Back to GetFilings.com

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 0-9321

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

      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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act).     Yes o          No þ

      On May 23, 2003, there were 5,513,292 shares of the Registrant’s Common Stock outstanding. The aggregate market value of the Common Stock (based upon the closing price of $11.00 per share as quoted in the Nasdaq Stock Market® on May 23, 2003) held by non-affiliates of the Registrant was $40,450,740.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on August 20, 2003 are incorporated by reference into Part III and Part IV of this report.

Table of Contents

PRINTRONIX, INC.

INDEX TO FORM 10-K

2

Table of Contents

PART I

Forward-Looking Statements

      Except for historical information, this Annual Report and Form 10-K contains “forward-looking statements” about Printronix, within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as “objectives,” “believes,” “expects,” “plans,” “intends,” “should,” “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; a worsening of the global economy due to general conditions; a worsening of the global economy resulting from terrorist attacks or risk of war; a worsening of the global economy resulting from SARS (Severe Acute Respiratory Syndrome); the ability of the company to maintain our production capability in our Singapore plant or obtain product from our Asia Pacific suppliers given the outbreak of SARS; the ability of the company to hold or to 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 to 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; the ability of the company to retain its customer base and channel; the ability of the company to compete against alternate technologies for applications in our markets; 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. The company does not undertake to publicly update or revise any of its forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized.

Item 1.     Business

General

      Printronix is the leader in multi-technology “Supply-chain Printing Solutions,” which provide remotely-managed printers that produce documents of all types in ERP network printing systems of businesses around the world. Printronix manufactures three types of applications-compatible printers — line matrix, thermal and fanfold laser, as well as software that manages these printers in an enterprise network. Its integrated network solutions improve the printing of bar codes, labels and forms, verify accuracy and offer unequaled diagnostic technology. Printronix’s advanced solutions work with its industry-recognized line matrix, thermal and laser printers to deliver the most reliable printing available for enterprise networks. The company is based in Irvine, California, and its common stock is traded on NASDAQ under the symbol PTNX. Our website address is www.printronix.com. All of our filings with the Securities and Exchange Commission are available free of charge at our website or alternatively at www.sec.gov, immediately upon filing.

      Printronix develops, designs, manufactures and markets medium- and high-speed printing solutions and the related supplies and services. Products are designed for use in mission-critical applications where unsurpassed reliability and performance are crucial. Products are used in industrial settings such as manufacturing plants and distribution centers, in addition to the back office and the information technology department. Printronix has a global presence with manufacturing and configuration sites located in the United States, Singapore, Holland and Mexico. In addition, we have 19 sales and support locations around the world.

      Printronix printers function on a wide range of computer systems and enterprise software and are compatible with various label-generation and label-management software. All Printronix printers have extensive industrial graphics capabilities that allow them to support most popular industrial graphics languages while producing every type of printed computer output, including labels, bar codes, multi-part forms and reports.

      Printronix is distinguished from competitors in several key areas. We offer three printing technologies: line matrix, thermal and fanfold laser. We also provide post-sales support with supplies, spares, repairs and

3

Table of Contents

      To support the installed base of printers and verifiers, Printronix sells consumables, such as ribbons and toner. We also sell spare parts and provide other customer services such as the Advanced Exchange spare parts logistics program, repairs and maintenance. The consumable supplies, spare parts and customer services provide recurring revenue on the installed base of Printronix printers.

      Printronix markets and sells products worldwide through major computer systems companies (“OEMs”), and a network of system integrators, full-service distributors and value-added resellers. In addition, Printronix has a program to market directly to Major Accounts, which are mostly fulfilled through the distribution-channel. All three technologies are largely intended for use in the same applications and are marketed through the same channels.

      The business is affected by global changes in the level of capital spending to expand or enhance manufacturing plants, distribution centers and investments in information technology spending. We believe that greater emphasis on supply-chain management, warehouse automation and the increasing use of bar coded labels offers opportunities for long-term growth.

      Printronix, Inc. was incorporated in California in 1974 and was reincorporated in Delaware in December 1986. Our headquarters are located in Irvine, California. Unless the context otherwise requires, the terms “we,” “our,” “us,” “company” and “Printronix” refer to Printronix, Inc. and its consolidated subsidiaries.

      Certain geographical information for Item 1 is found in Note 8 of the Notes to Consolidated Financial Statements on page 47 of this Annual Report on Form 10-K.

Market Overview

      Various industry analysts track market share data and such data for fiscal year 2003 is not yet available. In fiscal year 2002, Printronix had a 62 percent market share in the worldwide line matrix market, excluding Japan. We introduced a thermal printer line in late fiscal year 2000 and have increased market share to six percent of the performance segment of the 2002 worldwide thermal market. Industry analysts do not track the size of the fanfold laser market. However, we believe Printronix has a dominant market share in the high-end fanfold laser label-printing segment.

Geographical Regions

      We classify revenue into three geographical regions; The Americas, Asia-Pacific, and Europe, the Middle East and Africa (“EMEA”). Printronix products are sold in over seventy-nine countries. We believe that a large percentage of our future revenue will continue to come from outside of the Americas. Printronix products are priced in United States dollars and in Euros. A summary of the effects of the change in the Euro’s value can be found in Note 1 of the Notes to Consolidated Financial Statements on page 35 of this Annual Report on Form 10-K. A summary of revenue and assets by region can be found in Note 8 on page 47 of this Annual Report on Form 10-K.

Growth Strategy

      Printronix intends to continue investing in printing solutions and to leverage those solutions across its line matrix, thermal and laser products. We also intend to continue to invest in high-speed line matrix printer

4

Table of Contents

      Printronix intends to grow revenue from our installed base of printers by expanding channels for supplies, and by increasing services, such as maintenance, repairs, spare parts logistics programs and by increasing professional services, such as training and custom applications. We expect that these actions will increase our share of this market. We also are expanding market share of remanufactured Printronix printers, a market segment Printronix entered in fiscal year 2002.

      Printronix has entered into strategic alliances with providers of warehouse management-systems software, that serve the retail logistics and automotive industries. We believe these alliances will expand our channels to market and increase the value of our industry solutions. We expect to enter into additional alliances.

      We expect to create demand for Printronix’s products through Major Accounts marketing and vertical marketing programs. Major Accounts are large companies who can utilize all three printing technologies, are often multi-national and are often leaders in their industry. We are working with retail and automotive industry leaders to provide printing solutions using all three of our printing technologies. We believe we can achieve efficiencies for our end-user customers through our global channel partners due to the common architecture, worldwide support and post-sales supplies and services. We continue to invest in Asia Pacific, as we believe it will be an area of growth.

Technology

      Printronix’s core technologies include line matrix and thermal print engines, subsystem controllers and software, bar code verification and network-printer management. Line matrix, thermal and laser printers developed from these technologies are unified by a common control architecture called Printronix System Architecture (PSA™), the latest version of which is PSA™3 (PSA3). This architecture permits all three printing technologies to be application-compatible by supporting common industrial graphics languages, host communication protocols, and global network management.

      Printronix also offers advanced network-printer management solutions with PrintNet Enterprise, which is a combination of hardware and software components. PrintNet Enterprise is a Web-enabled remote printer-management tool, combining printer diagnostics, troubleshooting, an alerting system and visibility that allows remote management control of Printronix printers anywhere in the world from a networked desktop. PrintNet Enterprise includes an interface card to provide connection to an Ethernet network and a Java-based software application providing advanced configuration-management tools, event notification, remote status and diagnostic capabilities.

