1
EXHIBIT 13
Printronix 1998 Annual Report
From the corporate office to the middle of the factory floor, from Peoria,
Illinois to Frankfurt and Bangalore -- Printronix printers are interwoven
tightly into the fabric of commerce and society.
Our global strategy -- triangulated with operations in California, Singapore and
Holland -- combines with localized software to make our printers competitive in
developed and emerging markets around the world.
Our industry leadership supports continuing technology and product enhancement.
Printronix supplies over 50% of line matrix printers worldwide.
Our manufacturing efficiency enables quick delivery of products to customers --
typically under two days from order -- as well as fast response to changing
market conditions, lower inventory and higher productivity.
2
To Our Stockholders
Fiscal 1998 saw record net income for Printronix for the second year in a row.
The increase was driven largely by increased margins from manufacturing
efficiencies companywide as well as cost reductions realized by the move of our
Singapore operations to a new facility in October 1996 and the successful
conversion to the Printronix P5000 Series line matrix products. Sales did not
grow due to lower sales to certain OEM customers in Europe and the Americas,
lower sales of laser products due to increased competition in Europe and lower
sales in much of Asia. Sales increased in China and India despite the generally
slower Asia/Pacific market conditions that arose during the fiscal year.
Revenue for fiscal 1998 decreased 2% to $170.4 million, while net income
increased 29% to a record $15.1 million. Diluted earnings per share were $1.83
vs. $1.40. The gross margin increased to 31.7% from 26.5% and the net margin was
8.8% vs. 6.7%. Order backlog at fiscal year end advanced to $16.1 million from
$13.4 million at the end of fiscal 1997 due to increased orders from our largest
OEM customer.
Printronix has a strong financial position with no debt and $10.3
million in cash and cash equivalents at fiscal year end vs.$12.8 million at the
end of fiscal 1997. Uses of cash during fiscal 1998 included the purchase of
land for a new facility in Irvine, California for $8.1 million, the RJS
acquisition for $2.9 million and repurchase of 741,400 shares of common stock
for $11.4 million.
Going forward, our operations are efficient and product development and
channel development programs are vigorous. The challenge is to spur top-line
growth, which we believe will result from continuing, steady implementation of
our global product and marketing strategy.
In essence, we are offering a "plug-and-play" print solution with quick
delivery to virtually anywhere in the world for any major computer system using
different local languages.
That has led to Printronix's commanding market share in line matrix
printers worldwide. The line matrix market is characterized by some as "mature,"
but that refers largely to developed countries, not emerging economies whose
business growth and industrial development are increasing. Sales to the Americas
accounted for 59% of total sales last year, 34% in Europe/Middle East/Africa and
7% in Asia/Pacific. Printronix's overall market share in line matrix printers is
composed of individual markets where market share ranges from 80% in some cases
to as low as 10% in others, giving room for growth in under-served markets.
Printronix pioneered line matrix printing and is continually reinventing
the technology to advance the state of our art. In fiscal 1998, we made several
upgrades to the P5000 Series line matrix printers, introduced just one year
before. In the laser printer line, we introduced two companion products, the
L5020 (20 pages per minute-ppm) for continuous form applications utilizing a
wide array of paper and label media, including cloth-type synthetics. It uses a
flash fusing process, which fuses via a xenon lamp rather than heat or pressure
typically employed by others. We also introduced the L5035 (35 ppm), which
switches between continuous form and cut sheets on command. Its duty cycle of
300,000 pages per month makes it the ultimate "industrial strength laser
printer."
This process of continuous product enhancement, which distinguishes
Printronix as the technology leader, continues unabated as evidenced by our
commitment of 9.2% of sales to R&D during fiscal 1998.
Another product introduced in fiscal 1998 for line matrix printers has
already begun to contribute to sales and, we believe, should be a major factor
in the future. PrintNet(TM) enables network administrators to access, monitor
and control P5000 Series line matrix printers anywhere on a LAN or WAN using a
standard web browser. As customers expand networking throughout their
operations, this is a distinct advantage, enabling easier management of
networked printers. We are finding PrintNet encourages the purchase of
additional Printronix printers due to its efficient management of printing
resources.
The next-generation Printronix System Architecture, PSA(TM)2, allows all
printers across our three product lines to work and interact compatibly with
customers' software. Increasingly, customers are employing all three printing
technologies (line matrix, laser, thermal) for different needs throughout their
operations. PSA2 is a strong driver of sales both to new customers and to those
we already serve. Importantly, all Printronix products are Year 2000 compliant.
In fiscal 1998, we made a strategic acquisition of the RJS bar code
verification technology and intend to use that asset as a base to expand the
technology and become the leader in online verification (simultaneous printing
and bar code verification), as well as verification instruments. By adding this
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technology, we are broadening our service to the many customers who are
increasing their use of bar code labeling and printing as a means of product and
inventory control, requiring 100% accuracy for bar coded products shipped around
the world. Currently, online verification is only used on thermal printers, but
Printronix intends to expand the application to line matrix and laser printers
in the future.
To enhance sales reach, we increased the number of distributors for
Printronix products in fiscal 1998 and opened a new sales office in Vienna,
Austria to better serve the expanding Eastern European markets.
To increase efficiency and control future facility costs, we purchased
land in Irvine, California where we plan to consolidate our corporate
headquarters, R&D and U.S. manufacturing operations now housed in five buildings
in the area.
