<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from to
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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 August 1, 1997
--------------------- -----------------------------
$ .01 par value 7,891,993
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PRINTRONIX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information (2)
Consolidated Balance Sheets
Assets (3)
Liabilities and Stockholders' Equity (4)
Consolidated Statements of Operations (5)
Consolidated Statements of Cash Flows (6)
Condensed Notes to Consolidated Financial Statements (8)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (10)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (13)
Item 6. Exhibits and Reports on Form 8-K (14)
Signatures (15)
Index to Exhibits (16)
</TABLE>
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PRINTRONIX, INC. AND SUBSIDIARIES
FORM 10-Q
------------
FOR THE QUARTER ENDED JUNE 27, 1997
------------
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 28, 1997,
as filed with the Securities and Exchange Commission.
2
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
------------------
ASSETS
<TABLE>
<CAPTION>
March 28, 1997
June 27, 1997 (Derived from audited
(Unaudited) financial statements)
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(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 18,465 $ 12,766
Accounts receivable, net of allowances
for doubtful accounts of
$1,114 as of June 27, 1997 and
$1,010 as of March 28, 1997 23,308 23,086
Inventories
Raw materials, subassemblies and
work in process 12,675 15,640
Finished goods 6,099 4,388
-------- --------
18,774 20,028
Prepaid expenses 762 792
-------- --------
TOTAL CURRENT ASSETS 61,309 56,672
-------- --------
Property and Equipment, at cost:
Machinery and equipment 34,066 32,690
Furniture and fixtures 13,651 13,581
Building and improvements 6,804 6,769
Leasehold improvements 2,046 2,008
-------- --------
56,567 55,048
Less-Accumulated depreciation
and amortization (33,059) (31,520)
-------- --------
23,508 23,528
-------- --------
Other assets 583 453
-------- --------
TOTAL ASSETS $ 85,400 $ 80,653
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------
<TABLE>
<CAPTION>
March 28, 1997
June 27, 1997 (Derived from audited
(Unaudited) financial statements)
------------ ---------------------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 9,803 $ 8,621
Accrued expenses:
Payroll and employee benefits 4,939 4,087
Warranty 1,636 1,536
Environmental 214 214
Income taxes 1,053 641
Other 1,707 1,326
-------- --------
TOTAL CURRENT LIABILITIES 19,352 16,425
-------- --------
Other long-term liabilities 720 720
-------- --------
TOTAL LONG-TERM LIABILITIES 720 720
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01-
Authorized 12,000,000 shares,
issued and outstanding
7,854,222 and 8,032,303 shares
as of June 27, 1997 and
March 28, 1997, respectively 79 80
Additional paid-in capital 30,576 30,887
Retained earnings 34,673 32,541
-------- --------
Total Stockholders' Equity 65,328 63,508
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 85,400 $ 80,653
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 6
PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
June 27, June 28,
1997 1996
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(Amounts in thousands,
except share data)
<S> <C> <C>
NET SALES $ 43,667 $ 44,619
COST OF SALES 30,743 33,636
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Gross Profit 12,924 10,983
OPERATING EXPENSES:
Engineering and development 3,851 3,456
Selling, general and administrative 5,318 4,905
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Total operating expenses 9,169 8,361
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INCOME FROM OPERATIONS 3,755 2,622
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Other (income) expense, net (313) 30
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INCOME BEFORE TAXES 4,068 2,592
Provision for income taxes 425 100
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NET INCOME $ 3,643 $ 2,492
========= =========
EARNINGS PER SHARE:
Primary $ .45 $ .30
Fully Diluted $ .44 $ .30
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 8,160,000 8,323,213
Fully Diluted 8,224,569 8,350,659
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
5
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Three Months Ended:
June 27, 1997 and June 28, 1996
<TABLE>
<CAPTION>
1997 1996
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,643 $ 2,492
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,009 1,925
(Gain) loss on sales of property & equipment (18) 99
Compensation expense related to restricted stock plan 397 366
Changes in assets and liabilities:
Accounts receivable (222) (1,424)
Inventories 1,254 (4,242)
Accounts payable 1,182 1,546
Payroll and employee benefits 852 670
Accrued income taxes 412 36
Other 381 364
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Net cash provided by operating activities 9,890 1,832
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,068) (2,407)
Purchase of building and improvements (35) (3,681)
Proceeds from disposition of equipment 132 395
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Net cash used in investing activities (1,971) (5,693)
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</TABLE>
See accompanying notes to consolidated financial statements
6
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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
-------------------------------------
For the Three Months Ended:
June 27, 1997 and June 28, 1996
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<TABLE>
<CAPTION>
1997 1996
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt $ -- $ (113)
Repurchase and retirement of common stock (2,252) --
Proceeds from issuance of common stock 32 104
Proceeds from issuance of long-term debt -- 2,915
-------- --------
Net cash (used in) provided by financing activities (2,220) 2,906
-------- --------
Increase (decrease) in cash and cash equivalents 5,699 (955)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,766 6,486
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,465 $ 5,531
======== ========
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Supplementary disclosures of cash flow information:
Taxes paid $ 21 $ 50
Interest paid $ 114 $ 7
</TABLE>
See accompanying notes to consolidated financial statements
7
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PRINTRONIX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------
JUNE 27, 1997
-------------------------
(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) Bank Borrowings and Debt Arrangements
-------------------------------------
The Company ended the quarter with no outstanding debt against its
unsecured lines of credit.
5) 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:
<TABLE>
<CAPTION>
Three Months Ended
---------------------
June 27, June 28,
1997 1996
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<S> <C> <C>
Weighted average shares outstanding 7,903,278 7,861,299
Common stock equivalents:
Options - Primary 256,722 461,914
Options - Fully Diluted 321,291 489,360
Shares outstanding:
Primary 8,160,000 8,323,213
Fully Diluted 8,224,569 8,350,659
</TABLE>
8
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PRINTRONIX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------
JUNE 27, 1997
-------------------------
(Unaudited)
6) Capital Stock
-------------
As authorized by the Board of Directors, the Company repurchased and
retired 192,500 shares of common stock during the quarter at prices ranging
from $10.88 to $15.00 per share, at a cost of $2.2 million. Purchases of an
additional 17,500 shares of common stock were made subsequent to the end of
the quarter and future purchases of up to 790,000 shares of common stock
may be made at the Company's discretion.
9
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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 28, 1997 for a detailed discussion and analysis of the
Company's financial condition and results of operations for the periods covered
by that report.
RESULTS OF OPERATIONS
- ---------------------
Revenues and Backlog
- --------------------
Net sales for the quarter ended June 27, 1997 were 7% higher than the previous
quarter and 2% lower than the year-ago quarter. Sales in the current quarter
increased as a result of higher sales to the Company's largest customer. The
previous quarters sales were negatively impacted as the Company's largest
customer completed implementation of a quarterly inventory control plan. The
$1.0 million decrease in sales, as compared to the same quarter in the previous
year, is attributable to unusually high sales in the year-ago quarter which was
a result of pent up demand due to product shortages in the fourth quarter of
fiscal 1996.
Americas (North, Central, and South Americas) sales ended the quarter with $25.4
million, compared with $24.3 million last quarter and $27.8 million in the
year-ago quarter. EMEA (Europe, Middle East, and Africa) sales for the quarter
increased to $15.4 million compared with $13.8 million in the previous quarter
and $14.9 million in the year-ago quarter. Sales to the Asia Pacific market
remained flat at $2.9 million in the current quarter but increased $1.0 million
as compared to the same quarter in the previous fiscal year. The 53% sales
growth in the Asia Pacific region compared to the same quarter in the previous
year is attributable to the Company's focused efforts on increasing sales and
market share in this rapidly growing region.
Sales to OEM customers for the quarter increased to $22.8 million as compared to
$19.2 million in the previous quarter and $24.4 in the same quarter in the
previous year. Sales to distributors were $20.9 million for the quarter compared
to $21.7 in the previous quarter and $20.2 million in the same quarter in the
previous year. Sales to the Company's largest customer were negatively impacted
in the previous quarter as they implemented a quarterly inventory control plan.
Line matrix sales increased 8% to $36.9 million in the quarter as compared to
the previous quarter and decreased from $38.1 million in the year-ago quarter.
Laser sales decreased $0.2 million from the previous quarter to $5.8 million in
the current quarter and remained flat as compared to the year-ago quarter.
Thermal sales increased 5% over the prior quarter and 40% over the year-ago
quarter; however, thermal sales remain below 3% of total sales.
10
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PRINTRONIX, INC. AND SUBSIDIARIES
Sales to the largest customer, IBM, represented 29% of total sales for the first
quarter as compared to 24% in the previous quarter and 32% in the year-ago
quarter. Sales to the second largest customer represented 8% of total sales for
the quarter as compared to 9% in the previous quarter and 10% in the year-ago
quarter.
Order backlog at quarter-end was $14.0 million compared with $13.4 million at
the end of the previous quarter and $21.4 million at the end of the year-ago
quarter. Backlog levels reflect the ongoing program in which the Company's
customers order on a just-in-time delivery process.
Gross Profit
- ------------
Gross profit as a percentage of sales for the quarter increased to 29.6%
compared with 28.9% in the previous quarter and 24.6% in the year-ago quarter.
The increase in gross margin over the year-ago quarter was achieved through
manufacturing efficiencies and cost reductions from the successful conversion to
the ProLine Series line matrix products. Increases in margin as compared to the
previous quarter are attributable to manufacturing efficiencies gained through
higher sales volume.
Operating and Other Expenses and Taxes
- --------------------------------------
Engineering expense for the quarter increased to $3.9 million as compared to
$3.6 million in the previous quarter and $3.5 million in the year-ago quarter.
As a percent of sales, engineering and development expenses remained constant at
approximately 9% for both the current and previous quarters but increased from
approximately 8% in the year-ago quarter. Selling, general, and administrative
expenses increased $0.4 million to $5.3 million for the current quarter as
compared to both the previous quarter and the same quarter in the previous year.
As a percent of sales, selling, general, and administrative expenses remained
flat at approximately 12% for the current and previous quarters but increased
from 11% in the year-ago quarter. The increase in operating expenses over the
year-ago quarter is due to expenses remaining approximately flat while sales
decreased 2%.
Other income remained flat compared to the previous quarter and increased $0.3
million from the same quarter in the previous year. The increase in other income
as compared to the same quarter in the previous year is due to increased
interest income on average cash balances and no debt balances in the current
quarter.
The income tax provision increased to $0.4 million as compared with $0.2 million
in the previous quarter and $0.1 in the year-ago quarter. The Company continues
utilizing Federal net operating loss carryforwards; however, the State net
operating loss carryforwards were completely utilized in the fourth quarter of
fiscal 1997. Increases in the tax provision are attributable to increased
profitability and the prior fiscal year utilization of the State net operating
loss carryforwards.
11
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PRINTRONIX, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company ended the quarter with cash of $18.5 million compared with $12.8
million last quarter. The Company's stronger cash position relative to the prior
quarter results primarily from lower inventory levels which declined $1.3
million and increased profitability. The reduction in inventory results
primarily from reductions the Company's mature products.
The Company repurchased and retired 192,500 shares of common stock at an average
share price of $11.68 during the quarter.
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.
12
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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 28, 1997.
Printronix, Inc. vs. Kentek Information Systems, Inc.
- -----------------------------------------------------
On May 16, 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 had discriminated against the Company in the prices
that it charged 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 sought damages of
$2.5 million for breach of contract and violation of the Robinson-Patman Act
(damages for which are trebled) and sought an injunction against further price
discrimination.
On December 23, 1996, Kentek's counterclaims against the Company were filed. The
counterclaims allege that the Company is in breach of the contract for failing
to exercise its best efforts in the sale of Kentek products and that the Company
misrepresented its intentions to perform under the contract in the course of
negotiations. The counterclaims sought damages and punitive damages in
unspecified amounts.
By agreement dated May 12, 1997, the parties have settled the lawsuit. The
settlement provides for the dismissal of all claims with prejudice, release of
certain claims, a reduction in prices charged to the Company for consumables,
retroactive to January 6, 1996 and continuing thereafter as provided in the
contract, and certain other credits. The terms of the settlement will not have a
material impact on the Company. The parties have expressly denied liability to
one another.
13
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PRINTRONIX, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION - continued
----------------------
ITEM 6. Exhibits and Reports on Form 8-K
----------------------
(a) Exhibits.
27. Financial Data Schedule
(b) Reports.
No reports on Form 8-K have been filed by the Registrant for the
quarterly period covered by this report.
14
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PRINTRONIX, INC. AND SUBSIDIARIES
SIGNATURES
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINTRONIX, INC.
--------------------------------
(Registrant)
Date: August 8, 1997 By: /s/ GEORGE L. HARWOOD
----------------------------
George L. Harwood
Sr. Vice-President, Finance,
Chief Financial Officer,
and Secretary
(Principal Financial Officer
and Duly Authorized Officer)
15
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PRINTRONIX, INC. AND SUBSIDIARIES
Index to Exhibits to Form 10-Q
--------------------------------
JUNE 27, 1997
---------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------ ----
<C> <S> <C>
27 Financial Data Schedule Filed only with
EDGAR version
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-27-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> JUN-27-1997
<CASH> 18,465
<SECURITIES> 0
<RECEIVABLES> 24,422
<ALLOWANCES> 1,114
<INVENTORY> 18,774
<CURRENT-ASSETS> 61,309
<PP&E> 56,567
<DEPRECIATION> 33,059
<TOTAL-ASSETS> 85,400
<CURRENT-LIABILITIES> 19,352
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 65,249
<TOTAL-LIABILITY-AND-EQUITY> 85,400
<SALES> 43,667
<TOTAL-REVENUES> 43,667
<CGS> 30,743
<TOTAL-COSTS> 39,912
<OTHER-EXPENSES> (313)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 4,068
<INCOME-TAX> 425
<INCOME-CONTINUING> 3,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,643
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.44
</TABLE>
