<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 27, 1996          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 principal 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>
<CAPTION>
                                           As of December 9, 1996
                                           ----------------------
<S>                                        <C> 
Aggregate market value of the voting
 stock held by non-affiliates of the 
 Registrant based upon the closing
 bid price of such stock:                            $103,800,626
 
Number of shares of Common Stock                       
 outstanding                                           10,943,260
</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 February 13, 1997, 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 products. The Company's
products, based upon its proprietary electroluminescent (EL) flat panel display
technology, are used in a wide variety of medical, industrial process control,
instrumentation, military/avionics, transportation, communications and other
applications. The Company also provides specialized cathode ray tube (CRT)
displays for use in demanding aircraft cockpit 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 Allied
Signal, Datascope, Hewlett-Packard, Nellcor, Protocol Systems, SCI/Johnson &
Johnson, Siemens, and Smiths Industries.

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. These
trends are converging to drive a growing demand for 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 large, heavy, 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 basis of competition among display suppliers are
commercial availability, long life, price, display performance, size, customer
service, design flexibility, power usage and ruggedness.

     Passive Matrix LCD. Passive matrix liquid crystal display (PMLCD)
technology is primarily used in displays for calculators, watches, other
consumer products and laptop computers because of its relatively low cost and
power consumption. However, its relatively low image quality, slow response time
and limited effective temperature range make it inadequate for many demanding
commercial and industrial applications. LCDs modulate light (which is either
reflected or applied directly) by applying a voltage to a liquid crystal
material placed between two glass plates.

     Active Matrix LCD. AMLCD screens incorporate 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.

     Gas Plasma. Gas plasma creates a visible image by ionizing a gas contained
between two glass plates. The ionized gas emits a visible light, typically red.
Gas plasma displays generally have higher power consumption requirements than
other display technologies but may provide the most cost effective 
<PAGE>
 
solution for large-sized displays. These displays are primarily used in
industrial, point-of-sale and military 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.

     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), ferroelectic LCDs and
various forms of projection displays.

STRATEGY

     The Company's goal is to enhance its position as a leading, independent
supplier of information displays. The Company has successfully developed a broad
product line of information displays which has resulted in large market
acceptance. In the last two fiscal years, the Company has shipped over a quarter
million units to customers with a particular emphasis on the medical,
industrial, instrumentation, transportation and military / avionics markets. The
Company is now seeking to broaden its technology base and market penetration.
Key elements of the Company's strategy to achieve this goal include:

     Expand Market Presence. The Company continues to identify and pursue
growing markets that have a high correlation between the capabilities of the
Company's products and the specific needs of the target market. Within these
markets, the Company focuses on a broad range of customers whose applications
receive high value and benefit from Planar's products. Today, the Company's core
markets are industrial (medical, process control and instrumentation),
transportation and military/avionics. Additionally, Planar is focusing increased
attention on emerging markets for high information content displays including
communications and business/office.

     Provide Differentiated Products. To maintain its technological advantage,
the Company is continuing to expand the capabilities and applications of its
proprietary EL and CRT technologies. During fiscal year 1996, Planar
incorporated its Integral Contrast Enhancement (ICE(TM)) technology, which
significantly improves the viewability of monochrome EL displays, into a new 
product family, ICEBrite(TM). In addition, the Company continues its
development of a militarized AMLCD in connection with its agreement with dpiX (a
Xerox company).

     Enhance Competitive Position Through Operations. The Company seeks to
manufacture and deliver products of superior quality and reliability supported
by a high level of customer service. The Company maintains a close relationship
with its customers throughout the product life cycle, from engineering
prototypes through production and sales.
<PAGE>
 
     The Company believes that it is the only display company with full
development, manufacturing and sales operations in both the United States and
Europe. The Company believes that separate regional facilities permit the
Company to provide: (i) direct access to key regional markets, allowing for a
faster and more complete response to customer needs; (ii) two internal sources
of manufactured products to protect the Company's customers from disruption of
supply; (iii) multiple production and processing technologies to accelerate new
product development and optimize displays for specific applications; and (iv)
reduced supplier risk as each operation tends to use different vendors.

     Pursue Strategic Relationships. The Company seeks to provide customers with
the best display solution regardless of technology. Display industry customers
are constantly asking for higher product performance at competitive prices. To
meet these customer demands, the Company intends to continue to evaluate, and
actively seek to develop or acquire, promising technologies directly, or through
strategic relationships.

MARKETS

The Company is currently serving the following core market segments:

          Industrial-Medical. Displays are used in patient monitors and a range
     of diagnostic and therapeutic equipment, including 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 by multiple users at the
     same time. The Company believes that its displays provide superior display
     quality and reliability for crucial medical applications.

          Industrial-Process Control. Displays are used in a wide range of
     manufacturing environments, including industrial computers, operator
     interfaces and machine control panels. 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.

          Industrial-Instrumentation. The Company's displays are 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.

          Military/Avionics. The Company's sales in this market consist
     primarily of high performance CRTs sold to systems integrators for military
     cockpits. Additionally, the Company sells processed EL display glass to
     military systems suppliers for integration into various military subsystems
     used in communications applications, tactical displays, avionics and
     shipboard command and control equipment. Although military spending is
     contracting in the U.S., the Company believes that this will remain an
     important strategic market because military customers continue to require
     increasing display performance, are often willing to share development
     costs 
<PAGE>
 
     and have significant influence over the distribution of research and
     development funding from government sources.

          Transportation. 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 navigation applications, cockpit displays for trains, forklift
     applications and railway car information systems.


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

          Communications. As hardware becomes increasingly portable and the
     support systems allow for greater transmission of data, telecommunication
     devices require displays with more information capability. The Company has
     sold displays to customers for use in field communication systems and
     financial trader telephone turrets.

          Business/Office Equipment. The Company sells displays for a variety of
     applications in the office and retail markets, including high speed
     photocopiers, office control panels, point-of-sale devices, custom designed
     monitors and elevators.

PRODUCTS

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

     Flat Panel Displays. The EL displays product line includes standard
monochrome, ICE(TM), ICEPLUS(TM), ICEBrite(TM) and  multi-color displays. This
is principally an OEM component market where the customers purchase displays to
either incorporate directly into their products or enhance the displays by
integrating additional features and reselling them to the ultimate user.

     Cathode Ray Tubes. With the acquisition of Planar Advance, the Company
offers high performance CRTs based on its proprietary taut shadow mask
technology. These displays are sold primarily to military systems companies who
integrate them into cockpit applications.

     Value-added Display Solutions. To be able to better satisfy customers'
display needs, the Company has a small business activity that develops,
manufactures and sells end user products. These products incorporate displays
into systems that often include keyboards, touch input devices, local computing
capability and special packaging. An initial market for these products has been
bedside computing applications where hospitals are increasingly recognizing the
productivity gained by such installations.

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 $16.5, $14.1 and $8.4 million for the fiscal years 1996,
1995 and 1994, respectively. These expenses were partially offset by contract
funding from both government agencies (in the United States and Finland) and
private sector companies of 
<PAGE>
 
$9.4, $9.1 and $5.0 million in fiscal years 1996, 1995 and 1994, respectively.
Research and development expenses of the Company are related to advanced
technology programs in a new display family utilizing AMEL technology, new drive
architectures and fundamental process improvements. During fiscal 1996, the
Company discontinued the commercialization of full color EL products due to
reduced AMLCD pricing and began a series of initiatives to bring a more
competitive full color product line to market in 1997. 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:

     Active Matrix EL (AMEL). This program is focused on the development of high
resolution image sources for headmounted display applications. The Company has
demonstrated a working 1,280 X 1,024 pixel array on a 1.2" X 1" substrate.
Current development efforts are addressing higher resolution (up to 2,000 lines
per inch), improved performance and lower manufacturing costs. Potential markets
include medical, industrial, military, computing and entertainment.

     Small Graphics Displays (SGD). This product development effort led to 
a SGD service that provides quick turnaround designs coupled with volume
production of small graphics custom display systems. Initial targeted markets
include industrial process control, business/office equipment 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, field emission displays
(FED), and organic light emitting diodes.

GOVERNMENT AND INDUSTRY PARTNERSHIPS

     The Company believes that it is necessary for the United States and Europe
to further develop sources of supply, equipment and a base of trained personnel
to support the display industry. Additionally, as part of the Company's
technology strategy, the Company believes that it is important to be involved
with a broad range of display technologies and industry groups. As a result of
its participation, the Company benefits from work being done which complements
(and in some cases, funds) the Company's internal development objectives. To
that end, the Company has employees who actively participate in several
government/industry partnerships, including:

     American Display Consortium (ADC). The ADC was created to perform pre-
competitive generic research and development in areas that benefit multiple
technologies. Currently, ADC is in the final year of a three year, $13.2 million
cost-shared, program funded by the Department of Commerce, through the
Advanced Technology Program administered by the National Institute of Standards
and Technology. The Company is performing, directly, or through subcontractors,
work that accounts for approximately 
<PAGE>
 
$6.3 million of the current grants. Dr. Christopher N. King, an officer of the
Company, serves as chairman of the ADC.

