are used
in a wide variety of medical, industrial (process control, instrumentation),
transportation, communications and other applications. The Company competes on a
global basis with full development, manufacturing and marketing operations in
both the United States and Europe. Major customers include Datascope, Agilent,
Welch Allyn Protocol, Inc., Sun Micro Systems, Marconi Commerce Systems,
Siemens, and Smiths Industries.
Industry Background
The information display industry is undergoing significant changes as
the proliferation and sophistication of microprocessors is increasing the volume
of text, graphics and video information that is generated and displayed. At the
same time, electronic systems are becoming smaller and more portable. Also,
color active matrix liquid crystal displays are a rapidly growing part of the
display industry. These trends are converging to drive a growing demand for
color, high performance flat, lightweight, power-efficient displays that are
capable of delivering high volumes of information. Although commodity CRTs
dominate the overall information display market, they are large, heavy, fragile,
and require substantial amounts of power to operate.
There are several display technologies currently in development or
commercially available, including various forms of liquid crystal, gas plasma
and EL displays. The principal basis of competition among display suppliers are
commercial availability, long life, price, display performance, size, customer
service, design flexibility, power usage and ruggedness.
Passive Matrix LCD. PMLCDs modulate light (which is either reflected or
transmitted) by applying a voltage to a liquid crystal material placed between
two glass plates.
Active Matrix LCD. AMLCD screens incorporate the PMLCD technology plus
add a transistor at every pixel location. This allows each pixel to be turned on
and off independently which increases the image quality, response time and
side-to-side viewing angle of the display.
Gas Plasma. Gas plasma creates a visible image by ionizing a gas
contained between two glass plates. The ionized gas emits an ultra violet light,
which excites phosphors, which emit visible light. Gas plasma displays generally
have higher power consumption requirements than other display technologies but
may provide the most cost effective solution for large-sized displays. These
displays are primarily used in industrial and entertainment applications.
Electroluminescent. Planar's standard monochrome EL display technology
is a solid state device with a thin film luminescent layer sandwiched between
transparent dielectric (insulator)
2
layers and a matrix of row and column electrodes deposited on a single glass
substrate. A circuit board, with control and drive components mounted within the
same area as the viewing area on the glass panel, is connected to the back of
the glass substrate using various interconnect technologies. The result is a
flat, compact, reliable and rugged display device. When AC voltage is applied to
a column and a row electrode, the phosphor thin film between them emits light
that passes through the transparent electrode, through the glass face, and on to
the viewer. Increasing the number of rows and columns, and thus the number of
pixels, in a given space increases the clarity of the display to the viewer.
Other. There is a wide diversity of new technologies constantly under
development with the objective of competing in this market. Some of the more
visible efforts include field emissions displays (FED), ferroelectric LCDs,
organic light emitting diodes (OLEDs) and various forms of projection displays.
3
Markets
The Company is currently serving the following core market segments:
Medical. Displays are used in patient monitors and a range of
diagnostic and therapeutic equipment, including defibrillators,
anesthesia systems, ventilators, infusion pumps and blood analyzers.
These medical applications typically require a wide viewing angle and
clear, crisp images readable from across the room in varying light
conditions by multiple users at the same time. The Company believes that
its displays provide superior display quality and reliability for
crucial medical applications.
Industrial. Displays are used in a wide range of manufacturing
environments, including the gas pump industry, industrial computers,
operator interfaces and machine control panels. The reliability,
ruggedness, wide operating temperature range and low susceptibility to
electromagnetic interference of Planar displays permit the Company to
deliver solutions to a range of problems in these difficult
environments. The Company's displays are also used in a wide range of
test and measurement products, including digital oscilloscopes,
analyzers and telecommunications test equipment. The Company believes
there is an increasing market demand for the Company's displays in
smaller, more portable test equipment. A pending merger will give the
Company a position in the automated teller machine (ATM) and outdoor
kiosk market.
Transportation. The Company's sales in this market consist
primarily of high performance CRTs sold to systems integrators for
military cockpits and displays for commercial transportation
applications. The Company has been in the military avionics AMLCD market
which it is exiting upon completion of existing contracts in fiscal
2001. Additionally, the Company sells processed EL display glass to
military systems suppliers for integration into various military
subsystems used in communications applications, tactical displays,
avionics and shipboard command and control equipment.
4
The pervasive use of microprocessors has increased the demand for higher
information content displays for space constrained transportation
applications. The Company has sold displays to customers for use in
global positioning applications, long-haul trucks, off road vehicle
instruments, farm equipment, cockpit displays for trains, warehouse
inventory management displays, forklift applications and railway car
information systems.
In addition to the core markets described above, Planar is serving the following
emerging markets:
Desktop Monitors. The Company introduced its first commercial
product -- a flat panel desktop monitor -- in October 2000 through select
retail channels. Flat panel monitors provide an option to larger, more
bulky CRTs on the desktop.
Communications. As hardware becomes increasingly portable and the
support systems allow for greater transmission of data,
telecommunication devices require displays with more information
capability. The Company has sold displays to customers for use in field
communication systems and financial trader telephone turrets.
Business/Office Equipment. The Company sells displays for a
variety of applications in the office and retail markets, including high
speed photocopiers, office control panels, point-of-sale devices, custom
designed monitors and elevators.
Products
The Company offers a variety of displays and display systems in a wide
range of resolutions, formats, viewing areas and technologies. These can be
classified in three primary product lines:
Flat Panel Displays. This product line includes monochrome EL and LCD,
multi-color EL and full color AMLCD displays. This is principally an OEM
(original equipment manufacturer) component market in which the customers
purchase displays to incorporate directly into their products or stand alone
flat panel monitors to integrate into a system. In early fiscal 2001, the
Company began selling a commercial flat panel desktop monitor through selected
retail channels.
Cathode Ray Tubes. The Company offers high performance CRTs based on its
proprietary taut shadow mask technology. These displays are sold primarily to
military systems companies who integrate them into cockpit applications.
Value-added Display Solutions. To be able to better satisfy customers'
display needs, the Company incorporates displays into systems and sub-systems
that often include keyboards, touch input devices, local computing capability or
special packaging. The Company markets its complete display systems for
computing applications.
5
Research, Development and Product Engineering
The Company believes that a significant level of investment in research,
development and product engineering is required to maintain market leadership.
Total expenses were $14.1, $23.8, and $19.9 million for the fiscal years 2000,
1999, and 1998, respectively, for research, development, and product
engineering. These expenses were partially offset by contract funding from both
government agencies (in the United States and Finland) and private sector
companies of $3.8, $9.7, and $11.2, million in fiscal years 2000, 1999, and
1998, respectively. Research and development expenses of the Company are
primarily related to advanced technology programs in active matrix
electroluminescent (AMEL) technology, AMLCD and PMCLD technologies, , organic
light emitting diodes (OLEDs), new drive architectures and fundamental process
improvements. Product engineering expenses are directly related to the design,
prototyping and release to production of new Company products. Research,
development and product engineering expenses consist primarily of salaries,
project materials, outside services, allocation of facility expenses and other
costs associated with the Company's ongoing efforts to develop new products,
processes and enhancements.
Recent development efforts have been focused on both short-term and
long-term programs designed to enhance the Company's product offerings and
capabilities. These programs include the following:
AMEL. This program is focused on the development of high resolution
image sources for miniature display applications. Current development efforts
are addressing higher resolution, improved performance, color, and lower
manufacturing costs. Potential markets include medical, industrial and
transportation.
Small Graphics Displays (SGD). This product development effort led to
the SGD service that provides quick turnaround designs coupled with volume
production of small graphics custom display systems. Initial targeted markets
include industrial process control, business/office equipment and
transportation.
New Technology Development. As part of the Company's strategy,
relationships are continuing to be established to explore various display
technologies and their incorporation into the product line. Some of the projects
being pursued include AMLCDs, fast PMLCDs, backlights, organic light emitting
diodes (OLEDs) and other thin film devices.
Government and Industry Partnerships
The Company believes that it is necessary for the United States and
Europe to further develop sources of supply, equipment and a base of trained
personnel to support the display industry. Additionally, as part of the
Company's technology strategy, the Company believes that it is important to be
involved with a broad range of display technologies and industry groups. As a
result of its participation, the Company benefits from work being done which
complements (and in some cases, funds) the Company's internal development
objectives. To that end, the
6
Company has employees who actively participate in several government/industry
partnerships, including the Phosphor Technology Center of Excellence (PTCOE).
The Advance Research Projects Agency (ARPA) has funded the creation of the PTCOE
to promote the development of appropriate materials and processes for the
fabrication of phosphors for light emissive displays.
Manufacturing
The Company operates EL manufacturing facilities in both the United
States and Finland. These facilities are designed to produce a wide range of
display sizes and types from 1"x 4" to 12"x 14" that can be manufactured with
relatively minor changes to the basic equipment set-up. The Company's LCD
facility is also designed to produce a wide range of display sizes and types.
The CRT facility is designed to produce 5" x 5" and 6" x 6" militarized CRTs.
The Company's manufacturing operations consist of the procurement and
inspection of components, manufacture of the display component, final assembly
of all components and extensive testing of finished products. The Company
currently procures all of its raw materials from outside suppliers. This
includes glass substrates, driver integrated circuits, electronic circuit
assemblies, power supplies and high density interconnects.
Quality and reliability are emphasized in the design and manufacture of
the Company's products. All of the Company's manufacturing facilities have
active operator training/certification programs and regularly use advanced
statistical process control techniques. The Company's products undergo thorough
quality inspection and testing throughout the manufacturing process.
The Company believes that worldwide quality standards are increasing and
that many customers now want manufacturers to have ISO9001 certification. This
certification requires that a company meet a set of criteria, established by an
independent, international quality organization that measures the quality of
systems, procedures and implementation in manufacturing, marketing and
development of products and services. All of the operating divisions have
received and maintain their ISO9001 certification.
In addition to its own manufacturing facilities, the Company has
agreements with offshore manufacturers. A portion of the Company's custom liquid
crystal display (LCD) products are manufactured in Hong Kong and China and
electroluminescent (EL) display assembly and testing will be done in Indonesia.
The Company also has an equity investment in a Taiwan, China based company that
manufactures stand alone flat panel monitors for Planar.
Sales and Marketing
The Company's products are distributed worldwide through a combination
of independent sales representatives, distributors and Company-employed sales
personnel. In the United States,
7
Planar has regional sales personnel in the Boston, Milwaukee, Portland, and
Tampa metropolitan areas. In addition, there are four sales offices in Europe --
Helsinki, London, Paris, and Munich. Each of these locations is staffed by a
regional sales manager who has responsibility for OEM sales in a specific
region. Each region also has a number of independent sales representatives who
generally have exclusive marketing and sales rights in their area and are
managed by the regional sales manager. International sales are conducted through
a combination of direct sales offices (Finland, Germany, France, and the United
Kingdom), independent sales representatives and distributors.