      In addition, Printronix offers the unique ODV capability that ensures all bar codes produced on the T5000 thermal printer line are readable by bar code scanners, thus eliminating disruption and costly rework in the supply-chain. ODV analyzes each bar code immediately after the label is printed and validates that the bar code is within specifications. ODV also provides a quality control record of each bar code printed. ODV Data Manager, introduced in fiscal year 2003, provides enhanced data capturing and reporting capabilities and the ability to evaluate data within each bar code.

      All Printronix printers support Printronix IGP®/ PGL® and IGP/ VGL bar code label printing languages. During fiscal year 2003, we further advanced our industry leadership in printing solutions through new product development. One of our new products is the P5224D, planned for release in the second quarter of fiscal year 2004, which at 2400 lines per minute is the world’s fastest line matrix printer. In addition, Printronix released a wireless feature option on the thermal and line matrix printer lines in fiscal year 2003.

      Printronix has designed and developed software and hardware that leads the industry in connectivity to allow the printers to operate in a wide variety of computer systems, software and networks. In addition,

5

Table of Contents

Printers

      Computer printers are output devices that use electromechanical techniques to convert digitized information sent from a host computer to a printed form. Printing occurs by either impact or non-impact technologies. The printer output can be on a variety of media, including paper, card stock, plastic and cloth. Whether people and/or machines read the output depends upon whether the printed output is a bar code or text, and bar coded labels contain both formats. Printronix’s line matrix printers are impact printers and they can process single-part or multi-part forms. Printronix’s non-impact printers print only single-part forms by means of thermal and laser techniques.

      Printing is accomplished as a hammer bank shuttles a small distance back and forth, enabling the hammers to place dots anywhere along a row across the paper or other media. As the paper or other media advances, the hammer bank returns to position to print the successive rows of dots. Dots overlap horizontally and vertically to produce graphics as well as alphanumeric characters.

      The dot placement of our line matrix printers is very precise, permitting accurate character alignment. The combination of precise dot placement anywhere on the page and the use of overlapping dots rather than fully formed characters enables Printronix’s printers, under computer control, to produce graphic output. Another key feature of the line matrix technology is that hammer energy is optimized to print only dots, resulting in improved print quality on multi-part forms. These printers are available in pedestal or cabinet models with worldwide languages, a wide range of computer capabilities and a power paper stacker for cabinet model units.

      Uses for line matrix printers include reports, multi-part forms, bar codes, labels and program listings. The P5000 series line matrix printers operate at 500, 1000, 1500, 2000 and 2400 lines per minute (“LPM”). The value provided by line matrix printing is the high level of reliability, the ability to function in harsh environments, the lowest cost per printed page and the ability to process multi-part forms. The P5000 series models were introduced in fiscal year 1996, and replaced our previous generation of models. In fiscal year 2003, expenditures were made to develop the P5224D, which is planned for release in the second quarter of fiscal year 2004. The P5224D prints at 2400 LPM using a double row of hammer banks and is the world’s fastest line matrix printer, surpassing the P5220, introduced in fiscal year 2002, which operates at 2000 LPM. In addition, expenditures were made in fiscal year 2003 to develop the P5220S featuring an enhancement that uses a single hammer bank. The P5220S is planned for release in the first quarter of fiscal year 2004. Our P5000 series of line matrix printers offers the PrintNet Enterprise option, which includes high-speed Ethernet connectivity and full remote printer management capabilities.

      Thermal printers have become the primary instruments in the creation of on-demand bar codes and label printing, increasingly important in supply-chain logistics.

      Thermal printers create images on paper or other media by heating thermal-sensitive media. The image is created either by heating an ink-based ribbon which transfers ink to the media (transfer) or by heating media in which the thermally sensitive ink is already impregnated (direct). This technology results in a readable bar code image. The value provided by thermal printing is the flexibility of high-quality on-demand label printing from wired or wireless network stations along the manufacturing production line or throughout the distribution center.

      Printronix thermal printers range in print width from 4.1 to 8.5 inches and in speed from 6 to 10 inches per second. They print from 200 to 300 dots per inch (“DPI”). The latest version is the T5000e, which was

6

Table of Contents

      The T5000e wireless-enabled thermal printer models were designed, engineered and manufactured by Printronix, and they incorporate PSA3 and PrintNet Enterprise. The T5000e also offers the unique ODV capability that ensures all the bar codes it produces meet industry specifications and will scan accurately. With PrintNet Enterprise, ODV and PSA3, the T5000e sets a new standard of durability, versatility, flexibility, and manageability to meet today’s enterprise users’ needs. These printers address a wide range of label printing applications in the manufacturing, warehousing/distribution, transportation, retail logistics and health care sectors.

      Fanfold laser printers create images by fixing toner on paper electrographically, like a copier machine. The controllers, which we designed, are integrated with print engines purchased from outside suppliers. All models are available with optional power stackers.

      The LaserLine® printers combine print quality and speed with the distinct advantages of fanfold forms. A straight-through paper path combined with optional power stacking allows for long, unattended print runs. The L1524 laser printer operates at up to 24 pages per minute (“PPM”) and 300 DPI. The L1524 uses the more conventional heat/pressure fusing process, supports form widths up to 10 inches and offers a 50,000 pages per month duty cycle. The L1524 is primarily used for medium-volume billing and labeling applications.

      The LaserLine L5520 and L5535 fanfold laser printers, with their unique label-printing capabilities, operate at up to 35 PPM, 240 to 400 DPI, and have a unique flash fusing process, which produces output of exceptional durability and quality. Unlike other laser printers, the L5520 and L5535 can print on a wide variety of media including synthetics and plastic cards. The wide carriage, which can print widths up to 14.6 inches, high-duty cycle and durability of the output make these printers particularly well suited for high-volume utility-type billing and labeling applications.

      Fanfold laser printing provides value with its high-resolution, high-speed batch printing and jam-free operation.

Bar Code Verification Products

      A bar code verifier reads and decodes a bar code in the same manner as a normal scanner, but it also analyzes the adherence of the bar code to published industry specifications. Hand-held portable models and on-line models are available that meet practically any industry requirement. On-line verifiers are fixed to either printers or conveyance systems. When attached to a printer, the verifier analyzes the bar codes being produced by the printer. When attached to a conveyance system, the verifier analyzes the bar codes as they traverse in front of it. On-line models have an additional feature that communicates with the printers or conveyance systems and allows them to be controlled. These control features can stop the printers or conveyance systems, sound alarms or alert operators that manual intervention is required, if the bar codes are not meeting industry specifications.

Supplies, Consumables and Services

      Printronix sells associated printer supplies and consumables such as ribbons and toner. Line matrix ribbons are designed and manufactured by us; other supplies and consumables are purchased from outside suppliers. We offer maintenance services and the Advanced Exchange program, which provides logistical support for spares and repairs, and minimizes the amount of inventory needed by our resellers and channel partners to service the printers. The printers are sold with warranties, but customers can purchase maintenance service agreements from us or from our channel that cover the post-warranty period. Printronix also repairs and sells spare parts to our channel, which are used to support their maintenance service programs. Supplies, consumables and services, such as maintenance, are an area of expected growth.

7

Table of Contents

Worldwide Market for Printronix Products

      Printronix markets products to manufacturers, distribution centers and retailers for use in mission-critical applications producing bar codes, labels, tags, transaction documents and information reports, in which reliability and scannable bar codes are valued. In addition, we market our products to information systems departments for use in producing multi-part forms and reports. The market for bar code verifiers consists mainly of companies that use bar codes as a critical source for data, that print bar codes, or that supply bar codes to other companies either as labels or on products and/or have internal quality procedures relating to bar codes, such as ISO 9000 requirements.

Warranties

      We offer warranties of various lengths to our customers, depending upon the specific product and terms of the customer purchase agreement. Printronix offers either a 90-day on-site or a 12-month return-to-factory standard parts-and-labor warranty on printer and verifier products to most customers. Defective printers and verifiers can be returned to us for repairs or replacement in the applicable warranty period at no cost to the customer. Supplies are warranted for the shelf life of the products, which can be up to two years.