     Phosphor Technology Center of Excellence (PTCOE). Advance Research Projects
Agency (ARPA) has funded the creation of the PTCOE to promote the development of
appropriate materials and processes for the fabrication of phosphors for light
emissive displays. Dr. King is a member of the steering committee of the PTCOE's
Board.

     United States Display Consortium (USDC). The USDC was created to develop an
infrastructure to support a U.S.-based display industry by funding equipment and
materials suppliers in this industry, establishing and maintaining appropriate
benchmarks and disseminating information to industry participants. The USDC is
funded by contracts from ARPA and member contributions. Curtis M. Stevens, an
officer of the Company, serves on the Board of Directors and Executive Committee
of the USDC.

     Next Generation EL Manufacturers Consortium.  This Consortium was created
in connection with an agreement with ARPA under a focused Technology
Reinvestment Project. This two-year cost share program which will provide the
Planar-led consortium with approximately $15 million, which the consortium is
required to match on a one to one basis, to further develop technologies
necessary to manufacturing AMEL headmounted displays.

     EUREKA. EUREKA is a European Union program targeted at supporting the
development of critical technology capacity within Europe. Planar International
qualified for participation in the EUREKA program for its project to develop
multi-color and full color EL display products and received funding under this
program in 1995 and 1996.

MANUFACTURING

     The Company operates EL manufacturing facilities in both the U.S. and
Finland. These facilities are designed to 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 CRT facility is designed to produce 5" x 5" and 6" x 6" militarized
CRTs. However, the Company believes that the CRT facility and technology can be
scaled to produce displays up to 25" per side with little capital investment.

     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 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.
<PAGE>
 
     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. As of September 27, 1996, all three
operating divisions have received and maintain their ISO9001 certification.

SALES AND MARKETING

     The Company's products are distributed worldwide through a combination of
independent sales representatives, distributors and Company-employed sales
personnel. In the United States, Planar has regional sales personnel in the
Newark, Boston, Chicago, Dallas, Tampa and Portland metropolitan areas. Each of
these locations is staffed by a regional sales manager who has responsibility
for OEM sales in a specific region. Each region also has a number of independent
sales representatives who generally have exclusive marketing and sales rights in
their area and are managed by the regional sales manager. International sales
are conducted through a combination of direct sales offices (Finland, Germany
and the United Kingdom), independent sales representatives and distributors.

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 is unable to increase unit volumes or increase the performance of
its products in order to offset or reduce any decreases in selling prices, 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 reduce cost of sales in an amount sufficient to compensate for any decreases
in selling prices.

     While the Company's only significant current competitor in the EL display
market is Sharp, the Company competes with other display manufacturers,
including suppliers of displays using competing display technologies. The
principal bases of competition among display suppliers are 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, flexibility, responsiveness, regional production sites,
technical support and customer satisfaction programs are important to the
competitive position of the Company.

     In addition to EL, the principal display technologies against which the
Company competes are gas plasma displays, PMLCDs and AMLCDs. The principal
supplier of gas plasma displays is Fujitsu. The principal suppliers of PMLCDs
are Sharp, Toshiba, Optrex, Seiko-Epson and Hitachi. The principal suppliers of
AMLCDs are Sharp, DTI, Hitachi and NEC. A number of Korean companies including
Samsung, Hyundai and Goldstar have also made significant investments in AMLCD
technology.

     The Company's CRT business, Planar Advance, has no direct competitors but
there are three companies offering military avionic displays: Sextant Avionique
SA, Sony Corp. and Thompson CSF. Due 
<PAGE>
 
to the products' design and performance, the Company believes that it currently
supplies 100% of the United States' market for high brightness full color
military CRTs and has a dominant share of the total military cockpit display
market worldwide. Increasingly, the Company is seeing display manufacturers
attempting to move into the military avionics markets with the U.S. government
investing significantly in the AMLCD technology for avionics applications. The
primary competitors producing militarized AMLCDs are Litton Canada and OIS
Optical Imaging Systems.

INTELLECTUAL PROPERTY

     The Company relies on a combination of patents, trade secrets, trademarks,
copyrights and other 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 1999 to 2012. Features for which the Company has and
is seeking patent protection include display glass design, materials,
electronics addressing and control functions and process manufacturing.

     Pursuant to 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 27, 1996, the Company had 557 full-time, regular employees
worldwide, 287 in the United States and 270 in Europe. Of these employees, 41
were engaged in marketing and sales, 93 in research, development and product
engineering, 47 in finance and administration, 67 in manufacturing support and
309 in manufacturing.

     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 its three primary manufacturing facilities and various
sales offices in the United States and Europe. The two U.S. facilities, located
in Beaverton, Oregon, are Planar America and Planar Advance. Planar America
leases 45,000 square feet of custom designed space, including 5,000 square feet
of cleanroom. Planar Advance's operation is located in a large facility in which
it leases 29,000 
<PAGE>
 
square feet, including about 7,000 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.

     During fiscal 1994, the Company acquired a 21,000 square foot facility with
approximately 6,000 square feet of cleanroom located near the Planar America
facility. This facility will be used for research and development activities and
production of headmounted displays. Additionally, the Company has leased 17,000
square feet of an adjacent building.

     The Company has five field sales offices in key U.S. metropolitan areas and
two sales offices in Europe. The offices are located in Newark, Boston, Chicago,
Dallas, Tampa,  London and Munich metropolitan areas. Lease commitments for
these facilities are short term, typically six to twelve months. None of these
sales offices has any significant leasehold improvements nor are any planned.

     The Company believes that its current facilities are adequate for its
immediate and near term requirements and does not anticipate the need for
significant 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.
<PAGE>
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Shares of the Company's Common Stock stock commenced trading in the over-
the-market on the Nasdaq National Market System on December 16, 1993, under the
symbol PLNR. As of December 9, 1996, there were 5,460 beneficial holders of the
Company's Common Stock.

     The Company has never declared nor paid any cash dividend on its capital
stock. 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 1995
First Quarter                                              $23.38    $13.75
Second Quarter                                              24.25     19.75
Third Quarter                                               22.25     18.00
Fourth Quarter                                              22.63     18.50
 
FISCAL 1996
First Quarter                                               20.00     15.00
Second Quarter                                              18.75     10.63
Third Quarter                                               16.50     12.00
Fourth Quarter                                              13.00      9.50
 
FISCAL 1997
First Quarter (through December  9, 1996)                   10.50      9.88
</TABLE> 
 
ITEM 6. SELECTED FINANCIAL DATA

<TABLE> 
<CAPTION> 
Fiscal year
(in thousands, except per share)      1996      1995      1994      1993      1992
<S>                                   <C>       <C>       <C>       <C>       <C> 
OPERATIONS
Sales                                 $80,371   $78,523   $60,359   $45,799   $38,134
Gross Profit                           27,988    28,388    20,740    14,926     8,736
Income from operations                  9,104    12,102     8,582     5,142       415
Net income                            $ 8,672   $10,537   $ 7,462   $ 6,038   $ 2,203
Net income per share                  $  0.77   $  0.98   $  0.77   $  0.81   $  0.31
BALANCE SHEET
Working capital                       $56,924   $59,078   $40,067   $20,562   $18,191
Assets                                 97,295    88,674    64,015    29,865    27,582
Long term liabilities                   4,176     2,477       450        23       186
Shareholders' equity                   79,969    72,356    49,402    19,697    17,240
</TABLE>
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS

General

     The Company is a  worldwide leader in the development, manufacture and
marketing of high performance electronic display products.  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.  In August 1994, the company acquired the avionics
display operations of Tektronix, Inc. and has continued these operations through
a wholly owned subsidiary, Planar Advance, Inc.   Therefore, the Company's
results of operations for fiscal year 1994 include only one month of results
from Planar Advance.

