PLANAR SYSTEMS INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - PLANAR SYSTEMS INC	Financial_Report.xls
EX-32.1 - EX-32.1 - PLANAR SYSTEMS INC	d500516dex321.htm
EX-31.1 - EX-31.1 - PLANAR SYSTEMS INC	d500516dex311.htm
EX-32.2 - EX-32.2 - PLANAR SYSTEMS INC	d500516dex322.htm
EX-31.2 - EX-31.2 - PLANAR SYSTEMS INC	d500516dex312.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Act of 1934

For the Quarter Ended March 29, 2013

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

incorporation or organization)

(IRS Employer

Identification No.)


1195 NW Compton Dr., Beaverton, Oregon		97006
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code: (503) 748-1100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No x

Number of common stock outstanding as of April 29, 2013

21,241,691 shares, no par value per share

PLANAR SYSTEMS, INC.

INDEX


		Page
Part I.	Financial Information		3
Item 1.	Financial Statements		3
	Consolidated Balance Sheets as of March 29, 2013 (unaudited) and September 28, 2012		3
	Consolidated Statements of Operations for the Three and Six Months Ended March 29, 2013 and March 30, 2012 (unaudited)		4
	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended March 29, 2013 and March 30, 2012 (unaudited)		5
	Consolidated Statements of Cash Flows for the Six Months Ended March 29, 2013 and March 30, 2012 (unaudited)		6
	Notes to the Consolidated Financial Statements (unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 4.	Controls and Procedures		22
Part II.	Other Information		23
Item 1.	Legal Proceedings		23
Item 1a.	Risk Factors		23
Item 6.	Exhibits		33
	Signatures		34

Part 1. FINANCIAL INFORMATION

Item 1.

Financial Statements

PLANAR SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS


	Mar. 29, 2013			Sept. 28, 2012
	(unaudited)
	(In thousands, except share data)
ASSETS
Current assets:
Cash	$	12,914		$	17,768
Accounts receivable, net of allowance for doubtful accounts of $448 at March 29, 2013 and $535 at September 28, 2012		18,825			18,604
Inventories (Note 2)		29,866			31,984
Other current assets		2,948			2,829

Total current assets		64,553			71,185
Property, plant and equipment, net		2,948			3,554
Intangible assets, net		270			565
Other assets		10,081			6,580

	$	77,852		$	81,884

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,463		$	11,686
Current portion of capital leases		759			449
Deferred revenue		1,619			1,659
Other current liabilities (Notes 5 and 6)		12,073			15,915

Total current liabilities		27,914			29,709
Capital leases, less current portion		807			545
Other long-term liabilities		4,674			5,111

Total liabilities		33,395			35,365
Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 10,000,000 shares, no shares issued		—			—
Common stock, no par value. Authorized 30,000,000 shares; 20,732,561 and 20,354,300 issued shares at March 29, 2013 and September 28, 2012, respectively		185,532			184,556
Retained deficit		(137,718	)		(134,751	)
Accumulated other comprehensive loss		(3,357	)		(3,286	)

Total shareholders’ equity		44,457			46,519

	$	77,852		$	81,884

See accompanying notes to consolidated financial statements.

PLANAR SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)


	Three months ended						Six months ended
	Mar. 29, 2013			Mar. 30, 2012			Mar. 29, 2013			Mar. 30, 2012
Sales	$	39,441		$	37,542		$	83,616		$	85,250
Cost of sales		31,429			30,335		$	64,595			67,532

Gross profit		8,012			7,207			19,021			17,718
Operating expenses:
Research and development, net		1,828			2,767			3,855			5,486
Sales and marketing		5,044			6,706			10,104			13,643
General and administrative		2,913			3,701			6,326			7,780
Amortization of intangible assets		148			175			295			350
Restructuring (Note 5)		—			518			194			518
Loss (gain) on sale of assets (Note 9)		(177	)		—			1,314			—

Total operating expenses		9,756			13,867			22,088			27,777

Loss from operations		(1,744	)		(6,660	)		(3,067	)		(10,059	)
Non-operating income (expense):
Interest, net		48			6			65			6
Foreign exchange, net		95			(163	)		(13	)		263
Other, net		181			279			296			321

Net non-operating income		324			122			348			590

Loss before income taxes		(1,420	)		(6,538	)		(2,719	)		(9,469	)
Provision (benefit) for income taxes (Note 7)		(140	)		127			43			392

Net loss		(1,280	)		(6,665	)		(2,762	)		(9,861	)

Net loss per share
Basic and diluted	$	(0.06	)	$	(0.33	)	$	(0.13	)	$	(0.49	)

Average shares outstanding—basic and diluted		20,643			20,031			20,558			19,927

See accompanying notes to consolidated financial statements.

PLANAR SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three months ended						Six months ended
	Mar. 29, 2013			Mar. 30, 2012			Mar. 29, 2013			Mar. 30, 2012
	(In thousands)						(In thousands)
Net loss	$	(1,280	)	$	(6,665	)	$	(2,762	)	$	(9,861	)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		(433	)		516			(71	)		(596	)

Comprehensive loss	$	(1,713	)	$	(6,149	)	$	(2,833	)	$	(10,457	)

See accompanying notes to consolidated financial statements.

PLANAR SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended
	Mar. 29, 2013			Mar. 30, 2012
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,762	)	$	(9,861	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		980			1,439
Restructuring charges		194			518
Deferred taxes		—			199
Loss on sale of assets		1,314			—
Share based compensation		869			653
Net reduction in carrying amounts of certain assets and liabilities		(491	)		—
Lease incentives		—			151
(Increase) decrease in accounts receivable, net		(1,836	)		5,384
Increase in inventories		(4,634	)		(994	)
(Increase) decrease in other assets		(270	)		190
Increase in accounts payable		2,213			24
Decrease in deferred revenue		(37	)		(567	)
Decrease in other liabilities		(2,895	)		(2,320	)

Net cash used in operating activities		(7,355	)		(5,184	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(2,055	)		(1,599	)
Purchase of leasehold improvements reimbursed by landlord		—			(151	)
Proceeds from sale of assets		4,145			—

Net cash provided by (used in) investing activities		2,090			(1,750	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital lease		1,017			459
Payments of capital lease obligations		(445	)		—
Value of shares withheld for tax liability		(205	)		(349	)
Net proceeds from issuance of capital stock		104			—

Net cash provided by financing activities		471			110
Effect of exchange rate changes on cash		(60	)		(288	)

Net decrease in cash		(4,854	)		(7,112	)
Cash at beginning of period		17,768			22,231

Cash at end of period	$	12,914		$	15,119

See accompanying notes to consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States. However, certain information and footnote disclosures normally included in such financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the periods presented. These financial statements should be read in connection with the Company’s audited financial statements for the year ended September 28, 2012. All references to a year or a quarter in these notes are to the Company’s fiscal year or quarter in the period stated.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.

The accompanying financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. The results of operations from the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending September 27, 2013.

NOTE 2 – INVENTORIES

Inventories, stated at the lower of cost or market, consist of:


	Mar. 29, 2013		Sept. 28, 2012
Raw materials	$	15,152	$	16,249
Work in process		228		1,485
Finished goods		14,486		14,250

	$	29,866	$	31,984

NOTE 3 – EARNINGS PER SHARE

Weighted average basic and diluted shares outstanding for the three and six months ended March 29, 2013 were 20,643,000 and 20,558,000, respectively. Weighted average basic and diluted shares outstanding for the three and six months ended March 30, 2012 were 20,031,000 and 19,927,000, respectively. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification^TM (“ASC”) Topic 260, “Earnings per Share,” requires that employee equity share options, nonvested shares and similar equity instruments granted by the Company be treated as potential common shares in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options and nonvested shares, which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits or deficiencies that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares. There was no dilutive effect of in-the-money employee stock options or nonvested shares as of March 29, 2013 and March 30, 2012, respectively, due to the Company incurring a net loss for each of the three and six months then ended.

NOTE 4 – SHAREHOLDERS’ EQUITY

In the first quarter of fiscal 2010 the Company adopted the 2009 Incentive Plan (the “2009 Plan”). This plan replaced the Company’s 1993 Stock Incentive Plan, the 1996 Stock Incentive Plan, the 1999 Non-Qualified Stock Option Plan, the 2007 New Hire Incentive Plan, the Clarity Visual Systems, Inc. 1995 Plan and Non-Qualified Stock Option Plan as well as any individual inducement awards, which are collectively referred to as the “Prior Plans.” The 2009 Plan authorizes the issuance of 1,300,000 shares of common stock. In addition, up to 2,963,375 shares subject to awards outstanding under the Prior Plans at the time the 2009 Plan was approved became available for issuance under the 2009 Plan to the extent that these shares cease to be subject to the original awards (such as by expiration, cancellation or forfeiture of the awards). In the fourth quarter of 2012, shareholders approved an amendment to the 2009 Plan, authorizing the issuance of an additional 1,700,000 shares of common stock. The maximum number of shares that may be issued under the 2009 Plan is 5,963,375 shares, including shares available from the Prior Plans.

Stock Options

The 2009 Plan provides for the granting of stock options, which generally vest and become exercisable over a three-year period and expire seven to ten years after the date of grant. Options were last granted in the second quarter of fiscal 2008.

Information regarding outstanding options is as follows:


	Number of Shares			Weighted Average Exercise Prices
Options outstanding at September 28, 2012		951,467		$	9.65
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(82,025	)		12.11

Options outstanding at March 29, 2013		869,442		$	9.41

All options outstanding at March 29, 2013 were exercisable. As of March 29, 2013, the total pretax intrinsic value of options outstanding and options exercisable was $0 and the options had a weighted average remaining contractual term of 2.0 years.

Restricted Stock

The 2009 Plan provides for the issuance of restricted stock (“nonvested shares” per ASC Topic 718, “Compensation – Stock Compensation”). Shares issued generally vest over a one to three year period upon the passage of time, or upon meeting objective performance conditions.

Information regarding outstanding restricted stock awards is as follows:


	Number of Shares			Weighted Average Grant Date Fair Value
Restricted stock outstanding at September 28, 2012		1,316,671		$	2.45
Granted		805,000			1.39
Vested		(418,742	)		2.49
Canceled		(11,166	)		2.26

Restricted stock outstanding at March 29, 2013		1,691,763		$	1.94

Employee Stock Purchase Plan

The 2004 Employee Stock Purchase Plan (“ESPP” or “the Plan”) 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% of the fair market value at specific dates. The fair value of the purchase rights is estimated on the first day of the offering period using the Black-Scholes model. As of March 29, 2013, approximately 680,000 shares remained available for purchase.

Valuation and Expense Information

The following table summarizes share based compensation expense related to share based payment awards and employee stock purchases for the three and six months ended March 29, 2013 and March 30, 2012. The expense was allocated as follows:


	Three Months Ended Mar. 29, 2013		Three Months Ended Mar. 30, 2012		Six Months Ended Mar. 29, 2013		Six Months Ended Mar. 30, 2012
Cost of sales	$	28	$	23	$	53	$	36

Research and development	$	35	$	24	$	82	$	63
Sales and marketing		82		30		151		55
General and administrative		279		294		583		499

Share based compensation expense included in operating expenses	$	396	$	348	$	816	$	617

Share based compensation expense related to employee stock options, restricted stock awards and employee stock purchase plan	$	424	$	371	$	869	$	653

The Company recognizes compensation expense for all share based payment awards made to its employees and directors including employee stock options, restricted stock awards and employee stock purchases related to the ESPP, based on estimated fair values. The Company calculates the value of employee stock options on the date of grant using the Black-Scholes model. This model is also used to estimate the fair value of employee stock purchases related to the ESPP. The Company values restricted stock awards at the closing price of the Company’s shares on the date of grant. As share based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures were estimated based on historical and anticipated future experience.

