Second best quarter ever for Planar Systems

Planar Systems reports strong financial results for its third quarter, ended 29th June 2001, marking seven consecutive quarters of year-over-year revenue growth.

Planar Systems reports strong financial results for its third quarter, ended 29th June 2001, marking seven consecutive quarters of year-over-year revenue growth.

Sales in the third quarter were $52.4 million, a 16% increase over the $45.3 million reported for the same period a year ago.

The quarterly sales figure is the second highest in the company's history, behind only the $54.5 recorded in the second quarter of fiscal 2001.

Net income of $4.0 million for the third quarter is more than 50% higher than last year's third quarter result, and improved to $0.30 per diluted share over last year's $0.21 per diluted share.

"Our ongoing efforts to win incremental business in new markets are gaining traction", said Balaji Krishnamurthy, Planar's president and CEO: "I'm particularly pleased that the company could demonstrate such strong results during a time of economic uncertainty".

Planar is also announcing a new business initiative, consistent with a stated strategy of developing new, high-growth market opportunities where the company's unique attributes can be leveraged.

Planar has deployed its proprietary atomic layer deposition (ALD) technology on glass for use in electroluminescent display production since pioneering the process in the 1980s.

ALD is the basis for this new programme, called Photonics, with an initial focus on producing specialised optical filters for use in the telecommunications industry.

"Planar leads the world in the use of ALD on glass, and our proprietary technology is well suited for the development of a variety of components, including those used in fibre-optic switching systems", said Krishnamurthy.

"We have several initiatives underway to address opportunities for our ALD technology, with Photonics the first to reach sufficient maturity to make an announcement.

Financial impact from this program is not expected to be material in the near term".

With ALD, precise control can be maintained for depositing layers of various substances as thin as a few atoms, and the process enables atomic layer uniformity across relatively large surfaces.

Compared to traditional methods used in production of optical filters, such as ion beam sputtering, ALD-produced components offer substantial cost and performance advantages to telecommunications subsystem manufacturers.

Planar is also announcing the completion and closure of its business supplying high-performance CRTs to the military aviation market.

One-time costs of $1.2 million were booked in the third quarter, in anticipation of closing the business in the first quarter of fiscal 2002.

Current backlog should produce fourth quarter sales consistent with prior quarters, leading to expectations of fiscal year 2001 sales of about $22 million.

Together with $8 million in estimated 2001 sales from the military AMLCD business, the exit from which was announced earlier, approximately $30 million in fiscal 2001 sales will not continue into 2002.

Other nonrecurring accounting items in the third quarter included one-time charges for the settlement of an outstanding contract dispute and the cancellation of a government research project, totalling $1.5 million.

Nonrecurring gains in the quarter included a reduction of estimated costs in the exit from the military AMLCD business, totaling $3.2 million.

Without the impact of nonrecurring items this quarter, net income per diluted share would have been $0.29.

Gross margins for the third quarter, as a percentage of sales, reached 32.2%, compared with 27.8% in last year's third quarter.

Operating expenses rose slightly compared to the year-ago quarter, to 20.6% from 20.2%.

On a sequential basis, sales for the third quarter declined 3.7% from last quarter's sales.

Adjusting for the exit from the military AMLCD business, which declined to zero sales revenue in the third quarter from $2.8 million in the second quarter, third quarter sales grew slightly on a sequential basis.

Nine new design wins were achieved in the quarter, the quality of which improved over prior quarters.

The company saw a slowing of the design-win cycle largely due to increased economic uncertainty.

Planar's backlog dropped about $7 million during the third quarter, almost entirely due to the company's closure of the military CRT business.

The backlog in the company's continuing operations remains healthy and stable.

The medical business unit, the company's largest segment, recorded third quarter year-over-year sales growth of 8%, driven largely by sales of medical-grade flat-panel monitors.

Increased shipments to the ATM, transit ticketing, and gasoline pump markets contributed to a strong annual growth rate of 18% in the industrial business segment.

Sales in Planar's transportation business declined by 9% compared with last year's third quarter, reflecting softness in the fuel-dependent markets.

Planar's commercial desktop monitor business, launched in October 2000, continued to demonstrate positive results with about $4 million in sales recorded in the third quarter.

"While this business comprises a small fraction of the company's activities, I'm pleased that the execution of our plan is proving successful", said Krishnamurthy.: "By leveraging our established supply chain for sourcing the monitors, our business model carries little inventory risk, enabling us to manage the operation for healthy asset turns." For the nine months ended June 29, 2001, sales reached $157.3 million, 24 percent higher than the comparable period in fiscal year 2000.

Net income more than doubled to $11.1 million, or $0.86 per diluted share, from $5.4 million, or $0.46 per diluted share, in the first nine months of fiscal 2000.

Quarterly and year-to-date results reflect the company's acquisition of AllBrite Technologies, and the comparative fiscal 2000 results have been restated in accordance with the pooling of interests treatment for the acquisition.

"Year-to-date performance puts us in a good position to realise our stated targets for full-year financial results," said Krishnamurthy.

"This has been possible in these challenging economic conditions due to effective strategy execution in three key areas: development of a broad set of customers in diverse markets, limited exposure to highly cyclical sectors of the economy, and the addition of incremental business in new markets.".

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