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 June 26, 1998
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)
(949) 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 July
24, 1998
$0.01 par value 7,222,444
PRINTRONIX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
------------------------------
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 JUNE 26, 1998
------------------------------------
PART I. FINANCIAL INFORMATION
------------------------------------
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 27, 1998,
as filed with the Securities and Exchange Commission.
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
Assets
(Amounts in thousands)
June 26, 1998 March 27, 1998
(Unaudited)
------------ ---------------
Current Assets:
Cash and cash equivalents $12,652 $10,264
Accounts receivable, net of
allowances for doubtful
accounts of $2,228 and
$1,920 as of June 26, 1998 and
March 27, 1998, respectively 24,155 26,739
Inventories:
Raw materials, subassemblies
and work in process 14,526 15,782
Finished goods 2,036 1,826
----------- -----------
16,562 17,608
Prepaid expenses 626 1,015
----------- -----------
Total current assets 53,995 55,626
----------- -----------
Property and equipment, at cost:
Machinery and equipment 33,167 32,740
Furniture and fixtures 18,715 18,435
Land 8,100 8,100
Building and improvements 7,053 7,046
Leasehold improvements 2,127 2,104
----------- -----------
69,162 68,425
Less-accumulated depreciation
and amortization (38,168) (37,159)
----------- -----------
30,994 31,266
----------- -----------
Intangible assets, net 1,106 1,166
Other assets 844 806
----------- -----------
Total assets $86,939 $88,864
=========== ===========
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
---------------------------
Liabilities and Stockholders' Equity
------------------------------------
(Amounts in thousands, except share data)
June 26, 1998 March 27, 1998
(Unaudited)
------------ ---------------
Current Liabilities:
Accounts payable $9,805 $9,988
Accrued expenses:
Payroll and employee benefits 5,263 4,590
Warranty 1,681 1,681
Other 1,299 1,385
Income taxes 1,423 760
Environmental 214 214
----------- -----------
Total current liabilities 19,685 18,618
Other long-term liabilities 964 1,009
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.01-
Authorized 30,000,000 shares,
issued and outstanding
7,281,597 and 7,649,901
shares as of June 26, 1998 and
March 27, 1998, respectively 73 77
Additional paid-in capital 28,826 30,054
Retained earnings 37,391 39,106
----------- -----------
Total stockholders' equity 66,290 69,237
----------- -----------
Total liabilities and
stockholders' equity $86,939 $88,864
======= =======
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
-------------------------------------
(Amounts in thousands, except share data)
Three Months Ended
June 26, June 27,
1998 1997
(Unaudited)
-------- --------
Net sales $45,703 $43,667
Cost of sales 30,939 30,743
---------- ----------
Gross profit 14,764 12,924
Operating expenses:
Engineering and development 4,261 3,851
Sales and marketing 4,099 3,612
General and administrative 2,455 1,710
---------- ----------
Total operating expenses 10,815 9,173
---------- ----------
Income from operations 3,949 3,751
Other income, net (205) (313)
---------- ----------
Income before provision for
income taxes 4,154 4,064
Provision for income taxes 850 425
---------- ----------
Net income $ 3,304 $ 3,639
========== ==========
Net income per common share
Basic $ 0.44 $ 0.46
Diluted $ 0.43 $ 0.45
========== ==========
Weighted average common shares
Basic 7,448,073 7,903,278
Diluted 7,740,391 8,153,606
========== ==========
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------
(Amounts in thousands)
Three Months Ended
June 26, June 27,
1998 1997
(Unaudited)
-------- --------
Cash flows from operating activities
Net income $3,304 $3,639
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,865 2,009
Compensation expense related to restricted
stock plan 236 397
(Gain) on sale of equipment (80) (18)
Changes in assets and liabilities:
Accounts receivable 2,584 (222)
Inventories 1,046 1,254
Accounts payable (183) 1,186
Payroll and employee benefits 673 852
Accrued income taxes 663 412
Other 280 381
----------- -----------
Net cash provided by operating activities 10,388 9,890
----------- -----------
Cash flows from investing activities
Purchases of property and equipment (1,765) (2,068)
Purchase of building and improvements -- (35)
Proceeds from disposition of equipment 252 132
----------- -----------
Net cash used in investing activities (1,513) (1,971)
----------- -----------
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - continued
---------------------------------------------
(Amounts in thousands)
Three Months Ended
June 26, June 27,
1998 1997
(Unaudited)
-------- --------
Cash flows from financing activities
Repurchase and retirement of common stock ($6,668) ($2,252)
Proceeds from issuance of common stock 181 32
----------- -----------
Net cash used in financing activities (6,487) (2,220)
----------- -----------
Increase in cash and cash equivalents 2,388 5,699
----------- -----------
Cash and cash equivalents at beginning
of period 10,264 12,766
----------- -----------
Cash and cash equivalents at end of period $12,652 $18,465
=========== ===========
- -------------------------------------
Supplementary disclosures of cash flow information
Taxes paid $255 $114
Interest paid $ -- $ 21
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
-----------------------------------------------
JUNE 26, 1998
-------------
(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) Reclassifications
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period's presentation.
