UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Washington, D.C. 20549

Form 10-K

(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended March 31, 2006
		For the fiscal year ended March 30, 2007
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number 0-9321

Printronix, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		95-2903992 (I.R.S. Employer Identification No.)
14600 Myford Road P.O. Box 19559, Irvine, California (Address of Principal Executive Offices)		92623 (Zip Code)

Registrant’s telephone number, including area code

(714) 368-2300

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

~~None~~ Common Stock, par value $0.01 per share, Including Common Share Purchase Rights (Title of each class) The Nasdaq Stock Market LLC (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: ~~Common Stock, Par Value $.01,~~None ~~Including Common Share Purchase Rights~~

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of 15(d) of the Act. Yes o No þ

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 a large accelerated filer, an accelerated filer or a non-accelerated. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company. Yes o No þ

On September 2329, ~~2005~~2006, the aggregate market value of the Common Stock (based upon the closing price of $1613.0039 per share as quoted in the Nasdaq Stock Market ~~Market~~LLC® on September 2329, ~~2005~~2006) held by non-affiliates of the Registrant was $7564,~~911~~092,~~808~~869.

The number of shares of the registrant’s Common Stock outstanding as of May 2625, ~~2006~~2007 was 6,~~601~~679,~~524~~564 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on August 2221, ~~2006~~2007 are incorporated by reference into Part III and Part IV of this report.

PRINTRONIX, INC.

INDEX TO FORM 10-K

		Page
Message from the President			1
PART I:
Item 1.	Business		2
Item 1A.	Risk Factors		1413
Item 1B.	Unresolved Staff Comments		2018
Item 2.	Properties		2019
Item 3.	Legal Proceedings		2019
Item 4.	Submission of Matters to a Vote of Security Holders		2120
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		2120
Item 6.	Selected Financial Data		22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2322
Item 7A.	Qualitative and ~~Quantitative~~Quantitiative Disclosures About Market Risk		3940
Item 8.	Financial Statements and Supplementary Data		4142
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		7172
Item 9A.	Controls and Procedures		7172
Item 9B.	Other Information		72
PART III:
Item 10.	Directors, ~~and~~ Executive Officers ofand ~~the~~Corporate ~~Registrant~~Governace		72
Item 11.	Executive Compensation		7374
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		74
Item 13.	Certain Relationships and Related Transactions, and Director Independence		74
Item 14.	Principal ~~Accountant~~Accounting Fees and Services		74
PART IV:
Item 15.	Exhibits and Financial ~~Statements~~Statement Schedules		7475
SIGNATURES			7576
EXHIBIT 10.8
EXHIBIT 10.10
EXHIBIT 14
EXHIBIT 21
EXHIBIT 23
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I

Forward-Looking Statements

Except for historical information, this Annual Report on 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 peripheral 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 an outbreak of avian flu or other world health epidemic~~, or from a resurgence of SARS (Severe Acute Respiratory Syndrome)~~; the ability of the company to maintain its ~~its~~ production capability in its Singapore plant or obtain product ~~product~~ from its Asia Pacific suppliers should a ~~resurgence of SARS or other~~ world health epidemic 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 requirements for radio frequency ~~identification~~ identification (“RFID”) products by Wal ~~Wal~~«Mart and/or the Department of Defense (the “DOD”) and 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 its markets; ~~and~~ the ability of the company to continue to develop and ~~and~~ market new and innovative products superior to those of the competition and to keep pace with technological change.; Weand that InfoPrint Solutions Company, the successor entity to IBM’s Printing Systems Division, may change its product and marketing focus in a way that reduces its purchase of Printronix products. We encourage readers of this Annual Report on Form 10-K to review the Risk Factors section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. The company does not undertake to publicly update or revise any of its forward-looking statements, even if experience or new information shows that the indicated results or events will not be realized.

Message from the President

Fiscal ~~2006~~2007 Year in Review —

Revenue for fiscal year ~~2006~~2007 was $~~127~~128.84 million, ~~down~~up from $~~131~~127.78 million a year ago. The net ~~loss~~income for fiscal year ~~2006~~2007 was $82.09 million, or $10.2845 per diluted share, compared with net ~~income~~loss of $18.90 million, or ($01.30 28) per diluted share, in fiscal year ~~2005~~2006.

~~The~~Fiscal ~~net~~year ~~losses~~2007, ~~for~~which ~~the~~ended ~~fiscal~~March 30, 2007, resulted in continued year ~~2006~~over ~~were~~year ~~due~~growth ~~primarily~~in tothe line matrix and thermal ~~three~~product ~~factors:~~lines. anPrintronix ~~increase~~line matrix business increased slightly in ~~the~~fiscal ~~tax~~year ~~asset~~2007, ~~valuation~~primarily ~~allowance~~due to a of $2.62 million ~~resulting~~increase ~~from~~in ~~cumulative~~consumables ~~losses~~sales inover the prior ~~United~~fiscal ~~States,~~year anas ~~increase~~more inlegacy ~~general~~printers ~~and~~were ~~administrative~~converted to the new ~~expenses~~P7000 ~~due~~family. toThe ~~costs~~P7000 ~~incurred~~family ~~for~~of ~~Sarbanes-Oxley~~printers, ~~compliance~~introduced ~~for~~in fiscal ~~consulting~~year ~~and~~2006, ~~external~~uses ~~audit~~a ~~fees~~unique ofprint ~~$2.5 million,~~management ~~and~~system awhich has been ~~tax~~very ~~charge~~well ofreceived $2by our customers.~~1 million~~ ~~resulting~~As ~~from~~a ~~repatriation~~result, ofline matrix ~~$32.0 million~~ribbon ofsales ~~foreign~~are ~~earnings~~growing significantly as more legacy printers are converted to the UP7000 family.S.

~~Fiscal~~The ~~year~~increase ~~2006, which ended March 31, 2006, resulted~~ in ~~continued~~ ~~year over year growth in~~ line matrix ~~and~~consumables ~~thermal product~~sales ~~lines in the Americas and Asia Pacific. That growth~~ was partially ~~more than~~ offset by a ~~sales downturn in EMEA of 11~~5.79 percent ~~year~~decline ~~over~~in ~~year~~printer sales in ~~all~~Asia Pacific, ~~technologies~~mainly due ~~primarily~~ to aseveral ~~slowdown~~large sales in ~~the~~fiscal ~~Western~~year ~~Europe economy~~2006 ~~manufacturing~~into ~~sector~~the ~~and~~South ~~automotive~~East ~~segments~~Asia ~~in particular~~market. ~~The continuing~~A ~~development~~new oflow-end ~~RFID~~line ~~solutions maintained Printronix~~matrix asmodel, ~~a leader in supply chain printing for~~ the ~~Wal«Mart/DOD~~ ~~RFID initiatives. Unfortunately~~P7X02H, ~~contrary~~was tointroduced ~~industry expectations, RFID deployment stayed~~ in ~~the~~fiscal ~~pilot~~year ~~program~~2007 ~~stage~~as ~~another~~well ~~year,~~as ~~resulting~~a innew ~~Printronix~~high-definition ~~RFID~~P7000HD printer ~~sales~~that ofis ~~$3.2 million~~optimized ~~vs.~~for ~~$2.6 million~~printing ~~for~~in ~~fiscal~~Windows-based ~~year 2005~~environments. ~~However,~~Although ~~the~~line ~~industry~~matrix ~~did~~technology ~~settle~~is onnot ~~the~~a ~~new~~growth ~~EPC~~market, ~~Global~~it ~~Gen~~continues 2to ~~label~~be ~~standard~~an ~~with~~ongoing ~~initial~~user ~~production~~requirement ofbecause ~~Gen~~it 2provides ~~compliant labels and hardware in~~ the ~~latter~~ ~~half~~lowest ~~of fiscal year 2006. In addition, the~~ cost of ~~RFID~~ ~~labels~~printing, ~~decreased~~and tothe amost ~~more~~reliable, ~~affordable 12¢ — 15¢~~versatile ~~range.~~printer ~~Printronix~~for ~~introduced~~mission ~~its~~critical ~~new~~applications, ~~line~~especially ofin ~~“RFID~~harsh ~~ready”~~environments. ~~thermal~~As ~~printers at~~ the ~~start~~world ofmarket ~~fiscal~~share ~~year~~leader ~~2006~~in ~~and~~this ~~added xml and other application features as the year progressed~~technology, ~~including Gen 2 upgrades for earlier~~ Printronix ~~RFID~~has ~~printers. Overall, RFID sales were up~~a ~~21.4 percent~~good ~~for~~ongoing ~~fiscal~~line ~~year~~matrix ~~2006 vs~~business. ~~fiscal year 2005.~~ ~~Going forward,~~

Printronix thermal bar code label business increased 5.6 percent, or $1.3 million, over fiscal year 2006. In the fourth quarter of fiscal year 2007, Printronix introduced the mid-range SL4M/T4M light industrial printer/encoder.

~~Wal«Mart~~This ~~will~~new beproduct ~~requiring Gen~~represents 2the ~~labels~~industry’s ~~starting~~first ~~in July 2006, and will substantially~~globally ~~increase~~available ~~the number of suppliers~~mid-range, ~~stores,~~industrial-grade ~~warehouses~~metal ~~and~~printer/encoder ~~products~~designed ~~that must have RFID labels by January 2007. Printronix is well positioned~~ for ~~growth~~and inupgradeable ~~RFID deployment, which the industry expects~~ to goGen ~~through~~2 anUHF ~~inflection point in calendar 2007. Overall, thermal printer sales (including~~ RFID) ~~were down~~applications. ~~4.3 percent~~Together ~~for~~with ~~fiscal~~the ~~year~~T5000r ~~2006~~high ~~vs.~~performance ~~fiscal~~product ~~year 2005~~line, ~~primarily~~ ~~due to an economic slowdown in the automotive sector~~this ingives ~~Western~~a ~~Europe.~~full ~~Printronix~~range ~~continues~~of toindustrial ~~believe that~~ thermal~~/RFID~~ ~~printing~~bar iscode ~~the~~label ~~“growth engine” for future Printronix sales~~printers.

~~Printronix~~In ~~line~~January ~~matrix~~2007, ~~business~~IBM, ~~declined~~our ~~1.4 percent~~largest ~~in fiscal year 2006~~customer, ~~primarily due to a decline in printer sales~~representing ~~offset~~20.0 percent byof ~~stronger~~our ~~recurring~~fiscal ~~revenue~~year ~~within~~2007 ~~the~~sales, ~~installed~~and ~~base.~~Ricoh ~~The~~announced ~~line~~their ~~matrix~~intent ~~growth~~to inform ~~the~~a ~~Americas~~joint ~~and~~venture ~~Asia~~company, ~~Pacific was~~the ~~offset~~InfoPrint bySolutions ~~lower~~Company, ~~sales~~which inwill ~~EMEA~~acquire ~~due to slowness in the~~IBM’s ~~manufacturing~~Printing ~~sector~~Systems ~~and~~Division. ~~automotive~~The ~~segment~~Printronix incontract ~~particular.~~with ~~This~~IBM has ~~product~~been ~~line~~assigned ~~had~~to aInfoPrint ~~major~~Solutions. ~~update~~As inIBM’s ~~the second quarter of fiscal~~Printing ~~year~~Systems ~~2006,~~Division ~~providing~~is ~~users~~coping with ~~higher~~the ~~print~~effects ~~quality,~~of athis ~~lower~~transition, ~~cost~~sales ofto ~~ownership~~IBM ~~and~~during ~~greater~~our ~~user~~fourth ~~convenience.~~quarter Inof ~~April~~fiscal ~~2006,~~year a2007 ~~high~~declined ~~definition~~$1.4 million ~~model~~when ~~was~~compared ~~introduced~~to ~~that~~the ~~provides~~same ~~direct~~quarter ~~printing~~last ~~from “windows” for industrial applications~~year. ~~These~~ The new ~~user~~joint ~~benefits~~venture ~~provide~~is ~~reasons~~expected to ~~upgrade~~be ~~and extend~~established late in the ~~installed~~first ~~base~~quarter of ~~line~~fiscal ~~matrix~~year ~~printers~~2008. ~~Although~~As ~~line~~a ~~matrix~~result of ~~technology~~these isdistractions, ~~not~~we ado ~~growth~~not ~~market,~~believe itthat ~~continues~~sales to beIBM ~~an ongoing~~will ~~user~~return ~~requirement~~to ~~because~~normal itlevels ~~provides~~until later in the ~~lowest~~year. ~~cost~~The ofdecline in ~~printing,~~OEM ~~and~~sales ~~the~~was ~~most~~offset ~~reliable,~~by ~~versatile~~increased ~~printer~~sales ~~for~~through ~~mission~~the distribution ~~critical~~channel ~~applications.~~and Asdirect ~~the~~sales. ~~world~~Much ~~market~~of ~~share~~this ~~leader~~increase in ~~this~~sales was in ~~technology~~2-tier distribution, ~~Printronix~~which ~~has~~was astarted ~~good~~in ~~ongoing~~fiscal ~~line~~year ~~matrix business~~2006.

During fiscal year ~~2006~~2007, ~~Printronix~~we ~~updated~~were ~~its~~able ~~major~~to ~~product lines~~increase ~~of high performance thermal/RFID label printers and line~~our ~~matrix~~profitability ~~printers~~over ~~with~~the ~~added~~prior ~~value~~fiscal ~~for~~year ~~users.~~by ~~In addition,~~increasing ~~Printronix,~~productivity ~~along~~and ~~with~~continuing ~~other~~our ~~industry~~focus ~~vendors,~~on iscost ~~adding~~containment ~~RoHS~~and ~~(Restriction~~product ofcost ~~Hazardous~~reduction. ~~Substances)~~Gross ~~compliance~~margin ~~for~~increased ~~Europe that~~from is37.7 percent ~~required~~in ~~for~~fiscal ~~all~~year ~~products~~2006 ~~starting~~to ~~July 2006~~39.0 percent ~~Taken together,~~in ~~this~~fiscal ~~has~~year ~~used~~2007. ~~available~~Operating ~~development~~expenses ~~resources~~decreased ~~and added cost for~~6.8 percent ~~these~~compared ~~product line transitions. These costs are expected~~ to ~~decrease~~ ~~in the latter half of~~ fiscal year ~~2007~~2006, ~~and~~particularly ~~development resources~~through ~~will~~reduced ~~become available for more new products throughout~~labor ~~fiscal year 2007~~costs.

