<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               -----------------

                                   FORM 10-K

             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

    For the fiscal year ended September 28, 2001    Commission File No 0-23018

                               -----------------

                             PLANAR SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

                     Oregon                                93-0835396
         (State or other jurisdiction of                (I.R.S. employer
         incorporation or organization)              identification number)

                             1400 NW Compton Drive
                              Beaverton, OR 97006
         (Address of principle executive offices, including zip code)

                                (503) 690-1100
             (Registrant's telephone number, including area code)

                               -----------------

       Securities registered pursuant to Section 12(b) of the Act: None

   Securities registered pursuant to Section 12(g) of the Act: Common Stock

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X]  NO [_]

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

<TABLE>
<S>                                                                      <C>
As of December 13, 2001
Aggregate market value of the voting stock held by non-affiliates of the
  Registrant based upon the closing bid price of such stock:             $238,022,110
                                                                         ------------
Number of shares of Common Stock outstanding:                              12,547,291
                                                                         ------------
</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the Proxy Statement to be used in connection with the Annual
Meeting of Shareholders to be held on January 31, 2002, are incorporated by
reference into Part III of this report.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                                    Part I

Item 1.

                                   BUSINESS

   Planar Systems, Inc. (Planar) is a leading developer, manufacturer and
marketer of high-performance electronic display systems. The Company's products
include its proprietary electroluminescent (EL) flat-panel displays, active
matrix liquid crystal displays (AMLCDs), and passive matrix liquid crystal
display (PMLCD) products. These products are used in a wide variety of medical,
industrial (process control, instrumentation), transportation, communications
and other applications. The Company competes on a global basis with full
development, manufacturing and marketing operations in both the United States
and Europe. Major customers include Philips, Marconi, Datex Ohmeda, GE Medical,
DataScope, Tokheim, Sun Microsystems, Kodak, Allen Bradley and Dell Computer
Systems.

Industry Background

   The information display industry is undergoing significant changes as the
proliferation and sophistication of microprocessors is increasing the volume of
text, graphics and video information that is generated and displayed. At the
same time, electronic systems are becoming smaller and more portable. Also,
color displays are a rapidly growing part of the display industry. These trends
are converging to drive a growing demand for color, high-performance, flat,
lightweight, power-efficient displays that are capable of delivering high
volumes of information. Although commodity CRTs dominate the overall
information display market, they are bulky, fragile, and require substantial
amounts of power to operate.

   There are several display technologies currently in development or
commercially available, including various forms of liquid crystal, gas plasma
and EL displays. The principal bases of competition among display suppliers are
commercial availability, long life, price, performance, size, customer service,
design flexibility, power usage and ruggedness.

   Passive Matrix LCD--PMLCDs modulate light (which is either reflected or
transmitted) by applying a voltage to a liquid crystal material placed between
two glass plates. These are typically monochrome displays.

   Active Matrix LCD--AMLCD screens incorporate the PMLCD technology plus add a
transistor at every pixel location. This allows each pixel to be turned on and
off independently which increases the image quality, response time and
side-to-side viewing angle of the display. These are typically color displays.

   Gas Plasma--Gas plasma creates a visible image by ionizing a gas contained
between two glass plates. The ionized gas emits an ultra-violet light, which
excites phosphors and emit visible light. Gas plasma displays generally have
higher power consumption requirements than other display technologies but may
provide the most cost effective solution for large-sized displays. These
displays are primarily used in industrial and entertainment applications.

   Electroluminescent--Planar's standard monochrome EL display technology is a
solid state device with a thin-film luminescent layer sandwiched between
transparent dielectric (insulator) layers and a matrix of row and column
electrodes deposited on a single glass substrate. A circuit board, with control
and drive components mounted within the same area as the viewing area on the
glass panel, is connected to the back of the glass substrate using various
interconnect technologies. The result is a flat, compact, reliable and rugged
display device. When AC voltage is applied to a column and a row electrode, the
phosphor thin film between them emits light that passes through the transparent
electrode, through the glass face, and on to the viewer. Increasing the number
of rows and columns, and thus the number of pixels in a given space, increases
the clarity of the display to the viewer.

                                      2

<PAGE>

   Other--There is a wide diversity of new technologies constantly under
development with the objective of competing in this market. Some of the more
visible efforts include field emissions displays (FED), ferroelectric LCDs,
organic light emitting diodes (OLEDs) and various forms of projection displays.

Markets

   The Company is currently serving the following core market segments:

   Medical--Displays are used in patient monitors and a range of diagnostic and
therapeutic equipment, including defibrillators, anesthesia systems,
ventilators, infusion pumps and blood analyzers. These medical applications
typically require a wide viewing angle and clear, crisp images readable from
across the room in varying light conditions. The Company also sells medical
monitors to both OEMs for use in their systems and to some end-users such as
hospitals and medical clinics. The Company believes that its displays provide
superior display quality and reliability for crucial medical applications.

   Industrial--Displays are used in a wide range of manufacturing environments,
including the gas pump industry, industrial computers, operator interfaces and
machine control panels. The acquisition of AllBrite Technologies, Inc. in
December 2000 provided the company with a significant position in the automated
teller machine (ATM) and kiosk market. The reliability, ruggedness, wide
operating temperature range and low susceptibility to electromagnetic
interference of Planar displays permit the Company to deliver solutions to a
range of problems in these difficult environments. The Company's displays are
also used in a wide range of test and measurement products, including digital
oscilloscopes, analyzers and telecommunications test equipment. The Company
believes there is an increasing market demand for the Company's displays in
smaller, more portable test equipment.

   Transportation--The Company's sales in this market formerly consisted
primarily of high-performance CRTs sold to systems integrators for military
cockpits and displays for commercial transportation applications. The Company
closed its CRT business during fiscal 2001. This business did not have any
future orders as the customers were moving to flat-panel display solutions. The
Company had been in the military avionics AMLCD market, which it exited upon
completion of existing contracts during fiscal 2001. Additionally, the Company
sells processed EL display glass to systems suppliers for integration into
various subsystems used in communications applications, tactical displays,
avionics and shipboard command and control equipment.

   The pervasive use of microprocessors has increased the demand for higher
information-content displays for space- constrained transportation
applications. The Company has sold displays to customers for use in global
positioning applications, long-haul trucks, off-road vehicle instruments, farm
equipment, cockpit displays for trains, warehouse inventory management
displays, forklift applications and railway car information systems.

   In addition to the core markets described above, Planar is serving the
following emerging markets:

   Desktop Monitors--The Company introduced its first commercial products--a
line of flat-panel desktop monitors--in October 2000. These Planar-branded
monitors are available through the leading online retailers. Flat-panel
monitors provide an alternative to larger, more bulky CRTs on the desktop.

   Photonics--The Company has deployed its proprietary Atomic Layer Deposition
(ALD) technology in markets outside displays, beginning with the manufacturing
of thin-film filters for the fiber-optic telecommunications industry. ALD
enables precise control of atom-thin layers of substances on glass, and the
Company believes its unique capabilities will have demonstrable value in the
marketplace.

                                      3

<PAGE>

Products

   The Company offers a variety of displays and display systems in a wide range
of resolutions, formats, viewing areas and technologies. These can be
classified in two primary product lines:

   Flat-Panel Displays--This product line includes monochrome EL and LCD,
multi-color EL and full-color AMLCD displays. This is principally an OEM
(original equipment manufacturer) component market in which the customers
purchase displays to incorporate directly into their products or stand alone
flat panel monitors to integrate into a system. In early fiscal 2001, the
Company began selling a line of commercial flat-panel desktop monitors through
selected retail channels.

   Value-added Display Solutions--To be able to better satisfy customers'
display needs, the Company incorporates displays into systems and sub-systems
that often include keyboards, touch input devices, local computing capability
or special packaging. The Company differentiates its services through the
development of close business relationships with its customers.

Research, Development and Product Engineering

   The Company believes that a significant level of investment in research,
development and product engineering is required to maintain market leadership.
Total expenses were $15.1 million, $14.3 million and $23.8 million for the
fiscal years 2001, 2000, and 1999, respectively, for research, development, and
product engineering. These expenses were partially offset by contract funding
from both government agencies (in the United States and Finland) and private
sector companies of $4.0 million, $3.8 million and $9.7 million in fiscal years
2001, 2000, and 1999, respectively. Research and development expenses of the
Company are primarily related to advanced technology programs in active matrix
electroluminescent (AMEL) technology, AMLCD and PMLCD technologies, organic
light emitting diodes (OLEDs), new drive architectures and fundamental process
improvements. Product engineering expenses are directly related to the design,
prototyping and release to production of new Company products. Research,
development and product engineering expenses consist primarily of salaries,
project materials, outside services, allocation of facility expenses and other
costs associated with the Company's ongoing efforts to develop new products,
processes and enhancements.

   Recent development efforts have been focused on both short-term and
long-term programs designed to enhance the Company's product offerings and
capabilities. These programs include the following:

   AMEL--This program is focused on the development of high resolution image
sources for miniature display applications. Current development efforts are
addressing higher resolution, improved performance, full-color, and lower
manufacturing costs. Potential markets include medical, industrial and
transportation.

   New Technology Development--As part of the Company's strategy, relationships
are continuing to be established to explore various display technologies and
their incorporation into the product line. Some of the projects being pursued
include AMLCDs, fast PMLCDs, backlights, organic light emitting diodes (OLEDs)
and other thin-film devices.

Manufacturing

   The Company operates EL manufacturing facilities in both the United States
and Finland. These facilities produce a wide range of display sizes and types
from 1" x 4" to 12" x 14" that can be manufactured with relatively minor
changes to the basic equipment set-up. The Company's LCD facility, in the U.S.,
is also designed to produce a wide range of display sizes and types.

   The Company's manufacturing operations consist of the procurement and
inspection of components, manufacture of the display component, final assembly
of all components and extensive testing of finished

                                      4

<PAGE>

products. The Company currently procures all of its raw materials from outside
suppliers. This includes glass substrates, driver integrated circuits,
electronic circuit assemblies, power supplies and high-density interconnects.

   Quality and reliability are emphasized in the design and manufacture of the
Company's products. All of the Company's manufacturing facilities have active
operator training/certification programs and regularly use advanced statistical
process control techniques. The Company's products undergo thorough quality
inspection and testing throughout the manufacturing process.

   The Company believes that worldwide quality standards are increasing and
that many customers now want manufacturers to have ISO9001 certification. This
certification requires that a company meet a set of criteria, established by an
independent, international quality organization that measures the quality of
systems, procedures and implementation in manufacturing, marketing and
development of products and services. All of the Company's operating divisions
have received and maintain their ISO9001 certification.

   In addition to its own manufacturing facilities, the Company has agreements
with offshore manufacturers. A portion of the Company's custom liquid crystal
display (LCD) products are manufactured in China and a portion of
electroluminescent (EL) display assembly and testing is done in Indonesia. The
Company also has an equity investment in a Taiwan-based company that
manufactures stand-alone, flat-panel monitors for Planar.

Sales and Marketing

   The Company's products are distributed worldwide primarily through
Company-employed sales personnel. In the United States, Planar has regional
sales personnel in the Austin, Boston, Chicago, New York, Portland, Raleigh and
San Diego metropolitan areas. In addition, there are four sales offices in
Europe--Helsinki, London, Paris, and Munich. Each of these locations is staffed
by a regional sales manager who has responsibility for OEM sales in a specific
region. International sales are conducted through a combination of direct sales
offices (Finland, Germany, France, and the United Kingdom), independent sales
representatives and distributors.

   As of September 28, 2001, the Company's backlog of domestic and
international orders aggregated approximately $44.8 million. The Company
includes in its backlog all accepted contracts or purchase orders that are
scheduled for delivery in the next six months. The Company believes that its
backlog may be of limited utility in predicting future sales. Variations in the
magnitude and duration of contracts received by the Company and customer
delivery requirements may result in substantial fluctuations in backlog from
period to period.

Competition

   The market for information displays is highly competitive, and the Company
expects this to continue. The Company believes that over time this competition
will have the effect of reducing average selling prices of flat-panel displays.
If the Company were unable to increase unit volumes or increase its value-added
contribution to each unit, the Company's results of operations would be
adversely impacted. In addition, the Company's ability to maintain gross
margins will depend in part on its ability to provide additional value to its
customers through peripheral devices and system integration and to reduce cost
of sales in an amount sufficient to compensate for any decreases in commodity
selling prices.

   The Company competes with other display manufacturers based upon commercial
availability, long life, price, display performance (e.g., brightness, color
capabilities, contrast and viewing angle), size, customer service, design
flexibility, power usage, durability and ruggedness. The Company believes its
total quality program, wide range of product offerings, flexibility,
responsiveness, regional production sites, technical support and customer
satisfaction programs are important to the competitive position of the Company.

                                      5

<PAGE>

   The principal display competitors against which the Company competes include
Sharp, Toshiba, Optrex, Seiko-Epson and Hitachi for LCDs; Sharp for EL; Sharp,
DTI, Hitachi and NEC for AMLCDs. In addition, a significant number of Korean
companies including Samsung, Hyundai and Goldstar have also made large
investments in AMLCD technology. In the desktop monitor market, competitors
also include Panasonic, Fujitsu, Samsung, Sony, ViewSonic and others.

   In its photonics business, the Company's competitors include Agere, Corning,
JDS Uniphase and others, most of whom use ion-beam sputtering technology in the
production of their thin-film filters.

Intellectual Property

   The Company relies on a combination of patents, trade secrets, trademarks,
copyrights and other elements of intellectual property law, nondisclosure
agreements and other measures to protect its proprietary rights. The Company
currently owns or has license rights to over 50 patents and several more
pending patent applications for its technologies. The expiration dates of the
Company's existing patents range from 2001 to 2020. Features for which the
Company has and is seeking patent protection include display glass design,
materials, electronics addressing, control functions and process manufacturing.

   Within the agreements under which the Company receives research and
development funding from government agencies, the funding entities retain
certain rights with respect to technical data developed by the Company pursuant
to funded research. Generally, these rights restrict the government's use of
the specific data to governmental purposes, performed either directly or by
third parties sub-licensed by the government. Rights under the Company's
funding agreements with private sector companies vary significantly, with the
Company and the third party each retaining certain intellectual property rights.

Employees

   As of September 28, 2001, the Company had 747 employees worldwide, 494 in
the United States and 253 in Europe. Of these employees, 69 were engaged in
marketing and sales, 91 in research, development and product engineering, 75 in
finance and administration, and 512 in manufacturing and manufacturing support.

   The Company's future success will depend in a large part upon its ability to
continue to attract, retain and motivate highly skilled and qualified
manufacturing, technical, marketing, engineering and management personnel. The
Company's U.S. employees are not represented by any collective bargaining units
and the Company has never experienced a work stoppage in the U.S. The Company's
Finnish employees are, for the most part, covered by national union contracts.
These contracts are negotiated annually between the various unions and the
Employer's Union and stipulate benefits, wage rates, wage increases, grievance
and termination procedures and work conditions.

Item 2. Properties

   The Company leases three of its primary manufacturing facilities and various
sales offices in the United States and Europe. The EL manufacturing operation,
located in Hillsboro, Oregon, leases 70,000 square feet which includes 25,000
square feet of clean room. In addition the Company's assembly operations
located in Beaverton, Oregon, leases 79,000 square feet of custom designed
space, including 15,000 square feet of cleanroom. The European facility,
located in Espoo, Finland, is a custom designed facility in which Planar leases
85,000 square feet, including approximately 15,000 square feet of cleanroom.