To continue to enhance stockholder value, the Company announced on May
15, 1998 that the Board of Directors authorized the repurchase of 1,000,000
shares of Printronix common stock, in addition to the 1,000,000 shares
authorized in 1997. As of June 22, 1998, 1,138,400 shares had been repurchased.
We believe Printronix is ready for the future. The Company's technology
leadership is delivering increasingly valuable products to the marketplace. Our
global strategy gives Printronix strong presence wherever markets are growing.
Quick response enables shipment of products built-to-order in just two days --
down from four days last year and 18 days the year before -- to satisfy users'
needs. Dedicated customer service helps retain loyal and satisfied users of a
broad range of Printronix products. Operations are increasingly efficient even
as we add products and markets. Printronix has strong cash flow and no debt.
In fiscal 1999, we anticipate moderate sales growth as we continue
investment in product and market development aimed at reporting stronger
top-line results in the year 2000 and beyond.
The Company's continuing success is attributable to the steady efforts
of our employees and management team, supported by industry partners and
affiliates. We appreciate the loyalty of our customers, who have committed to
Printronix for their printing needs, and the oversight of our Board of Directors
as we continue to expand our role as a global printing solution provider. We
look forward to reporting continuing improvement in fiscal 1999.
Robert A. Kleist
President and Chief Executive Officer
June 15, 1998
4
Management's Discussion and Analysis of Results of Operations and Financial
Condition
General
In January 1998, the Company, through a 91.5% majority-owned subsidiary,
acquired the assets and rights to the bar code verification business and the RJS
name from Eltron for $2.9 million in a business combination accounted for as a
purchase. RJS is primarily engaged in bar code verification products (See Note
2).
Results of Operations
Net sales
Revenue of $170.4 million for fiscal 1998 decreased $2.9 million, or 2%,
compared to fiscal 1997. The decrease resulted from lower sales to certain OEM
customers in the Americas and Europe, lower sales of laser products due to
increased competition in Europe, partially offset by increased sales in China
and India in the Asia Pacific Region. Sales to the Americas decreased $1.3
million, and sales to Europe, Middle East and Africa decreased $2.9 million
compared to fiscal 1997. Fiscal 1998 decreases in sales were partially offset by
increased sales to Asia Pacific of $1.3 million, or a 12% increase, compared to
fiscal 1997. OEM sales decreased to $82.7 million in fiscal 1998 compared to
$89.9 million in fiscal 1997, a decrease of 8%. The Printronix P5000 Series line
matrix products accounted for revenue of $122.9 million, or 72% of fiscal 1998
sales. Sales of consumable products increased $2.6 million, or 14%, over fiscal
1997, representing 13% of total revenue.
Fiscal 1997 revenue of $173.3 million was up $14.0 million, or 9%, over
fiscal 1996 sales of $159.3 million. Year-over-year revenue growth came from
increased sales in the Company's Printronix P5000 Series line matrix printers.
Printronix P5000 Series accounted for revenue of $116.2 million, or 67% of
fiscal 1997 sales. Sales of consumable products were 11% of total revenue, an
increase of $2.1 million, or 12%, over fiscal 1996. OEM sales grew to $89.9
million in fiscal 1997 compared to $78.0 million in fiscal 1996, an increase of
15%.
Gross profit
Gross profit as a percentage of sales was 32% in 1998 compared with 27% and 24%
in fiscal years 1997 and 1996, respectively. The increase in gross profit
percentage in 1998 and 1997 resulted from manufacturing efficiencies and cost
reductions on the new Printronix P5000 Series line matrix printers. Margins in
1996 were unfavorably impacted from both the start-up costs related to the
development and production ramp-up of the Printronix P5000 Series product family
and the manufacturing phase down of the mature line matrix products. 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. Manufacturing of the Printronix
P5000 Series commenced in the second quarter of fiscal 1996 and was at full
production by the first quarter of fiscal 1997. Meanwhile, production of the
previous generations of line matrix printers were being phased out, with
production ending in mid fiscal 1997.
Operating expenses
Engineering and development spending increased to $15.6 million (excluding a
one-time acquisition related charge of $0.9 million) compared with $14.3 million
in fiscal 1997, and as a percentage of sales, increased to 9% from 8% in fiscal
1997. The growth in engineering spending reflects the Company's commitment to
continuous improvement of the Printronix P5000 Series line matrix, LaserLine and
ThermaLine industrial strength printers.
In fiscal 1997, the Company spent $14.3 million on engineering and
development compared with $13.7 million in fiscal 1996. The growth in
engineering and development spending over fiscal 1996 resulted from the
Company's commitment to continuous improvement in all three print technologies
and also increasing customer support and development around the world.
Selling, general and administrative spending increased to $23.2 million
compared with $19.9 million in fiscal 1997, while spending as a percentage of
sales increased to 14% compared with 11% in fiscal 1997. Spending increased over
the prior year as a result of increased sales coverage and marketing emphasis on
developing the Americas, Europe, Middle East, and Asia Pacific markets.
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Selling, general and administrative expenses, as a percentage of sales,
remained flat at 11% in fiscal 1997 compared with fiscal 1996. Spending
increased partly due to increased provision for bad debts and partly due to
increased sales and marketing expenses.
Other income and expenses
Foreign currency remeasurement gains were $732,000 in fiscal 1998 compared with
losses of $35,000 in fiscal 1997 and losses of $45,000 in fiscal 1996. Foreign
currency remeasurement gains in fiscal 1998 were due to the Company's Singapore
manufacturing operations.