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.  27, 1996    SEPT. 29, 1995    SEPT. 30, 1994
                                            ---------------    --------------    --------------
<S>                                         <C>                <C>               <C>
Sales                                                100.0%            100.0%            100.0%
Cost of sales                                         65.2              63.8              65.6
                                            --------------     -------------     -------------
Gross profit                                          34.8              36.2              34.4
Operating expenses:
  Research and development, net                        8.8               6.4               5.5
  Sales and marketing                                  8.8               8.5               9.0
  General and administrative                           6.5               6.5               6.5
  Amortization of excess fair market
   value of acquired
    net assets over purchase price                    (0.6)             (0.6)             (0.8)
                                            --------------     -------------     -------------
      Total operating expenses                        23.5              20.8              20.2
                                            --------------     -------------     -------------
Income from operations                                11.3              15.4              14.2
Non-operating income (expense):
  Interest, net                                        1.9               1.9               1.4
  Foreign exchange, net                                0.3              (0.9)             (2.2)
  Other, net                                            --                --              (0.1)
                                            --------------     -------------     -------------
      Net non-operating income (expense)               2.2               1.0              (0.9)
                                            --------------     -------------     -------------
Income before income taxes                            13.5              16.4              13.3
Provision for income taxes                             2.7               3.0               0.9
                                            --------------     -------------     -------------
Net income                                            10.8%             13.4%             12.4%
                                            ==============     =============     =============
</TABLE>

     Sales. The Company's sales increased by 2.4% to $80.4 million in fiscal
1996 from $78.5 million in fiscal 1995. The increase in fiscal 1996 was
attributed primarily to increases in sales to manufacturers of medical and
industrial products and sales in the information technology market, specifically
in the bedside point of care market which offset a decline of nearly 30% in
military sales. Fiscal 1995 sales increased by 30.1% from $60.4 million in
fiscal 1994. The increase in fiscal 1995 sales was principally due to the
additional sales attributed to Planar Advance, which was acquired in August
1994.
<PAGE>
 
     International sales, net of intercompany eliminations, increased 10% to
$29.8 million in fiscal 1996 over the $27.1 million recorded in fiscal 1995 and
increased 70.2% in fiscal 1995 from fiscal 1994. As a percentage of the total
sales, international sales increased in fiscal 1996 to 37.1%.  This was
attributable to two primary factors:  increase in military orders to Europe
which offset a decline in European sales of the component business. The higher
percentage, 34.5%, in fiscal 1995 versus fiscal 1994, 26.4%, is largely
attributable to the addition of Planar Advance and general strengthening in the
European economy.

     Gross Profit. The Company's gross profit as a percentage of sales decreased
to 34.8% in fiscal 1996 from 36.2% in fiscal 1995 and 34.4% in fiscal 1994. The
decrease in gross margin in fiscal 1996 is primarily due to the decline in the
CRT business which is historically at a higher margin. The increase in gross
margin in fiscal 1995  related primarily to the addition of the CRT sales which
are historically at a higher margin.

     Research and Development. Total expenses related to research and
development increased 17.1% in fiscal 1996 from fiscal 1995 and 68.1% in fiscal
1995 from fiscal 1994. Net expenses (after the deduction of related contract
funding) increased 41.2% in fiscal 1996 from fiscal 1995 and increased by 49.1%
in fiscal 1995 from fiscal 1994. The increase in fiscal 1996 is primarily
related to the continued development of new technologies. The increase in fiscal
1995 is due to both the expansion of on-going programs and the addition of
Planar Advance.  Increases in net expenses in both years are related to
continued work on the next generation color products, new technology development
at Planar Advance including work on AMLCDs and FEDs and the development of a new
display product line, AMEL headmounted displays.

     Sales and Marketing. Sales and marketing expenses increased by 6.7% to $7.1
million in fiscal 1996 from $6.7 million in fiscal 1995 and increased 23.2% in
fiscal 1995 from $5.4 million in fiscal 1994. The increase in marketing and
sales costs is attributed to sales commissions paid on a higher level of sales
and an increased focus on marketing.  As a percentage of sales, sales and
marketing expenses increased to 8.8% in 1996 from 8.5% in fiscal 1995 and
decreased from 9.0% in fiscal 1994. The increase in fiscal 1996 is due to the
additional resources added to the North American sales force. The decrease in
fiscal 1995 as a percentage of sales was attributed to better utilization of
sales and marketing resources due to the growth in sales.

     General and Administrative. General and administrative costs increased by
1.9% to $5.2 million in fiscal 1996 from $5.1 million in fiscal 1995 and
increased 31.8% over the $3.9 million spent in fiscal 1994. The increase in
fiscal 1996 was primarily due to the increases in overall costs. The increase in
fiscal 1995 was primarily related to the additional administration costs
associated with Planar Advance.
<PAGE>
 
     Amortization of Excess of Fair Market Value of Acquired Net Assets Over
Purchase Price. In connection with the Company's acquisition of Planar
International 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 of 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 $476,000
per year. Negative goodwill is being amortized over a ten-year period.

     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 income increased in fiscal 1996 from fiscal
1995 due to increased average cash balances. Net interest income increased in
fiscal 1995 from fiscal 1994 due to the increased cash invested as a result of
the completion of the Company's secondary public offering and increased
profitability.

     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 denominated in foreign currencies to the applicable
functional currency. Foreign currency exchange gains and losses accounted for a
gain of $242,000, or 2.2% of  income before provision for income taxes in fiscal
1996, a loss of $690,000, or 5.4% of income before provision for income taxes in
fiscal 1995, and a loss of approximately $1.4 million in fiscal 1994. These
amounts are comprised of realized gains and losses on cash transactions
involving various currencies and unrealized gains and losses related to foreign
currency denominated receivables and payables resulting from exchange rate
fluctuations between the various currencies in which the Company operates.

     From September 29, 1995 to September 27, 1996, the U.S. dollar strengthened
by almost 6% against the Finnish markka. This strengthening of the U.S. dollar
resulted in lower reported revenues and operating expenses due to translation of
the Finnish markka to U.S. dollars for consolidated financial reporting.

     Generally, most European sales are denominated in the German mark. From
September 29, 1995 to September 27, 1996, the German mark strengthened against
the Finnish markka by approximately 1% which resulted in higher revenues and
higher gross profits on these sales.

     The Company generally realizes about one-third of its revenue outside the
United States and expects this to continue in the future. Additionally, the
functional currency of the Company's major foreign subsidiary, Planar
International, is the Finnish markka which must be translated to U.S. dollars
for consolidation. As such, the Company's business and operating results will be
impacted by the effects of future foreign currency fluctuations.

     Provision for Income Taxes. The effective income tax rate for the year
ended September 27, 1996 was 20.0 % versus 18.2% in 1995 and 7.0% in fiscal
1994. This increase in effective tax rates is due to the profitability of the
Planar International compared to the United States entities. The increase in
1995 
<PAGE>
 
was due to the increased profitability of the Company and the reduction of net
operating loss carryforwards available. As a result of the acquisition of Planar
International 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 carryforwards for U.S. tax purposes. In each post-change year
prior to fiscal 1994, the Company did not fully utilize its available net
operating loss carryforwards and therefore the amount available in subsequent
years was increased. In fiscal 1994, the Company fully utilized its available
net operating loss carryforwards and therefore, in fiscal 1995 and 1996, the
Company is subject to the $2.1 million annual limitation.

QUARTERLY RESULTS OF OPERATIONS

     The following table presents unaudited consolidated financial results for
each quarter in the two year period ended September 27, 1996. 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
                                                    -------------------------------------------------
                                                           (in thousands, except per share data)
                                                    -------------------------------------------------
                               Sept. 28,    June 28,     March 29,    Dec. 29,     Sept. 29,    June 30,     March 31,    Dec. 30,
                                 1996         1996         1996         1995         1995         1995         1995         1994
                               ---------    --------     ---------    --------     ---------    --------     ---------    -------- 
<S>                            <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Sales                           $20,421      $19,519      $20,114      $20,317      $19,381      $19,529      $20,620      $18,993
Gross profit                      6,180        7,136        7,536        7,136        6,991        7,311        7,295        6,791
Income from operations            1,524        2,269        2,548        2,763        2,909        2,963        3,223        3,007
Net income                        1,210        2,111        2,646        2,705        2,802        2,759        2,567        2,409
Net income per common and       
 common equivalent share        $  0.11      $  0.19      $  0.24      $  0.24      $  0.25      $  0.26      $  0.24      $  0.22
Weighted average number of      
 common and common              
 equivalent shares               
  outstanding                    11,184       11,233       11,243       11,246       11,243       10,763       10,785       10,750 
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities was $1.5 million, $9.5 million
and $5.6 million in fiscal 1996, 1995 and 1994, respectively. The decline in
1996 from 1995 was primarily due to the increase in inventory and a decline in
operating income. The increase in 1995 was primarily related to higher operating
income.