NOTE 5 – RESTRUCTURING CHARGES

No restructuring charges were incurred in the three months ended March 29, 2013. In the first quarter of 2013, the Company recorded $194 in restructuring charges related to severance benefits estimated for the termination of certain employees who performed manufacturing and general and administrative functions at the Company’s facility in Finland. For the three and six months ended March 30, 2012, the Company recorded $518 in net restructuring charges. The Company recorded $575 in charges related to the severance benefits estimated for the termination of certain employees who performed manufacturing, engineering, sales, marketing, and general and administrative functions. During the second quarter of 2012 the Company also determined that severance benefits related to previously recorded charges would be less than initially estimated and reduced the liability to reflect the current estimate of amounts to be paid. This revision was recorded as a $57 reduction in operating expenses in the second quarter of 2012.

Restructuring charges related to previously recorded charges affected the Company’s financial position as follows:


	Accrued Compensation			Other Current Liabilities
Balance as of September 28, 2012	$	583		$	68
Additional charges		194			—
Cash paid		(417	)		—
Revisions to original estimate		—			—

Balance as of March 29, 2013	$	360		$	68

NOTE 6 – OTHER CURRENT LIABILITIES

Other current liabilities consist of:


	Mar. 29, 2013		Sept. 28, 2012
Warranty reserve	$	3,716	$	3,827
Accrued compensation		3,033		5,391
Other		5,324		6,697

Total	$	12,073	$	15,915

The Company provides a warranty for its products and establishes an allowance at the time of sale which the Company believes, based on its best estimates, is sufficient to cover costs during the warranty period. The warranty period is generally between 12 and 36 months. This reserve is included in other current liabilities.

A reconciliation of the changes in the warranty reserve is as follows:


	Mar. 29, 2013
	Three months ended			Six months ended
Balance at beginning of period	$	3,684		$	3,827
Cash paid for warranty repairs		(1,194	)		(2,068	)
Provision for current period sales		1,226			1,957

Balance at end of period	$	3,716		$	3,716

NOTE 7 – INCOME TAXES

The provision (benefit) for income taxes for the second quarter of 2013 was recorded based upon the current estimate of the Company’s annual effective tax rate. Generally, the provision (benefit) for income taxes is the result of a mix of profits (losses) the Company and its subsidiaries earn in tax jurisdictions with a broad range of income tax rates. The tax benefit of $140 for the three months ended March 29, 2013 was driven by a benefit in certain foreign jurisdictions, partially offset by tax expenses in certain foreign jurisdictions and state taxes. The provision for the six months ended March 29, 2013 was generated by a mix of tax expense in foreign jurisdictions and state taxes, partially offset by a benefit in certain foreign jurisdictions.

For the three months ended March 29, 2013 the effective tax rate of 9.9% differs from the federal statutory rate due the effects of the Company’s operations in foreign jurisdictions and to the valuation allowance on U.S. and Finnish losses. The negative effective tax rate of 1.9% for the three months ended March 30, 2012 differed from the federal statutory rate due to the valuation allowance on U.S. and Finnish losses and the release of uncertain tax positions.

The Company establishes a valuation allowance for deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. In the second quarter of fiscal 2012 the Company recorded a valuation allowance against its Finnish deferred tax assets due its cumulative three year operating loss in Finland. In fiscal 2007 the Company determined that a valuation allowance should be recorded against all of its U.S. deferred tax assets, and as of March 29, 2013 the Company continues to place a valuation allowance its U.S. deferred tax assets. While a valuation allowance is still in place for financial statement purposes as of March 29, 2013, the valuation allowance does not limit the Company’s ability to utilize the loss-carryforwards or other deferred tax assets on future tax returns.

The Company is subject to taxation primarily in the United States, Finland, and France, as well as in certain states (including Oregon and California) and other foreign jurisdictions. The Company’s larger jurisdictions generally provide for statutes of limitations from three to five years. The Company has settled with the Internal Revenue Service on their examination of all United States federal income tax matters through fiscal year 2008. The Company has also settled examinations of both its Finnish tax returns for all tax years through 2006. In January 2011 the French tax authority began a routine examination of the Company’s French tax returns for fiscal years 2009 and 2010, which was settled in the second quarter of 2012. The Company does not anticipate total gross unrecognized tax benefits will significantly change, either as a result of full or partial settlement of audits or the expiration of statutes of limitations within the next 12 months.

NOTE 8 – BORROWINGS

The Company’s credit agreement was amended on November 16, 2012 and allows for borrowing up to 80% of its eligible domestic accounts receivable with a maximum borrowing capacity of $12.0 million. As of March 29, 2013 the Company’s borrowing capacity was $10.3 million, of which $1.9 million was committed through standby letters of credit related to the Company’s capital lease obligations. The credit agreement, as amended, has an interest rate of LIBOR + 1.75%, expires on December 1, 2013 and performance of all of the Company’s obligations, thereunder, including repayment of borrowings, is secured by substantially all of the assets of the Company. There were no amounts outstanding under the Company’s credit agreement as of March 29, 2013 and September 28, 2012. The credit agreement contains certain financial covenants, with which the Company was in compliance as of March 29, 2013.

NOTE 9 – LOSS ON SALE OF ASSETS

In the first quarter of 2013 the Company sold the assets and liabilities associated with EL product line to Beneq Products Oy (“Beneq”) for a base sale price of $6.5 million, of which $3.9 million was paid in cash at closing, with the remaining $2.6 million held as a promissory note and included in other assets as of December 28, 2012 and March 29, 2013. The term of the note is five years with payments due annually beginning on November 30, 2014. The note accrues interest at 8% annually in the first year and 15% annually thereafter. The transaction terms also provide for up to $3.5 million in additional cash consideration, which may be earned based upon the EL business achieving certain financial results in calendar years 2013 through 2015. As a result of this transaction the Company recorded a loss on sale of $1.5 million. During the second quarter of 2013, the Company received an additional $0.2 million in cash consideration as a result of a purchase price adjustment. This resulted in the adjustment of the loss on sale to $1.3 million. The loss recognized includes transaction costs that were comprised primarily of legal and other professional services fees. The

transaction provides transition services, including IT, infrastructure, sales and operations services, between the Company and Beneq for a period up to twelve months, ending no later than November 30, 2013. The sale of these assets and liabilities did not constitute a disposal of a component of the Company as defined by ASC Topic 205, “Presentation of Financial Statements.”

NOTE 10 – SUBSEQUENT EVENTS

In April 2013 the Company consolidated its two assembly and integration facilities in the United States to a single facility. As a result, the Company recorded restructuring charges and a related liability of $2.4 million, of which $2.1 million relates to the estimated present value of the remaining lease payments on the vacated facility less an assumption for sublease income. The remaining $0.3 million of the charge relates to reductions in the carrying amounts of leasehold improvements and other property, plant, and equipment disposed of as part of the consolidation.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the consolidated interim financial statements and the notes thereto in Part I, Item I of this Quarterly Report and with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended September 28, 2012.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made pursuant to the safe harbor provisions of the federal securities laws. 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 risk factors included in Part II, Item 1A of this report and the following, could cause actual results to differ materially from the forward-looking statements: poor or further weakened domestic and international business and economic conditions; changes or continued reductions in the demand or order rates for products in the various display markets served by the Company; any delay in the timing of customer orders or the Company’s ability to ship product upon receipt of a customer order; the extent and timing of any additional expenditures by the Company to address business growth opportunities; any inability to reduce costs or to do so quickly enough, in either case, in response to reductions in revenue; the ability of the Company to successfully implement any cost reduction initiatives or generally cause ongoing operating expenses to be maintained at levels permitting Company profitability; adverse impacts on the Company or its operations relating to or arising from any inability to fund desired expenditures, including due to difficulties in obtaining necessary financing; changes in the flat-panel monitor industry; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or the ability to keep pace with technological changes; technological advances; shortages of manufacturing capacity from the Company’s third-party manufacturing partners or other interruptions in the supply of components the Company incorporates in its finished goods including as a result of natural disasters and future production variables resulting in excess inventory. 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, it should not be concluded that the Company will make additional updates with respect thereto or with respect to other forward-looking statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company reaffirms the critical accounting policies and use of estimates reported in its Form 10-K for the year ended September 28, 2012.

INTRODUCTION

Planar Systems, Inc. is a provider of specialty display products, solutions and services for customers in a number of end-market segments. Products include display components, completed displays, and display solutions and systems based on a variety of flat panel and front- and rear-projection technologies. The Company has a global reach with sales offices in North America, Europe and Asia and manufacturing facilities in France and North America.

The electronic specialty display industry is driven by the proliferation of display products, from both the increase in functionality in “smart” devices and the availability and versatility of LCD flat panel displays at increasingly lower costs; the ongoing need for system providers and integrators to rely on display experts to provide customized solutions; and from the growth in the market for targeted marketing and messaging to consumers using digital signage in a variety of form factors in both indoor and outdoor applications.

Unless context otherwise requires, or as otherwise indicated, “we,” “us,” “our” and similar terms, as well as references to the “Company” and “Planar,” refer to Planar Systems, Inc. and, unless the context requires otherwise, includes all of the Company’s consolidated subsidiaries.

The Company’s Strategy

For over 30 years, Planar has been designing and bringing to market innovative display solutions. The Company has historically focused on customized or specialty display products and systems, generally in niche display markets where requirements are more stringent, innovation is valued, and the customer is not served or is underserved by the mass-market, commodity display providers. In recent years, the Company has been transitioning its focus, strategic direction, and resources to target the larger and faster-growing market for digital signage displays, where a variety of its customers use the Company’s video wall and large format stand-alone monitors for digital signage applications in retail, airport, sports arena and stadium, hospitality, quick serve restaurant, corporate and higher-education venues, as well as in applications that have traditionally used customized or specialty display products and systems.

The Company’s Products

Planar delivers display products and related solutions for a wide variety of applications and vertical markets. It categorizes the products into two areas, “Digital Signage” and “Commercial and Industrial.”

Digital Signage

The Digital Signage display market has experienced rapid growth in recent years and is expected to have strong growth over the next three to five years. Digital Signage solutions are being installed in many environments including retail locations, airports, and sports arenas, as well as in emerging applications and in applications historically served by Commercial and Industrial products, including rear-projection cubes. Planar provides solutions for a number of display applications for the digital signage market utilizing a variety of technologies and products.

• Matrix and Mosaic (tiled LCD) Systems: Planar’s super narrow bezel LCD display systems allow customers to create flat, large video walls for a number of applications including ambience, advertising, architectural and brand promotion, and are being deployed in a large range of markets including retail, hospitality, commercial, sports venues and airports, as well as in markets traditionally served by rear-projection cubes, such as control rooms. Solutions utilize specialized LCD panels and “tile” them together using video processing to create large video wall displays. Products offered are well suited to these applications as they are designed for simple installation, easy and cost effective maintainability and off-boarding of power and video processing. The Company offers and supports a growing number of sizes and resolutions of super narrow bezel displays, including touch panels, that can be utilized in creating a wide variety of video wall solutions.

• LCD Commercial Flat Panel Displays: Planar provides a line-up of commercial-grade LCD displays, including the recently launched zero bezel “UltraLux” and Ultra HD “UltraRes” product offerings, suitable for a wide range of digital signage uses. Included in this category are outdoor signage displays, which are designed and manufactured by Planar and are uniquely suited to demanding environmental conditions.