Interest and other income, net, increased $0.5 million in fiscal 1998
compared with fiscal 1997 due to increased interest income resulting from higher
average cash balances and decreased interest expense. Interest and other income,
net, decreased $0.2 million in fiscal 1997 compared with fiscal 1996 due to
increased interest expense resulting from a $5.0 million loan to fund the
Singapore building purchase. By fiscal end 1997, all outstanding debt was
repaid.
Income taxes
For Federal income tax purposes, the Company currently has available a net
operating loss carryforward of $11.9 million. Accordingly, there were no Federal
taxes owed for fiscal years 1998, 1997, and 1996. The California net operating
losses were fully utilized in the fourth quarter of fiscal 1997. The provision
for taxes consists of certain state and foreign income taxes.
Liquidity and Capital Resources
Cash and equivalents totaled $10.3 million at the end of fiscal 1998 compared
with $12.8 million for fiscal 1997. The decrease in cash is due primarily to the
purchase of land for the new corporate facilities, purchases of Printronix stock
totaling $11.4 million and $2.9 million for the RJS acquisition, which were
funded by current year operations.
Capital expenditures during fiscal 1998 consisted of $8.1 million for
the purchase of land in Irvine to consolidate into one complex the corporate
headquarters, research and development, and manufacturing, which are currently
housed in five buildings in the area. Capital expenditures related to machinery,
equipment, furniture, and fixtures totaled $6.9 million and $0.5 million for
buildings and improvements.
Fiscal 1998 year-end inventory was lower than fiscal 1997 due to ongoing
improvements in the JIT inventory system. The Company's increased manufacturing
efficiencies have reduced the time from order to shipment from an average of
eighteen days in 1996 and four days in 1997 to an average of only two days in
1998. This reduction in lead time has enabled the Company to maintain lower
inventory levels while increasing inventory turns.
Unsecured lines of credit at March 27, 1998 totaled $10.2 million of
which $8.4 million was available for borrowing.
At the end of fiscal 1998, 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 9).
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 1999.
Supplemental Information
Fiscal years 1998, 1997, and 1996 utilized a fifty-two week period.
During fiscal 1998, the Company completed the implementation of a year
2000 compliant enterprise-wide information system. The Company has also
initiated an assessment project, both within the Company and with its business
partners, which addresses those other significant systems that may have year
2000 compliance issues. The Company presently believes that with the
implementation of the new system and modification to existing software, year
2000 compliance will not pose a significant operational challenge for the
Company. However, if these modifications are not completed on a timely basis,
including implementation by its business partners, the Company's financial
position, results of operations, and cash flows may materially and adversely be
affected.
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For fiscal 1999, the Company will be required to adopt Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." The impact of the adoption of this pronouncement is not expected to
have a material impact on the Company's presentation of financial position or
results of operations.
For fiscal 1999, the Company will be required to adopt SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
Company is currently evaluating what impact this pronouncement will have on the
Company's disclosures.
For fiscal 1999, the Company will be required to adopt SFAS No. 132,
"Employees Disclosures About Pensions and Other Postretirement Benefits." The
impact of the adoption of this pronouncement is not expected to have a material
impact on the Company's disclosures.
For fiscal 2000, the Company will be required to adopt SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The impact of
the adoption of this pronouncement is not expected to have a material impact on
the Company's presentation of financial position or results of operations.
The Company believes that the effects of inflation on its operations and
financial condition are minimal.
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Consolidated Balance Sheets
1998 1997
---------------------------------
$ in thousands, except share data
As of March 27, 1998 and March 28, 1997
Assets
Current Assets
Cash and cash equivalents $ 10,264 $ 12,766
Accounts receivable, net of allowance for doubtful
accounts of $1,920 in 1998 and $1,010 in 1997 26,739 23,086
Inventories
Raw materials, subassemblies and work in process 15,782 16,253
Finished goods 1,826 3,775
-------- --------
17,608 20,028
Prepaid expenses 1,015 792
-------- --------
Total Current Assets 55,626 56,672
-------- --------
Property and Equipment, at Cost
Machinery and equipment 32,740 32,690
Furniture and fixtures 18,435 13,581
Land 8,100 --
Buildings 7,046 6,769
Leasehold improvements 2,104 2,008
-------- --------
68,425 55,048
Less: Accumulated depreciation and amortization (37,159) (31,520)
-------- --------
31,266 23,528
Intangible assets, net 1,166 --
Other assets 806 453
-------- --------
Total Assets $ 88,864 $ 80,653
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 9,988 $ 8,621
Accrued expenses
Payroll and employee benefits 4,590 4,087
Warranty 1,681 1,536
Other 1,385 1,326
Income taxes 760 641
Environmental 214 214
-------- --------
Total Current Liabilities 18,618 16,425
-------- --------
Other long-term liabilities 794 720
Minority interest in subsidiary 215 --
Commitments and contingencies
Stockholders' Equity
Common stock, $0.01 par value
