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 25, 1999
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 (I.R.S. Employer
of incorporation or Identification No.)
organization)
17500 Cartwright
P.O. Box 19559
Irvine, California 92623
(Address of principal (Zip Code)
executive offices)
(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 23, 1999
$0.01 par value 6,478,688
PRINTRONIX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 25,
1999 and March 26, 1999
Assets (3)
Liabilities and (4)
Stockholders' Equity
Consolidated Statements of Operations for (5)
the Three Months Ended June 25, 1999 and
June 26, 1998
Consolidated Statements of Cash Flows for (6)
the Three Months Ended June 25, 1999 and
June 26, 1998
Condensed Notes to Consolidated (8)
Financial Statements
Item 2. Management's Discussion and Analysis (10)
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (15)
Item 6. Exhibits and Reports on Form 8-K (15)
Signatures (16)
Index to Exhibits (17)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
June 25,1999 March 26,1999
(Unaudited)
____________ _____________
ASSETS
Current assets:
Cash and cash equivalents $ 9,532 $ 11,911
Accounts receivable, net of
allowance for doubtful accounts of
$2,372 and $2,302 as of June 25, 1999
and March 26, 1999, respectively 24,808 23,954
Inventories:
Raw materials, 12,778 13,416
subassemblies and work
in process
Finished goods 1,789 2,037
___________ ___________
14,567 15,453
Prepaid expenses 1,066 1,044
___________ ___________
Total current assets 49,973 52,362
Property and equipment, at cost:
Machinery and equipment 26,239 25,320
Furniture and fixtures 20,019 19,529
Land 8,100 8,100
Building and improvements 16,865 11,266
Leasehold improvements 1,929 1,819
___________ __________
73,152 66,034
Less accumulated
depreciation and (33,229) (31,798)
amortization ___________ ___________
39,923 34,236
Intangible assets, net 847 908
Other assets 1,363 1,360
__________ __________
Total assets $ 92,106 $ 88,866
========== ===========
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
(Amounts in thousands, except share data)
June 25, 1999 March 26, 1999
(Unaudited)
____________ _____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,056 $ 12,209
Accrued expenses:
Payroll and 5,596 4,531
employee benefits
Warranty 2,016 2,001
Other 1,195 1,512
Income taxes 1,125 97
Environmental 214 214
___________ ___________
Total current 23,202 20,564
liabilities
Minority interest in 277 283
subsidiary
Other long-term 1,567 1,568
liabilities
Commitments and contingencies
Stockholders' equity:
Common stock, par value 65 66
$0.01- Authorized 30,000,000
shares, issued and
outstanding 6,491,891 and
6,583,366 shares as of June
25, 1999 and March 26, 1999,
respectively
Additional paid-in 27,884 28,338
capital
Retained earnings 39,111 38,047
___________ __________
Total stockholders' 67,060 66,451
equity
----------- -----------
Total liabilities and
stockholders' equity $ 92,106 $ 88,866
============ ===========
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 25, 1999 June 26, 1998
(Unaudited)
___________ ___________
Net sales $ 44,885 $ 45,703
Cost of sales 29,964 30,939
__________ ___________
Gross profit 14,921 14,764
Operating expenses:
Engineering and 4,647 4,261
development
Sales and marketing 4,535 4,099
General and 2,392 2,455
administrative __________ _________
Total operating expenses 11,574 10,815
---------- ---------
Income from 3,347 3,949
operations
Minority interest in loss of 6 4
subsidiary
Other income, net 227 201
___________ __________
Income before provision for income 3,580 4,154
taxes
Provision for income taxes 1,180 850
____________ _____________
Net income $ 2,400 $ 3,304
============ =============
Net income per common
share
Basic $ 0.37 $ 0.44
Diluted $ 0.36 $ 0.43
============ =============
Weighted average common
shares
Basic 6,536,853 7,448,073
Diluted 6,702,957 7,740,391
============ =============
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
Three Months Ended
June 25, 1999 June 26, 1998
(Unaudited)
______________ ______________
Cash flows from operating
activities:
Net income $ 2,400 $ 3,304
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,804 1,865
Compensation expense related to -- 236
restricted stock plan
Loss (gain) on sale of equipment 42 (80)
Minority interest (6) (4)
Changes in assets and
liabilities:
Accounts receivable (854) 2,584
Inventories 886 1,046
Other assets 36 411
Accounts payable 847 (183)
Payroll and employee benefits 1,065 673
Accrued income taxes 1,028 663
Other liabilities (303) (127)
________ ________
Net cash provided by operating 6,945 10,388
activities
Cash flows from investing activities:
Purchase of property and (2,060) (1,765)
equipment
Construction of new building (5,534) --
Proceeds from disposition of 61 252
equipment __________ ___________
Net cash used in investing (7,533) (1,513)
activities
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - continued
(Amounts in thousands)
Three Months Ended
June 25, 1999 June 26, 1998
(Unaudited)
______________ _____________
Cash flows from financing
activities:
Repurchase and retirement of common (1,964) (6,668)
stock
Proceeds from the exercise of stock 173 181
options ____________ ____________
Net cash used in financing (1,791) (6,487)
activities
Net (decrease) increase in cash and (2,379) 2,388
cash equivalents
Cash and cash equivalents at 11,911 10,264
beginning of period
------------ -------------
Cash and cash equivalents at end of $ 9,532 $ 12,652
period ============ =============
Supplementary disclosures of cash flow
information
Income taxes paid $ 134 $ 255
Interest paid $ 4 $ --
See accompanying notes to consolidated financial statements
PRINTRONIX, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
JUNE 25, 1999
(Unaudited)
1) Basis of Presentation
The unaudited consolidated financial statements included herein
have been prepared by Printronix, Inc. (the "Company"), pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the
information presented not misleading.