   The Company entered into a new lease in August 2001. This facility will be
used for administrative office space, design engineering and associated lab and
research and development activities. The facility is currently under
construction and will be approximately 72,000 square feet. Construction is
expected to be completed in June 2002.

                                      6

<PAGE>

   During 1994, the Company acquired a 21,000 square foot facility, with
approximately 6,000 square feet of cleanroom, also located in Beaverton,
Oregon. This facility is being used for research and development activities and
production of miniature displays. Additionally, the Company has leased 17,000
square feet of an adjacent building.

   On September 26, 1997, the Company acquired Standish Industries, Inc. and
its Lake Mills, Wisconsin, LCD manufacturing operation, which includes a 70,000
square foot facility with approximately 7,500 square feet of cleanroom.

   The Company has field sales offices in key U.S. metropolitan areas and four
sales offices in Europe. The offices are located in the Austin, Boston,
Chicago, New York, Portland, Raleigh, San Diego, Helsinki, London, Paris and
Munich metropolitan areas. Lease commitments for these facilities are short
term; typically six to twelve months. None of these sales offices has
significant leasehold improvements nor are any planned.

   The Company believes that its facilities are adequate for its immediate and
near-term requirements and does not anticipate the need for significant
additional expansion in the near future.

Item 3. Legal Proceedings

   There are no pending, material legal proceedings to which the Company is a
party or to which any of its property is subject.

Item 4. Submission of Matter to a Vote of Security Holders

   No matters were submitted to stockholders during the fourth quarter of the
fiscal year.

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

   Shares of the Company's Common Stock commenced trading in the
over-the-counter market on the Nasdaq National Market System on December 16,
1993, under the symbol PLNR.

   The Company currently intends to retain its earnings to support operations
and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. The following table sets forth for the fiscal periods
indicated, the range of the high and low closing prices for the Company's
Common Stock on the Nasdaq National Market System.

<TABLE>
<CAPTION>
                                                           High   Low
                                                          ------ ------
        <S>                                               <C>    <C>
        Fiscal 2000
           First Quarter................................. $ 7.94 $ 5.25
           Second Quarter................................  16.69   7.25
           Third Quarter.................................  14.50   7.98
           Fourth Quarter................................  19.88  12.25

        Fiscal 2001
           First Quarter................................. $28.88 $14.88
           Second Quarter................................  32.69  12.44
           Third Quarter.................................  28.23  12.38
           Fourth Quarter................................  31.50  16.40
</TABLE>

   During the quarter ended September 28, 2001, the Company sold securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act") upon the exercise of certain stock options granted under the
Company's stock option plans. An aggregate of 4,518 shares of Common Stock were
issued at

                                      7

<PAGE>

exercises prices ranging from $2.50 to $6.50. These transactions were effected
in reliance upon the exemption from registration under the Securities Act
provided by Rule 701 promulgated by the Securities and Exchange Commission
pursuant to authority granted under Section 3 (b) of the Securities Act.

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                            Fiscal year
                                          ----------------------------------------------
                                            2001     2000      1999      1998     1997
                                          -------- --------  --------  -------- --------
                                             (in thousands, except per share amounts)
<S>                                       <C>      <C>       <C>       <C>      <C>
Operations:
Sales.................................... $207,952 $174,551  $122,914  $129,015 $ 88,850
Gross profit.............................   64,828   40,659    33,175    40,252   28,488
Income (loss) from operations............   22,571   (2,160)   (3,151)   11,827   (1,396)
Net income (loss)........................   14,537      543    (5,125)    8,951      274
Net income (loss) per share (diluted).... $   1.13 $   0.05  $  (0.44) $   0.74 $   0.02

Balance Sheet:
Working capital.......................... $ 59,286 $ 50,296  $ 54,378  $ 51,520 $ 52,871
Assets...................................  136,200  128,175   111,771   118,629  114,196
Long-term liabilities....................   13,392   15,486    16,622     4,526    8,851
Shareholders' equity.....................   96,089   73,268    72,744    83,378   77,280
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

                                    GENERAL

   The Company is a worldwide leader in the development, manufacture and
marketing of high performance electronic display products and systems. Planar
began shipping products in 1983 and has experienced revenue growth based upon
the expansion of its product line and market acceptance of its products for a
variety of applications.

                             BUSINESS ACQUISITIONS

   In December 2000, the Company acquired AllBrite Technologies, Inc., by
exchanging 941,823 shares of common stock of the Company for all of the
outstanding capital stock of AllBrite. The acquisition qualified as a tax-free
reorganization and has been accounted for as a pooling of interests under
Accounting Principles Board Opinion No. 16. Accordingly, the fiscal 2000 prior
period consolidated financial statements presented have been restated to
include the combined results of operations, financial position and cash flows
of AllBrite as though it had been a part of the Company. The years prior to and
including fiscal 1999 have not been restated as the impact on the results of
operations, financial position and cash flows are not material.

   Prior to the acquisition, AllBrite's fiscal year ended on December 31. In
recording the business combination, AllBrite's prior period financial
statements have been restated to a year ended September 30, to conform to the
Company's fiscal year-end and the Company's presentation.

                                      8

<PAGE>

                             RESULTS OF OPERATIONS

   The following table sets forth, for the periods indicated, the percentage of
net sales of certain items in the Consolidated Financial Statements of the
Company. The table and the discussion below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
                                                      Fiscal year ended
                                                ---------------------------
                                                Sept. 28, Sept. 29, Sept. 24,
                                                  2001      2000      1999
                                                --------- --------- ---------
   <S>                                          <C>       <C>       <C>
   Sales.......................................   100.0 %   100.0 %   100.0 %
   Cost of sales...............................    68.8      76.7      73.0
                                                  -----     -----     -----
      Gross profit.............................    31.2      23.3      27.0
   Operating expenses:
      Research and development, net............     5.3       6.0      11.4
      Sales and marketing......................     8.1       7.9       9.2
      General and administrative...............     7.2       7.4       7.9
      Non-recurring charges....................    (0.3)      3.2       1.0
                                                  -----     -----     -----
   Total operating expenses....................    20.3      24.5      29.5
                                                  -----     -----     -----
   Income (loss) from operations...............    10.9      (1.2)     (2.5)
   Non-operating income (expense):
      Interest, net............................    (0.2)     (0.2)     (0.2)
      Foreign exchange, net....................    (0.2)      1.2       1.3
      Other, net...............................      --        --      (4.4)
                                                  -----     -----     -----
   Net non-operating income (expense)..........    (0.4)      1.0      (3.3)
                                                  -----     -----     -----
   Income (loss) before income taxes...........    10.5      (0.2)     (5.8)
   Provision (benefit) for income taxes........     3.5      (0.5)     (1.6)
                                                  -----     -----     -----
      Net income (loss)........................     7.0%      0.3%     (4.2)%
                                                  =====     =====     =====
</TABLE>

Sales

   The Company's sales of $208.0 million in 2001 increased $33.4 million or
19.1% as compared to sales of $174.6 million in 2000. The increase in sales was
principally due to higher sales of $23.7 million and $9.4 million within the
Industrial and Medical segments, which increased 39.9% and 15.3%, respectively.
Sales in the Transportation segment were relatively flat year over year.
Industrial market sales increased due to higher volumes of sales to the desktop
monitor and kiosk markets. Sales volumes in the Medical market increased
primarily in the medical instrument and medical monitor markets. The
Transportation segment was the market most negatively impacted by the economic
climate due to its dependency on fuel prices and the capital intensive nature
of our customers' products. Sales to military customers in the Transportation
segment were $29.9 million in 2001 which is a slight increase over fiscal 2000
sales. The Company's sales of $174.6 million in 2000 increased $51.6 million or
42.0% as compared to sales of $122.9 million in 1999. The increase in sales was
principally due to higher sales of $23.9 million, $19.4 million and $8.4
million within the Transportation, Medical and Industrial segments, which
increased 80.7%, 45.7% and 16.4%, respectively. Transportation sales increased
primarily due to higher volume sales in both the vehicle and avionics AMLCD
markets and also due to higher CRT sales volumes. Sales volumes in the Medical
market increased primarily in the medical instrument and medical monitor
markets. Industrial market sales increased due to higher volumes to the kiosk,
wireless test, gas pump and industrial controls industries.

   International sales increased by 39.8% to $49.4 million in 2001 as compared
to $35.4 million recorded in 2000, and increased 31.9% in 2000 from 1999 sales
of $26.8 million. The increase in international sales was due

                                      9

<PAGE>

primarily to increased sales in existing market segments in the Company's
foreign markets, primarily medical monitors in the Company's foreign markets.
As a percentage of total sales, international sales increased to 23.8% in 2001
and decreased to 20.3% in 2000 from 21.8% in 1999. The increase in
international sales in 2001 as a percentage of total sales was mainly
attributable to the overall increase in demand for our medical monitor products
in Europe. In 2000, the decline in international sales as a percentage of total
sales was mainly attributable to the higher sales volumes in 2000.

Gross Profit

   The Company's gross margin as a percentage of sales increased to 31.2% in
2001 from 23.3% in 2000. The increase was primarily due to $7.4 million of
non-recurring charges, which were recorded in 2000 as compared to a
non-recurring gain of $2.2 million in 2001. The Company also realized higher EL
margins as yields improved, higher margins on our commercial AMLCD products due
to increased volumes and higher margins on our CRT products due to higher
yields and increased volumes. These increases were partially offset by lower
margins on the LCD products due to lower volumes and lower gross margins on our
desktop monitor products. The Company's gross margin as a percentage of sales
decreased to 23.3% in 2000 from 27.0% in 1999. The decrease was primarily a
result of the non-recurring charges of $7.4 million, or 4.2% of sales, which
was recorded in the fourth quarter, continuing manufacturing problems
associated with the military AMLCD products, lower EL margins associated with
our new production facility and increased inventory reserves for the end-user
products. These decreases were partially offset by better yields on the LCD
products and higher margins and increased volumes of CRT and commercial AMLCD
products.

Research and Development

   Research and development expenses of $11.1 million increased $605,000 or
5.8% from $10.5 million in the prior year. This increase was due primarily to
increased spending related to our new photonics program. As a percentage of
sales, research and development expenses decreased to 5.3% in 2001 from 6.0% in
2000. This decrease was primarily due to the increase in sales. Research and
Development expenses of $10.5 million in 2000 decreased $3.5 million or 25.5%
from $14.0 million in 1999. The decrease was due to lower development effort
associated with both the commercial and military color AMLCD products and
tighter cost controls. This decrease was partially offset by increases in
research due to less contract funding of $5.9 million received in 2000.

Sales and Marketing

   Sales and marketing expenses increased $3.0 million or 21.5% to $16.9
million in 2001 from $13.9 million in 2000. This increase was primarily due to
the Company's strategic decision to reorganize by market segments, which
resulted in increasing our investments in marketing. In addition, higher
commissions on higher sales volumes contributed to the increase in sales and
marketing expenses. Commission expenses were also higher due to the Company's
decision to move to a direct sales force, which resulted in payments to the old
distributors and the new direct sales force. As a percentage of sales, sales
and marketing expenses increased to 8.1% in 2001 as compared to 7.9% in 2000.
Sales and marketing expenses increased $2.5 million or 22.4% to $13.9 million
in 2000 from $11.4 million in 1999. The increase was due primarily to higher
commissions being paid on the higher sales levels. As a percentage of sales,
sales and marketing expenses decreased to 7.9% in 2000 as compared to 9.2% in
1999. This decrease was due to the sales increasing at a faster rate than the
sales and marketing expenses.

General and Administrative

   General and administrative expenses increased $2.1 million or 16.2% to $15.0
million in 2001 from $12.9 million in 2000. The increases in general and
administrative expenses were primarily due to increased personnel costs and
acquisition costs related to the AllBrite Technologies, Inc. acquisition. As a
percentage of

                                      10

<PAGE>

sales, general and administrative expenses decreased to 7.2% in 2001 from 7.4%
in 2000. General and administrative expenses were $12.9 million in 2000, an
increase of $3.2 million or 33.0% from $9.7 million in 1999. The increase was
primarily due to increased personnel costs and bad debt expenses. As a
percentage of sales, general and administrative expenses decreased to 7.4% of
sales in 2000 from 7.9% of sales in 1999. The decrease was due to higher sales
volumes in 2000 as compared to 1999.

  Amortization of Goodwill and Excess of Fair Market Value of Acquired Net
  Assets over Purchase Price

   In connection with the Company's acquisition of Standish Industries, Inc. in
September 1997, the Company recorded goodwill on its balance sheet for the
excess of the purchase price over the fair value of the net assets acquired.
The goodwill is being amortized over a ten-year period, resulting in operating
expenses of $571,000 per year. Goodwill amortization is included in general and
administrative expenses in the Consolidated Statement of Operations.

   In connection with the Company's acquisition of its Finland operation in
January 1991, the Company exchanged Common Stock with a fair market value
(based upon an independent valuation) equivalent to the value of the business
acquired. Due to historical losses of this business and the expectation of
future losses, the value of the Common Stock paid was less than the fair market
value of the net assets acquired. This required the Company to write fixed
assets down to zero and to record negative goodwill on its balance sheet for
the remaining amount of the excess fair market value of the net assets acquired
over the purchase price. Amortization of this negative goodwill has created a
positive offset to operating expenses in the amount of $120,000 in fiscal 2001
and $476,000 per year in fiscal 2000 and 1999. Negative goodwill was being
amortized over a ten-year period and is included in general and administrative
expenses. The amount was fully amortized during fiscal 2001.

Non-recurring Charges

  CRT Charges

   During the third quarter of fiscal 2001, the Company made a decision to
close its military CRT business. This business was a mature business, in which
the customers have been converting to flat-panel displays over the past few
years. The Company has received last time buy orders from customers and has
shipped all of those orders in the fourth quarter. The Company will complete
the closing of this business in the first quarter of fiscal 2002. As a result
of this decision, the Company has recorded non-recurring charges of $1.2
million, including charges for excess inventory, severance related to workforce
reductions of 29 employees and lease cancellation costs. The inventory charge
of $826,000 has been recorded as cost of sales and the remaining charges of
$383,000 for severance charges and lease termination costs have been recorded
as non-recurring charges in the Consolidated Statements of Operations. Cash of
$383,000 is expected to be used in connection with the severance and lease
termination costs.

  Military AMLCD Charges

   In the fourth quarter of fiscal year 2000, the Company made a decision to
exit its unprofitable business of supplying high performance, full-color AMLCD
flat panel displays for military avionics. As a result of this decision, the
Company recorded non-recurring charges of $13.0 million, including charges
primarily for excess inventory, recognition of losses on contracts which will
not be fulfilled and the expected losses to be incurred in fulfilling the
existing contracts, impairment of fixed assets and workforce reductions of 27
people. Management has completed the fulfillment of existing contracts during
the third quarter of fiscal year 2001. Other actions have substantially been
completed by the end of fiscal year 2001. Cash of $168,000 is expected to be
used in connection with the lease termination costs, which has not yet been
paid.