~~Financial~~Cash ~~operating~~and ~~performance in fiscal year 2006 was heavily impacted by Sarbanes~~short-~~Oxley~~term ~~costs,~~investments ~~which~~ were $238.59 million~~, or~~ ~~1.9 percent~~at ~~of revenue. Printronix is a global business~~the ~~with~~end ~~a “microcap” capitalization that qualifies for current SOX Section 404 compliance. The cost~~ of ~~implementing~~ ~~SOX~~fiscal onyear ~~companies~~2007 ~~such~~compared asto ~~Printronix is more onerous than on larger companies. Offshore cash of~~ $3242.01 million ~~was~~ ~~repatriated~~at ~~under~~ the ~~American Jobs Creation Act~~ ~~(“AJCA”),~~end atof afiscal ~~total~~year ~~cost of $2.3 million~~2006, ~~including~~ ~~consulting~~primarily ~~expense~~due ofto $0.2 ~~million, income tax of $1~~.03 million, ~~and foreign withholding tax expense~~ of ~~$1.1 million.~~dividends Inpaid ~~addition,~~to itstockholders ~~was~~during ~~necessary~~fiscal toyear ~~increase~~2007 ~~the~~and ~~deferred tax valuation allowance by~~ $2.65 million ~~due~~in ~~to cumulative~~taxes ~~losses~~related into the ~~United~~funds ~~States. Profit was further~~repatriated ~~impacted~~under bythe aAmerican ~~drop~~Jobs inCreation ~~revenue~~Act ~~due~~at tothe anend ~~economic~~of ~~slowdown~~fiscal inyear ~~Western Europe and the product line transitions noted above~~2006. ~~As we~~We gobelieve ~~into~~that ~~fiscal~~this ~~year~~strong ~~2007,~~cash ~~Printronix~~position iscan ~~focused~~fund ~~on staying in~~future ~~the~~growth ~~forefront of RFID deployment for supply chain applications~~opportunities, ~~expanding~~ ~~geographic~~as ~~and~~well ~~other~~as ~~channels~~support tocontinuing ~~market and reducing~~stockholder ~~product costs~~dividends.

The Printronix balance sheet remains strong, with net cash and short-term investments of $42.1 million at the end of fiscal year 2006 vs. $44.9 million at the end of fiscal year 2005, after payment of $1.7 million of dividends to stockholders during fiscal year 2006. We believe that this strong cash position can fund future growth opportunities.

Robert A. Kleist
President and Chief Executive Officer
Printronix, Inc.


Item 1.	*Business*

General

Printronix is the worldwide leader in multi-technology supply-chain printing solutions for the industrial marketplace. We manufacture three types of applications-compatible printers — line matrix, thermal and fanfold laser, as well as printer management software. Our integrated network ~~network~~ solutions enable the printing of bar codes, labels, forms, and reports, verify their accuracy and offer unequaled diagnostic ~~diagnostic~~ technology. The ~~solutions~~printers and ~~printers~~their applications are based on an an open systems architecture that facilitates seamless integration ~~integration~~ into enterprise networks and operation with legacy applications ~~applications~~ written for other printers.

Printronix continually invests in new technology to meet the user’s need to transition to new information technology (“IT”) infrastructures. This is exemplified by the company’s entry in RFID smart label (label with an embedded chip and antenna) printing solutions. Printronix was the first to deliver RFID printing for the Wal «Mart/DOD compliance requirements and we foster collaborative partnerships to develop products and solutions that enable Wal «Mart/DOD suppliers to fulfill these requirements in a timely manner without business interruption.

Printronix, Inc. was incorporated in California in 1974 and was reincorporated in Delaware in December 1986. The headquarters are located at 14600 Myford Road, Irvine, California, 92623 and the internet web address is www.printronix.com. Our main phone number is (714) 368-2300. All of Printronix’s filings with the Securities and Exchange Commission (“SEC”) are available free of charge through the investor relations page on the internet site, as soon as reasonably practicable after such documents are filed, or alternatively at www.sec.gov. Our stock is traded on the Nasdaq Stock Market LLC under the symbol PTNX. 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 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

embedded chip and antenna) printing solutions. Printronix was the first to deliver RFID printing solutions for the Wal«Mart/DOD compliance requirements and we foster collaborative partnerships to develop products that enable Wal«Mart/DOD suppliers to fulfill these requirements in a timely manner without business interruption. Printronix continued to be a leader in the worldwide UHF Electronic Product Code (“EPC”) printer market in 2005, according to the 2005 Global RFID Planning Service study conducted by Venture Development Corporation (“VDC”).

Printronix, Inc. was incorporated in California in 1974 and was reincorporated in Delaware in December 1986. The headquarters are located at 14600 Myford Road, Irvine, California, 92623 and the internet web address is www.printronix.com. Our main phone number is (714) 368-2300. All of Printronix’s filings with the Securities and Exchange Commission (“SEC”) are available free of charge through the investor relations page on the internet site, as soon as reasonably practicable after such documents are filed, or alternatively at www.sec.gov. Our stock is traded on the Nasdaq Stock Market under the symbol PTNX. 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 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

Printing Technologies

Printronix products are designed for use in mission-critical applications where unsurpassed reliability and performance are crucial. The products are used in industrial settings such as manufacturing plants and distribution centers, as well as in back offices and information technology centers. The printers are available in languages used around the world. We support our global network of users, channel partners and strategic alliances with manufacturing and configuration sites located in the United States, Singapore, Holland and Mexico along with 2320 sales and support locations around the world.

The printers function on a wide range of computer systems and enterprise software solutions and are compatible with a variety of label-generation and label-management software applications. All Printronix printers have extensive industrial graphics capabilities to support the most popular industrial graphics languages while producing every type of printed computer output, including labels, bar codes, RFID smart labels, multi-part forms and reports. In fiscal year 2007, we introduced several new printers that expanded all product lines including: P7000HD, P7000 and Hanzi line matrix products; the L7032 fanfold laser product; and SLPA8000, SL4M and T4M thermal bar code label printing products.

Market Overview

Based on the most recent market share studies conducted by Gartner, DataQuest and Infosource, in calendar year 2005, Printronix had a 60.4 percent market share in the worldwide line matrix market, excluding Japan. The market continued to experience declining sales worldwide, but we were able to minimize the decline relative to the market and increased market share in all regions as a result. Printronix worldwide high-performance thermal market share was 8.2 percent in 2005. Printronix continues to gain exposure to leading Consumer Packaged Goods (“CPG”) enterprises through the RFID initiatives, which are contributing to an increase in revenue for both RFID and non-RFID thermal products in the Americas region. Revenue shipment of RFID printers to EMEA (Europe, Middle East and Africa) and Asia Pacific regions has commenced.

During calendar year 2005, we enhanced the series of RFID printer/encoders with new features and EPC Gen 2 protocol support. This enabled us to continue as a leader in the fast growing RFID UHF printer/encoder segment, according to the Preliminary 2006 Global RFID Planning Service study conducted by VDC. Although the final RFID report is not yet available at the time of this publication, the initial VDC findings estimate the 2005 global UHF desktop and applicator market to be at least $8.1 million, an increase of 79 percent. Printronix captured $2.6 million of the market, an increase of 37 percent.

Industry analysts do not track the size of the fanfold laser market; however, we believe the company continued to have a significant market share in the high-end fanfold laser label-printing segment.

Geographical Regions

Revenue is classified into three geographical regions: The Americas, EMEA, and Asia Pacific. Printronix products are sold in eighty-~~one~~nine countries. We believe that a ~~large~~growing percentage of of our future revenue will continue to come from outside of the Americas. Sales outside the Americas were $65.1 million in fiscal year 2007, or 50.7 percent of total sales. We believe the largest growth opportunities for line matrix exist in the industrializing countries of Asia Pacific, especially China and India, and also in areas of EMEA. Growth opportunities for thermal, and in particular RFID, exist worldwide starting with North America and growing into EMEA and Asia Pacific as standards are set for those regions. The products are predominantly 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” A summary of revenue and assets by region can be found in Note 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

Growth Strategy

Printronix intends to continue investing in competitive advancement of line matrix, thermal, and fanfold laser product lines. Additional investments will continue to be directed to tie these products together in printing solutions that deliver high user value in global enterprise networks.

About 50.5 percent of total revenue in the last quarter of fiscal year 2007 was derived from printers and options that were introduced during fiscal years 2006 and 2007 (excludes consumables revenue). This includes revenue from our updated line matrix and thermal product lines. The process of updating the fanfold laser product line was started in fiscal year 2007 and continues through fiscal year 2008.

Line matrix investments support expanded new applications, such as the new high definition P7000HD model introduced in fiscal year 2007 that prints directly from a Windows operating environment with high resolution printing, and the P7X02H which expands complex Asian character printing at the lower performance end of our product range. Also, ribbon technology continues to be expanded to enable consistent print quality and product reliability.

Thermal printer models were expanded in March 2007 with the introduction of the SL4M, our most affordable RFID printer. It is a mid-range performance industrial printer that complements the high performance SL5000 series printers. Similar to the high performance models, the new mid-range industrial RFID printer is available in an RFID ready version, the T4M, for printing bar codes only. In addition, the new SLPA 8000 RFID label applicator was introduced during fiscal year 2007 as a higher performance upgrade to the prior SLPA 7000 label applicator. The SLPA 8000 is also available in an RFID ready version that prints bar codes only. Printronix intends to continue its leadership in RFID printing solutions with both label printers and label applicators that protect the customer’s investment in bar code printing with equipment that can be easily upgraded on-site for RFID printing.

~~come~~Fanfold ~~from~~laser ~~outside~~printers ofare ~~the~~particularly ~~Americas.~~suited ~~Sales outside the Americas were $64.8 million in fiscal year 2006, or 50.7 percent of total sales. We believe the largest growth opportunities~~ for ~~line matrix exist in the industrializing~~batch ~~countries~~printing of ~~Asia~~labels ~~Pacific, especially China,~~ and ~~also in areas of EMEA. Growth opportunities for thermal~~, ~~and in particular RFID~~therefore, ~~exist worldwide starting with North America and growing into EMEA and Asia Pacific as standards~~ are ~~set~~a ~~for~~complementing ~~those~~solution ~~regions.~~to ~~The~~our ~~products~~line ~~are~~matrix ~~predominantly priced in United States dollars~~ and inthermal ~~Euros~~printers. AThis ~~summary~~product ofline ~~the effects of the change in~~has ~~the~~not ~~Euro’s~~been ~~value~~upgraded ~~can be found~~ in ~~Item 7, “Management’s~~recent ~~Discussion~~years ~~and~~due ~~Analysis~~to offocus ~~Financial Condition~~on ~~and~~line ~~Results of Operations.” A summary of revenue~~matrix and ~~assets~~thermal/RFID ~~by region can be found in Note 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K~~development.

Printronix also intends to continue ~~Growth~~higher-than-industry-average ~~Strategy~~engineering expenditure in order to maintain our focus on solutions that seamlessly integrate all of our product lines into global enterprise networks. Tailored to mission-critical applications, these solutions operate with legacy applications, provide the most efficient management of these reliable printers in the enterprise network, and have the ability to manage compliance requirements for both bar coded and RFID labels, a growing requirement for supply-chain printing.

~~We intend to continue investing in printing solutions and to~~ ~~leverage those solutions across our line matrix, thermal and~~Technology ~~fanfold~~and ~~laser~~Product ~~products. Printronix believes our strong balance~~Development ~~sheet positions us well to pursue growth opportunities across all three technologies.~~

Printronix ~~intends~~core totechnologies ~~continue~~include toline ~~invest~~matrix inand ~~high-speed~~thermal print ~~line~~engines, subsystem controllers, printing system software, ~~matrix~~RFID smart label printing/encoding, network-printer ~~development~~management and bar code verification. Line matrix, thermal and ~~believes~~laser printers developed from these ~~high-speed~~technologies ~~models~~are unified by a ~~offer~~common ancontrol ~~opportunity~~architecture tocalled ~~replace~~Printronix ~~aging~~System Architecture (“PSA”tm), the ~~prior~~latest ~~generation~~version ~~line~~of which is PSA3. This architecture permits ~~matrix~~all ~~printers~~three ~~and~~printing technologies to ~~fulfill~~be ~~the~~application-compatible ~~growing~~by supporting ~~need~~common ~~for~~industrial ~~reliable~~graphics languages, host ~~low~~communication ~~cost~~protocols, ~~mission~~and ~~critical~~global ~~printing~~network inmanagement, ~~emerging~~thereby enhancing ~~markets~~user productivity and printer up-time. WePrintronix has ~~continue~~designed toand ~~develop~~developed ~~enhancements~~software and ~~new~~hardware ~~features~~that leads the industry in connectivity to ~~refresh~~allow the printers and applicators ~~line~~to ~~matrix~~operate ~~products~~in a wide variety of computer systems, software applications and ~~are~~networks. ~~actively~~In ~~designing~~addition, ~~improvements~~emulation software has been developed which allows the printers and applicators to be placed in environments with equipment manufactured by others and ~~ribbon~~seamlessly ~~inking~~print ~~technology~~the host data streams without the need for modifying ~~line~~the ~~matrix~~applications. Printronix printers are designed to print the local languages of most regions around the world.

InPrintronix ~~fiscal~~also ~~year~~offers ~~2006~~advanced network-printer management solutions with PrintNet® Enterprise, wewhich ~~continued~~is toa ~~place~~combination ~~special~~of ~~emphasis~~hardware onand software ~~geographic~~components. ~~expansion~~PrintNet Enterprise is a web-enabled remote printer-management tool, ~~particularly~~combining inprinter ~~China~~diagnostics, troubleshooting, toan ~~fully~~alerting ~~capitalize~~system and visibility that allows onremote ~~the~~management ~~growth~~of Printronix printers anywhere in ~~emerging~~the ~~markets~~world from a networked desktop. ~~The~~PrintNet ~~company~~Enterprise ~~expects~~includes tospecial ~~continue~~printer capabilities, an interface connection to ~~invest~~an ~~resources~~Ethernet network inand ~~high~~a Java-~~growth~~based ~~industrializing~~software application providing advanced ~~countries~~configuration-management ortools, ~~under-served~~event ~~markets~~notification, ~~around~~remote status ~~the~~and ~~world~~diagnostic capabilities.