     Additions to plant and equipment were $4.3 million, $6.9 million and $3.1
million in fiscal 1996, 1995 and 1994, respectively. The principle acquisitions
during fiscal 1996 were related to additional capacity improvements at both
Planar America and Planar International. The principle acquisitions during
fiscal 1995 were related to upgrading the production facility and equipment at
Planar International and additional research and development equipment at Planar
America and the renovation costs associated with the acquired facility. In
fiscal 1994, the principle acquisition was the purchase of a building near the
Company's existing Oregon facility for $1.3 million.  Investing activities in
1994 included the $2.3 million purchase of the avionics display operation of
Tektronix, Inc.
 
     At September 27, 1996, the Company had a bank line of credit agreement with
a borrowing capacity available of $2.5 million and credit facilities for
financing equipment of $15.0 million. A similar bank line of credit was in place
as of September 29, 1995. As of September 27, 1996 and September 29, 
<PAGE>
 
1995, no borrowings were outstanding under the credit line and approximately
$5.2 million and $2.8 million was outstanding under the equipment financing
lines, respectively.

     In June 1995, the Company completed a secondary stock offering of its
common stock. The sale of  447,000 shares of Common Stock provided the Company
with net cash proceeds, after deduction of issuing costs and expenses, of
approximately $8.1 million. The Company believes that these proceeds, along with
the cash on hand before the offering and cash generated from operations, will be
sufficient to meet the Company's working capital requirements for the
foreseeable future.

OUTLOOK: ISSUES AND UNCERTAINTIES

     Planar does not provide forecasts of future financial performance. While
Planar's management is optimistic about the Company's long-term prospects, the
following issues and uncertainties, among others, should be considered in
evaluating its growth outlook.

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.
Certain of the Company's competitors have substantially greater name recognition
and financial, technical, marketing and other resources than the Company, and
competitors of the Company have made and continue to make significant
investments in the construction of manufacturing facilities for AMLCDs and other
advanced displays. There can be no assurance that the Company's competitors will
not succeed in developing or marketing products that would render the Company's
products obsolete or noncompetitive. To the extent the Company is unable to
compete effectively against its competitors, whether due to such practices or
otherwise, its financial condition and results of operations would be materially
adversely affected.

DEVELOPMENT OF NEW PRODUCTS AND RISKS OF TECHNOLOGICAL CHANGE

     The Company's future results of operations will depend upon its ability to
improve and market its existing products and to successfully develop,
manufacture and market new products. There can be no assurance that the Company
will be able to continue to improve and market its existing products or develop
and market new products, or that technological developments will not cause the
Company's products or technology to become obsolete or noncompetitive. Even
successful new product introductions 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.

     The Company's flat panel products rely significantly on EL technology,
which currently constitutes only a small portion of the information display
market. The Company's future success will depend in part upon increasing
acceptance of EL technology in the marketplace and development or acquisition of
other display technologies by the Company. In that respect, the Company's
competitors are investing substantial resources in the development and
manufacture of displays using a number of alternative technologies. In the event
these efforts result in the development of products that offer significant
advantages over the Company's products, and the Company is unable to improve its
technology or develop or acquire 
<PAGE>
 
alternative technology that is more competitive, the Company's business and
results of operations will be adversely affected.

     The Company's military product sales are principally based on CRT
technology. Military avionics contractors are increasingly focused on
incorporating displays, primarily AMLCDs, into cockpit applications that have
traditionally used CRTs. The Company's ability to transition the military
product line to flat panel displays over the next few years will be important to
the long term success of Planar's military avionics business. The Company
entered into an agreement with dpiX (a Xerox company) to jointly develop,
manufacture and market AMLCDs into military applications. However, there can be
no assurance that this business arrangement will be successful.

LEVEL OF ADVANCED RESEARCH AND DEVELOPMENT FUNDING

     The Company's advanced research and development activities have
significantly been funded by outside sources, including agencies of the United
States and Finnish governments and private sector companies. The Company's
recently funded research and development activities have principally focused on
multi-color and full color displays, headmounted displays, advanced packaging
and other applications. The actual funding that will be recognized in future
periods is subject to wide fluctuation due to a variety of factors including
government appropriation of the necessary funds and the level of effort spent on
contracts by the Company.

     As Congress has become more serious about balancing the federal budget,
there has been significant debate on the level of funding to be made available
to programs that have historically supported the Company's research activities.
Additionally, government research and development funding has been gradually
shifting to a more commercial approach, and contractors are increasingly
required to share in the development costs. This trend is likely to continue,
which could increase the Company's net research and development expenses. While
the Company has historically not experienced any loss or decline of external
research funding, the loss or substantial reduction of such funding could
adversely affect the Company's results of operations and its ability to continue
research and development activities at current levels. See Note 1 in the "Notes
to Consolidated Financial Statements".

RELIANCE ON MEDICAL EQUIPMENT MARKET

     Over one third of the Company's sales in fiscal 1996 were made to customers
that manufacture and sell medical equipment to health care providers worldwide,
and the Company believes that sales in this market will continue to be important
to the Company. As a result, developments that adversely impact the market for
medical equipment produced by the Company's customers could, in turn, adversely
affect the Company's business and results of operations. In addition, the
Company's sales have been and may in future periods be adversely affected due to
delays in approvals by foreign or domestic government regulatory agencies which
prevent a customer of the Company from introducing, producing or marketing
products.
<PAGE>
 
INTERNATIONAL OPERATIONS AND CURRENCY EXCHANGE RATE FLUCTUATIONS

     Shipments to customers outside of North America accounted for approximately
37.1%, 34.5% and 26.4% of the Company's sales in fiscal 1996, fiscal 1995 and
fiscal 1994, respectively. The Company anticipates that international shipments
will continue to account for a significant portion of its sales. As a result,
the Company is subject to risks associated with international operations,
including trade restrictions, overlapping or differing tax structures, changes
in tariffs, export license requirements and difficulties in staffing and
managing international operations (including, in Finland, relations with
national labor unions).   See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

DECLINING MILITARY EXPENDITURES

     As a result of the Company's acquisition of Planar Advance, the Company's
sales for military applications have increased. Military capital expenditure
levels have been declining for several years and depend largely on factors
outside of the Company's control. Although the Company believes that its
dependence on military sales will decrease as the Company continues to expand
its customer base, no assurance can be given that military sales will continue
at current levels.

EFFECTS OF QUARTERLY FLUCTUATIONS IN OPERATING RESULTS

     Results of operations have fluctuated significantly from quarter to quarter
in the past, and may continue to fluctuate in the future. Various factors,
including timing of new product introductions by the Company or its competitors,
foreign currency exchange rate fluctuations, disruption in the supply of
components for the Company's products, changes in product mix, capacity
utilization, the timing of orders from major customers, production delays or
inefficiencies, seasonality, the timing of expenses and other factors affect
results of operations. Quarterly fluctuations may adversely affect the market
price of the Common Stock.

     The Company's backlog at the beginning of each quarter does not normally
include all orders needed to achieve expected sales for the quarter.
Consequently, the Company is dependent upon obtaining orders for shipment in a
particular quarter to achieve its sales objectives for that quarter. The
Company's expense levels are based, in part, on expected future sales. If sales
levels in a particular quarter do not meet expectations, operating results may
be adversely affected.
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                             PLANAR SYSTEMS, INC.

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----
<S>                                                                 <C>
Independent Auditors' Report....................................... F-2
Consolidated Balance Sheets........................................ F-3
Consolidated Statements of Operations.............................. F-4
Consolidated Statements of Shareholders' Equity.................... F-5
Consolidated Statements of Cash Flows.............................. F-6
Notes to Consolidated Financial Statements......................... F-7
                
 
</TABLE>
<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 27, 1996 and September 29, 1995,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three year period ended September 27,
1996. 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 generally accepted auditing
standards. 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 27, 1996 and September 29, 1995,
and the results of their operations, and their cash flows for each of the years
in the three-year period ended September 27, 1996 in conformity with generally
accepted accounting principles.

     As discussed in Note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Standards Board's Statement of
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" during the year ended September 29, 1995.