   During the third quarter of fiscal year 2001, the Company determined that
$3.3 million of the original $13.0 million reserve was not required. The
original estimates changed due to the unanticipated sale of inventory

                                      11

<PAGE>

which had been fully reserved, the use of inventory to build warranty and
replacement units, which was higher than originally anticipated, and the
cancellation of firm purchase commitments all of which were included in the
original inventory reserves. In addition, the estimates changed due to higher
than anticipated yields resulting in lower losses on contracts which were
included in the original reserve and the payment or anticipated settlement of
contractual liabilities and commitments, which were lower than originally
anticipated. These changes in estimates from the original reserve were not
anticipated and resulted in a non-recurring gain in the third quarter of fiscal
year 2001 of $2.2 million, which has been included in cost of sales and an
non-recurring gain of $1.1 million, which has been included in non-recurring
charges in the Consolidated Statements of Operations.

   The Company has recorded $5.2 million of charges related to excess and
obsolete inventory, which has been identified as a direct result of the
decision to exit these product lines. The Company has also recognized expected
losses of $2.2 million to be incurred during the fulfillment of the existing
contracts. Total non-recurring charges of $7.4 million have been recorded as
cost of sales in the Consolidated Statements of Operations in the fourth
quarter of fiscal year 2000. The Company has also recorded a charge of $3.7
million for other contractual liabilities, which relate to losses on contracts
which will not be fulfilled, lease termination costs and other contractual
liabilities. The Company has also recorded a charge of $1.2 million related to
fixed asset impairment. The impairment loss is the carrying amount of the
assets as the assets will be disposed of by abandonment when the contractual
commitments are fulfilled. In addition, the Company has recorded severance
charges of $405,000. Total charges of $5.4 million have been recorded as non-
recurring charges in the Consolidated Statements of Operations in the fourth
quarter of fiscal year 2000. The Company has recorded $200,000 of estimated bad
debt expense for customers who will not pay their existing accounts receivable
balances as a result of the Company's decision to exit these product lines.
This amount has been recorded as general and administrative expense in the
Consolidated Statement of Operations in the fourth quarter of fiscal year 2000.

  Flat Candle Charges

   In the fourth quarter of fiscal year 1999, the Company began to implement a
series of actions intended to align operations with current market conditions
and to improve the profitability of its operations. As a result of these
actions, the Company recorded a non-recurring charge of $1.5 million. These
actions included a workforce reduction of 18 people and the write-off of
prepaid royalties. In addition, the Company decided at that time to sell Planar
Flat Candle, Inc., a wholly owned subsidiary that manufactures and sells
backlights for liquid crystal displays. These actions were completed by the end
of fiscal year 2000 and the total cash paid was $243,000.

   The exit of the Flat Candle business resulted in a charge of $1.1 million
which included inventory charges of $237,000 related to the exit of certain
products, $651,000 related to goodwill, $183,000 related to severance and
$66,000 related to other assets and liabilities. The inventory charge of
$237,000 was recorded as cost of sales and the remaining amount of $900,000 was
recorded as non-recurring charges in the Consolidated Statements of Operations
in the fourth quarter of fiscal year 1999. During the second quarter of fiscal
year 2000, the Company determined that a buyer could not be found. As a result,
the remaining value of the assets was reduced to fair value and a charge of
$200,000 was recorded as non-recurring charges in the Consolidated Statements
of Operations in the second quarter of fiscal year 2000. The assets were
disposed of during fiscal year 2000.

   The Company also recorded additional severance charges of $188,000 related
to headcount reductions. In addition, a charge of $163,000 was recorded related
to prepaid royalties, which were impaired due to lower than expected future
sales. The fair value of the asset was determined through the calculation of
the net present value of discounted cash flows expected to be provided by the
asset. These amounts were recorded as non-recurring charges in the Consolidated
Statements of Operations in the fourth quarter of fiscal year 1999.

   During fiscal year 2001, the Company paid cash of $3.2 million related to
contractual liabilities and severance. The remaining amounts are expected to be
paid through the second quarter of fiscal year 2002.

                                      12

<PAGE>

Operating Expenses

   Operating expenses decreased $562,000 or 1.3% to $42.3 million in 2001 from
$42.8 million in 2000. As a percentage of sales, operating expenses decreased
to 20.3% in 2001 from 24.5% in 2000. Operating expenses increased $6.5 million
or 17.9% to $42.8 million in 2000 from $36.3 million in 1999. As a percentage
of sales, operating expenses decreased to 24.5% in 2000 from 29.5% in 1999.

Non-operating Income and Expense

   Non-operating income and expense includes interest income on investments,
interest expense and net foreign currency exchange gain or loss. Net interest
expense increased to $376,000 in 2001 from $315,000 in 2000. This increase was
due to lower cash balances earning interest offset by lower interest expense on
decreased borrowings in 2001. Net interest expense increased to $315,000 in
2000 from net interest expense of $233,000 in 1999 due to lower cash balances
earning interest income.

   On July 6, 1999, the Company acquired a 20% interest in dpiX Holding Company
LLC, which owns 80.1% of dpiX LLC. The Company paid $5.0 million in cash for
its interest in dpiX Holding Company LLC. dpiX LLC manufactures and sells
amorphous silicon thin-film transistor arrays for use in x-ray digital
detectors and liquid crystal displays. The investment was accounted for under
the equity method of accounting. As part of the acquisition agreement, there
was a disproportionate allocation of profit and losses where the Company
recognized the first $5.0 million of losses incurred. The Company has written
off the entire investment of $5.4 million, which included transaction costs of
$395,000, in the fourth quarter of fiscal year 1999 based upon the actual
losses incurred since the date of acquisition and the belief that the
investment was other than temporarily impaired.

   Foreign currency exchange gains and losses are related to timing differences
in the receipt and payment of funds in various currencies and the conversion of
cash accounts, accounts receivable and accounts payable denominated in foreign
currencies to the applicable functional currency. Foreign currency exchange
gains and losses amounted to a loss of $444,000 in 2001 and gains of $2.1
million in 2000 and $1.7 million in 1999. In the prior year the U.S. dollar was
strengthening against the Finnish Markka which is the opposite of what occurred
in the first quarter of the current year. Fluctuations in the exchange rate
subsequent to January 1, 2001 were mitigated by the adoption of the Company's
hedging strategy. The actual exchange rates at the end of September 1999 were
5.56, which increased to 6.73 at the end of September 2000. From the end of
September 2000, the actual exchange rate decreased to 6.31 at the end December
2000.

   The Company currently realizes about one-fourth of its revenue outside the
United States and expects this to continue in the future. Additionally, the
functional currency of the Company's foreign subsidiary is the Euro which must
be translated to U.S. Dollars for consolidation. Beginning January 1, 2001, the
Company began hedging its Euro exposure with foreign exchange forward
contracts. The Company believes that this hedging will mitigate the risks
associated with foreign currency fluctuations.

Provision for Income Taxes

   The Company recorded a tax provision of $7.2 million in 2001, a tax benefit
of $933,000 in 2000 and a tax benefit of $2.0 million in 1999. For fiscal 2001,
the difference between the effective tax rate and the federal statutory tax
rate was due to state income taxes, permanent differences resulting from
purchase accounting adjustments, research credits, changes in the valuation
allowance and the effects of the Company's foreign tax rates. For fiscal 2000
and 1999, the change in the effective tax rates was due to recognition of book
losses in the United States compared to book income for the Company's Finland
subsidiary. In 2000, the book loss in the United States was due primarily to
the non-recurring charges. In addition, the Company realized a tax benefit
related to a reduction in the valuation allowance related to the net operating
loss carryforward. In 1999, the book loss in the United States was due
primarily to the write-off of the dpiX investment and the non-recurring
charges. As a result of the acquisition of the Company's Finland subsidiary in
January 1991, the Company recognized a change in ownership for tax purposes
that resulted in a limitation on the annual utilization of net operating loss

                                      13

<PAGE>

carryforwards for United States tax purposes. In fiscal 2000 and 1999, the
Company was subject to the $2.1 million annual limitation.

Net Income

   In 2001, net income was $14.5 million or $1.13 per diluted share. Net income
for 2000 was $543,000 or $0.05 per diluted share. In 1999, the net loss was
$5.1 million or $0.44 per diluted share.

                        QUARTERLY RESULTS OF OPERATIONS

   The table below presents unaudited consolidated financial results for each
quarter in the two-year period ended September 28, 2001. The Company believes
that all necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with the Consolidated Financial
Statements. The operating results for any quarter are not necessarily
indicative of the results that may be expected for any future period.

<TABLE>
<CAPTION>
                                                               Three months ended
                                   ---------------------------------------------------------------------------
                                   Sept. 28, June 29, March 30, Dec. 29, Sept. 29, June 30, March 31, Dec. 31,
                                     2001      2001     2001      2000     2000      2000     2000      1999
                                   --------- -------- --------- -------- --------- -------- --------- --------
                                                      (in thousands, except per share data)
<S>                                <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
Sales.............................  $50,647  $52,447   $54,463  $50,395   $47,839  $45,331   $41,950  $39,430
Gross profit......................   15,705   16,885    17,003   15,235     6,760   12,601    11,437    9,860
Income (loss) from operations.....    5,278    6,060     5,835    5,398    (8,715)   3,452     2,215      887
Net income (loss).................    3,402    3,956     3,865    3,314    (4,901)   2,582     1,963      898
Net income (loss) per share
  (diluted).......................  $  0.26  $  0.30   $  0.30  $  0.26   $ (0.42) $  0.21   $  0.16  $  0.08
Weighted average number of common
  shares outstanding (diluted)....   13,298   13,105    13,086   12,930    11,686   12,073    12,092   11,547
</TABLE>

                        LIQUIDITY AND CAPITAL RESOURCES

   Net cash provided by operating activities was $16.4 million, $2.4 million
and $6.0 million in fiscal years 2001, 2000 and 1999, respectively. The net
cash provided by operations in 2001 was due primarily to the net income,
depreciation and amortization and the changes in inventories and other current
assets offset by the changes in accounts receivable, other current liabilities
and deferred taxes. The net cash provided by operations in 2000 was due
primarily to the non-recurring charges, the increase in other current
liabilities and depreciation and amortization offset by the change in deferred
taxes and the other balance sheet accounts. The net cash provided by operations
in 1999 was primarily due to the loss on the dpiX investment and the
non-recurring charges offset by the change in deferred taxes and other balance
sheet accounts.

   Additions to plant and equipment were $13.0 million, $9.2 million and $5.0
million in 2001, 2000 and 1999, respectively. In 2001, the ERP systems in the
U.S. were replaced. Additions and upgrades were also made to all of the
manufacturing facilities. In 2000, significant additions were made related to
the Company's new EL manufacturing facility in Hillsboro, Oregon, which began
operating in the third quarter. Additions were also made related to the
Wisconsin and Finland manufacturing facilities. The significant acquisitions
during 1999 were purchases of equipment for the Wisconsin and Finland
manufacturing operations.

   At September 28, 2001, the Company had two bank line of credit agreements
with a total borrowing capacity of $20.0 million. As of both September 28, 2001
and September 29, 2000, borrowings outstanding under the credit lines were $0.
Borrowings outstanding under the equipment financing lines were $13.7 million
and

                                      14

<PAGE>

$16.1 million as of September 28, 2001 and September 29, 2000, respectively.
The Company believes its existing cash and investments together with cash
generated from operations and existing borrowing capabilities will be
sufficient to meet the Company's working capital requirements for the
foreseeable future.

                       FUTURE ACCOUNTING PRONOUNCEMENTS

   In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations",
("FAS 141") and Statement of Financial Accounting Standards No. 142. "Goodwill
and Other Intangible Assets", (FAS 142"). FAS 141 eliminates the pooling of
interests method of accounting. It is effective for all business combinations
entered into after June 30, 2001. FAS 142 changes the accounting for goodwill
from an amortization method to an impairment only approach. Under FAS 142,
goodwill will be tested annually and whenever events or circumstances occur
indicating that goodwill may be impaired. Upon adoption of FAS 142,
amortization of goodwill will cease. The effective date for FAS 142 is for
fiscal years beginning after December 15, 2001. The Company can elect to early
adopt FAS 142 in its first quarter of fiscal 2002 and has elected to do so.
Upon adoption, the Company will be required to perform a transitional goodwill
impairment assessment. This assessment has not been completed and as such has
not determined the impact this standard will have on its results of operations
or its financial position.

   In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations", ("FAS 143"). FAS 143
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. It is required to be adopted for fiscal years beginning after
June 15, 2002. The Company has not yet determined the impact that this standard
will have on its results of operations or its financial position.

   The FASB also issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", ("FAS 144").
FAS 144 supercedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". This new standard also supercedes certain aspects of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB 30"), with regard to reporting the effects of a disposal of a segment of
a business and will require expected future operating losses from discontinued
operations to be reported in the period incurred (rather than on the
measurement date as required by APB 30). In addition, more dispositions will
qualify for discontinued operations treatment. This statement is required to be
adopted for fiscal years beginning after December 15, 2001 and interim periods
within that fiscal year. The Company has not yet determined what impact this
statement will have on its results of operations or its financial position.

                          FORWARD-LOOKING STATEMENTS

   This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Report contain statements that are
forward-looking statements within the meaning of the Securities Litigation
Reform Act of 1995. Such statements are based on current expectations,
estimates and projections about the Company's business, management's beliefs
and assumptions made by management. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates" and variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties, and assumptions that are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in such forward-looking statements due to numerous
factors including the following: domestic and international business and
economic conditions, changes in growth in the flat panel monitor industry,
changes in customer demand or ordering patterns, changes in the competitive
environment including pricing pressures or technological changes, continued
success in technological advances, shortages of manufacturing capacities from

                                      15

<PAGE>

our third party partners, final settlement of contractual liabilities, future
production variables impacting excess inventory and other risk factors
described below under "Outlook: Issues and Uncertainties''. The forward-looking
statements contained in this Report speak only as of the date on which they are
made, and the Company does not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this Report. If the Company does update one or more forward-looking statements,
investors and others should not conclude that the Company will make additional
updates with respect thereto or with respect to other forward-looking
statements.

Outlook: Issues and Uncertainties

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

A significant slowdown in the demand for our OEM customers' products would
adversely affect our business.

   We generally do not sell products to end users with the exception of our
desktop monitor and medical monitor customers. Instead, we design and
manufacture various display solutions that our Original Equipment Manufacturers
(OEM) customers incorporate into their products. As a result, our success
depends almost entirely upon the widespread market acceptance of our OEM
customers' products. Accordingly, we must identify industries that have
significant growth potential and establish relationships with OEMs in those
industries. Our failure to identify potential growth opportunities or establish
relationships with OEMs in those industries would adversely affect our
business. Our dependence on the success of the products of our OEM customers
exposes us to a variety of risks, including the following:

  .  our ability to match our 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 placed by customers that we can manufacture and ship in a quarter;
     and

  .  the cyclical nature of the industries and markets our customers serve.

   Our failure to address these risks may have an adverse affect on our
revenues and operating results.

We are subject to lengthy development periods and product acceptance cycles.

   We generally sell our displays to OEMs, which then incorporate them into the
products they sell. OEMs make the determination during their product
development programs whether to incorporate our displays or pursue other
alternatives. This requires us to make significant investments of time and
capital in the custom design of display modules well before our customers
introduce their products incorporating these displays and before we can be sure
that we will generate any significant sales to our customers or even recover
our investment. During a customer's entire product development process, we face
the risk that our display will fail to meet our customer's technical,
performance, or cost requirements or will be replaced by a competing product or
alternative technological solution. Even if we complete our design process in a
manner satisfactory to our customer, the customer may delay or terminate its
product development efforts. The occurrence of any of these events would
adversely affect our operating results.