~~Printronix~~While ~~expects~~thermal toprinters ~~increase~~are ~~sales~~ideal ~~through~~for ~~the~~industrial ~~OEM channel by~~labeling ~~expanding~~applications ~~the~~because ~~sales~~of ~~growth~~their ~~program~~reliability ~~with~~and ~~IBM.~~speed, ~~Under this program~~adverse inconditions ~~fiscal~~may ~~year~~arise ~~2006,~~whereby webar ~~provided~~codes ~~field~~cannot ~~sales~~be ~~support for IBM and~~printed ~~its~~accurately. ~~resellers~~These asconditions ~~well~~can asbe ~~telemarketing~~caused toby ~~the~~print ~~IBM~~head ~~installed base~~wear ~~for~~(the ~~demand-generation~~print inhead ~~the~~is ~~United~~considered ~~States.~~a ~~The~~consumable), ~~sales-teaming~~anomalies in the ~~program~~paper, ~~has~~and ~~allowed~~contaminant build-up us due to ~~stop~~ the ~~decline~~operating inenvironment. ~~sales~~Printronix tooffers ~~IBM~~the inunique ~~the~~ODVtm (Online ~~United~~Data ~~States~~Validation) incapability ~~fiscal~~that ~~year~~verifies ~~2006.~~all ~~Printronix~~bar ~~has started~~codes ~~deployment~~produced ofon ~~this~~T5000 ~~program~~thermal inprinters ~~EMEA~~are ~~and~~readable ~~other~~by ~~selected~~bar ~~countries~~code ~~around~~scanners, ~~the~~thus ~~world~~eliminating ~~during~~disruption ~~fiscal~~and ~~year~~costly ~~2006.~~rework ~~IBM~~in is the ~~biggest~~ ~~channel~~supply-chain, toas ~~market~~well ~~and~~as ~~teaming~~minimizing ~~with~~supplier ~~IBM~~charge-backs in bar code compliance applications. ODV analyzes each ~~region~~bar iscode ~~designed~~immediately toafter ~~grow~~the ~~both~~label ~~line~~is ~~matrix~~printed and ~~thermal~~validates ~~printer~~that ~~sales,~~the ~~since~~bar ~~IBM~~code is awithin ~~Printronix~~specifications. ~~OEM~~The ~~customer~~T5000 ~~for~~will ~~both of these~~automatically ~~printing~~strike ~~technologies.~~out ~~The~~an ~~plan~~invalid islabel toand ~~continue~~print ~~growing~~a ~~the~~new ~~sales~~label. ODV also ~~teaming~~provides ina ~~more~~quality ~~countries~~control ~~into~~record ~~fiscal~~of ~~year~~each ~~2007~~bar code printed. ~~This~~ODV Data ~~plan~~Manager, isintroduced ain fiscal year 2003, provides enhanced ~~multi-year~~data ~~program~~capturing and ~~results~~reporting ~~usually~~capabilities ~~appear~~and 1the ability to evaluate 2data within each bar code. RFID ~~years~~printers have a ~~after~~similar ~~inception~~capability.

~~Printronix~~Fiscal ~~intends~~year to2007 ~~grow~~was ~~revenue~~a ~~from~~significant ~~the~~year ~~installed~~for ~~base~~new ofproduct ~~printers~~introductions ~~through~~in ~~demand-generation~~line ~~programs~~matrix, ~~expanding~~thermal, ~~channels~~RFID, ~~for supplies~~ Print/Encode/Apply and ~~increasing~~laser ~~services~~technologies. ~~Services~~For ~~include~~line matrix, Printronix introduced ~~maintenance,~~enhancements ~~repairs,~~to ~~spare~~the ~~parts~~P7000 family. ~~logistics~~The ~~programs~~P7000HD, ~~and~~introduced ~~professional~~in ~~services.~~the ~~Particular~~first ~~focus~~quarter of fiscal year 2007, is ~~being~~a ~~placed~~new high-definition line matrix printer designed for use in Windows environments, enabling near laser quality printed output on a ~~growing~~very ~~supplies~~wide ~~and~~variety ~~services~~of informs. ~~EMEA~~The ~~and~~P7000HD ~~Asia~~prints ~~Pacific~~at ~~where~~79 inches per minute. The P7X02H offers a lower cost entry point into our ~~current~~family ~~market~~of ~~share~~Hanzi isline ~~much~~matrix ~~less~~models, ~~than~~for in the ~~Americas~~Asian markets.

WeNew ~~believe~~printer ~~the~~models ~~growing~~were ~~importance~~also ofintroduced ~~RFID~~for in the ~~supply-chain~~thermal, RFID, ~~presents~~and ~~growth~~print/apply ~~opportunities~~product lines. ~~Printronix~~The ~~RFID~~SL4M ~~products~~and ~~are~~T4M, launched ~~recognized~~worldwide asin the ~~industry~~fourth ~~leader~~quarter ~~and~~of wefiscal ~~have~~year a2007, ~~major~~form ~~share~~a ofnew ~~that~~mid-range ~~small,~~industrial ~~but~~platform ~~rapidly~~with ~~growing~~full ~~market.~~PSA ~~During 2006, Printronix~~system ~~announced~~compatibility. aLike ~~second~~the ~~generation of a high~~higher-~~performance~~end ~~thermal product~~T5000 ~~line~~family, ~~with~~ the ~~introduction~~T4M ~~of the T5000r. This new~~family ~~product~~models ~~line~~are isall RFID ~~upgradeable~~ready, inallowing ~~the~~easy field, ~~has~~upgrade ~~faster~~when ~~label~~a ~~printing,~~customer ~~and~~later isneeds ~~able~~RFID tocapability. ~~operate~~The ~~with~~SLPA8000r, ~~applications~~a ~~written~~new ~~for~~model ~~competitive~~in ~~printers.~~the ~~Printronix~~SLPA ~~intends~~print toand ~~stay~~apply inproduct ~~front~~line, ofwas ~~the~~launched in North ~~technology~~America ~~and~~in ~~more~~the ~~products~~third ~~are~~quarter ~~expected~~of ~~to be released during~~ fiscal year 2007. and was

Throughout fiscal year 2006, the company increased its market leadership in the RFID UHF, EPC printer segment and believes we are well positioned to be a leading participant in the growing RFID thermal printer market.

Throughout fiscal year 2006, Wal«Mart continued to expand its production rollout of RFID with its top suppliers. By the end of the fourth quarter of fiscal year 2006, an additional 200 suppliers were added for a total of 337 Wal«Mart suppliers actively shipping RFID tagged goods to a total of 5 Wal«Mart distribution centers and 500 stores, an increase of 2 distribution centers and 350 stores. Wal«Mart has instructed the next 300 suppliers to commence shipping RFID tagged goods by January 1, 2007, at which time they will expand the receiving centers to include up to 10 distribution centers and 1,000 stores. In addition to Wal«Mart, other major retailers such as Target, Tesco, Best Buy and Metro, and the Department of Defense have mandated RFID programs. These mandates have

~~set~~launched in ~~motion~~Europe ain ~~trend~~the infourth ~~advanced~~quarter ~~automation~~of ~~requiring~~fiscal ~~suppliers~~year 2007. The SLPA8000r brings very high performance automated RFID application to ~~focus~~the ~~their~~market, ~~resources~~operating onat ~~implementing~~up to 100 labels per minute. This product provides customers with the capability to encode and apply RFID ~~printing~~at full production line speeds. It also comes in an RFID ready version, known as the LPA8000r.

~~During~~The LaserLine® printer family was also enhanced in the third quarter of fiscal ~~year 2006, Printronix~~ ~~introduced~~year ~~the~~2007 ~~SL5000r~~with ~~MP2,~~ the ~~next~~launch ~~generation family~~ of ~~RFID printers~~the ~~delivering~~L7032, ~~true~~a ~~Gen~~600 2dots ~~RFID~~per ~~encoding designed to~~inch ~~EPCglobaltm Gen~~(“DPI”) ~~specifications.~~printer ~~These~~that ~~printers~~provides ~~feature~~13.6 inch print ~~EPCglobaltm Gen~~width 2at ~~Certified~~32 ~~Hardware,~~pages ~~RFID~~per ~~Smart~~minute ~~encoding~~(“PPM”). ~~technology~~This ~~and~~product ~~address~~complements aour ~~wide~~existing ~~range~~LaserLine ofprinters ~~applications~~ and ~~global~~provides ~~frequency~~the ~~requirements.~~lowest ~~The~~cost ~~SL5000r~~per ~~MP2~~page ~~now~~printing ~~comes~~of inthe ~~both 4-inch and 6-inch models~~family.

Also during the third quarter of fiscal year 2006, the SLPA7000r MP2 was introduced. The SLPA7000r MP2 delivers true Gen 2 RFID encoding designed to EPCglobaltm Generation 2 (Gen 2) encoding specifications while meeting faster throughput requirements for automated RFID and thermal bar-code labeling within manufacturing and distribution environments. The SLPA7000 print, encode and apply system was co-developed with FOX IV, a leading label applicator provider.

Finally, in fiscal year 2006, we were also the first to commercially ship the multi-protocol printer family for the Korean, Hong Kong, Taiwan, Singapore and Australian markets. These Printronix RFID Smart Label printers encode the label with a UHF radio signal, print human readable traditional bar code information on the label and verify the encoded information.

We believe Printronix is well positioned to take advantage of the RFID roll out to CPG companies as momentum builds over the coming years.

We also intend to grow the non-RFID thermal market share by expanding the channels to market to serve other VARS (value added resellers). A new channel to market, ScanSource, Inc., was added for thermal printers late in the fourth quarter of fiscal year 2005 and has been a growth factor in fiscal year 2006. RFID has provided Printronix exposure to many of the leading global consumer packaged goods companies to which Printronix previously did not have access and allows us to sell our other products, such as line matrix, thermal and laser because the customers can see the value offered through the common architecture, solutions and support.

The continuous form laser product line continues to be a synergistic fit within the existing sales structure and channels, and provides an important extension to the overall corporate range of products. Additionally, Printronix has a relatively large installed base of older laser products that are available for upgrades. Therefore, a strategic decision has been made to bring updated laser products to market. It is expected that these newer models will deliver higher speeds, longer service intervals, and better cost per page to drive upgrades and preserve the robust consumable revenue stream.

Technology and Product Development

Printronix core technologies include line matrix and thermal print engines, subsystem controllers, printing system software, RFID smart label printing/encoding, network-printer management and bar code verification. Line matrix, thermal and laser printers developed from these technologies are unified by a common control architecture called Printronix System Architecture (“PSA”tm), the latest version of which is 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, thereby enhancing user productivity and printer up-time. Printronix has designed and developed software and hardware that leads the industry in connectivity to allow the printers and applicators to operate in a wide variety of computer systems, software and networks. In addition, emulation software has been developed which allows the printers and applicators to be placed in environments with equipment manufactured by others and seamlessly print the host data streams without the need for modifying the applications. Printronix printers are designed to print the local languages in most every region around the world.

Printronix also offers advanced network-printer management solutions with PrintNet, which is a combination of hardware and software components. PrintNet is a web-enabled remote printer-management tool, combining printer diagnostics, troubleshooting, an alerting system and visibility that allows remote management of Printronix printers anywhere in the world from a networked desktop. PrintNet includes special printer capabilities, 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 (Online Data Validation) capability that verifies all bar codes produced on T5000 thermal printers 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. The T5000 will automatically strike out an invalid label and print a new label. 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. RFID printers have a similar capability.

Fiscal year 2006 was a significant year for new product introductions in line matrix, thermal, RFID and Print/Encode/Apply technologies. For line matrix, Printronix introduced an entirely new printing platform, the P7000 family. This family is characterized by many user advantages, including lowered cost of printing, improved print quality, fewer interventions, ease of use and lower cost of maintenance. The P7000 family includes an innovative Integrated Print Management system, incorporating a new Ultra Capacity Ribbon, which provides complete system control of print density, optimized consumable life, and the ability to set specific consumable change points to meet application specific print density requirements. The Ultra Capacity Ribbon on the P7000 provides up to 270 percent longer print life than the prior P5000 ribbons. A new Zero-Tear model of the P7000 was also introduced, providing single sheet printing capability with no forms loss. The P7000, launched on a worldwide basis, further extends the Printronix technology leadership in line matrix printing.

New platforms and printer models were also introduced for the thermal, RFID and print/apply product lines. The new T5000r platform included many industry-leading features: all 4 and 6 inch models come standard as RFID-Ready allowing easy field upgrade when a customer later needs RFID capability, five competitive print language interpreters are included as standard features, ODV and RFID interoperate on the same printer providing both bar code and EPC data validation. The RFID printer line was enhanced with a new platform, the SL5000r MP2. This marked the industry’s first introduction of a printer capable of encoding the Generation 2 EPC standard — a milestone in an industry that is converging on Gen 2 as the standard for the future. The SLPA7000 family was also upgraded to Gen 2 capability and its performance enhanced to accommodate up to 60 cartons per minute for applications on CPG conveyor systems. Printronix expects to be able to continue to provide RFID technology leadership, worldwide, through our focused investment in RFID research and development.

Line Matrix Printers

Line matrix 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 print the successive rows of dots. By increasing or decreasing the total number of hammers within the bank, the speed in which each individual row is drawn changes, creating different fundamental printer speeds. By varying the speed of the shuttle and the distance of each step of vertical paper movement, a wide range of print resolutions can be achieved.

The dot placement of line matrix printers is very precise, permitting accurate character, graphics, and bar code alignment. The combination of precise dot placement anywhere on the page and the use of overlapping dots enables line matrix printers, made by Printronix, to produce graphic output, as well as ~~letters~~ letters and numbers. Another key feature of the line matrix ~~technology~~ technology is that hammer energy is very consistent, resulting in improved print quality on multi-part forms.

~~These~~Uses ~~printers~~for ~~are available in tabletop, pedestal and cabinet models. A special zero-tear configuration enables printing on single sheets without any forms loss. The standard resolution~~ line matrix printers ~~operate~~include ~~at 500~~reports, ~~1000, 1500, 2000 and 2400~~transaction ~~lines~~documents, ~~per minute (“LPM”). The high~~multi-~~resolution~~part ~~P7000 H-Series~~forms, ~~printers~~bar ~~operate at 300~~codes, ~~600~~labels, ~~and~~graphics ~~800 LPM for complex~~and ~~Asian~~program ~~characters~~listings. ~~Printer~~The ~~model~~value ~~capabilities~~provided ~~are augmented~~ by ~~optional~~ ~~accessories;~~line ~~including~~matrix ~~PrintNet~~printing ~~Enterprise high-speed~~is ~~Ethernet~~the ~~connectivity,~~high ~~providing~~level ~~full~~of ~~remote printer management capabilities~~reliability, ~~and~~the aability ~~power~~to ~~stacker.~~function ~~The~~in ~~printers support a wide~~harsh ~~array of worldwide languages and character sets~~environments, athe ~~broad~~lowest ~~range of~~cost ~~physical~~per ~~input/output~~printed ~~options~~page, and athe ~~full line of host system~~ability ~~support. The result is a printer with connectivity~~ to ~~virtually every~~handle ~~information~~difficult ~~system~~form ~~environment~~sets inand ~~worldwide~~multi-part ~~markets~~forms.

~~Uses~~These ~~for~~printers ~~line~~are ~~matrix~~available ~~printers~~in ~~include~~four ~~reports,~~configurations: ~~transaction~~tabletop, ~~documents~~pedestal, ~~multi-part~~quiet ~~forms~~cabinet, ~~bar~~and ~~codes,~~a ~~labels,~~special ~~graphics~~zero-tear ~~and~~configuration ~~program~~that ~~listings.~~enables ~~The~~printing ~~value~~on ~~provided~~single bysheets without any forms loss. The standard resolution line matrix ~~printing~~printers isoperate at 500, ~~the~~1000, 1500, 2000 and 2400 LPM. The high-resolution ~~level~~P7000 H-Series ofprinters ~~reliability~~for complex Asian characters operate at 200, 300, ~~the~~600, ~~ability~~and to800 LPM.

The P7000 family of printers, introduced in fiscal year 2006, 6uses a unique ribbon that delivers longer lasting darker print along with a system for precise life monitoring. This new Integrated Print Management system, with its unique consumable, has been very well received by our customers. As a result, line matrix ribbon sales are growing significantly as more legacy printers are converted to the P7000 family.

