Planar Reports Fourth Quarter and Fiscal 2008 Financial Results

Press Release

Planar Reports Fourth Quarter and Fiscal 2008 Financial Results

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Posted 19 November 2008 @ 05:07 pm ET

Planar Systems, Inc. (NASDAQ:PLNR), a worldwide leader in specialty display solutions, recorded sales of $66.5 million and a GAAP loss per share of $1.06 in the fourth quarter ended September 26, 2008, positively impacted by discontinued operations and negatively impacted by net accounting charges of $24.2 million. On a Non-GAAP basis (see reconciliation table), net loss per share was $0.37 in the fourth quarter of 2008, negatively impacted by accounting charges totaling approximately $7.3 million (a subset of the total charges of $24.2 million). Sales for fiscal year 2008 were $259.3 million compared to $229.1 million in fiscal 2007. For fiscal year 2008 GAAP loss per share was $5.05 compared with a loss per share of $1.33 in fiscal 2007. Non-GAAP loss per share was $0.59 in fiscal 2008 compared with loss per share of $0.31 in fiscal 2007. Net operating results from the Medical business, and the gain on the sale of the business on August 5, 2008, are reflected within discontinued operations for the fourth quarters and fiscal years presented.

"Fiscal 2008 was a difficult year for the Company as we dealt with various integration challenges and softer than expected demand in our newly acquired businesses, especially Home Theater," said Gerry Perkel, Planar's President and Chief Executive Officer. "While we are taking a number of corrective actions to improve future financial performance, our Industrial segment continues to grow and contribute solid financial results. In addition, we have continued to make progress over the last several months strengthening our balance sheet by reducing inventory levels, and selling two of our non-strategic businesses for cash."

SUMMARY OF FISCAL YEAR 2008 FINANCIAL PERFORMANCE

The following table presents a breakdown of the Company's Non-GAAP financial performance by major business unit for fiscal year 2008. Additional comparative segment financial information, along with reconciliations to GAAP and information regarding the use of Non-GAAP financial measures, are presented in supplementary tables and notes within this release.

Business Segment (in $ thousands)	IBU	CBU	CSBU	HTBU	Total
Net Sales	72,651	78,177	58,192	50,290	259,310
- Y/Y Growth %	18%	0%	-11%	113%	13%
Business Unit Operating Income (loss)	14,470	4,282	3,064	(14,826)	6,990
Corporate Expense Allocation	(6,737)	(3,318)	(6,705)	(5,943)	(22,703)
Non-GAAP Operating Income (loss)	7,733	964	(3,641)	(20,769)	(15,713)
Depreciation	2,565	230	1,346	1,505	5,646
Non-GAAP EBITDA	10,298	1,194	(2,295)	(19,264)	(10,067)
- EBITDA % of Sales	14%	2%	-4%	-38%	-4%
Notes: Corporate Expense Allocation includes primarily G&A expense along with Corporate R&D and Sales & Marketing Expense

SUMMARY OF FOURTH QUARTER FINANCIAL RESULTS

Sales in the Company's Industrial segment (IBU) grew 31 percent to $21.4 million in the fourth quarter compared to the fourth quarter in fiscal 2007. Sales were positively impacted by the previously announced new custom retail display products developed for PRN, which began shipping during the fourth quarter. Sales in the Commercial Business Unit (CBU) were flat sequentially, as the pricing environment for desktop monitors was relatively stable. Sales for both the Control Room & Signage (CSBU) and Home Theater (HTBU) segments declined sequentially. Both of these businesses were impacted by the global economic slowdown, with the Home Theater business negatively affected by lower consumer spending as well as continued contraction in new higher-end home construction starts.