Channel

      Printronix’s printers and other products are sold worldwide through OEMs, and a network of full-service distributors, systems integrators and value-added resellers. In addition, Printronix has a program to market directly to Major Accounts, most of which are fulfilled through the distribution-channel. OEM sales, distribution-channel sales and direct sales were 38.9%, 56.4% and 4.7% of net sales for fiscal year 2003, respectively. Channel sales were 43.0% OEM, 54.5% distribution and 2.5% direct for fiscal year 2002 and 44.0% OEM, 53.4% distribution and 2.6% direct for fiscal year 2001.

      Information on sales to our largest customers can be found in Note 8 of the Notes to Consolidated Financial Statements on page 48 of this Annual Report on Form 10-K.

Competition

      Printronix’s products compete in the overall market for medium- and high-speed computer printers. The overall market includes line matrix, thermal transfer, laser, inkjet, serial, and band printers. We compete directly with several companies of varying sizes, including some of the largest businesses in the United States and Japan.

      Competitive factors in the printer markets include reliability, durability, price, total cost of ownership, print quality, versatility of special performance features, information systems connectivity, channel-to-market, post-sales support, including professional services and financial resources to invest in new product designs and features. We believe our printers are highly competitive with regard to features, reliability, durability, price/ performance and cost of ownership. Our professional services includes a wide range of services to assure that our printing solutions deliver their full potential in our customer’s enterprise system. We invest more heavily in research and development than the industry average. We can offer no assurance that products with superior technology or superior price/performance will not be introduced by competitors. If introduced, those products could have a materially adverse impact on our results of operations and financial position. Knowledge of a pending new product in the marketplace by us or by our competitors may have an adverse impact on revenue as customers may delay purchasing decisions until the new product is available.

      Industry analysts have estimated the size of the 2002 worldwide line matrix market to be $242 million based on end-user pricing, excluding Japan. Printronix continues to hold the dominant position in this market, growing our market share one percent to 62 percent in fiscal year 2002, in spite of a declining market. Industry analysts reported a seven percent drop in this market for fiscal year 2002, which marks the third consecutive year of decline. A closer review of the industry data has resulted in a clarification of the line matrix market for fiscal year 2001, estimated at $261 million. For fiscal years 2001 and 2000, the decrease was 24 percent and nine percent, respectively. The decline in the market over the past three years is partly due to a return to levels

8

Table of Contents

      Industry analysts have estimated the fiscal year 2002 worldwide market for high-end thermal printers to be $181 million based on end-user pricing, up three percent over the prior year. On average, these printers have a list price of $2,500 or more. The high-end market is defined as printers used in mission-critical applications with high-performance features. A further study of the high-end market has resulted in a clarification of that market as some products previously classified as high-end based upon list price did not contain high-performance features. The generally modest growth in the market was partly due to the general slowness in the economy and partly due to a shift in customer demand to the mid-range products due to price/performance aspects. Printronix grew our fiscal year 2002 market share to six percent, up from four percent in the prior fiscal year, after introducing our own thermal printer in late fiscal year 2000. Our strategy for the thermal market is to continue to grow market share by focusing sales and marketing efforts on Major Accounts and on alliance partners and to add value through our unique solutions of ODV and PrintNet. Our primary competitors in the thermal market are Zebra Technologies Corporation, Sato, Tokyo Electric Company (TEC) and Intermec, a subsidiary of Unova, and together they account for 79 percent of the market, down from 82 percent in the prior fiscal year. All brand names used throughout this Annual Report on Form 10-K are trademarks or registered trademarks of their respective companies.

      Industry data on the fanfold laser market is not available. We believe we have a significant share of the segment devoted to fanfold laser label printing.

      Verification products offer a unique feature mix of fixed-position scanning, verification communication and controls. There is little direct competition at this time for on-line verifier products. For portable verifiers, there are two major competitors in the United States. Both major competitors purchase on-line verification products from us.

      Printronix invests a larger share of its revenue than do our competitors in research and development, about 11 percent versus six percent, respectively, and expects to continue to do so. The incremental expenditure incurred by Printronix is primarily due to the added solutions development over and above the development of printers. We believe that our global presence, three technologies, advanced network-printer management capabilities and unique ODV capability provide a competitive advantage.

Order Backlog

      Printronix’s customers place the majority of their orders on a just-in-time basis. We ship directly to most of our end-user customers, except for the OEM channel in EMEA. As a result, we believe order backlog is not a meaningful indicator of future sales.

Raw Materials

      We purchase custom mechanical and both custom and standard electronic components from numerous outside suppliers. Most of those components used in our impact and thermal printers are available from alternate sources should an issue arise with the existing source. Tooling is typically transferable to a new source with minimal ramp-up time to full production capabilities. We also purchase certain components from sole sources and have no reason to believe that supply from these sources would be placed in jeopardy. If we were to lose any sole source for a component, there could be a delay in shipment of printers requiring those components until an alternate source could be ramped to fulfill production requirements. Safety stock is typically maintained for such long-lead time items. Our laser printer products are designed to use specific proprietary print engines and printer assemblies manufactured by outside suppliers. We have entered into written purchase agreements for these printer components and have no reason to believe that we will be unable to obtain the materials required.

9

Table of Contents

Engineering and Development

      Printronix operates in an industry that is subject to technological change, and our ability to compete successfully depends upon, among other things, our ability to anticipate market needs and to respond quickly with new solutions. Accordingly, we are committed to a product-development process that is coupled to market requirements and facilitates high-quality, rapid, product development and introduction.

      Engineering and development expenditures were $15.8 million in fiscal year 2003, $15.7 million in fiscal year 2002 and $16.7 million in fiscal year 2001. Engineering personnel are located in all three key regions: the Americas, Europe, and Asia Pacific. Expenditures were made in fiscal year 2003 to develop the wireless printers, the T5000e, the P5240D, and the P5220S, an enhanced version of the P5220. Research and development expenditures were made in fiscal years 2002 and 2001 to enhance our suite of enterprise system printing solutions. These enhancements included: Introduction of PrintNet Enterprise, a significant innovation in enterprise network-printer management; the P5220; new network printing protocols; feature and language enhancements to the T5000 thermal printers; and ODV enhancements.

Patents and Licenses

      Printronix has been issued 46 United States and related foreign patents (primarily in Canada, the United Kingdom, France and Germany) associated with various aspects of our printers. We believe that our patents, in various technologies (line matrix, thermal, system architecture, printer control), have competitive value and we intend to continue our practice of enforcing our patent rights against potential infringements where we deem appropriate. Although there can be no assurance that we will be successful in defending our rights to any of our patents, we believe our patents are valid.

      Printronix has no material licenses from others pertaining to the manufacture of products, including those under development, and believe none are currently required. Certain software is obtained under licensing agreements. We believe, based on industry practice, any such licenses as might be required in the future could be obtained on terms that would not have a material effect on us.

Employees

      Printronix had 852 employees as of March 28, 2003, including 469 in the United States, 305 in Asia Pacific and 78 in Europe.

      None of our employees in the United States or Asia Pacific is subject to a collective-bargaining agreement. Our wholly-owned subsidiary, Printronix Nederland BV, is a member of the Employers Union FME-CWN, and some of our employees have elected to become members of an employee union. This employee union is not government-sponsored and is supported by contributions from its members. We believe our relationship with our employees is good.