~~Table~~ A ofnew ~~Contents~~low-end Hanzi model, the P7X02H, was introduced in fiscal year 2007. Additionally, in fiscal year 2007, a new high-definition P7000HD printer was launched that is optimized for printing in Windows-based environments and prints at 79 inches per minute.

~~function~~Printer inmodel ~~harsh~~capabilities ~~environments~~are augmented by optional accessories; including PrintNet Enterprise high-speed Ethernet connectivity, ~~the~~providing ~~lowest~~full ~~cost~~remote ~~per~~printer ~~printed~~management ~~page~~capabilities, and ~~the~~a ~~ability~~power tostacker. ~~handle~~The ~~difficult~~printers ~~form~~support a wide array of worldwide languages and character sets, a broad range of physical input/output options, and a full line of host system ~~multi-part~~support. ~~forms~~The result is a printer with connectivity to virtually every information system environment in worldwide markets.

During fiscal year 2006, Printronix refreshed the entire line matrix product family with the worldwide rollout of a new generation of equipment under the family model name P7000. This family offers a broad range of enhancements targeted to appeal to existing users. This new family employs an improved ribbon, which provides high quality, cost effective printing for the customer, while yielding higher revenues and capture rates for Printronix. Our largest OEM customer, IBM, has followed this same market strategy in an unprecedented level of coordination, helping to reinforce the overall message and impact in the market.

Thermal Printers

Thermal printers continue to be the printers of choice in the creation of on-demand bar codes and label printing. Thermal printers create images on paper or other media by heat. 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 as well as ~~offers~~offering graphics and printing. The value provided by thermal printing is the flexibility of high quality, fast, durable, on-demand label printing from wired or wireless network stations along the manufacturing production line, distribution centers, or ~~throughout the supply-chain. Thermal printers may be~~ ~~either standard bar code and label printers (non-RFID), or RFID printers that include both standard bar code and label printing and RFID encoding.~~

~~The 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 at 203 or 300 dots per inch (“DPI”). The T5000 wireless-enabled thermal printer models were designed, engineered and manufactured by Printronix, and they incorporate PSA3 and PrintNet. The T5000 also offers the unique Online Data Validation (ODV) capability that verifies that the bar codes produced meet industry specifications and will scan accurately. With PrintNet, ODV and PSA3, the T5000 sets the standard of durability, versatility, flexibility, and manageability to meet today’s enterprise users’ needs.

AnTable update of the product line (the T5000r) was announced in the first quarter of fiscal year 2006. This update has high-performance controller architecture and delivers industry leading throughput and print performance, as well as being “RFID Ready.” The printers support both direct and thermal transfer methods and were designed to fulfill the demands of the high-volume, mission-critical industrial users. It is the first printer capable of supporting multiple printer languages that were developed for Zebra, SATO, Intermec, Datamax and TEC printers, as well as Printronix PGL. Users may simply select the printer language and seamlessly integrate their Printronix printer into legacy systems. The T5000r series can be upgraded to RFID in the field and includes the ability to print with applications written for competitive printers. As the industry’s first standard RFID field upgradeable thermal printer, the T5000r offers customers the opportunity to buy a standard bar code printer today, with the flexibility to move to RFID encoding in the future. Contents

throughout the supply-chain. Thermal printers may be either standard bar code and label printers (non-RFID), or RFID printers that include both standard bar code and label printing and RFID encoding.

The Printronix thermal printers range in print width from 4.1 to 8.5 inches, print at speeds up to 10 inches per second, and print at 203, 300 or 305 DPI. All thermal printer models (T4 and T5) are wireless enabled and incorporate PSA3 and PrintNet. The T5 also offers the unique ODV capability. ODV scans and verifies the data encoded in the bar codes, ensures it meets industry specifications and provides the capability to compare the data to the host data stream. With PrintNet, ODV and PSA3, the T5000 sets the standard for durability, versatility, flexibility, and remote management to meet today’s enterprise users’ printing needs. Although the printers are inherently reliable, the ODV function mitigates the issues of print head life and other application anomalies not controlled by the printer that may cause the bar code to not be correctly printed.

A key update of the SmartLine product line, the SLPA8000r, is a new RFID label applicator that was announced in the third quarter of fiscal year 2007. This update uses the PSA3 high-performance controller architecture, delivers industry leading throughput (up to 100 labels per minute) and is offered in an “RFID Ready” version (LPA8000r). This automated printer applicator supports both direct and thermal transfer methods and was designed to fulfill automated high-speed production lines for UHF RFID smart label applications. It is the first printer applicator capable of supporting multiple printer languages developed for Zebra, SATO, Intermec, Datamax and TEC printers, as well as Printronix PGL. The LPA8000r series can also be upgraded to RFID in the field.

In the fourth quarter of fiscal year 2007, Printronix further expanded the SmartLine product family with the introduction of the mid-range SL4M light industrial RFID printer/encoder. This new product represents the industry’s first globally available mid-range, industrial-grade metal printer/encoder designed for EPCglobal Gen 2 UHF RFID applications. Designed by Printronix, the SL4M integrates PSA3, PrintNet, and its patented MP2 encoding technology, setting a new price/performance benchmark standard for the industry. Like the rest of the SmartLine product line, the SL4M supports the same multiple printer languages for easy integration. With label interoperability across the entire SmartLine product line, the SL4M can increase widespread RFID adoption. Printronix also offers the “RFID ready” T4M mid-range bar code printer for customers who need to buy a standard thermal printer today with the flexibility to move to RFID encoding in the future with field upgradeability.

Radio Frequency Identification (“RFID”) Smart Label Printers

We believe Printronix remains well positioned to bemaintain ~~a leading~~its ~~participant~~leadership role in the growing UHF RFID thermal printer market.

RFID technology, in various forms, has long been inused ~~use~~ in products such as toll road transponders ~~that~~and ~~identify~~smart ~~automobiles~~cards, ~~to the transit~~for ~~authorities,~~asset ~~for~~tracking ~~animal~~and ~~identification~~in ~~purposes~~other ~~and~~Automatic inIdentification ~~libraries~~applications. RFID technology embedded in labels ~~increase~~can increase the effectiveness of product identification by combining traditional ~~barcode~~bar code information with electronic data on the same label.

~~Much~~There ~~like~~are ~~the~~three ~~Universal~~main ~~Product~~components ~~Code~~of ~~(“UPC”)~~a ~~used~~typical UHF RFID label ~~today~~generating system: RFID labels, software, and a printer/encoder. The RFID label consists of a microchip with a flexible antenna embedded in the label stock used for traditional bar ~~code~~ coded labels, ~~the~~and are known as smart labels. ~~are~~The RFID printers include ~~required~~a toreader, ~~use~~sometimes ~~the~~referred ~~electronic~~to ~~equivalent~~as an encoder, which encodes the microchip ~~Electronic~~in the label and then immediately verifies that the ~~Product~~label ~~Code~~is ~~(“EPC”)~~readable. The ~~EPC~~reader ~~identifies~~uses radio waves to scan the ~~particular~~microchip ~~item~~via inthe antenna. The reader can read the ~~supply~~labels without the need for physical contact or line-~~chain~~of-sight positioning byas ~~identifying~~needed ~~the~~in a traditional bar code label scanner. ~~manufacturer~~Many suppliers are choosing to automate this process by selecting a method that will automatically encode, print and then apply the ~~product~~label to a case or pallet. With this method, ~~and~~a robotic ~~version~~system ~~with~~is used which integrates a ~~unique~~thermal ~~serial~~printer and ~~number~~RFID encoding system into a label applicator. ~~The~~Another method to achieve RFID compliance requires suppliers to attach an RFID label that contains only the antenna and microchip. inA printer is not needed to create the label ~~has~~with ~~memory~~the antenna and microchip under this method, only an encoder. We believe there are advantages and disadvantages to ~~accommodate~~all ~~the~~methods, but each suits a ~~EPC~~particular ~~number~~mode of compliance.

~~There~~Much ~~are~~like ~~various~~the ~~methods~~Universal toProduct ~~achieve~~Code ~~compliance~~(“UPC”) ~~with the~~used ~~Wal«Mart/DOD~~today ~~mandate.~~in ~~A primary~~traditional ~~method~~bar ~~uses~~code alabels, ~~printer~~smart ~~to create the~~ labels ~~and~~with embedded ~~Printronix~~chips iswill ~~addressing~~use the ~~needs~~electronic ofequivalent, the ~~suppliers~~Electronic ~~who choose~~Product ~~this~~Code ~~method~~(“EPC”). IfThe aEPC ~~supplier~~identifies ~~chooses this method of compliance,~~ the ~~components of a typical RFID label generating system consist~~ ~~of three main items: RFID labels, software, and a printer/encoder. The RFID label consists of a microchip with a~~

~~flexible~~particular ~~antenna~~item ~~embedded~~ in the ~~label~~supply-chain ~~stock~~by ~~used~~identifying ~~for~~the ~~traditional~~manufacturer, ~~bar~~the ~~coded labels~~product, and ~~are~~version ~~known~~with asa ~~smart~~unique ~~labels. The~~serial ~~reader uses radio waves to scan the microchip via the antenna~~number. ~~The~~ ~~reader can read the labels without the need for physical contact or line-of-sight positioning as needed in a traditional bar coded label scanner.~~ The ~~RFID printers include a reader, sometimes referred to as an encoder, which encodes the~~ microchip in the label ~~and~~has ~~then immediately~~memory ~~verifies that the label is readable. Many suppliers are choosing~~ to ~~automate~~accommodate ~~this process by selecting a method that will automatically encode, print and then apply~~ the ~~label to a~~ ~~case~~EPC ~~or pallet~~number. ~~With this method, a robotic system is used which~~ integrates a thermal printer and RFID encoding system into a label applicator. Another method to achieve RFID compliance requires suppliers to attach an RFID label that contains only the antenna and microchip. A printer is not needed to create the label with the antenna and microchip under this method, only an encoder. We believe there are advantages and disadvantages to all methods, but each suits a particular mode of compliance.

RFID technology will improve supply-chain visibility by allowing companies to know where every item in their supply-chain is located at any moment in time. One example of the expected benefits of RFID technology might be seen in the shipping of products from the manufacturer to the retailer. As trucks are loaded, RFID technology will allow suppliers to tell customers exactly how many of each product has been shipped. This should also enable better theft control since RFID technology would allow for continuous product tracking throughout the supply-chain. In addition, RFID technology should reduce problems like inventory stock-outs by enabling more efficient demand planning and response as well as minimizing the potential for misplacement of in-stock items. Finally, distribution centers can streamline the identification of inventory in process, which should lead to improved inventory accuracy, improved operational productivity and reduction of product shortages. All of these improvements are likely to contribute to higher revenues, lower supply-chain costs as well as better customer service and associated customer loyalty for end users of RFID technology.

EPCglobaltm, which is part of ~~GS1~~GSI (formerly, a joint venture of EAN International and Uniform Code Council (UCC)), is developing standards for the EPC number. Together, ~~GS1~~GSI constitutes 100 member organizations worldwide with more than one million members from 102 countries. Printronix is a founding member of ~~EPCglobaltm~~EPCglobal. Standards for the emerging RFID market continue to evolve very rapidly. UHF frequency operational standards have ~~now~~ been set for many countries, including the United States, Canada, ~~Brazil, Chile,~~ Australia, Taiwan, Singapore, Hong Kong, Korea, ~~India~~ and the European Union., ~~The design~~ and ~~protocols~~Printronix ~~used~~desktop byRFID ~~the~~printers ~~microchip~~have ~~used in RFID smart~~been ~~labels~~certified isfor ~~also~~these ~~evolving~~countries. asOther ~~the~~countries ~~industry~~(such ~~moves forward.~~as ~~Throughout fiscal year 2006~~Argentina, ~~the original four classes of chips available~~Brazil, ~~EPC Class 0~~Japan, ~~Class 0+~~India and ~~Class 1,~~Malaysia) ~~and Philips~~have ~~UCode 1.19, began to migrate to the new EPC Class 1~~established ~~Gen~~RFID 2standards ~~chip~~and ~~that becomes the standard going forward.~~ Printronix ~~expects~~ ~~this~~will ~~transition~~continue to ~~continue~~certify ~~throughout fiscal year 2007~~products ~~with~~in ~~many~~those ~~retailers~~countries ~~setting~~that ~~sunset~~make ~~provisions~~business ~~for the older classes~~sense.

~~Printronix~~Nearly ~~now~~all ~~markets~~worldwide ~~RFID~~supply-chain ~~offerings such as the SmartLine~~ RFID ~~desktop~~ ~~printers~~applications ~~(SL5000)~~have ~~and Smart Label Printer Applications~~now ~~(SLPA7000),~~migrated asto ~~well~~EPCglobal asClass 1 aGen2 ~~line~~standard. ofAs ~~RFID~~with ~~labels to support~~ the ~~customers’~~printers, ~~test~~all ~~and production requirements. This provides our customers a full~~ RFID ~~print~~reader ~~solution.~~and ~~For~~tag ~~RFID~~suppliers ~~pilot development,~~have ~~Printronix offers a Smart Label Developer’s~~re-engineered ~~Kit~~their ~~that~~products ~~allows the customers~~ to ~~develop~~support ~~RFID~~the ~~printing~~new ~~solutions in~~Gen2 ~~a test environment before integrating these solutions into current operations~~standard. We ~~have~~continue ~~developed Software Migration Tools~~to ~~(“SMT”)~~see ~~which~~an ~~enable~~evolution aof ~~printer to automatically create~~ RFID ~~commands~~tags ~~from~~optimizing ~~existing~~for ~~legacy~~performance, ~~label bar code~~size ~~applications’~~and ~~data streams~~cost. ~~Printronix~~There is also ~~offers~~ an ~~RFID Integrator~~emerging ~~Program~~interest ~~that~~towards ~~brings customers together with partners~~item ~~carefully~~marking ~~selected~~which byprovides ~~Printronix~~further ~~who~~opportunities ~~are~~for ~~RFID industry experts~~Printronix ~~and technicians~~printers.

Printronix ~~has~~now ~~also~~markets ~~developed~~RFID aofferings ~~Professional~~such ~~Services~~as ~~staff~~the ~~that~~SmartLine RFID isdesktop ~~leveraging~~printers ~~its~~(SL5000 ~~technical~~and ~~know-how~~SL4M) ~~with~~and ~~the~~Smart ~~goal~~Label Printer Applications (SLPA8000), as well as a line of ~~supporting~~RFID labels to ~~its~~support the customers’ intest ~~their~~and ~~migration~~production torequirements. This anprovides our customers with a full RFID~~-enabled~~ ~~environment~~print solution. All ~~This~~of isour ~~being~~RFID ~~accomplished~~products ~~through~~use ~~consulting,~~the ~~label~~same ~~compliance~~patented MP2 encoding technology and ~~certification,~~all ~~and~~support ~~application~~the ~~migration~~same ~~and~~Gen2 ~~implementation~~tags. Printronix also ~~support~~offers an RFID Integrator Program that brings customers together with partners carefully selected by Printronix who are RFID industry experts and technicians.