As of September 29 , 2000 , the Company's backlog of domestic and
international orders aggregated approximately $73.7 million. The Company
includes in its backlog all accepted contracts or purchase orders that are
scheduled for delivery in the next six months. The Company believes that its
backlog may be of limited utility in predicting future sales, particularly since
its international sales are primarily conducted through distributors, which
typically do not place purchase orders substantially in advance of delivery
dates. Variations in the magnitude and duration of contracts received by the
Company and customer delivery requirements may result in substantial
fluctuations in backlog from period to period.
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. If the Company were unable to increase unit volumes or increase
the performance of its products in order to offset or reduce any decreases in
selling prices, the Company's results of operations would be adversely impacted.
In addition, the Company's ability to maintain gross margins will depend in part
on its ability to reduce cost of sales in an amount sufficient to compensate for
any decreases in selling prices.
The Company competes with other display manufacturers based upon
commercial availability, long life, price, display performance (e.g.,
brightness, color capabilities, contrast and viewing angle), size, customer
service, design flexibility, power usage, durability and ruggedness. The Company
believes its total quality program, wide range of product offerings,
flexibility, responsiveness, regional production sites, technical support and
customer satisfaction programs are important to the competitive position of the
Company.
The principal display competitors against which the Company competes
include Sharp, Toshiba, Optrex, Seiko-Epson and Hitachi for LCDs; Sharp for EL;
Sharp, DTI, Hitachi and NEC for AMLCDs. In addition, a significant number of
Korean companies including Samsung, Hyundai and Goldstar have also made large
investments in AMLCD technology. In the non-core commercial desktop monitor
market, competitors include Panasonic, Fujitsu, Samsung, Sony and others.
The Company's CRT products dominate the United States' market for high
performance full color avionic CRTs and have a significant share of the market
worldwide. Increasingly, the
8
Company is seeing commercial display ruggedizers attempting to move into the
military avionics markets with commercial AMLCD products for avionics
applications.
9
Intellectual Property
The Company relies on a combination of patents, trade secrets,
trademarks, copyrights and other intellectual property law, nondisclosure
agreements and other measures to protect its proprietary rights. The Company
currently owns or has license rights to over 50 patents and several more pending
patent applications for its technologies. The expiration dates of the Company's
existing patents range from 2000 to 2020. Features for which the Company has and
is seeking patent protection include display glass design, materials,
electronics addressing and control functions and process manufacturing.
Pursuant to the agreements under which the Company receives research and
development funding from government agencies, the funding entities retain
certain rights with respect to technical data developed by the Company pursuant
to funded research. Generally, these rights restrict the government's use of the
specific data to governmental purposes, performed either directly or by third
parties sub-licensed by the government. Rights under the Company's funding
agreements with private sector companies vary significantly, with the Company
and the third party each retaining certain intellectual property rights.
Employees
As of September 29, 2000, the Company had 881 employees worldwide, 615
in the United States and 266 in Europe. Of these employees, 68 were engaged in
marketing and sales, 97 in research, development and product engineering, 74 in
finance and administration, and 642 in manufacturing and manufacturing support.
The Company's future success will depend in a large part upon its
ability to continue to attract, retain and motivate highly skilled and qualified
manufacturing, technical, marketing, engineering and management personnel. The
Company's U.S. employees are not represented by any collective bargaining units
and the Company has never experienced a work stoppage in the U.S. The Company's
Finnish employees are, for the most part, covered by national union contracts.
These contracts are negotiated annually between the various unions and the
Employer's Union and stipulate benefits, wage rates, wage increases, grievance
and termination procedures and work conditions.
Item 2. Properties
The Company leases three of its primary manufacturing facilities and
various sales offices in the United States and Europe. The EL manufacturing
operation, located in Hillsboro, Oregon, leases 70,000 square feet which
includes 25,000 square feet of clean room. In addition the Company's assembly
operations located in Beaverton, Oregon, leases 79,000 square feet of custom
designed space, including 15,000 square feet of cleanroom. The CRT operation is
located in a large facility in which it leases 29,000 square feet, including
approximately 7,000 square feet of cleanroom. The European facility, located in
Espoo, Finland, is a custom designed facility in which Planar leases 85,000
square feet, including approximately 15,000 square feet of cleanroom.
10
During 1994, the Company acquired a 21,000 square foot facility with
approximately 6,000 square feet of cleanroom also located in Beaverton, Oregon.
This facility is being used for research and development activities and
production of miniature displays. Additionally, the Company has leased 17,000
square feet of an adjacent building.
As of September 26, 1997, the Company acquired Standish Industries, Inc
and its Lake Mills, Wisconsin LCD manufacturing operation, which includes a
70,000 square foot facility with approximately 7,500 square feet of cleanroom.
The Company has four field sales offices in key U.S. metropolitan areas
and four sales offices in Europe. The offices are located in the Boston,
MilwaukeePortland, Tampa, Helsinki, London, Paris and Munich metropolitan areas.
Lease commitments for these facilities are short term, typically six to twelve
months. None of these sales offices has any significant leasehold improvements
nor are any planned.
The Company believes that its facilities are adequate for its immediate
and near term requirements and does not anticipate the need for any significant
additional expansion in the near future.
Item 3. Legal Proceedings
There are no pending material legal proceedings to which the Company is
a party or to which any of its property is subject.
Item 4. Submission of Matter to a Vote of Security Holders
No matters were submitted to stockholders during the fourth quarter of
the fiscal year.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Shares of the Company's Common Stock commenced trading in the
over-the-counter market on the Nasdaq National Market System on December 16,
1993, under the symbol PLNR.
11
Company currently intends to retain its earnings to support operations and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The following table sets forth for the fiscal periods indicated, the
range of the high and low closing prices for the Company's Common Stock on the
Nasdaq National Market System.
High Low
Fiscal 1999
First Quarter 12.50 6.69
Second Quarter 9.81 7.13
Third Quarter 9.00 7.13
Fourth Quarter 7.81 6.13
Fiscal 2000
First Quarter 7.94 5.25
Second Quarter 16.69 7.25
Third Quarter 14.50 7.98
Fourth Quarter 19.88 12.25
During the quarter ended September 29, 2000, 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 15,161 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 6. Selected Financial Data
Fiscal year
(in thousands, except per 2000 1999 1998 1997 1996
share amounts)
Operations
Sales $169,206 $122,914 $129,015 $ 88,850 $80,371
Gross profit 39,150 33,175 40,252 28,488 27,988
Income (loss) from operations (2,398) (3,151) 11,827 (1,396) 9,104
Net income (loss) $ 351 $ (5,125) $ 8,951 $ 274 $ 8,672
Net income (loss)per share $ 0.03 $ (0.48) $ 0.81 $ .02 $ 0.77
(diluted)
Balance Sheet
Working capital $ 50,047 $ 54,378 $ 51,520 $ 52,871 $56,924
Assets 125,901 111,771 118,629 114,196 97,295
Long-term liabilities 15,065 16,622 4,526 8,851 6,015
Shareholders' equity 72,822 72,744 83,378 77,280 79,969
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
The Company is a worldwide leader in the development, manufacture and marketing
of high performance electronic display products and systems. Planar began
shipping products in 1983 and has experienced revenue growth based upon the
expansion of its product line and market acceptance of its products for a
variety of applications.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of net
sales of certain items in the Consolidated Financial Statements of the Company.
The table and the discussion below should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
Fiscal year ended Sept. 29, 2000 Sept. 24, 1999 Sept. 25, 1998
- ----------------------------------------------------------------------------------------------
Sales 100.0% 100.0% 100.0%
Cost of sales 76.9 73.0 68.8
----- ----- -----
Gross profit 23.1 27.0 31.2
Operating expenses:
Research and development, net 6.1 11.4 6.7
Sales and marketing 7.7 9.2 8.5
General and administrative 7.4 7.9 6.8
Non-recurring charges 3.3 1.0 -
----- ----- -----
Total operating expenses 24.5 29.5 22.0
----- ----- -----
Income (loss) from operations (1.4) (2.5) 9.2
Non-operating income (expense):
Interest, net (0.1) (0.2) 0.5
Foreign exchange, net 1.2 1.3 (0.5)
Other, net -- (4.4) -
----- ----- -----
Net non-operating income (expense) 1.1 (3.3) -
----- -----
Income (loss) before income taxes (0.3) (5.8) 9.2
Provision (benefit) for income taxes (0.5) (1.6) 2.3
----- ----- -----
Net income (loss) 0.2% (4.2)% 6.9%
===== ===== =====
- ----------------------------------------------------------------------------------------------
Non-recurring Charges
In the fourth quarter of fiscal year 2000, the Company made a decision to exit
its unprofitable business of supplying high performance, full-color AMLCD flat
panel displays for military avionics. As a result of this decision, the Company
recorded non-recurring charges of $13.0 million. The actions include
primarilycharges for excess inventory, recognition of losses on contracts which
will not be fulfilled and the expected losses to be incurred in fulfilling the
existing contracts, impairment of fixed assets and workforce reductions of 27
people. Management expects to complete the production of units anticipated under
the contracts during the third quarter of fiscal year 2001. Other actions are
expected to be completed by the end of fiscal year 2001.
13
Cash of $5.2 million is expected to be used in connection with the expected
losses on contracts and the severance benefits, which have not yet been paid.
The Company has recorded $5.2 million of charges related to excess and obsolete
inventory, which has been identified as a direct result of the decision to exit
these product lines. The Company has also recognized expected losses of $2.2
million to be incurred during the fulfillment of the existing contracts. Total
non-recurring charges of $7.4 million have been recorded as cost of sales in the
Consolidated Statement of Operations. The Company has also recorded a charge of
$3.7 million for other contractual liabilities which relate to losses on
contracts which will not be fulfilled, lease termination costs and other
contractual liabilities. The Company has also recorded a charge of $1.2 million
related to fixed asset impairment. The impairment loss is the carrying amount of
the assets as the assets will be disposed of by abandonment when the contractual
commitments are fulfilled. In addition, the Company has recorded severance
charges of $405,000 Total charges of $5.4 million have been recorded as non-
recurring charges in the Consolidated Statement of Operations. The Company has
recorded $200,000 of estimated bad debt expense for customers who will not pay
their existing accounts receivable balances as a result of the Company's
decision to exit these product lines. This amount has been recorded as general
and administrative expense in the Consolidated Statement of Operations.
In the fourth quarter of fiscal year 1999, the Company began to implement a
series of actions intended to align operations with current market conditions
and to improve the profitability of its operations. As a result of these
actions, the Company recorded a non-recurring charge of $1.5 million. These
actions included a workforce reduction of 18 people and the write-off of prepaid
royalties. In addition, the Company decided at that time to sell Planar Flat
Candle, Inc., a wholly owned subsidiary that manufactures and sells backlights
for liquid crystal displays. These actions were completed by the end of fiscal
year 2000 and the total cash paid was $243,000.
The exit of the Flat Candle business resulted in a charge of $1.1 million
which included inventory charges of $237,000 related to the exit of certain
products, $651,000 related to goodwill, $183,000 related to severance and
$66,000 related to other assets and liabilities. The inventory charge of
$237,000 was recorded as cost of sales and the remaining amount of $900,000 was
recorded as non-recurring charges in the Consolidated Statement of Operations.