KPMG PEAT MARWICK LLP

Portland, Oregon
November 8, 1996
<PAGE>
 
                             PLANAR SYSTEMS, INC.
                               AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                         September 27,    September 29,  
                                                                             1996             1995       
                                                                         -------------    -------------  
                                                                                                        
                                     ASSETS                                                             
<S>                                                                       <C>                <C>        
Current assets:                                                                                         
 Cash and cash equivalents (Note 1).........................              $23,089            $26,689    
 Short-term investments (Note 1 and 3)......................                7,111             12,792    
 Accounts receivable, net of allowance for doubtful                                                     
 accounts of $130 at 1996 and $110 at 1995 (Note 3 and 5)...               15,267             13,836    
 Inventories (Notes 1 and 5)................................               17,134             11,818    
 Other current assets (Note 1 and 9)........................                5,634              5,576    
                                                                          -------            -------    
    Total current assets....................................               68,235             70,711    
 Plant and equipment, net (Notes 1, 4 and 5)................               13,752             11,760    
 Long-term investments (Note 1 and 3).......................               12,838              5,602    
 Other......................................................                2,470                601    
                                                                          -------            -------    
                                                                          $97,295            $88,674    
                                                                          =======            =======     
</TABLE>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S>                                                                       <C>                <C>      
 Accounts payable.....................................................    $ 3,900            $ 5,001  
 Accrued compensation.................................................      2,979              3,092  
 Current portion of long term debt (Note 5)...........................      1,039                427  
 Other current liabilities (Notes 2 and 6)............................      2,917              2,637  
 Current portion of excess fair market value of acquired                                             
  net assets over purchase price (Note 1).............................        476                476  
                                                                          -------            -------  
    Total current liabilities.........................................     11,311             11,633  
Deferred taxes (Note 7)...............................................        291                184  
Long term debt, less current portion (Note 5).........................      4,123              2,372  
Other long-term liabilities (Note 2)..................................         53                105  
Long-term portion of excess fair market value of                                                     
 acquired net assets over purchase price (Note 1).....................      1,548              2,024  
                                                                          -------            -------  
    Total liabilities.................................................     17,326             16,318  
Shareholders' equity:                                                                                
 Preferred stock, $.01 par value. Authorized 10,000,000                                              
  shares, no shares issued at 1996 or 1995                                                           
 Common stock, no par value. Authorized 30,000,000                                                   
  shares; issued 10,925,218 and 10,838,906 shares at 1996 and 1995,                                  
  respectively........................................................     71,867             71,204  
 Unrealized loss on marketable securities (Note 1)....................        (10)                (1) 
 Retained earnings....................................................     10,579              1,907  
 Foreign currency translation adjustment..............................     (2,467)              (754) 
                                                                          -------            -------  
    Total shareholders' equity........................................     79,969             72,356  
                                                                          -------            -------  
                                                                          $97,295            $88,674  
                                                                          =======            =======  
</TABLE> 
        
          See accompanying notes to consolidated financial statements.
<PAGE>
 
                              PLANAR SYSTEMS, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
 
                                                                      Fiscal Year Ended
                                                                     -------------------
 
                                                   September 27,         September 29,         September 30, 
                                                   -------------         -------------         -------------
                                                       1996                  1995                   1994
                                                       ----                  ----                   ----
<S>                                              <C>              <C>              <C>
Sales...................................              $80,371               $78,523               $60,359
Cost of sales...........................               52,383                50,135                39,619
                                                      -------               -------               -------
Gross profit............................               27,988                28,388                20,740
Operating expenses:
 Research and development, net (Note 1).                7,044                 4,987                 3,345
 Sales and marketing....................                7,097                 6,652                 5,401
 General and administrative.............                5,219                 5,123                 3,888
 Amortization of excess fair market
  value of
  acquired net assets over purchase                      (476)                 (476)                 (476)
   price (Note 1).......................              -------               -------               -------
    Total operating expenses............               18,884                16,286                12,158
                                                      -------               -------               -------
Income from operations..................                9,104                12,102                 8,582
 
Non-operating income (expense):
 Interest income........................                1,880                 1,516                   838
 Interest expense.......................                 (383)                  (48)                  (19)
 Foreign exchange, net..................                  242                  (690)                1,358
 Other, net.............................                -----                  ----                   (23)
                                                      -------               -------               -------
    Net non-operating income  (expense).                1,739                   778                  (562)
                                                      -------               -------               -------
 
Income before income taxes..............               10,843                12,880                 8,020
Provision for income taxes (Notes 1 and                 2,171                 2,343                   558
 7).....................................              -------               -------               -------
    Net income..........................              $ 8,672               $10,537               $ 7,462
                                                      =======               =======               =======
 
Net income per share (Note 1):
    Net income..........................                $0.77                 $0.98                 $0.77
                                                      =======               =======               =======
Weighted average number of common and
 common equivalent shares outstanding
 (Note 1)...............................               11,216                10,760                 9,648
</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>
 
                              PLANAR SYSTEMS, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
 
                                      Common Stock
                                      ------------
                                   Shares      Amount      Unrealized          Retained           Foreign               Total
                                   ------      ------        Loss on           Earnings           Currency          Shareholders'
                                                           Marketable          (Deficit)        Translation             Equity
                                                           Securities          ---------         Adjustment         -------------   
                                                           ----------                           -----------    
<S>                             <C>            <C>       <C>                <C>               <C>                 <C>
Balance, September 24, 1993..      7,034,196    42,589            --            (16,092)            (6,800)             19,697
 Shares issued in public                                                                                            
  offering                                                                                                          
  (Note 8)...................      3,000,000    19,015                                                                  19,015
 Unrealized loss on long term                                                                                       
  investments................                                   (106)                                                     (106)
                                                                                                                    
 Proceeds from issuance of                                                                                          
  common stock...............         85,995       164                                                                     164
 Foreign currency translation                                                                                       
  adjustment.................                                                                        3,170               3,170
 Net income..................                                                     7,462                                  7,462
                                  ----------   -------        -------      --------------    --------------           -------- 
                                                                                                                    
                                                                                                                    
Balance, September 30, 1994..     10,120,191    61,768          (106)            (8,630)            (3,630)             49,402
 Shares issued in public                                                                                            
  offering                                                                                                          
  (Note 8)...................        446,988     8,072                                                                   8,072
 Unrealized gain on long term                                                                                       
  investments................                                     105                                                      105
 Proceeds from issuance of                                                                                          
  common stock...............        271,727       803                                                                     803
 Tax benefit from stock                                                                                             
  option                                                                                                            
  exercises (Note 7).........                      561                                                                     561
 Foreign currency translation                                                                                       
  adjustment.................                                                                        2,876               2,876
 Net income..................                                                    10,537                                 10,537
                                  ----------   -------        -------      ------------      --------------           --------
Balance, September 29, 1995..     10,838,906    71,204            (1)             1,907               (754)             72,356
                                                                                                                    
 Unrealized loss on long term                                                                                       
  investments................                                     (9)                                                       (9)
                                                                                                                    
 Proceeds from issuance of                                                                                          
  common stock...............         86,312       520                                                                     520
 Tax benefit from stock                                                                                             
  option                                                                                                            
  exercises (Note 7).........                      143                                                                     143
 Foreign currency translation                                                                                       
  adjustment.................                                                                       (1,713)             (1,713)
                                                                                                                    
 Net income..................                                                     8,672                                  8,672
                                  ----------   -------   ------------    --------------      --------------    --------------- 
Balance, September 27, 1996..     10,925,218   $71,867          $(10)          $ 10,579             (2,467)            $79,969
                                  ==========   =======   ============    ==============      ==============    =============== 
 
 
</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>
 
                              PLANAR SYSTEMS, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
 
                                                                  Fiscal Year Ended
                                                                 -------------------
 
                                                  September 27,         September 29,         September 30,     
                                                  -------------         -------------         -------------
                                                      1996                  1995                  1944
                                                      ----                  ----                  ----              
<S>                                        <C>                   <C>                   <C>
Cash flows from operating activities:
Net income..............................              $ 8,672              $ 10,537              $  7,462
Adjustments to reconcile net income to
 net cash provided by operating activities:
 Depreciation and amortization..........                2,003                 1,636                   718
 Amortization of excess market value of
  acquired net assets over purchase price                (476)                 (476)                 (476)
 Gain on sale of equipment..............                  (20)                   --                    --
 Increase in deferred taxes.............                  119                    69                    38
 Foreign exchange (gain) loss...........                 (263)                  398                   820
 Tax benefit of stock option exercised..                  143                   561                    --
 Increase in accounts receivable........               (1,777)               (2,557)               (2,500)
 (Increase) decrease in inventories.....               (5,870)                1,274                (2,831)
 (Increase) decrease in other current                  (1,187)               (2,558)                  532
  assets................................
 Increase (decrease) in accounts payable                 (983)                  456                   547
 Increase (decrease) in accrued                            (6)                  465                   675
  compensation..........................
 Increase (decrease) in other current                   1,095                  (270)                  626
  liabilities...........................              -------              --------              --------
Net cash provided by operating                          1,450                 9,535                 5,611
 activities.............................
 