(Authorized 30,000,000 shares; issued and outstanding
7,649,901 shares in 1998 and 8,032,303 shares in 1997) 77 80
Additional paid-in capital 30,054 30,887
Retained earnings 39,106 32,541
-------- --------
Total Stockholders' Equity 69,237 63,508
-------- --------
Total Liabilities and Stockholders' Equity $ 88,864 $ 80,653
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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Consolidated Statements of Income
For each of the three years March 27, March 28, March 29,
in the period ended March 1998 1998 % 1997 % 1996 %
----------- --- ----------- --- ----------- ---
$ in thousands, except share data
Net sales $ 170,391 $ 173,290 $ 159,261
Cost of sales 116,461 127,347 121,765
----------- --- ----------- --- ----------- ---
Gross profit 53,930 31.7% 45,943 26.5% 37,496 23.5%
----------- --- ----------- --- ----------- ---
Operating expenses
Engineering and development 15,621 9.2% 14,324 8.3% 13,694 8.6%
In-process engineering charge 942 0.6% -- -- -- --
Selling, general & administrative 23,223 13.6% 19,920 11.5% 17,457 11.0%
----------- --- ----------- --- ----------- ---
39,786 23.3% 34,244 19.8% 31,151 19.6%
----------- --- ----------- --- ----------- ---
Income from operations 14,144 8.3% 11,699 6.8% 6,345 4.0%
Foreign currency remeasurement gain (loss) 732 (35) (45)
Interest and other income, net 926 476 627
----------- --- ----------- --- ----------- ---
Income before minority interest and taxes 15,802 9.3% 12,140 7.0% 6,927 4.3%
Minority interest in loss in subsidiary (48) -- --
Provision for income taxes 786 469 156
----------- --- ----------- --- ----------- ---
Net income $ 15,064 8.8% $ 11,671 6.7% $ 6,771 4.3%
=========== === =========== === =========== ===
Net income per share
Basic $ 1.91 $ 1.47 $ 0.88
Diluted $ 1.83 $ 1.40 $ 0.82
Number of common shares used in the
computation of net income per share
Basic 7,884,024 7,913,010 7,689,978
Diluted 8,229,279 8,309,748 8,246,467
The accompanying notes are an integral part of these consolidated financial
statements.
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Consolidated Statements of Stockholders' Equity
Common Stock
--------------------------
For each of the three years Number of Additional Retained
in the period ended March 1998 Shares Amount Paid-in Capital Earnings
--------- ---------- ---------- ----------
$ in thousands, except share data
B a l a n c e , M a r c h 3 1 , 1 9 9 5 7,458,842 $ 75 $ 27,368 $ 14,099
Exercise of stock options 366,060 3 896 --
Compensation expense for restricted stock -- -- 784 --
Purchase price of vested portion of
restricted stock -- -- 83 --
Repurchase and retirement of
shares of common stock (1,536) -- (6) --
Net income -- -- -- 6,771
--------- ---------- ---------- ----------
B a l a n c e , M a r c h 2 9 , 1 9 9 6 7,823,366 78 29,125 20,870
Exercise of stock options 209,019 2 532 --
Compensation expense for restricted stock -- -- 1,147 --
Purchase price of vested portion of
restricted stock -- -- 83 --
Redemption and retirement of
fractional common shares (82) -- -- --
Net income -- -- -- 11,671
--------- ---------- ---------- ----------
B a l a n c e , M a r c h 2 8 , 1 9 9 7 8,032,303 80 30,887 32,541
Exercise of stock options 358,998 4 812 --
Compensation expense for restricted stock -- -- 1,257 --
Repurchase and retirement of shares of
common stock (741,400) (7) (2,902) (8,499)
Net income -- -- -- 15,064
--------- ---------- ---------- ----------
B a l a n c e , M a r c h 2 7 , 1 9 9 8 7,649,901 $ 77 $ 30,054 $ 39,106
========= ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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Consolidated Statements of Cash Flows
March 27, March 28, March 29,
For each of the three years in the period ended March 1998 1998 1997 1996
-------- -------- --------
$ in thousands
Cash Flows From Operating Activities:
Net income $ 15,064 $ 11,671 $ 6,771
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,533 7,091 5,626
Compensation expense for restricted stock 1,257 1,147 784
In-process engineering charge 942 -- --
Loss (gain) on sale of property and equipment 222 52 (12)
Minority interest in loss in subsidiary (48) -- --
Changes in assets and liabilities:
Accounts receivable (3,045) 490 (1,274)
Inventories 3,079 2,682 (3,612)
Other long-term assets (353) (202) 19
Accounts payable 1,146 (3,225) 654
Accrued warranty expenses 100 400 --
Accrued income taxes 119 312 (50)
Other long-term liabilities 14 (97) (668)
Other current assets and liabilities, net 268 864 (998)
-------- -------- --------
Net cash provided by operating activities 26,298 21,185 7,240
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of machinery, equipment, furniture and fixtures (6,904) (9,024) (9,796)
Purchase of land (8,100) -- --
Purchase of buildings and leasehold improvements (498) (6,769) --
Acquisition of RJS (2,900) -- --
Proceeds from disposition of property and equipment 194 476 178
-------- -------- --------
Net cash used in investing activities (18,208) (15,317) (9,618)
-------- -------- --------
Cash Flows From Financing Activities:
Payments against debt borrowing -- (5,205) (460)
Issuance of term loan -- 5,000 --
Proceeds from exercise of stock options 816 617 985
Repurchase and retirement of shares of common stock (11,408) -- (6)
-------- -------- --------
Net cash (used in) provided by financing activities (10,592) 412 519
-------- -------- --------
Decrease (increase) in cash and cash equivalents (2,502) 6,280 (1,859)
Cash and cash equivalents at beginning of year 12,766 6,486 8,345
-------- -------- --------
Cash and cash equivalents at end of year $ 10,264 $ 12,766 $ 6,486
======== ======== ========
Supplementary Disclosures of Cash Flow Information:
Interest paid $ 80 $ 244 $ 534
Taxes paid $ 956 $ 119 $ 498
The accompanying notes are an integral part of these consolidated financial
statements.