In the opinion of management, the consolidated financial statements
reflect all adjustments (which include only normal recurring
adjustments) considered necessary to present fairly the financial
position and results of operations as of and for the periods
presented. These consolidated financial statements should be read
in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's latest Annual Report on
Form 10-K for the fiscal year ended March 26, 1999, as filed with
the Securities and Exchange Commission. The results of operations
for such interim periods are not necessarily indicative of the
results for the full year.
Certain amounts from the prior year consolidated financial
statements have been reclassified to conform to the current year
presentation.
2) 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
JUNE 25, 1999
(Unaudited)
3) Earnings per Share
The number of shares used in computing diluted earnings per share
equals the total of the weighted-average number of common shares
outstanding during the periods presented plus the dilutive effect
of stock options. The dilutive effect of stock options represents
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 reduction in the number of shares outstanding from 1998 to 1999
is due to the Company's authorized share repurchase program (See
Note 4). The following table shows the calculation for basic and
diluted shares outstanding:
Three Months Ended
June 25, June 26,
1999 1998
____________ ____________
Basic weighted-average
common shares 6,536,853 7,448,073
outstanding
Effect of dilutive stock 166,104 292,318
options
----------- -----------
Diluted weighted-average
common shares 6,702,957 7,740,391
outstanding =========== ===========
4) Common Stock
As authorized by the Board of Directors, the Company repurchased
and retired 145,000 shares of common stock during the quarter at
prices ranging from $11.37 to $15.12 per share, at a cost of $2.0
million. Purchases of an additional 24,100 shares of common stock
were made subsequent to the end of the quarter and future purchases
of up to 823,500 shares of common stock may be made at the
Company's discretion.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PRINTRONIX, INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing may be considered forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which provides a "safe harbor" for
these types of statements. Forward-looking statements are made based
upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Company.
These forward-looking statements are subject to certain risks and
uncertainties, including those identified below, which could cause
actual results to differ materially from historical results or those
anticipated. Terms such as "objectives," "believes," "expects,"
"plans," "intends," "estimates," "anticipates," and variations of
such words and similar expressions are intended to identify such
forward looking statements. Among these risks and uncertainties are
the impact of the Year 2000, the market's acceptance of the Company's
existing products, the Company's ability to develop new products that
meet customers' needs, the timing of the release of new products,
competitors' introduction of new technologies and products offering
improved features and functionality, and political and economic
uncertainties in emerging growth markets throughout the world.
RESULTS OF OPERATIONS
Revenues
Consolidated revenues for the first quarter ended June 25, 1999, were
$44.9 million, a decrease of 1.8% compared to the same period last
year. The decrease is the result of the Company's largest customer
converting to direct shipment in the U.S., effective July 1999. As a
result of this conversion, the customer no longer needs to maintain
any U.S. inventory. Therefore, sales to it during the quarter were
lower than usual as it depleted its existing inventory. Direct
shipment provides quick, just in time delivery to the end user,
reduces the amount of inventory in the total supply chain, and couples
the Company's orders directly to end user demand. Conversion to
direct shipment means this customer will no longer need to place
orders for U.S. shipments in advance for the upcoming quarter. To
date, the majority of the Company's customers have converted to just
in time delivery and direct shipment, so that order backlog is no
longer an indicator of future sales. At the end of the first quarter,
backlog was $7.7 million.
Excluding this one time event, first quarter revenue increased over
the same period last year due to increased sales in Americas
Distribution, EMEA and Asia Pacific, where sales where up 36.3%. In
comparison to the prior quarter, revenue decreased 3.3% due to lower
sales to the Americas and seasonality in Asia Pacific, slightly offset
by higher sales to EMEA and by RJS.
