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 29, 2000

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

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.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial statements

See accompanying notes to consolidated financial statements

Except for historical information, this report may contain "forward-looking statements" about Printronix, within the meaning of the Private Securities Reform Act of 1995. Terms such as "objectives," "believes," "expects," "plans," "intends," "estimates," "anticipates," "forecasts," "projections," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including: adverse business conditions and a failure to achieve growth in the computer industry and in the economy in general; the ability of the Company to achieve growth in the Asia Pacific market; adverse political and economic events in the Company's markets; the ability of the Company to hold or increase market share with respect to line matrix printers; the ability of the Company to successfully compete against entrenched competition in the thermal printer market; the ability of the Company to attract and retain key personnel; the ability of the Company's customers to achieve their sales projections, upon which the Company has in part based its sales and marketing plans; and the ability of the Company to continue to develop and market new and innovative products superior to those of the competition and to keep pace with technological change.

Consolidated revenues for the three months ended September 29, 2000, were $41.4 million, a decrease of 8.5% from the same period last year. Distribution sales and revenues for the thermal product line were up, but were more than offset by shortfalls in OEM line matrix sales primarily in Western Europe. Sales to the Americas for the quarter were $25.9 million, up from $25.4 million a year ago. Americas distribution sales increased 9.3% to $13.3 million. Continued success in the Major Account program resulted in an increase in sales to the Company's largest distributor of 20.7%. Americas OEM sales decreased 2.7% to $11.9 million. EMEA (Europe, Middle East and Africa) sales decreased 27.9% to $11.4 million from the same period last year. This decrease reflected a drop in the Western Europe line matrix OEM business across most OEM customers. Asia Pacific sales for the quarter increased 1.4% to $4.1 million. Sales increases of 51% into India were partly offset by decreased sales to Singapore. Sales by RJS decreased $0.3 million, or 29.9%, to $0.7 million.

In comparison with the prior quarter, revenue increased $1.7 million, or 4.3%, which includes a 6.3% increase in the Americas, a 5.4% decrease in EMEA and a 25.5% increase in Asia Pacific.

For the six months ended September 29, 2000, sales decreased to $81.2 million, a 10.0% decrease over the same period last year. Sales in the Americas, EMEA and Asia Pacific decreased 1.0%, 26.2% and 2.0% respectively. This decrease in EMEA sales was primarily due to a drop in the Western Europe line matrix OEM business. RJS sales decreased to $1.4 million, a 21.3% decrease over the same period last year, due to large sales in the prior period to the United States Postal Service.

For the three months ended September 29, 2000, sales by channel were 42.4% OEM and 57.6% distribution, compared with 47.2% OEM and 52.8% distribution for the same period last year. Sales to OEM customers decreased 17.8% to $17.6 million, while distribution sales were flat, compared with the same quarter last year. In the prior quarter, sales by channel were 47.2% OEM and 52.8% distribution.

For the six months ended September 29, 2000, sales by channel were 44.7% OEM and 55.3% distribution compared with 46.5% OEM and 53.5% distribution for the same period last year. OEM year to date sales decreased 13.4% to $36.3 million and distribution sales decreased 7.1% to $44.9 million over the same period last year.

Line matrix sales for the quarter were $31.5 million, a decrease of 16.0% from the same period last year, primarily due to the drop in Western Europe line matrix OEM business. Line matrix revenue was 76.1% of total revenue for the quarter. Laser sales for the quarter totaled $5.3 million, down 4.1% from the prior year. Laser revenue was 12.8% of total revenue for the quarter. Thermal sales for the quarter were $3.9 million, up 217.5% over the same period last year due to the new T5000 thermal product line. Thermal sales were 9.4% of total revenue. In the prior quarter, line matrix sales were $31.5 million, or 79.3% of revenue, laser sales were $5.1 million, or 12.8% of revenue, and thermal printer sales were $2.4 million, or 6.0% of revenue.

For the six months ended September 29, 2000, line matrix sales were $63.1 million, a decrease of 15.4% compared with the same period last year. Laser sales were $10.4 million, a decrease of 7.8% compared with the same period last year. Thermal sales were $6.3 million, an increase of 144.4% over the same period a year ago.

Sales to the largest customer, IBM, represented 23.7% of total sales for the quarter, compared with 30.6% a year ago. Sales to the second largest customer represented 10.1% of total sales for the quarter, compared with 7.7% last year.

Sales to IBM for the six months ended September 29, 2000, represented 26.9% of total sales, compared with 29.5% in the same period last year. Sales to the second largest customer represented 8.8%, compared with 8.0% for the same period last year.