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Notes to Consolidated Financial Statements
As of March 27, 1998 and March 28, 1997 and for each of the three years in the
period ended March 27, 1998.
Note 1 Summary of Significant Accounting Policies
General
Printronix, Inc. ("the Company") 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 labels to bar codes. The Company also produces and
markets Intelligent Graphics Printing (IGPTM) 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 and majority 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
all periods presented.
Cash equivalents
For cash flow reporting purposes, the Company considers all highly liquid
temporary cash investments with original 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, which include material, labor, and overhead costs, 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
Buildings 30 years
Leasehold improvements Lesser of useful life or term of lease
Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are capitalized at
cost. 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. Depreciation expense was $7.5
million, $7.1 million, and $5.6 million for the years ended 1998, 1997, and
1996, respectively.
Intangible assets
The Company recorded certain intangible assets of $1.2 million resulting from
the purchase of RJS in fiscal 1998. The intangible assets are being amortized
over a period of five years using the straight-line basis. Amortization expense
of $33,000 was charged to operations in fiscal 1998.
Long-term assets
The carrying value of long-term assets is periodically reviewed by management,
and impairment losses, if any, are recognized when the expected non-discounted
future operating cash flows derived from such assets are less than their
carrying value.
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
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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. Products that
are defective upon arrival are handled under the Company's warranty policy.
Income on maintenance contracts
The Company generates revenue 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 net 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 not material in any fiscal year presented.
Warranty costs
The Company's financial statements reflect accruals for potential warranty
claims based on the Company's claim experience.
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.
Advertising
The Company expenses advertising costs including promotional literature,
brochures, and trade shows as incurred. Advertising expense was $2.1 million,
$1.3 million, and $1.2 million for the years 1998, 1997, and 1996, respectively.
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 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.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes." 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.
Net income per common share
During the year ended March 27, 1998, the Company adopted SFAS No. 128,
"Earnings per Share." In accordance with SFAS No. 128, basic net income per
common share is computed using the weighted average number of shares of common
stock outstanding and diluted net income per common share is computed using the
weighted average number of shares of common stock outstanding and potential
shares outstanding, if dilutive. Net income per share amounts for all periods
presented have been restated to conform with SFAS No. 128 requirements.
March 27, March 28, March 29,
1998 1997 1996
---------- ---------- ----------
$ in thousands, except share data
Numerator: Net income $ 15,064 $ 11,671 $ 6,771
Denominator for basic net income per share 7,884,024 7,913,010 7,689,978
Basic net income per share $ 1.91 $ 1.47 $ 0.88
Effect of dilutive securities:
Weighted average shares outstanding 7,884,024 7,913,010 7,689,978
Stock options 345,255 396,738 556,489
---------- ---------- ----------
Denominator for diluted net income per share 8,229,279 8,309,748 8,246,467
Diluted net income per share $ 1.83 $ 1.40 $ 0.82
13
Capital stock
In June 1996, the Company completed a stock split effected in the form of a
fifty percent (50%) stock dividend. Retroactive effect has been given to the
stock split in all share, price, and per share data presented.
Accounting for stock-based compensation
The Company accounts for stock-based compensation issued to employees using the
intrinsic value based method as prescribed by the Accounting Principles Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees". Under the
intrinsic value based method, compensation is the excess, if any, of the fair
value of the stock at the grant date or other measurement date over the amount
an employee must pay to acquire the stock. Compensation expense, if any, is
recognized over the applicable service period, which is usually the vesting
period (See Note 6).
New pronouncements
For Fiscal 1999, the Company will be required to adopt SFAS No. 130, "Reporting
Comprehensive Income." The impact of the adoption of this pronouncement is not
expected to have a material impact on the Company's presentation of financial
position or results of operations.
For Fiscal 1999, the Company will be required to adopt Statement of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
Company is currently evaluating what impact this pronouncement will have on the
Company's disclosures.
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.
Reclassifications
Certain amounts for previous fiscal years have been reclassified to conform with
the fiscal 1998 presentation.
Note 2 Acquisition
In January 1998, the Company, through a 91.5% majority-owned subsidiary,
acquired the assets, rights to the bar code verification business and the RJS
name, and assumed certain liabilities from Eltron in a cash expenditure of $2.9
million in a business combination accounted for as a purchase. RJS is primarily
engaged in bar code verification products. The results of operations of RJS are
included in the consolidated financial statements since the date of acquisition.
The fair value of assets acquired exceeded the purchase price by $0.9 million
based upon appraised values and the excess has been allocated to reduce the
value of noncurrent assets acquired. The acquisition also resulted in a $1.2
million intangible asset (See Note 1). Fourth quarter results include a one-time
charge for in-process engineering expenses of $0.9 million before tax benefit,
or $0.6 million after tax.
Note 3 Land Purchase
During the fourth quarter of fiscal 1998, the Company purchased land in Irvine,
California for $8.1 million. The Company plans to consolidate into one complex
the corporate headquarters, research and development and U.S. manufacturing
operations now housed in five buildings in the area. Construction of the
building is scheduled to begin the summer of 1998 with an expected move date
during the fall of 1999.
Note 4 Bank Borrowing and Debt Arrangements
The Company maintains an unsecured line of credit of $7.5 million with a United
States bank. The line of 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% of the
unused portion of the line, and is renewable in August of 1998. At the end of
fiscal years 1998 and 1997, there were no cash borrowings against this line of
credit.
