1
PRINTRONIX
1996 ANNUAL REPORT
[PHOTOGRAPH]
EXHIBIT 13
2
PRINTRONIX 1996 HIGHLIGHTS
o Sales increased to a record $159.3 million
o Laser product revenue increased 44% over 1995
o New models of ProLine Series 5(TM) line matrix printers introduced
throughout the year
o Family of ThermaLine(TM) printers launched in fourth quarter
o Printronix achieved worldwide ISO 9000 certification
SELECTED FINANCIAL DATA ($ IN THOUSANDS, EXCEPT SHARE DATA)
(FOR THE FISCAL YEARS ENDED MARCH)
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net sales $159,261 $146,589 $107,419 $93,864 $88,555
Income (loss) from Operations 6,345 7,980 2,302 (4,027) (8,677)
Net income (loss) 6,771 7,160 1,869 (2,340) (8,412)
Earnings (loss) per Share $ 0.82 $ 0.89 $ 0.25 $(0.34) $(1.23)
SELECTED BALANCE SHEET DATA
Working capital $ 35,285 $ 31,815 $ 22,939 $21,748 $25,083
Long-term liabilities 817 1,485 1,850 2,214 1,596
Total assets 69,130 61,675 51,916 48,276 50,668
Stockholders' equity $ 50,073 $ 41,542 $ 32,366 $30,443 $34,872
3
INVESTING FOR THE FUTURE
Our commitment to business basics
TO OUR STOCKHOLDERS AND CUSTOMERS,
At Printronix, we believe that time alone will obsolete a product, even if
the competitors do not. That's why we continually develop all Printronix
products and their technologies to higher performance levels - it's our way of
Investing For The Future.
To serve our customers better, we make significant investments every year in
the foundation of the Company - new products, new business systems, and new
manufacturing capabilities - all worldwide in scope.
We believe the continuity of that investment stream is essential. It's the
reason that Printronix sales are growing. Over the last four years, we have
doubled our share of the line matrix market and made significant advances in
the laser, thermal, and consumables markets. During that four year period,
Printronix overall sales have achieved a 16% compounded annual growth rate.
PRINTRONIX SALES GROWTH
($ in millions)
[GRAPH]
1992 1993 1994 1995 1996
$88.5 $93.9 $107.4 $146.6 $159.3
As part of the Company's international expansion, we are investing in a new
state-of-the-art manufacturing facility in Singapore. It will have the latest
in production equipment, including computer-controlled machine centers, chrome
sputtering and surface mount technologies. This facility will strengthen our
business presence in the Pacific Rim.
At the same time, we are investing in an advanced worldwide client/server
business system that will propel Printronix into the next century of corporate
communications. It will provide instantaneous, world-wide data about real-time
operations and will help all employees do their jobs better. For example, our
manufacturing facilities in Irvine, Singapore, and Holland will be able to
access each other's inventory data at any time.
We'll be on-line with our customers as well. The communications capabilities
of the system will allow us to take customer orders from anyplace in the world
and to specify shipment from the manufacturing facility that best serves that
customer. So, we will always know what we can ship and when - from Printronix
worldwide factories.
And our product development investments continue to pay off. For the first
time, we are marketing entirely new families of industrial strength printers in
three separate printer technologies: line matrix, laser, and thermal. In fiscal
1997, we expect about three-fourths of the Company's sales will come from
products that were introduced in fiscal 1996.
Armed with the new printing power of these three technologies, our printer
families can handle an extremely wide range of industrial printing
requirements. This makes Printronix the international leader in industrial
strength printing solutions.
In short, we are using a vigorous investment strategy to improve both our
Company operations and our products - to deliver greater value to our customers
around the globe.
In the next few pages, we'll tell more about these new multi-technology
printer families.
ROBERT A. KLEIST
ROBERT A. KLEIST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4
THE PROLINE SERIES(TM) FAMILY
ProLine Series 5 is the fifth generation of our traditional line matrix
printers. We pioneered the line matrix concept when we started the Company in
1974.
It is no surprise that these continuous forms printers are the world leaders in
line matrix technology. They offer unsurpassed durability - many of our
original printers are still running today, more than 20 years later.
Line matrix printers retain their popularity, because they deliver great value
- - industrial strength printing with good print quality at the lowest cost per
page. And the market is substantial. So, we just keep making them better and
better.
ProLine Industrial Strength Printers
PROLINE PRINTERS offer a wide performance range of continuous forms printing
with outstanding functionality. Pedestal models print at speeds of 475 and 800
lines per minute. Cabinet models are library quiet, while printing at speeds of
475, 800, and 1200 lines per minute. With a new electromechanical design, these
printers have no duty cycle limitation, which means the user can print as many
pages as needed in mission-critical applications.
Equipped with flash memory, these printers are smarter than ever - storing
applications, emulations, fonts, and print job setups. Flash memory allows easy
upgrading of the printer's options at any time - directly from a PC. Using
industry standard graphics languages, ProLine printers are compatible with a
wide variety of computer systems. And by printing with Genuine Printronix
Ribbons, the user can expect top quality printing every time.
5
A SALUTE TO OUR DISTRIBUTORS
AND OEM CUSTOMERS
Great products come first. But, great distribution is the key to profitable
growth. At Printronix, we use two primary channels to market products to
end-user customers. Over the years, we have maintained a steady strategy of
vigorously supporting these two global distribution channels - and we have
built them into mutually profitable business relationships.
One channel is a network of well-established product distribution companies
that are based in all major countries around the world. These product
distributors sell our printers under the Printronix label to both end-users
and Value Added Resellers. And they play a vital role in providing the customer
support that is always necessary in the field - post-sales contact, product
service, technical assistance, hardware and software training, and programming.
The other channel is a group of OEM customers. These leading international
computer system companies have chosen to outsource their printers from
Printronix. Their standards are high and they want to deal with "the leader in
printer technology." They sell our printers under their own labels. We
thoroughly support each of them by carefully tailoring our printer hardware and
software to their specific product line requirements. This unique and intensive
support has built highly effective relationships with these OEM customers.
We take pleasure in extending our thanks to the members of these
distribution channels. They are major factors in the success of Printronix.
TYPICAL CUSTOMER APPLICATIONS
o Data processing reports
o Preprinted multi-part forms
o Billing and customer statements
o Bar code labels and forms
6
THE LASERLINE(TM) FAMILY
LaserLine printers are designed for medium to high volume production print jobs
and fit into almost any computing environment. They excel at printing sharply
defined text with strikingly attractive photos and graphics.
By using continuous forms, LaserLine printers are better able to control the
movement of paper than cut sheet lasers. They are better suited for
applications with stringent forms registration demands and non-standard form
sizes.
The typical cost per page is only about twice that of our most economical line
matrix printers. Thus, LaserLine printers produce documents with a
"professional touch" that have surprisingly low cost.
