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Form 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-9321

PRINTRONIX, INC.

(714) 368-2300
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES [X]            NO [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act).

YES [  ]            NO [X]

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

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PRINTRONIX, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

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PART I. FINANCIAL INFORMATION

PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

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

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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS continued
(Unaudited)

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

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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

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

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PRINTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

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

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PRINTRONIX, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 2003
(Unaudited)

1)		Basis Of Presentation
		The unaudited, consolidated financial statements included herein have been prepared by Printronix, Inc., pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading.
		In the opinion of management, the consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) considered necessary for a fair statement of the financial position and results of operations and cash flows as of and for the periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our latest Annual Report on Form 10-K for the fiscal year ended March 28, 2003, as filed with the Securities and Exchange Commission. The consolidated balance sheet as of March 28, 2003, presented herein has been obtained from the audited consolidated balance sheet contained in our latest Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.
		Unless the context otherwise requires, the terms “we,” “our,” “us,” “company” and “Printronix” refer to Printronix, Inc. and its consolidated subsidiaries.
		Certain amounts for the previous fiscal year have been reclassified to conform to the fiscal year 2004 presentation.
2)		Inventories
		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. We also perform regular reviews of our inventory and record a provision for estimated excess and obsolete items based upon forecasted demand, and any other known factors at the time. Inventories, which include material, labor and overhead costs, are valued at the lower of cost (first-in, first-out method) or market. Work in process inventory was immaterial for all periods presented.

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3)		Intangible Assets
		The company recorded $44 thousand and $133 thousand of intangible amortization expense, related to unpatented technology for the three months and nine months ended December 27, 2002, respectively. As of March 28, 2003, all intangible assets had been fully amortized.
4)		Bank Borrowings And Debt Arrangements
		Seven-Year Note
		On May 1, 2000, we obtained a credit facility with a United States bank for a $17.5 million, seven-year note secured by our Irvine facility. The seven-year note contains customary default provisions, no restrictive covenants and requires monthly principal and interest payments, with a balloon payment of $12.6 million due June 1, 2007. Interest on the note is at variable rates based upon the London Interbank Offered Rate (“LIBOR”) plus 1.25%, and is reset for periods from one month up to one year, at our discretion. The interest rate on the note at December 26, 2003 was 2.5% and the weighted average interest rate on the note for the current quarter was 2.4%. The year to date weighted average interest rate was 2.5%. Total interest expense on the note was $0.1 million for both the current and year ago quarter. Total fiscal year to date interest expense was $0.3 million and $0.4 million for the current and prior year periods, respectively. We ended the current quarter with a balance of $15.1 million on the note, which consisted of $14.4 million long-term debt and $0.7 million for the current portion of long-term debt.
		Lines Of Credit
		At December 26, 2003, one of our foreign subsidiaries maintained unsecured lines of credit for $2.1 million with foreign banks, which included a standby letter of credit of $1.5 million, reduced from $1.8 million on October 29, 2003. These credit facilities are subject to certain standard financial covenants. We were in compliance with these financial covenants for all fiscal periods presented. The parent company guarantees any amounts outstanding on these lines of credit. There were no cash borrowings against these lines of credit for the fiscal periods presented. No fees are charged for the unused portion of the lines of credit. Any borrowings on the lines of credit would be subject to interest rates at approximately 0.25% to 1.0% above the prime lending rate.
		In conjunction with our workers’ compensation insurance program, we obtained a standby letter of credit on December 19, 2003, from a United States bank for $0.2 million secured by a cash deposit. The standby letter of credit expires on December 20, 2004, but is subject to an automatic renewal. There were no cash borrowings against this letter of credit as of December 26, 2003. Any borrowings would be subject to interest rates at 2.0% above the prime lending rate, subject to certain maximum limits.