During the second quarter of fiscal year 2000, the Company determined that a
buyer could not be found. As a result, the remaining value of the assets was
reduced to fair value and a charge of $200,000 was recorded as non-recurring
charges in the Consolidated Statement of Operations. The assets were disposed of
during fiscal year 2000.
During 1999, the Company also recorded additional severance charges of
$188,000 related to headcount reductions. In addition, a charge of $163,000 was
recorded related to prepaid royalties, which were impaired due to lower than
expected future sales. The fair value of the asset was determined through the
calculation of the net present value of discounted cash flows expected to be
provided by the asset. These amounts were recorded as non-recurring charges in
the Consolidated Statement of Operations.
14
Sales
The Company's sales of $169.2 million in 2000 increased $46.3 million or 37.7%
as compared to sales of $122.9 million in 1999. The increase in sales was
principally due to higher sales of $23.9 million, $19.4 million and $3.0 million
within the Transportation, Medical and Industrial segments, which increased
80.7%, 45.7% and 5.9%, respectively. Transportation sales have increased
primarily due to higher volume sales in both the vehicle and avionics AMLCD
markets and also due to higher CRT sales volumes. Sales volumes in the Medical
market have increased primarily in the medical instrument and medical monitor
markets. Industrial market sales have increased due to higher volumes to the
wireless test, gas pump and industrial controls industries. The Company's sales
in 1999 decreased $6.1 million or 4.7% as compared to $129.0 million in 1998.
The decrease in sales was principally due to a slowdown across all of the
Company's markets in both Europe and North America due to customers pushing out
shipment dates and reduced sales due to weak end-product sales. The Company
presently expects sales for fiscal year 2001 to increase approximately 20% in
its continuing business. After adjusting for approximately $10.0 million of
military AMLCD business in 2000 and $5.0 million in 2001, and $10.0 million for
the acquisition of AllBrite Technologies, Inc. the Company's revenue target is
$205.0 million for 2001.
International sales, net of intercompany eliminations, increased by 31.9% to
$35.4 million in 2000 as compared to $26.8 million recorded in 1999, and
increased 1.4% in 1999 from 1998 sales of $26.5 million. The increase in
international sales was due primarily to increased sales in existing market
segments in the Company's foreign markets. As a percentage of total sales,
international sales decreased to 20.9% in 2000 from 21.8% in 1999 and increased
from 20.5% in 1998. The decline in international sales as a percentage of total
sales was mainly attributable to the higher sales volumes in 2000.
Gross Profit
The Company's gross margin as a percentage of sales decreased to 23.1% in 2000
from 27.0% in 1999. The decrease was primarily a result of the non-recurring
charges of $7.4 million, or 4.4% of sales, which was recorded in the fourth
quarter, continuing manufacturing problems associated with the military AMLCD
products, lower EL margins associated with our new production facility and
increased inventory reserves end-user products. These decreases were partially
offset by better yields on the LCD products and higher margins and increased
volumes of CRT and commercial AMLCD products. The Company's gross margin as a
percentage of sales decreased to 27.0% in 1999 from 31.2% in 1998. This decrease
was largely attributable to increased inventory reserves for the end-user
products and start-up manufacturing issues associated with the military avionics
AMLCD products. For 2001, the Company expects gross margins to be approximately
28.0%
15
Research and Development
Research and Development expenses of $10.3 million in 2000 decreased $3.7
million or 26.7% from $14.0 in 1999. The decrease was due to lower development
effort associated with both the commercial and military color AMLCD products and
tighter cost controls. This decrease was partially offset by increases in
research due to less contract funding of $5.9 million received in 2000. Research
and development expenses increased $5.4 million or 61.7% to $14.0 million in
1999 from $8.7 million in 1998. The increase was due primarily to additional
expenses related to the development of new technologies and product engineering
associated with the development of color AMLCD products in both the commercial
and military avionics businesses. In addition, the Company received $1.5 million
less in contract funding in 1999 as compared to 1998.
Sales and Marketing
Sales and marketing expenses increased $1.6 million or 14.5% to $13.0 million in
2000 from $11.4 million in 1999. The increase was due primarily to higher
commissions being paid on the higher sales levels. As a percentage of sales,
sales and marketing expenses decreased to 7.7% in 2000 as compared to 9.2% in
1999. This decrease was due to the sales increasing at a faster rate than the
sales and marketing expenses. Sales and marketing expenses increased $453,000 or
4.2% to $11.4 million in 1999 as compared to $10.9 million in 1998. The increase
was primarily due to additional marketing resources associated with the medical
and transportation markets. As a percentage of sales, sales and marketing
expenses increased from 8.5% in 1998 to 9.2% in 1999 due to higher expenses and
lower sales levels in 1999.
General and Administrative
General and administrative expenses were $12.7 million in 2000, an increaseof
$3.0 million or 30.9% from $9.7 million in 1999. The increase was primarily due
to increased personnel costs and bad debt expenses. As a percentage of sales,
general and administrative expenses decreased to 7.4% of sales in 2000 from 7.9%
of sales in 1999. The decrease was due to higher sales volumes in 2000 as
compare to 1999. General and administrative expenses increased $835,000 or 9.4%
to $9.7 million in 1999 from $8.8 million in 1998. The increase in general and
administrative expenses was primarily due to increased bad debt expense and the
search and transition related to a new President and Chief Executive Officer. As
a percentage of sales, general and administrative expenses increased to 7.9% in
1999 from 6.8% in 1998. This increase is due to higher expenses and lower sales
levels in 1999.
16
Amortization of Goodwill and Excess of Fair Market Value of Acquired Net Assets
over Purchase Price
In connection with the Company's acquisition of Standish Industries, Inc. in
September 1997, the Company recorded goodwill on its balance sheet for the
excess of the purchase price over the fair value of the net assets acquired. The
goodwill is being amortized over a ten-year period, resulting in operating
expenses of $571,000 per year. Goodwill amortization is included in general and
administrative expenses in the Consolidated Statement of Operations.
In connection with the Company's acquisition of its Finland operation in
January 1991, the Company exchanged Common Stock with a fair market value (based
upon an independent valuation) equivalent to the value of the business acquired.
Due to historical losses of this business and the expectation of future losses,
the value of the Common Stock paid was less than the fair market value of the
net assets acquired. This required the Company to write fixed assets down to
zero and to record negative goodwill on its balance sheet for the remaining
amount of the excess fair market value of the net assets acquired over the
purchase price. Amortization of this negative goodwill has created a positive
offset to operating expenses in the amount of $476,000 per year. Negative
goodwill is being amortized over a ten-year period and is included in general
and administrative expenses.
Operating expenses
Operating expenses increased $5.2 million or 14.4% to $41.5 million in 2000 from
$36.3 million in 1999. As a percentage of sales, operating expenses decreased to
24.5% in 2000 from 29.5% in 1999. Operating expenses in 1999 increased $7.9
million or 27.8% from $28.4 million in 1998 or 22.0%, as a percentage of sales.
The Company believes that operating expenses will be approximately 20.0% of
revenues in 2001. The Company will increase its investment in sales and
marketing in order to strengthen its focus on markets and customer intimacy. In
addition, the Company continues to make a significant investment in a new ERP
system.
Non-operating Income and Expense
Non-operating income and expense includes interest income on investments,
interest expense and net foreign currency exchange gain or loss. Net interest
expense increased to $278,000 in 2000 from $233,000 in 1999. This increase was
due to lower cash balances earning interest offset by lower interest expense on
decreased borrowings in 2000. Net interest income (expense) decreased from net
interest income of $736,000 in 1998 to net interest expense of $233,000 in 1999
due to lower cash balances earning interest income and higher interest expense
due to increased borrowings. In 1999, the Company increased its borrowings to
finance equipment purchases associated with a new production facility.
On July 6, 1999, the Company acquired a 20% interest in dpiX Holding Company
LLC. dpiX Holding Company LLC which owns 80.1% of dpiX LLC. The Company paid
$5.0 million in cash for its interest in dpiX Holding Company LLC. dpiX LLC
manufactures and sells amorphous silicon thin-film transistor arrays for use in
x-ray digital detectors and liquid crystal displays. The investment was
accounted for under the equity method of accounting. As part of
17
the acquisition agreement, there was a disproportionate allocation of profit and
losses where the Company recognized the first $5.0 million of losses incurred.
The Company has written off the entire investment of $5.4 million, which
included transaction costs of $395,000, in the fourth quarter of fiscal year
1999 based upon the actual losses incurred since the date of acquisition and the
belief that the investment is other than temporarily impaired.
Foreign currency exchange gains and losses are related to timing differences
in the receipt and payment of funds in various currencies and the conversion of
cash accounts denominated in foreign currencies to the applicable functional
currency. Foreign currency exchange gains and losses amounted to gains of $2.1
million in 2000 and $1.7 million in 1999 and a loss of $659,000 in 1998. 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 receivables and payables resulting from exchange rate
fluctuations between the various currencies in which the Company conducts
business.
The Company currently 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 foreign subsidiary 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 Company recorded a tax benefit of $942,000 in 2000, a tax benefit of $2.0
million in 1999 and a tax provision of $3.0 million for 1998. For fiscal 2000
and 1999, the change in the effective tax rates was due to recognition of book
losses in the United States compared to book income for the Company's Finland
subsidiary. In 2000, the book loss in the United States was due primarily to the
non-recurring charges. In addition, the Company realized a tax benefit related
to a reduction in the valuation allowance related to the net operating loss
carryforward. In 1999, the book loss in the United States was due primarily to
the write-off of the dpiX investment and the non-recurring charges. The
effective tax rate for 1998 was due to the relative profitability of the
Company's Finland subsidiary compared to the United States entities. As a result
of the acquisition of the Company's Finland subsidiary in January 1991, the
Company recognized a change in ownership for tax purposes that resulted in a
limitation on the annual utilization of net operating loss carryforwards for
United States tax purposes. In fiscal 2000, 1999 and 1998, the Company was
subject to the $2.1 million annual limitation. The Company believes that the
effective tax rate for 2001 will be 33%.
Net Income
Net income for 2000 was $351,000 or $0.03 per diluted share. In 1999, the net
loss was $5.1 million or $0.48 per diluted share. In 1998, net income was $9.0
million or $0.81 per diluted share. In 2001, the Company believes earnings per
share will be $0.95 excluding foreign currency.
18
QUARTERLY RESULTS OF OPERATIONS
The table below presents unaudited consolidated financial results for each
quarter in the two-year period ended September 29, 2000. The Company believes
that all necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with the Consolidated Financial
Statements. The operating results for any quarter are not necessarily indicative
of the results that may be expected for any future period.