LaserLine Industrial Strength Printers
LASERLINE PRINTERS are masters of unattended printing of continuous forms. The
LaserLine L1024 offers entry-level laser printing at 24 pages per minute in a
very compact package. It can be placed on either a desktop or on a power
stacker pedestal. The L5031 prints at 31 pages per minute in a straight through
paper path and offers numerous top-of-the-line features. Its unique
DuraFusion(TM) flash-fusing toner system is able to use inexpensive forms and
label stock, because it uses neither heat rollers nor pressure.
Nevertheless, DuraFusion produces unparalleled document durability - the toner
penetrates so deeply that the printed images cannot be rubbed off. Used with
Genuine Printronix Supplies, these printers produce optimum print jobs on every
run. In short, LaserLine printers offer the advantage of high precision
continuous forms combined with high resolution laser printing.
7
THE CONCEPT THAT UNIFIES OUR PRINTERS
Printronix System Architecture, which we call PSA(TM), is a unique design
concept that unifies our printer families - and gives them a rare quality -
applications software compatibility.
Regardless of the technology - line matrix, laser, or thermal - PSA enables
application programs to be easily interchanged among Printronix printers. Thus,
it is easy to print the application on the technology that best suits the job
requirements.
More than that, PSA provides applications compatibility with a wide variety
of programs that already exist on other printers - on older Printronix models,
many serial matrix printers, and numerous laser printers.
PSA also makes improvements on the human side. Now, all of our printers have
PSA-based control panels that have a similar "look and feel." That pleases our
users, since they can easily operate any of our printers - no matter which
technology is used.
PSA is the design foundation for the hardware and software of our printers.
It may seem rather technical, but the benefits are tangible. By unifying the
design structures of all our printers, PSA delivers more printer power to the
user.
TYPICAL CUSTOMER APPLICATIONS
o Appliance rating labels
o Plastic membership cards
o IS departmental reports
o Retail hang tags
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THE THERMALINE(TM) FAMILY
ThermaLine printers have a natural specialty - on-demand label printing. That
means labels can be printed and immediately applied - wherever they are needed.
Naturally, this style of on-demand printing is very popular, but these printers
also turn out large, unattended batches of labels, whenever required.
A major advantage of thermal transfer technology is that it will print on
almost any kind of stock - from ordinary paper to complex synthetics and films.
While the cost per page is higher than line matrix or laser printing, thermal
printers are often the only possible printing solution for many critical
labeling on-demand applications.
These rugged printers are supported by our Genuine Printronix Supplies, which
we've carefully developed and certified to the highest standards. Used with
our premium ribbons and media, the thermal printheads of these printers last
longer and the print jobs achieve optimum print quality.
ThermaLine Industrial Strength Printers
THERMALINE PRINTERS are available in a variety of direct thermal and thermal
transfer models with carriage widths of 4, 6, and 8 inches. Speeds cover the
range of 5, 8, and 10 inches per second. Label tear-off capability for
on-demand printing is standard.
These printers will print easily on all kinds of roll-form or fan-folded stock.
And they support industry standard graphics languages, as well as all popular
bar code symbologies. Even better, ThermaLine printers allow easy migration to
thermal printing from other existing Printronix label applications - there's no
need to change the application program.
9
MORE SOFTWARE WITH YOUR HARDWARE
Our ultimate goal is to develop printers that are compatible with virtually
any printing application within our marketplace.
Towards that goal, we're making major progress. Our latest software advances
make Printronix printers far more powerful and much more flexible.
Specifically, we've designed a set of new software packages that we call PSA
Software.
These software packages are filled with versatile printer options - a rich
set of industry standard graphics languages - numerous emulations for the most
popular line matrix and laser printers - and a remarkable set of international
fonts.
These font sets and their supporting software are unusually powerful. For
instance, in the Arabic and Thai font sets, the way the characters are printed
is dynamically changed based on the order of the characters in the text. And
there are four sets of Kanji fonts - for Japan, Korea, Taiwan, and the People's
Republic of China. These Kanji sets contain from eight thousand to ten thousand
ideographs, which are extraordinarily complex. Font sets are also included for
the Hebrew, Greek, Cyrillic, and Turkish languages.
Stay tuned. More PSA Software packages are on the way.
TYPICAL CUSTOMER APPLICATIONS
o Bar code shipping labels
o Chemical drum labels
o Production/Inventory tracking labels
o Automotive compliance labels
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
NET SALES
Fiscal 1996 revenue reached a new Company high at $159.3 million, increasing 9%
from fiscal 1995. Products released this year include the L1024 continuous form
laser printer, the ProLine Series 5 family of line matrix products, and the
ThermaLine family of thermal products. Revenue from these products is expected
to represent approximately 75% of total sales in fiscal 1997.
This year's revenue increase came from sales growth in the Company's line
matrix and continuous form laser products in both OEM and distribution
channels. The introduction of the Company's fifth generation ProLine Series 5
line matrix products drove the $5.2 million growth in line matrix revenue, and
sales of this new product line continue to grow, ending the year with revenue
of $23.3 million or 15% of sales. Rising demand for the new ProLine Series
did, however, result in a decline in mature product sales, as these products
were being discontinued towards the end of the fiscal year. Higher sales of
continuous form laser products also contributed to sales growth with the L5031
and L1024 products leading the $8.0 million jump in fiscal 1996 laser revenue.
International sales totaled $65.9 million compared with $56.4 million in fiscal
1995. International sales growth has come from Printronix's growing presence in
key international markets which resulted in greater sales to our OEM and
distribution customers in those markets.
Fiscal 1995 revenue of $146.6 million was up $39.2 million or 36% over fiscal
1994 sales of $107.4 million. Year-to-year revenue growth came from line
matrix, laser and thermal product families. Line matrix product sales grew 41%
over 1994 and were driven primarily by higher sales of the P4280 and P9212
printers to the Company's major OEM customers. Higher revenue levels were also
achieved through the Company's laser and thermal printer markets, which
combined with greater sales of the Company's Genuine Printronix Supplies, led
to laser and thermal product revenue growth of 15% over 1994. International
sales grew to $56.4 million in fiscal 1995, a $15.5 million or 38% increase
compared with fiscal 1994 sales of $40.9 million.
GROSS PROFIT
Gross profit as a percentage of sales was 24% in fiscal 1996 compared with 26%
in fiscal 1995. The decline in gross profit percentage resulted primarily from
start-up costs related to the development and production ramp-up of the ProLine
Series product family. The majority of start-up costs were related to
establishing suppliers for new component parts, (including controller boards),
developing new production processes for the printer hammerbank, integrating new
equipment into the production process, and training employees.
Gross profit as a percentage of sales grew to 26% in fiscal 1995 compared with
25% in fiscal 1994. The higher gross profit percentage reflected manufacturing
improvements achieved during fiscal 1995, including: 1) lower overhead expenses
resulting from the consolidation of multiple factory operations in Irvine into
a single production facility during the prior fiscal year; 2) reduced inventory
costs driven by improved Just-In-Time inventory processes; and 3) production
volume efficiencies associated with the increase in sales over the prior year.