Printronix has also developed a professional services staff that is leveraging its technical know-how with the goal of supporting its customers in their migration to an RFID-enabled environment. This is being accomplished through consulting, label compliance and certification, and application migration and implementation support.

Printronix RFID printers support the widest range of UHF RFID tags in the industry. The company has adopted a collaborative, non-proprietary strategy to openly encourage the availability of reliable RFID labels for Printronix RFID printers. To support this strategy, we are continuing to release RFID label guide specifications (posted on our website) to the RFID community for specifying RFID labels for use in Printronix RFID printers.

Given the Wal «Mart/ and DOD mandates that eventually all suppliers use RFID tags on all pallets and cases, it is expected that the RFID portion of the thermal market will have significant growth potential. Being first to market with an EPC printing solution, and through the subsequent significant level of focus on RFID technology, ~~Printronix~~ Printronix expects to have market access for RFID applications beyond that which the present thermal market share might indicate. While we acknowledge that there are other companies vying for a position in the RFID printer market, we believe that Printronix remains positioned as a strong participant in the emerging RFID print opportunity.

have market access for RFID applications beyond that which the present thermal market share might indicate. While we acknowledge that there is at least one larger company now vying for a strong position in the RFID printer market, we believe that Printronix remains positioned as a strong participant in the emerging RFID print opportunity.

Fanfold Laser Printers

The LaserLine® printers combine print quality and speed with the ~~distinct~~ distinct advantages of fanfold forms. A straight-through paper path and continuous forms media handling enables large batch ~~production~~ production of labels and complex form sets that ~~are~~cannot ~~not possible to~~ be printed on cut sheet lasers. Fanfold laser printers create images by fixing toner on ~~paper electrographically. Fanfold~~ ~~laser printing provides value with its high-resolution, high-speed batch printing and jam-free operation.~~

~~The L1524 laser printer operates at up to 24 pages per minute~~ ~~(“PPM”) and 300 DPI. The L1524 uses the more~~7 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.

TheTable LaserLine L5535 fanfold laser printer operates at up to 35 PPM, 240 to 400 DPI, and has a flash fusing process. Using a brilliant flash of light, instead of heat and pressure, to fuse the image onto the media, these printers can print on a very wide range of media and work with a broad range of label adhesives. For example, unlike most other laser printers, the L5535 can print on synthetics and plastic cards. Additionally, this process yields exceptional durability and quality that cannot be scratched off. 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. Contents

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

The L1524 laser printer operates at up to 24 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 L5535 fanfold laser printer operates at up to 35 PPM, 240 to 400 DPI, and has a flash fusing process. Using a brilliant flash of light, instead of heat and pressure, to fuse the image onto the media, these printers can print on a very wide range of media and work with a broad range of label adhesives. For example, unlike most other laser printers, the L5535 can print on synthetics and plastic cards. Additionally, this process yields exceptional durability and print quality. 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.

The LaserLine was extended in fiscal year 2007 with the introduction of a 32 PPM heat and pressure fusing engine. This model, the L7032, offers a compact footprint, competitive cost per page, low price point, and a very high-duty cycle. It is ideal for label and report production that does not require flash fusing. It is offered with a range of options including two power stackers, a cabinet stand, paper cutter, and MICR printing capability.

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 to verify that any scanner can read the bar code. Hand-held portable models and online models are available that meet practically any industry requirement. Online 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 labeled products traverse in front of it. Online 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. When used on Printronix thermal printers, they interact with the printer so the printer automatically overprints and voids ~~the~~any bad label, prints a new one, and the network manager is provided a record of the transactions through ODV Data Manager.

Supplies, Consumables and Services

To support the installed base of printers and verifiers, Printronix sells associated printer supplies and consumables such as ribbons, toner, labels, and repair or maintenance services. Line matrix ribbons are designed and manufactured by Printronix; other supplies and consumables are purchased from outside suppliers. Printronix offers maintenance services and the Advanced Exchange program, which provides logistical support for spares and repairs, minimizing the amount of inventory needed by the resellers and channel partners to service the printers. The printers are sold with warranties, and customers can purchase maintenance service agreements from Printronix or from the channel that cover the post-warranty period. Printronix also repairs and sells spare parts to the channel, which are used to support their maintenance service programs. We have emphasized sales and marketing efforts to capture an increasing share of the post-sale recurring revenue stream. Supplies, consumables and services, such as maintenance, are an area of expected growth.

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, Printronix markets 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 on products and/or have internal quality procedures relating to bar codes, such as ISO 9000 requirements.

and scannable bar codes are valued. In addition, Printronix markets 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 on products and/or have internal quality procedures relating to bar codes, such as ISO 9000 requirements.

Standards for the emerging RFID market are evolving very rapidly. As reflected in the most recent Global RFID Planning Service study conducted by VDC, Printronix has positioned itself as a RFID UHF printer/encoder market leader. Printronix market leadership in calendar year 2005 is a result of the RFID initiatives in the Americas and the launch of RFID in EMEA in fiscal year 2005.

Sales outside the Americas were $64.8 million, or 50.7 percent of total sales in fiscal year 2006 and $69.3 million, or 52.6 percent of total sales in fiscal year 2005. Our strategic geographic locations allow us to fulfill customer needs quickly.

Warranties

Printronix offers warranties of various lengths to our customers, depending upon the specific product and terms of the customer purchase agreement. We generally offer either a 90-day on-site repair ~~warranty~~option or a 12-month to ~~return~~36-~~to-factory~~month ~~standard~~on-site ~~parts~~return-~~and~~to-~~labor~~factory ~~warranty on printer and verifier products to most customers~~option. The 90on-~~day~~site warranty covers the cost of the parts and the labor to replace ~~said~~these parts. The ~~12-month~~ return to factory warranty covers only the replacement parts. ~~Defective~~If ~~printers and~~a ~~verifiers~~defective ~~can~~product cannot be ~~returned~~repaired, ~~for repairs or replacement in the~~it ~~applicable~~is ~~warranty~~replaced ~~period~~ at no additional cost to the customer. Supplies are ~~are~~ warranted for ~~the~~one ~~shelf life of the products, which can be up to two years~~year.

Seasonality

Revenue patterns are only somewhat impacted by seasonal fluctuations and are more significantly impacted by the level of global spending on plant expansion and refurbishment. Typical historical revenue patterns have resulted in slightly higher revenues in the third fiscal quarter ending in December, as many of ~~the~~our customers and their end users are completing their fourth calendar quarter at that time. In addition, we historically experience a drop in sales in EMEA in the summer months during the second fiscal quarter due to the European vacation period.

Channel

Printronix markets and sells products worldwide through major computer systems companies (“OEMs”), and a network of system integrators, full-service distributors, including two-tier resellers, and value-added resellers. In addition, there are programs to market directly to Major Accounts (large companies that can use all three printing technologies, are often multi-national and are leaders in their industries). These sales are accomplished primarily through the distribution channel or IBM. All three technologies are largely intended for use in related applications and are marketed through the same channels.

Channel sales as a percent of total revenue for the three fiscal years in the period ended March 3130, ~~2006~~2007 were as follows:

	March 31,			March 25,			March 26,
	March 30,			March 31,			March 25,
	2006			2005			2004
	2007			2006			2005
Channel:
OEM		2925.39	%		29.73	%		3129.37	%
Distribution		6568.54	%		6465.25	%		6364.12	%
Direct		5.27	%		65.12	%		5.6.1	%
		100.0	%		100.0	%		100.0	%

In the U.S. and parts of EMEA, Printronix builds products to order and ships directly from the factories to the end user in most cases, thus reducing our partners’ inventory levels and resulting in minimal Printronix order backlog.

Information on sales to our largest customers can be found in Note 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

Competitive and Market Factors

Printronix products compete in the overall market for medium- and high-speed computer printers, ~~and~~bar code label printers, and RFID printer/encoders. The overall market includes line matrix, thermal transfer, RFID printer/encoders, printer applicators, laser, inkjet, serial, and band printers. Printronix competes directly with several companies of varying sizes, including some of the largest businesses in the United States and Japan. Our primary competitors include: Datamax (a unit of Dover Corporation); Godex; Intermec; Paxar; Ricoh/Hitachi; Sato; Taiwan Semiconductor; TallyGenicom; Toshiba TEC Corporation; and Zebra Technologies Corporation.

Printronix is differentiated from its competitors in several key areas that include mission critical printing solutions, integration into enterprise networks and efficient printer management. The line matrix, thermal and fanfold laser printing technologies are unified by a common control architecture named Printronix System Architecture (“PSA”tm). In addition, the company has provided post-sales support in the form of supplies, spares, ~~repairs and onsite maintenance~~ services as well as professional services. PrintNet® Enterprise (“PrintNet”) is a Web-enabled remote printer-management tool that combines printer diagnostics, troubleshooting, an alert system and visibility to allow remote management control of Printronix printers anywhere in the world from a networked desktop. The printing solutions also offer direct connectivity to the enterprise software (i.e. SAP®, Oracle®), thus eliminating costly middleware. In addition, a unique Online Data Validation (“ODV”tm), feature provides a differentiated solution in thermal printing for compliance labeling by monitoring bar code labels as they print to ensure scanability. This capability, together with the ODV Data Manager for network management, provides the architecture for RFID printing that requires 100-percent readability. Printronix also designs, manufactures and markets hand-held and online bar code verifiers that incorporate traditional and American National Standards Institute (“ANSI”) verification.

~~We believe Printronix printers are highly competitive with~~ ~~regard to features, reliability, durability, price/performance,~~9 post-sales support and cost of ownership. The wide range of professional services enables our printing solutions to deliver their full potential in the customer’s enterprise system. Although Printronix’s investment in research and development is above 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 material adverse impact on the consolidated 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.

The worldwide market for line matrix printers and options for calendar year 2005 based on the most recent market share data was $89.3 million, excluding Japan. This represents a decline from calendar year 2004 as this mature technology is affected by competition from lower price laser and thermal printers, trends of decentralized printing and conversion to electronic forms. As the market contracts, competition has consolidated to three leading manufacturers: Printronix, TallyGenicom, and Ricoh/Hitachi, with Printronix continuing to hold the strong leadership position. By being well established in the key high growth markets of China and India, both of which achieved year-on-year line matrix growth, the company extended its leadership position from 57.0 percent for calendar year 2004 to 60.4 percent in calendar year 2005.

Printronix’s strategy in this mature market is two fold. First, is to increase product turnover within the large installed base to provide users with more productive printing solutions and second is to gain more revenue from consumables and services to this base. The cornerstone of this strategy was the worldwide rollout of the new P7000 line matrix printer family. The new P7000 provides many features and benefits as well as improved consumable offerings over the older models. The P7000 provides a cost effective solution for existing customers who want to maintain the benefits and cost effectiveness of line matrix printing, but are experiencing increased costs of operation or reduced support on older models whose parts are becoming scarce. The new offerings are being driven directly through to the end users via the demand generation team as well as a continued focus on direct major account engagement by the Printronix sales force. These new initiatives and the strengthening of active sales teaming with IBM have resulted in gains in fiscal year 2006 compared to fiscal year 2005 for IBM line matrix sales in all regions.

According to the Preliminary 2006 Global AIDC Planning Service study conducted by VDC (the most recent data available), the worldwide market for high-end thermal printers for calendar year 2005 was $203.7 million. This

~~represents~~repairs aand ~~market~~onsite ~~decline~~maintenance ofservices ~~2 percent~~as ~~from~~well ~~calendar~~as ~~year~~professional ~~2004~~services. PrintNet® Enterprise ~~Excluding~~(“PrintNet”) ~~the~~is ~~RFID~~a ~~UHF~~Web-enabled remote printer~~/encoder~~-management ~~market~~tool ~~segment~~that combines printer diagnostics, ~~which~~troubleshooting, isan aalert ~~subset~~system ofand ~~the~~visibility ~~market~~to ~~for~~allow ~~high-end thermal printers~~remote ~~that~~management iscontrol ~~estimated~~of toPrintronix ~~have~~printers ~~grown~~anywhere atin the world from a ~~robust~~networked ~~rate~~desktop. ofThe atprinting ~~least~~solutions also offer ~~79 percent,~~direct ~~the~~connectivity ~~high-end~~to ~~thermal~~the ~~printer~~enterprise ~~market~~software ~~experienced~~(i.e. aSAP®, Oracle®), thus ~~decline~~eliminating ofcostly ~~3 percent~~middleware. ~~Printronix~~In ~~maintained~~addition, ~~market~~a ~~share~~unique Online inData ~~the~~Validation (“ODV”tm) feature ~~overall~~provides ~~high-end~~a ~~thermal~~differentiated ~~business~~solution ~~with~~in athermal ~~slight decline~~printing ~~from~~for ~~8.3 percent~~compliance inlabeling ~~2004~~by tomonitoring ~~8.2 percent~~bar incode ~~2005,~~labels ~~due~~as they ~~primarily~~print to aensure ~~slowing~~scanability. ofThis ~~printer~~capability, ~~and~~together ~~accessory~~with ~~sales in Europe.~~the ~~The~~ODV ~~primary~~Data ~~competitors~~Manager infor ~~the~~network ~~thermal~~management, ~~market~~provides ~~(non-~~the architecture for RFID) ~~are~~printing that requires 100 percent ~~Zebra~~readability. ~~Technologies~~Printronix ~~Corporation~~also ~~(“Zebra”)~~designs, ~~Sato,~~manufactures and markets ~~Toshiba~~hand-held ~~TEC~~and ~~Corporation~~online ~~(“TEC”)~~bar ~~and~~code ~~Intermec.~~verifiers ~~Together~~that incorporate ~~they~~traditional ~~account~~and ~~for~~American ~~80 percent~~National ofStandards ~~the~~Institute (“ANSI”) ~~thermal high-end market~~verification.

~~Our~~We ~~strategy~~believe inPrintronix ~~the~~printers ~~RFID~~are ~~UHF~~highly ~~printer~~competitive with regard to features, reliability, durability, price/~~encoder~~performance, post-sales ~~market~~support ~~segment~~and iscost of ownership. The wide range of toprofessional ~~continue~~services enables our printing solutions to ~~grow~~deliver their ~~with~~full ~~the~~potential ~~market~~in ~~and~~the ~~maintain~~customer’s ~~our~~enterprise ~~leadership~~system. ~~position~~Although Printronix continues to make significant investments in research ~~this~~and ~~space~~development, awe ~~small~~can ~~but~~offer ~~emerging~~no ~~growth~~assurance ~~area,~~that products with similar or superior technology or price/performance will not be introduced by competitors. If ~~providing~~introduced, ~~innovative~~those products ~~that~~could ~~meet~~have ~~worldwide~~a ~~RFID~~material adverse impact ~~initiatives~~on ~~including~~the consolidated results of operations and financial ~~Wal«Mart~~position. ~~and~~Knowledge ~~DOD~~of ~~RFID~~a pending new product in the marketplace ~~requirements.~~by ~~Printronix~~us ~~will~~or ~~also~~by ~~continue~~our tocompetitors ~~pursue~~may ~~channel~~have an adverse impact on ~~expansion~~revenue ~~strategies~~as tocustomers ~~increase~~may ~~share~~delay inpurchasing decisions until the new ~~market~~product ~~place~~is available.