• Custom Signage Displays: Planar manufactures a variety of customized LCD solutions for customers with requirements which go beyond those available from off the shelf products. Included in this category are customized and ruggedized indoor retail signage products used for direct marketing purposes. These displays are typically ruggedized to withstand extreme weather, direct sunlight, moisture, dust, vibration and other conditions present in public viewing spaces

Commercial and Industrial

The Commercial and Industrial display markets that the Company serves are varied and numerous. Some of these markets are relatively mature, and others offer unique opportunities to grow based on new technology enhancements and other factors. The Company serves these markets with a wide range of solutions including standard as well as highly differentiated custom display products and systems.

• Rear-Projection Cube Displays: The market for control room video wall solutions is driven by the development, expansion, and upgrade of industrial infrastructure such as power plants, transportation systems, communication systems, and security monitoring. Planar provides premium quality rear-projection displays and video processing solutions that meet the customer’s needs for virtually seamless video walls that support 24x7 operations.

• Touch Monitor Displays: Planar markets a wide variety of touch LCD products for use in kiosks and point of sale applications. As touch and interactive displays become more commonplace, particularly with the recent introduction of Microsoft^® Windows^® 8, the Company expects future opportunities for growth in this product category.

• Electroluminescent (“EL”) Displays: Planar previously leveraged its proprietary intellectual property and historical core competency in EL technologies to provide customized, embedded and ruggedized displays to Original Equipment Manufacturers (“OEMs”) and other system suppliers for use in instrumentation, medical equipment, vehicle dashboards and military applications. In the first quarter of 2013, the Company sold the assets and liabilities associated with its EL product line and no sales of EL products are expected in future periods.

• Custom Commercial and Industrial Displays: Planar designs and manufactures custom LCD products that are generally targeted toward the transportation, military and medical vertical markets. These displays are typically ruggedized to withstand extreme weather, direct sunlight, moisture, dust, vibration and other extreme conditions.

• Desktop Monitor Displays: Planar capitalizes on its strong supply chain, logistics and distribution partnerships to sell a variety of primarily LCD based displays to principally the United States marketplace.

• High-End Home Displays: Planar offers a wide variety of high-performance home theater front-projection systems, video processing equipment, large-format thin displays, and accessories, largely aimed at the high-end home market and certain commercial installations. The Company has sold these products under the Runco brand since May 2007 when it acquired Runco International, an industry leader in high-end, luxury video products. Planar’s Runco products are primarily sold to its established network of custom home installation dealers in the United States.

Overview

The Company recorded sales of $39.4 million in the three months ended March 29, 2013 (the “second quarter of 2013”), which was an increase of $1.8 million or 5.1% as compared to sales of $37.6 million in the three months ended March 30, 2012 (the “second quarter of 2012”). The increase in sales in the second quarter of 2013 as compared to the second quarter of 2012 was primarily a result of a $5.9 million or 79.6% increase in sales of digital signage products to $13.4 million from $7.5 million. The increase was partially offset by a $4.1 million or 13.5% decrease in sales of commercial and industrial products to $26.0 million in the second quarter of 2013 from $30.1 million in the second quarter of 2012. In the six months ended March 29, 2013 (the “first six months of 2013”), sales were $83.6 million, which was a decrease of $1.7 million or 1.9% as compared to sales of $85.3 million in the six months ended March 30, 2012 (the “first six months of 2012”). The decrease in sales in the six months ended March 29, 2013 as compared to the six months ended March 30, 2012 was due to a $13.6 million or 20.3% decrease in sales of commercial and industrial products to $53.3 million from $66.9 million. This decrease was partially offset by an $11.9 million or 65.1% increase in sales of digital signage products to $30.3 million in the first six months of 2013 from $18.4 million in the first six months of 2012.

Loss from operations in the second quarter of 2013 was $1.7 million as compared to $6.7 million in the second quarter of 2012. For the first six months of 2013 loss from operations was $3.1 million as compared to $10.1 million in the first six months of 2012. The improvement in loss from operations in the three and six months ended March 29, 2013 was due primarily to decreases in operating expenses of $4.1 million and $5.7 million, respectively, as well as increases in gross profit of $0.8 million and $1.3 million, respectively. The increase in gross profit in the second quarter of 2013 as compared to the second quarter of 2012 was due primarily to the increase in sales and also due to lower labor and overhead expenses. The increase in gross profit in the first six months of 2013 as compared to the first six months of 2012 was due primarily to changes in product mix, with a shift toward higher margin products. The decrease in operating expenses in the second quarter of 2013 as compared to the second quarter of 2012 was due primarily to decreases in each category of operating expenses as well as a $0.2 million gain on the sale of assets and liabilities related to the Company’s EL product line as a result of a purchase price adjustment recorded in the second quarter of 2013. The decrease in operating expenses for the first six months of 2013 as compared to the first six months of 2012 was due primarily to decreases in each category of operating expenses, which were partially offset by a $1.3 million loss on the sale of assets and liabilities related to the Company’s EL product line. The decreases in each category of operating expenses for the three and six months ended March 29, 2013 from the same periods in the prior year was due primarily to cost reduction measures implemented in fiscal 2012.

Net loss was $1.3 million or $0.06 per basic and diluted share in the second quarter of 2013 as compared to a net loss of $6.7 million or $0.33 per basic and diluted share in the second quarter of 2012. For the first six months of 2013 net loss was $2.8 million or $0.13 per basic and diluted share as compared to a net loss of $9.9 million or $0.49 per basic and diluted share in the first six months of 2012. The improvement in net loss for the three and six months ended March 29, 2013 was due primarily to the improvement in loss from operations in both periods.

In the second quarter of 2013 the Company continued to experience strong demand for its digital signage products as the increase in sales of digital signage products more than offset the decrease in sales of commercial and industrial products, including EL product sales. The Company continues to believe there are opportunities to increase digital signage sales and, accordingly, continues to focus on driving revenue growth in this product area. These efforts are focused on accessing new customers, expanding relationships with existing customers, and by adding product offerings to broaden the Company’s differentiated digital signage product portfolio. In the first six months of fiscal 2013 the Company has developed the UltraRes product line to further complement its product offerings for businesses which use digital signage to attract customers.

Sales

Sales for the Three Months Ended March 29, 2013

For the three months ended March 29, 2013, the Company’s sales increased $1.8 million or 5.1% to $39.4 million from sales of $37.6 million for the three months ended March 30, 2012. The increase was due to an increase in sales of digital signage products, which was partially offset by a decrease in sales of commercial and industrial products. The increase in sales of digital signage products of $5.9 million or 79.6% was due primarily to increases in sales of tiled LCD video wall systems and LCD commercial flat

panels. The decrease in sales of commercial and industrial products of $4.1 million or 13.5% was due primarily to decreases in sales of EL displays following the sale of the assets and liabilities related to this product line in the first quarter of 2013. The decrease was also due to decreases in sales of high-end home products, desktop monitors, and custom commercial and industrial products, which were partially offset by increases in sales of touch monitors and rear-projection cubes. A summary of the major components of sales for the second quarter of 2013, including changes in sales from the second quarter of 2012 due to changes in volumes and average selling price (ASP) is as follows:


	Three months ended				$ Change			% Change			% Change in Volumes⁽¹⁾			% Change in ASP⁽¹⁾
	Mar. 29, 2013		Mar. 30, 2012		$ Change			% Change			% Change in Volumes⁽¹⁾			% Change in ASP⁽¹⁾
	(In millions, except percentages)
Commercial & Industrial Sales
High-end home	$	2.5	$	3.2	$	(0.7	)		-23.5	%		-37.3	%		14.6	%
Custom commercial & industrial		2.6		2.7		(0.1	)		-3.2	%		-41.9	%		66.6	%
Desktop monitors		9.0		9.3		(0.3	)		-3.0	%		13.0	%		-23.9	%
Rear-projection cubes		6.3		5.4		0.9			16.7	%		-10.4	%		28.8	%
Touch monitors		5.3		3.6		1.7			51.4	%		67.8	%		-10.2	%
Electroluminescent⁽²⁾		—		5.2		(5.2	)		-100.0	%		—			—
Other		0.3		0.7		(0.4	)		-67.5	%		—			—

Total Commercial & Industrial sales		26.0		30.1		(4.1	)		-13.5	%		—			—
Digital Signage Sales
Tiled LCD video wall systems		9.8		5.5		4.3			78.5	%		82.2	%		-2.0	%
LCD commercial flat panels		3.5		1.6		1.9			128.5	%		95.1	%		17.1	%
Customized digital signage		0.1		0.4		(0.3	)		-58.1	%		-64.7	%		-24.3	%

Total Digital Signage sales		13.4		7.5		5.9			79.6	%		—			—

Total sales	$	39.4	$	37.6	$	1.8			5.1	%		—			—

⁽¹⁾	Due to the significant differences in volumes and ASP for each product category, changes in volumes and ASP have not been included for the “Other” categories or subtotals.

⁽²⁾	In the first quarter of 2013, the Company sold the assets and liabilities related to its EL product line.

The increase in volumes sold of tiled LCD video wall systems, including Matrix and Mosaic, were due primarily to increased demand for indoor video wall systems and the Company’s efforts to drive customer transition toward digital signage products through expanded product offerings and sales and marketing efforts. The decrease in average selling prices of tiled LCD video wall systems was due to product mix and a decline in the selling prices of certain older products, which were partially offset by higher selling prices for new product offerings. The increase in volumes sold and average selling prices of LCD commercial flat panels was due primarily to increased product offerings available during the second quarter of 2013 as compared to the second quarter of 2012 as well as a change in product mix toward products with higher ASPs. The decrease in volumes sold and average selling prices of customized digital signage products was due primarily to lower demand from certain customers and a change in product mix. For the three months ended March 29, 2013, the decrease in volumes of EL displays sold was due to the sale of the Company’s EL related assets and liabilities during the first quarter of 2013, resulting in no sales during the second quarter of 2013 as compared to the second quarter of 2012. The decrease in high-end home product volumes sold was due to a continued decline in demand for high-end projection home theater systems. The increase in high-end home average selling prices was due primarily to a change in product mix to include products with higher ASPs. The increase in volumes sold and decrease in average selling prices of desktop monitors was due to increased demand as well as efforts to reduce inventory levels which resulted in lower margin sales in the second quarter of 2013 as compared to the second quarter of 2012. The decrease in volumes sold of custom commercial and industrial products was due primarily to certain large customer orders that shipped in the second quarter of 2012 that were not repeated in the second quarter of 2013. The increase in average selling prices of custom commercial and industrial products was due primarily a change in product mix during the second quarter of 2013 as compared to the same period of 2012. The increase in touch monitor volumes sold was due primarily to increased demand for touch-based solutions as the number of touch applications in the market grows. The decrease in touch monitor average selling prices was due to a general decline in the selling prices of these products as certain product offerings mature. The decrease in rear-projection cube sales volumes was due primarily to continued customer transition from rear-projection cube format to LCD panels and reduced demand for this product offering. The increase in ASPs of rear-projection cubes was due primarily to a change in product mix from lamp-based cubes to LED-based cubes.