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		Credit Agreement For Hedging Activity
		On September 8, 2003, we increased our credit agreement with a major foreign bank to support our hedging activities from $0.9 million to $2.5 million. This credit agreement has no restrictive covenants and is available to fund any forward currency contracts should we be unable to satisfy our obligations. The agreement automatically renews annually, subject to certain compliance requirements. There are no annual fees under this agreement if no amounts are borrowed. Any borrowings under this agreement would be subject to interest rates available at that time. No amounts were borrowed under this credit agreement for the fiscal periods presented.
5)		Net Income Per Share
		Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted average number of shares of common stock outstanding and potential shares outstanding during the period, if dilutive. Net income per share data for the three and nine months ended December 26, 2003 and December 27, 2002, is as follows:

		The dilutive weighted average shares outstanding does not include the antidilutive impact of 34,850 and 724,884 weighted average shares for the three months and 73,557 and 575,386 weighted average shares for the nine months ended December 26, 2003 and December 27, 2002, respectively. The above shares were antidilutive because the exercise price of the stock options exceeded the average market value of the stock in the periods presented.
6)		Stock-Based Compensation
		We account for stock-based compensation issued to employees using the intrinsic-value-based method as prescribed by the Accounting Principles Board Opinion (“APB”) No. 25,

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		“Accounting for Stock Issued to Employees.” Under the intrinsic-value-based method, compensation is the excess, if any, of the fair market value of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. Compensation expense, if any, is recognized over the applicable service period, which is usually the vesting period. No stock-based employee compensation cost was recorded for the periods presented as all options granted under the stock-based compensation plan had an exercise price equal to the market value of the underlying common stock on the date of grant.
		The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation and is provided in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”

7)		Common Stock
		In the fourth quarter of fiscal year 2002, the Board of Directors authorized the company to purchase up to 500,000 shares of the company’s outstanding common stock. Purchases may be made from time-to-time in the open market. During fiscal years 2002 and 2003, 165,905 shares of common stock were repurchased at prices ranging from $9.03 to $11.87 for a total cost of $1.7 million. We repurchased 106,700 shares of common stock at prices ranging from $9.70 to $10.61 per share for a total cost of $1.1 million during the first quarter of fiscal year 2004. No shares of common stock were repurchased during the second and third quarters of fiscal year 2004. Future purchases of 227,395 shares of common stock may be made at our discretion.
		Stock options exercised totaled 95,763 and 325,459 for the three and nine months ended December 26, 2003, respectively. Cash generated from the exercise of employee stock options was $1.0 million and $3.2 million for the three and nine months ended December 26, 2003, respectively. For the three and nine months ended December 27, 2002, stock

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		options exercised totaled 13,576 and 72,496, respectively. Cash generated from the exercise of employee stock options during the three and nine months ended December 27, 2002 was $0.1 million and $0.5 million, respectively.
8)		Stock Incentive Plan
		Under our 1994 Stock Incentive Plan, options may be granted to purchase shares of our common stock. As of December 26, 2003, there were 947,763 stock options outstanding and 744,576 stock options available to grant.
9)		Restructuring Charges
		During fiscal year 2001, we completed a plan to restructure certain line matrix, thermal and verifier manufacturing, and support operations. The restructuring was initiated to reduce production costs by relocating certain line matrix and thermal manufacturing processes into our Singapore facility and by consolidating manufacturing of critical line matrix components into the Irvine facility. Also, configuration activities for printers for the domestic market were consolidated into the Irvine facility from the Memphis facility, and the verifier operations were relocated to the Irvine facility from another California location. In total, 72 positions were eliminated, or approximately 7.1% of the worldwide workforce.
		We fully utilized the remaining $59 thousand restructuring accrual for leasehold and rental costs on the unoccupied portion of the Memphis facilities, as of the second quarter of fiscal year 2004.
10)		Guarantees And Product Warranties
		Financial Accounting Standards Board Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requires that upon issuance of a guarantee, the guarantor must disclose and recognize a liability for the fair value of the obligation it assumes under the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002, and are applicable to the company’s product warranty liability and certain guarantees.
		Our financial statements reflect reserves for potential warranty claims based upon our claims experience and other known factors. 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. Estimated costs of future warranty obligations are charged to cost of sales in the period in which the products are sold.