Foreign Operations

      We have manufacturing facilities in Singapore, wherein line matrix and thermal printer products and some key components are produced. The Singapore facilities also provide product support and customer service for the Asia Pacific region. We have a facility in the Netherlands that provides product support, customer service, line matrix, thermal and laser printer configuration and distribution. In April 2002, we began manufacturing line matrix ribbons in Mexico for shipment to the Americas. In November 2002, we expanded the manufacture of line matrix ribbons in Mexico to include those for export to EMEA and Asia Pacific. We have sales offices within Germany, France, the United Kingdom, Austria, India, Korea, China and Singapore.

      International sales information is found in Note 8 of the Notes to Consolidated Financial Statements on page 47 of this Annual Report on Form 10-K.

      We are not aware of any significant risks with respect to our foreign business other than those inherent in the competitive nature of the business, fluctuations in foreign currency exchange rates and other world events.

10

Table of Contents

      Printronix owns a facility measuring approximately 186,000 square feet in Irvine, California, which houses our U.S. operations, sales support, engineering and development and also is the Company headquarters. The leased facility in Memphis, Tennessee, is approximately 44,000 square feet, and provides logistics support for spares and supplies for the Americas market, and is able to deliver orders throughout the United States the next morning.

      Foreign operations are located in Singapore, the Netherlands and Mexico. Singapore operations are in a facility we own, which was constructed in fiscal year 1997 and totals approximately 74,000 square feet. The Netherlands operations are in leased facilities of approximately 33,000 square feet. The Mexico operations are in leased facilities of approximately 17,410 square feet. We also lease several small offices, generally on short-term leases, throughout the United States, Asia Pacific and Europe for sales, support or service.

      See Note 9 of the Notes to Consolidated Financial Statements on page 48 of this Annual Report on Form 10-K for a summary of the expiration dates and lease or rental commitments.

Environmental Assessment and Legal Matters

      Information on environmental assessment and legal matters is found in Note 9 of the Notes to Consolidated Financial Statements on page 48 of this Annual Report on Form 10-K.

      Printronix did not submit any matter during the fourth quarter of the fiscal year covered by this report to a vote of security holders through the solicitation of proxies or otherwise.

PART II

11

Table of Contents

      The following income statement and balance sheet data have been derived from our consolidated financial statements. The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

      The matters discussed in this Management’s Discussion and Analysis of Results of Operations and Financial Condition on Form 10-K should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements provided under Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

      We prepare the consolidated financial statements of Printronix in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available to us at the time. These estimates and assumptions affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities for the fiscal year periods presented. We continuously evaluate our estimates, including those related to product returns, customer programs and incentives, doubtful accounts, inventories, warranty obligations, intangible assets and other long-lived assets, income taxes, contingencies and litigation. Actual results may differ from these estimates under different assumptions or conditions.

      We believe the most critical accounting policies used to prepare the accompanying consolidated financial statements are the following:

      We recognize revenue from product sales when it is realized or realizable and earned, which is generally at the time of shipment and passage of title. We consider revenue to be realized or realizable and earned when we have persuasive evidence of a sales arrangement in the form of a contract or a purchase order, the product has been shipped, the sales price is fixed or determinable and collectibility is reasonably assured. Our sales are based upon written contractual agreements with our resellers that include established pricing and terms. Customers may return products that are incompatible with the intended application.

      We continuously monitor such product returns and, at the time of sale, record a provision for the estimated amount of such future returns, based upon historical experience, notification we receive of

12

Table of Contents

      We record estimated revenue reductions at the time of sale for customer programs and incentive offerings, including special pricing, rebates, or other programs. Future market conditions may cause us to increase the amount of incentive programs or other programs and could result in additional revenue reductions at that time.

      We offer professional services, such as training and customized applications to customers. These services are generally short-term in duration and are billed separately upon completion and acceptance of the service. Although the revenue received from professional services is not currently material, professional services are considered an area of potential growth.

      We record revenue for shipping costs charged to customers. The related shipping costs incurred are recorded in cost of sales.

      We offer printer-maintenance services through service agreements that customers may purchase separately from the printer. These agreements are mostly for a one-year period. We provide the point-of-customer-contact and initial diagnostic services, and supply the parts used for printer repairs. We have contracted with third parties to perform the on-site repair services. During fiscal years 2003, 2002 and during the second quarter of fiscal year 2001, revenue from maintenance contracts was deferred and recognized on a straight-line basis over the period of each individual contract, which approximates the manner in which costs are incurred.

      During the second quarter of fiscal year 2001, we acquired a portfolio of domestic third-party maintenance contracts and assumed the responsibility for servicing those contracts. Upon the purchase of those contracts, we provided the point-of-customer-contact and initial diagnostic services, and supplied the parts used for printer repairs. We contracted with third parties to perform the on-site repair services. Revenue from the purchased maintenance contracts was deferred and recognized on a straight-line basis over the period of the contracts. Prior to the purchase of this portfolio of maintenance contracts, we generated revenue on maintenance contracts through the sale of the service obligation to a third-party provider. The third-party provider was responsible for providing all repair parts and for the performance of all on-site maintenance services for the contract period. The revenue on such contracts was recognized fully in the period the contract was sold to the third-party provider because we assumed no further material obligation after the date of sale.

      We perform credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness. We continuously monitor collections and payments from our customers and maintain an allowance for estimated doubtful accounts based upon our historical experience, the general economic conditions and any specific customer-collection issues we have identified. Although such bad debt losses historically have been within our expectations and the allowance we have established, we cannot guarantee that we will continue to experience the same bad debt loss rates that we have in the past. Because our accounts receivable include substantial receivables from a few large resellers, a significant change in the liquidity or financial position of any one of these resellers could result in additional allowances that could have a materially adverse effect upon our future operating results and financial condition.

      We record a provision to value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory, or the current estimated market value of the inventory, based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. We also perform regular reviews

13

Table of Contents

      Our internal research-and-development costs, which include software-development costs, are expensed as incurred. Under our current development methods and procedures, the technological feasibility of the software being developed is not established until substantially all of the product development costs have been incurred. As a result, we have not capitalized any software-development costs for software that is embedded in our products, because the costs incurred after attaining technological feasibility are not material.

      We offer warranties of various lengths to our customers, depending upon the specific product and terms of the customer purchase agreement. Printronix offers either a 90-day on-site or a 12-month return-to-factory standard parts-and-labor warranty on printer and verifier products to most customers. Defective printers and verifiers can be returned to us for repairs or replacement in the applicable warranty period at no cost to the customer. Supplies are warranted for the shelf life of the products, which can be up to two years. We record an estimate for warranty related costs based on our actual historical return rates and repair costs at the time of sale.

      We engage in product-quality programs and processes, including evaluating our suppliers. Although our warranty costs historically have been within our expectations and the provisions we have established, we cannot guarantee that we will continue to experience the same warranty return rates or repair costs that we have in the past. A significant increase in product return rates, or a significant increase in the cost to repair our products, could have a materially adverse impact upon our operating results and financial condition.

      We assess the carrying value of long-lived assets, including intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an underlying asset may not be recoverable. In the event the carrying value of assets is determined to be unrecoverable, we would record an adjustment to the carrying value of the assets affected based upon a discounted-cash-flow method. Any major unanticipated change in circumstances could have a significant impact upon the recoverability of long-lived assets and upon our operating results and financial condition. All goodwill and most intangible assets were fully amortized as of March 29, 2002, and the remaining intangible asset related to unpatented technology was fully amortized as of March 28, 2003.

      We estimate our income tax liability based upon current tax laws in the tax jurisdictions in which we operate. These estimates include judgments about deferred tax assets and liabilities resulting from temporary differences between assets and liabilities recognized for financial reporting purposes and those recognized for tax purposes.