During the fourth quarter, the Company recorded several accounting charges. First, the Company recorded a $15.3 million non-cash GAAP impairment charge for intangible and other long-lived assets associated with its Home Theater business unit, partially as a result of the decision to reduce the number of brands being marketed and to focus its resources on the Runco Brand. Second, the Company recorded a $6.4 million Non-GAAP charge related to excess inventory and warranty costs, some of which was driven by the same Home Theater brand consolidation strategy. Third, the Company recorded a $1.4 million allowance for bad debt, resulting from both a Non-GAAP charge relating to the poor economic climate and GAAP charge relating to the change in strategic direction in the Home Theater segment. Finally, the Company recorded a $1.1 million GAAP charge related to restructuring plans made during the fourth quarter, partially offset by the reversal of some previously recorded purchase accounting acquisition related liabilities.

UPDATE ON STRATEGIC DIRECTION AND BUSINESS OUTLOOK

As previously communicated, the Company initiated a new strategic direction two quarters ago intended to fix or fix and sell its under-performing or non-strategic business segments, reduce costs further, and to improve and strengthen its balance sheet. The first step in this process was completed during the fourth quarter with the sale of the Company's Medical Business Unit. Additionally, as announced earlier today, the Company entered into an agreement to sell a portion of its digital signage business for cash to Bally Gaming, Inc. Under the agreement with Bally, Planar retains the Coolsign business and products for all fields of use other than the gaming industry while Bally has the rights to pursue the gaming marketplace. The Company will continue to pursue opportunities to partner in other markets for Coolsign as part of its continuing strategy of evaluating all Company wide opportunities to enhance shareholder value. In addition, a restructuring plan was initiated in the fourth quarter of 2008 to reduce costs associated with global operations and production as well as changes in the Home Theater business. Finally, the Company is in the process of putting in place additional cost reduction actions in the first quarter of 2009 in an effort to further reduce its cost structure given the difficult global economic conditions. As a result, the Company expects to incur additional restructuring charges in the first quarter, of which no more than $1.5 million is expected to be in cash.

While investments to grow the Industrial segment are showing signs of success, the business may experience periodic sequential revenue slowing or declines as seasonal patterns and the timing of certain large new opportunities may not ramp linearly in terms of shipments and revenue. As such, the Company believes the first quarter of 2009 will experience a sequential revenue decline, followed by sequential growth in the second quarter, with sales expected to be $47 million to $50 million in the first quarter. While the Company is going through the current transition, near-term earnings are difficult to predict, and may continue to result in modest losses on a Non-GAAP basis over the next few quarters. The Company believes it will end the first quarter of 2009 with $8 million to $10 million in net cash, partially driven by the timing of certain tax and restructuring payments. Cash flow should turn positive in the second half of the fiscal year as the Company implements its previously stated objectives. Over the longer term, the Company expects to benefit from cost reductions as well as continued monetization of underperforming and / or non-strategic assets to drive improved shareholder value.

Results of operations and the business outlook will be discussed in a conference call today, November 19, 2008, beginning at 2:00 PM Pacific Time. The call can be heard via the Internet through a link on Planar's Web site, www.planar.com, or through numerous other investor sites, and will be available for replay until December 19, 2008. The Company intends to post on its Web site a transcript of the prepared management commentary from the conference call shortly after the conclusion of the call.