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A summary of our accrued warranty obligation for the periods presented is as follows:

		In the normal course of business to facilitate sales of its products, the company may indemnify customers and hold them harmless against losses arising from intellectual property infringement claims. The term of these indemnification agreements is generally perpetual any time after execution of the agreement subject to statute of limitations restrictions. The maximum potential amount of future payments we could be required to make under these agreements is unlimited. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal and have not recorded a liability for these agreements. The company has also agreed to hold harmless a former officer of the company in the event of an unfavorable outcome of ongoing litigation. We believe the fair value of the resolution of this litigation is minimal and have not recorded a liability for it. In addition, in connection with the standby letter of credit agreement obtained for our workers’ compensation insurance program, we have agreed to indemnify the bank from any third party claims related to its performance on our behalf. The term of this indemnification agreement extends beyond the term of the standby letter of credit agreement. We believe the fair value of this indemnification agreement is minimal and have not recorded a liability for it.
11)		Commitments And Contingencies
		Contractual Obligations And Commercial Commitments
		We are obligated under certain borrowing and lease commitments. Additional information on our borrowing obligations can be found in Note 4. There were no material changes in our borrowing and operating lease agreements as of December 26, 2003 from that reported in our Annual Report on Form 10-K, except for the increase in the credit facility related to our hedging activity, the reduction in our foreign subsidiary’s standby letter of credit, and the addition of our December 19, 2003 standby letter of credit agreement as reported in Note 4.
		Operating Leases
		With the exception of Singapore, we conduct our foreign operations, Memphis operations and United States sales offices using leased facilities under non-cancelable operating

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		leases that expire at various dates from fiscal year 2004 through fiscal year 2008. We own the building in Singapore and have a land lease that expires in fiscal year 2057.
		Environmental Assessment
		In January 1994 and March 1996, we were notified by the California Regional Water Quality Control Board - Santa Ana Region (the “Board”) that ground under one of our former production plants and ground adjacent to property previously occupied by us was thought to be contaminated with various chlorinated volatile organic compounds (“VOCs”). Evidence adduced from site studies undertaken to date indicates that compounds containing the VOCs were not used by Printronix during our tenancy, but were used by the prior tenant during its long-term occupancy of the site. Presently, the Board continues to investigate the source of the VOCs. We believe we have fulfilled all requests to provide information at this time.
		In August 2002, we responded to an inquiry from the California Department of Toxic Substance Control (the “Department”) regarding our operations at the site of our former production plant. We believe we have fulfilled all requests for information at this time.
		As of December 26, 2003, we continued to maintain an accrual for $0.2 million, included in Accrued Liabilities Other, which we believe is a reasonable estimate to cover any additional expenses related to environmental tests that could be requested by the Board or the Department. We are convinced that we bear no responsibility for any contamination at the sites and we intend to defend vigorously any action that might be brought against us with respect thereto. Furthermore, we believe that we have adequately accrued for any future expenditures in connection with environmental matters and that such expenditures will not have a materially adverse effect upon our financial condition or results of operations and cash flows.
		Legal Matters
		We are involved in various claims and legal matters in the ordinary course of business. We do not believe that these matters will have a materially adverse effect upon our results of operations or financial condition.
		Accrued Liabilities Other
		Accrued liabilities other include reserves for potential tax issues.
12)		Other Comprehensive Income Or Expense
		Other comprehensive income or expense represents unrealized gains and losses on our Euro foreign currency forward exchange contracts that qualify for hedge accounting. The aggregate amount of such gains or losses that have not yet been recognized in net income is reported in the equity portion of the consolidated balance sheets as accumulated other comprehensive income or expense.