~~Industry~~Printronix’s ~~data~~strategy onfor the ~~fanfold~~mature ~~laser~~line matrix market consists isof ~~not~~four ~~available~~key elements. ~~The~~First, increase turnover within ~~industrial~~the ~~fanfold~~existing ~~laser~~installed ~~market~~base. This is adriven ~~special~~by ~~niche~~the creation of the attractive P7000 product which has lower cost of maintenance and added performance features. Second, derive more revenue per printer footprint, primarily through increased consumable sales and an increased focus on securing service contracts. Third, increase market ~~with~~share through geographic expansion into growing ~~few~~markets ~~vendors~~such as India and China. WeFinally, ~~believe~~extend wethe ~~continue~~product line with complementary products, such as the P7000HD which opens doors to ~~have~~Windows aprinting ~~significant~~opportunities ~~market~~or new paper ~~share~~handling inoptions ~~this~~that ~~segment~~increase usability and the value of each sale.

Our strategy in the RFID UHF printer/encoder market segment is to continue to grow with the market and maintain our leadership position in this space, a small but emerging growth area, by providing innovative products that meet worldwide RFID initiatives including Wal «Mart and DOD RFID requirements. Printronix will also continue to pursue channel expansion strategies to increase share in the market place.

The industrial fanfold laser market is a special niche market with few vendors. We believe we continue to have a significant market share in this segment.

Verification products offer a unique feature mix of fixed-position verification scanning, online verification, hand-held verifiers, communication and controls. There is little direct competition at this time for online verifier products.

Printronix is differentiated by the breadth of ~~the~~its product offerings, superior connectivity, a broader range of printer emulations, and a higher level of integrated solutions over and above the development of printers. We believe that ~~the~~our global presence, three application-compatible technologies, advanced network-printer management capabilities, unique ODV capability and RFID printing solution leadership provide a competitive advantage.

Business Environment

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 the increasing importance of supply-chain management, warehouse automation and the increasing use of bar-coded labels offer opportunities for long-term growth. RFID smart label printing solutions are expected to contribute to this growth as a new technology that generates new buying decisions. This fits into the corporate strategy of continually building user satisfaction within ~~its~~our installed base while developing printing solutions to support the next IT infrastructure for those users.

~~The emergence of the RFID market has created new opportunities.~~ ~~Printronix has actively sought and obtained new alliance~~10 partners and RFID integrators in order to provide users with the “whole product solutions” and speed adoption of the new RFID technology for supply chain printing. Printronix also introduced the second edition of “RFID Labeling,” a textbook that was written by Printronix to train people for RFID development.

The emergence of the RFID market has created new opportunities. Printronix has actively sought and obtained new alliance partners and RFID integrators in order to provide users with “whole product solutions” and speed adoption of the new RFID technology for supply-chain printing.

Order Backlog

Pursuant to our business model, whenever possible, the company builds to order and direct ships to the channel partners’ customer. The manufacturing process of building to order is enabled by design and manufacturing for “late point configuration” of the end users’ unique combination of options, which achieves a rapid order completion. In most cases, orders are shipped the day after they are received. As a result, order backlog is minimal, represents approximately one week of sales, and is not a meaningful indication of future sales.

Production and Manufacturing

We believe the quality and price-performance of ~~the~~our products are instrumental to our success. As a result, Printronix utilizes concurrent design and manufacturing in the development of products by incorporating the manufacturing processes with the product design. We source raw materials and components from a variety of suppliers and assemble printer products mainly in Singapore and then configure-to-order to customer specifications in the U.S., Holland and Singapore.

Raw Materials

Printronix purchases custom and standard electronic and mechanical components from numerous outside suppliers. Most of ~~those~~the components used in the manufacturing of impact and thermal printers are available from alternate sources should an issue arise with the existing sources. Tooling is company owned and is ~~typically~~ 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 Printronix 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 or single-sourced items. The laser printer products are designed to use specific proprietary print engines and printer assemblies manufactured by outside suppliers. Printronix has entered into written purchase agreements for these printer components and has no reason to believe that we will be unable to obtain the materials required.

Engineering and Development

Printronix operates in an industry that is subject to technological change, and the ability to compete successfully depends upon, among other things, the ability to anticipate market needs and to respond quickly with new solutions. This is especially apparent with the rapid explosion of technology and applications associated with RFID. The investment in research and development in fiscal year ~~2006~~2007 was approximately 1110 percent of revenue~~, higher than the industry norm of 7 to 8 percent~~. This ~~higher~~ level of investment has enabled Printronix to establish and maintain its technology leadership position in line matrix printing, ~~RFID~~thermal and RFID printing/encoding, and automated RFID print/encode/apply systems. Although we have invested at a relatively high level in research and development, we continue to ~~focus~~place significant focus on improved productivity and expense ~~reductions~~ control. Engineering and development expenditures were $1412.34 million in fiscal year ~~2006~~ 2007, $1514.83 million in fiscal year ~~2005~~2006 and $15.98 million in fiscal year ~~2004~~2005.

Printronix is committed to a product-development process that is coupled to market requirements and opportunities, and that facilitates high quality, and rapid, product development and introduction. Engineering personnel are located in all three key regions: the Americas, Europe, and Asia Pacific and are connected by broad-band communications and share the latest development tools. For fiscal year ~~2006~~2007, product development focused on a multi-faceted, multi-technology strategy: introduce new printing platforms for all key technologies, extend technology leadership in line matrix and RFID, broaden product lines within existing markets, and enhance existing products to support regional expansion.

~~Intellectual~~ ~~Property~~11

Printronix operates in an industry characterized by technological change and, as a result, we rely on patents, trademarks, copyrights, licenses (to a limited extent with respect to software), trade secrets, non-disclosure agreements with third parties and other rights we may have to protect our intellectual property. During fiscal year 2006, Printronix was granted 5 patents (3 of which were granted in May 2005 and reported in the prior year 10-K) and no patents expired. There were 13 patents filed in fiscal year 2006 that are still pending. As of March 31, 2006, Printronix had been issued 51 United States and related foreign patents associated with various aspects of its printers and other technology. These patents expire from August 2006 to June 2024. Printronix also has numerous RFID and other technology-related patent applications pending. Printronix believes that its patents, in various technologies (e.g., line matrix, thermal, system architecture, printer control, bar code verification, RFID), have competitive value and we intend to enforce our patents against infringers where and when we deem it appropriate. We do not believe the expiration of any of these individual patents will significantly or materially impact the financial condition or operations. Although there can be no assurance that we will be successful in enforcing any of the patents, we believe the patents are valid and enforceable. However, patent litigation is risky, and unforeseen events or facts may make the enforcement of a patent unsuccessful. Therefore, despite our best efforts, we may fail to protect the patents and other intellectual property from unauthorized use. In addition, our global operations and sales expose us to the risk that other countries may fail to provide the same level of protection for our intellectual property as afforded in the United States.

~~Printronix has no material licenses from others pertaining to~~ ~~the manufacture and sale of products, including those under~~Intellectual ~~development, and believes none are currently required. Certain~~Property 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 an adverse material effect on us.

Printronix operates in an industry characterized by technological change and, as a result, we rely on patents, trademarks, copyrights, licenses, trade secrets, non-disclosure agreements with third parties and other rights we may have to protect our intellectual property. During fiscal year 2007, Printronix was granted 5 patents. There were 10 patents filed in fiscal year 2007 that are still pending. As of March 30, 2007, Printronix had been issued 55 United States and related foreign patents associated with various aspects of its printers and other technology. These patents expire from June 2007 to August 2025. Printronix believes that its patents, in various technologies (e.g., line matrix, thermal, system architecture, printer control, bar code verification, RFID), have competitive value and we intend to enforce our patents against infringers where and when we deem it appropriate. We do not believe the expiration of any of these individual patents will significantly or materially impact the financial condition or operations. Although there can be no assurance that we will be successful in enforcing any of the patents, we believe the patents are valid and enforceable. However, patent litigation is risky, and unforeseen events or facts may make the enforcement of a patent unsuccessful. Therefore, despite our best efforts, we may fail to protect the patents and other intellectual property from unauthorized use. In addition, our global operations and sales expose us to the risk that other countries may fail to provide the same level of protection for our intellectual property as afforded in the United States.

In the fourth quarter of fiscal year 2007, Printronix began selling a new mid-range thermal product which includes a cross-licensing agreement for some of the technology components of the design. Other than this licensing arrangement on the mid-range thermal product, Printronix has no other material licenses from others pertaining to the manufacture and sale of products, including those under development, and believes no further licenses are currently required. Certain software is obtained under licensing agreements. We believe, based on industry practice, any such licenses that might be required in the future could be obtained on terms that would not have an adverse material effect on us.

Employees

Printronix had ~~715~~673 employees as of March 3130, ~~2006~~2007, including ~~370~~350 in the ~~United States~~Americas, ~~266~~245 in Asia Pacific and 7978 in in Europe.

None of the employees in the ~~United~~Americas ~~States~~ or Asia Pacific isare subject to a collective-bargaining agreement. The wholly-owned subsidiary, Printronix Nederland BV, is a member of the Employers Union FME-CWM, and some of its 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. The company believes its relationship with its employees is good.

Foreign Operations

Printronix has a manufacturing facility in Singapore, wherein line matrix and thermal printer products and some key components are produced. The Singapore facility also provides line matrix, thermal and laser printer configuration and distribution, printing solutions, 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~~ thermal, RFID and laser printer configuration and distribution, and printing solutions for the EMEA region. Line matrix ribbons are manufactured in Mexico for shipment to the Americas, EMEA and Asia Pacific. Printronix has sales offices within Germany, France, the United Kingdom, Austria, Spain, the ~~Russian~~ Russian Federation, ~~United Arab Emirates,~~ India, Korea, China, Singapore, Mexico, Brazil and Australia.

International sales information is found in Note 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

The company is 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. See further discussion of risk factors in Item 1A, “Risk Factors,” of this Annual Report on Form 10-K. Selected financial information regarding foreign and export sales by geographical area is set forth in Note 6 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.


Item 1A.	*Risk Factors*

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management’s current expectations concerning future activities or events and their potential impact upon the company. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to forecast results or trends in future periods. We can offer no assurance that future activities or events affecting the company will be those anticipated by management. In addition, any of the following risks and uncertainties could adversely affect the business, financial results or financial condition and cause the actual results to differ from those expressed or implied in the forward-looking statements in this document. Other risks and uncertainties also could affect the business. Although we reassess material trends and uncertainties affecting the consolidated results of operations and financial condition in connection with the preparation of the 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.

We Operate in an Industry Influenced by Worldwide Capital Spending.

~~The~~Our products are used for mission-critical applications in industrial settings such as manufacturing plants and distribution centers and also in information technology and back office operations. ~~The~~Revenue is impacted by the worldwide level of spending for capital expenditures related to manufacturing plant expansion or refurbishment. In addition, revenue is impacted by the level of activity in the worldwide supply-chain processes.

worldwide level of spending for capital expenditures related to manufacturing plant expansion or refurbishment. In addition, revenue is impacted by level of activity in the worldwide supply-chain processes.

We Operate in an Industry Affected by Competing Technologies.

The industrial printing market utilizes varying technologies including line matrix, direct thermal and thermal transfer, laser, inkjet, ~~serial~~dot matrix and band printing technologies. Across ~~all~~ all technologies, the printers are characterized as high-, medium- or low-end depending upon their range of features, ~~including~~ including functionality and durability. Products made by ~~Printronix~~ Printronix utilize line matrix, thermal transfer (high-end) and high-end fanfold laser printing technologies.

We cannot offer assurance that we can successfully develop the needed products and compete against current competitors or future competitors for mid-range thermal and laser printers that are used in industrial environments. Even if we are able to maintain or increase market share for a product, line matrix in particular, revenue could still decline as the market for the product matures.

We Operate in an Industry Characterized by Technological Change and Evolving Industry Standards.

The printing-solutions industry is extremely competitive and is characterized by technological change, frequent new product development, periodic product obsolescence, evolving industry standards, particularly for RFID, 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 Printronix currently competes favorably with respect to these characteristics, this may change in the future. Future success largely depends upon our ability to continuously develop new products with the quality levels that customers demand, and to develop new services and solutions for evolving IT infrastructure needs. Printronix spends a greater amount on research and development than the industry average because we believe that providing innovative products and solutions is important to future operations. In spite of our efforts, we may fail to develop new products in a timely manner. Additionally, the new products we develop may not achieve market acceptance or may not be manufactured at competitive costs or in sufficient volumes. If we cannot proportionately decrease the cost structure in a timely manner in response to competitive pressures, the consolidated results of operations could be affected. We cannot guarantee the success of ~~the~~our research and development efforts.

Any delay in the development, production or marketing of a new RFID product could result in not being first to market, which could harm our competitive position. We must adapt quickly to changes mandated by the RFID industry standard setting group, EPC Global, and customers to maintain market share.

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

We Operate in a Highly Competitive Market.

The market for medium- and high-speed computer printers, printer/encoders and related post-sale supplies is highly competitive, subject to change, and is likely to become even more competitive.

Printronix competes directly with several companies of various sizes, including some of the largest businesses in the United States and Japan. ~~The~~Competitors ~~competitors~~ include privately held companies, publicly held companies and subsidiaries of multinational ~~multinational~~ corporations. Some ~~of the~~ competitors may enter into strategic business relationships with other companies. We cannot offer assurance that we can successfully compete against current or future competitors.

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

Increased competition may result in price reductions, increased sales incentive offerings, lower gross margins, and loss of market share and could require increased investment in inventory, research and development, sales expenses, marketing programs and expenditures to expand channels to market. Competitors may offer products with superior market acceptance, superior price or superior performance. Printronix may be adversely affected if we are unable to maintain current product cost reductions, or achieve future product cost reductions, including warranty costs.

Customers may defer their purchasing decisions in anticipation of the introduction of new products or the actual introduction of new products by the company or its competitors.

If we fail to address the competitive challenges, there could be a material adverse effect upon the business, consolidated results of operations and financial condition.

We Compete in the Rapidly Evolving Market for RFID for the Supply-Chain.

We cannot guarantee to successfully compete against competitors in the RFID market, nor can we provide assurances that Printronix will be successful in maintaining our market leadership or improving our market share.

While we believe the interest in RFID remains high, we can offer no assurance that the speed of RFID deployment will increase.