We do not have long-term purchase commitments from our customers.

   Our customers generally do not provide us with firm, long-term volume
purchase commitments. We typically plan our production and inventory levels
based on internal forecasts of customer demand which rely in part on nonbinding
forecasts provided by our customers. As a result, our noncancellable backlog
generally does not exceed three or four months, which makes forecasting our
revenues difficult. Inaccuracies in our forecast as a

                                      16

<PAGE>

result of changes in customer demand or otherwise may result in our 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 could have a material
adverse affect on our business and operating results. We have experienced such
problems in the past and may experience such problems in the future.

We face intense competition.

   The market for information displays is highly competitive, and we expect
this to continue. We believe that over time this competition will have the
effect of reducing average selling prices of our flat panel displays. Certain
of our competitors have substantially greater name recognition and financial,
technical, marketing and other resources than we do. In addition, certain of
our competitors have made and continue to make significant investments in the
construction of manufacturing facilities for AMLCDs and other advanced
displays. We cannot assure you that our competitors will not succeed in
developing or marketing products that would render our products obsolete or
noncompetitive. To the extent we are unable to compete effectively against our
competitors, whether due to such practices or otherwise, our financial
condition and results of operations would be materially adversely affected.

   Our ability to compete successfully depends on a number of factors, both
within and outside our control. These factors include the following:

  .  our success in designing and manufacturing new product solutions,
     including those implementing new technologies;

  .  our ability to address the needs of our customers;

  .  the quality, performance, reliability, features, ease of use, pricing and
     diversity of our product solutions;

  .  foreign currency fluctuations, which may cause a foreign competitor's
     products to be priced significantly lower than our product solutions;

  .  the quality of our customer services;

  .  our efficiency of production;

  .  the rate at which customers incorporate our product solutions into their
     own products; and

  .  product or technology introductions by our competitors.

Shortages of components and materials may delay or reduce our sales and
increase our costs.

   Our inability to obtain sufficient quantities of components and other
materials necessary to produce our displays could result in reduced or delayed
sales or lost orders. Any delay in or loss of sales could adversely impact our
operating results. We obtain many of the materials we use in the manufacture of
our displays from a limited number of suppliers, and we do not have long-term
supply contracts with any of them. As a result, we are subject to increased
costs, supply interruptions and difficulties in obtaining materials. Our
customers also may encounter difficulties or increased costs in obtaining from
others the materials necessary to produce their products into which our
displays are incorporated.

   We depend on Topvision Display Technologies, Inc., which is located in
Taiwan, for the manufacture of the displays that we sell in the medical monitor
and desktop monitor markets. We also rely on certain other contract
manufacturing operations in Asia for the manufacture of circuit boards and
other components and the manufacture and assembly of certain of our products.
We do not have a long-term supply contract with Topvision or the other Asian
contract manufacturers on which we rely. If Topvision were to terminate its
arrangements with us or become unable to provide these displays to us on a
timely basis, we would be unable to sell our medical monitor and desktop
monitor products until alternative manufacturing arrangements could be made. If
one or more of the other contract manufacturers on which we rely were to
terminate its arrangements with us or become

                                      17

<PAGE>

unable to provide products or services to us, our ability to sell certain
products would be impaired until alternative arrangements could be made.
Furthermore, we cannot assure you that we would be able to establish
replacement manufacturing or assembly arrangements and relationships on
acceptable terms, which could have a material adverse effect on our revenue and
earnings.

   Our reliance on Topvision and other contract manufacturers involves certain
risks, including:

  .  the lack of control over production capacity and delivery schedules;

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

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

  .  trade policies and political and economic instability.

   Topvision, as well as other third parties with which we do business, are
located in Taiwan. In 1999, Taiwan experienced several earthquakes which
resulted in many Taiwanese companies experiencing related business
interruptions. Our business could suffer significantly if Topvision's or other
significant vendors' operations were disrupted for an extended period of time.

Our exit from the military flat panel AMLCD and CRT business will reduce our
revenues and may be more costly than we expect.

   We announced in September 2000 that we were exiting the military flat panel
AMLCD business and would not seek new military flat panel AMLCD supply
contracts or contract extensions when the existing contracts expire in fiscal
2001. At that time, we recorded a non-recurring charge of approximately $13
million to cover excess inventory, expected losses on contracts which will not
be fulfilled, expected losses on contracts that will be fulfilled, impairment
of fixed assets and workforce reductions, all in connection with the decision
to exit the military flat panel AMLCD business. In the third quarter of fiscal
2001, we also announced our intention to close our CRT business which resulted
in a charge of $1.2 million. Our inability to satisfy our obligations under
existing contracts could result in warranty obligations that exceed the amounts
we have recorded, which would adversely affect our earnings. In addition, our
decision to exit these businesses could impair our ability to continue to
participate in the commercial avionics market, which would adversely affect our
revenues and earnings.

We must maintain satisfactory manufacturing yields and capacity.

   Our inability to maintain high levels of productivity or to satisfy delivery
schedules at our manufacturing facilities would adversely affect our operating
results. The design and manufacture of our displays involves highly complex
processes that are sensitive to a wide variety of factors, including the level
of contaminants in the manufacturing environment, impurities in the materials
used and the performance of personnel and equipment. At times we have
experienced lower than anticipated manufacturing yields and lengthening of
delivery schedules and may experience such problems in the future, particularly
with respect to new products or technologies. Any such problems could have a
material adverse effect on our revenue and earnings.

Our continued success depends on the development of new products and
technologies.

   Our future results of operations will depend in part on our ability to
improve and market our existing products and to successfully develop,
manufacture and market new products. If we are not able to continue to improve
and market our existing products, develop and market new products and continue
to make technological developments, our products or technology could become
obsolete or noncompetitive. Even if we are successful in developing new
products, new products typically result in pressure on gross margins during the
initial phases as costs of manufacturing start-up activities are spread over
lower initial sales volumes. We have experienced lower than expected yields
with respect to new products and processes in the past. These low yields have a
negative impact on gross margins. In addition, customer relationships can be
negatively impacted due to production problems and late delivery of shipments.

                                      18

<PAGE>

   A portion of our display products rely on EL technology, which currently
constitutes only a small portion of the information display market. Through the
acquisition of Standish Industries, Inc., we have diversified our display
products and expanded our addressable market significantly to include flat
panel PMLCD applications. Our future success will depend in part upon increased
market acceptance of existing EL, PMLCD and AMLCD technologies and other future
technological developments. Some of our competitors are investing substantial
resources in the development and manufacture of displays using a number of
alternative technologies. If these efforts result in the development of
products that offer significant advantages over our products, and we are unable
to improve our technology or develop or acquire an alternative technology that
is more competitive, our business and results of operations will be adversely
affected.

   Our future operating results will depend to a significant extent on our
ability to continue to provide new product solutions that compare favorably on
the basis of time to introduction, cost and performance with the design and
manufacturing capabilities of OEMs and competitive third-party suppliers. Our
success in attracting new customers and developing new business depends on
various factors, including the following:

  .  utilization of advances in technology;

  .  innovative development of new solutions for customer products;

  .  efficient and cost-effective services; and

  .  timely completion of the design and manufacture of new product solutions.

Our efforts to develop new technologies may not result in commercial success.

   Our research and development efforts with respect to new technologies may
not result in customer or widespread market acceptance. Some or all of those
technologies may not successfully make the transition from the research and
development lab to cost-effective production as a result of technology
problems, competitive cost issues, yield problems and other factors. Even when
we successfully complete a research and development effort with respect to a
particular technology, our customers may determine not to introduce or may
terminate products utilizing the technology for a variety of reasons, including
the following:

  .  difficulties with other suppliers of components for the products;

  .  superior technologies developed by our competitors;

  .  price considerations;

  .  lack of anticipated or actual market demand for the products; and

  .  unfavorable comparisons with products introduced by others.

Our efforts to sell desktop monitors in the end-user market may not be
successful.

   We recently began selling flat panel AMLCD monitors in the desktop market.
We generally have not sold our products in end-user markets and have entered
into arrangements with a number of large computer retailers to market our
desktop monitor products. The market for desktop monitors is highly
competitive, subject to rapid price changes, subject to rapid technological
change and subject to changes in consumer tastes and demand. Our failure to
successfully monitor and control inventory levels or quickly respond to pricing
changes, technological changes or changes in consumer tastes and demand could
result in excess and obsolete inventories of our desktop monitor products which
could adversely affect our business and operating results.

We face risks associated with international operations.

   Our manufacturing, sales and distribution operations in Europe and Asia
create a number of logistical and communications challenges. Our international
operations also expose us to various economic, political and other risks,
including 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;

                                      19

<PAGE>

  .  overlap of tax issues;

  .  tariffs, export control and duties;

  .  possible employee turnover or labor unrest;

  .  lack of developed infrastructure;

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

  .  political or economic instability in certain parts of the world.

   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, or the expropriation of private enterprises also could
have a material adverse effect on us. Any actions by our host countries to
reverse policies that encourage foreign investment or foreign trade also could
adversely affect our 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 our services to our U.S. customers.

Variability of customer requirements may adversely affect our operating results.

   Custom manufacturers for OEMs must provide increasingly rapid product
turnaround and respond to ever-shorter lead times. A variety of conditions,
both specific to individual customers and generally affecting the demand for
their products, may cause customers to cancel, reduce, or delay orders.
Cancellations, reductions, or delays by a significant customer or by a group of
customers could adversely affect our business. On occasion, customers require
rapid increases in production, which can strain our resources and reduce our
margins. Although we have increased our manufacturing capacity, we may lack
sufficient capacity at any given time to meet our customers' demands if their
demands exceed anticipated levels.

Our operating results have significant fluctuations.

   In addition to the variability resulting from the short-term nature of our
customers' commitments, other factors contribute to significant periodic
quarterly fluctuations in our results of operations. These factors include the
following:

  .  the timing of orders;

  .  the volume of orders relative to our capacity;

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

  .  evolution in the life cycles of customers' products;

  .  timing of expenditures in anticipation of future orders;

  .  effectiveness in managing manufacturing processes;

  .  changes in cost and availability of labor and components;

  .  product mix;

  .  headcount reductions and other non-recurring charges;

  .  pricing and availability of competitive products and services; and

  .  changes or anticipated changes in economic conditions.

   Accordingly, you should not rely on the results of any past periods as an
indication of our future performance. It is likely that in some future period,
our operating results may be below expectations of public market analysts or
investors. If this occurs, our stock price may decrease.

We must effectively manage our growth.

   The failure to manage our growth effectively could adversely affect our
operations. We have increased the number of our manufacturing and design
programs and may expand further the number and diversity of our programs in the
future. Our ability to manage our planned growth effectively will require us to:

  .  enhance our operational, financial and management systems;

                                      20

<PAGE>

  .  expand our facilities and equipment; and

  .  successfully hire, train and motivate additional employees.

   The expansion and diversification of our product and customer base may
result in increases in our overhead and selling expenses. We also may be
required to increase staffing and other expenses as well as our expenditures on
capital equipment and leasehold improvements in order to meet the anticipated
demand of our customers. Any increase in expenditures in anticipation of future
orders that do not materialize would adversely affect our profitability.
Customers also may require rapid increases in design and production services
that place an excessive short-term burden on our resources.

We must protect our intellectual property, and others could infringe on or
misappropriate our rights.

   We believe that our continued success depends in part on protecting our
proprietary technology. We rely on a combination of patent, trade secret and
trademark laws, confidentiality procedures and contractual provisions to
protect our intellectual property. We seek to protect certain of our technology
under trade secret laws, which afford only limited protection. We face risks
associated with our intellectual property, including the following:

  .  pending patent applications may not be issued;

  .  intellectual property laws may not protect our intellectual property
     rights;

  .  third parties may challenge, invalidate, or circumvent any patent issued
     to us;

  .  rights granted under patents issued to us may not provide competitive
     advantages to us;

  .  unauthorized parties may attempt to obtain and use information that we
     regard as proprietary despite our efforts to protect our proprietary
     rights; and

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

   We may find it necessary to take legal action in the future to enforce or
protect our intellectual property rights or to defend against claims of
infringement. Litigation can be very expensive and can distract our
management's time and attention, which could adversely affect our business. In
addition, we may not be able to obtain a favorable outcome in any intellectual
property litigation.

   Third parties could claim that we are infringing their patents or other
intellectual property rights. In the event that a third party alleges that we
are infringing its rights, we may not be able to obtain licenses on
commercially reasonable terms from the third party, if at all, or the third
party may commence litigation against us. The failure to obtain necessary
licenses or other rights or the institution of litigation arising out of such
claims could materially and adversely affect us.

The market price of our common stock may be volatile.

   The market price of our common stock has been subject to wide fluctuations.
During the last twelve months ended September 28, 2001, the closing market
price of our stock has ranged from $12.38 to $32.69. The trading price of our
common stock in the future is likely to continue to be subject to wide
fluctuations in response to various factors, including the following:

  .  variations in our quarterly operating results;

  .  actual or anticipated announcements of technical innovations or new
     product developments by us or our competitors;

  .  changes in analysts' estimates of our financial performance;

  .  general conditions in the electronics industry; and

  .  worldwide economic and financial conditions.

                                      21

<PAGE>

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

We must finance the growth of our business and the development of new products.

   To remain competitive, we must continue to make significant investments in
research and development, equipment and facilities. As a result of the increase
in fixed costs and operating expenses related to these capital expenditures,
our failure to increase sufficiently our net sales to offset these increased
costs would adversely affect our operating results.

   From time to time, we may seek additional equity or debt financing to
provide for the capital expenditures required to maintain or expand our design
and production facilities and equipment. We cannot predict the timing or amount
of any such capital requirements at this time. If such financing is not
available on satisfactory terms, we may be unable to expand our business or to
develop new business at the rate desired and our operating results may suffer.
Debt financing increases expenses and must be repaid regardless of operating
results. Equity financing could result in additional dilution to existing
stockholders.

We may pursue acquisitions and investments that could adversely affect our
business.

   In the past we have made, and in the future we may make, acquisitions of and
investments in businesses, products and technologies that are intended to
complement our business, expand the breadth of our markets, enhance our
technical capabilities, or otherwise offer growth opportunities. If we make any
future acquisitions, we could issue stock, incur substantial debt, or assume
contingent liabilities. Any acquisitions that we undertake, including our
recent acquisition of AllBrite Technologies, Inc., could be difficult to
integrate, disrupt our business, dilute stockholder value and harm our
operating results. Any such acquisitions may also involve numerous risks,
including the following:

  .  problems assimilating the purchased operations, technologies, or products

  .  unanticipated costs associated with the acquisition;

  .  diversion of management's attention from our core businesses;

  .  adverse effects on existing business relationships with suppliers and
     customers;

  .  risks associated with entering markets in which we have no or limited
     prior experience; and

  .  potential loss of key employees of purchased organizations.

   We cannot assure you that we would be successful in overcoming problems
encountered in connection with such acquisitions, and our inability to do so
could adversely affect our business and operating results.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   The Company's exposure to market risk for changes in interest rates relates
primarily to its investment portfolio, and short-term and long-term debt
obligations. The Company mitigates its risk by diversifying its investments
among high credit quality securities in accordance with the Company's
investment policy.

   The Company believes that its net income or cash flow exposure relating to
rate changes for short-term and long-term debt obligations is not material. The
Company primarily enters into debt obligations to support capital expenditures
and working capital needs. The Company does not hedge any interest rate
exposures.