Sales for the Six Months Ended March 29, 2013

For the six months ended March 29, 2013, the Company’s sales decreased $1.7 million or 1.9% to $83.6 million from sales of $85.3 million for the six months ended March 30, 2012. The decrease was due to a decrease in sales commercial and industrial products, which was partially offset by an increase in sales of digital signage products. The decrease in sales of commercial and industrial products of $13.6 million or 20.3% was due primarily to decreases in sales of EL displays, high-end home products, rear-projection cubes, desktop monitors, and custom commercial and industrial products, which were partially offset by an increase in sales of touch monitors. The increase in sales of digital signage products of $11.9 million or 65.1% was primarily due to increases in sales of tiled LCD video wall systems and LCD commercial flat panels. A summary of the major components of sales for the first six months of 2013, including changes in sales from the first six months of 2012 due to changes in volumes and average selling price (ASP) is as follows:


	Six months ended				$ Change			% Change			% Change in Volumes⁽¹⁾			% Change in ASP⁽¹⁾
	Mar. 29, 2013		Mar. 30, 2012		$ Change			% Change			% Change in Volumes⁽¹⁾			% Change in ASP⁽¹⁾
	(In millions, except percentages)
Commercial & Industrial Sales
High-end home	$	5.5	$	8.5	$	(3.0	)		-35.5	%		-43.6	%		8.9	%
Custom commercial & industrial		4.6		5.7		(1.1	)		-19.1	%		-42.7	%		35.0	%
Desktop monitors		17.7		18.9		(1.2	)		-6.2	%		10.7	%		-25.6	%
Rear-projection cubes		12.4		14.4		(2.0	)		-14.1	%		-34.1	%		10.3	%
Touch monitors		10.2		7.1		3.1			44.9	%		51.2	%		-1.8	%
Electroluminescent⁽²⁾		2.3		10.9		(8.6	)		-78.9	%		-79.1	%		1.3	%
Other		0.6		1.4		(0.8	)		-59.3	%		—			—

Total Commercial & Industrial sales		53.3		66.9		(13.6	)		-20.3	%		—			—
Digital Signage Sales
Tiled LCD video wall systems		23.2		14.7		8.5			57.6	%		69.9	%		-7.3	%
LCD commercial flat panels		6.7		3.0		3.7			125.7	%		91.9	%		17.6	%
Customized digital signage		0.4		0.7		(0.3	)		-32.2	%		-72.0	%		95.2	%

Total Digital Signage sales		30.3		18.4		11.9			65.1	%		—			—

Total sales	$	83.6	$	85.3	$	(1.7	)		-1.9	%		—			—

⁽¹⁾	Due to the significant differences in volumes and ASP for each product category, changes in volumes and ASP have not been included for the “Other” categories or subtotals.

⁽²⁾	In the first quarter of 2013, the Company sold the assets and liabilities related to its EL product line.

For the six months ended March 29, 2013, the decrease in volumes of EL displays sold was due primarily to the sale of the Company’s EL related assets and liabilities during the first quarter of 2013, resulting in lower shipments during the first six months of 2013 as compared to the first six months of 2012. The decrease in high-end home product volumes sold was due to continued declines in demand for high-end projection home theater systems. The increase in high-end home average selling prices was due primarily to a change in product mix toward higher priced products. The decrease in rear-projection cube volumes sold was a result of continued customer transition from rear-projection cube format to LCD panels. The increase in rear-projection cube average selling prices was due primarily to a change in product mix from lamp-based cubes to LED-based cubes as well as toward larger format and high definition rear-projection cubes. The increase in volumes sold of desktop monitors was due to increased demand in the first six months of 2013 as compared to the first six months of 2012, which was partially a result of lower ASPs. The decrease in average selling prices was due to a change in product mix to lower-priced offerings as well as efforts to decrease inventory levels as compared to the first six months of 2012. The increase in touch monitor volumes sold was due primarily to increased demand for touch-based solutions as the number of available touch-based applications increase. The decrease in touch monitor average selling prices was due to a general decline in the selling prices of these products as certain product offerings mature. The increase in volumes sold of tiled LCD video wall systems, including Matrix and Mosaic, was due primarily to increased demand for indoor video wall systems as customers continue to transition toward digital signage products and as the Company expands product offerings and the number of resellers who sell its products to end users. The decrease in average selling prices of tiled LCD video wall systems was due to changes in product mix and a decline in the selling prices of certain older products, which were partially offset by higher selling prices for new product offerings. The increase in volumes sold and average selling prices of LCD commercial flat panels was due primarily to increased product offerings available during the first six months of 2013 as compared to the first six months of 2012 as well as a change in product mix toward products with higher ASPs.

Sales by Geographic Region


											% of Total Sales
	Three months ended										Three months ended
	Mar. 29, 2013		Mar. 30, 2012		$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012
	(In millions, except percentages)
Domestic (United States) sales	$	29.9	$	27.2	$	2.7			10.1	%		75.9	%		72.3	%
International sales		9.5		10.4		(0.9	)		-8.8	%		24.1	%		27.7	%

Total sales	$	39.4	$	37.6	$	1.8			5.1	%

Domestic (United States) sales increased $2.7 million or 10.1% to $29.9 million in the second quarter of 2013 from $27.2 million in the second quarter of 2012. The increase in domestic sales for the three months ended March 29, 2013 was due primarily to an increase in sales of digital signage products, which were partially offset by a decrease in sales of commercial and industrial products. The increase in domestic digital signage product sales and the decrease in domestic commercial and industrial sales were due primarily to the reasons discussed in the preceding section for sales for the three months ended March 29, 2013. International sales decreased $0.9 million or 8.8% to $9.5 million in the second quarter of 2013 from $10.4 million in the second quarter of 2012. The decrease in international sales for the three months ended March 29, 2013 was due primarily to a decrease in sales of commercial and industrial products, including EL and rear-projection cubes, which was partially offset by an increase in sales of digital signage products. The decrease in international sales was led by a decrease in sales in the Asia Pacific region, which was partially offset by an increase in sales to the Europe, Middle East, and Africa (EMEA) region. The decrease in Asia Pacific sales was due primarily to lower volumes sold of EL displays following the sale of the assets and liabilities related to the EL product line in the first quarter of 2013, as well as lower volumes sold of rear-projection cubes, which have historically been a significant portion of Asia Pacific revenues. The increase in sales in the EMEA region was due primarily to increased sales of rear-projection cubes and tiled LCD video wall systems in the second quarter of 2013 as compared to the second quarter of 2012. As a percentage of sales, international sales decreased to 24.1% in the second quarter of 2013 from 27.7% in the second quarter of 2012. The Company does not have material sales to any particular country outside the United States.


											% of Total Sales
	Six months ended										Six months ended
	Mar. 29, 2013		Mar. 30, 2012		$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012
	(In millions, except percentages)
Domestic (United States) sales	$	62.4	$	60.2	$	2.2			3.8	%		74.7	%		70.6	%
International sales		21.2		25.1		(3.9	)		-15.5	%		25.3	%		29.4	%

Total sales	$	83.6	$	85.3	$	(1.7	)		-1.9	%

Domestic (United States) sales increased $2.2 million or 3.8% to $62.4 million in the first six months of 2013 from $60.2 million in the first six months of 2012. The increase in domestic sales for the six months ended March 29, 2013 was due primarily to an increase in sales of digital signage products, including significant growth in tiled LCD video wall systems, which were partially offset by a decrease in sales of commercial and industrial products. The increase in domestic digital signage product sales and decrease in domestic commercial and industrial sales were due primarily to the reasons discussed in the preceding section for sales for the six months ended March 29, 2013. International sales decreased $3.9 million or 15.5% to $21.2 million in the first six months of 2013 from $25.1 million in the first six months of 2012. The decrease in international sales for the six months ended March 29, 2013 was due to a decrease in sales in the Asia Pacific region, which was partially offset by an increase in sales to the EMEA region. The decrease in Asia Pacific sales and the increase in EMEA sales were due the changes discussed above for the second quarter of 2013. As a percentage of sales, international sales decreased to 25.3% in the first six months of 2013 from 29.4% in the first six months of 2012.

Gross Profit


	Three months ended											Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change		% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change		% Change
	(In millions, except percentage and basis point changes)
Gross profit	$	8.0		$	7.2		$	0.8		11.2	%	$	19.0		$	17.7		$	1.3		7.4	%
Gross profit margin		20.3	%		19.2	%		—		110 bps			22.7	%		20.8	%		—		190 bps

Gross profit as a percentage of sales increased to 20.3% in the second quarter of 2013 from 19.2% in the second quarter of 2012. Total gross profit increased $0.8 million or 11.2% to $8.0 million in the second quarter of 2013 as compared to $7.2 million in the second quarter of 2012. The increase was due primarily to changes in product mix to higher margin products as well as lower labor and overhead expenses, which were partially a result of the sale of the assets and liabilities associated with the EL product line in the first quarter of 2013.

In the first six months of 2013 gross profit as a percentage of sales increased to 22.7% from 20.8% in the first six months of 2012. Total gross profit increased $1.3 million or 7.4% to $19.0 million in the first six months of 2013 as compared to $17.7 million in the first six months of 2012. The increase in gross profit for the six months-ended March 29, 2013 was primarily due to changes in product mix toward higher margin products and increased overhead absorption, as well as due to lower estimates of existing inventory value related to certain end-of-life products in the first six months of 2012 that were not repeated in the first six months of 2013.

Research and Development


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Research and development, net	$	1.8		$	2.8		$	(1.0	)		-33.9	%	$	3.9		$	5.5		$	(1.6	)		-29.7	%
% of sales		4.6	%		7.4	%		—			(280) bps			4.6	%		6.4	%		—			(180) bps

Net research and development expenses decreased $1.0 million or 33.9% to $1.8 million in the second quarter of 2013 from $2.8 million in the second quarter of 2012. Net research and development expenses decreased $1.6 million or 29.7% to $3.9 million in the first six months of 2013 from $5.5 million in the first six months of 2012. The decreases for both the three and six months ended March 29, 2013 were primarily due to lower headcount as well as efforts to reduce expenditures in this area as the Company decreases the number of custom projects for customers and focuses research and development expenses on growing digital signage product offerings.

As a percentage of sales, net research and development expenses decreased to 4.6% in the second quarter of 2013 as compared to 7.4% in the second quarter of 2012. The decrease was due to both decreased expenditures and increased sales in the quarter. As a percentage of sales, net research and development expenses decreased to 4.6% in the first six months of 2013 as compared to 6.4% in the first six months of 2012. The decrease was due primarily to net research and development expenses decreasing at a faster rate than the decline in sales in that period.

Sales and Marketing


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Sales and marketing	$	5.0		$	6.7		$	(1.7	)		-24.8	%	$	10.1		$	13.6		$	(3.5	)		-25.9	%
% of sales		12.8	%		17.9	%		—			(510) bps			12.1	%		16.0	%		—			(390) bps

Sales and marketing expenses decreased $1.7 million or 24.8% to $5.0 million in the second quarter of 2013 as compared to $6.7 million in the second quarter of 2012. Sales and marketing expenses decreased $3.5 million or 25.9% to $10.1 million in the first six months of 2013 from $13.6 million in the first six months of 2012. The decrease for both the three and six months ended March 29, 2013 were primarily due to lower sales commissions and headcount, which were partially offset by increased program spending as compared to the same periods in the prior year.

As a percentage of sales, sales and marketing expenses decreased to 12.8% in the second quarter of 2013 as compared to 17.9% in the same period of the prior year. The decrease in sales and marketing expense, as a percentage of sales, was primarily the result of lower sales and marketing expenses due to the reasons discussed above as well as an increase in sales versus the second quarter of 2012. In the first six months of 2013, sales and marketing expenses were 12.1% of sales as compared to 16.0% of sales in the first six months of 2012. The decrease in sales and marketing expenses as a percentage of revenue in the first six months of 2013 was the result of sales and marketing expenses decreasing at a faster rate than the decline in sales in that period.

General and Administrative (G&A)


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
General and administrative	$	2.9		$	3.7		$	(0.8	)		-21.3	%	$	6.3		$	7.8		$	(1.5	)		-18.7	%
% of sales		7.4	%		9.9	%		—			(250) bps			7.6	%		9.1	%		—			(150) bps

General and administrative expenses decreased $0.8 million or 21.3% to $2.9 million in the second quarter of 2013 from $3.7 million in the second quarter of 2012. The decrease in general and administrative expenses was primarily due to decreases in headcount, which was partially offset by higher compensation-related items, including share-based compensation. General and administrative expenses were $6.3 million in the first six months of 2013 as compared to $7.8 million in the first six months of 2012. The $1.5 million or 18.7% decrease was due primarily to decreases in headcount and a general decrease in expenditures as a result of the Company’s efforts to control costs and the sale of the assets and liabilities related to the EL product line, which led to lower headcount.