Sales to the Americas were $24.6 million, a decrease of 9.0% compared
to the year-ago quarter and a decrease 4.6% compared to the previous
quarter. Sales to Americas Distribution increased over the prior year
quarter; however, this increase was offset by the decrease in Americas
OEM, due to the conversion of the Company's largest customer to direct
shipment. EMEA sales were $16.0 million, an increase of 4.5% compared
to the same period last year and 0.9% compared to the previous
quarter. Sales to Asia Pacific were $3.5 million, an increase of
36.3% compared to the same quarter last year and a decrease of 15.0%
compared to the previous quarter. The increase in sales compared to
the prior year quarter is due to the improved economics in the region.
The decrease in sales from the previous quarter is the result of
seasonal buying trends in the Asia Pacific market. Sales by RJS
remained relatively flat at $0.8 million.
Line matrix revenue for the first quarter was $37.0 million, a 4.0%
decrease compared to the same period last year and a 3.5% decrease
compared to the previous quarter. The decrease compared to the prior
year and prior quarter was the result of the conversion to direct
shipment by the Company's largest customer. Thermal sales for the
current quarter were $1.3 million, an increase of 28.1% compared to
the same period last year, and an increase of 1.7% compared to the
previous quarter. Laser sales were $5.7 million for the first
quarter, an increase of 8.0% over the same period last year and a
decrease of 5.5% compared to the previous quarter.
Sales by channel were 44% OEM and 56% distribution, as compared to 42%
and 58% last quarter. A year ago, sales were 51% OEM and 49%
distributors. The growth in the distribution channel business is
primarily due to adding new channel partners, and more effective sales
and marketing programs.
Sales to the largest customer, IBM, represented 28.5% of the total
sales for the three months ended June 25, 1999, compared to 31.5% and
27.9% for the same period last year and the previous quarter,
respectively. Sales to IBM were impacted by their conversion to
direct shipment. Excluding this one time event, sales to IBM were up
approximately 6%. Sales to the second largest customer represented
8.4% of the total sales for the first quarter compared to 8.1% and
9.7% for the same period last year and the previous quarter,
respectively.
Gross Profit
Gross profit for the quarter ended June 25, 1999, was 33.2% of sales
compared to 32.3% for the same quarter last year and 33.9% for the
prior quarter. The increase over the same quarter last year was
attributable to manufacturing efficiencies and cost reductions
achieved over the past year. The decrease compared to the prior
quarter was due to the reduction in production volumes.
Operating Expenses, Other Income and Taxes
Operating expenses consist of engineering and development, sales and
marketing, and general and administrative costs. For the three months
ended June 25, 1999, total operating expenses were $11.6 million
compared to $10.8 million for the same period a year ago.
For the current quarter, engineering and development expenses were
$4.6 million, an increase of 9.1% compared to the same quarter for
1998. As a percentage of sales, engineering and development expenses
were 10.4% for the current quarter and 9.3% for the same quarter last
year. Higher engineering and development expenses over the prior
fiscal year reflect the Company's commitment to product development of
the Printronix ThermaLine, P5000 series line matrix and LaserLine
industrial strength printers, as well as higher salaries required to
stay competitive in hiring and retaining engineering personnel.
Sales and marketing expenses increased 10.6% to $4.5 million compared
to the same period a year ago. Sales and marketing expenses were
10.1% of sales compared to 9.0% of sales for the same period last
year. The increase in spending was due to global expansion of sales
coverage and marketing capabilities.
General and administrative expenses decreased slightly to $2.4 million
for the current quarter compared to $2.5 million for the prior year
quarter. As a percentage of sales, general and administrative
expenses for the current quarter were 5.3% compared to 5.4% for the
same quarter in 1998.
Other income increased 12.9% for the three months ended June 25, 1999,
compared to the same period a year ago, primarily due to foreign
currency remeasurement gains in 1999 compared to losses in 1998.
The income tax provision increased to $1.2 million from $0.9 million
for the same quarter last year. In prior fiscal years, the Company
had net operating loss carryforwards and had been paying minimal
income taxes. During the fiscal year 1999, the Company fully utilized
the net operating loss carryforwards it had enjoyed in prior years.
The effective tax rate for fiscal year 1999 was 20%. The Company
estimates that its fully taxed rate will be 33% for fiscal year 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the quarter with cash and cash equivalents of $9.5
million compared to $11.9 million in the previous quarter. The
Company's current cash position compared to the previous quarter
reflects expenditures for the construction of the new corporate
headquarters in Irvine, which totaled $5.5 million. In addition, the
Company repurchased and retired 145,000 shares of Printronix common
stock at an average share price of $13.57, totaling $2.0 million.