OPERATING EXPENSES
Engineering and development spending increased to $13.7 million compared with
$12.7 million in fiscal 1995, and as a percentage of sales, remained flat at
8.6%. The growth in engineering spending reflects additional investment
required to launch and support products in all three of the Company's
technologies introduced during fiscal 1996.
In fiscal 1995, the Company spent $12.7 million on engineering and development
compared with $10.2 million in fiscal 1994.
NET SALES ($ in millions) SALES PER EMPLOYEE
($ in thousands)
[GRAPH] [GRAPH]
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The growth in engineering and development spending over fiscal 1994 resulted
partly from higher OEM customization requirements and partly from early
development of ProLine Series 5 products.
Selling, general and administrative spending increased slightly to $17.5
million compared with $17.3 million in fiscal 1995, while spending as a
percentage of sales decreased to 11% of sales compared with 12% in fiscal 1995.
Spending remained essentially flat with the prior year as the Company was able
to control sales and marketing expenses for new products by minimizing
administrative costs.
Selling, general and administrative expense, as a percentage of sales, fell to
12% in fiscal 1995 compared with 13% in fiscal 1994. Total dollar spending in
fiscal 1995 compared with fiscal 1994 increased $3.4 million, or 25%. The
growth in spending over fiscal 1994 resulted primarily from increased sales and
marketing costs associated with a 36% increase in sales.
OTHER INCOME AND EXPENSE
Foreign currency remeasurement losses were $45,000 in fiscal 1996 compared with
$723,000 in fiscal 1995 and $68,000 in fiscal 1994. The decline in the current
year's foreign currency loss compared with fiscal 1995 was due to a
stabilization of the United States dollar versus foreign currencies.
Interest income in fiscal 1996, net of interest expense, increased $0.3 million
compared with fiscal 1995 due to increased interest income earned from higher
average cash balances, combined with a slight decline in interest expense
resulting from declining debt levels. Interest expense in fiscal 1995 decreased
$0.3 million compared with fiscal 1994 due primarily to lower average debt
requirements.
INCOME TAXES
The Company currently has available a net operating loss carryforward of $33.9
million for Federal income tax purposes. Accordingly, there were no Federal
taxes owed for fiscal years 1996, 1995 and 1994. The provision for taxes allows
for certain state and foreign income taxes.
SUPPLEMENTAL INFORMATION
Fiscal years 1996 and 1994 utilized a fifty-two week period compared with a
fifty-three week period for fiscal 1995.
All stockholders' equity and share data presented have been retroactively
adjusted to reflect stock split-ups effected in the form of fifty percent (50%)
stock dividends distributed in June 1996, and December 1994. (see note 1).
Effective March 30, 1996, the Company will be required to adopt SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." The statement requires that impairment losses for
long-lived assets and identifiable intangibles to be held and used be based on
the fair value of the asset. The statement also requires that these assets be
reported at the lower of carrying amount or fair value less cost to sell. The
Company believes that adoption of this statement will not have a material
effect on the Company's financial position.
Accounting for Stock-Based Compensation, SFAS No. 123, was issued in October
1995 and will be effective for the Company's fiscal year beginning March 30,
1996. The Company intends to continue using the measurement prescribed by the
former standard (APB Opinion No. 25), and accordingly, this pronouncement will
not have a material effect on the Company's financial position or results of
operations.
The Company believes that the effects of inflation on its operations and
financial condition are minimal.
OPERATING EXPENSE %
[GRAPH]
NET INCOME ($ in millions)
[GRAPH]
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash, net of short-term debt, totaled $6.3 million at the end of fiscal 1996
compared with $8.1 at the end of fiscal 1995. The decrease in net cash was due
primarily to $9.8 million in capital expenditures and a $3.6 million increase
in inventory.
Capital expenditures during fiscal 1996 consisted primarily of $5.2 million for
manufacturing equipment in the Company's Irvine and Singapore facilities
required for the production of new ProLine Series 5 products. An additional
$1.9 million in capital expenditures were incurred for personal computers,
computer servers and project costs for an upgrade to a client/server
information system, along with $0.4 million in surface-mount technology
equipment in Singapore. All of these factors contributed to the higher capital
investment level in fiscal 1996. In fiscal 1995, purchases of property and
equipment totaled $5.3 million and consisted primarily of investment in
manufacturing equipment for the production of new line matrix and laser
products.
Increases in fiscal 1996 year-end inventory were driven by higher levels of
line matrix printers resulting from the production ramp-up of ProLine products
required to meet growing customer demand. However, during the fourth quarter
the Company did not achieve planned finished goods production levels, thereby
creating an increase in work-in-process at fiscal year-end. In addition,
certain laser and printer supplies inventory was also higher due, in part, to
sales of these products being lower than expected.
Subsequent to year-end the Company entered into an agreement to purchase a new
manufacturing facility in Singapore. This state-of-the-art facility is expected
to result in capital expenditures of $3.8 million for the building with an
additional $2.0 million in building improvements. The Company has secured a
five-year term loan of $5.0 million in anticipation of financing 86% of the
total cost. The Company expects to take possession of the building in the
first quarter of fiscal 1997 (see note 7).
Unsecured lines of credit at March 29, 1996 totaled $10.7 million of which $8.6
million was eligible for borrowing (see note 6). The Company also has $0.2
million of outstanding borrowing related to equipment financing, which is
collateralized by certain of the Company's fixed assets.
At the end of fiscal 1996, the Company continues to reserve $0.2 million for an
environmental issue associated with the closing down of the Company's Irvine
hammerbank factory in fiscal 1994 (see note 2).
The Company believes that its internally-generated funds, together with
available bank credit agreements, will adequately provide for working capital
requirements, capital expenditures and engineering and development needs
through fiscal 1997.