At March 27, 1998, one of the Company's foreign subsidiaries maintained
unsecured lines of credit with foreign banks of $2.7 million which include a
standby Letter of Credit of $1.8 million. These credit facilities are subject to
parent guarantees, require payment of certain loan fees, and provide for
interest at approximately 3/4 to 1% above the bank's cost of raising capital.
During fiscal years 1998 and 1997, there were no cash borrowings against these
lines of credit.
14
The Company entered into an agreement in fiscal 1997 to secure a five-year
term loan of $5.0 million to acquire a manufacturing facility in Singapore.
During fiscal 1997, the Company borrowed $5.0 million on the term loan and paid
off the entire balance by the end of fiscal 1997.
Note 5 401(k) Savings, Profit-Sharing, and Bonus Plans
Effective January 1, 1985, the Company adopted a 401(k) Savings and Investment
Plan (the "401(k) Plan"), for all elegible employees, 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 $1,000 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 $515,000, $434,000,
and $306,000 for fiscal years 1998, 1997, and 1996, 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 contingent upon achieving specific operating performance targets established
by the Board of Directors. Company contributions to these plans were $3.0
million, $3.1 million, and $2.4 million for fiscal years 1998, 1997, and 1996,
respectively.
Note 6 Stock Option and Stock Incentive Plans and Common Share Purchase
Rights
Stock option and stock incentive plans
The Company has one stock option plan under which options may be granted to
purchase shares of its common stock. A total of 1,525,000 shares are 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 plan 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% per year,
and expire five years from the date of grant.
The following is a summary of the transactions, including restricted stock,
as discussed below, relating to the plans for fiscal years ended 1998, 1997 and
1996:
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Common Stock Options and Exercise Exercise Exercise
Restricted Stock Purchases Shares Price Shares Price Shares Price
------- --------- ------- --------- ------- ---------
Beginning, outstanding 782,437 $ 9.04 963,332 $ 7.34 920,354 $ 3.16
Granted 485,525 11.41 69,575 13.55 430,557 12.20
Exercised (358,998) 8.84 (209,019) 2.55 (366,060) 2.51
Canceled (25,918) 11.48 (41,451) 10.38 (21,519) 6.69
------- --------- ------- --------- ------- ---------
Ending, outstanding 883,046 $ 10.35 782,437 $ 9.04 963,332 $ 7.34
------- --------- ------- --------- ------- ---------
Options exercisable 377,200 294,837 180,251
------- --------- ------- --------- ------- ---------
Weighted average fair
value of options granted $ 8.15 $ 6.16 $ 5.94
As of March 27, 1998 options to acquire 372,648 shares remained available to
grant. A detail of options outstanding and exercisable as of March 27, 1998 is
presented below:
Options outstanding Options exercisable
- --------------------------------------------- ----------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
exercise prices Outstanding Life in Years Price Exercisable Price
- --------------- ----------- ------------- --------- ----------- ---------
$2.00 - $4.11 208,883 0.96 $ 3.39 171,734 $ 3.26
11.00 - 11.83 181,081 2.93 11.07 93,482 11.12
11.92 - 12.17 228,225 3.76 12.02 24,297 12.16
12.33 - 18.44 264,857 2.92 13.91 87,687 13.37
- --------------- ------- ---- --------- ------- ---------
$ 2.00 - $18.44 883,046 2.68 $ 10.35 377,200 $ 8.13
=============== ======= ==== ========= ======= =========
15
Had compensation cost for these plans been determined consistent with SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net income and
diluted net income per share would have been reduced to the following pro forma
amounts for the three fiscal years ended March 1998:
March 27, March 28, March 29,
1998 1997 1996
---------- ---------- ---------
$in thousands, except share data
Net Income as reported $ 15,064 $ 11,671 $ 6,771
Pro forma 13,310 10,700 6,178
Diluted net income per share as reported $ 1.83 $ 1.40 $ 0.82
Pro forma $ 1.62 $ 1.29 $ 0.75
The fair value of each option granted to employees and directors is estimated
using the Black-Scholes option-pricing model on the date of grant using the
following assumptions: no dividend yield, average volatility of 54% for fiscal
year 1998 and 65% for fiscal years 1997 and 1996, weighted average risk-free
interest rate of approximately 5.8, 6.2 and 5.7% for fiscal years 1998, 1997 and
1996, respectively, and an average expected life of 3.2 years for fiscal year
1998 and 3.3 years for fiscal years 1997 and 1996, respectively.
Under the now expired 1984 Stock Incentive Plan ("the 1984 Plan") and the
1994 Stock Incentive Plan ("the 1994 Plan"), grants of restricted stock can be
made at any price. In fiscal 1991 and fiscal 1993, 258,750 shares and 112,500
shares were issued, respectively, under the 1984 Plan and an additional 236,000
shares were issued in fiscal 1998 under the 1994 Plan. The shares issued under
both plans are subject to certain repurchase agreements and performance criteria
which lapse over an extended period not exceeding seven years for the 1984 Plan
and two years for the 1994 Plan beginning in fiscal 1999. All repurchase
agreements on shares issued in fiscal 1991 and fiscal 1993 expired prior to
March 27,1998. 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. As discussed in Note 1 above, the Company accounts for the
above plans under APB No. 25. In each of fiscal 1998, 1997, and 1996, 92,816 or
25% of the issued shares vested, with $1.3 million, $1.1 million, and $0.8
million, respectively, charged to operations under the 1984 Plan. Compensation
expense for shares issued in 1998 under the 1994 Plan will be recognized in
fiscal years 1999 and 2000, if the performance criteria are met.
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% or more, or announce an offer for 30% 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 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 7 Income Taxes
Provision for income taxes
March 27, March 28, March 29,
1998 1997 1996
- ----------------------------------------------------------------------------------
$in thousands
Current
Federal $ 262 $ 155 $ (6)
State 538 205 (22)
Foreign 294 289 184
Deferred (308) (180) --
----- ----- -----
Total $ 786 $ 469 $ 156
Components of income before taxes
16
March 27, March 28, March 29,
1998 1997 1996
------- ------- -------
$in thousands
United States $ 9,824 $11,820 $ 4,215
Foreign 6,026 320 2,712
------- ------- -------
Total $15,850 $12,140 $ 6,927
Amounts for tax provision and components of income 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
March 27, March 28, March 29,
1998 1997 1996
------- ----- -----
$in thousands
Capitalized research and development $ (308) $ -- $ --
Tax depreciation (under) over depreciation
for financial reporting purposes (137) (191) 65
Inventory costs capitalized for tax and
expensed for financial reporting (210) 198 (114)
(Increase) decrease in liability reserves (670) (217) 1,176
Utilization (nonutilization) of net operating
losses and credits 4,618 3,263 (1,873)
Foreign tax credit expiration -- -- 2,700
AMT credit carryforward (255) (180) --
Valuation reserve (3,346) (3,053) (1,954)
------- ------- -------
Total $ (308) $ (180) $ --
Deferred income taxes are not provided on the undistributed earnings (which
totaled approximately $43.1 million as of March 27, 1998) 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
March 27, March 28,
1998 1997
-------- --------
$in thousands
Capitalized research and development $ 308 $ --
Tax depreciation under (over) depreciation
for financial reporting purposes 118 (19)
Inventory costs capitalized for tax and
expensed for financial reporting 666 456
Liability reserves 1,432 762
Net operating loss carryforward 4,056 8,674
AMT credit carryforward 472 217
-------- --------
Gross deferred tax asset 7,052 10,090
Valuation reserve (6,527) (9,873)
-------- --------
Total $ 525 $ 217
At March 27, 1998, the Company had available net operating loss carryforwards
for Federal income tax purposes of approximately $11.9 million expiring in 2002
to 2010. Approximately $3.6 million of the valuation reserve for the net
operating loss carryforward is related to the deduction of stock options and
will be allocated directly to capital when utilized.
17
Reconciliation of Effective Tax Rate to
Statutory Federal Tax Rate
March 27, 1998 March 28, 1997 March 29, 1996
Amount % Amount % Amount %
------- ---- ------- ---- ------- ----
$in thousands
Provision computed at
statutory rates $ 5,548 35.0 $ 4,248 35.0 $ 2,355 34.0
State income taxes,
net of Federal tax
benefit (provision) 350 2.2 180 1.5 (22) (0.3)
Book income from which Federal
benefit is utilized (3,260) (20.6) (4,136) (34.0) (1,439) (20.8)
Rate increase (reductions)
due to foreign operations
(including carryback) (1,852) (11.6) 177 1.4 (738) (10.7)
------- ---- ------- ---- ------- ----
Total $ 786 5.0 $ 469 3.9 $ 156 2.2
The Company has a favorable pioneer tax status in Singapore for income generated
from the manufacture of new Printronix P5000 Series line matrix products. The
pioneer status started in April 1996, lasts for a duration of five years, and is
extendible to eight years. The pioneer status mandates that the Company meet
certain requirements, including meeting specific levels of capital investment
and engineering headcount. Earnings generated there are exempt from tax
liability through 2001, extendible to 2004. The aggregate dollar effect of the
pioneer status was to reduce foreign taxes by $1.8 million, $0.1 million, and
$0.7 million for fiscal years 1998, 1997, and 1996, respectively. The diluted
net income per share effects of this pioneer status would be 22 cents, one cent,
and eight cents for fiscal years 1998, 1997, and 1996, respectively.
Note 8 Segment and Customer Data
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:
Europe, Middle
The Americas East & Africa Asia Pacific Eliminations Consolidated
------------ -------------- ------------ ------------ ------------
$in thousands
1998
Revenues:
Net sales $ 118,267 $ 39,235 $ 12,889 $-- $ 170,391
Transfers between
geographic locations 10,957 1,949 42,128 (55,034)
--------- --------- --------- ------- ---------
129,224 41,184 55,017 (55,034) 170,391
Income from operations $ 8,264 $ 4,643 $ 1,237 $-- $ 14,144
Identifiable assets $ 55,260 $ 13,750 $ 19,849 $-- $ 88,864
1997
Revenues:
Net sales $ 120,439 $ 41,731 $ 11,120 $-- $ 173,290
Transfers between
geographic locations 18,307 601 42,658 (61,566) --
--------- --------- --------- ------- ---------
138,746 42,332 53,778 (61,566) 173,290
Income from operations $ 6,217 $ 4,239 $ 1,243 $-- $ 11,699
Identifiable assets $ 44,993 $ 12,257 $ 23,403 $-- $ 80,653
1996
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
18
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 $22.1 million, $23.5
million, and $22.9 million for fiscal years 1998, 1997, and 1996, respectively.
Export sales are principally to Europe, Canada, and Asia.