   Interest expense is affected by the general level of U.S. interest rates
and/or LIBOR. Increases in interest expense resulting from an increase in
interest rates would be offset by a corresponding increase in interest earned
on the Company's investments.

   The Euro is the functional currency of the Company's subsidiary in Finland.
The Company enters into foreign exchange forward contracts to hedge certain
balance sheet exposures and intercompany balances against

                                      22

<PAGE>

future movements in foreign exchange rates. The forward exchange contracts are
settled and renewed on a monthly basis in order to maintain a balance between
the balance sheet exposures and the contract amounts. The Company maintains
open contracts of approximately $8.3 million. If rates shifted dramatically,
the Company believes it would not be materially impacted. In addition, the
Company does maintain cash balances denominated in currencies other than the
U.S. Dollar. If foreign exchange rates were to weaken against the U.S. Dollar,
the Company believes that the fair value of these foreign currency amounts
would not decline by a material amount.

                                      23

<PAGE>

Item 8. Financial Statements and Supplementary Data

                             PLANAR SYSTEMS, INC.

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
   <S>                                                                   <C>
   Independent Auditors' Report.........................................  25
   Consolidated Balance Sheets..........................................  26
   Consolidated Statements of Operations................................  27
   Consolidated Statements of Cash Flows................................  28
   Consolidated Statements of Shareholders' Equity......................  29
   Notes to Consolidated Financial Statements...........................  30
</TABLE>

                                      24

<PAGE>

                         Independent Auditors' Report

The Board of Directors
Planar Systems, Inc. and Subsidiaries:

   We have audited the accompanying consolidated balance sheets of Planar
Systems, Inc. and subsidiaries as of September 28, 2001 and September 29, 2000,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended September 28,
2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based upon our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Planar
Systems, Inc. and subsidiaries as of September 28, 2001 and September 29, 2000,
and the results of their operations, and their cash flows for each of the years
in the three-year period ended September 28, 2001 in conformity with accounting
principles generally accepted in the United States of America.

/s/ KPMG LLP
KPMG LLP

Portland, Oregon
October 29, 2001

                                      25

<PAGE>

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       Sept. 28,   Sept. 29,
                                                                                         2001        2000
                                                                                       ---------   ---------
                                                                                       (In thousands, except
                                                                                        per share amounts)
<S>                                                                                    <C>         <C>
                                       ASSETS
Current assets:
   Cash and cash equivalents.......................................................... $ 22,007    $ 16,456
   Accounts receivable, net of allowance for doubtful accounts of $1,705 at 2001 and
     $3,146 at 2000 (Note 2)..........................................................   34,817      28,516
   Inventories........................................................................   23,192      29,728
   Other current assets (Note 8)......................................................    5,989      15,017
                                                                                       --------    --------
       Total current assets...........................................................   86,005      89,717
Property, plant and equipment, net (Note 5)...........................................   35,460      27,738
Goodwill..............................................................................    3,428       4,004
Other assets (Note 8).................................................................   11,307       6,716
                                                                                       --------    --------
                                                                                       $136,200    $128,175
                                                                                       ========    ========
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable................................................................... $  8,981    $ 15,318
   Accrued compensation...............................................................    7,096       4,870
   Current portion of long-term debt (Note 6).........................................    2,019       2.023
   Deferred revenue...................................................................      478       1,080
   Other current liabilities (Notes 7 and 8)..........................................    8,145      16,130
                                                                                       --------    --------
       Total current liabilities......................................................   26,719      39,421
Long-term debt, less current portion (Note 6).........................................   11,686      14,126
Other long-term liabilities (Note 8)..................................................    1,706       1,360
                                                                                       --------    --------
       Total liabilities..............................................................   40,111      54,907

Shareholders' equity:
   Preferred stock, $.01 par value. Authorized 10,000,000 shares, no shares issued at
     2001 or 2000.....................................................................       --          --
   Common stock, no par value. Authorized 30,000,000 shares; issued 12,533,823 and
     11,851,976 shares at 2001 and 2000, respectively.................................   87,803      79,296
   Retained earnings..................................................................   19,554       6,078
   Accumulated other comprehensive loss (Note 13).....................................  (11,268)    (12,106)
                                                                                       --------    --------
       Total shareholders' equity.....................................................   96,089      73,268
                                                                                       --------    --------
                                                                                       $136,200    $128,175
                                                                                       ========    ========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      26

<PAGE>

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        Fiscal year ended
                                                  ----------------------------
                                                  Sept. 28, Sept. 29, Sept. 24,
                                                    2001      2000      1999
                                                  --------- --------- ---------
                                                    (In thousands, except per
                                                         share amounts)
<S>                                               <C>       <C>       <C>

Sales............................................ $207,952  $174,551  $122,914
Cost of sales....................................  143,124   133,892    89,739
                                                  --------  --------  --------
Gross profit.....................................   64,828    40,659    33,175

Operating expenses:
   Research and development, net.................   11,065    10,460    14,047
   Sales and marketing...........................   16,892    13,902    11,357
   General and administrative....................   14,954    12,867     9,671
   Non-recurring charges (Note 4)................     (654)    5,590     1,251
                                                  --------  --------  --------
       Total operating expenses..................   42,257    42,819    36,326
                                                  --------  --------  --------
Income (loss) from operations....................   22,571    (2,160)   (3,151)

Non-operating income (expense):
   Interest income...............................      810       859     1,341
   Interest expense..............................   (1,186)   (1,174)   (1,574)
   Foreign exchange, net.........................     (444)    2.085     1,658
   Loss on investment (Note 3)...................       --        --    (5,395)
                                                  --------  --------  --------
       Net non-operating income (expense)........     (820)    1,770    (3,970)
                                                  --------  --------  --------
Income (loss) before income taxes................   21,751      (390)   (7,121)
Provision (benefit) for income taxes (Note 8)....    7,214      (933)   (1,996)
                                                  --------  --------  --------
       Net income (loss)......................... $ 14,537  $    543  $ (5,125)
                                                  ========  ========  ========
Basic net income (loss) per share................ $   1.21  $   0.05  $  (0.44)
Average shares outstanding--basic................   11,980    11,557    11,596
Diluted net income (loss) per share.............. $   1.13  $   0.05  $  (0.44)
Average shares outstanding--diluted..............   12,859    12,037    11,596
</TABLE>


         See accompanying notes to consolidated financial statements.

                                      27

<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         Fiscal year ended
                                                   ----------------------------
                                                   Sept. 28, Sept. 29, Sept. 24,
                                                     2001      2000      1999
                                                   --------- --------- ---------
                                                          (In thousands)
<S>                                                <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ 14,537   $   543  $ (5,125)
Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
   Depreciation and amortization..................    7,100     6,092     5,473
   Amortization of excess market value of
     acquired net assets over purchase price......     (120)     (476)     (476)
   Loss on investment.............................       --        --     5,395
   Non-recurring charges..........................   (2,006)   13,163     1,488
   Deferred taxes.................................   (3,883)   (6,240)   (3,497)
   Foreign exchange (gain) loss...................      444    (2,085)   (1,658)
   Tax benefit of stock options exercised.........    2,060       471        22
   (Increase) decrease in accounts receivable.....   (6,167)   (9,791)    1,504
   (Increase) decrease in inventories.............    6,326    (9,089)     (134)
   (Increase) decrease in other current assets....    5,404    (5,113)    3,367
   Increase (decrease) in accounts payable........   (2,639)    4,324     2,126
   Increase (decrease) in accrued compensation....    2,199       846      (447)
   Increase (decrease) in deferred revenue........     (624)      (59)      270
   Increase (decrease) in other current
     liabilities..................................   (6,226)    9,826    (2,350)
                                                   --------   -------  --------
Net cash provided by operating activities.........   16,405     2,412     5,958

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment...................  (13,005)   (9,201)   (4,958)
Investment in a business..........................   (1,533)       --    (5,395)
Increase in other long-term liabilities...........      310       717       593
Net sales (purchases) of short-term investments...       --     2,010    (2,010)
Net sales (purchases) of long-term investments....      351      (950)     (211)
                                                   --------   -------  --------
Net cash used by investing activities.............  (13,877)   (7,424)  (11,981)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) of long-term debt.........   (2,444)   (1,228)   13,356
Net proceeds from long-term accounts receivable...       --       583       120
Net proceeds from issuance of capital stock.......    6,447     3,501       912
Net payments under short-term debt................       --        --   (10,000)
Stock repurchase..................................   (1,061)     (439)   (3,382)
                                                   --------   -------  --------
Net cash provided by financing activities.........    2,942     2,417     1,006
Effect of exchange rate changes...................       81     1,147      (505)
                                                   --------   -------  --------
Net increase (decrease) in cash and cash
  equivalents.....................................    5,551    (1,448)   (5,522)
Cash and cash equivalents at beginning of period..   16,456    17,904    23,426
                                                   --------   -------  --------
Cash and cash equivalents at end of period........ $ 22,007   $16,456  $ 17,904
                                                   ========   =======  ========

Supplemental cash flow disclosure:
   Cash paid for interest......................... $  1,174   $ 1,172  $  1,172
   Cash paid for income taxes..................... $  3,595   $ 1,166  $  1,547
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      28

<PAGE>

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                          Common Stock               Accumulated
                                                       -------------------              Other         Total
                                                                           Retained Comprehensive Shareholders'
                                                         Shares    Amount  Earnings Income (Loss)    Equity
                                                       ----------  ------- -------- ------------- -------------
                                                                 (In thousands, except share amounts)
<S>                                                    <C>         <C>     <C>      <C>           <C>

BALANCE, SEPTEMBER 25, 1998........................... 11,729,349  $74,813 $14,481    $ (5,223)      $84,071
Components of comprehensive loss (Note 13):
   Net loss...........................................         --       --  (5,125)         --        (5,125)
   Currency translation adjustment....................         --       --      --      (3,061)       (3,061)
                                                                                                     -------
       Total comprehensive loss.......................                                                (8,186)
Proceeds from issuance of common stock................     79,166      912      --          --           912
Tax benefit from stock option exercises (Note 8)......         --       22      --          --            22
Stock repurchase......................................   (376,459)      --  (3,382)         --        (3,382)
                                                       ----------  ------- -------    --------       -------
BALANCE, SEPTEMBER 24, 1999........................... 11,432,056   75,747   5,974      (8,284)       73,437
Components of comprehensive loss (Note 13):
   Net income.........................................         --       --     543          --           543
   Currency translation adjustment....................         --       --      --      (4,031)       (4,031)
   Unrealized gain on investments.....................         --       --      --         209           209
                                                                                                     -------
       Total comprehensive loss.......................                                                (3,279)
Proceeds from issuance of common stock................    419,920    3,078      --          --         3,078
Tax benefit from stock option exercises (Note 8)......         --      471      --          --           471
Stock repurchase......................................         --       --    (439)         --          (439)
                                                       ----------  ------- -------    --------       -------
BALANCE, SEPTEMBER 29, 2000........................... 11,851,976   79,296   6,078     (12,106)       73,268
Components of comprehensive income (Note 13):
   Net income.........................................         --       --  14,537          --        14,537
   Currency translation adjustment....................         --       --      --         998           998
   Unrealized loss on investments.....................         --       --      --        (160)         (160)
                                                                                                     -------
       Total comprehensive income.....................                                                15,375
Proceeds from issuance of common stock................    730,172    6,447      --          --         6,447
Tax benefit from stock option exercises (Note 8)......         --    2,060      --          --         2,060
Stock repurchase......................................    (48,325)      --  (1,061)         --        (1,061)
                                                       ----------  ------- -------    --------       -------
BALANCE, SEPTEMBER 28, 2001........................... 12,533,823  $87,803 $19,554    $(11,268)      $96,089
                                                       ==========  ======= =======    ========       =======
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      29

<PAGE>

                             PLANAR SYSTEMS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

   Planar Systems, Inc. was incorporated on April 27, 1983 and commenced
operations in June 1983. Planar Systems, Inc., and its wholly owned
subsidiaries (collectively, the "Company") are engaged in the developing,
manufacturing and marketing of electronic display products and systems. These
display products and systems primarily include electroluminescent displays
(EL), liquid crystal displays (LCDs), active matrix liquid crystal displays
(AMLCDs) and high performance taut shadow mask cathode ray tubes (CRT).

Principles of consolidation

   The consolidated financial statements include the financial statements of
Planar Systems, Inc. and its wholly-owned subsidiaries, Planar International
Ltd., Planar Advance, Inc and AllBrite Technologies, Inc. All significant
intercompany accounts and transactions are eliminated in consolidation.

Fiscal year

   The Company's fiscal year ends on the last Friday in September. The last day
of fiscal 2001, 2000 and 1999 was September 28, September 29 and September 24,
respectively. Due to statutory requirements, Planar International's fiscal
year-end is September 30. All references to a year in these notes are to the
Company's fiscal year ended in the period stated which includes the fiscal year
results of Planar International.

Use of estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results may differ from those estimates.

Foreign currency translation

   The local currency is the functional currency of the Company's foreign
subsidiary. Assets and liabilities of the foreign subsidiary are translated
into U.S. Dollars at current exchange rates, and sales and expenses are
translated using average rates. Gains and losses from translation of net assets
are included in accumulated other comprehensive income (loss). Gains and losses
from foreign currency transactions are included as a component of non-operating
income (expense).

Cash and cash equivalents

   Cash and cash equivalents include cash deposits in banks and highly liquid
instruments with maturities of three months or less from the time of purchase.

Investments

   Debt securities for which the Company does not have the intent or ability to
hold to maturity are classified as available for sale, along with the Company's
investment in equity securities. Securities available for sale are

                                      30

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

carried at fair value, with unrealized gains and losses, net of tax, reported
in accumulated other comprehensive loss. At September 28, 2001 and September
29, 2000, the Company had no investments that qualified as trading or held to
maturity.

   As of September 28, 2001 and September 29, 2000, the Company's investments
in debt and equity securities were classified as cash and cash equivalents. The
investments are diversified among high credit quality securities in accordance
with the Company's investment policy. As of September 28, 2001 and September
29, 2000, all debt securities were invested in either government securities or
commercial paper. These securities have been reported at their fair market
value, which equaled their historical cost. The contractual maturities of the
investments as of September 28, 2001 and September 29, 2000 were less than
three months.

Inventories

   Inventories are stated at the lower of cost (first-in, first-out method) or
market, net of reserves for estimated inventory obsolescence based upon the
Company's best estimate of future product demand. Inventories consist of:

<TABLE>
<CAPTION>
                                                          2001    2000
                                                         ------- -------
       <S>                                               <C>     <C>
       Raw materials.................................... $12,824 $15,793
       Work in process..................................   3,652   7,643
       Finished goods...................................   6,716   6,292
                                                         ------- -------
                                                         $23,192 $29,728
                                                         ======= =======
</TABLE>

   Included in cost of sales are $734, $2,956 and $2,909 of charges related to
inventory obsolescence reserves for the years ended September 28, 2001,
September 29, 2000 and September 24, 1999, respectively. The Company has
inventory reserves of $2,997 and $2,859 as of September 28, 2001 and September
29, 2000, respectively.

Property, plant and equipment

   Depreciation of equipment is computed on a straight-line basis over the
estimated useful lives of the assets, generally three to seven years. Leasehold
improvements are amortized on a straight-line basis over the lesser of the life
of the leases or the estimated useful lives of the assets. Depreciation of the
buildings is computed on a straight-line basis over the estimated useful life
of the buildings, estimated to be 39 years.