Three months ended Sept. 29, June 30, March 31, Dec. 31, Sept. 24, June 25, March 26, Dec. 25,
(in thousands, except per share data) 2000 2000 2000 1999 1999 1999 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
Sales $ 46,513 $ 43,495 $ 40,606 $ 38,592 $ 32,773 $ 30,426 $ 29,239 $ 30,476
Gross profit6,447 12,086 10,957 9,660 7,267 8,190 8,462 9,256
Income (loss) from operations (8,491) 3,126 1,960 1,007 (4,065) (652) 181 1,385
Net income (loss) (4,655) 2,266 1,718 1,024 (7,088) 68 955 940
Net income (loss) per share
(diluted) $ (0.43) $ 0.21 $ 0.16 $ 0.10 $ (0.67) $ 0.01 $ 0.09 $ 0.09
Weighted average number of common
shares outstanding (diluted) 10,744 11,131 11,150 10,605 10,527 10,779 10,838 10,975
- -----------------------------------------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $2.4 million, $5.8 million and
$4.1 million in fiscal years 2000, 1999 and 1998, respectively. The net cash
provided by operations in 2000 was due primarily to the non-recurring charges,
the increase in other current liabilities and depreciation and amortization
offset by the change in deferred taxes and the other balance sheet accounts. The
net cash provided by operations in 1999 was primarily due to the loss on the
dpiX investment and the non-recurring charges offset by the change in deferred
taxes and other balance sheet accounts. The net cash provided by operations in
1998 was primarily related to changes in the balance sheet accounts including
inventory, accounts receivable, other current assets and other current
liabilities.
Additions to plant and equipment were $9.2 million, $5.0 million and $13.6
million in 2000, 1999 and 1998, respectively. In 2000, significant additions
were made related to the Company's new EL manufacturing facility in Hillsboro,
Oregon, which began operating in the third quarter. Additions were also made
related to the Wisconsin and Finland manufacturing facilities. The significant
acquisitions during 1999 were purchases of equipment for the Wisconsin and
Finland manufacturing operations. In 1998, most of the additions related to
deposits and payments for manufacturing equipment related to the Company's
future Hillsboro location.
At September 29, 2000, the Company had two bank line of credit
agreements with a total borrowing capacity of $20.0 million As of both September
29, 2000 and September 25, 1999, borrowings outstanding under the credit lines
were $0. Borrowings outstanding under the equipment financing lines were $15.6
million and $17.4 million as of September 29, 2000 and September 24, 1999,
respectively. The Company was in violation of certain financial covenants under
one of the lines of credit as of September 29, 2000. The bank has waived the
covenant violations. The Company believes its existing cash and investments
together with cash generated
19
from operations and existing borrowing capabilities will be sufficient to meet
the Company's working capital requirements for the foreseeable future.
During December 2000, the Company signed a definitive agreement to acquire
all of the outstanding shares of AllBrite Technologies, Inc. in exchange for
$24.9 million of the Company's common stock. The number of shares will be
determined by dividing $24.9 million by the average stock price, which is the
average of the closing stock price for the ten trading days ending on the fourth
business day before the closing date. The business combination will be accounted
for using the pooling methodology of accounting.
On May 13, 1998, the Company announced its intention to repurchase up to $5.0
million of the Company's shares of outstanding common stock from time to time
over the following twelve months in open market and negotiated transactions.
During the year ended September 24, 1999, the Company completed the repurchase
plan and repurchased approximately 376,000 shares of its outstanding common
stock for $3.4 million.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations 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
20
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 the
following: domestic and international business and economic conditions, changes
in growth in the flat panel monitor industry, changes in customer demand or
ordering patterns, changes in the competitive environment including pricing
pressures or technological changes, continued success in technological advances,
shortages of manufacturing capacities from our third party partners, final
settlement of contractual liabilities, future production variables impacting
excess inventory and other risk factors described below. The forward-looking
statements contained in this Report speak only as of the date on which they are
made, and the Company does not undertake any obligation to update any forward-
looking statement to reflect events or circumstances after the date of this
Report. If the Company does update one or more forward-looking statements,
investors and others should not conclude that the Company will make additional
updates with respect thereto or with respect to other forward-looking
statements.
Outlook: Issues and Uncertainties
The following issues and uncertainties, among others, should be
considered in evaluating the Company's future financial performance and
prospects for growth.
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
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
21
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 has experienced lower
than expected yields with respect to new products and processes in the past.
These low yields have, and will continue to have, a negative impact on gross
margins. In addition, customer relationships can be negatively impacted due to
production problems and late delivery of shipments.
A portion of the Company's flat panel products rely on EL technology,
which currently constitutes only a small portion of the information display
market. Through the acquisition of Standish Industries, Inc., the Company has
diversified its display products and expanded its addressable market
significantly to include flat panel passive liquid crystal display applications.
The Company's future success will depend in part upon increased market
acceptance of existing EL, passive LCD and active matrix LCD technologies, and
other future technological developments. In that regard, 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 an alternative technology that is more
competitive, the Company's business and results of operations will be adversely
affected.
Level of Advanced Research and Development Funding
The Company's advanced research and development activities have been
significantly 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 the
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 experienced significant
decline of external research funding, additional losses or substantial
reductions of such funding could adversely affect the Company's results of
operations and its ability to continue research and development activities at
current levels. See Note 1 in the "Notes to Consolidated Financial Statements".
International Operations and Currency Exchange Rate Fluctuations
Shipments to customers outside of North America accounted for
approximately 20.9%, 21.8% and 20.5%, of the Company's sales in fiscal 2000,
fiscal 1999 and fiscal 1998,
22
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). See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Declining Military Expenditures
The Company's sales associated with military applications have been
increasing. However, military capital expenditure levels have been declining for
several years and depend largely on factors outside of the Company's control.
The Company has announced its exit of the military avionics AMLCD product line
and as a result military sales will not continue at current levels. In addition,
as a result of the reduction in military sales, several key 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. The Company continues to develop strategic relationships with suppliers.
However, there can be no assurance given that these strategic relationships will
continue in the future and the Company will receive the critical components
required to meet production and shipment schedules.
The Company has fixed price contracts for flat panel displays with a small
number of military avionics customers. As a result of the performance
requirements for these displays and difficulties in the manufacturing process,
the Company has experienced difficulties in satisfying its obligations under
these contracts and generally has not realized a profit selling these products.
Although the Company has successfully renegotiated specifications and prices
under certain of these contracts, the Company has not been able to renegotiate
the terms of all such contracts or achieve a level of profitability on these
products that would justify continuing sales. As previously announced, , the
Company will not seek new contracts or contract extensions when the existing
contracts expire in fiscal 2001. The Company's inability to satisfy its
obligations under existing contracts could result in contractual liabilities to
the Company, a reduction in the Company's revenues and earnings and the
impairment of the Company's ability to continue to participate in the military
avionics market and potentially the commercial avionics market.
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, inventory obsolescence charges, warranty return rate
fluctuations related to newer products, changes in estimates associated with the
non-recurring charges, the timing of expenses and other factors affect results
of operations. Quarterly fluctuations may adversely affect the market price of
the Common Stock.
23
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 7A. Quantitative and Qualatative Disclosures About Market Risk
The Company's exposure to market risk for changes in interest rates
relates primarily to its investment portfolio, and short-term and long-term debt
obligations. The Company mitigates its risk by diversifying its investments
among high credit quality securities in accordance with the Company's investment
policy.
The Company believes that its net income or cash flow exposure relating
to rate changes for short-term and long-term debt obligations is not material.
The Company primarily enters into debt obligations to support capital
expenditures and working capital needs. The Company does not hedge any interest
rate exposures.
Interest expense is affected by the general level of U.S. interest rates
and/or LIBOR. Increases in interest expense resulting from an increase in
interest rates would be offset by a corresponding increase in interest earned on
the Company's investments.
The Finnish Markka is the functional currency of the Company's
subsidiary in Finland. The Company does not currently enter into foreign
exchange forward contracts to hedge certain balance sheet exposures and
intercompany balances against future movements in foreign exchange rates. The
Company does maintain cash balances denominated in currencies other than the
U.S. Dollar. If foreign exchange rates were to weaken against the U.S. Dollar,
the Company believes that the fair value of these foreign currency amounts would
not decline by a material amount.