INVENTORY TURNS CAPITAL INVESTMENT
($ in millions)
[GRAPH] [GRAPH]
13
CONSOLIDATED BALANCE SHEETS
As of March 29, 1996 and March 31, 1995 ($ IN THOUSANDS, EXCEPT SHARE DATA)
- -------------------------------------------------------------------------------
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 6,486 $ 8,345
Accounts receivable, net of allowance for doubtful
accounts of $937 in 1996 and $908 in 1995 23,576 22,305
Inventories
Raw materials, subassemblies and work in process 18,969 16,139
Finished goods 3,741 2,959
-----------------------
22,710 19,098
Prepaid expenses 753 715
-----------------------
Total Current Assets 53,525 50,463
-----------------------
Property and Equipment, at cost
Machinery and equipment 33,010 26,809
Furniture and fixtures 12,864 12,037
Leasehold improvements 3,448 3,311
-----------------------
49,322 42,157
Less: Accumulated Depreciation and Amortization (33,968) (31,215)
-----------------------
15,354 10,942
Other Assets 251 270
-----------------------
Total Assets $ 69,130 $ 61,675
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------
Current Liabilities
Short-term debt $ 205 $ 257
Accounts payable 11,846 11,192
Accrued expenses
Payroll and employee benefits 3,492 3,758
Warranty 1,136 1,136
Environmental 214 214
Restructuring -- 93
Other 1,018 1,619
Accrued income taxes 329 379
-----------------------
Total Current Liabilities 18,240 18,648
-----------------------
Other Long-Term Liabilities 817 1,485
-----------------------
Stockholders' Equity
Common stock, $0.01 par value
(Authorized 27,000,000 shares; issued and outstanding
7,823,366 shares in 1996 and 7,458,842 shares in 1995) 78 75
Additional paid-in capital 29,125 27,368
Retained earnings 20,870 14,099
-----------------------
Total Stockholders' Equity 50,073 41,542
-----------------------
Total Liabilities and Stockholders' Equity $ 69,130 $ 61,675
==========================================================================================
The accompanying notes are an integral part of these consolidated balance
sheets.
14
CONSOLIDATED STATEMENTS OF INCOME
For each of the three years in the period
ended March 29, 1996 ($ IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
March 29 March 31 March 25
1996 % 1995 % 1994 %
- ---------------------------------------------------------------------------------------------------------------
Net sales $ 159,261 $ 146,589 $ 107,419
Cost of sales 121,765 108,621 81,039
-------------------------------------------------------------------
Gross profit 37,496 23.5% 37,968 25.9% 26,380 24.6%
-------------------------------------------------------------------
Operating expenses
Engineering and development 13,694 8.6% 12,666 8.6% 10,201 9.5%
Selling, general &
administrative 17,457 11.0% 17,322 11.8% 13,877 12.9%
-------------------------------------------------------------------
31,151 19.6% 29,988 20.5% 24,078 22.4%
-------------------------------------------------------------------
Income from operations 6,345 4.0% 7,980 5.4% 2,302 2.1%
Foreign currency remeasurement
loss (45) (723) (68)
Interest income (expense), net 445 113 (186)
Other income, net 182 85 6
-------------------------------------------------------------------
Income before taxes 6,927 4.3% 7,455 5.1% 2,054 1.9%
Provision for taxes 156 295 185
-------------------------------------------------------------------
Net income $ 6,771 4.3% $ 7,160 4.9% $ 1,869 1.7%
===================================================================
Net Income per share
Primary $ 0.82 $ 0.90 $ 0.26
Fully diluted $ 0.82 $ 0.89 $ 0.25
Weighted average common
shares & common stock
equivalents outstanding
Primary 8,246,454 7,987,176 7,272,392
Fully diluted 8,246,454 8,073,582 7,457,583
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For each of the three years in the period
ended March 29, 1996 ($ IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
COMMON STOCK
Number of Additional Retained
Shares Amount Paid-in Capital Earnings
- -----------------------------------------------------------------------------------------------
BALANCE, MARCH 26, 1993 6,945,650 $69 $25,305 $ 5,070
Issuance of common stock 32,584 1 76 --
Repurchase and retirement of
common stock (6,750) -- (24) --
Net income -- -- -- 1,869
- -----------------------------------------------------------------------------------------------
BALANCE, MARCH 25, 1994 6,971,484 70 25,357 6,939
Issuance of common stock 487,460 5 1,194 --
Compensation expense for
stock options and restricted stock -- -- 736 --
Purchase price of vested portion
of restricted stock -- -- 83 --
Redemption and retirement of
fractional common shares (102) -- (2) --
Net income -- -- -- 7,160
- -----------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1995 7,458,842 75 27,368 14,099
Issuance of common stock 364,524 3 890 --
Compensation expense for
restricted stock -- -- 784 --
Purchase price of vested
portion of restricted stock -- -- 83 --
Net income -- -- -- 6,771
- -----------------------------------------------------------------------------------------------
BALANCE, MARCH 29, 1996 7,823,366 $78 $29,125 $20,870
===============================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
15
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended March 29, 1996 ($ IN THOUSANDS)
March 29 March 31 March 25
1996 1995 1994
---------------------------------------------
Cash flows from operating activities :
Net income $ 6,771 $ 7,160 $ 1,869
Adjustments to reconcile net income to net
cash provided by operating activities :
Depreciation and amortization 5,626 4,952 4,462
(Gain)/loss on sale of property and equipment (12) 55 36
Compensation expense for stock options
& restricted stock 784 736 --
Changes in assets and liabilities :
Accounts receivable (1,274) (2,939) (5,052)
Inventories (3,612) (2,458) 1,875
Accounts payable 654 1,716 2,166
Accrued income taxes (50) 178 (98)
Accrued restructuring expenses (93) (389) (1,420)
Accrued environmental expenses -- (36) 250
Accrued warranty expenses -- 367 --
Other long-term liabilities (668) (109) (2)
Other current assets and liabilities, net (905) 2,478 (630)
Other, net 19 (105) (52)
---------------------------------------------
Net cash provided by operating activities 7,240 11,606 3,404
---------------------------------------------
Cash flows from investing activities :
Purchase of property and equipment (9,796) (5,262) (4,995)
Sale of building -- -- 766
Proceeds from disposition of property and equipment 178 180 182
---------------------------------------------
Net cash used in investing activities (9,618) (5,082) (4,047)
---------------------------------------------
Cash flows from financing activities :
Payments under credit facility, net -- (543) (634)
Payments against debt borrowing (460) (357) (328)
Issuance (payment) of short term loan -- (2,100) 2,100
Proceeds from issuance of common stock 979 1,219 78
Repurchase and retirement of common stock -- (2) (24)
---------------------------------------------
Net cash provided by (used in) financing activities 519 (1,783) 1,192
---------------------------------------------
Increase (decrease) in cash and cash equivalents (1,859) 4,741 549
Cash and cash equivalents at beginning of year 8,345 3,604 3,055
---------------------------------------------
Cash and cash equivalents at end of year $ 6,486 $ 8,345 $ 3,604
---------------------------------------------
Supplementary disclosures of cash flow information :
Interest paid $ 534 $ 105 $ 164
Taxes paid $ 498 $ 112 $ 176
The accompanying notes are an integral part of these consolidated financial
statements.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
GENERAL -
Printronix, Inc. was incorporated in California in 1974 and was reincorporated
in Delaware in December 1986. The Company designs, manufactures, and markets
medium and high speed printers which support a wide range of computer systems
and software platforms. Printronix printers produce "hard copy" through the
application of impact, laser, and thermal technologies. The Company's product
line is designed primarily for business and industrial applications, quickly
and reliably producing every type of printed computer output, from reports and
graphics to bar code labels. The Company also produces and markets the
Intelligent Graphics Printing (IGP(TM)) which resides in the printer, enabling
it to produce bar codes, forms, and logos.