As a percentage of sales, general and administrative expenses decreased to 7.4% in the second quarter of 2013 as compared to 9.9% in the second quarter of 2012. For the first six months of 2013, general and administrative expenses decreased to 7.6% as a percentage of sales from 9.1% in the first six months of 2012. The decreases in general and administrative expenses as a percentage of sales in the three and six months ended March 29, 2013 were primarily due to the reasons discussed above.

Amortization of Intangible Assets


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Amortization	$	0.1		$	0.2		$	(0.1	)		-15.4	%	$	0.3		$	0.4		$	(0.1	)		-15.7	%
% of sales		0.4	%		0.5	%		—			(10) bps			0.4	%		0.4	%		—			—

Expenses for the amortization of intangible assets were $0.1 million and $0.2 million in the second quarters of 2013 and 2012, respectively. In the first six months of 2013, amortization expenses were $0.3 million as compared to $0.4 million in the same period of 2012. The decrease in amortization expenses for the three and six months ended March 29, 2013 as compared to the three and six months ended March 30, 2012 was the result of certain intangible assets that became fully amortized in the fourth quarter of 2012 and, as such, had no related amortization expense in the first six months of 2013.

Restructuring Charges


	Three months ended											Six months ended
	Mar. 29, 2013		Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Restructuring charges	$	—	$	0.5		$	(0.5	)		-100.0	%	$	0.2		$	0.5		$	(0.3	)		-62.5	%
% of sales		—		1.4	%		—			(140) bps			0.2	%		0.6	%		—			(40) bps

No restructuring charges were incurred in the second quarter of 2013. Restructuring charges were $0.5 million in the second quarter of 2012. In the first six months of 2013, the Company recorded $0.2 million in net restructuring charges as compared to $0.5 million in the first six months of 2012. As discussed in Note 5—Restructuring Charges, the charges consisted primarily of severance benefits estimated for the termination of certain employees who performed manufacturing and general and administrative functions for the Company.

Loss on Sales of Assets


	Three months ended										Six months ended
	Mar. 29, 2013			Mar. 30, 2012		$ Change			% Change		Mar. 29, 2013			Mar. 30, 2012		$ Change		% Change
	(In millions, except percentage and basis point changes)
Loss (gain) on sale of assets	$	(0.2	)	$	—	$	(0.2	)		—	$	1.3		$	—	$	1.3		—
% of sales		0.4	%		—		—			(40) bps		1.6	%		—		—		160 bps

During the first quarter of 2013, the Company sold the assets and liabilities associated with the EL product line. As discussed in Note 9—Loss on Sale of Assets, the Company recorded a $1.5 million loss on the sale during the first quarter of 2013, which was adjusted to $1.3 million in the second quarter of 2013 as a result of additional cash consideration received from the buyer.

Total Operating Expenses


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Total operating expenses	$	9.8		$	13.9		$	(4.1	)		-29.6	%	$	22.1		$	27.8		$	(5.7	)		-20.5	%
% of sales		24.7	%		36.9	%		—			(1,220) bps			26.4	%		32.6	%		—			(620) bps

Total operating expenses decreased $4.1 million or 29.6% to $9.8 million in the second quarter of 2013 from $13.9 million in the same period of the prior year. The decrease in operating expenses was the result of decreases in each category of operating expenses, as well as the gain recognized on the sale of the assets and liabilities related to the Company’s EL product line. In the first six months of 2013, total operating expenses decreased $5.7 million or 20.5% to $22.1 million as compared to $27.8 million in the

same period of 2012. The decrease in total operating expenses was primarily due to decreases in general and administrative expenses, sales and marketing expenses, research and development expenses, restructuring charges, and the amortization of intangible assets, which were partially offset by the loss recognized on the sale of the assets and liability related to the Company’s EL product line. The decreases in operating expenses in both the three and six months ended March 29, 2013 as compared to the same periods in the prior year were due to the reasons discussed above.

As a percentage of sales, total operating expenses decreased to 24.7% in the second quarter of 2013 from 36.9% in the second quarter of 2012. The decrease in total operating expenses as a percentage of sales was primarily the result of the decrease in operating expenses and an increase in sales versus the same period of the prior year. As a percentage of sales, total operating expenses were 26.4% in the first six months of 2013 compared to 32.6% in the first six months of 2012. The decrease is primarily a result of operating expenses decreasing at a faster rate than sales in the period.

Non-operating Income and Expense


	Three months ended								Six months ended
	Mar. 29, 2013		Mar. 30, 2012			$ Change			Mar. 29, 2013		Mar. 30, 2012		$ Change
	(In millions)
Interest, net	$	—	$	—		$	—		$	—	$	—	$	—
Foreign exchange, net		0.1		(0.2	)		0.3			—		0.3		(0.3	)
Other, net		0.2		0.3			(0.1	)		0.3		0.3		00

Total non-operating income (expense)	$	0.3	$	0.1		$	0.2		$	0.3	$	0.6	$	(0.3	)

Non-operating income and expense includes interest income, interest expense, net foreign exchange gain or loss and other income or expense. Net interest income in the second quarter of 2013 was $48 thousand as compared to $6 thousand in the second quarter of 2012. Net interest income was $65 thousand in the first six months of 2013 as compared to $6 thousand in the first six months of 2012.

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 receivable and accounts payable denominated in foreign currencies to the applicable functional currency. Foreign exchange gains and losses amounted to a net gain of $0.1 million in the second quarter of 2013 and a net loss of $0.2 million in the second quarter of 2012. For the first six months of 2013, foreign currency exchange gains and losses amounted to a net loss of $13 thousand as compared to a net gain of $0.3 million in the same period of the prior year.

Net other income was $0.2 million in the second quarter of 2013 as compared to net other income of $0.3 million in the same period of 2012. Net other income was $0.3 million in each of the first six months of 2013 and 2012.

Provision for Income Taxes

In the second quarter of 2013 the Company recorded an income tax benefit of $0.1 million on a pretax loss of $1.4 million, resulting in an effective tax rate of 9.9%. Comparatively, the Company recorded an income tax expense of $0.1 million on a pretax loss of $6.5 million in the second quarter of 2012, resulting in an effective tax rate of negative 1.9%. The tax benefit recorded in the second quarter of 2013 was generated by tax benefits in certain foreign jurisdictions, partially offset by tax expense in certain foreign jurisdictions and state taxes. Comparatively, the tax expense of $0.1 million for second quarter of 2012 was driven by tax expense in certain foreign jurisdictions and state taxes, settlement of a foreign tax audit, and the establishment of a valuation allowance on Finnish deferred tax assets, which were partially offset by the release of uncertain tax positions relating to research credits.

The effective tax rates for the six months ended March 29, 2013 and March 30, 2012 were negative 1.6% and negative 4.1%, respectively. The difference between the effective tax rate and the federal statutory tax rate for the six months ended March 29, 2013 is due primarily to the valuation allowance on the Company’s U.S. and Finnish deferred tax assets, the provision for taxes in certain foreign jurisdictions and state income taxes, partially offset by the generation of tax benefits in certain foreign jurisdictions. The difference between the effective tax rate and the federal statutory rate for the six months ended March 30, 2012 was due primarily to a valuation allowance on the Company’s U.S. and Finnish deferred tax assets, the provision for state income taxes, and the settlement of a French tax audit, which were partially offset by a tax benefit recognized as a result of the expiration of statute of limitations on uncertain tax positions relating to research credits. During periods of time in which a valuation allowance is required for GAAP accounting purposes, the effective tax rate recorded will not represent the Company’s longer-term normalized tax rate in profitable times. Additionally, given the relationship between fixed dollar tax items and pretax financial results, the effective tax rate can change materially based on small variations of income.

Net Loss


	Three months ended												Six months ended
	Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change			Mar. 29, 2013			Mar. 30, 2012			$ Change			% Change
	(In millions, except percentage and basis point changes)
Net loss	$	(1.3	)	$	(6.7	)	$	(5.4	)		-80.8	%	$	(2.8	)	$	(9.9	)	$	(7.1	)		-72.0	%
% of sales		-3.2	%		-17.8	%		—			(1,460) bps			-3.3	%		-11.6	%		—			(830) bps
Net loss per share basic and diluted		(0.06	)		(0.33	)								(0.13	)		(0.49	)

In the second quarter of 2013 net loss was $1.3 million or $0.06 per basic and diluted share, as compared to net loss of $6.7 million or $0.33 per basic and diluted share in the second quarter of 2012. In the first six months of 2013, net loss was $2.8 million or $0.13 per basic and diluted share, as compared to net loss of $9.9 million or $0.49 per basic and diluted share in the first six months of 2012.

Liquidity and Capital Resources

Net cash used in operating activities was $7.4 million in the first six months of 2013 as compared to $5.2 million in the first six months of 2012. Net cash used in operating activities in the first six months of 2013 primarily relates to the net loss incurred in the period and increases in inventories and accounts receivable, as well as a decrease in other liabilities. These uses of cash were partially offset by an increase in accounts payable and non-cash charges including depreciation and amortization, share based compensation, restructuring charges, and the loss on the sale of assets and liabilities related to the Company’s EL product line, which do not result in a current cash outlay.

Working capital decreased $4.9 million to $36.6 million at March 29, 2013 from $41.5 million at September 28, 2012. The decrease in working capital was due primarily to decreases in cash and inventories and an increase in accounts payable, which were partially offset by a decrease in other current liabilities and increases accounts receivable and other current assets. Current assets decreased $6.6 million to $64.6 million at March 29, 2013 as compared to $71.2 million at September 28, 2012. The decrease in current assets was due primarily to decreases in cash and inventories. Cash decreased $4.9 million due primarily to the net cash used in operating activities, partially offset by the net cash provided by investing and financing activities. Inventories decreased $2.1 million as increased purchases were more than offset by the sale of EL related inventories to Beneq. Accounts receivable increased $0.2 million as a result of the timing of sales and cash receipts in the second quarter of 2013, partially offset by the sale of EL related accounts receivable to Beneq as part of the sale of EL assets and liabilities in the first quarter of 2013. Current liabilities decreased $1.8 million to $27.9 million at March 29, 2013 as compared to $29.7 million at September 28, 2012. The decrease was due primarily to decreases in other current liabilities, partially offset by an increase in accounts payable. The decrease in other current liabilities of $3.8 million was due primarily to payment of, and other reductions in, certain compensation related liabilities and payment of severance arrangements, which were accrued in prior periods. The $1.8 million increase in accounts payable was due to the timing of payments made to the Company’s vendors, partially offset by the sale of EL related accounts payable to Beneq.

The Company’s position on indefinite reinvestment of unremitted earnings from foreign operations may limit its ability to transfer cash between or across foreign and U.S. operations.

Recent Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income,” (“ASU 2011-05”) which requires that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” which defers the requirement within ASU 2011-05 to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. ASU 2011-05 is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted this standard effective September 29, 2012 and elected to present comprehensive income and its components in two separate, consecutive statements.

In February 2013, the FASB issued Accounting Standards Update No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which adds additional disclosure requirements for items reclassified out of accumulated other comprehensive income. ASU No. 2013-02 effectively replaces the requirements previously included in ASU 2011-05 and 2011-12. ASU 2013-02 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012, with early adoption permitted. As this ASU relates only to disclosure requirements, the Company does not expect the adoption of this standard to have a material impact on our financial position, results of operations or cash flows.

Item 4.

Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls or in other factors during the quarter ended March 29, 2013 that could significantly affect the Company’s internal controls over financial reporting.