24
Item 8. Financial Statements and Supplementary Data
PLANAR SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.......................................... 26
Consolidated Balance Sheets........................................... 27
Consolidated Statements of Operations................................. 28
Consolidated Statements of Cash Flows................................. 29
Consolidated Statements of Shareholders' Equity....................... 30
Notes to Consolidated Financial Statements............................ 31
25
Independent Auditors' Report
The Board of Directors
Planar Systems, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Planar
Systems, Inc. and subsidiaries as of September 29, 2000 and September 24, 1999,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended September 29,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based upon our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Planar
Systems, Inc. and subsidiaries as of September 29, 2000 and September 24, 1999,
and the results of their operations, and their cash flows for each of the years
in the three-year period ended September 29, 2000 in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Portland, Oregon
October 31, 2000, except as to Note 14, which is as of December 11, 2000
26
Consolidated Balance Sheets
(In thousands, except share amounts) Sept. 29, 2000 Sept. 24, 1999
- ----------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,772 $ 17,795
Short-term investments (Note 2) -- 2,010
Accounts receivable, net of allowance for doubtful
accounts of $3,146 at 2000 and $601 at 1999 (Note 2) 27,795 20,982
Inventories 28,910 25,373
Other current assets (Note 8) 15,584 10,623
----------- ----------
Total current assets 88,061 76,783
Property, plant and equipment, net (Note 5) 27,709 16,245
Goodwill 3,428 4,000
Other assets (Note 8) 6,703 14,743
----------- ----------
$ 125,901 $ 111,771
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,269 $ 11,513
Accrued compensation 4,870 3,975
Current portion of long-term debt (Note 6) 1,894 1,778
Deferred revenue 1,080 1,301
Other current liabilities (Notes 7 and 8) 15,781 3,362
Current portion of excess fair market value of acquired net
assets over purchase price 120 476
----------- -----------
Total current liabilities 38,014 22,405
Long-term debt, less current portion (Note 6) 13,705 15,599
Other long-term liabilities (Note 8) 1,360 1,023
----------- -----------
Total liabilities 53,079 39,027
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value. Authorized 10,000,000 shares,
no shares issued at 2000 or 1999
Common stock, no par value. Authorized 30,000,000 shares;
issued 10,910,153 and 10,490,233 shares at 2000 and 1999,
respectively 78,868 75,319
Retained earnings 6,060 5,709
Accumulated other comprehensive loss (Note 13) (12,106) (8,284)
----------- -----------
Total shareholders' equity 72,822 72,744
----------- -----------
$ 125,901 $ 111,771
=========== ===========
- ----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
27
Consolidated Statements of Operations Fiscal year ended
(In thousands, except per share amounts) Sept. 29, 2000 Sept. 24, 1999 Sept. 25, 1998
- ----------------------------------------------------------------------------------------------
Sales $ 169,206 $ 122,914 $ 129,015
Cost of sales 130,056 89,739 88,763
---------- ---------- ----------
Gross profit 39,150 33,175 40,252
---------- ---------- ----------
OPERATING EXPENSES:
Research and development, net 10,300 14,047 8,685
Sales and marketing 13,000 11,357 10,904
General and administrative 12,658 9,671 8,836
Non-recurring charges (Note 4) 5,590 1,251 -
---------- ---------- ----------
Total operating expenses 41,548 36,326 28,425
---------- ---------- ----------
Income (loss) from operations (2,398) (3,151) 11,827
NON-OPERATING INCOME (EXPENSE):
Interest income 894 1,341 1,029
Interest expense (1,172) (1,574) (293)
Foreign exchange, net 2,085 1,658 (659)
Loss on investment(Note 3) -- (5,395) -
---------- ---------- ----------
Net non-operating income (expense) 1,807 (3,970) 77
---------- ---------- ----------
Income (loss) before income taxes (591) (7,121) 11,904
Provision (benefit) for income taxes (Note 8) (942) (1,996) 2,953
---------- ---------- ----------
Net income (loss) $ 351 $ (5,125) $ 8,951
========= ========== ==========
Basic net income (loss) per share $ 0.03 $ (0.48) $ 0.83
Average shares outstanding - basic 10,615 10,654 10,837
Diluted net income (loss) per share $ 0.03 $ (0.48) $ 0.81
Average shares outstanding - diluted 11,095 $ 10,654 11,098
- ----------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
28
Consolidated Statements of Cash Flows
Fiscal year ended
(In thousands) Sept. 29, 2000 Sept. 24, 1999 Sept. 25, 1998
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 351 $ (5,125) $ 8,951
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 6,079 5,473 4,712
Amortization of excess market value of acquired net
assets over purchase price (476) (476) (476)
Loss on investment -- 5,395 -
Non-recurring charges 13,163 1,488 -
Deferred taxes (6,240) (3,497) 1,614
Foreign exchange (gain) loss (2,085) (1,658) 659
Tax benefit of stock options exercised 471 22 93
(Increase) decrease in accounts receivable (9,392) 1,504 (1,451)
Increase in inventories (8,518) (134) (4,456)
(Increase) decrease in other current assets (5,103) 3,367 (3,416)
Increase in accounts payable 3,810 2,126 932
Increase (decrease) in accrued compensation 851 (447) (918)
Increase (decrease) in deferred revenue (59) 270 (252)
Increase (decrease) in other current liabilities 9,499 (2,459) (1,885)
---------- ---------- ----------
Net cash provided by operating activities 2,351 5,849 4,107
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (9,181) (4,958) (13,597)
Investment in a business -- (5,395) -
Increase (decrease) in other long-term liabilities 717 593 (183)
Net sales (purchases) of short-term investments 2,010 (2,010) 8,170
Net sales (purchases) of long-term investments (950) (211) 2,245
---------- ---------- ----------
Net cash used by investing activities (7,404) (11,981) (3,365)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) of long-term debt (1,778) 13,356 (4,555)
Net proceeds from long-term accounts receivable 583 120 1,221
Net proceeds from issuance of capital stock 3,078 912 1,102
Net proceeds (payments) under short-term debt -- (10,000) 8,870
Stock repurchase -- (3,382) (5,221)
---------- ---------- ----------
Net cash provided by financing activities 1,883 1,006 1,417
Effect of exchange rate changes 1,147 (505) (510)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (2,023) (5,631) 1,649
Cash and cash equivalents at beginning of period 17,795 23,426 21,777
---------- ---------- ----------
Cash and cash equivalents at end of period $ 15,772 $ 17,795 $ 23,426
=========== =========== ===========
Supplemental cash flow disclosure:
Cash paid for interest $ 1,172 $ 1,172 $ 914
Cash paid for income taxes $ 1,166 $ 1,547 $ 3,419
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
29
Consolidated Statements of Shareholders' Equity
Accumulated
Other Total
Common Stock Retained Comprehensive Shareholders'
(In thousands, except share amounts) Shares Amount Earnings Income (Loss) Equity
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 26, 1997 11,075,730 $ 73,190 $ 10,486 $ (6,396) $ 77,280
Components of comprehensive income (Note 13):
Net income -- -- 8,951 -- 8,951
Currency translation adjustment -- -- -- 1,180 1,180
Unrealized loss on investments -- -- -- (7) (7)
-----------
Total comprehensive income 10,124
Proceeds from issuance of common stock 154,946 1,102 -- -- 1,102
Tax benefit from stock option exercises (Note 8) -- 93 -- -- 93
Stock repurchase (443,150) -- (5,221) -- (5,221)
----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 25, 1998 10,787,526 74,385 14,216 (5,223) 83,378
Components of comprehensive loss (Note 13):
Net loss -- -- (5,125) -- (5,125)
Currency translation adjustment -- -- -- (3,061) (3,061)
-----------
Total comprehensive loss (8,186)
Proceeds from issuance of common stock 79,166 912 -- -- 912
Tax benefit from stock option exercises (Note 8) -- 22 -- -- 22
Stock repurchase (376,459) -- (3,382) -- (3,382)
----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 24, 1999 10,490,233 75,319 5,709 (8,284) 72,744
Components of comprehensive loss (Note 13):
Net income -- -- 351 -- 351
Currency translation adjustment -- -- -- (4,031) (4,031)
Unrealized loss on investments -- -- -- 209 209
-----------
Total comprehensive loss (3,471)
Proceeds from issuance of common stock 419,920 3,078 -- -- 3,078
Tax benefit from stock option exercises (Note 8) -- 471 -- -- 471
----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 29, 2000 10,910,153 $ 78,868 $ 6,060 $ (12,106) $ 72,822
=========== =========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
30
Notes to Consolidated Financial Statements
Three Years Ended September 29, 2000
(Dollars in thousands, except per share amounts)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
Planar Systems, Inc. was incorporated on April 27, 1983 and commenced operations
in June 1983. Planar Systems, Inc., and its wholly owned subsidiaries
(collectively, the "Company") are engaged in the developing, manufacturing and
marketing of electronic display products and systems. These display products and
systems primarily include electroluminescent displays (EL), liquid crystal
displays (LCDs), active matrix liquid crystal displays (AMLCDs) and high
performance taut shadow mask cathode ray tubes (CRT).
Principles of consolidation
The consolidated financial statements include the financial statements of Planar
Systems, Inc. and its wholly-owned subsidiaries, Planar International Ltd.,
Planar America, Inc., Planar Standish, Inc., Planar Flat Candle, Inc. and Planar
Advance, Inc. All significant intercompany accounts and transactions are
eliminated in consolidation.
Fiscal year
The Company's fiscal year ends on the last Friday in September. The last day of
fiscal 2000, 1999 and 1998 was September 29, September 24 and September 25,
respectively. Due to statutory requirements, Planar International's fiscal
year-end is September 30. All references to a year in these notes are to the
Company's fiscal year ended in the period stated which includes the fiscal year
results of Planar International.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of sales and
expenses during the reporting period. Actual results may differ from those
estimates.
Foreign currency translation
The local currency is the functional currency of the Company's foreign
subsidiary. Assets and liabilities of the foreign subsidiary are translated into
U.S. Dollars at current exchange rates, and sales and expenses are translated
using average rates. Gains and losses from translation of net assets are
included in accumulated other comprehensive income (loss). Gains and losses from
foreign currency transactions are included as a component of non-operating
income (expense).
31
Cash and cash equivalents
Cash and cash equivalents include cash deposits in banks and highly liquid
instruments with maturities of three months or less from the time of purchase.
Investments
Debt securities for which the Company does not have the intent or ability to
hold to maturity are classified as available for sale, along with the Company's
investment in equity securities. Securities available for sale are carried at
fair value, with unrealized gains and losses, net of tax, reported in
accumulated other comprehensive loss. At September 29, 2000 and September 24,
1999, the Company had no investments that qualified as trading or held to
maturity.
As of September 29, 2000, the Company's investments in debt and equity
securities were classified as cash and cash equivalents. As of September 24,
1999, the Company's investments in debt and equity securities were $9,319 of
which $2,010 were classified as investments and the remainder were classified as
cash and cash equivalents. The investments are diversified among high credit
quality securities in accordance with the Company's investment policy. As of
September 29, 2000 and September 24, 1999, all debt securities were invested in
either government securities or commercial paper. These securities have been
reported at their fair market value, which equaled their historical cost. The
contractual maturities of the investments as of September 29, 2000 and September
24, 1999 were less than three months.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market, net of reserves for estimated inventory obsolescence based upon the
Company's best estimate of future product demand. Inventories consist of:
2000 1999
================================================================================
Raw materials $ 15,227 $ 16,632
Work in process 7,643 4,058
Finished goods 6,040 4,683
----------- -----------
$ 28,910 $ 25,373
=========== ===========
- --------------------------------------------------------------------------------
Included in cost of sales are $2,528, $2,909 and $1,305 of charges related to
inventory obsolescence reserves for the years ended September 29, 2000,
September 24, 1999 and September 25, 1998, respectively. The Company has
inventory reserves of $2,812 and $4,283 as of September 29, 2000 and September
24, 1999, respectively.
32
Property, plant and equipment
Depreciation of equipment is computed on a straight-line basis over the
estimated useful lives of the assets, generally three to seven years. Leasehold
improvements are amortized on a straight-line basis over the lesser of the life
of the leases or the estimated useful lives of the assets. Depreciation of the
buildings is computed on a straight-line basis over the estimated useful life of
the buildings, estimated to be 39 years.
Other assets
Included in other assets of $6,703 and $14,743 as of September 29, 2000 and
September 24, 1999, respectively, are assets associated with the implementation
of a new production facility and equipment which had not been placed in service
as of September 29, 2000 and September 24, 1999 in the amounts of $3,332 and
$13,982, respectively. In fiscal years 2000, 1999, and 1998 interest was
capitalized in the amounts of $0, $0 and $621, respectively.
Income taxes
Deferred tax assets and liabilities are established for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at the enacted tax rates expected to be in
effect when such amounts are realized or settled. Deferred tax assets are
reduced by a valuation allowance when it is more likely than not that some
portion of the deferred tax assets will not be realized.
Revenue recognition
The Company recognizes revenue from product sales generally at the time the
product is shipped. Service revenue is deferred and recognized over the contract
period or as services are rendered.
33
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:
2000 1999 1998
================================================================================
Research and
development expense $ 14,149 $ 23,758 $ 19,927
Contract funding (3,849) (9,711) (11,242)
----------- ----------- ------------
Research and development, net $ 10,300 $ 14,047 $ 8,685
=========== =========== ============
- --------------------------------------------------------------------------------
As of September 29, 2000 and September 24, 1999, included in other current
assets are receivables of $1,132 and $2,782, respectively, related to these
research and development contracts.
Product warranty
The Company provides a warranty for its products and establishes an allowance at
the time of sale adequate to cover warranty costs during the warranty period.
The warranty period is generally between twelve and fifteen months. This reserve
is included in other current liabilities (Note 7).
Goodwill and excess fair market value of acquired net assets over purchase price
Goodwill and the excess of fair market value of acquired net assets over
purchase price are being amortized over a ten-year period using the
straight-line method. Long-lived assets and intangibles are reviewed for
impairment when events or circumstances indicate costs may not be recoverable.