Other assets

   Included in other assets of $11,307 and $6,716 as of September 28, 2001 and
September 29, 2000, respectively, are assets associated with equipment which
had not been placed in service as of September 28, 2001 and September 29, 2000
in the amounts of $4,947 and $3,332, respectively.

Income taxes

   Deferred tax assets and liabilities are established for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at the enacted tax rates expected to be in
effect when such amounts are realized or settled. Deferred tax assets are
reduced by a valuation allowance when it is more likely than not that some
portion of the deferred tax assets will not be realized.

                                      31

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


Revenue recognition

   The Company recognizes revenue from product sales generally at the time the
product is shipped. Service revenue is deferred and recognized over the
contract period or as services are rendered.

Research and development costs

   Research and development costs are expensed as incurred. The Company
periodically enters into research and development contracts with certain
governmental agencies and private sector companies. These contracts generally
provide for reimbursement of costs. Funding from research and development
contracts is recognized as a reduction in operating expenses during the period
in which the services are performed and related direct expenses are incurred,
as follows:

<TABLE>
<CAPTION>
                                                   2001     2000     1999
                                                  -------  -------  -------
<S>                                               <C>      <C>      <C>
Research and development expense................. $15,080  $14,309  $23,759
Contract funding.................................  (4,015)  (3,849)  (9,711)
                                                  -------  -------  -------
Research and development, net.................... $11,065  $10,460  $14,047
                                                  =======  =======  =======
</TABLE>

Product warranty

   The Company provides a warranty for its products and establishes an
allowance at the time of sale adequate to cover warranty costs during the
warranty period. The warranty period is generally between twelve and fifteen
months. This reserve is included in other current liabilities (Note 7).

Goodwill and excess fair market value of acquired net assets over purchase price

   Goodwill and the excess of fair market value of acquired net assets over
purchase price are being amortized over a ten-year period using the
straight-line method. Long-lived assets and intangibles are reviewed for
impairment when events or circumstances indicate costs may not be recoverable.
Impairment exists when the carrying value of the asset is greater than the net
undiscounted future cash flows expected to be provided by the asset. If
impairment exists, the asset's book value will be written down to its fair
value. Fair value is determined through quoted market values or through the
calculation of the net present value of discounted future cash flows expected
to be provided by the asset. Accumulated amortization was $2,290 and $1,714 as
of September 28, 2001 and September 29, 2000, respectively.

Net income (loss) per share

   Basic net income (loss) per share was computed using the weighted average
number of common shares outstanding during each period. Diluted net income
(loss) per share is computed using the weighted average number of common shares
plus dilutive common equivalent shares outstanding during the period.
Incremental shares of 879,000, 480,000 and 0 for the fiscal years ended
September 28, 2001, September 29, 2000 and September 24, 1999, respectively,
were used in the calculations of diluted earnings per share. In years in which
a net loss is incurred, no common stock equivalents are included as they are
antidilutive.

Financial instruments

   For short-term financial instruments, including cash and cash equivalents,
accounts receivable, short-term debt, accounts payable and accrued
compensation, the carrying amount approximates the fair value because of

                                      32

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

the immediate short-term nature of those instruments. The fair value of
long-term debt is estimated based upon quoted market prices for similar
instruments or by discounting expected cash flows at rates currently available
to the Company for instruments with similar risks and maturities. The
differences between the fair values and carrying amounts of the Company's
financial instruments at September 28, 2001 and September 29, 2000 were not
material.

Derivative instruments

   Beginning in January 2001, the Company began using forward exchange
contracts to hedge the fluctuations in the dollar value of its foreign currency
accounts receivable and payables related to our Finnish operations. In the year
ended September 28, 2001, after beginning our hedging strategy, the net loss on
foreign exchange was $70, which has been recorded as Foreign exchange, net in
the Consolidated Statements of Operations. The forward exchange contracts are
settled and renewed on a monthly basis in order to maintain a balance between
the balance sheet exposures and the contract amounts. The amounts recorded in
the balance sheet approximate fair value due to the short duration of the
contacts. The Company maintains open contracts of approximately $7,000.

Stock-based compensation plans

   The Company accounts for its stock-based plans under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees".

Future accounting pronouncements

   In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations",
("FAS 141") and Statement of Financial Accounting Standards No. 142. "Goodwill
and Other Intangible Assets", (FAS 142"). FAS 141 eliminates the pooling of
interests method of accounting. It is effective for all business combinations
entered into after June 30, 2001. FAS 142 changes the accounting for goodwill
from an amortization method to an impairment only approach. Under FAS 142,
goodwill will be tested annually and whenever events or circumstances occur
indicating that goodwill may be impaired. Upon adoption of FAS 142,
amortization of goodwill will cease. The effective date for FAS 142 is for
fiscal years beginning after December 15, 2001. The Company can elect to early
adopt FAS 142 in its first quarter of fiscal 2002 and has elected to do so.
Upon adoption, the Company will be required to perform a transitional goodwill
impairment assessment. This assessment has not been completed and as such has
not determined the impact this standard will have on its results of operations
or its financial position.

   In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations", ("FAS 143"). FAS 143
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. It is required to be adopted for fiscal years beginning after
June 15, 2002. The Company has not yet determined the impact that this standard
will have on its results of operations or its financial position.

   The FASB also issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", ("FAS 144").
FAS 144 supercedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". This new standard also supercedes certain aspects of
Accounting Principles Board

                                      33

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" ("APB 30"), with regard to
reporting the effects of a disposal of a segment of a business and will require
expected future operating losses from discontinued operations to be reported in
the period incurred (rather than on the measurement date as required by APB
30). In addition, more dispositions will qualify for discontinued operations
treatment. This statement is required to be adopted for fiscal years beginning
after December 15, 2001 and interim periods within that fiscal year. The
Company has not yet determined what impact this statement will have on its
results of operations or its financial position.

Reclassification

   Certain balances in the 2000 and 1999 financial statements have been
reclassified to conform with 2001 presentations. Such reclassifications had no
effect on results of operations or retained earnings.

NOTE 2 CONCENTRATION OF CREDIT RISK

   Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of trade receivables and investments. The
risk in trade accounts receivable is limited due to the credit worthiness of
the companies comprising the Company's customer base and their dispersion
across many different sectors of the electronics industry and geographies. The
risk in investments is limited due to the credit worthiness of investees
comprising the portfolio, the diversity of the portfolio and relative low risk
of municipal securities. At September 28, 2001, the Company does not believe it
had any significant credit risks.

NOTE 3 BUSINESS ACQUISITIONS

   In December 2000, the Company acquired AllBrite Technologies, Inc., by
exchanging 941,823 shares of Common Stock of the Company for all of the
outstanding capital stock of AllBrite. The acquisition qualified as a tax-free
reorganization and has been accounted for as a pooling of interests under
Accounting Principles Board No. 16. Accordingly, the fiscal 2000 prior period
consolidated financial statements presented have been restated to include the
combined results of operations, financial position and cash flows of AllBrite
as though it had always been a part of the Company. Net income in fiscal 2000
increased $192 due to the business combination. The years prior to and
including fiscal 1999 have not been restated as the impact on the results of
operations, financial position and cash flows are not material.

   Prior to the acquisition, AllBrite's fiscal year ended on December 31. In
recording the business combination, AllBrite's prior period financial
statements have been restated to a year ended September 30, to conform with the
Company's fiscal year-end and the Company's presentation.

   In October 2000, the Company acquired a 12.5% interest in TopVision
Technologies, a Taiwanese manufacturing Company. TopVision manufactures and
sells flat panel monitors. The Company paid $1,533 for its interest in
TopVision. This investment has been accounted for using the cost method of
accounting. During the year ended September 28, 2001, the Company purchased $
18,499 of materials from TopVision.

   On July 6, 1999, the Company acquired a 20% interest in dpiX Holding Company
LLC, which owns 80.1% of dpiX LLC. The Company paid $5,000 in cash for its
interest in dpiX Holding Company LLC. dpiX LLC manufactures and sells amorphous
silicon thin-film transistor arrays for use in x-ray digital detectors and
liquid

                                      34

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

crystal displays. The investment has been accounted for under the equity method
of accounting. As part of the acquisition agreement, there is a
disproportionate allocation of profit and losses where the Company recognizes
the first $5,000 of losses incurred. The Company wrote off the entire
investment of $5,395, which includes transaction costs of $395, in the fourth
quarter of fiscal year 1999 based upon the actual losses incurred since the
date of acquisition and the belief that the investment was other than
temporarily impaired. This charge has been recorded in other non-operating
expenses in the Consolidated Statement of Operations. During the years ended
September 28, 2001, September 29, 2000 and September 24, 1999, the Company
purchased $0, $11,906 and $4,462 of materials from dpiX LLC.

NOTE 4 NON-RECURRING CHARGES

CRT Charges

   During the third quarter of fiscal 2001, the Company made a decision to
close its military CRT business. This business was a mature business, in which
the customers have been converting to flat panel displays over the past few
years. The Company has received last time buy orders from customers and has
shipped all of those orders in the fourth quarter. The Company will complete
the closing of this business in the first quarter of fiscal 2002. As a result
of this decision, the Company has recorded non-recurring charges of $1.2
million, including charges for excess inventory, severance related to workforce
reductions of 29 employees and lease cancellation costs. The inventory charge
of $826,000 has been recorded as cost of sales and the remaining charges of
$383,000 for severance charges and lease termination costs have been recorded
as non-recurring charges in the Consolidated Statements of Operations. Cash of
$383,000 is expected to be used in connection with the severance and lease
termination costs.

Military AMLCD Charges

   In the fourth quarter of fiscal year 2000, the Company made a decision to
exit its unprofitable business of supplying high performance, full-color AMLCD
flat panel displays for military avionics. As a result of this decision, the
Company recorded non-recurring charges of $13.0 million, including charges
primarily for excess inventory, recognition of losses on contracts which will
not be fulfilled and the expected losses to be incurred in fulfilling the
existing contracts, impairment of fixed assets and workforce reductions of 27
people. Management has completed the fulfillment of existing contracts during
the third quarter of fiscal year 2001. Other actions have substantially been
completed by the end of fiscal year 2001. Cash of $168,000 is expected to be
used in connection with the lease termination costs, which has not yet been
paid.

   During the third quarter of fiscal year 2001, the Company determined that
$3.3 million of the original $13.0 million reserve was not required. The
original estimates changed due to the unanticipated sale of inventory which had
been fully reserved, the use of inventory to build warranty and replacement
units, which was higher than originally anticipated, and the cancellation of
firm purchase commitments all of which were included in the original inventory
reserves. In addition, the estimates changed due to higher than anticipated
yields resulting in lower losses on contracts which were included in the
original reserve and the payment or anticipated settlement of contractual
liabilities and commitments, which were lower than originally anticipated.
These changes in estimates from the original reserve were not anticipated and
resulted in a non-recurring gain in the third quarter of fiscal year 2001 of
$2.2 million, which has been included in cost of sales and an non-recurring
gain of $1.1 million, which has been included in non-recurring charges in the
Consolidated Statements of Operations.

                                      35

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


   The Company has recorded $5.2 million of charges related to excess and
obsolete inventory, which has been identified as a direct result of the
decision to exit these product lines. The Company has also recognized expected
losses of $2.2 million to be incurred during the fulfillment of the existing
contracts. Total non-recurring charges of $7.4 million have been recorded as
cost of sales in the Consolidated Statements of Operations in the fourth
quarter of fiscal year 2000. The Company has also recorded a charge of $3.7
million for other contractual liabilities, which relate to losses on contracts
which will not be fulfilled, lease termination costs and other contractual
liabilities. The Company has also recorded a charge of $1.2 million related to
fixed asset impairment. The impairment loss is the carrying amount of the
assets as the assets will be disposed of by abandonment when the contractual
commitments are fulfilled. In addition, the Company has recorded severance
charges of $405,000. Total charges of $5.4 million have been recorded as non-
recurring charges in the Consolidated Statements of Operations in the fourth
quarter of fiscal year 2000. The Company has recorded $200,000 of estimated bad
debt expense for customers who will not pay their existing accounts receivable
balances as a result of the Company's decision to exit these product lines.
This amount has been recorded as general and administrative expense in the
Consolidated Statement of Operations in the fourth quarter of fiscal year 2000.

Flat Candle Charges

   In the fourth quarter of fiscal year 1999, the Company began to implement a
series of actions intended to align operations with current market conditions
and to improve the profitability of its operations. As a result of these
actions, the Company recorded a non-recurring charge of $1.5 million. These
actions included a workforce reduction of 18 people and the write-off of
prepaid royalties. In addition, the Company decided at that time to sell Planar
Flat Candle, Inc., a wholly owned subsidiary that manufactures and sells
backlights for liquid crystal displays. These actions were completed by the end
of fiscal year 2000 and the total cash paid was $243,000.

   The exit of the Flat Candle business resulted in a charge of $1.1 million
which included inventory charges of $237,000 related to the exit of certain
products, $651,000 related to goodwill, $183,000 related to severance and
$66,000 related to other assets and liabilities. The inventory charge of
$237,000 was recorded as cost of sales and the remaining amount of $900,000 was
recorded as non-recurring charges in the Consolidated Statements of Operations
in the fourth quarter of fiscal year 1999. During the second quarter of fiscal
year 2000, the Company determined that a buyer could not be found. As a result,
the remaining value of the assets was reduced to fair value and a charge of
$200,000 was recorded as non-recurring charges in the Consolidated Statements
of Operations in the second quarter of fiscal year 2000. The assets were
disposed of during fiscal year 2000.

   The Company also recorded additional severance charges of $188,000 related
to headcount reductions. In addition, a charge of $163,000 was recorded related
to prepaid royalties, which were impaired due to lower than expected future
sales. The fair value of the asset was determined through the calculation of
the net present value of discounted cash flows expected to be provided by the
asset. These amounts were recorded as non-recurring charges in the Consolidated
Statements of Operations in the fourth quarter of fiscal year 1999.

                                      36

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


   The non-recurring charges incurred affected the Company's financial position
as follows:

<TABLE>
<CAPTION>
                                                     Other  Fixed     Accounts             Accrued        Other
                                        Inventories  Assets Assets   Receivable Goodwill Compensation  Liabilities
                                        -----------  ------ -------  ---------- -------- ------------  -----------
<S>                                     <C>          <C>    <C>      <C>        <C>      <C>           <C>
1999 Original charge...................     $   237  $ 229  $    --    $  --     $ 651          $ 371      $    --
  Cash paid out........................          --     --       --       --        --           (128)          --
  Non-cash write-offs..................        (237)  (229)      --       --      (651)            --           --
                                            -------  -----  -------    -----     -----          -----      -------
Balance as of September 24, 1999.......          --     --       --       --        --            243           --
2000 Activity:
  Additional charges...................       4,701     --    1,444      200        --            405        6,413
  Cash paid out........................          --     --       --       --        --           (243)          --
  Non-cash write-offs..................      (4,701)    --   (1,444)    (200)       --             --           --
                                            -------  -----  -------    -----     -----          -----      -------
Balance as of September 29, 2000.......          --     --       --       --        --            405        6,413
2001 Activity:
  Additional charges (adjustments).....         330     --     (100)      --        --            328       (2,023)
  Cash paid out........................          --     --       --       --        --           (336)      (2,844)
  Non-cash (write-offs) adjustments....        (330)    --      100       --        --             --       (1,150)
                                            -------  -----  -------    -----     -----          -----      -------
Balance as of September 29, 2000.......     $    --  $  --  $    --    $  --     $  --          $ 397      $   396
                                            =======  =====  =======    =====     =====          =====      =======
</TABLE>

   During fiscal year 2001, the Company has paid cash of $3,180 related to
contractual liabilities and severance. The remaining amounts are expected to be
paid through the second quarter of fiscal year 2002.