3) Bank Borrowings and Debt Arrangements
The Company ended the quarter with no outstanding debt against its
unsecured lines of credit.
4) Earnings per Share
The number of shares used in computing earnings per share equals
the total of the weighted average number of common 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
June 26, June 27,
1998 1997
Basic weighted-average
common shares outstanding 7,448,073 7,903,278
Effect of dilutive
stock options 292,318 250,328
--------- ---------
Diluted weighted-average
common shares outstanding 7,740,391 8,153,606
========= =========
PRINTRONIX, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
-----------------------------------------------
JUNE 26, 1998
-------------
(Unaudited)
5) Common Stock
As authorized by the Board of Directors, the Company repurchased
and retired 417,000 shares of common stock during the quarter at
prices ranging from $14.81 to $17.00 per share, at a cost of $6.7
million. Purchases of an additional 130,000 shares of common stock
were made subsequent to the end of the quarter and future purchases
of up to 711,600 shares of common stock may be made at the
Company's discretion.
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 27, 1998 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 June 26, 1998 increased $2.0 million
over the same quarter in the prior year and $2.3 million compared with
the prior quarter, an increase of 5% over both quarters. Sales in the
current quarter increased compared with the prior year quarter due to
increased sales to the Company's largest customer and sales from the
Company's subsidiary, RJS, which was acquired in January 1998. The
sales increase compared with the prior quarter was due to sales to the
Company's largest customer and increased sales by RJS, partially
offset by declines in sales to certain distribution customers.
Americas (North, Central, and South Americas) sales ended the quarter
at $27.6 million, compared to $25.1 million last quarter and $25.4
million in the year-ago quarter. EMEA (Europe, Middle East, and
Africa) sales for the quarter increased to $15.4 million compared to
$15.1 million in the previous quarter and remained flat compared to
the year-ago quarter. Sales to the Asia Pacific market decreased to
$2.7 million in the current quarter compared to $3.2 million in the
previous quarter and $2.9 million in the same quarter in the previous
year. Despite the generally slow Asia Pacific market conditions,
sales to China and India remain strong.
Sales to OEM customers for the quarter increased to $23.4 million as
compared to $19.5 million in the previous quarter and $22.8 in the
same quarter in the previous year. Sales to distributors were $22.3
million for the quarter compared to $23.9 in the previous quarter and
$20.9 million in the same quarter in the previous year. Sales to OEM
customers increased in the current quarter due to increased sales to
the Company's largest customer.
PRINTRONIX, INC. AND SUBSIDIARIES
Revenues and Backlog - Continued
Sales to the largest customer, IBM, represented 31% of total sales for
the first quarter as compared to 23% in the previous quarter and 29%
in the year-ago quarter. Sales to the second largest customer
represented 8% of total sales for the quarter as compared to 11% in
the previous quarter and 8% in the year-ago quarter.