BASIS OF CONSOLIDATION -
The consolidated financial statements include the accounts of the Company,
Printronix, Inc. and its wholly owned subsidiaries. All intercompany accounts
and transactions have been eliminated.
ACCOUNTING PERIOD -
The Company utilizes a fifty-two, fifty-three week fiscal year ending on the
last Friday of March. The Company is reporting a fifty-two week fiscal year for
the period ended March 29, 1996, compared with a fifty-three week fiscal year
for the period ended March 31, 1995 and a fifty-two week fiscal year for
the period ended March 25, 1994.
CASH EQUIVALENTS -
For cash flow reporting purposes, the Company considers all highly liquid
temporary cash investments with maturities of three months or less at the time
of purchase to be cash equivalents. The effect of exchange rate changes on cash
balances held in foreign currencies was not material for the periods presented.
INVENTORIES -
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
PROPERTY AND EQUIPMENT -
Depreciation and amortization of property and equipment are provided using the
straight-line method over the following estimated useful lives:
Machinery and equipment 3 to 5 years
Furniture and fixtures 3 to 7 years
Leasehold improvements Term of lease
Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are capitalized.
When assets are disposed of, the applicable costs and accumulated depreciation
and amortization thereon are removed from the accounts and any resulting gain
or loss is included in operations.
SALES RECOGNITION -
Sales are recorded as of the date shipments are made to customers. The
Company's products are sold primarily to customers in the computer and bar code
industry and accordingly, the majority of the Company's accounts receivable are
concentrated among such customers. Sales returns and allowances are reflected
as a reduction in sales and reflected in inventory at cost or expected net
realizable value, whichever is lower. Every six months the Company allows North
American distributors a stock rotation, whereby 2% of the prior six months
sales can be returned, subject to various limitations, in exchange for other
products. The Company has not experienced sales returns of a material amount,
as they are limited to the utilized portion of the 2% stock rotation for North
American distributor revenue. Products that are defective upon arrival are
handled under the Company's warranty policy.
INCOME ON MAINTENANCE CONTRACTS -
The Company generates income on extended maintenance contracts through the sale
of the service obligation to a third party provider. The third party provider
is responsible for the performance of all maintenance services for the contract
period. The income on such contracts is recognized fully in the period the
contract is sold to the third party provider as the Company assumes no further
material obligation after the date of sale. Revenue generated from maintenance
contracts was less than 2% of total sales in fiscal years 1996, 1995, and 1994.
WARRANTY COSTS -
The Company's financial statements reflect accruals for potential warranty
claims based on the Company's claim experience.
FOREIGN CURRENCY REMEASUREMENT AND TRANSLATION -
The United States dollar is the functional currency for all of the Company's
foreign subsidiaries. For these subsidiaries, the assets and liabilities have
been remeasured at the end of the period exchange rates, except inventories and
property 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.
INCOME TAXES -
Provisions are made for the amount of income taxes on the reported operations
of each year. Tax credits are treated as reductions of the applicable Federal
income tax provisions in the years earned. On a quarterly basis, the Company
provides for state and foreign income taxes based on an estimate of the
effective rate for the entire year.
The Company accounts for income taxes in accordance with SFAS No. 109. SFAS No.
109 requires the use of the asset and liability method for financial accounting
and reporting for income taxes, and further prescribes that current and
deferred tax balances be determined based on the difference between the
financial statement and tax basis of assets and liabilities using tax rates in
effect for the year in which the differences are expected to reverse.
ENGINEERING AND DEVELOPMENT -
Company-funded engineering and development costs are expensed as incurred. A
substantial portion of the engineering and development expense is related to
developing new products and making significant improvements to existing
products or processes.
DIVIDENDS -
The Company has not paid cash dividends on its stock. However, in 1989, the
Company declared a dividend of one common share purchase right per share of
common stock (see note 5 (b)).
RECLASSIFICATIONS -
Certain amounts for previous fiscal years have been reclassified to conform
with the fiscal 1996 presentation.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
EARNINGS PER COMMON SHARE -
Earnings per common share are calculated using the weighted average number of
shares outstanding and the dilutive effects of stock options, using the
treasury stock method.
USE OF ESTIMATES -
The preparation of 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CAPITAL STOCK -
Subsequent to the Company's fiscal year-end, the Board of Directors declared a
stock split effected in the form of a fifty percent (50%) stock dividend of the
Company's common stock. This stock dividend resulted in a distribution of
2,622,494 common shares on June 10, 1996. Retroactive effect has been given to
the dividend in stockholders' equity as of March 29, 1996, and in all share,
price, and per share data in the accompanying financial statements. In fiscal
1995 a similar stock split effected in the form of a fifty percent (50%) stock
dividend was declared, resulting in the distribution of 2,478,750 shares of
common stock on December 21, 1994. This stock split was treated the same as
noted above.
NEW PRONOUNCEMENTS -
Effective March 30, 1996, the Company will be required to adopt SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." The statement requires that impairment losses for
long-lived assets and identifiable intangibles to be held and used be based on
the fair value of the asset. The statement also requires that these assets be
reported at the lower of carrying amount or fair value less cost to sell. The
Company believes that adoption of this statement will not have a material
effect on the Company's financial position.
Effective March 30, 1996, the Company will be required to adopt SFAS No. 123,
"Accounting for Stock-Based Compensation." The statement requires, at a
minimum, new disclosures regarding employee and non-employee stock-based
compensation plans and recommends that companies change how they previously
accounted for these plans by recording compensation expense based on the
intrinsic value of the options. The statement requires companies who do not
change their accounting in accordance with this new pronouncement to disclose
what their earnings and earnings per share would have been had they changed.
The Company intends to continue using the measurement prescribed by the former
standard, and accordingly, this pronouncement will not have a material effect
on the Company's financial position or results of operations.
NOTE 2 - COMMITMENTS AND CONTINGENCIES -
OPERATING LEASES -
The Company conducts its operations using leased facilities under
non-cancelable operating leases which expire at various dates from fiscal years
1997 through 2000.
The following is a summary of rental expense of non-cancelable building and
equipment operating leases incurred for each of the three years in the period
ended March 29, 1996:
($ in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------
Gross rental expenses $3,703 $3,343 $3,279
Less: sublease rental income (82) (76) (38)
- ------------------------------------------------------------------------------
Net rental expense $3,621 $3,267 $3,241
The minimum rental commitments required under existing non-cancelable operating
leases for each fiscal year are as follows: ($ in thousands)
1997 1998 1999 2000 2001 Total
-------------------------------------------------------------------------
$3,429 $1,975 $ 403 $ 18 -- $5,825
OTHER LONG-TERM LIABILITIES -
During fiscal 1996, the Company settled a tax issue related to a past
acquisition. This issue is now closed and resulted in a Federal tax payment of
$177,000 and interest of $491,000 which was charged against other long-term
liabilities. The remaining amount is reserved for potential liabilities related
to other ongoing tax issues.