ABOUT PLANAR

Planar Systems, Inc (NASDAQ:PLNR) is a global leader of specialty display technology providing hardware and software solutions for the world's most demanding environments. Hospitals, space and military programs, utility and transportation hubs, shopping centers, banks, government agencies, businesses, and home theater enthusiasts all depend on Planar to provide superior performance when image experience is of the highest importance. Founded in 1983, Planar is headquartered in Oregon, USA, with offices, manufacturing partners, and customers worldwide. For more information, visit www.planar.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 relating to Planar's business operations and prospects, including statements relating to corrective actions taken to improve future financial performance and the statements made under the heading "Business Outlook." These statements are made pursuant to the safe harbor provisions of the federal securities laws. These and other forward-looking statements, which may be identified by the inclusion of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "goal" and variations of such words and other similar expressions, are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Many factors, including the following, could cause actual results to differ materially from the forward-looking statements: the possibility that Planar will experience further difficulties integrating and operating the Clarity and Runco businesses; changes or slower growth in the digital signage and/or command and control display markets; further inability to realize expected benefits and synergies of the Clarity and Runco acquisitions; domestic and international business and economic conditions; any reduction in or delay in the timing of customer orders or the Company's ability to ship product upon receipt of a customer order; any inability to reduce costs quickly enough in response to unanticipated reductions in revenue; adverse impacts on the Company or its operations relating to or arising from the Company's indebtedness including difficulties in obtaining financing for the companies growth initiatives, changes in the flat-panel monitor industry; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or technological changes; technological advances; shortages of manufacturing capacity from the Company's third-party manufacturing partners; final settlement of contractual liabilities; balance sheet changes related to updating certain estimates required for the purchase accounting treatment of the Clarity and Runco acquisitions; future production variables impacting excess inventory and other risk factors listed from time to time in the Company's Securities and Exchange Commission (SEC) filings. The forward-looking statements contained in this press release 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 press release.

Note Regarding the Use of Non-GAAP Financial Measures:

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), the Company's earnings release contains Non-GAAP financial measures that exclude the income statement effects of the acquisitions of Clarity Visual Systems and Runco International, share-based compensation and the requirements of SFAS No. 123R, "Share-based Payment" ("123R"). The Non-GAAP financial measures also exclude impairment and restructuring charges, the amortization of intangible assets related to previous acquisitions, and various tax charges including the valuation allowance against deferred tax assets. The earnings release also contains a calculation of Non-GAAP earnings before interest, taxes, depreciation, and amortization (Non-GAAP EBITDA), which, in addition to excluding the effects of the Clarity and Runco acquisitions, share based compensation, and other adjustments, includes an allocation of Corporate expenses to the Company's business segments in order to calculate Non-GAAP EBITDA by business segment. Such corporate expenses include Corporate General and Administrative (primarily), Research and Development, and Sales and Marketing which are not specifically identified as related to each business segment in the information provided to the Chief Operating Decision Maker, rather are estimated for the purpose of presenting fully burdened lines of business. The Non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Planar Systems, Inc.

Consolidated Statement of Operations

(In thousands, except per share amounts)

(unaudited)

Three months ended

Twelve months ended

Sept. 26, 2008

Sept. 28, 2007

Sept. 26, 2008

Sept. 28, 2007

Sales

66,476

73,154

259,310

229,053

Cost of Sales

61,690

58,660

210,293

177,761

Gross Profit

4,786

14,494

49,017

51,292

Operating Expenses:

Research and development, net

2,520

2,911

11,378

11,690

Sales and marketing

9,028

10,459

35,174

32,573

General and administrative

4,965

5,759

22,561

21,639

Amortization of intangible assets

1,175

1,854

6,600

6,814

Acquisition related costs

898

1,685

2,572

Impairment and restructuring

16,915

75,082

1,377

Total Operating Expenses

34,649

21,881

152,480

76,665

Income (loss) from operations

(29,863

)

(7,387

)

(103,463

)

(25,373

)

Non-operating income (expense):

Interest, net

(43

)

(173

)

(852

)

933

Foreign exchange, net

220

(242

)

(22

)

(152

)

Other, net

(136

)

299

(201

)

262

Net non-operating income (expense)

(116

)

(1,075

)

1,043

Loss from continuing operations before taxes

(29,822

)

(7,503

)

(104,538

)

(24,330

)

Provision (benefit) for income taxes

429

7,173

673

2,116

Loss from continuing operations

(30,251

)

(14,676

)

(105,211

)

(26,446

)

Income from discontinued operations

11,240

883

15,453

3,262

Net income (loss)

(19,011

)

(13,793

)

(89,758

)

(23,184

)

Basic loss per share from continuing operations

($1.68

)

($0.84

)

($5.92

)

($1.52

)

Basic income per share from discontinued operations

0.63

0.05

0.87

0.19

Basic net loss per share

($1.06

)

($0.79

)

($5.05

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