Impairment exists when the carrying value of the asset is greater than the net
undiscounted future cash flows expected to be provided by the asset. If
impairment exists, the asset's book value will be written down to its fair
value. Fair value is determined through quoted market values or through the
calculation of the net present value of discounted future cash flows expected to
be provided by the asset. Accumulated amortization was $1,714 and $1,143 as of
September 29, 2000 and September 24, 1999, respectively.
Net income (loss) per share
Basic net income (loss) per share was computed using the weighted average number
of common shares outstanding during each period. Diluted net income (loss) per
share is computed using the weighted average number of common shares plus
dilutive common equivalent shares outstanding during the period. Incremental
shares of 480,000, 0 and 261,000 for the fiscal years ended September 29, 2000,
September 24, 1999 and September 25, 1998, respectively, were used in the
34
calculations of diluted earnings per share. In years in which a net loss is
incurred, no common stock equivalents are included as they are antidilutive.
Financial instruments
For short-term financial instruments, including cash and cash equivalents,
accounts receivable, short-term debt, accounts payable and accrued compensation,
the carrying amount approximates the fair value because of the immediate
short-term nature of those instruments. The fair value of long-term debt is
estimated based upon quoted market prices for similar instruments or by
discounting expected cash flows at rates currently available to the Company for
instruments with similar risks and maturities. The differences between the fair
values and carrying amounts of the Company's financial instruments at September
29, 2000 and September 24, 1999 were not material.
Stock-based compensation plans
The Company accounts for its stock-based plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees".
Future accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new
statement will require recognition of all derivatives as either assets or
liabilities on the balance sheet at fair value. The new statement is effective
for fiscal year 2001, but early adoption is permitted. Management has determined
that this standard will not have a material impact on the Company's consolidated
financial statements.
Reclassification
Certain balances in the 1999 and 1998 financial statements have been
reclassified to conform with 2000 presentations. Such reclassifications had no
effect on results of operations or retained earnings.
NOTE 2 CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of trade receivables and investments. The risk
in trade accounts receivable is limited due to the credit worthiness of the
companies comprising the Company's customer base and their dispersion across
many different sectors of the electronics industry and geographies. The risk in
investments is limited due to the credit worthiness of investees comprising the
portfolio, the diversity of the portfolio and relative low risk of municipal
securities. At September 29, 2000, the Company does not believe it had any
significant credit risks.
35
NOTE 3 BUSINESS ACQUISITIONS
On July 6, 1999, the Company acquired a 20% interest in dpiX Holding Company
LLC. dpiX Holding Company LLC owns 80.1% of dpiX LLC. The Company paid $5,000 in
cash for its interest in dpiX Holding Company LLC. dpiX LLC manufactures and
sells amorphous silicon thin-film transistor arrays for use in x-ray digital
detectors and liquid crystal displays. The investment has been accounted for
under the equity method of accounting. As part of the acquisition agreement,
there is a disproportionate allocation of profit and losses where the Company
recognizes the first $5,000 of losses incurred. The Company wrote off the entire
investment of $5,395, which includes transaction costs of $395, in the fourth
quarter of fiscal year 1999 based upon the actual losses incurred since the date
of acquisition and the belief that the investment was other than temporarily
impaired. This charge has been recorded in other non-operating expenses in the
Consolidated Statement of Operations. During the years ended September 29, 2000
and September 24, 1999, the Company purchased $11,906 and $4,462 of materials
from dpiX LLC.
NOTE 4 NON-RECURRING CHARGES
In the fourth quarter of fiscal year 2000, the Company made a decision to exit
its unprofitable business of supplying high performance, full-color AMLCD flat
panel displays for military avionics. As a result of this decision, the Company
recorded non-recurring charges of $12,963. The actions include charges primarily
for excess inventory, recognition of losses on contracts which will not be
fulfilled and the expected losses to be incurred in fulfilling the existing
contracts, impairment of fixed assets and workforce reductions of 27 people.
Management expects to complete the production of units anticipated under the
contracts during the third quarter of fiscal year 2001. Other actions are
expected to be completed by the end of fiscal year 2001. Cash of $5,151 is
expected to be used in connection with the expected losses on contracts and the
severance benefits, which have not yet been paid.
The Company has recorded $5,151 of charges related to excess and obsolete
inventory, which has been identified as a direct result of the decision to exit
these product lines. The Company has also recognized the expected losses of
$2,222 to be incurred during the fulfillment of the existing contracts. Total
non-recurring charges of $7,373 have been recorded as cost of sales in the
Consolidated Statement of Operations. The Company has also recorded a charge of
$3,741 for other contractual liabilities which relate to losses on contracts
which will not be fulfilled, lease termination costs and other contractual
liabilities. The Company has also recorded a charge of $1,244 related to fixed
asset impairment. The impairment loss is the carrying amount of the assets as
the assets will be disposed of by abandonment when the contractual commitments
are fulfilled. In addition, the Company has recorded severance charges of $405.
Total charges of $5,390 have been recorded as non-recurring charges in the
Consolidated Statement of Operations. The Company has recorded $200 of estimated
bad debt expense for customers who will not pay their existing accounts
receivable balances as a result of the Company's decision to exit these product
lines. This amount has been recorded as general and administrative expense in
the Consolidated Statement of Operations
36
In the fourth quarter of fiscal year 1999, the Company began to implement a
series of actions intended to align operations with current market conditions
and to improve the profitability of its operations. As a result of these
actions, the Company recorded a non-recurring charge of $1,488. These actions
included a workforce reduction of 18 people and the write-off of prepaid
royalties. In addition, the Company decided at that time to sell Planar Flat
Candle, Inc., a wholly owned subsidiary that manufactures and sells backlights
for liquid crystal displays. These actions were completed by the end of fiscal
year 2000 and the total cash paid was $243.
The exit of the Flat Candle business resulted in a charge of $1,137 which
included inventory charges of $237 related to the exit of certain products, $651
related to goodwill, $183 related to severance and $66 related to other assets
and liabilities. The inventory charge of $237 was recorded as cost of sales and
the remaining amount of $900 was recorded as non-recurring charges in the
Consolidated Statement of Operations.During the second quarter of fiscal year
2000, the Company determined that a buyer could not be found. As a result, the
remaining value of the assets was reduced to fair value and a charge of $200 was
recorded as non-recurring charges in the Consolidated Statement of Operations.
The assets were disposed of during fiscal year 2000.
The Company also has recorded additional severance charges of $188 related
to headcount reductions. In addition, a charge of $163 was recorded related to
prepaid royalties, which were impaired due to lower than expected future sales.
The fair value of the asset was determined through the calculation of the net
present value of discounted cash flows expected to be provided by the asset.
These amounts were recorded as restructuring charges in the Consolidated
Statement of Operations.
The non-recurring charges incurred affected the Company's financial
position as follows:
Other Fixed Accounts Accrued Other
Inventories Assets Assets Receivable Goodwill Compensation Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
1999 Original charge $ 237 $ 229 $ -- $ -- $ 651 $ 371 $ --
Cash paid out -- -- -- -- (128) -- --
Non-cash write-offs (237) (229) -- -- (651) -- --
-------- ------ ------ -------- -------- -------- ----------
Balance as of September 24, 1999 -- -- -- -- -- 243 --
2000 Activity:
Additional charges 4,701 -- 1,444 200 -- 405 6,413
Cash paid out -- -- -- -- -- (243) --
Non-cash write-offs (4,701) -- (1,444) (200) -- -- --
-------- ------ ------ -------- -------- -------- ----------
Balance as of September 29, 2000$ $ -- $ -- $ -- $ -- $ -- $ 405 $ 6,413
======== ====== ====== ======== ======== ======== ==========
37
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of:
2000 1999
- -------------------------------------------------------------------------------
Land $ 115 $ 115
Building and improvements 3,731 3,731
Machinery and equipment 49,761 34,693
--------- ---------
Total property, plant and equipment 53,607 38,539
Less accumulated depreciation (25,898) (22,294)
--------- ---------
Net property, plant and equipment $ 27,709 $ 16,245
========= =========
- -------------------------------------------------------------------------------
NOTE 6 BORROWINGS
Line of credit
The Company has two bank lines of credit, which allow for total borrowings up to
$20,000. The lines bear interest at the Libor rate plus 100 or 125 basis points
(7.62% or 7.87% at September 29, 2000) or the prime rate (9.5% at September 29,
2000) and are unsecured with a negative pledge on accounts receivable and
inventories. The agreements will expire in April and May 2001. There were $0 of
borrowings outstanding on these lines as of both September 29, 2000 and
September 24, 1999. The Company was in violation of certain financial covenants
under one of the lines of credit as of September 29, 2000. The bank has waived
these covenant violations.
Long-term debt
The Company has entered into credit facilities with financial institutions to
finance equipment purchases. These loans are secured by the financed equipment
and bear interest at an average rate of 6.4%. As of September 29, 2000 and
September 24, 1999, the Company has $15,599 and $17,377 outstanding under these
loans. Aggregate maturities over the next five years are $1,894 in 2001, $2,019
in 2002, $2,151 in 2003, $2,292 in 2004 and $2,443 in 2005. Covenants under
these agreements are not considered restrictive to normal operations.