      We periodically review our deferred tax assets for realization based upon historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. We also record a valuation allowance to reduce our deferred tax assets when management believes that deferred tax assets more likely than not will not be realized. If the provision for income tax is inadequate, or if we are unable to realize deferred tax assets, or if the tax laws change unfavorably, we could experience income tax charges in excess of the reserves established. Likewise, if the provisions for current and deferred taxes are

14

Table of Contents

      We have operations in multiple international taxing jurisdictions and are subject to audit in those jurisdictions. These audits can involve complex issues. While we believe we have made adequate provision for any such issues, an unfavorable resolution of such issues could have an adverse effect upon our results of operations and financial condition.

Results of Operations

      Fiscal year 2003 reported improved profitability on lower revenue. We attribute the revenue decrease partially to the continuing softness in the worldwide economy and the related reduced capital spending and partially to the impact of competing technologies on line matrix printer sales. Printronix printers are used in manufacturing, supply-chain logistics and business-critical applications and have a long life, which allows users to delay programs to upgrade these printers in times of economic uncertainty. Gross margins improved as a result of a stronger Euro and continuing cost-reduction programs. Cost-control programs maintained relatively flat engineering and general and administrative spending, while continued emphasis on sales and marketing programs, including the Major Accounts and vertical marketing programs, resulted in higher spending in that area. Overall profitability also improved as a result of higher foreign currency exchange gains as the Euro strengthened and also as a result of lower interest expense due to lower interest rates. Cash balances increased by $7.0 million and inventory decreased by $2.4 million as a result of asset-management programs.

      Our focus during the fiscal year was on the programs initiated in fiscal year 2002 to expand our range of printing solutions in the retail-logistics and automotive-vertical markets. Also, we continued our emphasis on growth opportunities in the Asia Pacific region by expanding into Korea and by specifically targeting the banking industry in China, where sales were up 86.2% over the prior year. We also continued to grow our thermal printer sales, which were up 40.0% over the prior year, and to expand our Major Accounts marketing.

      We continue to take action to improve our profitability but have noted that revenues for the first quarter of fiscal year 2004 are trailing behind the prior quarter revenue of $34.8 million by approximately five to 10 percent. Despite the cost reduction programs, if revenue for the quarter is at the low end of the range of estimates, the company could record a net loss for the first quarter of fiscal year 2004.

      Fiscal year 2002 reported improved profitability on lower revenue. We attribute the revenue decrease partially to softness in the worldwide economy and reduced capital spending and partially to the impact of competing technologies on line matrix printer sales. Despite lower revenue, we returned to profitability due to several factors, including the improved gross margins resulting from the restructuring efforts initiated and completed in the latter part of fiscal year 2001, certain price increases and a continuing product cost reduction program. Cash balances increased by $12.8 million and inventory decreased by $5.6 million.

      Our focus during the year was to develop future revenue opportunities by expanding the Major Accounts marketing program and by expanding customer services. We began programs to pursue total printing solutions in the retail-logistics and automotive-vertical markets.

      Revenue for the fiscal year 2003 was $138.2 million, a decrease of $8.5 million, or 5.8%, compared with the prior fiscal year. We attribute the decrease partially to continued softness in the worldwide economy and the continued slowdown in capital spending for plant expansion or refurbishment and partially to the impact of competing technologies on line matrix printer sales. The decrease in sales was principally due to lower line matrix sales in the Americas. We also were impacted by lower sales to our major customer. Thermal printer sales increased 40.0% over the prior fiscal year, due to our Major Accounts and vertical marketing programs.

15

Table of Contents

      Americas sales were $72.0 million, down $9.1 million, or 11.2%, from a year ago. Americas OEM sales decreased 17.1% to $30.1 million, principally as a result of lower sales to our largest customer. Americas distribution sales decreased 10.1% to $37.4 million. Increased sales in the retail-logistics market as a result of our direct marketing were more than offset by lower sales elsewhere. Americas direct sales increased 40.6% to $4.5 million. EMEA sales were unchanged from the prior year at $48.9 million. EMEA OEM sales decreased $2.7 million, or 10.8%, to $22.1 million, principally as a result of lower sales to our largest customer. EMEA distribution sales were $25.0 million, up from $23.9 million a year ago, due to our direct-marketing programs. EMEA direct sales were $1.8 million, up from $0.2 million a year ago. Asia Pacific sales increased $0.1 million, or 4.1%, from a year ago to $17.3 million, mostly as a result of increased line matrix sales through the distribution-channel into the banking industry in China, where sales were up 86.2% over the prior year.

      Line matrix sales for fiscal year 2003 were $103.4 million, a decrease of 10.0% from the prior fiscal year. Line matrix revenue was 74.8% of revenue versus 78.3% in the prior fiscal year. Laser sales totaled $16.9 million, down 7.7% from the prior fiscal year. Laser sales were 12.2% of revenue compared with 12.5% in the prior fiscal year. Thermal sales were $15.9 million, up 40.0% from the prior fiscal year. Thermal sales were 11.5% of revenue compared with 7.7% in the prior fiscal year. Verification products were $2.0 million, a decrease of $0.1 million from the prior fiscal year. Verification product sales were 1.4% of revenue, essentially unchanged from the prior fiscal year. Sales of recurring items such as spares, consumables and customer services, included in the product-line sales discussed above, were $49.3 million, down 2.4% from the prior fiscal year.

      Sales to our largest customer, IBM, represented 23.8% of net sales for the fiscal year, compared with 27.4% a year ago. Sales to the second largest customer represented 9.0% of net sales for the fiscal year, compared with 8.6% a year ago. Sales to the top 10 customers represented 50.9% and 53.9% of net sales for the current and prior fiscal year, respectively.

      Sales by channel were 38.9% OEM, 56.4% distribution and 4.7% direct compared with 43.0% OEM, 54.5% distribution and 2.5% direct for the prior fiscal year. Revenue from United States customers was 50.2% and 53.3% of total revenue, while revenue from international customers was 49.8% and 46.7% of total revenue for fiscal years 2003 and 2002, respectively.

      Revenue for the fiscal year 2002 was $146.7 million, a decrease of $11.4 million, or 7.2%, compared with the prior fiscal year. We attribute the decrease partially to softness in the worldwide economy and the continued slowdown in capital spending for plant expansion or refurbishment and partially to the impact of competing technologies on line matrix printers sales. The decrease in sales was principally in the Americas. Lower sales were noted across all product lines, but mainly in line matrix products. We also were impacted by lower sales to our major customer.

      Americas sales were $81.2 million, down $11.9 million, or 12.8%, from a year ago. Americas OEM sales decreased 14.9% to $36.4 million. Lower sales to some of Printronix’s larger OEM customers were only partially offset by higher sales to some of the smaller OEMs. Americas distribution sales decreased 12.6% to $41.6 million. Americas direct sales increased 18.5% to $3.2 million. EMEA sales decreased $0.9 million, or 1.7%, to $48.9 million. EMEA OEM sales were unchanged from the prior year at $24.8 million. EMEA distribution sales were $23.9 million, up from $23.6 million a year ago. EMEA direct sales were $0.2 million, down from $1.4 million a year ago. Asia Pacific sales increased $1.3 million, or 8.7%, from a year ago to $16.6 million, mostly as a result of increased line matrix sales into India and China.

      Line matrix sales for fiscal year 2002 were $114.9 million, a decrease of 5.7% from the prior fiscal year. Line matrix revenue was 78.3% of revenue versus 77.0% in the prior fiscal year. Laser sales totaled $18.3 million, down 8.7% from the prior fiscal year. Laser sales were 12.5% of revenue compared with 12.7% in the prior fiscal year. Thermal sales were $11.3 million, down 17.5% from the prior fiscal year. Thermal sales were 7.7% of revenue compared with 8.7% in the prior fiscal year. Verification products were $2.1 million, a decrease of $0.4 million from the prior fiscal year. Verification product sales were 1.5% of revenue, compared

16

Table of Contents

      Sales to our largest customer, IBM, represented 27.4% of net sales for the fiscal year, compared with 26.1% a year ago. Sales to the second largest customer represented 8.6% of net sales for the fiscal year, compared with 8.5% a year ago. Sales to the top 10 customers represented 53.9% and 54.7% of net sales for the current and prior fiscal year, respectively.