NOTE 3. 401(K) SAVINGS AND PROFIT SHARING PLANS -
Effective January 1, 1985, the Company adopted a 401(k) Savings and Investment
Plan (the "401(k) Plan"), for all employees working a minimum of 1,000 hours
per year, which is designed to be tax deferred in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. All United States
employees (including officers, but not outside directors) may contribute from
1% to 17% of compensation per week (subject to certain limitations) on a
tax-free basis through a "salary reduction" arrangement. The Company matches
employee contributions up to a maximum of 2% of salary or one thousand dollars
per year, whichever is less. Employee contributions are always 100% vested. All
Company contributions become fully vested after four full years of employment.
Company contributions to the 401(k) plan were $306,000, $286,000, and $282,000
for fiscal years 1996, 1995, and 1994, respectively.
The Company also maintains a discretionary worldwide profit-sharing plan for
qualified employees. Employees who have been with the Company for 90 days of
continuous service are eligible to participate in the profit sharing plan. The
Company allocates a percentage of pre-tax profits to a profit sharing pool
which is then distributed to employees pro rata based on quarterly salary. In
addition, certain executives are eligible to participate in a bonus plan which
is subject to achieving specific operating performance targets established by
the Board of Directors. Company contributions to these plans were $2.4
million, $2.6 million, and $0.6 million for fiscal years 1996, 1995, and 1994,
respectively.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
- ------------------------------------------------------------------------------
NOTE 4. SEGMENT DATA AND EXPORT SALES - ($ IN THOUSANDS)
Printronix operates in one industry segment - the design, manufacture and
marketing of medium and high speed printers which support a wide range of
computer systems and software platforms. Regional segment data is as follows:
THE EUROPE, AFRICA,
1996 AMERICAS AND THE MIDDLE EAST ASIA ELIMINATIONS CONSOLIDATED
- -----------------------------------------------------------------------------------------------------
Revenues:
Net sales $116,368 $34,712 $ 8,181 $ -- $159,261
Transfers between
geographic locations 18,487 403 38,737 (57,627) --
-------------------------------------------------------------------------
134,855 35,115 46,918 (57,627) $159,261
Income from operations $ 2,811 $ 2,441 $ 1,093 $ -- $ 6,345
Identifiable assets $ 43,380 $10,795 $14,955 $ -- $ 69,130
1995
- -----------------------------------------------------------------------------------------------------
Revenues:
Net sales $113,417 $27,414 $ 5,758 $ -- $146,589
Transfers between
geographic locations 11,038 446 40,392 (51,876) --
-------------------------------------------------------------------------
124,455 27,860 46,150 (51,876) 146,589
Income from operations $ 3,620 $ 3,515 $ 845 $ -- $ 7,980
Identifiable assets $ 40,899 $ 8,836 $11,940 $ -- $ 61,675
1994
- -----------------------------------------------------------------------------------------------------
Revenues:
Net sales $ 80,717 $21,174 $ 5,528 $ -- $107,419
Transfers between
geographic locations 11,366 220 26,667 (38,253) --
-------------------------------------------------------------------------
92,083 21,394 32,195 (38,253) 107,419
Income from operations $ 94 $ 1,800 $ 408 $ -- $ 2,302
Identifiable assets $ 33,665 $ 8,064 $10,187 $ -- $ 51,916
Geographic information is based upon the principal location of the Company's
operations and not necessarily on the location of the customers. Transfers
between geographic locations are billed at manufacturing costs plus a margin
representing a reasonable rate of return for activities performed. Certain
operating expenses have been redistributed among geographic regions to reflect
a reasonable allocation of operating expenses which support worldwide
operations.
The Americas' sales included export sales of approximately $22.9 million, $23.2
million, and $14.2 million for fiscal years 1996, 1995, and 1994, respectively.
Export sales are principally to Europe, Canada, and Asia. Increases in export
sales during fiscal 1996 and 1995 compared with fiscal 1994 were due to higher
shipments of product to major OEMs with operations located outside the United
States.
In fiscal 1996, the Company had two customers each of which represented more
than 10 percent of consolidated net sales. Sales to the largest customer, IBM,
represented 30 percent, 29 percent, and 11 percent of net sales for fiscal
years 1996, 1995, and 1994, respectively. On a geographic basis, fiscal 1996
sales to IBM represented 33 percent of domestic and 26 percent of international
net sales. Sales to the second largest customer represented 10 percent, 11
percent, and 15 percent of net sales for fiscal years 1996, 1995, and 1994,
respectively. A significant decline in sales to either customer could have an
adverse effect on the Company's operations.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
NOTE 5. STOCK OPTION PLANS AND COMMON SHARE PURCHASE RIGHTS -
(A) STOCK AWARDS -
The Company has one stock option plan under which options may be granted to
purchase shares of its common stock. A total of 1,125,000 shares is authorized
for issuance under this plan. An additional plan which expired April 30, 1994
has options outstanding, but no further options may be granted under this plan.
Options under the plans are generally granted at prices not less than the fair
market value of the common stock on the date of grant and can become
exercisable in installments at dates ranging from one to ten years from the
date of grant, as determined by the Stock Option Committee of the Board of
Directors. Generally, outstanding options become exercisable at the rate of 25
percent per year, and expire five years from the date of grant.
The following is a summary of the transactions, including restricted stock,
relating to the plans for the year ended March 29, 1996:
COMMON STOCK OPTIONS SHARES PRICE
- ----------------------------------------------------------------------------------
Beginning, outstanding 920,354 $ 1.95 - $13.11
Granted 430,553 11.00 - 19.67
Exercised (366,060) 2.00 - 4.00
Canceled (21,519) 2.00 - 13.33
- ----------------------------------------------------------------------------------
Ending, outstanding 963,328 $ 1.95 - $19.67
As of March 29, 1996, options to acquire 180,251 shares were exercisable, and
options to acquire 463,304 shares remained available to grant.
Under the 1984 Stock Incentive Plan, grants of restricted stock can be made at
any price. The Company has sold stock to certain officers and key employees.
The shares issued under the plan are subject to repurchase agreements which
lapse over an extended period not exceeding seven years if certain Company
profitability performance measures are met. In fiscal 1991, 258,750 shares were
issued under the plan and an additional 112,500 shares were issued in fiscal
1993. The excess of the fair market value on the date of vesting over the
purchase price is charged to operations as compensation expense as the
restrictions lapse. In each of fiscal 1996 and 1995, 92,813 or 25 percent of
the issued shares vested, with $784,000 and $681,000 respectively charged to
operations. There were no charges to operations in fiscal year 1994 as the
required performance objectives were not met.
(B) COMMON SHARE PURCHASE RIGHTS -
On March 16, 1989, the Company declared a dividend payable on April 4, 1989 of
10,311,603 Common Share Purchase Rights.