Standards for the emerging EPC RFID market are ~~beginning~~continuing to ~~formulate~~evolve. ~~EPCglobalTM~~ EPCglobal has issued a ~~Generation 2 (“~~Gen2”) standard and products are beginning to come to market in accordance with this standard. Although Printronix has taken an early leadership role in in introducing a Gen2 printer with an EPC certified Gen2 RFID encoder, we cannot guarantee to successfully comply with all aspects of these evolving EPC standards. While we continue to focus intently on RFID technology leadership, we also cannot guarantee that we will continue to develop such products or that we will address user needs effectively in an industry characterized by rapid technological change.

We have entered into several key strategic alliances with the leaders in RFID labels, software and integration services. We cannot guarantee that these strategic alliances will be continued or be successful.

We Rely on Resellers to Sell Our Products and Services.

Printronix uses a variety of distribution channels, including OEMs and distributors, to market our products. Printronix may be adversely impacted by any conflicts that could arise between and among the sales channels.

~~We believe that our future success depends upon the ability to~~ ~~provide industrial-strength printing solutions to a broader~~14 customer base and to maintain good relationships with the major OEMs and distributors. We believe that continued purchase of the 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 or their decision to end-of-life products that have low sales volume.

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 major OEMs and distributors. We believe that continued purchase of our products by OEMs is dependent upon many factors, including the OEMs’ desire to use outside suppliers rather than investing the capital resources necessary to develop their own products or their decision to discontinue end-of-life products that have low sales volume.

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


	•	loss of channel and the ability to bring new products to market;

	•	concentration of credit risk, including disruption in distribution should the resellers’ financial condition deteriorate;

	•	reduced visibility to end user demand and pricing issues which makes forecasting more difficult;

	•	resellers leveraging their buying power to change the terms of pricing, payment and product delivery schedules; and

	•	direct competition should a reseller decide to manufacture printers internally or source printers from a competitor.

We cannot guarantee that resellers will not reduce, delay or eliminate purchases from us, which could have a material adverse effect upon the business, consolidated results of operations and financial condition. We rely upon a few resellers for a significant amount of the revenue. In fiscal years 2007 and 2006, sales to our largest OEM reseller, IBM, represented 20.0 percent and 22.5 percent of net sales, respectively, and sales to the second largest reseller represented 5.1 percent and 7.3 percent of net sales, respectively. Sales to our top ten customers represented 45.7 percent of net sales in fiscal year 2007 and 49.7 percent of net sales in fiscal year 2006. The loss of any one of these resellers would have a material adverse effect upon the business, consolidated results of operations and financial condition.

few resellers for a significant amount of the revenue. In fiscal years 2006 and 2005, sales to the largest OEM reseller, IBM, represented 22.5 percent and 21.5 percent of net sales, respectively, and sales to the second largest reseller represented 7.3 percent and 7.9 percent of net sales, respectively. Sales to the top ten customers represented 49.7 percent of net sales in fiscal year 2006 and 50.5 percent of net sales in fiscal year 2005. The loss of any one of these resellers would have a material adverse effect upon the business, consolidated results of operations and financial condition.

We Operate in an Environment of Unpredictable Demand.

We rely upon our ability to successfully manage ~~the~~our worldwide inventory supply-chain and inventory levels to support uncertain demand in a cost-effective manner.

~~The~~Sales ~~sales~~ to resellers are made under purchase orders that typically ~~typically~~ have short delivery requirements. Although we receive periodic ~~periodic~~ order forecasts from ~~the~~our major ~~reseller~~resellers, 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. Significant increases in demand could result in inventory shortages, higher costs to obtain expedited materials and components, higher costs to expedite shipment to ~~the~~ customers, and/or lost revenue opportunities. Significant decreases in demand could result in increased inventory levels, higher production costs, higher material and component procurement costs and reduced profitability.

~~The~~Quarterly ~~quarterly~~ sales patterns have historically reflected a slightly ~~slightly~~ higher than normal level of sales in the last few weeks of each quarter, making forecasting more difficult. In addition, seasonality in sales also affects the business to some degree. Typically sales are low in the EMEA region during the summer months as the region generally takes extended holidays. Sales are also typically higher in the third fiscal quarter, which ends in December, as many ~~of the~~ customers are on a calendar fiscal ~~fiscal~~ year. We cannot guarantee that these trends will continue or be supplanted by similar factors.

We Have International Customers, Suppliers and Operations.

For fiscal years ~~2006~~2007, ~~2005~~2006, and ~~2004~~2005, international revenue (excluding United States sales) accounted for approximately 5354.61 percent, 5553.16 percent, and 5155.61 percent, respectively, of the net sales. We expect that international revenue will continue to grow and account for a significant percentage of the revenue for the foreseeable future.

~~The~~Our products are sold in approximately ~~eighty~~ninety countries around the world, which subjects us to risks that may be unique to a particular country, but also to risk factors that may affect the global economy.

~~The products are manufactured using raw materials and components~~ ~~that are acquired from sources around the world. We use a large~~15 number of suppliers and regularly evaluate the availability of potential alternate suppliers should circumstances change with existing suppliers. Printronix relies on a single or limited number of sources for certain raw materials and components, although we attempt to have alternate sources where possible. Printronix internally develops most of the software used in its printer products. Certain software is purchased from suppliers through royalty agreements. If we were to experience a sudden loss of availability of purchased raw materials and components or purchased software, we are unable to guarantee that we could quickly obtain the needed items from alternate sources. The ability to ship the products in desired quantities and in a timely, cost-effective manner could be adversely affected, thus affecting the business, consolidated results of operations and financial condition.

Products are manufactured using raw materials and components that are acquired from sources around the world. We use a large number of suppliers and regularly evaluate the availability of potential alternate suppliers should circumstances change with existing suppliers. Printronix relies on a single or limited number of sources for certain raw materials and components, although we attempt to have alternate sources where possible. Printronix internally develops most of the software used in its printer products. Certain software is purchased from suppliers through royalty agreements. If we were to experience a sudden loss of availability of purchased raw materials and components or purchased software, we are unable to guarantee that we could quickly obtain the needed items from alternate sources. The ability to ship products in desired quantities and in a timely, cost-effective manner could be adversely affected, thus affecting the business, consolidated results of operations and financial condition.

We rely heavily upon the international facilities to maintain appropriate inventory levels, manufacture products, and complete configuration of printers in a timely and cost-efficient manner. Should we fail to successfully predict demand, we may not have sufficient inventory levels available to address customer requirements, or may need to use costly distribution methods, such as air freighting, to meet sales requirements.

There are many risks associated with international customers, suppliers and 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; • fluctuations in freight costs and disruptions at important geographic points of exit and entry; • differences in intellectual property protections; • differences in technology standards or customer requirements; • the possibility of defective parts from suppliers; • difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws; • currency fluctuations and restrictions on currency movements; • economic instability, including inflation, recession and interest rate fluctuations; • longer accounts receivable cycles and financial instability; • local labor regulations; • trade protection measures and regulations; • risk of loss of international assets due to political or economic instability; • political or civil turmoil; • war or conflict abroad or in the United States; • natural disasters, such as earthquakes, floods, tsunamis and typhoons; • consequences resulting from armed military conflict; • terrorist attacks or other armed hostilities abroad or in the United States; and • outbreaks of infectious disease such as avian flu, Severe Acute Respiratory Syndrome (SARS) or other public health issues.

Printronix is substantially self-insured for losses and business 17interruptions stemming from terrorist attacks, armed conflicts, war, power shortages and natural disasters. California and other parts of the United States have experienced major power shortages and blackouts and could experience them in the future, which could disrupt the business or that of our suppliers or customers. Our corporate headquarters and research and development activities are located in California, near known earthquake faults. It is impossible to predict any ultimate impact on the

• business, ~~fluctuations~~but inconsolidated ~~freight~~results ~~and duty costs and disruptions at important geographic points~~ of ~~exit~~operations and ~~entry;~~financial condition •could ~~differences~~suffer in ~~intellectual property protections; • differences in technology standards or customer requirements; •~~ the ~~possibility~~event of ~~defective parts from suppliers; • difficulties associated with repatriating cash generated or held abroad in~~ a ~~tax-efficient~~major manner and changes in tax laws; • currency fluctuations and restrictions on currency movements; • economic instability, including inflation, recession and interest rate fluctuations; • longer accounts receivable cycles and financial instability; • local labor regulations; • trade protection measures and regulations; • risk of loss of the international assets due to political or economic instability; • political or civil turmoil; • war or conflict abroad or in the United States; • natural disasters, such as earthquakes, floods, tsunamis and typhoons; • consequences resulting from armed military conflict; • terrorist attacks or other armed hostilities abroad or in the United States; and • outbreaks of infectious disease such as avian flu, Severe Acute Respiratory Syndrome (SARS) or other public health issuesearthquake.

Printronix is substantially self-insured for losses and business interruptions stemming from terrorist attacks, armed conflicts, war, power shortages and natural disasters. California and other parts of the United States have experienced major power shortages and blackouts and could experience them in the future, which could disrupt the business or that of the suppliers or customers. The corporate headquarters and research and development activities are located in California, near known earthquake faults. It is impossible to predict any ultimate impact on business, but consolidated results of operations and financial condition could suffer in the event of a major earthquake.

Printronix operates in many countries with differing and sometimes conflicting income tax requirements. The company’s effective tax rate could be adversely affected by:


	•	overlapping or differing tax laws;

	•	changes in the mix of earnings in countries with differing income tax rates and

	•	unfavorable outcomes of future audits by taxing authorities in various jurisdictions.

In particular, the realization of deferred tax assets, which are predominately in the United States, depends on the ability to generate future taxable income in the United States. As a result of the company’s recent losses in the United States, the company concluded that a full valuation allowance was required for its deferred tax assets in the United States.

Failure to manage the risks posed by our international customers, suppliers and operations could have a material adverse effect upon the business, consolidated results of operations and financial condition.

Environmental Laws and Regulations and Unforeseen Costs Could Impact ~~the~~Future ~~Future~~ Earnings.

Printronix could incur substantial costs, including clean up costs, fines, sanctions, property damage claims and personal injury claims, if we were to violate or become liable under environmental laws or if the products become non-compliant with environmental laws.

We face increasing complexity in the product design and 18procurement operations due to new and upcoming environmental regulations under various federal, state, and international laws, including the restrictions imposed in the European Union (the Restriction of Hazardous Substance Directive (“RoHS”), which places restrictions on lead and certain other substances in electronics, and the European Union Waste Electrical and Electronic Equipment Directive (“WEEE”), which makes producers of electrical goods, including computers and printers, responsible for collection, recycling, treatment and disposal of recovered products), and other similar legislation, including similar legislation currently proposed for China. There is substantial complexity associated with compliance with these new regulations and the costs of implementation are not easily quantifiable.

~~Table~~ We ofDepend on ~~Contents~~the Ability to Attract and Retain Key Personnel.

We face increasing complexity in the product design and procurement operations due to new and upcoming environmental regulations under various federal, state, and international laws, including the restrictions imposed in the European Union (the Restriction of Hazardous Substance Directive “RoHS,” which places restrictions on lead and certain other substances in electronics, and the European Union Waste Electrical and Electronic Equipment Directive “WEEE,” which makes producers of electrical goods, including computers and printers, responsible for collection, recycling, treatment and disposal of recovered products), and other similar legislation, including similar legislation currently proposed for China. There is substantial complexity associated with compliance with these new regulations and the costs of implementation are not easily quantifiable.

We Depend on the Ability to Attract and Retain Key Personnel and Future Changes in Equity Compensation Accounting Could Adversely Affect Earnings.

The ability to attract and to retain key, highly qualified personnel, both technical and managerial, is critical to Printronix’s success.

Developing, manufacturing and marketing the products is a complex process and requires significant expertise to meet customers’ specifications. Competition for personnel, particularly qualified engineers and employees with expertise in RFID applications, is keen. The loss of a significant number of key personnel, as well as the failure to recruit and train additional key personnel in a timely manner could have a material adverse effect upon the business, consolidated results of operations and financial condition.

~~In the future~~Volatility, ~~Printronix~~lack ~~will~~of bepositive ~~required~~performance toin ~~record~~our astock ~~charge~~price, toor ~~earnings~~changes ~~for~~to ~~employee~~our ~~stock~~overall ~~option~~compensation ~~grants. As a result~~program, weincluding ~~may~~our stock ~~incur~~incentive ~~increased~~program, ~~compensation~~resulting ~~costs~~from ~~and~~the ~~may~~adoption ~~need to change the~~of ~~equity~~SFAS 123(R) ~~compensation~~or ~~structure~~otherwise, ~~and~~may ~~find~~adversely itaffect ~~difficult~~our ~~to attract,~~ability to retain ~~and~~key ~~motivate~~ employees~~, all of which could impact the business~~.

Intellectual Property is Important to Our Success.

A third party may assert that Printronix, or customers indemnified by us, violate their intellectual property. 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 the key management and technical personnel, or breach of non-disclosure obligations, or the failure to achieve the intellectual property objectives may have a material adverse effect upon the business, consolidated results of operations and financial condition. Also as new technologies emerge, such as RFID, standards are also developing and the intellectual property rights of parties involved in their development can be uncertain.

~~Printronix relies upon patents to protect intellectual property.~~ ~~We execute confidentiality and non-disclosure agreements as~~17 ~~needed and limit access to, and distribution of, the proprietary information; however, we cannot guarantee that the efforts to protect the intellectual property will be successful.~~

The ability to compete successfully and to achieve future revenue growth depends, in part, upon the ability to protect the 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, diversion of management’s attention and resources from the ongoing business. Claims of intellectual property infringement also might require us to redesign products, enter into costly settlement or licensing agreements or pay costly damage awards. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual agreement to us.

Our Stock Price is Volatile.

The stock price has fluctuated and we expect that it will continue to do so. Many factors can influence the stock price, including but not limited to:

• the announcement of new products or innovations by Printronix or competitors; • changes in the levels of quarterly revenue or net income;

• Printronix ~~failure~~relies toupon ~~successfully~~patents ~~execute~~to ~~planned~~protect ~~cost~~intellectual ~~reductions~~property. We ~~could~~execute ~~result~~confidentiality ~~in product costs~~ and ~~expenses~~non-disclosure ~~that~~agreements ~~are~~as needed ~~greater~~and ~~than~~limit ~~expected;~~access to, and •distribution ~~speculation~~of, in the ~~press~~proprietary information; orhowever, ~~investment~~we ~~community~~cannot ~~about~~guarantee ~~the~~that ~~company,~~our inefforts ~~particular~~to protect asthe itintellectual ~~relates~~property towill ~~RFID~~be successful.

~~Investors~~The ~~should~~ability ~~not~~to ~~rely~~compete onsuccessfully ~~recent~~and ~~trends~~ to ~~predict~~achieve future ~~stock~~revenue ~~prices~~growth depends, ~~consolidated~~in ~~financial~~part, ~~condition~~upon the ability to protect the proprietary technology and to operate without infringing upon the rights of others. We may fail to do so. Such infringement claims, whether or ~~results~~not valid, could result in substantial costs and diversion of management’s attention and resources from ~~operations~~the ongoing business. Claims of intellectual property infringement also might require us to redesign products, enter into costly settlement or ~~cash~~licensing ~~flows~~agreements or pay costly damage awards. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual agreement to us.