Order backlog at quarter-end was $6.6 million compared to $16.1
million at the end of the previous quarter and $14.0 million at the
end of the year-ago quarter. June 26, 1998 backlog levels reflect
orders placed for only a portion of the second quarter of fiscal 1999
by the Company's largest customer. Another factor contributing to the
decreased backlog, to a lesser degree, is other customers increasing
reliance on the Company's ability to ship with ever decreasing lead
times.
Gross Profit
Gross profit as a percentage of sales for the quarter remained flat at
32.3% compared with the previous quarter and increased from 29.6% in
the year-ago quarter. The increase in gross margin over the year-ago
quarter was due to manufacturing efficiencies and cost reductions
achieved over the past year, partially offset by reduced prices.
Operating Expenses and Other Income and Taxes
Engineering expenses for the quarter increased to $4.3 million as
compared to $4.2 million in the previous quarter. Engineering
expenses increased 11%, or $0.4 million, from $3.9 million in the year-
ago quarter. As a percent of sales, engineering and development
expenses remained constant at approximately 9% for both the current
and year-ago quarter but decreased from approximately 10% in the prior
quarter. Current Engineering spending reflects the Company's
commitment to continuous improvement of the Printronix P5000 Series
line matrix, LaserLine and ThermaLine industrial strength printers.
Sales and marketing expenses increased $0.2 million to $4.1 million
for the current quarter as compared to the previous quarter and
increased $0.5 million, or 13%, compared with the same quarter in the
previous year. As a percent of sales, sales and marketing expenses
remained flat at approximately 9% for the current quarter compared
with the previous quarter but increased from 8% in the year-ago
quarter. The increase in sales and marketing expenses over the year-
ago quarter was due to increased sales coverage and marketing emphasis
on developing the Americas, Europe, Middle East, and Asia Pacific
markets.
PRINTRONIX, INC. AND SUBSIDIARIES
Operating Expenses and Other Income and Taxes -Continued
General and administrative expenses increased to $2.5 million compared
with $2.3 million in the prior quarter and $1.7 million in the prior
year quarter. As a percent of sales, general and administrative
expenses remained flat at 5% compared with the prior quarter and
increased from 4% in the prior year quarter. General and
administrative expenses increased compared with the prior year quarter
as a result of increased provision for bad debts, increased
depreciation expense related to the Company's new information system
and increased administrative labor.
The income tax provision increased to $0.9 million compared to a tax
benefit of $0.1 million in the previous quarter and a provision of
$0.4 million in the year-ago quarter. The Company has net operating
loss carryforwards and has been paying minimal income taxes. These
carryforwards are expected to be fully utilized during the current
fiscal year. The Company estimates that its effective income tax rate
for fiscal year 1999 will be approximately 20% and has increased the
quarterly provision accordingly. Once the net operating loss
carryforwards are fully utilized, the Company estimates its world-wide
effective tax rate will be approximately 30%. The prior quarter's
income tax benefit was due to the tax effect of a one-time write-off
of in-process engineering expenses related to the acquisition of RJS.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the quarter with cash and cash equivalents of $12.7
million compared to $10.3 million last quarter. The current cash
position includes the purchase and retirement of 417,000 shares of
Printronix common stock at an average share price of $15.99, totaling
$6.7 million for the quarter, funded by current operating activity.
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.
Year 2000 Considerations
During fiscal 1998, the Company completed the implementation of a year
2000 compliant enterprise-wide information system. The Company has
also initiated an assessment project, both within the Company and with
its business partners, which addresses those other significant systems
that may have year 2000 compliance issues. The Company presently
believes that with the implementation of the new system and
modification to existing software, year 2000 compliance will not pose
a significant operational challenge for the Company and the future
costs to the Company will not be material. However, if these
modifications are not completed on a timely basis, including
implementation by its business partners, the Company's financial
position, results of operations, and cash flows may materially and
adversely be affected.
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 27, 1998.
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: August 7, 1998 By: 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
-----------------------------------------------
JUNE 26, 1998
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EXHIBIT
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule Filed only with
EDGAR version