38
NOTE 7 OTHER CURRENT LIABILITIES
Other current liabilities consist of:
2000 1999
- --------------------------------------------------------------------------------
Warranty reserve $ 3,796 $ 1,443
Contractual liabilities and losses 6,413 --
Income taxes payable 3,652 --
Deferred income taxes 197 325
Other 1,723 1,594
---------- ----------
Total $ 15,781 $ 3,362
========== ==========
- --------------------------------------------------------------------------------
NOTE 8 INCOME TAXES
The components of income (loss) before income taxes consist of the following:
2000 1999 1998
- -------------------------------------------------------------------------------
Domestic $ (4,036) $ (8,958) $ 10,235
Foreign 3,445 1,837 1,669
-------- -------- ---------
Total $ (591) $ (7,121) $ 11,904
======== ======== =========
- -------------------------------------------------------------------------------
The following table summarizes the provision for US federal, state and
foreign taxes on income:
2000 1999 1998
- --------------------------------------------------------------------------------
Current:
Federal $ 3,500 $ 176 $ 550
State 463 238 248
Foreign 1,335 1,087 541
-------- -------- --------
5,298 1,501 1,339
Deferred:
Federal (5,319) (2,951) 1,324
State (704) (350) 150
Foreign (217) (196) 140
-------- -------- --------
(6,240) (3,497) 1,614
-------- -------- --------
$ (942) $ (1,996) $ 2,953
======== ======== ========
39
The differences between the U.S. federal statutory tax rate and the
Company's effective rate are as follows:
1999 1999 1998
- -------------------------------------------------------------------------------
Computed statutory rate (34.0)% (34.0)% 34.0%
State income taxes, net of federal tax benefits (4.5) 2.7 1.4
Effect of foreign tax rates -- 0.4 1.7
Permanent differences resulting
from purchase accounting 27.4 3.6 (1.0)
Change in valuation reserve (153.6) (3.9) (9.2)
State tax impact for reversal of
intangible basis differences -- -- (2.2)
Benefit of tax exempt interest earned (1.2) (0.1) (0.1)
Other, net 6.5 3.3 0.2
------ ------- -------
Effective tax rate (159.4)% (28.0)% 24.8%
====== ======= =======
- -------------------------------------------------------------------------------
The tax effects of temporary differences and carryforwards which gave rise to
significant portions of the deferred tax assets and liabilities as of September
29, 2000 and September 24, 1999 were as follows:
2000 1999
- -------------------------------------------------------------------------------
Deferred tax assets:
Inventory valuation reserve $ 2,439 $ 1,948
Loss on investment -- 2,077
Other reserves and liabilities 3,455 1,332
Non-recurring charges 4,991 490
Intangibles 223 215
Capital loss carryforwards 405 511
General business credits -- 480
Net operating loss carryforwards 543 1,336
Foreign tax credits 1,629 762
------- -------
Gross deferred tax assets 13,685 9,151
Valuation allowance (1,125) (2,327)
------- -------
Deferred tax assets 12,560 6,824
Deferred tax liabilities:
Inventory valuation reserve (197) (325)
Accumulated depreciation (394) (680)
Operating reserves (55) (145)
------- -------
Deferred tax liabilities (646) (1,150)
------- -------
Net deferred tax asset $11,914 $ 5,674
======= =======
- -------------------------------------------------------------------------------
40
The deferred tax assets and liabilities are recorded in the following
balance sheet accounts:
2000 1999
- -------------------------------------------------------------------------------
Other current assets $ 10,904 $ 6,352
Other assets 1,207 --
Other current liabilities (197) (325)
Other long-term liabilities -- (353)
---------- ----------
Total $ 11,914 $ 5,674
========== ==========
- -------------------------------------------------------------------------------
During fiscal years 2000, 1999, and 1998 the Company recognized tax
benefits of $471, $22, and $93, respectively, related to differences between
financial and tax reporting of stock option transactions. This difference was
credited to common stock.
The Company has established a valuation allowance for certain deferred tax
assets, including net operating loss and tax credit carryforwards. SFAS No. 109
requires that such a valuation allowance be recorded when it is more likely than
not that some portion of the deferred tax assets will not be realized. For
fiscal year 2000 and 1999, the valuation reserve decreased by $1,202 and $236,
respectively.
At September 29, 2000, the Company had net operating loss carryforwards of
approximately $1,410 available to reduce future federal taxable income. The
carryforwards expire at various dates through 2004. Utilization of the
carryforwards is subject to certain limitations due to the change in ownership
of the Company, which occurred in conjunction with the acquisition of its
Finland operation. As a result of the acquisition, utilization of available net
operating loss carryforwards is limited to approximately $2,060 per year.
NOTE 9 SHAREHOLDERS' EQUITY
Preferred stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock at
$.01 par value. At September 29, 2000, no shares of preferred stock have been
issued; however, 200,000 shares of Series D Junior Participating Preferred Stock
have been reserved for issuance in connection with the Company's Shareholder
Rights Plan. Additional series of preferred stock may be designated and the
related rights and preferences fixed by action of the Board of Directors.
Stock options
In fiscal 1994, the Company adopted the 1993 Stock Incentive Plan, which
provides for the granting of options to buy shares of Common Stock. These
options are intended to either qualify as "incentive stock options" under the
Internal Revenue Code or "non-qualified stock options" not intended to qualify.
There are 800,000 shares reserved under the 1993 Stock Incentive Plan. Under the
1993 plan, options issued prior to fiscal 2000 generally become exercisable 25%
one
41
year after grant and 6.25% per quarter thereafter, and expire ten years after
grant. Options issued during fiscal 2000 generally become exercisable 25% each
six months after grant, and expire 4 years after grant. During fiscal 1997, the
Company adopted the 1996 Stock Incentive Plan with the same provisions and
guidelines as the aforementioned 1993 plan. The Company reserved 1,200,000
shares of common stock for issuance under this plan. During fiscal 1999, the
Company adopted the 1999 Non Qualified Stock Option Plan with the same
provisions and guidelines as the aforementioned 1993 plan. The Company reserved
425,000 shares of common stock for issuance under this plan. The option price
under all plans is the fair market value as of the date of the grant. Total
shares reserved under these plans are 2,450,000 shares.
The Company also adopted a 1993 stock option plan for Nonemployee Directors
that provides an automatic annual grant to each outside director of the Company.
Total annual grants under this plan cannot exceed 60,000 shares per year.
Information regarding these option plans is as follows:
Number of Weighted Average
Shares Option Prices
- --------------------------------------------------------------------------------
Options outstanding at
September 26, 1997 1,361,324 $ 10.49
Granted 389,700 11.39
Exercised (114,489) 6.26
Canceled (101,371) 12.11
--------- --------
Options outstanding at
September 25, 1998 1,535,164 10.92
Granted 818,350 6.39
Exercised (38,614) 3.59
Canceled (92,220) 9.67
--------- --------
Options outstanding at
September 24, 1999 2,222,680 9.04
Granted 512,799 9.80
Exercised (353,637) 6.26
Canceled (190,052) 10.60
--------- --------
Options outstanding at
September 29, 2000 2,191,790 $ 9.55
========= ========
Exercisable at September 29, 2000 1,227,225
=========
- -------------------------------------------------------------------------------
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" which defines a fair value based
method of accounting for an
42
employee stock option or similar equity instrument. As is permitted under SFAS
No. 123, the Company has elected to continue to account for its stock-based
compensation plans under APB Opinion No. 25. The Company has computed, for pro
forma disclosure purposes, the value of all options granted during 2000, 1999,
and 1998 using the Black-Scholes option pricing model as prescribed by SFAS No.
123 using the following weighted average assumptions for grants:
2000 1999 1998
- -------------------------------------------------------------------------------
Risk free interest rate 6.0% 6.0% 4.5%
Expected dividend yield -- -- -
Expected lives (in years) 4.2 4.2 4.2
Expected volatility 89.4% 65.0% 54.6%
- -------------------------------------------------------------------------------
Using the Black-Scholes methodology, the total value of options granted
during fiscal 2000, 1999 and 1998 was $3,091, $3,335 and $2,579, respectively,
which would be amortized on a pro forma basis over the vesting period of the
options. The weighted average fair value of options granted during fiscal 2000,
1999 and 1998 was $9.80 per share, $6.39 per share and $11.39 per share,
respectively. If the Company accounted for its stock based compensation plans in
accordance with SFAS No 123, the Company's net income and net income per share
would approximate the pro forma disclosures below:
2000 1999 1998
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
- -------------------------------------------------------------------------------
Net income (loss) $ 351 $(1,052) $ (5,125) $(6,896) $ 8,951 $ 7,720
Net income (loss)
per share (diluted) $ 0.03 $ (0.10) $ (0.48) $ (0.65) $ 0.81 $ 0.70
- -------------------------------------------------------------------------------
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
January 1, 1995, and additional awards are anticipated in future years.
43
The following table summarizes information about stock options and grants
outstanding at September 29, 2000:
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------------------
Weighted
Weighted Average of Weighted Number of Weighted
Number Remaining Average Shares Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 9/29/00 Life Price at 9/29/00 Price
- -------------------------------------------------------------------------------------------
$ 0.00 - $ 7.88 800,954 7.65 $ 5.67 280,825 $ 5.64
$ 7.91 - $11.50 746,007 6.43 9.50 459,839 9.83
$12.00 - $23.38 644,829 6.57 14.42 486,561 13.91
- --------------- --------- ---- ------ -------- -------
$ 0.00 - $23.38 2,191,790 6.92 $ 9.55 1,227,225 $ 10.49
=============== ========= ==== ======== ========= =======
- -------------------------------------------------------------------------------
Performance restricted stock
The 1996 Stock Incentive Plan provides for the issuance of restricted stock to
employees. The shares issued vest over a two to five year period, based on the
attainment of specified performance measures or the passage of time. In the
event the performance measures are not met, any unvested shares would vest at
the end of ten years. Data relative to shares awarded is presented below:
2000 1999 1998
- -------------------------------------------------------------------------------
Number of shares awarded - 142,400 80,000
Fair value of restricted stock
granted during the year $ - $ 1,061 $ 920
- -------------------------------------------------------------------------------
Employee Stock Purchase Plan
In fiscal 1995, the Company adopted the 1994 Employee Stock Purchase Plan, which
provides that eligible employees may contribute, through payroll deductions, up
to 10% of their earnings toward the purchase of the Company's Common Stock at 85
percent of the fair market value at specific dates. At September 29, 2000,
132,708 shares remain available for purchase through the plan and there were 760
employees eligible to participate in the plan, of which 145, or 19.1%, were
participants. Employees purchased 66,283 shares, at an average price of $5.47
per share during the year. Total receipts to the Company were $363. Since the
plan is noncompensatory, no charges to operations have been recorded.
Shareholders Rights Plan
In February 1996, the Board of Directors approved a shareholder rights plan and
declared a dividend of one preferred share purchase right for each outstanding
common share. Each right represents the right to purchase one hundredth of a
share of Preferred Stock, at an exercise price of $60.00, subject to adjustment.
The rights are only exercisable ten days after a person or group
44
acquires, or commences a tender or exchange offer to acquire, beneficial
ownership of 15% or more of the Company's outstanding common stock. Subject to
the terms of the shareholder rights plan and the discretion of the Board of
Directors, each right would entitle the holder to purchase one share of Common
Stock of the Company for each right at one-half of the then-current price. The
rights expire in February 2006, but may be redeemed by action of the Board of
Directors prior to that time at $.01 per right.
NOTE 10 COMMITMENTS
Most of the Company's office and manufacturing facilities are subject to
long-term operating leases. In addition, regional sales offices and automobiles
are subject to leases with terms ranging from one to twelve months.
At September 29, 2000, the minimum annual operating lease payments are:
Fiscal year ending in September:
- -------------------------------------------------------------------------------
2001 $ 2,573
2002 2,481
2003 2,136
2004 2,062
2005 1,607
Thereafter 4,593
-------
$15,452
=======
- -------------------------------------------------------------------------------
Total rent expense was $2,438, $2,268 and $2,344 for the years ended
September 29, 2000, September 24, 1999 and September 25, 1998, respectively.
NOTE 11 BUSINESS SEGMENTS
The Company is organized based upon the products and services that it
offers. Under this organizational structure, the Company operates in three main
segments: Industrial, Medical, and Transportation. Industrial and Medical derive
revenue primarily through the development and marketing of electroluminescent
displays, liquid crystal displays and color active matrix liquid crystal
displays. Transportation derives revenue from the development and marketing of
high performance taut shadow mask cathode ray tubes, liquid crystal displays and
color active matrix liquid crystal displays. No single customer provides 10% or
more of the Company's revenues.