NOTE 5 PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment, at cost, consists of:

<TABLE>
<CAPTION>
                                                         2001      2000
                                                       --------  --------
     <S>                                               <C>       <C>
     Land............................................. $    115  $    115
     Buildings........................................    3,731     3,731
     Machinery and equipment..........................   63,143    49,805
                                                       --------  --------
       Total property, plant and equipment............   67,049    53,651
     Less accumulated depreciation....................  (31,589)  (25,913)
                                                       --------  --------
       Net property, plant and equipment.............. $ 35,460  $ 27,738
                                                       ========  ========
</TABLE>

NOTE 6 BORROWINGS

Line of credit

   The Company has two bank lines of credit, which allow for total borrowings
up to $20,000. The lines bear interest at the Libor rate plus 100 or 125 basis
points (3.63% or 3.88% at September 28, 2001) or the prime rate (6.0% at
September 28, 2001) and are unsecured with a negative pledge on accounts
receivable and inventories.

                                      37

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

The agreements will expire in April and May 2002. There were $0 of borrowings
outstanding on these lines as of both September 28, 2001 and September 29, 2000.

Long-term debt

   The Company has entered into credit facilities with financial institutions
to finance equipment purchases. These loans are secured by the financed
equipment and bear interest at an average rate of 6.4%. As of September 28,
2001 and September 29, 2000, the Company has $13,705 and $16,149 outstanding
under these loans. Aggregate maturities over the next five years are $2,019 in
2002, $2,151 in 2003, $2,292 in 2004, $2,443 in 2005 and $1,528 in 2006. These
agreements expire at various dates through December 2008. Covenants under these
agreements are not considered restrictive to normal operations.

NOTE 7 OTHER CURRENT LIABILITIES

   Other current liabilities consist of:

<TABLE>
<CAPTION>
                                                                2001   2000
                                                               ------ -------
   <S>                                                         <C>    <C>
   Warranty reserve........................................... $2,203 $ 3,822
   Contractual liabilities and losses.........................  1,765   6,413
   Deferred income taxes......................................    162     197
   Income taxes payable.......................................     --   3,652
   Other......................................................  4,015   2,046
                                                               ------ -------
    Total..................................................... $8,145 $16,130
                                                               ====== =======
</TABLE>

NOTE 8 INCOME TAXES

   The components of income (loss) before income taxes consist of the following:

<TABLE>
<CAPTION>
                                                     2001    2000     1999
                                                    ------- -------  -------
  <S>                                               <C>     <C>      <C>
  Domestic......................................... $19,332 $(3,835) $(8,958)
  Foreign..........................................   2,419   3,445    1,837
                                                    ------- -------  -------
  Total............................................ $21,751 $  (390) $(7,121)
                                                    ======= =======  =======
</TABLE>

   The following table summarizes the provision for US federal, state and
foreign taxes on income:

<TABLE>
<CAPTION>
                                                      2001   2000     1999
                                                     ------ -------  -------
   <S>                                               <C>    <C>      <C>
   Current:
    Federal......................................... $2,685 $ 3,500  $   176
    State...........................................    290     472      238
    Foreign.........................................    356   1,335    1,087
                                                     ------ -------  -------
                                                      3,331   5,307    1,501
   Deferred:
    Federal.........................................  3,252  (5,319)  (2,951)
    State...........................................    629    (704)    (350)
    Foreign.........................................      2    (217)    (196)
                                                     ------ -------  -------
                                                      3,883  (6,240)  (3,497)
                                                     ------ -------  -------
                                                     $7,214 $  (933) $(1,996)
                                                     ====== =======  =======
</TABLE>

                                      38

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


   The differences between the U.S. federal statutory tax rate and the
Company's effective rate are as follows:

<TABLE>
<CAPTION>
                                                            2001   2000    1999
                                                            ----  ------   -----
<S>                                                         <C>   <C>      <C>
Computed statutory rate.................................... 35.0%  (34.0)% (34.0)%
State income taxes, net of federal tax benefits............  4.1    (4.5)    2.7
Effect of foreign tax rates................................ (0.7)     --     0.4
Permanent differences resulting from purchase accounting...  1.0    41.5     3.6
Change in valuation reserve................................ (3.2) (232.8)   (3.9)
Research credits........................................... (2.3)
Effect of change in tax rates.............................. (1.8)     --      --
Benefit of tax exempt interest earned...................... (0.6)   (1.8)   (0.1)
Other, net.................................................  1.7    (7.6)    3.3
                                                            ----  ------   -----
Effective tax rate......................................... 33.2% (239.2)% (28.0)%
                                                            ====  ======   =====
</TABLE>

   The tax effects of temporary differences and carryforwards which gave rise
to significant portions of the deferred tax assets and liabilities as of
September 28, 2001 and September 29, 2000 were as follows:

<TABLE>
<CAPTION>
                                                              2001     2000
                                                             -------  -------
 <S>                                                         <C>      <C>
 Deferred tax assets:
 Inventory valuation reserve................................ $ 1,884  $ 2,439
 Other reserves and liabilities.............................   2,211    3,455
 Non-recurring charges......................................   1,111    4,991
 Intangibles................................................     152      223
 Capital loss carryforwards.................................     415      405
 Net operating loss carryforwards...........................   1,615      543
 Foreign tax credits........................................   1,627    1,629
 Research credits...........................................     654       --
                                                             -------  -------
 Gross deferred tax assets..................................   9,669   13,685
 Valuation allowance........................................    (425)  (1,125)
                                                             -------  -------
    Deferred tax assets.....................................   9,244   12,560
 Deferred tax liabilities:
 Inventory valuation reserve................................    (162)    (197)
 Accumulated depreciation...................................    (969)    (394)
 Operating reserves.........................................     (82)     (55)
                                                             -------  -------
    Deferred tax liabilities................................  (1,213)    (646)
                                                             -------  -------
 Net deferred tax asset..................................... $ 8,031  $11,914
                                                             =======  =======
</TABLE>

                                      39

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


   The deferred tax assets and liabilities are recorded in the following
balance sheet accounts:

<TABLE>
<CAPTION>
                                                               2001    2000
                                                              ------  -------
  <S>                                                         <C>     <C>
  Other current assets....................................... $4,545  $10,904
  Other assets...............................................  3,730    1,207
  Other current liabilities..................................   (162)    (197)
  Other long-term liabilities................................    (82)      --
                                                              ------  -------
  Total...................................................... $8,031  $11,914
                                                              ======  =======
</TABLE>

   During fiscal years 2001, 2000, and 1999 the Company recognized tax benefits
of $2,060, $471, and $22, respectively, related to differences between
financial and tax reporting of stock option transactions. This difference was
credited to common stock.

   The Company has established a valuation allowance for certain deferred tax
assets, including net operating loss and tax credit carryforwards. SFAS No. 109
requires that such a valuation allowance be recorded when it is more likely
than not that some portion of the deferred tax assets will not be realized. For
fiscal year 2001 and 2000, the valuation reserve decreased by $700 and $1,202,
respectively.

   At September 28, 2001, the Company had net operating loss carryforwards of
approximately $4,090 available to reduce future federal taxable income. The
carryforwards expire at various dates through 2020. Utilization of the
carryforwards is subject to certain limitations due to the change in ownership
of the Company, which occurred in conjunction with the acquisition of its
Finland operation. As a result of the acquisition, utilization of available net
operating loss carryforwards is limited to approximately $2,060 per year.

NOTE 9 SHAREHOLDERS' EQUITY

Preferred stock

   The Company is authorized to issue up to 10,000,000 shares of preferred
stock at $.01 par value. At September 28, 2001, no shares of preferred stock
have been issued; however, 200,000 shares of Series D Junior Participating
Preferred Stock have been reserved for issuance in connection with the
Company's Shareholder Rights Plan. Additional series of preferred stock may be
designated and the related rights and preferences fixed by action of the Board
of Directors.

Stock options

   In fiscal 1994, the Company adopted the 1993 Stock Incentive Plan, which
provides for the granting of options to buy shares of Common Stock. These
options are intended to either qualify as "incentive stock options" under the
Internal Revenue Code or "non-qualified stock options" not intended to qualify.
There are 800,000 shares reserved under the 1993 Stock Incentive Plan. Under
the 1993 plan, options issued prior to fiscal 2000 generally become exercisable
25% one year after grant and 6.25% per quarter thereafter, and expire ten years
after grant. Options issued after the beginning of fiscal 2000 generally become
exercisable 25% each six months after grant, and expire 4 years after grant.
During fiscal 1997, the Company adopted the 1996 Stock Incentive Plan with the
same provisions and guidelines as the aforementioned 1993 plan. The Company
reserved 2,100,000 shares of common stock for issuance under this plan. During
fiscal 1999, the Company adopted the 1999 Non Qualified Stock Option Plan with
the same provisions and guidelines as the aforementioned 1993 plan. The

                                      40

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

Company reserved 900,000 shares of common stock for issuance under this plan.
The option price under all plans is the fair market value as of the date of the
grant. Total shares reserved under these plans are 3,800,000 shares.

   The Company also adopted a 1993 stock option plan for Nonemployee Directors
that provides an automatic annual grant to each outside director of the
Company. Total annual grants under this plan cannot exceed 60,000 shares per
year.

   Information regarding these option plans is as follows:

<TABLE>
<CAPTION>
                                                            Number of  Weighted Average
                                                             Shares     Option Prices
                                                            ---------  ----------------
<S>                                                         <C>        <C>
Options outstanding at September 25, 1998.................. 1,535,164       $10.92
  Granted..................................................   818,350         6.39
  Exercised................................................   (38,614)        3.59
  Canceled.................................................   (92,220)        9.67
                                                            ---------       ------
Options outstanding at September 24, 1999.................. 2,222,680         9.04
  Granted..................................................   512,799         9.80
  Exercised................................................  (353,637)        6.26
  Canceled.................................................  (190,052)       10.60
                                                            ---------       ------
Options outstanding at September 29, 2000.................. 2,191,790         9.55
  Granted..................................................   615,130        21.59
  Exercised................................................  (576,885)        9.91
  Canceled.................................................  (181,290)       11.96
                                                            ---------       ------
Options outstanding at September 28, 2001.................. 2,048,745        13.28
                                                            ---------

Exercisable at September 28, 2001.......................... 1,212,821
                                                            =========
</TABLE>

Statement of Financial Accounting Standards No. 123

   During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" which defines a fair value based
method of accounting for an employee stock option or similar equity instrument.
As is permitted under SFAS No. 123, the Company has elected to continue to
account for its stock-based compensation plans under APB Opinion No. 25. The
Company has computed, for pro forma disclosure purposes, the value of all
options granted during 2001, 2000, and 1999 using the Black-Scholes option
pricing model as prescribed by SFAS No. 123 using the following weighted
average assumptions for grants:

<TABLE>
<CAPTION>
                                                             2001  2000  1999
                                                             ----  ----  ----
 <S>                                                         <C>   <C>   <C>
 Risk free interest rate....................................  5.1%  6.0%  6.0%
 Expected dividend yield....................................   --    --    --
 Expected lives (in years)..................................  4.1   4.2   4.2
 Expected volatility........................................ 76.6% 89.4% 65.5%
</TABLE>

   Using the Black-Scholes methodology, the total value of options granted
during fiscal 2001, 2000 and 1999 was $8,736, $3,091, and $3,335, respectively,
which would be amortized on a pro forma basis over the vesting period of the
options. The weighted average fair value of options granted during fiscal 2001,
2000 and 1999 was $13.25 per share, $9.80 per share, and $6.39 per share,
respectively. If the Company accounted for its

                                      41

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)

stock based compensation plans in accordance with SFAS No 123, the Company's
net income and net income per share would approximate the pro forma disclosures
below:

<TABLE>
<CAPTION>
                                                2001             2000             1999
                                          ---------------- ---------------  ----------------
                                             As      Pro      As     Pro       As      Pro
                                          Reported  Forma  Reported Forma   Reported  Forma
                                          -------- ------- -------- ------  -------- -------
<S>                                       <C>      <C>     <C>      <C>     <C>      <C>
Net income (loss)........................ $14,537  $11,399  $ 543   $ (860) $(5,125) $(6,896)
Net income (loss) per share (diluted).... $  1.13  $  0.89  $0.05   $(0.07) $ (0.44) $ (0.59)
</TABLE>

   The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
January 1, 1995, and additional awards are anticipated in future years.

   The following table summarizes information about stock options and grants
outstanding at September 28, 2001:

<TABLE>
<CAPTION>
                                                Options Outstanding        Options Exercisable
                                          -------------------------------- --------------------
                                           Weighted   Average of  Weighted  Number of  Weighted
                                            Number     Remaining  Average    Shares    Average
                                          Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Prices                  at 9/28/01     Life      Price   at 9/28/01   Price
------------------------                  ----------- ----------- -------- ----------- --------
<S>                                       <C>         <C>         <C>      <C>         <C>
$2.50-$2.50..............................     30,415      0.6        2.50      30,415     2.50
$4.25-$6.06..............................     57,758      7.3        5.84      26,821     5.58
$6.38-$9.50..............................    704,163      6.6        7.30     466,746     7.54
$9.88-$14.81.............................    536,597      5.7       12.43     504,879    12.45
$15.56-$22.60............................    481,309      5.4       18.53     104,153    17.75
$23.38-$31.50............................    238,503      5.6       25.75      79,695    27.19
                                           ---------      ---      ------   ---------   ------
$2.50-$31.50.............................  2,048,745      5.9      $13.28   1,212,821   $11.58
                                           =========      ===      ======   =========   ======
</TABLE>

Performance restricted stock

   The 1996 Stock Incentive Plan provides for the issuance of restricted stock
to employees. The shares issued vest over a two to five year period, based on
the attainment of specified performance measures or the passage of time. In the
event the performance measures are not met, any unvested shares would vest at
the end of ten years. Data relative to shares awarded is presented below:

<TABLE>
<CAPTION>
                                                            2001 2000   1999
                                                            ---- ---- --------
  <S>                                                       <C>  <C>  <C>
  Number of shares awarded.................................   --   --  142,400
  Fair value of restricted stock...........................
  granted during the year.................................. $ -- $ -- $  1,061
</TABLE>

Employee Stock Purchase Plan

   In fiscal 1995, the Company adopted the 1994 Employee Stock Purchase Plan,
which provides that eligible employees may contribute, through payroll
deductions, up to 10% of their earnings toward the purchase of the Company's
Common Stock at 85 percent of the fair market value at specific dates. At
September 28, 2001, 85,823 shares remain available for purchase through the
plan and there were 747 employees eligible to participate in the plan, of which
222, or 29.7%, were participants. Employees purchased 46,885 shares, at an
average price of $10.44 per share during the year. Total receipts to the
Company were $490. Since the plan is noncompensatory, no charges to operations
have been recorded.