Each right, when exercisable, entitles a stockholder to buy one share of the
Company's common stock at an exercise price of $15.55, subject to adjustment.
The rights become exercisable ten days after certain persons or groups announce
acquisition of 20 percent or more, or announce an offer for 30 percent or more,
of the Company's common stock. The rights are nonvoting, expire in ten years
and may be redeemed prior to becoming exercisable. In the event that the
Company was acquired in a merger or other business combination, each
outstanding right would entitle a holder to purchase, at the then current
exercise price, that number of shares of common stock of the surviving company
having a market value equal to two times the exercise price of the right. The
foregoing is a general description only and is subject to the detailed terms
and conditions set forth in the Common Share Rights Agreement, dated as of
March 17, 1989, between the Company and Chemical Trust Company of California.
NOTE 6. BANK BORROWING AND DEBT ARRANGEMENTS -
The Company maintains an unsecured line of credit of $7.5 million with a United
States bank. The credit agreement generally provides for interest at the prime
rate or LIBOR plus 2%, contains certain standard financial and non-financial
covenants, provides for an annual commitment fee of 1/2 percent of the unused
portion of the line, and is renewable in September 1996. At the end of fiscal
years 1996 and 1995, there were no cash borrowings against this line of credit.
At March 29, 1996, one of the Company's foreign subsidiaries maintained
unsecured lines of credit with foreign banks of $3.2 million which include a
standby Letter of Credit of $1.8 million, and additional restrictions on the
available credit balance of $339,000 relating to import letters of credit and
bank guarantees for building leases and utilities in Singapore. These credit
facilities are subject to parent guarantees, require payment of certain loan
fees, and provide for interest at approximately 3/4 to 1 percent above the
bank's cost of raising capital. At the end of fiscal years 1996 and 1995, there
were no cash borrowings against this line of credit.
In fiscal 1996 the Company paid down the remaining balance of short-term
equipment financing. Outstanding borrowings related to this were $257,000 at
the end of 1995. During fiscal 1996, the Company arranged additional equipment
financing for $409,000 with an imputed interest rate of 8 percent. The
remaining principal balance of $205,000 is due and payable in equal
installments through fiscal year 1997 and is collateralized by certain of the
Company's fixed assets.
NOTE 7. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT -
Subsequent to year-end, the Company completed an agreement to secure a
five-year term loan of $5.0 million to acquire a manufacturing facility in
Singapore. The Company expects to finance 86 percent of the building costs,
consisting of $3.8 million for the purchase of the facility, and an additional
$2.0 million for building improvements. The Company expects to take possession
of the new facility in the first quarter of fiscal 1997.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
NOTE 8. INCOME TAXES -
TAX PROVISION ($ IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
Current
Federal $ (6) $ 100 $ --
State (22) 158 36
Foreign 184 37 149
- ---------------------------------------------------------------------------------------------------------------
Total $ 156 $ 295 $ 185
COMPONENTS OF
INCOME (LOSS) BEFORE TAXES ($ IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
United States $ 4,215 $ 2,363 $ 2,591
Foreign 2,712 5,092 (537)
- ---------------------------------------------------------------------------------------------------------------
Total $ 6,927 $ 7,455 $ 2,054
Amounts for tax provision and components of income (loss) before taxes shown in
the two tables above are classified based on location of the taxing authority
and not on geographic region.
DEFERRED INCOME TAX PROVISION ($ IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
Tax depreciation over (under) depreciation
for financial reporting purposes $ 65 $ (72) $ (174)
Inventory costs (capitalized) expensed on the
tax return and (expensed) capitalized for
financial reporting (114) (50) 133
Decrease (increase) in liability reserves 1,176 (95) 1,261
Net operating income (loss) (1,873) 1,352 (800)
Foreign tax credit expiration 2,700
Valuation reserve (1,954) (1,135) (420)
- ---------------------------------------------------------------------------------------------------------------
Total $ -- $ -- $ --
Deferred income taxes are not provided on the undistributed earnings (which
totaled approximately $37.2 million as of March 29, 1996) of the Company's
foreign subsidiaries as the Company intends to reinvest these earnings
indefinitely outside of the United States. Deferred income taxes result from
differences in the timing of reporting income and expenses for financial
statement and income tax reporting purposes.
DEFERRED INCOME TAX ASSET ($ IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------------
Tax depreciation over depreciation
for financial reporting purposes $ 210 $ 145
Inventory costs capitalized on tax return
and expensed for financial reporting (654) (540)
Liability reserves (545) (1,721)
Net operating loss carryforward (11,937) (10,064)
Foreign tax credit -- (2,700)
AMT credit carryforward (37) --
- ----------------------------------------------------------------------------------------------
Gross deferred tax asset (12,963) (14,880)
Valuation reserve 12,926 14,880
- ----------------------------------------------------------------------------------------------
Total $ (37) $ --
At March 29, 1996, the Company had available net operating loss carryforwards
for Federal income tax purposes of approximately $33.9 million expiring in 2002
to 2010. Approximately $2.7 million of the valuation reserve for the net
operating loss carryforward is related to deduction of stock options and will
be allocated directly to capital when utilized. The Company also had certain
state operating loss carryforwards.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 29, 1996 and March 31, 1995 and for each of the three years in the
period ended March 29, 1996
NOTE 8. INCOME TAXES (CONTINUED) -
RECONCILIATION OF EFFECTIVE
TAX RATE TO STATUTORY 1996 1995 1994
FEDERAL TAX RATE OF 34% ($ IN THOUSANDS) Amount % Amount % Amount %
- ------------------------------------------------------------------------------------------------------------------
Provision computed at statutory rates $ 2,355 34.0 $ 2,534 34.0 $ 699 34.0
State income taxes, net
of Federal tax (provision)/benefit (22) (0.3) 126 1.7 36 1.8
Book (income) loss from which
Federal benefit is (utilized)/not available (1,439) (20.8) (672) (9.0) 857 41.7
Rate reductions due to foreign
operations (including carryback) (738) (10.7) (1,693) (22.7) (1,407) (68.5)
- ------------------------------------------------------------------------------------------------------------------
Total $ 156 2.2 $ 295 4.0 $ 185 9.0
The Company's pioneer tax status in Singapore expired in August 1995. Earnings
generated there were exempt from tax liability through that time. The aggregate
dollar effect of the pioneer status was to reduce foreign taxes by $694,000,
$1.0 million, and $620,000 for the fiscal years 1996, 1995, and 1994,
respectively. The primary and fully diluted net income per share effects of
this pioneer status would be 8 cents, 13 cents, and 8 cents for fiscal years
1996, 1995, and 1994, respectively.
The Company was subsequently granted pioneer tax status for income generated
from the manufacture of new ProLine Series 5 line matrix products. The latest
pioneer status is expected to take effect in June 1996 and lasts for a duration
of 5 years, extendible to 8 years. The pioneer status mandates that the Company
meet certain requirements, including meeting specific levels of capital
investment and engineering headcount (see note 7).
