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 AUGUST 2008 BEACONLosing $62 Million in Fiscal Third Quarter – Planar…PuntsCompany Sells Medical Unit to Raise Cash; Home Theater Losses Continue <August 6, 2008>Planar Systems Inc. announced results for its fiscal third quarter today showing strongly conflicting results in their various business units and booking a net loss of $3.48 per share or more than $62 million for the quarter. This loss includes a $58.4 million impairment charge against goodwill and other intangible assets, and a $300k restructuring charge resulting from a headcount reduction at the start of the quarter. This result was a substantial decline compared to last year’s net loss of $4.1 million for the quarter.
Perhaps because of this performance, the company also announced that it has sold its Medical Products and Technologies Unit to NDS Surgical Imaging for $34.25 million of which $30 million was received at closing, with the remainder due no later than September 25, 2008. The company intends to use this cash influx to retire existing debt and to boost working capital.
The Home Theater Business Unit (HTBU), which included the Runco brand that Planar acquired last year, showed a sales increase of 16% over the previous quarter and 111% over the previous year. Yet the unit showed a GAAP (Generally Accepted Accounting Principles) operating loss of $2.4 million for the quarter on revenues of $13.1 million.
For the nine months ending June 27, 2008 the HTBU is showing an operating loss of $6.6 million on sales of $39.6 million. The company overall showed an operating income of $17.3 million on sales of $225.4 million in the same period. The HTBU is the only unit showing an operating loss for the nine month period.
The company says that they are pleased with their performance as revenues topped analysts’ estimates and they claim on a non-GAAP basis that they actually broke even compared to a loss of $0.04 per share for the same period last year.
In a prepared statement, Gerry Perkel said, “I am pleased with our recent progress shoring up our balance sheet, highlighted by improvement in inventory management and the cash proceeds for the sale of our medical business segment.” Perkel went on to add, “While we are working hard to improve our liquidity and drive additional gains from our businesses that are performing well, we are also committed to turning around our underperforming segments through various actions underway in the current quarter.”
In a conference call with analysts, the company added some additional detail including noting a reduction in gross profit margin from 27.2% for the quarter last year to 25.9% in the second quarter this year to 25.3% in this year’s quarter. According to CFO Scott Hildebrandt, this decline was the result of an unfavorable business unit mix of sales with too much contribution from the lower margin HTBU.
Saying the HTBU’s “results have been disappointing,” CEO Perkel said the unit suffered a double whammy of “weak demand made worse by internal execution issues.” He went on to explain that the unit continued to struggle during the quarter to make a "full integration" of the unit within the company.
Perkel went on to note that the unit was poorly executing from a customer service perspective and that there were some unhappy customers. He also said that he felt that with the HTBU, they were trying to do too many things and needed more focus.
However, Perkel said that he felt the situation was improving and that they have decided to redouble efforts on “core” products and spend more time “featuring our Runco products as we go forward” with a diminished emphasis on their other home theater brands.
On the whole, Perkel sounded an optimistic note, although he pointed out that they continue to have major challenges ahead – not the least of which is digesting the divestiture of their medical business unit and continued efforts to improve the underperforming HTBU and CSBU businesses.
Planar’s stock closed the day at $2.24 per share, up 3.23%. |
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