Part II. OTHER INFORMATION

Item 1.

Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or to which any of its property is subject.

Item 1A.

Risk Factors

The following issues, risks, and uncertainties, among others, should be considered in evaluating the Company’s future financial performance and prospects for growth.

The risks inherent in the Company’s operations could be heightened by ongoing worldwide economic weakness and potential lack of credit availability.

In the recent past, general worldwide economic conditions have experienced a dramatic downturn due to a variety of factors, including credit conditions, the housing market crisis, liquidity concerns, slower economic activity, concerns about inflation and deflation, decreased consumer confidence, reduced corporate profits and capital spending, and adverse business conditions. The downgrade of the U.S. and certain European country credit ratings and the possibility that certain European member states will default on their debt obligations have increased the already significant uncertainty about the stability of global credit and financial markets. These conditions make it extremely difficult for the Company’s customers, the Company’s vendors, and the Company to accurately forecast and plan future business activities. In this time of economic difficulties, the Company’s financial performance and prospects for growth are subject to heightened risks including, but not limited to, the risk that the poor economic conditions and uncertainties in the credit and financial markets could adversely affect the amount, timing and stability of the demand for the Company’s products, the financial strength of the Company’s customers and vendors and their ability or willingness to do business with the Company, the ability of the Company’s customers and/or vendors to fulfill their obligations to the Company, and the ability of the Company’s customers and/or vendors to obtain credit in amounts and on terms acceptable to them. Each of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations, including:

•

disruptions in business relations between the Company and its vendors, which could result in delays or other difficulties obtaining, or increases in the price of, components and materials required for the Company’s products;

•

a rapid or unexpected decrease in demand for the Company’s products, including the cancellation or delay of existing or expected orders for the Company’s products, which could reduce sales and/or result in the Company carrying excess inventories;

•

a decline in the financial strength of the Company’s customers’ businesses which could result in the Company losing sales if the Company becomes unwilling to extend trade credit in connection with orders of its products, the customers inability to pay their vendors in a timely manner, declaring bankruptcy or otherwise ceasing operations, any of which could harm the Company’s ability to collect on amounts due from its customers in a timely manner, or at all. The Company does maintain allowances for estimated losses resulting from the inability of its customers to make required payments.

The Company took a number of measures to reduce costs in response to the worldwide economic downturn over the past three years. However, in connection with the execution of the growth strategy adopted during fiscal 2011 the Company has since begun to refocus sales and marketing resources to better position it for sales growth. If the economic recovery were to slow or cease and dip back into recession, or if customer demand for the Company’s products were to otherwise not improve or slow down, the Company might be unable to adjust expense levels rapidly enough in response to falling demand or adequately reduce expenses without changing the way in which it operates in a manner that has adverse consequences. If revenues were to decrease further and the Company was unable to adequately reduce expense levels, it might incur significant losses that could potentially adversely affect the Company’s overall financial performance and the market price of the Company’s common stock.

The Company’s operating results can fluctuate significantly.

In addition to the variability resulting from the short-term nature of commitments from the Company’s customers, other factors can contribute to significant periodic fluctuations in its results of operations. These factors include, but are not limited to, the following:

•

the receipt and timing of orders and the timing of receipt of components and products from vendors and the timing of delivery of orders;

•

the inability to adjust expense levels or delays in adjusting expense levels, in either case in response to lower than expected revenues or gross margins;

•

the volume of orders relative to the Company’s capacity;

•

product introductions and market acceptance of new products or new generations of products;

•

evolution in the lifecycles of customers’ products;

•

changes in cost and availability of labor and components;

•

variations in revenue and gross margins relating to the mix of products available for sale and the mix of products sold from period to period;

•

availability of sufficient quantities of the components of the Company’s products on a timely basis or at all;

•

variation in operating expenses;

•

vesting of restricted stock based upon achievement of certain performance measures;

•

pricing and availability of competitive products and services;

•

general economic conditions and changes—whether or not anticipated—in economic conditions; and

•

the ability to use cash flow to fund working capital, capital expenditures, development projects, acquisitions, and other general corporate purposes, which could be limited by any Company indebtedness and the covenants of the Company’s existing credit facility.

Accordingly, the results of any past periods should not be relied upon as an indication of the Company’s future performance. It is possible that, in some future period, the Company’s operating results may be below expectations of public market analysts and/or investors. If this occurs, the Company’s stock price may decrease.

The Company faces intense competition.

Each of the markets served by the Company is highly competitive, and the Company expects this to continue and even intensify. The Company believes that over time this competition will have the effect of reducing average selling prices of its products. Certain of the Company’s competitors have substantially greater name recognition and financial, technical, manufacturing, marketing and other resources than does the Company. There is no assurance that the Company will not face additional competitors or 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, its business, financial condition and results of operations would be materially adversely affected. The Company’s ability to compete successfully depends on a number of factors, both within and outside its control. These factors include, but are not limited to:

•

the Company’s effectiveness in designing new product solutions, including those incorporating new technologies;

•

the Company’s ability to anticipate and address the needs of its customers;

•

the Company’s ability to develop innovative, new technologies and the extent to which such technologies can be protected as proprietary to the Company;

•

the Company’s ability to develop effective technology;

•

the quality, performance, reliability, features, ease of use, pricing and diversity of the Company’s product solutions;

•

foreign currency fluctuations, which may cause competitors’ products to be priced significantly lower than the Company’s product solutions;

•

the quality of the Company’s customer services;

•

the effectiveness of the Company’s supply chain management;

•

the Company’s ability to identify new markets and develop attractive products to address the needs of such markets;

•

the Company’s ability to develop and maintain effective and financially viable sales channels;

•

the rate at which customers incorporate the Company’s product solutions into their own products; and

•

product or technology introductions by the Company’s competitors.

The Company’s success depends on the development of new products and technologies.

Future results of operations will partly depend on the Company’s ability to improve and successfully market its existing products, while also successfully developing and marketing new products and developing new markets for existing products and technologies. If the Company fails to do this, its products or technologies could become obsolete or noncompetitive. Additionally, if the Company were unable to successfully execute its transition from existing products to new offerings or technologies, it could result in the Company holding excess or obsolete inventory, which could have a material adverse effect on the Company’s business, financial condition, and results of operations. In the past, the Company has reduced its spending on research and development projects as a part of overall cost reductions. The Company may be required to reduce research and development expenditures in future periods as a part of cost reduction programs. These reductions could impact the Company’s ability to improve its existing products and to successfully develop new products.

New products and markets, by their nature, present significant risks and even if the Company is successful in developing new products, they typically result in pressure on gross margins during the initial phases as start-up activities are spread over lower initial sales volumes. The Company has experienced lower margins from new products and processes in the past, which have negatively impacted overall gross margins. In addition, customer relationships can be negatively impacted due to production and product performance problems and late delivery of shipments. Future operating results will depend on the Company’s ability to continue to provide new product solutions that compare favorably on the basis of cost and performance with competitors. The Company’s success in attracting new customers and developing new business depends on various factors, including, but not limited to, the following:

•

developing and/or deploying advances in technology;

•

developing innovative products for new markets;

•

offering efficient and cost-effective services;

•

timely completing the design and manufacture of new product solutions; and

•

developing proprietary technology positions and adequately protecting the Company’s proprietary property.

The Company must continue to add value to its portfolio of offerings.

Traditional display components are subject to increasing competition to the point of commoditization. In addition, advances in LCD technology make standard displays effective in an increasing breadth of applications. The Company must add additional value to its products and services for which customers are willing to pay. These areas could be outside of the Company’s historical business experience and it may not be successful at executing in such areas in the future. Failure to do so could adversely affect the Company’s revenue levels and its results of operations.

Shortages of components and materials may delay or reduce the Company’s sales and increase its costs.

The inability to obtain sufficient quantities of components and other materials necessary to produce the Company’s displays could result in reduced or delayed sales. The Company obtains much of the material it uses in the manufacture of its products from a limited number of suppliers, and it generally does not have long-term supply contracts with vendors. For some of this material the Company does not generally have a guaranteed alternative source of supply. In addition, given the Company’s cash management practices, vendors may not be willing to continue to ship materials on credit terms that are acceptable to the Company, or may impose lower than optimal credit lines for the Company. As a result, the Company is subject to cost fluctuations, supply interruptions and difficulties in obtaining materials. The Company has in the past and may in the future face difficulties ensuring an adequate supply of various display components such as quality high resolution glass used in its products. In the future the Company may also face difficulties ensuring an adequate supply of the rear-projection screens used in certain video wall products. If a supplier were to cease production of material used by the Company in the manufacture of its products, and if the Company were unable to find a suitable alternative, it may be forced to purchase last-time buys of certain components which could negatively impact the Company’s cash position, and which, if unused, could result in the Company holding excess and obsolete inventory, which would adversely impact the Company’s results of operations. The Company is continually engaged in efforts to address this risk area. In another recent example of such supply risks, in fiscal 2010 the U.S. International Trade Commission issued an exclusion order banning the import of certain LCD panels incorporated by the Company in certain of its specialty display products. While this matter was resolved, any future inability of the Company to import adequate supplies of such panels, or products including such panels, or other products or components, could have a material adverse effect on the Company’s business, financial condition, and results of operations. The Company is subject to vendor lead times that can vary considerably depending on capacity fluctuations and other manufacturing constraints of the Company’s vendors. These lead times can be significant when vendors operate with diminished capacity or experience other restrictions that limit their ability to produce products in a timely manner. For most of the Company’s products, vendor lead times significantly exceed its customers’ required delivery time causing the Company to order to forecast rather than order based on actual demand. Competition in the market continues to reduce the period of time customers will wait for product delivery. Ordering raw materials and building finished goods based on the Company’s forecast exposes the Company to numerous risks including its inability to service customer demand in an acceptable timeframe, holding excess and obsolete inventory or having unabsorbed manufacturing overhead.

In recent years, the Company has increased its reliance on Asian manufacturing companies for the manufacture of displays that it sells in all of the markets served by the Company. The Company also relies on certain other contract manufacturing operations in Asia, including those that produce circuit boards and other components, and those that manufacture and assemble certain of its products. Asia has experienced several earthquakes, tsunamis, typhoons, and interruptions to power supplies which resulted in business interruptions. In particular, the March 2011 earthquake and tsunami in Japan caused some of the Company’s vendors and some of the suppliers of the Company’s vendors to halt, delay or reduce production of displays, display components and other materials which are used in the Company’s products. Similar events in future periods could result in the inability of vendors to manufacture and deliver to the Company in a timely manner the displays and other components in the types and quantities it needs to fully satisfy customer demand for its products. Many of the Company’s components are obtained from single and sole sources and, if at all possible, finding suitable alternative sources of supply for displays and other components used in the Company’s products may be difficult and time consuming, and obtaining them in required quantities in a timely manner and at acceptable costs may not be possible at all. Any significant interruption in the supply of displays, components and contract manufacturing capacity necessary to produce and sell the Company’s products would have a material adverse effect on the Company’s business, financial condition and results of operations.

Additionally, constraints on the availability of certain natural resources used in the manufacturing process may impair manufacturers’ abilities to operate their facilities efficiently, which could result in longer lead times for components used in the Company’s products, disruptions to the Company’s sales, or an increase in the costs of these components. Further, there may be disruptions in transportation and logistics due to damaged infrastructure and concerns over radiation levels. This could result in potential disruption to the sales of the Company’s products and could increase the costs of transportation and shipping. The Company continues to monitor the situation in Japan and the effects on its operations.

Further, certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act will require us to report on “conflict minerals” used in our products and the supply chain due diligence process in place to assess whether such minerals originate from the Democratic Republic of the Congo and adjoining countries. The implementation of these requirements could affect the sourcing and availability of components used in our products.