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		Under our foreign currency-hedging program, we can enter into foreign currency forward exchange contracts with maturities from 30 to 180 days with a major financial institution. We do not use the contracts for speculative or trading purposes. As of December 26, 2003, we had outstanding forward exchange contracts with a notional amount of $4.6 million. Based on the fair value of these contracts at December 26, 2003, we recorded a net liability of $0.4 million.
		The following table reconciles net income to comprehensive income for the fiscal periods presented:

13)		Segment And Customer Data
		We manufacture and sell a variety of printers and associated products that have similar economic characteristics as well as similar customers, production processes and distribution methods. We therefore have aggregated similar products and report one segment.
		For the year to date periods ended December 26, 2003 and December 27, 2002, we had two resellers, each of which represented a significant percentage of consolidated net sales. Sales to the largest reseller, IBM, represented 19.7% and 23.5% of net sales for the three and nine months ended December 26, 2003, respectively and 23.4% and 24.4% of net sales for the year ago quarter and prior year to date period, respectively. Sales to the second largest reseller represented 9.1% of net sales for the current quarter compared with 8.6% of net sales for the year ago quarter and 8.7% of net sales for the nine months ended December 26, 2003 compared with 9.0% of net sales for the year ago period. Sales to the top ten customers represented 53.0% and 49.7% of net sales for the three months and 51.7% and 50.1% of net sales for the nine months ended December 26, 2003 and December 27, 2002, respectively.
14)		Income Taxes
		We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all available evidence, including the expected timing of reversals of existing temporary differences, estimated future taxable income, prudent and feasible tax planning strategies, and recent financial performance. As a result of recent U.S. cumulative losses and the full utilization of our loss carryback potential, we concluded that

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		a valuation allowance was appropriate for the quarter and current year to date period, which resulted in no net increase in deferred tax assets.
		We have subsidiaries in various countries and are therefore subject to varying income tax rates. We have a favorable pioneer tax status in Singapore for income generated from manufacturing the Printronix P5000 Series line matrix products, resulting in a reduced consolidated effective tax rate when compared with the U.S. statutory rate. The pioneer tax status is scheduled to expire at the end of the current fiscal year. The tax provision for the three and nine months ended December 27, 2002, reflects the realization of certain deferred tax assets due to our ability to carryback and the lower income tax rates in foreign countries in which we operate. The tax provision for the three and nine months ended December 26, 2003, reflects the tax provision of our foreign operations and a full valuation allowance against net operating loss carrryforwards generated in the United States.
15)		New Pronouncements
		In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” This Issue provides guidance on when and how to separate elements of an arrangement that may involve the delivery or performance of multiple products, services and rights to use assets into separate units of accounting. The guidance in the consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The transition provision allows either prospective application or a cumulative effect adjustment upon adoption. The adoption of this Issue did not have a material impact on our financial position or results of operation.
		In April 2003, the Financial Accounting Standards Board (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. The adoption of this statement did not have a material impact on our financial position or results of operations.
		In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how certain financial instruments with characteristics of both liabilities and equity are classified and measured. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement did not have a material impact on our financial position or results of operations.

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PART I. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Unaudited)

PRINTRONIX, INC. AND SUBSIDIARIES

Except for historical information, this Form 10-Q 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 a resurgence of 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 should a resurgence of SARS occur; 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 adapt to changes in the requirements for RFID products by Wal-Mart and/or the Department of Defense or others; 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.

OVERVIEW

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. Our sales are impacted by worldwide capital spending levels, plant expansions and supply chain activity. We also believe our printer sales, line matrix printer sales in particular, have been impacted by competing technologies.

Overall, the results for the third quarter of fiscal year 2004 were consistent with the rebound in the global economy and information technology spending, and earnings were positive.