      Sales by channel were 43.0% OEM, 54.5% distribution and 2.5% direct compared with 44.0% OEM, 53.4% distribution and 2.6% direct for the prior fiscal year. Revenue from United States customers was 53.3% and 54.9% of total revenue, while revenue from international customers was 46.7% and 45.1% of total revenue for fiscal years 2002 and 2001, respectively.

      Gross margin as a percentage of sales was 35.3% in fiscal year 2003 compared with 32.4% and 27.2% in fiscal years 2002 and 2001, respectively. The increase in gross margin in fiscal year 2003 is primarily due to the strength of the Euro and continuing cost reductions. The increase in gross margin percentage during fiscal year 2002 is due to a full year of benefits of the manufacturing restructuring activities which were completed in late fiscal year 2001, together with continuing cost reductions, certain price increases, and a more favorable product mix.

      Operating expenses, excluding restructuring charges, consist of engineering and development, sales and marketing, and general and administrative costs. Operating expenses, excluding restructuring charges, were $45.8 million, $44.1 million and $43.2 million for fiscal years 2003, 2002 and 2001, respectively.

      We believe it is critical to continue to invest in research and development to ensure technology leadership in line matrix and thermal printing solutions. Engineering expenses consist mostly of labor and test materials. In fiscal year 2003, we spent $15.8 million on engineering and development, compared with $15.7 million in fiscal year 2002 and $16.7 million for fiscal year 2001. In fiscal year 2003, expenditures were made to bring to market a wireless-feature option for the thermal and line matrix printers. In addition, expenditures were made to develop a 2400 LPM line matrix printer, the P5240D, and to develop the P5220S, a 2000 LPM line matrix printer which uses a single hammer bank instead of a double hammer bank. The P5240D is the world’s fastest line matrix printer, printing 2400 lines per minute using a double hammer bank.

      In fiscal years 2002 and 2001, expenditures were made to enhance the line matrix product family with a faster printer, resulting in the introduction of the P5220 during fiscal year 2002. We also enhanced our market-leading printer management networking solutions with PrintNet Enterprise and ODV verification solutions. The decrease in fiscal year 2002 compared with fiscal year 2001 was due to lower development costs as both the T5000 product line and P5220 line matrix printer moved into production. As a percentage of sales, engineering and development expenses increased slightly in fiscal year 2003, due to lower revenue, to 11.4% from 10.7% in fiscal year 2002 and 10.6% in fiscal year 2001.

      Sales and marketing expenses for fiscal year 2003 increased to $21.3 million, compared with $19.2 million for fiscal year 2002 and $18.0 million for fiscal year 2001. As a percentage of revenue, sales and marketing expenses increased to 15.4% from 13.1% in fiscal year 2002 and 11.4% in fiscal year 2001. The increase in sales and marketing expenses in all fiscal years presented is due to higher labor and marketing costs due to increased resources being applied to the Major Accounts and vertical marketing programs.

      General and administrative spending for fiscal year 2003 was $8.7 million in fiscal year 2003 compared with $9.2 million for fiscal year 2002 and $8.4 million for fiscal year 2001. General and administrative expenses decreased in fiscal year 2003 from the prior fiscal year due to lower labor costs, lower provision for doubtful accounts and lower amortization of intangibles. General and administrative expenses increased in fiscal year 2002 over the prior fiscal year due to higher property taxes, higher labor costs, increased provision for doubtful accounts, higher legal fees, and higher utility costs associated with the California energy shortage.

17

Table of Contents

      Information on restructuring charges incurred in fiscal year 2001 can be found in Note 5 of the Notes to Consolidated Financial Statements on page 41 of this Annual Report on Form 10-K.

      Foreign currency transactions and remeasurements were gains of $0.6 million in fiscal year 2003 compared with losses of $0.2 million in fiscal year 2002 and gains of $0.5 million in fiscal year 2001. Fiscal year 2003 foreign currency transaction and remeasurement gains were primarily due to a strengthened Euro. The foreign currency losses in fiscal year 2002 were primarily due to a weakened Euro. The future effect of changes in the value of the Euro or other foreign currencies upon our results of operations or financial condition is difficult to predict.

      A summary of the effects of the changes in the value of the Euro can be found in Note 1 of the Notes to Consolidated Financial Statements on page 32 of this Annual Report on Form 10-K.

      Interest and other expenses, net, decreased $0.6 and $0.5 million, respectively, in fiscal years 2003 and 2002. The decreases were due to lower interest expense as a result of reduced interest rates, partially offset by lower interest income.

      The effective tax rate for fiscal year 2003 and fiscal year 2002 was 13.4% and 11.0%, respectively, primarily as a result of domestic operating losses due to the revenue declines in the Americas and pre-tax earnings by subsidiaries that operate within lower-tax jurisdictions. We expect the effective tax rate for fiscal year 2004 to be between 5.0% and 15.0%.

      The effective tax rate for fiscal year 2001 was a benefit of 48.0%, primarily as a result of domestic operating losses and pre-tax earnings by subsidiaries that operate within lower-tax jurisdictions.

      We have a favorable pioneer tax status in Singapore for income generated from the manufacture of the Printronix P5000 Series line matrix products. The pioneer status started in April 1996, lasts for five years, and automatically is extendible to eight years. The pioneer status mandates that we meet certain requirements, including meeting specific levels of capital investment and engineering headcount. Earnings generated there are exempt from tax liability through 2003. The exemption is automatically extended to 2004. The pioneer status reduced foreign taxes by $0.9 million, $0.8 million and $0.6 million for fiscal years 2003, 2002 and 2001, respectively. The diluted net income per share effect of this pioneer status was 15 cents, 14 cents and 9 cents for fiscal years 2003, 2002 and 2001, respectively.

      The provision for taxes included certain state and foreign taxes for all fiscal years presented.

Liquidity and Capital Resources

      The primary source of liquidity historically has been cash generated from operations.

      On May 1, 2000, we obtained a credit facility with a United States bank for $27.5 million that consisted of a $17.5 million, seven-year note secured by our Irvine facility and a $10.0 million three-year unsecured line of credit. We repaid the line of credit borrowings as scheduled in the first quarter of fiscal year 2002, and, on June 15, 2001, cancelled our $10.0 million unsecured line of credit (See Note 3 on page 40 of this Annual Report on Form 10-K).

18

Table of Contents

     Fiscal Year 2003 Compared With 2002

      Cash and cash equivalents increased $7.0 million to $29.6 million in fiscal year 2003, principally due to increased profitability and a reduction in inventory levels. We generated $12.0 million in cash from operations, which was lower than the $20.7 million generated from operations a year ago. The decrease in the cash generated from operations compared with a year ago is the result of a slowing in the rate of decrease in inventory and an increase in accounts receivables. Investment in property, plant and equipment continued to be less than depreciation expense. The remaining major uses of cash were payments totaling $0.7 million made on the seven-year note and repurchases of stock totaling $1.7 million. We ended fiscal year 2003 with debt of $15.6 million related to the seven-year note, which consisted of $14.9 million long-term and $0.7 million for the current portion of the long-term debt.

      The remaining shares that could be repurchased at the discretion of management under the stock buyback program totaled 334,095 shares as of March 28, 2003.

      We believe our internally-generated funds are sufficient to finance anticipated capital requirements for the foreseeable future. Should we experience the need to obtain additional sources of funds, we believe we could obtain such funds through additional credit facilities.