The Company does not have long-term supply contracts with the contract manufacturers and other suppliers on which it relies. If any of these manufacturers in Asia or elsewhere were to terminate its arrangements with the Company, make decisions to terminate production of components or products required by the Company, or become unable to provide necessary products or components to the Company on a timely basis, the Company could be unable to sell its products until alternative manufacturing arrangements are made. Furthermore, there is no assurance that the Company would be able to establish replacement manufacturing or assembly relationships on acceptable terms, which could have a material adverse effect on the Company’s business, financial condition and results of operation.

The Company’s reliance on contract manufacturers involves certain risks, including, but not limited to:

•

lack of control over production capacity and delivery schedules;

•

unanticipated interruptions in transportation and logistics;

•

limited control over quality assurance, manufacturing yields and production costs;

•

potential termination by vendors of agreements to supply materials to the Company, which would necessitate the Company’s contracting of alternative suppliers, which may not be possible;

•

risks associated with international commerce, including unexpected changes in legal and regulatory requirements, foreign currency fluctuations and changes in duties and tariffs; and

•

trade policies and political and economic instability.

A significant slowdown in the demand for the products of certain of the Company’s customers would adversely affect its business.

The Company designs and manufactures custom display solutions that its customers incorporate into their products. As a result, the Company’s success partly depends upon the market acceptance of its customers’ products. Accordingly, the Company must identify industries that have significant growth potential and establish relationships with customers who are successful in those industries. Failure to identify potential growth opportunities or establish relationships with customers who are successful in those industries would adversely affect the Company’s business. Dependence on the success of products of the Company’s customers exposes the Company to a variety of risks, including, but not limited to, the following:

•

the Company’s ability to match its design and manufacturing capacity with customer demand and to maintain satisfactory delivery schedules;

•

customer order patterns, changes in order mix and the level and timing of orders that the Company can manufacture and ship in a quarter; and

•

the cyclical nature of the industries and markets served by the Company’s customers.

These risks could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company has aging information systems hardware and software, and capital investment and management attention will be required to replace such systems.

The Company maintains a variety of information systems in connection with the operation of its business, including an enterprise resource planning system (“ERP system”) that is integral to the Company’s ability to accurately and efficiently maintain its books and records, record its materials purchase transactions, manufacturing activities, account for and manage inventory and product sale transactions, provide critical business information to management, and prepare its financial statements. Certain of these systems, principally including the ERP system, are comprised of aging computer hardware and versions of software that are no longer actively supported by the vendor. The age of these systems heightens the risk of unanticipated difficulties, costs, disruptions and other adverse impacts and dictated that the Company take action to upgrade and improve the existing systems and replace them. The process of replacing the various hardware and software comprising, associated with or related to the Company’s ERP system began in fiscal 2012 with implementation planned for fiscal 2013. The process has caused, and will continue to cause the Company to incur costs, expend employee (including Company management) time and attention and otherwise burden the Company’s internal resources. This effort could detract from the Company’s various on-going business objectives. Failure to successfully replace the ERP system could damage the effectiveness of the Company’s business processes and controls and could adversely impact the Company’s ability to accurately and effectively forecast and manage sales demand, manage the Company’s supply chain, identify and implement actions that improve the Company’s operational effectiveness and margins, and report financial and management information on an accurate and timely basis.

The Company faces risks associated with other operations outside the United States.

The Company’s manufacturing, sales and distribution operations in Europe and Asia create a number of logistical, systems and communications challenges. The Company’s international operations also expose the Company to various economic, political and other risks, including, but not limited to, the following:

•

management of a multi-national organization;

•

compliance with local laws and regulatory requirements as well as changes in those laws and requirements;

•

employment and severance issues;

•

overlap of tax issues;

•

tariffs and duties;

•

employee turnover or labor unrest;

•

lack of developed infrastructure;

•

difficulties protecting intellectual property;

•

difficulties repatriating funds without adverse tax effects;

•

risks associated with outbreaks of infectious diseases;

•

burdens and costs of compliance with a variety of foreign laws;

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political or economic instability in certain parts of the world;

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effects of doing business in currencies other than the Company’s functional currency;

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effects of doing business in countries where the local currency is pegged to the currency of another country (For instance the exchange rate of the Chinese RMB to the U.S. Dollar is closely monitored by the Chinese government and there have been recent increases in the value of the RMB relative to the U.S. Dollar. The Company purchases a significant amount of goods from Chinese suppliers and, while those purchases are typically denominated in U.S. Dollars, increases in the RMB relative to the U.S. Dollar would tend to cause the cost of such goods to increase); and

•

effects of foreign currency fluctuations on overall financial results.

Changes in policies by the United States or foreign governments resulting in, among other things, increased duties, higher taxation, currency conversion limitations, restrictions on the transfer or repatriation of funds, limitations on imports or exports, changes in environmental standards or regulations, or the expropriation of private enterprises also could have a materially adverse effect. Any actions by the Company’s host countries to curtail or reverse policies that encourage foreign investment or foreign trade also could adversely affect its operating results. In addition, U.S. trade policies, such as “most favored nation” status and trade preferences for certain Asian nations, could affect the attractiveness of the Company’s services to its U.S. customers.

Future financial results of Planar could be adversely affected by changes in currency exchange rates.

While the Company is for the most part naturally hedged due to approximately equal foreign denominated sales and expenses, the Company is exposed to certain risks relating to U.S. Dollar denominated assets primarily held in Europe. In the past the Company has managed this non-cash generally accepted accounting principles (“GAAP”) income statement risk by periodically entering into forward exchange contracts to mitigate the income statement impact of fluctuations in the Euro value of certain U.S. Dollar denominated assets and liabilities. Due to volatility in the foreign exchange market and the Company’s strategic shift to preserve cash the Company adjusted its hedging strategy and as of March 27, 2009 discontinued its previous practice of hedging foreign currency risk through forward exchange contracts. As a result the Company may experience non-cash GAAP income statement losses due to changes in the U.S. Dollar versus the Euro exchange rate.

The value of intangible assets may become impaired in the future.

The Company has intangible assets recorded on the balance sheet as a result of the acquisition of Clarity Visual Systems, Inc. that relate primarily to developed technology, patents, and customer relationships. The initial value of intangible assets recorded at the time of acquisition represented the Company’s estimate of the net present value of future cash flows which can be derived from the intangible assets over time, and is amortized over the estimated useful life of the underlying assets. The remaining $0.3 million of the intangible assets represents customer relationships and will be amortized over the remaining useful lives of the respective assets of approximately 0.5 years and could, in the future, experience additional impairment. The estimated undiscounted future cash flows of the intangible assets are evaluated when a triggering event is identified, and if it becomes apparent that these estimates will not be met, a reduction in the value of intangible assets will be required. A determination of impairment of intangible assets could result in a charge to operations in a period in which an impairment loss is recognized. While such a charge would not have an effect on the Company’s cash flows, it would impact the net income in the period it was recognized.

Future indebtedness could reduce the Company’s ability to use cash flow for purposes other than debt service or otherwise restrict the Company’s activities.

The Company’s amended and restated credit agreement, as amended on November 16, 2012, has a maximum borrowing capacity of $12.0 million and expires on December 1, 2013. As of March 29, 2013 there were no amounts outstanding under this credit agreement; however $1.9 million was committed through standby letters of credit related to the Company’s capital lease obligations. If the Company incurred a significant amount of debt, the leverage would reduce the Company’s ability to use cash flow to fund working capital, capital expenditures, development projects, acquisitions, and other general corporate purposes. High leverage would also limit flexibility in planning for, or reacting to, changes in business and increases vulnerability to a downturn in the business and general adverse economic and industry conditions. Substantially all of the assets of the Company are pledged as security for the performance of the Company’s obligations under its credit agreement, which includes certain financial covenants, as discussed in Note 8—Borrowings in the Notes to the Consolidated Financial Statements in this Report. The Company may not generate sufficient profitability to meet these covenants. Failure by the Company to comply with applicable covenants, or to obtain waivers therefrom, would result in an event of default, and could result in the Company being unable to borrow amounts under the agreement, or could result in the acceleration of any amounts outstanding at that time, which, in turn could lead to the Company’s inability to pay its debts and the loss of control of its assets. In addition, the current credit agreement expires on December 1, 2013. If the Company were unable to renew or extend this agreement, the Company may need to pursue other sources of financing. Other sources of credit may not be available at all and, even if such credit is available, it may only be available on terms (including the cost of borrowing) that

are unattractive to the Company. If credit is not available to fully satisfy the Company’s liquidity needs, the Company may need to dispose of additional assets. In addition, the Company’s position on indefinite reinvestment of unremitted earnings from foreign operations may limit its ability to transfer cash between or across foreign and U.S. operations as may be required.

The Company may experience losses selling certain desktop monitors or other low margin products.

The market for the Company’s desktop monitor products is highly competitive and subject to rapid changes in prices and demand. The Company’s failure to successfully manage inventory levels or quickly respond to changes in pricing, technology or consumer tastes and demand could result in lower than expected revenue, lower gross margin and excess, obsolete and devalued inventories of its desktop monitor products which could adversely affect the Company’s business, financial condition and results of operations. Past market conditions have been characterized by rapid declines in end user pricing. Such declines caused the Company’s inventory to lose value and triggered price protection obligations for channel inventory. Supply and pricing of LCD panels has been volatile in the past and may be in the future. This volatility, combined with lead times of five to eight weeks, may cause the Company to pay too much for products or suffer inadequate product supply.

The Company does not have long-term agreements with its resellers, who generally may terminate their relationship with the Company with little or no notice. Such action by the Company’s resellers could substantially harm the Company’s operating results. Revenue could decrease due to reductions in demand, competition, alternative products, pricing changes in the marketplace and potential shortages of products which would adversely affect the Company’s revenue levels and its results of operations. In addition, strategic changes made by the Company’s management to invest greater resources in specialty display markets could result in reduced revenue from desktop monitors.

The disposal or elimination of a business or product line could result in unabsorbed overhead costs that must be absorbed by the Company’s remaining product lines.

In the fourth quarter of fiscal 2008 the Company disposed of its subsidiary that sold products to the medical diagnostic imaging market, in the second quarter of fiscal 2009 the Company sold its digital signage software assets, and in the first quarter of 2013 the Company sold its EL assets and liabilities. If the Company were to discontinue or substantially reduce its efforts to sell products to any of its targeted end-markets, or to discontinue certain businesses or product lines, for the purpose of reducing costs or losses or otherwise, it may not be possible to eliminate all associated fixed overhead costs which would have to be absorbed by the revenues generated by selling its other products to the remaining targeted end-markets. This could potentially adversely affect the Company’s overall financial performance in the future.

The recent sale of the Company’s EL display assets and liabilities involves significant risks.

In November 2012, the Company completed a transaction in which Beneq Products Oy (“Beneq”) purchased from the Company substantially all of the assets, and assumed certain liabilities, used or necessary in the Company’s EL display business (the “EL Transaction”). The completion of the EL Transaction presents certain significant risks to the Company, including but not limited to:

•

The assets sold to Beneq as part of the EL Transaction included the Company’s enterprise resource planning (or “ERP”) system software and hardware used by the Company to process and manage data relating to the manufacture and sale of the Company’s products in Europe as well as to receive, process, bill and ship orders on a timely basis and collect and report all financial and accounting information related to those transactions (the “IT Services”). The Company has entered into a Mutual Co-Operation and Services Agreement (the “Transition Services Agreement”) with Beneq pursuant to which, among other things, Beneq has agreed to continue providing the Company with IT Services necessary to permit the Company to continue its on-going European business operations. If the IT Services provided by Beneq are not adequate or were interrupted for any reason, the Company may be unable to find an alternative means of obtaining such IT Services, which would significantly impair the Company’s ability to serve its customers and conduct its business operations in Europe. Beneq’s obligations to provide the IT Services extend to November 30, 2013. The Company plans to migrate to a new ERP platform prior to that date. However, to the extent that the Company does not complete the migration by that date, and is not successful in obtaining a continuation in Beneq’s delivery of the IT Services, the Company’s business, financial condition and results of operations may be adversely affected.