The information provided below is obtained from internal information that
is provided to the Company's chief operating decision-maker for the purpose of
corporate management. Research and development expenses for future products are
allocated to the segments based upon a percentage of sales. Depreciation
expense, interest expense, interest income, other non-operating items and income
taxes by segment are not included in the internal information provided to the
chief operating decision-maker and are therefore not presented below. Inter-
segment sales are not
45
material and are included in net sales to external customers below. Prior year
amounts have been reclassified to conform to the fiscal year 2000 presentation.
2000 1999 1998
- ------------------------------------------------------------------------------
Net sales to external
customers (by segment):
Medical $ 61,690 $ 42,326 $44,545
Industrial 54,000 50,979 56,806
Transportation 53,516 29,609 27,664
-------- -------- --------
Total sales $169,209 $122,914 $129,015
======== ======== ========
Net sales to external
customers (by geography):
United States $133,851 $ 96,104 $102,557
Other 35,355 26,810 26,458
-------- -------- --------
Total sales $169,206 $122,914 $129,015
======== ======== ========
Operating income (loss):
Medical $ 2,816 $ (871) $ 5,990
Industrial 3,877 1,382 9,102
Transportation 4,072 (2,174) (3,264)
Non-recurring charges (13,163) (1,488) -
-------- -------- --------
Total operating income (loss) $ 2,398 $ 3,151 $ 11,827
======== ======== ========
Certain facility, information systems and other expenses are incurred by
Corporate and allocated to the segments based on a percentage of sales. The
assets and related capital expenditures of the Company are not reported by
segment.
NOTE 12 401(K) AND PROFIT SHARING
All employees in North America over 21 years of age who have completed at least
three months of service are eligible to participate in the 401(k) savings and
profit sharing plan. Employees can contribute up to 15% of their gross pay
subject to statutory maximums. The Company matches 55% of the first 10% of each
participating employee's contributions, also subject to statutory maximums.
Employer contributions vest over four years. The 401(k) plan expense amounted to
$1,063, $873 and $666 for the years ended September 29, 2000, September 24, 1999
and September 25, 1998, respectively.
46
NOTE 13 COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) and its components has no impact on the Company's
net income (loss) or total shareholders' equity. Comprehensive income (loss) and
its components were as follows:
1999 1999 1998
- ------------------------------------------------------------------------------------------
Net income (loss) (net of tax of $(942), $(1,996)
and $2,953, respectively) $ 351 $(5,125) $ 8,951
Other comprehensive income (loss):
Currency translation adjustment (net of tax
$(1,646), $(1,175) and $453, respectively) (4,031) (3,061) 1,180
Unrealized gain (loss) on available for sale securities
(net of tax of $85, $0 and $(3), respectively) 209 - (7)
------- ------- -------
Total comprehensive
income (loss) $(3,471) $(8,186) $10,124
======= ======= =======
NOTE 14 SUBSEQUENT EVENT
During December 2000, the Company signed a definitive agreement to acquire all
of the outstanding shares of AllBrite Technologies, Inc. in exchange for $24.9
million of the Company's common stock. The number of shares will be determined
by dividing $24.9 million by the average stock price, which is the average of
the closing stock price for ten trading days ending on the fourth business day
before the closing date. The business combination will be accounted for using
the pooling methodology of accounting.
47
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
- --------
Item 10. Directors and Executive Officers of Planar Systems, Inc.
The information set forth under the captions "Election of Directors",
"Management" and "Section 16(a) Beneficial Ownership Reporting Compliance"
appearing in the Proxy Statement to be used in connection with the Annual
Meeting of Shareholders on February 1, 2001, is incorporated by reference into
this Report.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation"
appearing in the Proxy Statement to be used in connection with the Annual
Meeting of Shareholders on February 1, 2001, is incorporated by reference into
this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Stock Owned by Management and
Principal Shareholders" appearing in of the Proxy Statement to be used in
connection with the Annual Meeting of Shareholders on February 1, 2001, is
incorporated by reference into this Report.
Item 13. Certain Relationships and Related Transactions
The Company owns a 20% interest in dpiX Holding Company LLC, which owns an 80.1%
interest of dpiX LLC. The Company paid $5.0 million for its interest in dpiX
Holding Company LLC during fiscal 1999. During fiscal 2000 the Company purchased
$11.9 million of components from dpiX LLC. As of September 29, 2000 the Company
had accounts payable due to dpiX LLC of $1.0 million.
Part IV
- -------
Item 14. Exhibits, Financial Statements, Schedules and Reports on 8-K
(a)(1) Financial Statements
The financial statements of Planar Systems, Inc. as set forth under Item 8
are filed as part of this report.
48
(a)(2) Financial Statement Schedules
Financial statement schedules have been omitted since the information
called for is not present in amounts sufficient to require submission of the
schedules.
The independent auditors' report with respect to the above-listed financial
statements appears on page 26 of this report.
(a)(3) Exhibits
Exhibit
Number Title
- ----------------------------------------------------------
3.1 Second Restated Articles of Incorporation of Planar Systems, Inc./(1)/
3.2 Second Restated Bylaws of Planar Systems, Inc./(11)/
3.3 Amendment to Second Restated Articles of Incorporation of Planar
Systems, Inc./(2)/
4.1 Specimen stock certificate/(1)/
4.4 Rights Agreement dated as of February 1, 1996 between Planar Systems,
Inc. and First Interstate Bank of Oregon, N.A./(3)/
10.1 Form of Indemnity Agreement between Planar Systems, Inc. and each of its
executive officers and directors/(1)/*
10.2 Amended and Restated 1983 Incentive Stock Option Plan/(1)/*
10.3 1993 Stock Option Plan for Nonemployee Directors/(1)/*
10.4 1993 Incentive Stock Option Plan/(1)/*
10.5 1994 Employee Stock Purchase Plan/(4)/*
10.6 Lease agreement dated as of September 30, 1993 between Science Park
Limited Partnership I and Planar Systems, Inc./(1)/
10.7 Lease agreement dated as of May 20, 1998 between Metra Corporation and
Planar International, Ltd (English translation)/(8)/
49
10.8 Lease agreement dated as of August 26, 1994 between Tektronix, Inc. and
Planar Systems, Inc./(5)/
10.9 Asset Purchase Agreement dated August 26, 1994 between Tektronix, Inc.
and Tektronix Federal Systems, Inc. and Planar Systems, Inc and Planar Advance
/(5)/
10.10 Stock Purchase Agreement dated August 25, 1997 by and among Planar
Systems, Inc., Standish Industries, Inc., Standish International, Inc., Charles
P. Hoke, Elizabeth A. Hoke and William R. Steinmetz, Trustee of the Steven Hoke
Management Trust, the Catherine Hoke Management Trust, the Lauren Hoke
Management Trust and the Charles D. Hoke Management Trust (`the Agreement")
(certain schedules to the Agreement and its exhibits are omitted)./(6)/
10.11 Amendment to Stock Purchase Agreement dated August 26, 1997/(6)/
10.12 1996 Stock Incentive Plan/(7)/*
10.13 Lease agreement dated May 30, 1997 between Pacific Realty Associates,
L.P. and Planar America, Inc./(7)/
10.14 Agreement and Plan of Merger dated as of May 13, 1999 by and among dpiX,
Inc., Xerox Corporation and New dpiX LLC/(9)/
10.15 Credit Agreement between Planar Systems, Inc. and Norwest Bank
Wisconsin, National Association dated July 29, 1999/(10)/
10.16 Employment Agreement between Planar Systems, Inc. and James M. Hurd
dated as of April 30, 1999/(10)/*
10.17 Planar Systems, Inc. Nonqualified Stock Option Agreement between Planar
Systems, Inc. and William D. Walker dated as of May 13, 1999/(10)/*
10.18 Executive Employment Agreement between Planar Systems, Inc. and
Balakrishnan Krishnamurthy dated as of September 24, 1999/(11)/*
10.19 Restricted Stock Award Agreement between Planar Systems, Inc. and
Balakrishnan Krishnamurthy dated as of September 24, 1999/(11)/*
10.20 Nonqualified Stock Option Agreement between Planar Systems, Inc. and
Balakrishnan Krishnamurthy dated as of September 27, 1999/(11)/*
10.21 Form of Restricted Stock Award Agreement under Planar Systems, Inc. 1996
Stock Incentive Plan dated as of May 24, 1999/(11)/*
10.22 Form of Restricted Stock Award Agreement under Planar Systems, Inc. 1996
Stock Incentive Plan dated as of May 24, 1999/(11)/*
10.23 Planar Systems, Inc. 1999 Nonqualified Stock Option Plan/(11)/*
10.24 Planar Systems, Inc. Deferred Compensation Plan/(11)/*
21 Subsidiaries of Planar Systems, Inc.
23 Consent of KPMG Peat Marwick LLP
24 Power of Attorney (included on Signature Page)
27 Financial Data Schedule
/(1)/ Incorporated by reference to the Company's Registration Statement on
Form S-1 (Reg. No. 33-71020), declared effective on December 15, 1993.
/(2)/ Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended September 27, 1996.
/(3)/ Incorporated by reference to the Company's Current Report on Form 8-K
filed on February 21, 1996.
/(4)/ Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994.
/(5)/ Incorporated by reference to the Company's Current Report on Form 8-K
filed as of September 12, 1994.
/(6)/ Incorporated by reference to the Company's Current Report on Form 8-K
filed on October 10, 1997.
/(7)/ Incorporated by reference to the Company's Annual report on form 10-K
for the year ended September 26, 1997.
/(8)/ Incorporated by reference to the Company's Annual report on form 10-K
for the year ended September 25, 1998.
/(9)/ Incorporated by reference to the Company's Current Report on Form 8-K
filed on July 20, 1999
/(10)/ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 25, 1999.
/(11)/ Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended September 24, 1999.
* This exhibit constitutes a management contract or compensatory plan or
arrangement
(b) Reports on Form 8-K
None
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PLANAR SYSTEMS, INC.
December 21, 2000 By: /s/ STEVE BUHALY
----------------
Steve Buhaly
Vice President
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Balaji Krishnamurthy and Steve Buhaly, and each
of them singly, as his true and lawful attorneys-in-fact, with full power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dated indicated.
/s/ BALAJI KRISHNAMURTHY President, Chief Executive Officer, December 21, 2000
- ------------------------
Balaji Krishnamurthy Director (Principal Executive Officer)
/s/ STEVE BUHALY Vice President, Chief Financial Officer, December 21, 2000
- ----------------
Steve Buhaly (Principal Financial and Accounting Officer)
/s/ WILLIAM D. WALKER Chairman of the Board December 21, 2000
- ---------------------
William D. Walker
/s/ CARL NEUN Director December 21, 2000
- -----------------
Carl Neun
/s/ HEINRICH STENGER Director December 21, 2000
- --------------------
Heinrich Stenger
/s/ E. KAY STEPP Director December 21, 2000
- ----------------
E. Kay Stepp
/s/ GREGORY H. TURNBULL Director December 21, 2000
- -----------------------
Gregory H. Turnbull
/s/ STEVEN E. WYNNE Director December 21, 2000
- -------------------
Steven E. Wynne
51