     Fiscal Year 2002 Compared With 2001

      For the fiscal year 2002, cash and cash equivalents increased to $22.6 million from $9.8 million in fiscal year 2001 primarily due to a return to profitability, reductions in inventory, lower accounts receivable, and reduced capital expenditures. We generated $20.7 million in cash provided by operations during the fiscal year, compared with a use of cash of $1.7 million in the prior fiscal year. Accounts receivable decreased due to lower sales. Inventory levels decreased as a result of completing the manufacturing restructuring wherein certain manufacturing processes were consolidated into the Singapore facilities, which had resulted in carrying more inventory during the transition, and also due to other manufacturing-asset management programs. Investment in property, plant and equipment was less than depreciation expense as we completed our major product-development efforts. The remaining major uses of cash were payments on the line of credit totaling $3.5 million and payments of $0.7 million made on the seven-year note. We ended fiscal year 2002 with debt of $16.3 million related to the seven-year note, which consisted of $15.6 million long-term and $0.7 million for the current portion of the long-term debt.

Contractual Obligations and Commercial Commitments

      We are obligated under certain borrowing and lease commitments. Additional information on our obligations can be found in Note 3 of the Notes to Consolidated Financial Statements on page 40 and in Note 9 on page 48. The minimum payments due as of March 28, 2003, for the subsequent fiscal years, are as follows:

19

Table of Contents

      We also are obligated under certain unsecured lines of credit and a credit agreement which support our hedging activities for our foreign subsidiaries. No amounts have been borrowed against these lines of credit or credit agreement as of March 28, 2003, or for the fiscal periods presented. The commitment amounts and expiration periods, as of March 28, 2003, are summarized below (See Note 3).

New Pronouncements

      In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” This statement requires that goodwill and other intangible assets be tested for impairment at least annually and prohibits periodic amortization of goodwill and some intangible assets into income. We adopted this standard in the first quarter of fiscal year 2003. The adoption of this standard did not have a material effect upon our financial position or results of operations. All goodwill was fully amortized into income in the normal course of business by the end of fiscal year 2002. Our review of the intangible assets resulted in no noted impairment and all intangible assets were fully amortized into income by the end of fiscal year 2003. (See Note 2 on page 39 of this Annual Report on Form 10-K for information on the required disclosures.)

      In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement addresses recognition and measurement of losses related to impairment or disposal of long-lived assets. We adopted the statement in the first quarter of fiscal year 2003. The adoption of this standard did not have a material effect on our financial position or results of operations.

      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”, which had required a liability for an exit cost be recognized at the date of a company’s commitment to an exit plan. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002 and requires that a liability for an exit cost be recognized when incurred. This statement also requires that the initial measurement of this liability be at fair value. Should we have a restructuring activity in the future, this statement would primarily impact the timing of the recognition of the expense. We do not believe the adoption of this statement will have a material impact on our financial position or results of operations.

      In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation provides for additional disclosures to be made by a guarantor in its interim and annual financial statements about obligations that it has. This interpretation is effective for financial statements of interim or annual periods ending after December 15, 2002. We adopted the disclosure provision of this interpretation during the third quarter of fiscal year 2003. The recognition provision of this interpretation had no impact on our financial position or results of operations.

      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 and Accounting Principles Board Opinion (“APB”) No. 28, “Interim Financial Reporting,” to require prominent disclosure in both the annual and interim financial statements about the method of

20

Table of Contents

      In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement is effective for contracts entered into or modified after June 30, 2003. We currently are evaluating the provisions of this statement.

Factors That May Affect Financial Results and Financial Condition

      Any of the following risks and uncertainties could adversely affect our business, financial results or financial condition. Other risks and uncertainties also could affect our business. Any of these factors could cause the actual results to differ from those expressed or implied in the forward-looking statements in this document. Although we reassess material trends and uncertainties affecting our results of operations and financial condition in connection with the preparation of our quarterly and annual reports, we do not intend to review or revise, in light of future events, any particular forward-looking statement contained in this document. The information contained below should be carefully considered when reviewing any forward-looking statements contained in this document.

      The printing-solutions industry is extremely competitive and is characterized by technological change, frequent new product development, periodic product obsolescence, evolving industry standards, changing information technologies and evolving distribution-channels. We must adapt quickly to changing technological, application and solutions needs, and the introduction of new technologies and products offering improved features and functionality. We could incur substantial cost to keep pace with the technological changes, and may not be able to adapt to these changes.

      Although we believe that we currently compete favorably with respect to these characteristics, this may change in the future. Our future success largely depends upon our ability to continuously develop new products, services and solutions. To develop new products, we invest in research and development. In spite of our efforts, we may fail to develop new products. Additionally, the new products we develop may not achieve market acceptance or may not be manufactured at competitive costs or in sufficient volumes. We cannot guarantee the success of our research and development efforts.

      Our failure to enhance our existing products, services and solutions or to develop and introduce new products, services and solutions that meet changing customer requirements and evolving technological standards would adversely impact our ability to sell our products.

     We Operate in a Highly Competitive Market.

      The market for medium- and high-speed computer printers and the related post-sale supplies is highly competitive and subject to change.

      We compete directly with several companies of various sizes, including some of the largest businesses in the United States and Japan. Our competitors include privately-held companies, publicly-held companies and subsidiaries of multinational corporations. Some of our competitors may enter into strategic business relationships with other companies.

      Our current main competitors in line matrix printers are Tally and Genicom. Our current main competitors in thermal printers are Zebra Technologies Corporation (NASDAQ: ZBRA), Tokyo Electric

21

Table of Contents

      Some competitors have significantly greater financial, technical, manufacturing, sales, marketing and other resources than we do and have achieved greater name recognition for their products and technologies than we have. We may not be able to successfully increase our market penetration or our overall share of the printer market.

      We can offer no assurance that products with superior market acceptance, superior price or superior performance will not be introduced by our competitors. Increased competition may result in price reductions, lower gross margins, loss of market share and could require increased investment in inventory, research and development, sales expenses, marketing programs and expenditures to expand distribution-channels. If we fail to address our competitive challenges, there could be a materially adverse effect upon our business, results of operations and financial condition.

      We rely upon a few resellers for a significant amount of our revenue. In fiscal year 2003, sales to our largest and second largest resellers represented 23.8% and 9.0% of net sales, respectively. Sales to the top ten customers represented 50.9% of net sales. The loss of any one of these resellers would have a materially adverse effect upon our business, results of operations and financial condition. We also may be adversely impacted by any conflicts that could arise between and among our sales channels.

      We believe that our future success depends upon our ability to provide industrial-strength printing solutions to a broader customer base and to maintain good relationships with our major OEMs and distributors. We believe that continued purchase of our products by OEMs is dependent upon many factors, including OEMs’ desire to use outside suppliers rather than investing the capital resources necessary to develop their own products.

      Our dependence upon a small number of major resellers exposes us to numerous risks, including:

	•	loss of channel;
	•	customers leveraging their buying power to change the terms of pricing, payment and product delivery schedules; and
	•	direct competition should a customer decide to manufacture printers internally.

      We cannot guarantee that a major reseller will not reduce, delay or eliminate purchases from us, which could have a materially adverse effect upon our business, results of operations and financial condition.

     We Operate in an Environment of Unpredictable Demand.

      We rely upon our ability to successfully forecast customer demand and to manage our worldwide inventory levels to support this demand in a cost-effective manner. Our sales to resellers are made under purchase orders that typically have short delivery requirements. Although we receive periodic order forecasts from our major reseller, they have no obligation to purchase the forecasted amounts and may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice. We cannot guarantee that our results of operations and financial condition will not be adversely affected in the future by such changes or cancellations or changes in demand.