Sales based on the location of the customers were as follows for fiscal
years 1998, 1997, and 1996, respectively: The Americas -- $100.5 million, $101.8
million and $99.0 million; Europe, the Middle East, and Africa -- $57.9 million,
$60.8 million, and $51.8 million; and Asia Pacific -- $12.0 million, $10.7
million, and $8.5 million.
In fiscal 1998, 1997, and 1996, the Company had two customers each of which
represented 10% or more of consolidated net sales. Sales to the largest
customer, IBM, represented 28%, 29%, and 30% of net sales for fiscal years 1998,
1997, and 1996, respectively. Sales to the second largest customer represented
10% of net sales for fiscal years 1998, 1997, and 1996. A significant decline in
sales to either customer could have an adverse effect on the Company's
operations.
Note 9 Commitments and Contingencies
Operating leases
The Company conducts its operations using leased facilities under non-cancelable
operating leases which expire at various dates beginning fiscal year 1999
through 2026. Leases, other than the land lease for the Company's building in
Singapore, expire at various dates through fiscal year 2005.
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 1998:
March 27, March 28, March 29,
1998 1997 1996
-------- -------- --------
$ in thousands
Gross rental expenses $ 2,949 $ 3,560 $ 3,703
------- ------- -------
Less: sublease rental income -- (25) (82)
------- ------- -------
Net rental expense $ 2,949 $ 3,535 $ 3,621
The minimum rental commitments required under existing non-cancelable operating
leases are as follows:
1999 2000 2001 2002 2003 Thereafter Total
------ ------ ----- ----- ----- ---------- -------
$ in thousands
$2,994 $1,612 $ 566 $ 352 $ 293 $4,873 $10,690
The minimum annual rental commitment for the land located at the Singapore
manufacturing facility represents $5.7 million of the above $10.7 million
commitment under non-cancelable operating leases.
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 occupied 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.
19
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 27, 1998, 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 with 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.
Note 10 Subsequent Event (unaudited)
Subsequent to year-end, the Board of Directors authorized the Company to
repurchase up to an additional 1,000,000 shares of the Company's outstanding
common stock, resulting in a total of 2,000,000 shares authorized for
repurchase. Subsequent to year-end, a total of 397,000 shares of common stock
were purchased at fair market value and retired, at a cost of $6.4 million. To
date, the Company has repurchased and retired 1,138,400 shares of common stock
at a cost of $17.8 million. Future purchases of up to 861,600 shares may be made
from time to time at the discretion of management.
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 27, 1998 and March 28,
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended March 27, 1998.
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 27, 1998 and March 28, 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
March 27, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
April 24, 1998
Quarterly Data (unaudited)
1st quarter 2nd quarter 3rd quarter 4th quarter
---------- ---------- ---------- ----------
$ in thousands, except share data
Fiscal 1998
Net sales $ 43,667 $ 40,788 $ 42,528 $ 43,408
Gross profit 12,924 13,192 13,810 14,004
Net income 3,639 3,739 4,529 3,157
Net income per share
Basic $ 0.46 $ 0.47 $ 0.56 $ 0.41
Diluted $ 0.45 $ 0.45 $ 0.54 $ 0.39
Stock Price
High $ 15.13 $ 21.25 $ 21.63 $ 18.00
Low $ 10.63 $ 14.63 $ 16.63 $ 14.38
20
1st quarter 2nd quarter 3rd quarter 4th quarter
------- ------- ------- -------
$ in thousands, except share data
Fiscal 1997
Net sales $44,619 $43,193 $44,521 $40,957
Gross profit 10,983 11,192 11,915 11,853
Net income 2,492 2,401 3,240 3,538
Net income per share
Basic $0.32 $0.30 $0.41 $0.44
Diluted $0.30 $0.29 $0.39 $0.42
Stock Price
High $19.00 $17.50 $17.00 $18.13
Low $11.00 $10.75 $12.25 $12.44
21
Corporate Information
Board of Directors
Bruce T. Coleman
Chief Executive Officer,
El Salto Advisors
(Advice and interim CEO services)
John R. Dougery*
(Venture capital investments)
Ralph Gabai*
President
Bi-Coastal Consulting Ltd.
(Strategic Business Planning)
Erwin A. Kelen*
President, Kelen Ventures
(Venture Investments)
Robert A. Kleist
President and Chief Executive
Officer, Printronix, Inc.
*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
Assistant Corporate Secretary
George L. Harwood
Senior Vice President,
Finance & IS,
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
J. Jeffrey Gibbons
Vice President, Marketing
22
Claus Hinge
Vice President, European Sales & Marketing
Michael K. Jacobs
Vice President, Distribution Sales, Americas
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 92623
Tel: (949) 863-1900
Fax: (949) 660-8682
Legal Counsel
Kirshman, Harris & Branton
A Professional Corporation,
General Counsel
315 S. Beverly Drive
Suite 315
Beverly Hills, California 90212
Tel: (310) 277-2323
Independent Auditors
Arthur Andersen LLP
18201 Von Karman Avenue
Suite 800
Irvine, California 92615
Tel: (949) 757-3100
Registrar and Transfer Agent
ChaseMellon
Stockholder Services
400 S. Hope Street
Fourth Floor
Los Angeles, California 90071
Tel: (800) 647-4273
Annual Meeting
Annual meeting will be held at 9:00 a.m., August 11, 1998, 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 27, 1998, there were 4,539 record holders of the Company's Common
Stock.
Corporate and Investor Information
23
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 92623
Tel : (949) 863-1900
http://www.printronix.com