•

Pursuant to the terms of the Transition Services Agreement, in addition to the IT Services Beneq has agreed to provide to the Company, the Company has agreed to provide to Beneq certain transition services in the areas of sales and operations management and infrastructure services for a period ending November 30, 2013. The delivery of transition services by the Company and the monitoring of transition services received by the Company could divert management and employee attention, and could involve the expenditure of substantial amounts of employee time. The Company’s inability to effectively manage its delivery of services to Beneq and/or its receipt of services from Beneq, under the Transition Services Agreement could adversely affect the Company’s business, financial condition and results of operations.

•

Under the agreements entered into with Beneq in connection with the EL Transaction, the Company may incur certain future liabilities, costs and expenses related to the EL Transaction, including claims by Beneq for (i) losses incurred by Beneq as a result of breaches of representations and warranties given by the Company, or (ii) liabilities relating to the EL display business that the Company retained as part of the EL Transaction. Any material liabilities, costs or expenses incurred by the Company as a result of an indemnification claim by Beneq could materially and adversely affect the Company’s business, financial condition and results of operations.

•

In the EL Transaction, Beneq paid a portion of the purchase price in promissory notes payable over a term of five years. A default by Beneq on the payments due under the promissory notes could materially and adversely affect the assets and financial condition of the Company.

Variability of customer requirements or losses of key customers may adversely affect the Company’s operating results.

The Company must provide increasingly rapid product turnaround and respond to ever-shorter lead times, while at the same time meet its customers’ product specifications and quality expectations. A variety of conditions, including bankruptcy and other conditions both specific to individual customers and generally affecting the demand for their products, may cause customers to cancel, reduce, or delay orders. These actions by a significant customer or by a set of customers could adversely affect the Company’s business. On occasion, customers require rapid increases in production, which can strain the Company’s resources and reduce margins. The Company may lack sufficient capacity at any given time to meet customers’ demands. Sales to a significant customer, if lost, could have a material, adverse impact on the results of operations. If accounts receivable from a significant customer or set of customers became uncollectible, a resulting charge could have a material adverse effect on operations, although the Company does maintain allowances for estimated losses resulting from the inability of its customers to make required payments.

The Company may lose key licensors, sales representatives, foundries, licensees, vendors, other business partners and employees due to uncertainties regarding the future results of Planar or the worldwide economic condition, which could seriously harm Planar.

Sales representatives, vendors, resellers, distributors, and others doing business with the Company may experience uncertainty about their future role with the Company, may elect not to continue doing business with Planar, may seek to modify the terms under which they do business in ways that are less attractive, more costly, or otherwise damaging to the business of Planar, or may declare bankruptcy or otherwise cease operations. Loss of relationships with these business partners could adversely affect Planar’s business, financial condition, and results of operations. Similarly, the Company’s employees may experience uncertainty about their future role with the Company to the extent that its operations are unsuccessful or its strategies are changed significantly. This may adversely affect Planar’s ability to attract and retain key management, marketing and technical personnel. The loss of a significant group of key technical personnel would seriously harm the product development efforts of Planar. The loss of key sales personnel could cause the Company to lose relationships with existing customers, which could cause a decline in the sales of the Company’s products.

The Company does not have long-term purchase commitments from its customers.

The Company’s business is generally characterized by short-term purchase orders and contracts which specify certain sales terms but which do not require that purchases be made. The Company typically plans its production and inventory levels based on internal forecasts of customer demand which rely in part on nonbinding forecasts provided by its customers. As a result, the Company’s backlog generally does not exceed three months, which makes forecasting its sales difficult. Inaccuracies in the Company’s forecast as a result of changes in customer demand or otherwise may result in its inability to service customer demand in an acceptable timeframe, the Company holding excess and obsolete inventory, or having unabsorbed manufacturing overhead. The failure to obtain anticipated orders and deferrals or cancellations of purchase commitments because of changes in customer requirements, or otherwise, could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company has experienced such problems in the past and may experience such problems in the future.

Economic or industry factors could result in portions of the Company’s inventory becoming obsolete or in excess of anticipated usage.

The Company is exposed to a number of economic and industry factors that could result in write-offs of inventory. These factors include, but are not limited to, technological and regulatory changes in the Company’s markets, the Company’s ability to meet changing customer requirements, competitive pressures in products and prices, forecasting errors, new product introductions, quality issues with key suppliers, product phase-outs, future customer service and repair requirements, and the availability of key components from the Company’s suppliers. Additionally, while the Company does not generally enter into long-term purchasing commitments with its suppliers, there are certain suppliers of high-end home products with which the Company has long-term purchasing commitments. These commitments could require the Company to purchase inventory it considers obsolete.

The Company must protect its intellectual property, and others could infringe on or misappropriate its rights.

The Company believes that its business success depends, in part, on developing proprietary intellectual property and protecting its proprietary technology. The Company relies on a combination of patent, trade secret, copyright and trademark laws, confidentiality procedures and contractual provisions to protect its intellectual property. The Company seeks to protect some of its technology under trade secret laws, which afford only limited protection. The Company faces risks associated with its intellectual property, including, but not limited to, the following:

•

pending patent and copyright applications may not be issued or may be significantly limited in scope prior to issuance;

•

patent and copyright applications are filed only in a limited number of countries;

•

intellectual property laws may not protect the Company’s intellectual property rights;

•

others may challenge, invalidate, or circumvent any patent or copyright issued to the Company;

•

rights granted under patents or copyrights issued to the Company may not provide competitive advantages to the Company;

•

unauthorized parties may attempt to obtain and use information that the Company regards as proprietary despite its efforts to protect its proprietary rights; and

•

others may independently develop similar technology or design around any patents issued to the Company.

In addition, the Company may find it necessary to defend against claims of infringement. Litigation can be very expensive and can distract management’s time and attention, which could adversely affect the Company’s business. In addition, the Company may not be able to obtain a favorable outcome in any intellectual property litigation. Others could claim that the Company is infringing their patents or other intellectual property rights. In the event of an allegation that the Company is infringing on another’s rights, it may not be able to obtain licenses on commercially reasonable terms from that party, if at all, or that party may commence litigation against the Company. The failure to obtain necessary licenses or other rights or the institution of litigation arising out of such claims could materially and adversely affect the Company’s business, financial condition and results of operations. For instance, a technology licensing company has asserted that various of the Company’s products require a license under certain patents held by such party. In addition, in recent fiscal years, the Company has been made party to lawsuits (among many other defendants) alleging infringement of certain United States patents relating to certain products marketed and sold by the Company, including stands for multiple displays, the Company’s Indisys image processing products and certain projector products. Each of these matters has been resolved and the Company will vigorously defend itself against the assertion of any future claims for infringement and will, as a matter of course, seek indemnification from third-party suppliers, where available. While the Company would, in each instance, seek indemnification from the manufacturer of an accused product if it were found to be liable, a determination of liability against the Company could have an adverse impact on the Company’s business, financial condition, and results of operations.

The market price of the Company’s common stock may be volatile.

The market price of the Company’s common stock has been subject to wide fluctuations. During the Company’s four most recently completed fiscal quarters, the closing price of the Company’s stock ranged from $1.14 to $2.41. The market price of the Company’s common stock in the future is likely to continue to be subject to wide fluctuations in response to various factors, including, but not limited to, the following:

•

variations in the Company’s operating results and financial condition;

•

variations in trading volumes of the Company’s stock;

•

public announcements by the Company as to its expectations of future sales and net income or loss;

•

actual or anticipated announcements of technical innovations or new product developments by the Company or its competitors;

•

changes in analysts’ estimates of the Company’s financial performance;

•

general conditions in the electronics industry; and

•

worldwide economic and financial conditions.

In addition, the public stock markets have experienced extreme price and volume fluctuations that have particularly affected the market prices for many technology companies and that often have been unrelated to the operating performance of these companies. These broad market fluctuations and other factors may continue to adversely affect the market price of the Company’s common stock.

The Company faces risks in connection with potential acquisitions.

The Company has made several acquisitions during its history. Not all of these acquisitions have been successful. It is possible that the Company will make additional acquisitions in the future. The Company’s ability to effectively integrate any future acquisitions will depend on, among other things, the adequacy of its implementation plans, the ability of management to oversee and effectively operate the combined operations and the Company’s ability to achieve desired operational efficiencies. The integration of businesses, personnel, product lines and technologies is often difficult, time consuming and subject to significant risks. For example, the Company could lose key personnel from companies that it acquires, incur unanticipated costs, lose major sources of revenue, fail to integrate critical technologies, suffer business disruptions, fail to capture anticipated synergies, or fail to establish satisfactory internal controls. Any of these difficulties could disrupt the Company’s ongoing business, distract management and employees, increase expenses and decrease revenues. Furthermore, the Company might assume or incur additional debt or issue additional equity securities to pay for future acquisitions. Additional debt may negatively impact the Company’s financial results and increase its financial risk, and the issuance of any additional equity securities could dilute the Company’s then existing shareholders’ ownership. In addition, in connection with any future acquisitions, the Company could:

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incur amortization expense related to intangible assets;

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uncover previously unknown liabilities; or

•

incur large and immediate write-offs that would reduce net income.

Acquisitions are inherently risky, and any acquisition may not be successful. If the Company is unable to successfully integrate the operations of any businesses that it may acquire in the future, its business, financial position, results of operations or cash flows could be materially adversely affected.

Changes in internal controls or accounting guidance could cause volatility in the Company’s stock price.

The Company’s internal controls over financial reporting are not currently required to be audited by its independent registered public accounting firm in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). If, in future periods, the Company’s internal controls over financial reporting are required to be audited by its independent registered public accounting firm significant additional expenditures could be incurred which could adversely impact the Company’s results of operations. Additionally, an audit by the independent public accounting firm could identify a material weakness which would result in the Company receiving an adverse opinion on its internal controls over financial reporting from its independent registered public accounting firm. This could result in additional expenditures responding to the Section 404 internal control audit, heightened regulatory scrutiny and potentially an adverse effect to the price of the Company’s stock.

The Company must maintain satisfactory manufacturing yields and capacity.

An inability to maintain sufficient levels of productivity or to satisfy delivery schedules at the Company’s manufacturing facilities would adversely affect its operating results. At times the Company has experienced lower-than-anticipated manufacturing yields and capacity and lengthened delivery schedules and may experience such problems again in the future, particularly with respect to new products or technologies. Any such problems could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company cannot provide any assurance that current environmental laws and product quality specification standards, or any laws or standards enacted in the future, will not have a material adverse effect on its business.

The Company’s operations are subject to environmental and various other regulations in each of the jurisdictions in which it conducts business. Some of the Company’s products use substances, such as lead, that are highly regulated or will not be allowed in certain jurisdictions in the future. The Company has redesigned certain products to eliminate such substances in its products. In addition, regulations have been enacted in certain jurisdictions which impose restrictions on waste disposal of electronic products and electronics recycling obligations. If the Company fails to comply with applicable rules and regulations in connection with the use and disposal of such substances or other environmental or recycling legislation, it could be subject to significant liability or loss of future sales.

Item 6.

Exhibits


(a)

31.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


				PLANAR SYSTEMS, INC. (Registrant)

DATE: May 13, 2013				/S/ RYAN W. GRAY
				Ryan W. Gray
				Vice President and Chief Financial Officer

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