     We Rely upon Domestic and Foreign Suppliers.

      Our products are manufactured using raw materials and components that are acquired domestically and internationally. We use a large number of suppliers and regularly evaluate the availability of potential alternate suppliers should circumstances change with existing suppliers. We internally develop most of the software used in our products. Certain software is purchased from suppliers through royalty agreements. If we were to

22

Table of Contents

     We Rely upon Our International Facilities.

      We rely heavily upon our international facilities for the manufacture of our products, key components and configuration. Our future operating results and financial condition may be adversely affected by several factors, including, but not limited to, failure of our international production and configuration facilities or international suppliers to supply products reliably, disruptions in international trade, or production and supply constraints that could result in additional costs. Also, we rely upon our ability to successfully predict demand and to adjust our worldwide inventories accordingly.

      There are many risks associated with international operations, including, but not limited to, the following:

	•	compliance with multiple and potentially conflicting regulations, including export requirements, tariffs, import duties, health and safety requirements and other barriers;
	•	differences in intellectual property protections;
	•	currency fluctuations;
	•	economic instability, including inflation and interest rate fluctuations;
	•	risk of loss of our international assets due to political or economic instability;
	•	competition from foreign suppliers;
	•	overlapping or differing tax structures;
	•	political or civil turmoil;
	•	war or conflict abroad;
	•	terrorist attacks and
	•	outbreaks of infectious disease such as Severe Accute Respiratory Syndrome (SARS).

      For fiscal years 2003, 2002, and 2001, international revenue (excluding United States sales) accounted for approximately 49.8%, 46.7%, and 45.1%, respectively, of our net sales. We expect that international revenue will continue to account for a significant percentage of our revenue for the foreseeable future.

      The terrorist attacks that occurred around the world and the SARS epidemic have created many economic and political uncertainties, some of which could negatively impact our business, results of operations and financial condition. Several possible results of these attacks or future attacks or epidemics could include supply-chain disruptions and deferral of customers’ purchasing decisions, but other potential impacts cannot be predicted. Failure to manage the risks posed by our international operations, customers and suppliers could have a materially adverse effect upon our business, results of operations and financial condition.

      The ability to attract and to retain key, highly-qualified personnel, both technical and managerial, is critical to our success.

      Developing, manufacturing and marketing our products is a complex process and requires significant expertise to meet customers’ specifications. Competition for personnel, particularly qualified engineers, is keen. The loss of a significant number of key personnel, as well as the failure to recruit and train additional key

23

Table of Contents

     Our Intellectual Property is Important to Our Success.

      We rely upon patents to protect our intellectual property. We execute confidentiality and non-disclosure agreements as needed and limit access to, and distribution of, our proprietary information. We have been granted a total of 46 United States and foreign patents.

      Our ability to compete successfully and to achieve future revenue growth depends, in part, upon our ability to protect our proprietary technology and to operate without infringing upon the rights of others. We may fail to do so. Such infringement claims, whether or not valid, could result in substantial costs and diversion of our resources. A third party claiming infringement also may obtain an injunction or other equitable relief, which effectively could block the distribution or sale of allegedly infringing products. The departure of any of our key management and technical personnel, or breach of non-disclosure obligations, or the failure to achieve our intellectual property objectives may have a materially adverse effect upon our business, results of operations and financial condition.

Item 7A.     Qualitative and Quantitative Disclosures About Market Risk

Foreign Currency Risk

      Our Singapore and European operations may be impacted by foreign currency fluctuations. We are not aware of any significant risks with respect to our foreign business other than those inherent in the competitive nature of the business and fluctuations in foreign currency exchange rates. Foreign currency transaction and remeasurement gains were $0.6 million for fiscal year 2003, compared with losses of $0.1 million for fiscal year 2002 and compared with gains of $0.3 million in fiscal year 2001. The primary reason for the gains in fiscal year 2003 was the strengthening of the Euro against the United States dollar. The primary reason for the losses in fiscal year 2002 was the result of a weakening Euro against the United States dollar. The future effect of changes in the value of the Euro or other foreign currencies on our results of operations or financial condition is difficult to predict.

      We employ a foreign currency hedging program in order to mitigate exposure to foreign currency rate movements. Information on our foreign currency hedging program is found in Note 1 of the Notes to Consolidated Financial Statements on page 37 of this Annual Report on Form 10-K.

      The effects of changes in the Euro’s value in fiscal year 2003, compared with fiscal year 2002, were as follows: an increase in revenue of $1.8 million, an increase in gross margin of $1.5 million, an increase in operating expenses of $0.4 million and foreign exchange gains of $0.7 million.

      The effects of changes in the Euro’s value in fiscal year 2002, compared with fiscal year 2001, were as follows: a decrease in revenue of $0.4 million, a decrease in gross margin of $0.4 million, a decrease in operating expenses of $0.1 million and foreign exchange losses of $0.4 million.

Interest Rate Risk

      We have financial instruments that are subject to interest rate risk, principally debt obligations and short-term cash investments. Borrowings are at variable rates for periods that generally do not exceed 90 days. Information about our bank borrowings is found in Note 3 of the Notes to Consolidated Financial Statements on page 40 of this Annual Report on Form 10-K. Information about the fair value of the financial instruments is found in Note 1 of the Notes to the Consolidated Financial Statements on page 32 of this Annual Report on Form 10-K. If interest rates were to increase by 10% (30 basis points on the seven-year note), the impact on our pre-tax earnings would not be material.

24

Table of Contents

Item 8.     Financial Statements and Supplemental Data

Index to Consolidated Financial Statements

25

Table of Contents

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Printronix, Inc.:

      In our opinion, the accompanying consolidated balance sheet as of March 28, 2003 and the related consolidated statements of operations, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Printronix, Inc. and its subsidiaries at March 28, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, Schedule II – Valuation and Qualifying Accounts presents fairly, in all material respects, the information set forth therein as of March 28, 2003 and for the year then ended when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements of the Company as of March 29, 2002 and for each of the two years in the period then ended, prior to the revisions described in Note 2, and the 2002 and 2001 financial statement schedule information were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those statements in their report dated April 26, 2002.

      As discussed above, the financial statements of Printronix, Inc. and its subsidiaries as of March 29, 2002, and for each of the two years in the period ended March 29, 2002 were audited by other independent accountants who have ceased operations. As described in Note 2, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, which was adopted by the Company as of March 30, 2002. We audited the transitional disclosures described in Note 2. In our opinion, the transitional disclosures for 2002 and 2001 in Note 2 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2002 or 2001 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2002 or 2001 financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

26

Table of Contents

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

      The following is a copy of a report previously issued by Arthur Andersen LLP. This report has not been reissued by Arthur Andersen LLP and Arthur Andersen LLP did not consent to the use of this report in this Form 10-K or any previously filed registration statements. As discussed in the Goodwill and Other Intangible Assets note, the company adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142) as of March 30, 2002. As discussed in the above referenced note, the company has presented the transitional disclosures for 2002 and 2001 required by SFAS No. 142. The Arthur Andersen LLP report does not extend to these revisions to the 2002 and 2001 consolidated financial statements. The revisions to the 2002 and 2001 consolidated financial statements were reported on by PricewaterhouseCoopers LLP as stated in their report appearing herein.

To the Board of Directors and Stockholders of Printronix, Inc.:

      We have audited the accompanying consolidated balance sheets of Printronix, Inc. (a Delaware Corporation) and subsidiaries as of March 29, 2002 and March 30, 2001, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended March 29, 2002. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Printronix, Inc. and subsidiaries as of March 29, 2002 and March 30, 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 29, 2002 in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Orange County, California

27

Table of Contents

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

28

Table of Contents

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

29

Table of Contents

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

30

Table of Contents

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS