Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
Commission file number 0-9321
PRINTRONIX, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2903992
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17500 Cartwright
P.O. Box 19559
Irvine, California 92623
(Address of principal executive offices) (Zip Code)
(714) 863-1900
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report) Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at October 30, 1996
$ .01 par value 7,894,099
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PRINTRONIX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
------------------------------
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Statement Regarding Financial Information (2)
Consolidated Balance Sheets
Assets (3)
Liabilities and Stockholders' Equity (4)
Consolidated Statements of Operations (5)
Consolidated Statements of Cash Flows (6)
Condensed Notes to Consolidated Financial Statements (8)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (10)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (12)
Item 4. Submission of Matters to a Vote of Security Holders (12)
Item 5. Other Information (13)
Signatures (14)
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PRINTRONIX, INC. AND SUBSIDIARIES
FORM 10-Q
-------------
FOR THE QUARTER ENDED SEPTEMBER 27, 1996
----------------------------------------
PART I. FINANCIAL INFORMATION
------------------------------------------
Item 1. Financial Statements
--------------------------------
STATEMENT REGARDING FINANCIAL INFORMATION
---------------------------------------------------------
The financial statements included herein have been prepared by Printronix,
Inc. (the "Company"), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information normally included
in the financial statements prepared in accordance with generally accepted
accounting principles has been omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that the
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended March 29, 1996, as filed with the Securities and Exchange
Commission.
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
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Assets
September 27, 1996 March 29, 1996
(Derived from audited
(Unaudited) financial statements)
------------- --------------------
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $5,915 $6,486
Accounts receivable, net of allowances
for doubtful accounts of
$ 987 as of September 27, 1996 and
$ 937 as of March 29, 1996 23,886 23,576
Inventories
Raw materials, subassemblies and
work in process 20,076 18,969
Finished goods 5,932 3,741
----------- -----------
26,008 22,710
Prepaid expenses 713 753
----------- -----------
TOTAL CURRENT ASSETS 56,522 53,525
----------- -----------
Property and Equipment, at cost:
Building and improvements 6,290 --
Machinery and equipment 30,314 33,010
Furniture and fixtures 13,568 12,864
Leasehold improvements 1,971 3,448
----------- -----------
52,143 49,322
Less-Accumulated depreciation
and amortization (30,824) (33,968)
----------- -----------
21,319 15,354
----------- -----------
Other assets 440 251
----------- -----------
TOTAL ASSETS $78,281 $69,130
======= =======
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See accompanying notes to consolidated financial statement
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
---------------------------
Liabilities and Stockholders' Equity
------------------------------------
September 27, 1996 March 29, 1996
(Derived from audited
(Unaudited) financial statements)
------------ --------------------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings 852 205
Accounts payable 8,550 11,846
Accrued expenses:
Payroll and employee benefits 4,493 3,492
Warranty 1,236 1,136
Environmental 214 214
Other 1,552 1,018
Accrued income taxes 588 329
----------- -----------
TOTAL CURRENT LIABILITIES 17,485 18,240
----------- -----------
Long-term debt 4,166 --
Other long-term liabilities 817 817
----------- -----------
TOTAL LONG-TERM LIABILITIES 4,983 817
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01-
Authorized 27,000,000 shares,
issued and outstanding
7,890,782 and 7,823,366
shares as of September 27, 1996 and
March 29, 1996, respectively. 79 78
Additional paid-in capital 29,971 29,125
Retained earnings 25,763 20,870
----------- -----------
Total Stockholders' Equity 55,813 50,073
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $78,281 $69,130
======= =======
See accompanying notes to consolidated financial statement
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
Sep. 27, Sep. 29, Sep. 27, Sep. 29,
1996 1995 1996 1995
(Amounts in thousands, except share data)
<S> <C> <C> <C> <C>
NET SALES $43,193 $39,509 $87,812 $81,721
COST OF SALES 32,001 29,772 65,637 61,050
-------- -------- -------- --------
Gross Profit 11,192 9,737 22,175 20,671
OPERATING EXPENSES:
Engineering and development 3,749 3,575 7,205 7,163
Selling, general and administrative 4,975 4,307 9,880 8,853
-------- -------- -------- --------
Total operating expenses 8,724 7,882 17,085 16,016
-------- -------- -------- --------
INCOME FROM OPERATIONS 2,468 1,855 5,090 4,655
-------- -------- -------- --------
Other income, net (33) (106) (3) (145)
-------- -------- -------- --------
INCOME BEFORE TAXES 2,501 1,961 5,093 4,800
Provision for income taxes 100 30 200 193
-------- -------- -------- --------
NET INCOME $ 2,401 $ 1,931 $ 4,893 $ 4,607
====== ====== ====== ======
EARNINGS PER SHARE:
Primary $ .29 $ .23 $ .59 $ .56
Fully Diluted $ .29 $ .23 $ .58 $ .56
====== ====== ====== ======
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Primary 8,288,696 8,294,391 8,314,110 8,243,087
Fully Diluted 8,355,968 8,294,513 8,367,235 8,269,707
========= ========= ========= =========
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See accompanying notes to consolidated financial statements
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Six Months Ended:
September 27, 1996 and September 29, 1995
- ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
1996 1995
Cash flows from operating activities:
Net income $ 4,893 $ 4,607
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,551 2,772
Loss (gain) on sales of property & equipment 94 (30)
Compensation expense related to restricted stock plan 687 876
Changes in assets and liabilities:
Accounts receivable (310) 1,523
Inventories (3,298) 524
Accounts payable (3,296) (1,162)
Payroll and employee benefits 1,001 (334)
Other current assets and liabilities, net 674 (805)
Accrued income taxes 259 (152)
Other (189) 5
----------- -----------
Net cash provided by operating activities 4,066 7,824
----------- -----------
Cash flows from investing activities:
Investment in property and equipment (3,920) (4,493)
Purchase of building and improvements (6,290) --
Proceeds from disposition of equipment 600 101
----------- -----------
Net cash used in investing activities (9,610) (4,392)
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statement
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
-------------------------------------
For the Six Months Ended:
September 27, 1996 and September 29, 1995
- ------------------------------------------------------------------------------
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(Unaudited)
<S> <C> <C>
1996 1995
Cash flows from financing activities:
Payment of short-term debt (187) --
Proceeds from issuance of common stock 160 625
Increase (decrease) in long-term debt 5,000 (252)
----------- -----------
Net cash provided by financing activities 4,973 373
----------- -----------
(Decrease) increase in cash and cash equivalents (571) 3,805
----------- -----------
Cash and cash equivalents at beginning of period 6,486 8,345
----------- -----------
Cash and cash equivalents at end of period $ 5,915 $12,150
======= =======
- ------------------------------------------------------------------------------
Supplementary disclosures of cash flow information:
Taxes paid $56 $272
Interest paid $93 $ 14
Capital lease additions -- $265
</TABLE>
See accompanying notes to consolidated financial statements
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PRINTRONIX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------
SEPTEMBER 27, 1996
-------------------------
(Unaudited)
1) Management Opinion
In the opinion of management, the consolidated financial statements reflect
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position and results of operations as of and
for the periods presented.
2) Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with
maturities of three months or less to be cash equivalents. The effect of
exchange rate changes on cash balances held in foreign currencies was not
material for the periods presented.
3) Inventories
Inventories are priced at the lower of cost (FIFO) or market and include
the cost of material, labor and manufacturing overhead.
4) Earnings per Share
The number of shares used in computing earnings per share equals the total
of the weighted average number of shares outstanding during the periods
presented plus common stock equivalents relating to options. Common stock
equivalents relating to options represent additional shares which may be
issued in connection with their exercise, reduced by the number of shares
which could be repurchased with the proceeds at the average market price
per share computed on a quarterly basis during the year. The following table
shows the calculation for primary and fully diluted shares outstanding:
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Three Months Ended Six Months Ended
Sep. 27, Sep. 29, Sep. 27, Sep. 29,
1996 1995 1996 1995
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Weighted avg. shares outstanding 7,882,381 7,697,166 7,879,089 7,618,901
Common stock equivalents:
Options - Primary 406,315 597,225 435,021 624,186
Options - Fully Diluted 473,587 597,347 488,146 650,807
Shares outstanding:
Primary 8,288,696 8,294,391 8,314,110 8,243,087
Fully Diluted 8,355,968 8,294,513 8,367,235 8,269,708
</TABLE>
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PRINTRONIX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------
SEPTEMBER 27, 1996
-------------------------
(Unaudited)
5) Long-term Debt
In May 1996, the Company secured a five-year term commitment of $5.0 million
with Wells Fargo Bank. At September 27, 1996, $5.0 million was outstanding
on this loan which was used to acquire a new manufacturing facility in
Singapore. The interest rate on the loan is variable based either on the
bank's prime rate or 2% above the LIBOR rate. There are no payments due
until December 1996, at which time principal and interest are scheduled to
be paid over a term of fifty-four months.
6) Capital Stock
In June 1996, Printronix completed a stock split-up effected in the form of
a fifty percent (50%) stock dividend. Retroactive effect has been given to
the stock split in all share and per share data presented.
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PRINTRONIX, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
------------------------------------------------------------
Reference is made to the Company's annual report on Form 10-K for the fiscal
year ended March 29, 1996 for a detailed discussion and analysis of the
Company's financial condition and results of operations for the periods
covered by that report.
RESULTS OF OPERATIONS
Revenues and Backlog
Net sales for the quarter ended September 27, 1996 were 3.2% lower than last
quarter and 9.3% higher than the year-ago quarter. On a year-to-date basis,
sales were up $6.1 million or 7.5% over the first six months of the prior
fiscal year. The increase in revenue for the first six months of the year
compared with the same period last year is due to higher unit sales of
ProLine impact printers to the Company's major OEM customers and laser
printers to distributors. Thermal product sales for the quarter were flat
with the prior quarter and represent approximately 2% of the Company's total
sales. Regionally, year-to-date sales to U.S. customers were flat with the
same period of the prior year while sales to international customers
increased approximately 20%. Revenue from the Company's five largest
customers, which primarily represent OEM business, decreased 2.3% from the
prior quarter but increased 17.5% over the year-ago quarter. For the first
six months of the fiscal year, sales to these customers were up $5.6 million
or 12.6% over the prior year period.
Order backlog at quarter-end was $18.0 million compared with $21.4 million at
the end of the previous quarter and $13.7 million at the end of the second
quarter for the previous fiscal year.
Gross Profit
Gross profit as a percentage of sales for the quarter increased to 25.9%
compared with 24.6% in the prior quarter and 24.6% in the prior year quarter.
The higher margin is attributable to manufacturing efficiencies from higher
production volumes of new line matrix printers and other favorable
manufacturing variances realized from the transition to the new ProLine Series
products, along with lower product costs. The year-to-date gross profit
percentage remained constant at 25.3% for the first six months of the fiscal
year compared with the first six months of the prior fiscal year.
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PRINTRONIX, INC. AND SUBSIDIARIES
Operating and Other Expenses and Taxes
Engineering expense for the quarter was 8.5% higher than the prior quarter
and increased 4.9% over the prior year quarter. On a year-to-date basis,
engineering expenses remained flat at $7.2 million compared with the first
six months of the prior fiscal year. Increases over the prior quarter have
been driven by higher customer demands for additional options and product
development. Selling, general, and administrative expenses increased 1.4%
over the prior quarter and increased 15.5% over the prior year quarter.
Year-to-date expenses increased by 11.6% to $9.9 million compared with $8.9
million for the corresponding prior year six months. The increased spending
over the prior year periods continues to be driven by higher sales expenses
for advertising and marketing due to the rollout of the new ProLine series
printers. As a percentage of sales, selling, general, and administrative
spending remained flat at 11% for the first six months of the year.
The year-to-date income tax provision remained flat at $0.2 million as
compared with the prior year. The Company continues utilizing Federal and
California net operating loss carryforwards and is required to provide only
for certain state and foreign taxes. The Company anticipates fully utilizing
its California net operating loss carryforward by year end and accordingly
expects to increase its quarterly tax provision percentage from 4% to 10%.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the quarter with cash, net of short-term borrowings, of
$5.1 million compared with $5.1 million last quarter and $11.9 million for
the year-ago quarter. The Company's lower cash position relative to the
prior year quarter results primarily from higher inventory levels partly due
to increased inventory balances in Singapore to move the Singapore
manufacturing operations to a new facility without impacting the Company's
product availability to its customers. Cash was also adversely impacted
from increased capital expenditures during fiscal year 1996 for new
manufacturing equipment for ProLine printers.