Cash flows from investing activities:
Purchase of plant and equipment.........               (4,320)               (6,911)               (3,064)
Purchase of a business..................                   --                    --                (2,271)
Equipment and rent deposits.............                  475                  (392)                 (146)
Payment of long term liability..........                 (209)                 (187)                   --
Purchase of equity security.............               (2,011)                   --                    --
Net sales (purchase) of short-term                      5,681                (7,367)               (3,931)
 investments............................
Net purchase of long-term investments...               (5,234)               (1,281)               (4,322)
                                                      -------              --------              --------
Net cash used by investing activities...               (5,618)              (16,138)              (13,734)
 
Cash flows from financing activities:
Principle payments under capital lease                     --                    --                  (185)
 obligations............................
Net proceeds of long term debt..........                2,363                 2,799                    --
Net proceeds of long term receivable....               (2,131)                   --                    --
Net proceeds from issuance of capital                     520                 8,875                19,179
 stock..................................              -------              --------              --------
Net cash provided by financing                            752                11,674                18,994
 activities.............................
 
Effect of exchange rate changes on cash
 and cash equivalents............................        (184)                  463                   329
                                                      -------              --------              --------
Net increase (decrease) in cash and cash
 equivalents............................               (3,600)                5,534                11,200
Cash and cash equivalents at beginning                 26,689                21,155                 9,955
 of period..............................              -------              --------              --------
Cash and cash equivalents at end of                   $23,089              $ 26,689              $ 21,155
 period.................................              =======              ========              ========
 
Supplemental cash flow disclosure:
 Cash paid for interest.................              $   383              $     48              $     19
 Cash paid for income taxes.............              $ 2,171              $  1,391              $    558
</TABLE> 
          See accompanying notes to consolidated financial statements.
<PAGE>
 
                             PLANAR SYSTEMS, INC.
                               AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995

               (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 developing, manufacturing and
marketing of electronic display products. These display products primarily
include electroluminescent (EL) and high performance taut shadow mask cathode
ray tubes (CRT) technologies.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the financial statements of
Planar Systems, Inc. and its wholly-owned subsidiaries, Planar International
Ltd., Planar America, Inc. and Planar Advance, 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 1996, 1995 and 1994 was September 27, September 29 and September
30, 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 the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and  liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could 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 rates of exchange, 
<PAGE>
 
and revenues and expenses are translated using weighted average rates, in
accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
"Foreign Currency Translation". Adjustments from foreign currency translation
are included as a separate component of shareholders' equity. Foreign currency
transaction gains and losses are included as a component of non-operating income
(expense).

STATEMENT OF CASH FLOWS

     Cash and cash equivalents consist of highly liquid instruments with
original maturities of three months or less in accordance with SFAS No. 95,
"Statement of Cash Flows".

     In accordance with SFAS No. 95, cash flows from the Company's operations in
Finland are calculated based upon its functional currency. As a result, amounts
related to assets and liabilities reported on the Statement of Consolidated Cash
Flows will not necessarily agree with changes in the corresponding balances on
the Consolidated Balance Sheets. The effect of exchange rate changes on cash
balances held in foreign currencies is reported as a separate line item in the
Consolidated Statements of Cash Flows.

INVESTMENTS

     Effective October 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". In accordance with SFAS
No. 115, prior years' financial statements have not been restated to reflect the
change in the accounting method.

     Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date.  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 carried at fair value, with unrealized gains
and losses, net of tax, reported in a separate component of shareholders'
equity.  At September 27, 1996, the Company had no investments that qualified as
trading or held to maturity.

     The amortized cost of debt securities classified as available for sale is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and interest are included in interest income.  The cost of
securities sold is based upon specific identification.

     At September 27, 1996, the Company's investments in debt and equity
securities were classified as cash and cash equivalents and short-term
investments.  These investments are diversified among high credit quality
securities in accordance with the Company's investment policy.  As of September
27, 1996, all debt securities are invested in federal and state and municipal
securities.   These securities have been reported at their fair market value of
$32,191 compared to historical cost of $32,201.  The unrealized losses of $10
are reported as a separate component of shareholders' equity, net of deferred
taxes.
<PAGE>
 
     The estimated fair value of debt securities available for sale by
contractual maturities at September 27, 1996 is as follows:

<TABLE>
<S>                                                       <C>    
Due in three months or less                               $14,253
Due after three months through one year                     7,111
Due after one year through three years                     10,827
                                                       ----------
                                                          $32,191
                                                       ========== 
</TABLE>

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>
 
                            September 27,        September 29, 
                            -------------        -------------
                                1996                  1995    
                                ----                  ----     
<S>                         <C>                  <C>
Raw materials.....              $10,616              $ 6,240
Work in process...                3,323                2,949
Finished goods....                3,195                2,629
                                -------              -------
                                $17,134              $11,818
                                =======              =======
</TABLE>

PLANT AND EQUIPMENT

     Depreciation of equipment is computed on a straight line basis over the
estimated useful lives of the assets, generally five 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
building is computed on a straight line basis over the estimate useful life of
the building, estimated to be 39 years.

INCOME TAXES

     Under SFAS No. 109, 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. Under SFAS No. 109,
the effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date. Income tax credits will be
recognized as reductions of the provision for income taxes in the year the
credits are realized (the "flow-through method").

REVENUE RECOGNITION

     The Company recognizes revenue from product sales upon shipment.

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
<PAGE>
 
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>
                                                            Fiscal Year Ended
                                              --------------------------------------------
                                              Sept. 27,        Sept. 29,         Sept. 30,     
                                              ---------        ---------         ---------    
                                                 1996             1995             1994    
                                                 ----             ----             ---- 
<S>                                           <C>              <C>               <C>
Research and development expense...             $16,493          $14,084           $8,377
Contract funding...................               9,449            9,097            5,032
                                                -------          -------           ------
Research and development, net......             $ 7,044          $ 4,987           $3,345
                                                =======          =======           ======
</TABLE>

As of September 27, 1996 and September 29, 1995, included in other current
assets is $2,964 and $3,032, respectively, related to these research and
development contracts.

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 6).

EXCESS FAIR MARKET VALUE OF ACQUIRED NET ASSETS OVER PURCHASE PRICE

     The excess of fair market value of acquired net assets over purchase price
is being amortized over a ten-year period using the straight line method.

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

     Net income per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares assumed
to be outstanding during the period, using the treasury stock method. Common
equivalent shares consist of options and warrants to purchase common stock.

FINANCIAL INSTRUMENTS
 
     The recorded amount of financial instruments approximates the fair market
value.

RECENT ACCOUNTING PRONOUNCEMENTS

     In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 will be
effective for fiscal years beginning after December 15, 1995, and will require
that the Company either recognize in its financial statements costs related to
its employees stock-based compensation plans, such as stock option and stock
purchase plans, or make pro forma disclosures of such costs in a footnote to the
financial statements.

     The Company expects to continue to use the intrinsic value based method of
Accounting Principles Board Opinion 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans and to adopt only
the disclosure requirements of SFAS No. 123 beginning with fiscal 
<PAGE>
 
year 1997. Accordingly, SFAS 23 is not expected to have a material impact on the
Company's results of operations or financial position.

     In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-lived Assets and for Long-lives Assets to be Disposed Of." This
statement specifies when long-lived assets should be reviewed for impairment,
how to determine if such an asset is impaired, and how to measure an impairment
loss. This statement also requires that long-lived assets held for disposal be
valued at the lower carrying amount or fair value less the cost to sell the
asset, except for assets that constitute part of discontinued operation.
Adoption of SFAS No. 121 on a prospective basis is required for fiscal years
beginning after December 15, 1995. The Company believes that implementation of
this statement will not have a material effect on the financial position or
results of operations.

NOTE 2 -- BUSINESS ACQUISITION

     In August 1994, the Company completed the acquisition of inventory, fixed
assets and certain other properties and rights and assumed certain liabilities
of the avionics business operation of Tektronix, Inc. (a related party) for a
base price of approximately $2,300. In addition to the base price, the Company
will also make contingent payments based on a percentage of revenue derived from
current products for the next three years. These contingent payment have been
estimated as of the date of the acquisition and are included in other current
and long term liabilities. The Company has continued these operations through a
wholly owned subsidiary, Planar Advance, Inc. since that time. This acquisition
has been accounted for under the purchase method, and accordingly, the operating
results of Planar Advance, Inc. have been included in the consolidated operating
results since the date of the acquisition. Planar Advance, Inc.'s primary
business is the manufacturing and selling of CRT's for defense avionics
applications.

     The funds used to acquire this business were provided by the Company's
operations and proceeds from the Company's recent initial public offering.

     The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Planar Advance, Inc. had been acquired
as of the beginning of the periods presented, after including the impact of
certain adjustments, such as amortization of intangibles, increased depreciation
and the related income tax effects.
<TABLE>
<CAPTION>
 
                             1994
                          -----------
                          (Unaudited)
                          -----------
<S>                       <C>
 
Sales..................      $75,956
Net income.............      $ 8,336
Net income per share...      $  0.86
</TABLE>

     The pro forma results are not necessarily indicative of what actually would
have occurred had the acquisition been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect synergies that might be achieved from combined
operations.
<PAGE>
 
NOTE 3 -- 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 creditworthiness 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 27, 1996, the Company does not believe it had any
significant credit risks.

NOTE 4 -- PLANT AND EQUIPMENT

     Plant and equipment, at cost, consists of:
<TABLE>
<CAPTION>
 
                                      1996        1995
                                    ---------   ---------
<S>                                 <C>         <C>
 
Buildings and improvements.......   $  1,331    $  1,331
Machinery and equipment..........     24,930      20,978
                                    --------    --------
 Total plant and equipment.......     26,261      22,309
 Less accumulated depreciation...    (12,509)    (10,549)
                                    --------    --------
  Net plant and equipment........   $ 13,752    $ 11,760
                                    ========    ========
</TABLE>
NOTE 5 -- BORROWINGS

LINE OF CREDIT

     The Company has a bank line of credit which allows for borrowings up to
$2,500. The line bears interest at the bank's prime rate (8.25% at September 27,
1996) and is unsecured with a negative pledge on account receivable and
inventories. The agreement is subject to review at January 31, 1997. There were
no borrowings outstanding on this line at September 27, 1996 or September 29,
1995.

LONG TERM DEBT

During fiscal 1996, the Company entered into credit facilities with several
financial institutions to borrow up to $15 million to finance equipment
purchases. These loans are secured by the financed equipment, mature in 2000 and
bear interest at an average rate of 7.5%. As of September 27, 1996 and September
29, 1995, the company has $5.2 million and $2.8 million outstanding under these
loans. Aggregate maturities over the next five years are $1,039 ,$1,120, $1,208,
$1,366 and $429. Covenants under these agreements are not considered restrictive
to normal operations.
<PAGE>
 
NOTE 6 -- OTHER CURRENT LIABILITIES

     Other current liabilities consist of:

<TABLE>
<CAPTION>
                                                        1996      1995
                                                       ------    ------
<S>                                                    <C>       <C>
Warranty reserve........................               $  643    $  810
Income taxes payable....................                  542       371
Deferred income taxes...................                  448       392
Current portion of long term contingent                   176       332
 payable................................               
Deferred revenue........................                   65       183
Other...................................                1,043       549
                                                       ------    ------
Total...................................               $2,917    $2,637
                                                       ======    ======
</TABLE> 
 
NOTE 7 -- INCOME TAXES
 
         The components of income before income taxes and extraordinary item
consist of the following:

<TABLE> 
<CAPTION> 
                                            1996       1995       1994
                                           -------    -------    ------
<S>                                        <C>        <C>        <C> 
Domestic................................   $ 5,484    $ 7,778    $5,285
Foreign.................................     5,359      5,102     2,735
                                           -------    -------    ------
    Total...............................   $10,843    $12,880    $8,020
                                           =======    =======    ======
</TABLE> 
 
         The following table summarizes the provision for US federal, state and
foreign taxes on income.

<TABLE> 
<CAPTION> 
                                            1996       1995       1994
                                           -------    -------    ------
<S>                                        <C>        <C>        <C>  
Current:
 Federal................................   $   660    $ 1,268    $  170
 State..................................       170        455        45
 Foreign................................     1,137        695       281
                                           -------    -------    ------
                                             1,967      2,418       496
Deferred:
 Federal................................      (195)      (200)       --
 State..................................        --         --        --
 Foreign................................       399        125        62
                                           -------    -------    ------
                                           $ 2,171    $ 2,343    $  558
                                           =======    =======    ======
</TABLE> 

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

<TABLE> 
<CAPTION> 
                                            1996       1995       1994
                                           ------     ------     ------
<S>                                        <C>        <C>        <C>  
Computed statutory rate.................    34.0%      34.0%      34.0%
State income taxes, net of federal tax                           
 benefits...............................     0.6%       2.3        0.4 
Effect of foreign tax rates.............    (2.7)      (3.2)      (2.5)
Permanent differences resulting from                             
 purchase accounting....................    (0.8)      (1.3)      (2.1) 
Change in valuation reserve.............    (2.0)      (6.8)      (2.3)
Utilization of net operating loss                                
 carryforwards..........................    (6.5)      (5.4)     (19.6) 
Benefit of tax exempt interest earned...    (3.0)      (2.4)      (1.9)
Other, net..............................     0.4        1.0        1.0
                                            ----       ----      -----
Effective tax rate......................    20.0%      18.2%       7.0%
                                            ====       ====      =====
</TABLE>
<PAGE>
 
     The tax effects of temporary differences and carryforwards which gave rise
to significant portions of the deferred tax assets and liabilities as of
September 27, 1996 and September 29, 1995 were as follows:

<TABLE>
<CAPTION>
                                             1996       1995
                                           --------   --------
<S>                                        <C>        <C>
Deferred tax assets:
Inventory valuation reserve.............   $   449    $   286
Allowance for doubtful accounts.........        62         54
Valuation of intangibles................        29         25
Accrued vacation and other compensation.       240        197
Deferred revenue........................        --         71
Accrued warranty reserve................       194        266
Capital loss carryforwards..............        47        180
Net operating loss carryforwards........     3,280      4,019
                                           -------    -------
Gross deferred tax assets...............     4,301      5,098
 Valuation allowance....................    (3,468)    (4,634)
                                           -------    -------  
  Deferred tax assets...................       833        463
 
Deferred tax liabilities:
Inventory valuation reserve.............      (448)      (392)
Accumulated depreciation................      (438)      (300)
Operating reserves......................      (291)      (147)
                                           -------    -------
  Deferred tax liabilities..............    (1,177)      (839)
                                           -------    -------
 
Net deferred tax liability..............     ($344)     ($376)
                                           =======    =======
</TABLE>

     During fiscal year 1996 and 1995, the Company recognized tax benefits of
$143 and $561 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 1996 and 1995, the valuation reserve decreased by $1,166 and $1,574,
respectively.

     At September 27, 1996, the Company has net operating loss carryforwards of
approximately $9,650 available to reduce future federal taxable income. The
carryforwards expire at various dates through 2006.  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 Planar
International. As a result of the acquisition, utilization of available net
operating loss carryforwards is limited to approximately $2,100 per year.

NOTE 8 -- SHAREHOLDERS' EQUITY

PREFERRED STOCK

     The Company is authorized to issue up to 10,000,000 shares of preferred
stock at $.01 par value. At the current time, no shares of preferred stock have
been issued.
<PAGE>
 
COMMON STOCK

     On June 19, 1995, the Company completed the issuance of an additional
447,000 shares  of its common stock. Proceeds to the Company were approximately
$8,100 after deducting applicable issuance costs and expenses. The net proceeds
are expected to be used for general corporate purposes, including the financing
of working capital requirements, development or acquisition of technology,
commercialization of new products and possible acquisitions.
 
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 "qualified stock options" not intended to qualify.
Under the 1993 plan, options generally become exercisable 25% one year after
grant and 6.25% per quarter thereafter, and expire ten years after grant. The
1993 plan generally supersedes the 1983 Stock Incentive Plan. Options remain
outstanding and exercisable under the 1983 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 2,097,604 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. Terms
of this plan generally follow the 1993 Stock Incentive Plan. Information
regarding these option plans is as follows:

<TABLE>
<CAPTION>
                                            Number of
                                              Shares           Option Prices
                                            ---------         ---------------
<S>                                         <C>               <C>
Options outstanding at September 24,          
 1993...................................      801,400           2.00 -   6.50
 Granted................................      175,750           6.50 -  12.00
 Exercised..............................       90,492           2.00 -   4.25
 Canceled...............................       23,492           2.25 -   9.00
                                            ---------         ------   ------
Options outstanding at September 30,          
 1994...................................      863,166         $ 2.00 - $12.00
 Granted................................      178,000          19.50 -  23.37
 Exercised..............................      261,894           2.00 -  10.25
 Canceled...............................       13,967           2.25 -  23.00
                                            ---------         ------   ------
Options outstanding at September 29,          
 1995...................................      765,305         $ 2.00 - $23.37
 Granted................................      822,700           9.87 -  19.13
 Exercised..............................       71,942           2.25 -  14.13
 Canceled...............................      344,199           2.50 -  23.00
                                            ---------         ------   ------
Options outstanding at September 27,        
 1996...................................    1,171,864         $ 2.00 - $23.37
                                            =========         =============== 
Exercisable at September 27, 1996.......      485,616
========================================    =========
</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 27, 1996, 261,197 shares remain available for purchase through the
plan and there were 532 employees eligible to participate in the plan, of which
128, or 24.1 percent, were participants. Employees 
<PAGE>
 
purchased 14,370 shares, at $10.41 per share during the year. Total receipts to
the company were $142. Since the plan is noncompensatory, no charges to
operations have been recorded.

NOTE 9 -- RELATED PARTY TRANSACTIONS

     The Company leases certain facilities from a related party. Rental expense
under this lease was $1,114, $1,126 and $908, for the years ended September 27,
1996, September 29, 1995 and September 30, 1994, respectively. As part of the
acquisition (discussed at Note 2), the company leases facilities space from
another shareholder, Tektronix, Inc. Rental expense under this lease was $216
and $196 for the years ended September 27, 1996 and September 29, 1995.

     The Company purchases equipment and supplies, at fair value, from a related
party.  Such purchases totaled $209, $682, and $66 during 1996, 1995 and 1994,
respectively.  Additionally, $179, $12 and $121 of the Company's sales during
1996, 1995 and 1994, respectively, were to this shareholder. These sales were
also at fair market value.

     The Company has receivables due from certain of its foreign subsidiary's
employees. Included in other current assets at September 27, 1996 and September
29, 1995 is $79 and $26, respectively, related to these receivables. At
September 29, 1995, employee receivables included in other assets were $107.

NOTE 10 -- COMMITMENTS

OPERATING LEASES

     Most of 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 27, 1996, the approximate minimum annual operating lease
payments are:

<TABLE> 
<CAPTION> 

Fiscal year ending in September:
--------------------------------
<S>                                      <C>   
1997.................................... $1,939
1998....................................  1,945
1999....................................  1,921
2000....................................  1,686
2001....................................  1,695
                                         ------ 
                                         $9,186   
                                         ======
</TABLE>

     Total rent expense was $1,921, $1,880 and $1,483 for the years ended
September 27, 1996, September 29, 1995 and September 30, 1994, respectively.

NOTE 11 -- GEOGRAPHIC INFORMATION

     The Company operates in one industry. Operations include developing,
manufacturing, and marketing EL displays and high performance CRTs.
<PAGE>
 
     Information concerning geographic area for fiscal year 1994, 1995 and 1996
is summarized below:

<TABLE>
<CAPTION>
                                 North          Rest of 
                                -------         -------
                                America          World     Eliminations    Consolidated
                                -------         -------    -------------   ------------ 
<S>                             <C>             <C>        <C>             <C>
1994:
 Sales.................         $45,989         $34,080       $(19,710)        $60,359
 Net income............           5,070           1,898            494           7,462
 Identifiable assets...          62,545          23,759        (22,289)         64,015
1995:
 Sales.................         $57,062         $40,244       $(18,783)        $78,523
 Net income............           6,299           3,801            437          10,537
 Identifiable assets...          78,589          31,393        (21,308)         88,674
1996:
 Sales.................         $60,351         $39,516       $(19,496)        $80,371
 Net income............           4,715           3,492            465           8,672
 Identifiable assets...          90,115          31,727        (24,547)         97,295
</TABLE>

     North American sales include all sales made in Canada, the United States
and Mexico. Rest of the World sales includes all sales made in countries outside
of North America, which in fiscal years 1996, 1995 and 1994 principally
consisted of sales made in Europe and Japan.

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 between 0% and 15% of their
gross pay subject to statutory maximums. The Company matches 50% 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 $438, $332 and $192 for the years ended September 27, 1996,
September 29, 1995 and September 30, 1994, respectively.
<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" and
"Management" appearing on pages 2 through 4 of the Proxy Statement to be used in
connection with the Annual Meeting of Shareholders on February 13, 1997, is
incorporated by reference into this Report.

ITEM 11.  EXECUTIVE COMPENSATION

     The information set forth under the caption "Executive Compensation"
appearing on pages 5 through 9 of the Proxy Statement to be used in connection
with the Annual Meeting of Shareholders on February 13, 1997, 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 on page 11 of the Proxy Statement to be used
in connection with the Annual Meeting of Shareholders on February 13, 1997, is
incorporated by reference into this Report.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     None.
<PAGE>
 
PART IV
-------

ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON 8-K

(a) Financial Statements and Schedules
 
     The financial statements of Planar Systems, Inc. as set forth under Item 8
are filed as part of this report.
 
     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 19 of this report.

(b) Reports on 8-K
 
     No reports on Form 8-K were filed during the last quarter of fiscal 1996.

(c) Exhibits

<TABLE> 
<CAPTION> 
Exhibit
Number    Title
------    -----
<C>       <S> 
3.1*      Second Restated Articles of Incorporation of Planar Systems, Inc.

3.2*      First Restated Bylaws of Planar Systems, Inc.

3.3       Amendment to Second Restated Articles of Incorporation of Planar
          Systems, Inc.

4.1*      Specimen stock certificate

4.4       Rights Agreement dated as of February 1, 1996 between Planar Systems,
          Inc. and First Interstate Bank of Oregon, N.A. (Incorporated by
          reference to the Company's Form 8-K filed as of February 21, 1996)

10.1*     Form of Indemnity Agreement between Planar Systems, Inc. and each of
          its executive officers and directors

10.2*     Amended and Restated 1983 Incentive Stock Option Plan

10.3*     1993 Stock Option Plan for Nonemployee Directors

10.4*     1993 Incentive Stock Option Plan
</TABLE> 
<PAGE>
 
<TABLE> 
<C>       <S>  
10.5      1994 Employee Stock Purchase Plan (incorporated by reference to the
          Company's Annual Report on Form 10-K filed on December 27, 1994)

10.6*     Registration Rights Agreement dated December 30, 1990

10.7*     Lease agreement dated as of September 30, 1993 between Science Park
          Limited Partnership I and Planar Systems, Inc.
 
10.8*     Lease agreement between Metra Corporation and Planar International,
          Ltd (English translation)
 
10.9      Lease agreement dated as of August 26, 1994 between Tektronix, Inc.
          and Planar Systems, Inc. (Incorporated by reference to the Company's
          Form 8-K filed as of August 26, 1994)
 
10.10     Asset Purchase Agreement dated August 26, 1994 between Tektronix, Inc.
          and Tektronix Federal Systems, Inc. and Planar Systems, Inc and Planar
          Advance (Incorporated by reference to the Company's Form 8-K filed on
          September 12, 1994)
 
21        Subsidiaries of Planar Systems, Inc. (Incorporated by reference to the
          Company's Annual Report on Form 10-K filed on December 27, 1994)
 
23        Consent of KPMG Peat Marwick LLP dated December 23, 1996

24        Power of Attorney (included on Signature Page)

27        Financial Data Schedule
</TABLE> 

* Incorporated by reference to the Company's Registration Statement on Form S-1
(Reg. No. 33-71020), declared effective on December 15, 1993.
 
<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 23, 1996                   By: /s/ JACK RAITON
                                       ----------------
                                    Jack Raiton
                                    Vice President
                                    Chief Financial Officer

                               POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack Raiton and James M. Hurd, 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.

<TABLE>
<S>                        <C>                                             <C>
/s/ JAMES M. HURD          President, Chief Executive Officer,             December 23, 1996
------------------------   Director (Principal Executive Officer)       
James M. Hurd                                                           
                                                                        
/s/ JACK RAITON            Vice President, Chief Financial Officer,        December 23, 1996
------------------------   (Principal Financial and Accounting Officer) 
Jack Raiton                                                             
                                                                        
/s/ CURTIS M. STEVENS      Executive Vice President,                       December 23, 1996
------------------------   Director                                     
Curtis M. Stevens                                                       
                                                                        
/s/ WILLIAM D. WALKER      Chairman of the Board                           December 23, 1996
------------------------                                                
William D. Walker                                                       
                                                                        
/s/ STEVEN E. WYNNE        Director                                        December 23, 1996
------------------------                                                
Steven E. Wynne                                                         
                                                                        
/s/ HEIKKI T. HORSTIA      Director                                        December 23, 1996
------------------------                                                
Heikki T. Horstia                                                       
                                                                        
/s/ GREGORY H. TURNBULL    Director                                        December 23, 1996
------------------------
Gregory H. Turnbull
</TABLE>