NOTE 9. ENVIRONMENTAL ASSESSMENT -
In January 1994, the Company was notified by the California Regional Water
Quality Control Board - Santa Ana Region (the "Board") that groundwater
monitoring reports indicated that the groundwater under one of the Company's
former production plants was contaminated with various chlorinated volatile
organic compounds (VOCs). Evidence adduced from site studies undertaken to date
indicate that compounds containing the VOCs were not used by the Company during
its tenancy, but were used by the prior tenant during its long-term occupancy
of the site. The tests also indicate that the composition of the soil is such
that off-site migration of contamination is very slow and contamination is most
likely confined to the site.
In March 1996, the Company received a request from the Board for information
regarding chemicals used by the Company or others on property adjacent to the
former production plant site. Although, the Company previously used a small
portion of this adjacent property primarily for office space and a machine
shop, initial review indicates that the Company did not use compounds
containing VOCs on this adjacent property.
Presently, the Board continues to investigate the source of the VOCs and there
are currently no further orders outstanding against the Company. As of March
29, 1996, the Company has reserved $214,000 which is a reasonable estimate to
cover further legal fees or any additional expenses related to environmental
tests which could be requested by the Board at either site. To date, the
Company has incurred only minimal expense in its initial response to the
Board's request for information and for environmental testing.
The Company is convinced that it bears no responsibility for any contamination
at the sites and intends to vigorously defend any action which might be brought
against it in respect thereto. Furthermore, the Company believes that it has
adequately accrued for any future expenditures in connection with environmental
matters and that such expenditures will not have a materially adverse effect on
its financial condition or results of operations.
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF PRINTRONIX, INC.:
We have audited the accompanying consolidated balance sheets of Printronix,
Inc. (a Delaware Corporation) and subsidiaries as of March 29, 1996 and March
31, 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended March 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on 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 financial statements referred to above present fairly, in
all material respects, the financial position of Printronix, Inc. and
subsidiaries as of March 29, 1996 and March 31, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
March 29, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
April 29, 1996
QUARTERLY DATA (DERIVED FROM AUDITED FINANCIAL STATEMENTS, EXCEPT STOCK PRICE
INFORMATION)
($ IN THOUSANDS, EXCEPT SHARE AND STOCK PRICE DATA)
QUARTER
--------------------------------------------------
FISCAL 1996 FIRST SECOND THIRD FOURTH
- ---------------------------------------------------------------------------------------------
Net sales $42,212 $39,509 $37,091 $40,449
Gross profit 10,934 9,737 7,789 9,036
Net income 2,676 1,931 830 1,334
Earnings per share
- primary & fully diluted $ 0.32 $ 0.23 $ 0.10 $ 0.16
Stock Price
high $ 18.50 $ 25.50 $ 21.50 $ 15.33
low $ 12.33 $ 16.00 $ 9.33 $ 10.50
QUARTER
--------------------------------------------------
FISCAL 1995 FIRST SECOND THIRD FOURTH
- ---------------------------------------------------------------------------------------------
Net sales $33,465 $34,301 $37,645 $41,178
Gross profit 8,654 8,845 9,847 10,622
Net income 1,400 1,527 1,902 2,331
Earnings per share
- primary & fully diluted $ 0.19 $ 0.19 $ 0.23 $ 0.29
Stock Price
high $ 4.33 $ 9.00 $ 18.50 $ 18.83
low $ 3.45 $ 3.89 $ 7.11 $ 11.00
Note: Earnings per share and stock price have been retroactively restated to
reflect a 50% stock dividend payable June 10, 1996 to stockholders of record as
of May 20, 1996.
23
CORPORATE INFORMATION
BOARD OF DIRECTORS
ROBERT A. KLEIST
President and Chief Executive Officer,
Printronix, Inc.
BRUCE T. COLEMAN
Chief Executive Officer, El Salto Advisors
(Advice and interim CEO services)
*JOHN R. DOUGERY
General Partner, Dougery & Wilder
(Venture capital investments)
*RALPH GABAI
President, Bi-Coastal Consulting Ltd.
(Business consulting to venture capital financed companies)
*ERWIN A. KELEN
President, Kelen Ventures
(Venture Investments)
* Member of the Audit Committee
CORPORATE OFFICERS
ROBERT A. KLEIST
President and Chief Executive Officer
J. EDWARD BELT PH.D.
Senior Vice President, Engineering,
Chief Technical Officer and Asst. Corporate Secretary
GEORGE L. HARWOOD
Senior Vice President, Finance & MIS,
Chief Financial Officer and Corporate Secretary
C. VICTOR FITZSIMMONS
Senior Vice President, Worldwide Manufacturing
RICHARD A. STEELE
Senior Vice President, Sales and Marketing
GORDON B. BARRUS
Vice President, Advanced Development
THEODORE A. CHAPMAN
Vice President, Product Development
STEVEN M. EGOL
Vice President, Sales - Asia Pacific & Latin America
NORM E. FARB PH.D.
Vice President, Strategic Technology
CLAUS HINGE
Vice President, European Sales & Marketing
PHILIP F. LOW
Vice President, Singapore Operations
JULI A. MATHEWS
Vice President, Human Resources
BRUCE E. MENN
Vice President, Product Management
CORPORATE DIRECTORY
PRINTRONIX CORPORATE OFFICES
17500 Cartwright Road, P.O. Box 19559,
Irvine, California 92713
Telephone: (714) 863-1900
Facsimile: (714) 660-8682
LEGAL COUNSEL
Kirshman & Harris
A Professional Corporation, General Counsel
11500 Olympic Blvd., Suite 605
Los Angeles, California 90064
Telephone: (310) 312-4544
INDEPENDENT AUDITORS
Arthur Andersen LLP
18500 Von Karman Ave., Suite 1100
Irvine, California 92715
Telephone: (714) 757-3100
REGISTRAR AND TRANSFER AGENT
Chemical Mellon Shareholder Services
15821 Ventura Blvd., Suite 670
Encino, California 91436
ANNUAL MEETING
Annual meeting will be held at 2:00 p.m.,
August 13, 1996, at Printronix Corporate Offices,
located at 17500 Cartwright Road, Irvine, California
PRINTRONIX COMMON STOCK
Traded OTC, NASDAQ, National Market System,
Stock Symbol: PTNX
STOCKHOLDERS
As of March 29, 1996, there were 4,087 record holders of the Company's Common
Stock.
CORPORATE AND INVESTOR INFORMATION
A copy of Printronix's annual report on Form 10-K filed with the Securities and
Exchange Commission (SEC) will be furnished without charge to any stockholder.
To obtain a copy, please write to:
Investor Relations Department, Printronix, Inc.
17500 Cartwright Road, P.O. Box 19559
Irvine, California 92713, Telephone: (714) 863-1900
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PRINTRONIX