Investment in capital equipment for the first six months of the fiscal year
was $3.9 million compared with $4.5 million for the same period in the prior
year. Year-to-date capital expenditures of $10.2 million included
manufacturing equipment for ProLine printer production, a new building for
Singapore manufacturing, and project expenditures on a corporate information
system.
In June 1996, the Company completed a split-up effected in the form of a
fifty percent (50%) stock dividend. Retroactive effect has been given to the
stock dividend in stockholder's equity accounts as of September 27,1996, and
in all share and per share data presented (see note 6).
The Company believes that its internally-generated funds, together with
available financing, will be adequate in providing its working capital
requirements, capital expenditures, and engineering development needs through
the current fiscal year.
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PRINTRONIX, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
---------------------------------------------------
Item 1. Legal Proceedings
---------------------------------------
See "Item 3. Legal Proceedings" reported in Part I of the Company's Report
on Form 10K for the fiscal year ended March 29, 1996.
Printronix, Inc. vs. Kentek Information Systems, Inc.
In May, 1996, the Company filed suit against Kentek Information Systems, Inc.
("Kentek") in the United States District Court for the Central District of
California. On or about June 19, 1996, the case was transferred to the
United States District Court for the District of Colorado.
The suit alleges that Kentek has discriminated against the Company in the
prices that it charges the Company for the purchase of consumable products,
in violation of the Robinson-Patman Act, and in breach of a contract between
the parties governing the purchase of such consumables. The suit seeks
damages of $2.5 million for breach of contract and violation of the Robinson-
Patman Act (damages for which are trebled) and seeks an injunction against
further price discrimination.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------------------------
The annual meeting of stockholders of the Company was held on August 13,
1996, at which five persons, constituting the entire board of directors,
were elected to serve until the next annual meeting of stockholders. The
names of the persons elected as directors are as follows:
Shares for Shares Withheld
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Bruce T. Coleman 6,984,869 16,521
John R. Dougery 6,986,519 14,871
Ralph Gabai 6,986,519 14,871
Erwin A. Kelen 6,986,519 14,871
Robert A. Kleist 6,985,114 16,276
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PRINTRONIX, INC. AND SUBSIDIARIES
Item 5. Other Information
---------------------------------------
The Company is party to restricted stock purchase agreements with certain of
its officers pursuant to which those officers purchased stock from the
Company at a discount to the market price. These agreements each provide
for a right of repurchase by the Company. The right of repurchase lapses as
to a portion of the shares in each fiscal year in which a certain performance
criterion is met. The lapse of the repurchase right means that such portion
of the shares becomes vested. In recognition of the officers' services to
the Company and the Company's performance in the first six months of fiscal
year 1997, effective September 25, 1996 the Company and those officers each
entered into agreements amending such restricted stock purchase agreements
by terminating the Company's right to repurchase the portion of those shares
in respect to fiscal year 1997, thus causing that portion of shares to become
vested.
PRINTRONIX, INC. AND SUBSIDIARIES
SIGNATURES
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINTRONIX, INC.
(Registrant)
Date: October 30, 1996 By: George L. Harwood
Sr. Vice-President, Finance,
Chief Financial Officer, and
Secretary
(Principal Financial Officer
and Duly Authorized Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-END> SEP-27-1996
<CASH> 5,915
<SECURITIES> 0
<RECEIVABLES> 24,873
<ALLOWANCES> 987
<INVENTORY> 26,008
<CURRENT-ASSETS> 56,522
<PP&E> 52,143
<DEPRECIATION> (30,824)
<TOTAL-ASSETS> 78,281
<CURRENT-LIABILITIES> 17,485
<BONDS> 0
<COMMON> 79
0
0
<OTHER-SE> 55,734
<TOTAL-LIABILITY-AND-EQUITY> 78,281
<SALES> 43,193
<TOTAL-REVENUES> 43,193
<CGS> 32,001
<TOTAL-COSTS> 41,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 2,501
<INCOME-TAX> 100
<INCOME-CONTINUING> 2,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,401
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