Inventories decreased due to the Company's continued improvement in
its just in time manufacturing system. The Company's increased
manufacturing efficiencies have reduced the time from order to
shipment, which in turn, has enabled the Company to attain lower
inventory levels.
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
This Year 2000 Readiness Disclosure Statement is made in accordance
with the "Year 2000 Information and Readiness Disclosure Act" of the
United States of America.
The Company's products are inherently Year 2000 compliant. No
Printronix printer or Printronix printer application software performs
relative date calculations using internal clocks. Such clocks are not
necessary for the printer to operate because the printer is only
concerned with converting host data into printed images. Therefore,
all Printronix products are Year 2000 compliant.
The Company is the majority shareholder of RJS Systems International
("RJS"), a manufacturer of bar code scanning and print quality
verification devices. RJS reports that none of its products perform
date calculations or contains a cloak. However, one product, Autoscan
II, is shipped together with a personal computer manufactured by a
third party. The computer operates under the DOS operating system.
Accordingly, at the turn of the century, the date on the computer will
revert to 1980. This has no effect on the operation of the Autoscan II
product, other than to indicate the wrong date on the printouts of
scanning results. The problem is easily corrected by entering the
correct date using the DOS "Date" command.
The Company has completed an assessment of the impact of the Year 2000
on its information systems and hardware. The assessment phases of the
Company's information system and hardware included the identification
of the systems or processes to be reviewed, evaluation of current
systems or processes, risk assessment and development of contingency
plans. The scope of the assessment addressed the information
technology systems, such as the accounting and financial reporting
systems, mainframe computers, personal computers and the distributed
network, and also addressed the non-information technology systems,
such as facilities, plant equipment, lab and test equipment,
distribution systems, security systems, communication systems, key
services provided by third parties, and key suppliers and customers.
The Company has partially completed an assessment of the impact on
its significant business partners and expects to finish the assessment
by fall 1999. The assessment includes inquiries of key suppliers and
customers related to their own Year 2000 issues.
The Company's objective is to be fully Year 2000 compliant for all
business critical systems by fall 1999 and to develop contingency
plans in the event it fails to complete its Year 2000 projects. To
date, the Company has not had to accelerate the replacement of systems
due to Year 2000 issues.
The Company's business critical operating system, accounting and
financial reporting systems, including manufacturing and sales, were
converted to a certified Year 2000 compliant enterprise wide software
package in August 1997, with the exception of the customer service and
fixed asset systems. The fixed assets system was converted in April
1999, and the customer service system is expected to be compliant by
fall 1999.
The Company is planning to move the Irvine operations from the current
buildings to a new facility in October 1999. All building systems
are being selected to be Year 2000 compliant. These systems include
telephone, elevator, security, HVAC, utilities, lighting, fire
control and parking.
Based upon its assessment and the suppliers' and customers'
representations, the Company believes the systems of its key suppliers
and customers are either Year 2000 compliant or will be made so by
fall 1999.
The Company believes the most significant Year 2000 compliance risk is
that the key customers, suppliers and third party service providers
may fail to complete their remediation efforts in a timely manner
particularly in areas outside the United States where less attention
is given to Year 2000 compliance. Any significant disruption of
business with key customers, suppliers and third party service
providers could have a material adverse impact on the Company's
revenues, income, cash flows or financial condition. Contingency
plans addressing these issues are expected to be complete by fall
1999.
In fiscal 1999 and 1998, the cost of Year 2000 assessment efforts and
remediation projects was not material and was funded from current
operations. Future expenditures are not expected to be material and
will continue to be funded from operations.
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qaulitative
Disclosure About Market Risk
PRINTRONIX, INC. AND SUBSIDIARIES
MARKET RISK
The United States dollar is the functional currency for all of the
Company's foreign sudsidiaries. For these subsidaries, the assets
and liabilities have been remeasured at the end of the period exchange
rates, except inventories and property and equipment which have been
remeasured at historical rates. The statements of operations have been
remeasured at average rates of exchange for the period, except cost of
sales and depreciation which have been remeasured at historical rates.
The Company's Singapore operation may be impacted by foriegn currency
fluctuations. The Company is not aware of any significant risks with
respect to its foreign business other than those inherent in the
competitive nature of the business and fluctuations in foreign currency
exchange rates. The impact of foreign currency flucuations has not
been material to the Company.
PART II. OTHER INFORMATION
PRINTRONIX, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings
See "Item 3. Legal Proceedings" reported in Part I of the Company's
Report on Form 10-K for the fiscal year end March 26, 1999.
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 9, 1999 By:
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 25, 1999
EXHIBIT
NUMBER DESCRIPTION PAGE
27 Financial Data Filed only with EDGAR
Schedule version