                                      42

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


Shareholders Rights Plan

   In February 1996, the Board of Directors approved a shareholder rights plan
and declared a dividend of one preferred share purchase right for each
outstanding common share. Each right represents the right to purchase one
hundredth of a share of Preferred Stock, at an exercise price of $60.00,
subject to adjustment. The rights are only exercisable ten days after a person
or group acquires, or commences a tender or exchange offer to acquire,
beneficial ownership of 15% or more of the Company's outstanding common stock.
Subject to the terms of the shareholder rights plan and the discretion of the
Board of Directors, each right would entitle the holder to purchase one share
of Common Stock of the Company for each right at one-half of the then-current
price. The rights expire in February 2006, but may be redeemed by action of the
Board of Directors prior to that time at $.01 per right.

NOTE 10 COMMITMENTS

   Most of the Company's office and manufacturing facilities are subject to
long-term operating leases. In addition, regional sales offices and automobiles
are subject to leases with terms ranging from one to twelve months.

   At September 28, 2001, the minimum annual operating lease payments are:

<TABLE>
<CAPTION>
     Fiscal year
     ending in September
     -------------------
     <S>                                                         <C>
     2002....................................................... $    2,570
     2003.......................................................      3,297
     2004.......................................................      2,964
     2005.......................................................      2,929
     2006.......................................................      2,923
     Thereafter.................................................     12,134
                                                                 ----------
                                                                 $   26,817
                                                                 ==========
</TABLE>

   Total rent expense was $2,667, $2,438, and $2,268 for the years ended
September 28, 2001, September 29, 2000, and September 24, 1999, respectively.

NOTE 11 BUSINESS SEGMENTS

   The Company is organized based upon the products and services that it
offers. Under this organizational structure, the Company operates in three main
segments: Industrial, Medical, and Transportation. Industrial and Medical
derive revenue primarily through the development and marketing of
electroluminescent displays, liquid crystal displays and color active matrix
liquid crystal displays. Transportation derives revenue from the development
and marketing of high performance taut shadow mask cathode ray tubes, liquid
crystal displays and color active matrix liquid crystal displays. No single
customer provides 10% or more of the Company's revenues.

                                      43

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


   The information provided below is obtained from internal information that is
provided to the Company's chief operating decision-maker for the purpose of
corporate management. Research and development expenses for future products are
allocated to the segments based upon a percentage of sales. Depreciation
expense, interest expense, interest income, other non-operating items and
income taxes by segment are not included in the internal information provided
to the chief operating decision-maker and are therefore not presented below.
Inter-segment sales are not material and are included in net sales to external
customers below.

<TABLE>
<CAPTION>
                                                  2001     2000      1999
                                                -------- --------  --------
<S>                                             <C>      <C>       <C>
Net sales to external customers (by segment):
 Medical....................................... $ 71,135 $ 61,690  $ 42,326
 Industrial....................................   82,996   59,345    50,979
 Transportation................................   53,821   53,516    29,609
                                                -------- --------  --------
   Total sales................................. $207,952 $174,551  $122,914
                                                ======== ========  ========
Net sales to external customers (by geography):
 United States................................. $158,515 $139,196  $ 96,104
 Other.........................................   49,437   35,355    26,810
                                                -------- --------  --------
   Total sales................................. $207,952 $174,551  $122,914
                                                ======== ========  ========
Operating income (loss):
 Medical....................................... $  4,132 $  2,816  $   (871)
 Industrial....................................    3,593    4,115     1,382
 Transportation................................   12,840    4,072    (2,174)
 Non-recurring charges.........................    2,006  (13,163)   (1,488)
                                                -------- --------  --------
Total operating income (loss).................. $ 22,571 $ (2,160) $  3,151
                                                ======== ========  ========
</TABLE>

   Certain facility, information systems and other expenses are incurred by
Corporate and allocated to the segments based on a percentage of sales. The
assets and related capital expenditures of the Company are not reported by
segment. Property, plant and equipment by geography is as follows:

<TABLE>
<CAPTION>
                                                             2001    2000
                                                            ------- -------
<S>                                                         <C>     <C>
US......................................................... $29,900 $23,557
Europe.....................................................   5,560   4,181
                                                            ------- -------
Total Assets............................................... $35,460 $27,738
                                                            ======= =======
</TABLE>

NOTE 12 401(K) AND PROFIT SHARING

   All employees in North America over 21 years of age who have completed at
least three months of service are eligible to participate in the 401(k) savings
and profit sharing plan. Employees can contribute up to 15% of their gross pay
subject to statutory maximums. The Company matches 55% of the first 10% of each
participating employee's contributions, also subject to statutory maximums.
Employer contributions vest over four years. The 401(k) plan expense amounted
to $965, $1,063, and $873 for the years ended September 28, 2001, September 29,
2000 and September 24, 1999, respectively.

                                      44

<PAGE>

                             PLANAR SYSTEMS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     THREE YEARS ENDED SEPTEMBER 28, 2001
               (Dollars in thousands, except per share amounts)


NOTE 13 COMPREHENSIVE INCOME (LOSS)

   Comprehensive income (loss) and its components has no impact on the
Company's net income (loss) or total shareholders' equity. Comprehensive income
(loss) and its components were as follows:

<TABLE>
<CAPTION>
                                                                                   2001     2000     1999
                                                                                  -------  -------  -------
<S>                                                                               <C>      <C>      <C>
Net income (loss) (net of tax of $7,214, $(933), and $(1,996), respectively)..... $14,537  $   543  $(5,125)
Other comprehensive income (loss):
   Currency translation adjustment (net of tax of $492, $(1,646), and $(1,175),
     respectively)...............................................................     998   (4,031)  (3,061)
   Unrealized gain (loss) on available for sale securities (net of tax of $(79),
     $85, and $0, respectively)..................................................    (160)     209       --
                                                                                  -------  -------  -------
Total comprehensive income (loss)................................................ $15,375  $(3,279) $(8,186)
                                                                                  =======  =======  =======
</TABLE>

                                      45

<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

   None.

                                   Part III

Item 10. Directors and Executive Officers of Planar Systems, Inc.

   The information set forth under the captions "Election of Directors",
"Management" and "Section 16(a) Beneficial Ownership Reporting Compliance"
appearing in the Proxy Statement to be used in connection with the Annual
Meeting of Shareholders on January 31, 2002, is incorporated by reference into
this Report.

Item 11. Executive Compensation

   The information set forth under the caption "Executive Compensation"
appearing in the Proxy Statement to be used in connection with the Annual
Meeting of Shareholders on January 31, 2002, is incorporated by reference into
this Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management

   The information set forth under the caption "Stock Owned by Management and
Principal Shareholders" appearing in of the Proxy Statement to be used in
connection with the Annual Meeting of Shareholders on January 31, 2002, is
incorporated by reference into this Report.

Item 13. Certain Relationships and Related Transactions

   The information set forth under the caption "Certain Relationships and
Related Transactions" appearing in of the Proxy Statement to be used in
connection with the Annual Meeting of Shareholders on January 31, 2002, is
incorporated by reference into this Report.

                                    Part IV

Item 14. Exhibits, Financial Statements, Schedules and Reports on 8-K

   (a)(1) Financial Statements

   The financial statements of Planar Systems, Inc. as set forth under Item 8
are filed as part of this report.

   (a)(2) Financial Statement Schedules

   Financial statement schedules have been omitted since the information called
for is not present in amounts sufficient to require submission of the schedules.

   The independent auditors' report with respect to the above-listed financial
statements appears on page 25 of this report.

   (a)(3) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number  Title
------  -----------------------------------------------------------------------------------------------
<C>     <S>
  3.1   Second Restated Articles of Incorporation of Planar Systems, Inc. (1)
  3.2   Second Restated Bylaws of Planar Systems, Inc. (11)
  3.3   Amendment to Second Restated Articles of Incorporation of Planar Systems, Inc. (2)
  4.1   Specimen stock certificate (1)
  4.4   Rights Agreement dated as of February 1, 1996 between Planar Systems, Inc. and First Interstate
        Bank of Oregon, N.A. (3)
 10.1   Form of Indemnity Agreement between Planar Systems, Inc. and each of its executive officers and
        directors (1)*
</TABLE>

                                      46

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Title
------  -------------------------------------------------------------------------------------------------
<C>     <S>
 10.2   Amended and Restated 1983 Incentive Stock Option Plan (1)*
 10.3   1993 Stock Option Plan for Nonemployee Directors (1)*
 10.4   1993 Incentive Stock Option Plan (1)*
 10.5   1994 Employee Stock Purchase Plan (4)*
 10.6   Lease agreement dated as of September 30, 1993 between Science Park Limited Partnership I and
        Planar System Inc. (1)
 10.7   Lease agreement dated as of May 20, 1998 between Metra Corporation and Planar International, Ltd
        (English translation) (8)
 10.8   Lease agreement dated as of August 26, 1994 between Tektronix, Inc. and Planar Systems, Inc. (5)
 10.9   Asset Purchase Agreement dated August 26, 1994 between Tektronix, Inc. and Tektronix Federal
        Systems, Inc. and Planar Systems, Inc and Planar Advance (5)
 10.10  Stock Purchase Agreement dated August 25, 1997 by and among Planar Systems, Inc., Standish
        Industries, Inc., Standish International, Inc., Charles P. Hoke, Elizabeth A. Hoke and William R.
        Steinmetz, Trustee of the Steven Hoke Management Trust, the Catherine Hoke Management Trust,
        the Lauren Hoke Management Trust and the Charles D. Hoke Management Trust (`the Agreement")
        (certain schedules to the Agreement and its exhibits are omitted) (6)
 10.11  Amendment to Stock Purchase Agreement dated August 26, 1997 (6)
 10.12  1996 Stock Incentive Plan (7)*
 10.13  Lease agreement dated May 30, 1997 between Pacific Realty Associates, L.P. and Planar America,
        Inc. (7)
 10.14  Agreement and Plan of Merger dated as of May 13, 1999 by and among dpiX, Inc., Xerox
        Corporation and New dpiX LLC (9)
 10.15  Credit Agreement between Planar Systems, Inc. and Norwest Bank Wisconsin, National Association
        dated July 29, 1999 (10)
 10.16  Employment Agreement between Planar Systems, Inc. and James M. Hurd dated as of April 30, 1999
        (10)*
 10.17  Planar Systems, Inc. Nonqualified Stock Option Agreement between Planar Systems, Inc. and
        William D. Walker dated as of May 13, 1999 (10)*
 10.18  Executive Employment Agreement between Planar Systems, Inc. and Balakrishnan Krishnamurthy
        dated as of September 24, 1999 (11)*
 10.19  Restricted Stock Award Agreement between Planar Systems, Inc. and Balakrishnan Krishnamurthy
        dated as of September 24, 1999 (11)*
 10.20  Nonqualified Stock Option Agreement between Planar Systems, Inc. and Balakrishnan
        Krishnamurthy dated as of September 27, 1999 (11)*
 10.21  Form of Restricted Stock Award Agreement under Planar Systems, Inc. 1996 Stock Incentive Plan
        dated as of May 24, 1999 (11)*
 10.22  Form of Restricted Stock Award Agreement under Planar Systems, Inc. 1996 Stock Incentive Plan
        dated as of May 24, 1999 (11)*
 10.23  Planar Systems, Inc. 1999 Nonqualified Stock Option Plan (11)*
 10.24  Planar Systems, Inc. Deferred Compensation Plan (11)*
 10.25  Agreement and Plan of Merger dated as of December 4, 2000 by and among Planar Systems, Inc.,
        AllBrite Technologies, Inc., Corona Acquisition Corporation and certain Shareholders of AllBrite
        Technologies, Inc. (12)
 10.26  First Amendment to Agreement and Plan of Merger dated as of December 11, 2000 by and among
        Planar Systems, Inc., AllBrite Technologies, Inc., Corona Acquisition Corporation and certain
        Shareholders of AllBrite Technologies, Inc. (12)
 10.27  Shareholders Agreement dated as of December 4, 2000 by and among Planar Systems, Inc., AllBrite
        Technologies, Inc. and the Shareholders of AllBrite Technologies, Inc. (12)
 10.28  Amendment to Executive Employment Agreement between Planar Systems, Inc. and Balakrishnan
        Krishnamurthy dated as of September 26, 2000 (13)*
</TABLE>

                                      47

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Title
------  -----------------------------------------------------------------------------------------------
<C>     <S>
 10.29  Form of Change in Control Agreement between Planar Systems, Inc. and certain executive officers
        dated as of September 26, 2000 (13)*
 10.30  Lease agreement dated August 23, 2001 between Amberjack, Ltd. and Planar Systems, Inc.
 10.31  Addendum to lease agreement dated August 23, 2001 between Amberjack, Ltd. and Planar Systems,
        Inc.
 21     Subsidiaries of Planar Systems, Inc.
 23     Consent of KPMG LLP
 24     Power of Attorney (included on Signature Page)
</TABLE>
--------
 (1) Incorporated by reference to the Company's Registration Statement on Form
     S-1 (Reg. No. 33-71020), declared effective on December 15, 1993.
 (2) Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended September 27, 1996.
 (3) Incorporated by reference to the Company's Current Report on Form 8-K
     filed on February 21, 1996.
 (4) Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended September 30, 1994.
 (5) Incorporated by reference to the Company's Current Report on Form 8-K
     filed as of September 12, 1994.
 (6) Incorporated by reference to the Company's Current Report on Form 8-K
     filed on October 10, 1997.
 (7) Incorporated by reference to the Company's Annual report on form 10-K for
     the year ended September 26, 1997.
 (8) Incorporated by reference to the Company's Annual report on form 10-K for
     the year ended September 25, 1998.
 (9) Incorporated by reference to the Company's Current Report on Form 8-K
     filed on July 20, 1999
(10) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the quarter ended June 25, 1999.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended September 24, 1999.
(12) Incorporated by reference to the Company's Current Report on Form 8-K
     filed on January 8, 2001.
(13) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the quarter ended December 29, 2000.
  *  This exhibit constitutes a management contract or compensatory plan or
     arrangement

   (b) Reports on Form 8-K

   None.

                                      48

<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          PLANAR SYSTEMS, INC.

December 20, 2001
                                          By: /s/ STEVE BUHALY
                                              ----------------------------------
                                              Steve Buhaly
                                              Vice President
                                              Chief Financial Officer

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Balaji Krishnamurthy and Steve Buhaly, and each
of them singly, as his true and lawful attorneys-in-fact, with full power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dated indicated.

/s/ BALAJI KRISHNAMURTHY    President, Chief Executive      December 20, 2001
---------------------------   Officer, Director (Principal
   Balaji Krishnamurthy       Executive Officer)

     /s/ STEVE BUHALY       Vice President, Chief Financial December 20, 2001
---------------------------   Officer, (Principal Financial
       Steve Buhaly           and Accounting Officer)

   /s/ WILLIAM D. WALKER    Chairman of the Board           December 20, 2001
---------------------------
     William D. Walker

       /s/ CARL NEUN        Director                        December 20, 2001
---------------------------
         Carl Neun

   /s/ HEINRICH STENGER     Director                        December 20, 2001
---------------------------
     Heinrich Stenger

     /s/ E. KAY STEPP       Director                        December 20, 2001
---------------------------
       E. Kay Stepp

  /s/ GREGORY H. TURNBULL   Director                        December 20, 2001
---------------------------
    Gregory H. Turnbull

    /s/ STEVEN E. WYNNE     Director                        December 20, 2001
---------------------------
      Steven E. Wynne

                                      49