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Printronix returned to profitability from the losses experienced in the previous quarter. Revenue rebounded sharply from the low point experienced in the prior fiscal quarter. Revenue was about on par with the year ago quarter and, without the impact of IBM’s continuing transition to a direct ship method in the Europe, Middle East and Africa region (“EMEA”), would have increased over the prior year. Orders in our pipeline in the third fiscal quarter appeared to close more quickly than in the second quarter rather than being deferred as noted earlier in the year. The cost control initiatives we implemented have improved our gross margins and operating costs while simultaneously allowing us to continue to invest a higher than industry average in research and development and invest in key programs to promote revenue growth. The rebound in revenue, the cost control initiatives, and the impact of a stronger Euro, allowed an 80% improvement in year over year net income for the current quarter. We increased our cash balances by $3.8 million during the quarter as a result of our asset management programs and stock option exercises. We noted improvement in all of our internal key performance indicators; the order pipeline, revenue growth, gross margins, and cash balances.

During the quarter, we moved forward on our revenue growth initiatives and RFID (Radio Frequency Identification) has emerged as a solid market opportunity. We were first to market with a RFID printer and shipped our RFID “Smart Label Developer’s Kit” and entered into several key alliances during the quarter. We have expanded our global reach by adding additional sales personnel in the Asia Pacific region, China in particular, and also opened new sales offices in Mexico and Australia. We have invested in expanding our marketing efforts to our installed base and capturing more of the recurring revenue streams.

RESULTS OF OPERATIONS

Revenue

Compared with the Prior Year Quarter

Consolidated revenue for the current quarter was $33.9 million, a decrease of $0.2 million, or 0.7%, from the same period last year. The decline in revenue was primarily due to IBM’s conversion to a direct ship method in EMEA, resulting in a slow-down in orders from IBM. As they worked through this conversion, IBM continued to sell to their customers; however; they did not place replenishment orders with Printronix in order to work down their existing inventory. Once converted to a direct ship method, IBM will no longer need to stock inventory in EMEA. Instead, Printronix will ship the products ordered by IBM directly to IBM’s customers. We believe converting to direct ship will result in an improved business model in the future as it is more closely tied to user demands and removes costs from the supply chain. Conversion to a direct ship method was initiated in the second fiscal quarter. We expect the conversion to be completed in the fourth fiscal quarter.

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Sales by Geographic Region

Sales by geographic region, related percent changes and percent of total sales for the third quarter of fiscal year 2004 and 2003 were as follows:

The decline in Americas sales was primarily due to lower sales through the OEM channel. EMEA sales were down principally due to IBM’s transition to a direct ship method. We estimate the lost revenues to be approximately $1.3 million during the quarter and expect to complete the transition during the fourth quarter. Asia Pacific sales increased primarily due to growth in the distribution channel, mainly into China, Thailand and Indonesia.

Sales by Product Technology

Sales by product technology, related percent changes and percent of total sales for the third quarter of fiscal year 2004 and 2003 were as follows:

Industry market analysts currently estimate the line matrix worldwide market for 2002 was $233 million, of which we hold market share of 63%. We intend to maintain and grow our market share through a focus on emerging markets, where we believe line matrix printing is particularly well-suited for the growing manufacturing infrastructure. We also intend to grow our market share by the development of new inking technologies, and expanding applications. We are also placing special emphasis on geographic expansion, particularly in China as their economy expands. We believe line matrix printers offer a lower cost, reliable and robust alternative to laser printing as they can withstand harsh operating conditions.

Industry market analysts currently estimate the high-performance thermal printer worldwide market for 2003 was $194 million, of which we hold market share of 7.6%. We intend to grow thermal sales through the following initiatives; utilizing our existing market access for

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printer solutions which feature network management, open systems architecture, wireless solutions and RFID capabilities and entering strategic alliances to gain new market access.

Sales by Channel

Sales by channel, related percent changes, and percent of total sales for the third quarter of fiscal year 2004 and 2003 were as follows: