Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
Commission file number 0-9321
PRINTRONIX, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2903992
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17500 Cartwright
P.O. Box 19559
Irvine, California 92623
(Address of principal executive offices) (Zip Code)
(714) 863-1900
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class of Common Stock Outstanding at February 5, 1998
$ .01 par value 7,694,183
PRINTRONIX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information (2)
Consolidated Balance Sheets
Assets (3)
Liabilities and Stockholders' Equity (4)
Consolidated Statements of Operations (5)
Consolidated Statements of Cash Flows (6)
Condensed Notes to Consolidated Financial
Statements (8)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (10)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (13)
Item 6. Exhibits and Reports on Form 8-K (13)
Signatures (14)
Index to Exhibits (15)
PRINTRONIX, INC. AND SUBSIDIARIES
FORM 10-Q
------------
FOR THE QUARTER ENDED DECEMBER 26, 1997
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
---------------------------------
Statement Regarding Financial Information
---------------------------------------------------------
The financial statements included herein have been prepared by
Printronix, Inc. (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information normally included in the
financial statements prepared in accordance with generally
accepted accounting principles has been omitted pursuant to
such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information
presented not misleading. It is suggested that the financial
statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended March 28, 1997,
as filed with the Securities and Exchange Commission.
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
Assets
December 26, 1997 March 28, 1997
(Derived from audited
(Unaudited) financial statements)
----------------- ---------------------
(In thousands)
CURRENT ASSETS:
Cash and cash equivalents $18,641 $12,766
Accounts receivable, net of
allowances for doubtful
accounts of $1,308 as of
December 26, 1997 and $1,010
as of March 28, 1997 24,341 23,086
Inventories:
Raw materials, subassemblies
and work in process 15,991 16,253
Finished goods 2,359 3,775
----------- -----------
18,350 20,028
Prepaid expenses 748 792
----------- -----------
TOTAL CURRENT ASSETS 62,080 56,672
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Property and equipment, at cost:
Machinery and equipment 31,995 32,690
Furniture and fixtures 18,010 13,581
Building and improvements 6,941 6,769
Leasehold improvements 2,105 2,008
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59,051 55,048
Less accumulated depreciation
and amortization (35,551) (31,520)
----------- -----------
23,500 23,528
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Other assets 542 453
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TOTAL ASSETS $86,122 $80,653
======= =======
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
---------------------------
Liabilities and Stockholders' Equity
------------------------------------
December 26, 1997 March 28, 1997
(Derived from audited
(Unaudited) financial statements)
----------------- ---------------------
(In thousands)
CURRENT LIABILITIES:
Accounts payable $8,088 $8,621
Accrued expenses:
Payroll and employee benefits 4,665 4,087
Warranty 1,636 1,536
Other 1,579 1,326
Income taxes 722 641
Environmental 214 214
----------- -----------
TOTAL CURRENT LIABILITIES 16,904 16,425
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Other long-term liabilities 720 720
----------- -----------
TOTAL LONG-TERM LIABILITIES 720 720
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01
Authorized 30,000,000 shares,
issued and outstanding
7,783,958 and 8,032,303
shares as of December 26,
1997 and March 28, 1997,
respectively. 78 80
Additional paid-in capital 30,538 30,887
Retained earnings 37,882 32,541
----------- -----------
Total Stockholders' Equity 68,498 63,508
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $86,122 $80,653
======= =======
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Three Months Ended Nine Months Ended
Dec. 26, Dec. 27, Dec. 26,Dec. 27,
1997 1996 1997 1996
(Amounts in thousands, except share data)
NET SALES $42,528 $44,521 $126,983 $132,333
COST OF SALES 28,718 32,606 87,057 98,243
-------- -------- -------- --------
Gross Profit 13,810 11,915 39,926 34,090
OPERATING EXPENSES:
Engineering and development 3,884 3,486 11,457 10,691
Selling, general and
administrative 5,898 5,171 16,950 15,051
-------- -------- -------- --------
Total operating expenses 9,782 8,657 28,407 25,742
-------- -------- -------- --------
INCOME FROM OPERATIONS 4,028 3,258 11,519 8,348
-------- -------- -------- --------
Other income, net (570) (96) (1,287) (99)
-------- -------- -------- --------
INCOME BEFORE TAXES 4,598 3,354 12,806 8,447
Provision for income taxes 69 114 896 314
-------- -------- -------- --------
NET INCOME $ 4,529 $ 3,240 $11,910 $ 8,133
======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.56 $ 0.41 $ 1.50 $ 1.03
Diluted $ 0.54 $ 0.39 $ 1.44 $ 0.98
======== ======== ======== ========
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic 8,048,214 7,923,644 7,945,801 7,883,847
Diluted 8,448,505 8,285,967 8,296,862 8,294,129
========= ========= ========= =========
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------
For the Nine Months Ended:
December 26, 1997 and December 27, 1996
1997 1996
(UNAUDITED)
($ IN THOUSANDS)
Cash flows from operating activities:
Net income $11,910 $ 8,133
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,340 5,414
Loss on sales of property & equipment 69 36
Compensation expense related to
restricted stock plan 1,191 918
Changes in assets and liabilities:
Accounts receivable (1,255) (2,002)
Inventories 1,678 1,537
Accounts payable (533) (1,291)
Payroll and employee benefits 578 877
Accrued income taxes 81 174
Other assets and liabilities, net 308 263
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Net cash provided by operating activities 19,367 14,059
----------- -----------
Cash flows from investing activities:
Investment in property and equipment (5,433) (7,880)
Purchase of building and improvements (173) (5,777)
Proceeds from disposition of equipment 225 487
----------- -----------
Net cash used in investing activities (5,381) (13,170)
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See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - continued
-------------------------------------
For the Nine Months Ended:
December 26, 1997 and December 27, 1996
1997 1996
(UNAUDITED)
($ IN THOUSANDS)
Cash flows from financing activities:
Payment of short-term debt $ -- $ (298)
Proceeds from issuance of common stock 702 399
Purchase and retirement of common stock (8,813) --
Increase in long-term debt -- 5,000
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Net cash provided by financing activities (8,111) 5,101
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Increase in cash and cash equivalents 5,875 5,990
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Cash and cash equivalents
at beginning of period 12,766 6,486
----------- -----------
Cash and cash equivalents at end of period $18,641 $12,476
=========== ===========
- ---------------------------------------------------------------------
Supplementary disclosures of cash flow information:
Taxes paid $866 $89
Interest paid 21 214
Capital lease additions -- --
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
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DECEMBER 26, 1997
-------------------------
(Unaudited)
1) Management Opinion
In the opinion of management, the consolidated financial statements
reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and
results of operations as of and for the periods presented.
2) Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments
with maturities of three months or less to be cash equivalents. The
effect of exchange rate changes on cash balances held in foreign
currencies was not material for the periods presented.
3) Inventories
Inventories are priced at the lower of cost (FIFO) or market and
include the cost of material, labor and manufacturing overhead.
4) Reclassifications
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period's presentation.
5) Statements of Financial Accounting Standards Adopted
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings per Share." This statement required dual presentation of
newly defined basic and diluted earnings per share ("EPS") on the
face of the income statements for all entities with complex capital
structures. The accounting standard is effective for all fiscal
years ending after December 15, 1997 and requires restatement of
all prior period EPS presented. Earnings per share amounts for
fiscal years 1998 and 1997 have been restated to give effect to the
application SFAS No. 128, which was adopted by the Company in the
third quarter of fiscal 1998. The effect of the restatement on
earnings per share was an increase of $0.02 for fiscal 1998 and no
effect on fiscal 1997.
6) Bank Borrowings and Debt Arrangements
The Company ended the quarter with no outstanding debt against its
unsecured lines of credit.
PRINTRONIX, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
-----------------------------------------------
DECEMBER 26, 1997
-------------------------
(Unaudited)
7) Earnings per Share
The number of shares used in computing earnings per share equals
the total of the weighted average number of shares outstanding
during the periods presented plus common stock equivalents relating
to options. Common stock equivalents relating to options represent
additional shares which may be issued in connection with their
exercise, reduced by the number of shares which could be
repurchased with the proceeds at the average market price per share
computed on a quarterly basis during the year. The following table
shows the calculation for basic and diluted shares outstanding:
Three Months Ended Nine Months Ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1997 1996 1997 1996
Weighted average number
of common shares used
in basic EPS 8,048,214 7,923,644 7,945,801 7,883,847
Effect of dilutive securities:
Stock options 400,291 362,323 351,062 410,282
Weighted average number
of common shares used
in diluted EPS 8,448,505 8,285,967 8,296,862 8,294,129
8) Capital Stock
As authorized by the Board of Directors, the Company repurchased
and retired 372,900 shares of common stock during the quarter at a
cost of $6.3 million. Purchases of an additional 101,000 shares of
common stock were made subsequent to the end of the quarter and
future purchases of up to 318,600 shares of common stock may be
made at the Company's discretion.
In June 1996, Printronix completed a stock split-up effected in the
form of a fifty percent (50%) stock dividend. Retroactive effect
has been given to the stock split in all share and per share data
presented.
PRINTRONIX, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Reference is made to the Company's annual report on Form 10-K for the
fiscal year ended March 28, 1997 for a detailed discussion and
analysis of the Company's financial condition and results of
operations for the periods covered by that report.
RESULTS OF OPERATIONS
Revenues and Backlog
Net sales for the quarter ended December 26, 1997 were $42.5 million,
an increase of $1.7 million, or 4.3%, over last quarter and $2.0
million, or 4.5%, below the year-ago quarter. On a year-to-date basis,
sales were $5.4 million, or 4.0%, lower than the first nine months of
the prior fiscal year. The decrease in revenue for the first nine
months of the year compared with the same period last year was
primarily due to weaker markets in the Americas and Europe, partially
offset by increased sales in Asia Pacific. The decrease in the
Americas is due to reduced sales to the Company's larger OEM
customers, partially offset by increased sales to the Company's
distribution channels. The decrease in European sales is due to
reduced sales to both the Company's larger OEM and distribution
customers. Regionally, year-to-date sales to customers in the
Americas decreased 3.1% compared with the same period of the prior
year while sales to customers in Europe, Middle East, and Africa
(EMEA) decreased approximately 9.1%. Revenue in Asia Pacific
increased 17.4% for the first nine months of fiscal 1998 compared with
the same period of the prior year. Revenue from the Company's five
largest customers, which primarily represent OEM business, increased
22.4% from the prior quarter and increased 3.7% over the year-ago
quarter. The increase as compared to the prior quarter was due to the
historically high sales volume from the Company's largest OEM customer
in the third quarter. For the first nine months of the fiscal year,
sales to these customers were down $7.3 million or 10.0% over the
prior year period.
Order backlog at quarter-end was $12.4 million compared with $20.8
million at the end of the previous quarter and $13.4 million at the
end of the third quarter for the previous fiscal year. The higher
backlog at the end of the second quarter was due to orders from the
Company's largest OEM customer to support its historically high sales
volume in the third quarter.
PRINTRONIX, INC. AND SUBSIDIARIES
Gross Profit
Gross profit as a percentage of sales for the quarter increased to
32.5% compared with 32.3% in the prior quarter and 26.8% in the prior
year quarter. The year-to-date gross profit percentage increased to
31.4% from 25.8% for the first nine months of the fiscal year compared
with the first nine months of the prior fiscal year. The higher
margin on a year-to-date basis is attributable to manufacturing
efficiencies and cost reductions from the successful conversion to the
ProLine Series line matrix products.
Operating Expenses, Other Income and Taxes
Engineering expense for the quarter was 4.4% higher than the prior
quarter and 11.4% higher than the prior year quarter. On a year-to-
date basis, engineering expenses increased by 7.2% to $11.5 million
compared with $10.7 million for the first nine months of the prior
fiscal year. Selling, general, and administrative expenses increased
2.9% over the prior quarter and increased 14.1% over the prior year
quarter. Year-to-date expenses increased by 12.6% to $16.9 million
compared with $15.1 million for the corresponding prior year nine
months. The increased spending over the prior year periods continues
to be driven by higher sales expenses for advertising and marketing
due to the rollout of the ProLine series printers and continued
efforts on new product development.
Other income was $0.2 million higher than the prior quarter and $0.5
million higher than the prior year quarter. On a year-to-date basis,
other income increased $1.2 million. The increase in other income was
due to increased interest income from higher average cash balances and
increased foreign currency gains.
The year-to-date income tax provision increased to $0.9 million as
compared to $0.3 million in the prior year. The increase in tax
provision is due to the full utilization of the California net
operating loss carryforwards in the fourth quarter of fiscal 1997.
The Company continues utilizing Federal net operating loss
carryforwards and is required to provide only for state and foreign
taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the quarter with cash, net of short-term borrowings,
of $18.6 million compared with $23.7 million last quarter and $11.4
million for the year-ago quarter. The Company's current cash position
compared with the year-ago quarter results primarily from increased
profitability and lower inventory levels. The higher inventory levels
in the prior year supported the move of the Singapore manufacturing
operations to a new facility without impacting the Company's product
availability to its customers.
PRINTRONIX, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Investment in capital equipment for the first nine months of the
fiscal year was $5.6 million compared with $13.2 million for the same
period in the prior year. Prior year capital expenditures included
manufacturing equipment for ProLine printer production and a new
facility for Singapore manufacturing. Both the current year and prior
year capital expenditures included amounts related to the Company's
new business information system.
In June 1996, the Company completed a split-up effected in the form of
a fifty percent (50%) stock dividend. Retroactive effect has been
given to the stock dividend in stockholder's equity accounts as of
September 26,1997, and in all share and per share data presented.
During the quarter ended September 26, 1997, the Company completed the
installation of a new business information system which is year 2000
compliant. The cost of the new business information system was
capitalized and will be amortized over its useful life. The Company
continues to assess the effect of the year 2000 on its operations and
does not expect the impact to be significant.
The Company believes that its internally-generated funds, together
with available financing, will be adequate in providing its working
capital requirements, capital expenditures, and engineering
development needs through the current fiscal year.
PRINTRONIX, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
----------------------------------------------------
Item 1. Legal Proceedings
---------------------------------------
See "Item 3. Legal Proceedings" reported in Part I of the Company's
Report on Form 10K for the fiscal year ended March 28, 1997 and the
Company's Report on Form 10Q for the period ended June 27, 1997.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------------------------
(a) Exhibits.
27. Financial Data Schedule
(b) Reports.
No reports on Form 8-K have been filed by the Registrant for the
quarterly period covered by this report.
PRINTRONIX, INC. AND SUBSIDIARIES
Signatures
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PRINTRONIX, INC.
------------------------------
(Registrant)
Date: February 9, 1998 By:/S/ George L. Harwood
------------------------------
George L. Harwood
Sr. Vice-President, Finance,
Chief Financial Officer,
and Secretary
(Principal Financial Officer
and Duly Authorized Officer)
PRINTRONIX, INC. AND SUBSIDIARIES
Index to Exhibits to Form 10-Q
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DECEMBER 26, 1997
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EXHIBIT
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule Filed only with
EDGAR version