Gross Profit

Gross profit for the quarter ended September 29, 2000, was 25.0% of sales, down from 33.2% for the same quarter last year. For the six months ended September 29, 2000, gross profit decreased to 27.0% compared with 33.2% for the corresponding period last year. The deterioration compared with the prior year and prior quarter is primarily due to volume, underabsorption of manufacturing costs, product mix, and the introduction of the 4" thermal product and the ramp up of the thermal printer production being based upon high cost soft tooling.

Engineering and development expenses for the three months ended September 29, 2000, decreased 12.7% to $4.3 million compared with the same period last year. The decrease reflects lower spending for research and design work on the T5000 product line as that product line moves into production. As a percentage of sales, engineering and development expenses were 10.4% for the current quarter and 10.9% for the same quarter last year. For the six months ended September 29, 2000, engineering and development expenses decreased to $8.9 million, a decrease of 7.3% over the same period last year.

Sales and marketing expenses for the three months ended September 29, 2000, decreased 2.3% to $4.5 million compared with the same period last year. The decrease is mainly due to lower labor and travel expenses. As a percentage of sales, sales and marketing expenses were 10.9% for the current quarter and 10.2% for the same quarter last year. For the six months ended September 29, 2000, sales and marketing expenses were $9.1 million, the same as the prior year period.

General and administrative expenses for the three months ended September 29, 2000, increased 5.6% to $2.5 million compared with the same period last year. The increase reflects higher depreciation and property taxes related to the new Irvine facility, partially offset by lower labor costs. As a percentage of sales, administrative expenses were 5.9% for the current quarter and 5.2% in the same quarter last year. For the six months ended September 29, 2000, general and administrative expenses decreased to $4.3 million, a decrease of 8.5% over the same period last year, due mostly to lower labor costs and a decrease in the provision for bad debts.

Operating expenses for the current quarter included a charge of $0.8 million related to restructuring certain line matrix manufacturing and support operations. The restructuring charge included accruals of $0.3 million related to employee costs and $0.5 million to write down fixed assets to net realizable value. The restructuring was initiated to reduce production costs by relocating certain manufacturing processes to the Company's Singapore plant. The restructuring will result in the elimination of approximately 50 positions, mostly in the Irvine and Memphis facilities. The workforce reductions cover mostly manufacturing and support personnel. The Company plans to complete the restructuring during the third quarter of fiscal year 2001.

Other income decreased for the three and six months ended September 29, 2000, compared with the same periods last year. The decrease was due to higher interest expense, lower interest income and reduced foreign currency exchange gains.

The Company ended the quarter with cash and cash equivalents of $11.9 million, down $3.1 million from the beginning of the fiscal year. The Company ended the quarter with long-term debt of $16.6 million. Short-term debt at the end of the quarter was $2.8 million, which includes borrowings of $2.1 million against the line of credit and $0.7 million mortgage repayment due within one year. The current cash position reflects expenditures during the quarter for the purchase and retirement of 52,200 shares of Printronix common stock at an average share price of $11.33, totaling $0.6 million. Capital expenditures for the quarter were $1.8 million.

Inventories were $20.6 million, an increase of $2.9 million from the beginning of the fiscal year. Inventories increased partly due to higher thermal product line inventory, and partly to Line Matrix ribbons, which are now manufactured in China in order to achieve significant cost reductions. Previously, the Company purchased ribbons from a United States supplier.

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.

PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company implemented a foreign currency hedging program as of April 2000 in order to mitigate currency rate fluctuation exposure related to foreign currency cash inflows. The Company entered into foreign currency forward exchange contracts with maturities from 30 to 180 days. All contracts are with a major financial institution. As of September 29, 2000, the Company had $5.4 million foreign currency forward exchange contracts outstanding. The Company does not use the contracts for speculative or trading purposes. Gains and losses under these contracts were immaterial for the quarter.

See "Item 3. Legal Proceedings" reported in Part I of the Company's Report on Form 10-K for the fiscal year end March 31, 2000.

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of stockholders of the Company was held on August 22, 2000, 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:

At the annual meeting, the stockholders also voted upon and approved the following matter:

1. To approve an amendment to the 1994 Stock Incentive Plan to increase by 300,000 the number of shares available for awards.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.
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.

 

 

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.

SEPTEMBER 29, 2000

EXHIBIT NUMBER	DESCRIPTION	PAGE
27	Financial Data Schedule	Filed only with EDGAR version