Our Stock Price is Volatile.

Our stock price has fluctuated and we expect that it will continue to do so. Many factors can influence the stock price, including but not limited to:


	•	the announcement of new products or innovations by Printronix or competitors;

	•	changes in the levels of quarterly revenue or net income;

	•	failure to successfully execute planned cost reductions could result in product costs and expenses that are greater than expected; and

	•	speculation in the press or investment community about the company, in particular as it relates to RFID.

Investors should not rely on recent trends to predict future stock prices, consolidated financial condition, results of operations or cash flows.

Changes in Accounting Standards and Use of Estimates Related to Complex Accounting Matters Could Significantly Affect Our Financial Results.

New accounting standards or pronouncements, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results for the affected periods. In connection with the application of accounting principles generally accepted in the United States of America, the company uses certain estimates and assumptions, which are based on historical experience and management’s knowledge of current events and actions that the company may undertake in the future. Changes in underlying assumptions, estimates or judgments could significantly change our consolidated results of operations and financial condition.

Failure to Maintain an Effective System of Internal Controls May Impact Our Ability to Accurately Report Our Financial Results or Prevent Fraud.

Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We have devoted significant resources and time to comply with changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess and our auditors attest to the design and operating effectiveness of our controls over financial reporting. Our compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. Any failure to implement required new or improved controls or difficulties encountered in their implementation or operation could harm our operating results or cause us to fail to meet our financial reporting obligations.


Item 1B.	*Unresolved Staff Comments*

None


Item 2.	*Properties*

Printronix owns a facility measuring approximately 186,000 square feet in Irvine, California, which houses the U.S. operations, sales support, engineering and development and also is the company headquarters. This facility secures the company’s $1312.58 million of long-term debt. See Note 2 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for additional discussion. ~~In September 2004, management closed~~ the company’s leased facility in Memphis. Related expenditures were approximately $0.4 million, which included charges for fixed asset write-offs, severance, and other costs. The closure of this facility did not have a material impact on the company’s consolidated financial position or results of operations.

Foreign operations are located in Singapore, the Netherlands and Mexico. Singapore operations are in a facility owned by Printronix, which was constructed in fiscal year 1997 and totals approximately 74,000 square feet. The Singapore facility is subject to a land lease, which expires in the year 2057. The Netherlands operations are in leased facilities of approximately 33,000 square feet. The lease on the Netherlands facilities is an annual lease that is automatically extended from year to year and currently expires in June ~~2007~~2008. The Mexico operations are in leased facilities of approximately 17,~~410~~000 square feet. The lease on the Mexico facilities expires in September ~~2006 and lease renewal is not expected to present any issues~~2008. The company believes it can readily obtain appropriate additional space as may be required at competitive rates by extending expiring leases or finding alternative space. Printronix also leases several small offices, generally on short-term leases, throughout the United States, Asia Pacific, ~~Europe~~ and ~~the~~Europe ~~Middle East~~ for sales, support or service. The company believes that its facilities are in good operating condition.

See Note 7 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for a summary of the expiration dates and lease or rental commitments.


Item 3.	*Legal Proceedings*

Environmental Assessment

Barranca Parkway Sites

In January 1994 and March 1996, Printronix was notified by the California Regional Water Quality Control Board — Santa Ana Region (the “Board”) that ground under one of the 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 its tenancy, but were used by the prior tenant during its long-term occupancy of the site.

In August 2002, Printronix responded to an inquiry from the California Department of Toxic Substance Control (the “Department”) regarding the operations at the site of the former production plant. In February 2004, the Department submitted a proposed Corrective Action Consent Agreement to Printronix, which would require Printronix to perform an investigation of the site that would be used as a basis to determine what, if any, remediation activities would be required of Printronix. ~~The Corrective Action Consent Agreement has not yet been agreed upon or executed.~~ During fiscal year 2006, the Department agreed to include the prior tenant of the site in the ongoing inquiry. ~~Printronix~~We have ~~has~~ agreed to perform an initial environmental test, which we believe will further support ~~the~~ our claim that ~~Printronix~~we did not use the VOCs in question. In May 2006, Printronix and the prior tenant referred to above were jointly issued an Enforcement Order in respect to 1700 Barranca Parkway, Irvine, CA. The Enforcement Order requires both parties to a) evaluate if interim measures are required and take action if necessary, b) perform an investigation of the site and c) take corrective measures if contaminants are found. The Enforcement Order allowed an appeal, which was filed on June 2, 2006. As of August 7, 2006, a Corrective Action Consent Agreement to conduct a Preliminary Endangerment Assessment (“PEA”) had been agreed upon and executed by both Printronix and the prior tenant, ~~referred~~and only requires that both parties: a) evaluate if interim measures are required and take action if necessary and b) perform an investigation of the site. Printronix and the prior tenant have selected an environmental consulting firm to conduct the PEA on their behalf.

above were jointly issued an Enforcement Order in respect to 1700 Barranca Parkway, Irvine, CA. The Enforcement Order requires both parties to a) evaluate if interim measures are required and take action if necessary, b) perform an investigation of the site and c) take corrective measures if contaminants are found. The Enforcement Order allows an appeal, which was filed on June 2, 2006.

We are convinced that we bear no responsibility for any contamination at the site and we intend to defend vigorously any action that might be brought against us with respect thereto.

As of March 3130, ~~2006~~2007 and March 2531, ~~2005~~2006, ~~Printronix~~we accrued ~~continued~~$118 tothousand ~~maintain~~and an$224 ~~accrual~~thousand, ~~for~~respectively ~~$0.2 million,~~which ~~included~~we believe inis ~~accrued~~a ~~liabilities~~reasonable ~~other,~~estimate ~~which~~to iscover ~~believed~~expenses tofor ~~be a~~environmental ~~reasonable~~tests, ~~estimate~~which towe ~~cover~~are ~~any~~prepared ~~additional~~to ~~expenses~~undertake. ~~for~~The accrual is ~~environmental~~included ~~tests~~in ~~the~~Accrued ~~Board~~Liabilities — ~~may~~Other ~~request~~on the consolidated balance sheets.

Denova Site

In August 2004, Printronix was notified by the Environmental Protection Agency (the “EPA”) that clean up costs had been incurred at an authorized facility used by Printronix and approximately 2,000 other companies for the disposal of certain toxic wastes. Printronix joined with a group of the companies contacted by the EPA and collectively negotiated a settlement with the EPA. Our share of the settlement iswas $32 thousand ~~and is~~, ~~reported~~which we paid in ~~the~~May ~~balance~~2006. ~~sheet~~At ~~with~~March 30, ~~accrued~~2007 ~~liabilities~~we ~~other~~had asno offurther ~~March 31,~~liability ~~2006~~regarding this matter.

Restriction of Hazardous Substance Directive (“RoHS”)

“Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment” ~~will~~became beeffective ~~enforced~~ throughout the European Community ~~starting~~ July 1, 2006. RoHS restricts the use of of six substances: lead, mercury, cadmium, hexavalent ~~chromium,~~ chromium, polybrominated biphenyls (“PBB”) or ~~polybrominated~~ polybrominated diphenyl ethers (“PBDE”), within electrical and electronic equipment. As of June 30, 2006, the conversion of products targeted for RoHS compliance had been completed without an impact to the realizability of the inventory on hand.

We are reviewing each of our products for the substances banned under RoHS, and expect to be compliant by the effective date, except for fanfold laser printer models, which are expected to be replaced later in fiscal year 2007. As of March 31, 2006, there was no impairment to our products or environmental liability with respect to RoHS.

Legal Matters

We are involved in various claims and legal matters in the ordinary course of business. We do not believe these matters will have a material adverse effect upon the consolidated results of operations or financial condition.

Our subsidiary in France was sued by a former employee for wrongful termination. The former employee claimed damages of 122,500 euros (approximately $164 thousand), which represented approximately 18 months of salary and legal fees. A settlement of 49,957 euros (approximately $67 thousand) was agreed upon by both parties on April 10, 2007 and has been accrued as of March 30, 2007.

A supplier to our subsidiary in Singapore filed a complaint for non-payment of parts purchased in prior fiscal years. Our subsidiary in Singapore withheld payments for the parts due to significant quality issues in the design of the product. The supplier has claimed damages of $140 thousand under this complaint. As of March 30, 2007, we have recorded an accrual related to this matter.


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

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


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

The common stock is traded on the Nasdaq Stock Market under the symbol PTNX. The following table sets forth the high and low closing price per share of the common stock for the periods indicated:

	2006				2005
	2007				2006
	High		Low		High		Low
1st Quarter	$	17.4609	$	13.8522	$	1517.1946	$	1213.3285
2nd Quarter		1813.3075		1512.6429		1618.9230		1315.5664
3rd Quarter		1613.5924		1411.2077		1816.4059		1314.3620
4th Quarter		1514.9705		1311.8390		2015.2097		1513.6083

Dividends

the first quarter of fiscal year 2007, Printronix paid a cash dividend of $0.07 per share. During the second, third and fourth quarters of fiscal year 2007, Printronix paid a cash dividend of $0.10 per share. The amount and timing of future dividends depends upon the results of operations, financial condition, cash requirements, future business prospects, general business conditions and other factors that the Board may deem relevant at the time.

Issuer Purchases of Equity Securities

Performance Graph

The following line graph compares the cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return of companies of the National Association of Securities Dealers Automated Quotations (“NASDAQ”) U.S. Companies Index and Peer Group Index over the same period of time. The Peer Group Index is a Computer Peripherals Industry Group created by Hemscott, Inc. The comparison assumes the investment of $100 in our common stock and reinvestment of all dividends.

COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PRINTRONIX, INC.,
NASDAQ MARKET INDEX AND HEMSCOTT GROUP INDEX

ASSUMES $100 INVESTED ON MAR. 30, 2002
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 30, 2007

Shareholders:

As of May 26, 2006, the closing price per share was $14.25 and there were 1,533 registered stockholders of record.

Dividends:

During the fourth quarter of fiscal year 2005, Printronix declared and paid its first quarterly cash dividend of $0.05 per share. During each quarter of fiscal year 2006, Printronix paid a cash dividend of $0.07 per share. The amount and timing of future dividends depends upon the results of operations, financial condition, cash requirements, future business prospects, general business conditions and other factors that the Board may deem relevant at the time.

Issuer Purchases of Equity Securities:

The Board of Directors has authorized share repurchases of up to 500,000 shares. Printronix did not repurchase any common shares during fiscal years 2006 or 2005. In fiscal years 2004 and 2003, 106,700 and 161,967 shares, respectively, of common stock were repurchased at prices ranging from $9.03 to $11.87 per share for a total cost of $1.1 million in fiscal year 2004 and $1.7 million in fiscal year 2003. Future purchases of 227,395 shares of common stock (unpurchased part of authorized 500,000 shares) may be made at our discretion.


Item 6.	*Selected Financial Data*

The following income statement and balance sheet data have been derived from the 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

	Fiscal Years Ended
	March 31,			March 25,			March 26,		March 28,		March 29,
	March 30,			March 31,			March 25,		March 26,		March 28,
	2006			2005			2004		2003		2002
	2007			2006			2005		2004		2003
	(53 weeks)			(52 weeks)			(52 weeks)		(52 weeks)		(52 weeks)
	(52 weeks)			(53 weeks)			(52 weeks)		(52 weeks)		(52 weeks)
	($ in thousands, except per share data)
Results of Operations:
Revenue	$	~~127~~128,~~821~~416		$	~~131~~127,~~711~~821		$	~~125~~131,~~070~~711	$	~~138~~125,~~229~~070	$	~~146~~138,~~683~~229
Net (loss) income (1)	$	(7,959	)	$	1,939		$	632	$	3,037	$	2,305
Net income (loss) (1)	$	2,880		$	(7,959	)	$	1,939	$	632	$	3,037
Basic net (loss) income per share	$	(1.28	)	$	0.31		$	0.11	$	0.52	$	0.39
Basic net income (loss) per share	$	0.46		$	(1.28	)	$	0.31	$	0.11	$	0.52
Diluted net (loss) income per share	$	(1.28	)	$	0.30		$	0.11	$	0.51	$	0.39
Diluted net income (loss) per share	$	0.45		$	(1.28	)	$	0.30	$	0.11	$	0.51
Selected Balance Sheet Data:
Cash and cash equivalents	$	4126,~~546~~847		$	3541,~~405~~546		$	3635,~~671~~405	$	2936,~~617~~671	$	2229,~~618~~617
Short-term investments	$	~~547~~12,015		$	~~9,500~~547		$	—9,500	$	—	$	—
Working capital	$	5243,~~515~~581		$	6052,~~320~~515		$	5660,~~001~~320	$	4656,~~670~~001	$	4046,~~486~~670
Total assets	$	~~109~~107,~~984~~027		$	~~113~~109,~~918~~984		$	~~111~~113,~~809~~918	$	~~106~~111,~~087~~809	$	~~104~~106,~~959~~087
Long-term debt, net of current portion	$	~~12,775~~—		$	1312,~~475~~775		$	1413,~~175~~475	$	14,~~875~~175	$	1514,~~575~~875
Stockholders’ equity per share	$	10.6677		$	1210.2366		$	12.6423	$	12.6764	$	1112.7267
Cash dividend declared per share	$	0.0709		$	0.0507		$	—0.05	$	—	$	—

(1) The net loss for the year ended March 31, 2006 ~~includes~~included two tax charges amounting to $4.7 million. The company repatriated an intercompany dividend in the fourth quarter of fiscal year 2006 of $32.0 million, which resulted in a federal and state ~~income~~ tax charge of $1.0 million and a foreign withholding tax charge of $1.1 million ~~(see Note 5 to the Consolidated Financial Statements)~~. In addition, there was an increase in the deferred tax asset valuation allowance of $2.6 million due to cumulative losses in our domestic operations.

deferred tax asset valuation allowance of $2.6 million due to cumulative losses in our domestic operations (see Note 5 to the Consolidated Financial Statements).


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The matters discussed in this Management’s Discussion and Analysis of ~~Results~~Financial ofCondition ~~Operations~~ and ~~Financial~~Results ~~Condition~~of Operations 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

The consolidated financial statements of Printronix are prepared 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 years presented. We continuously evaluate the estimates, judgments and assumptions, including those related to product returns, customer programs and incentives, doubtful accounts, inventories, warranty obligations, 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:

Revenue Recognition

Revenue is recognized in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition.” The application of the authoritative guidance requires judgment to determine whether revenue has been realized or is realizable and earned.

Revenue from product sales is recognized when it is realized or realizable and earned, which is generally at the time of shipment and passage of title and risk of loss. Revenue is considered to be realized or realizable and earned when persuasive evidence of a sales arrangement exists in the form of a contract or purchase order, the product has been shipped, the sales price is fixed or determinable and collection is reasonably assured. Evidence of an arrangement includes written contractual agreements with our resellers that include established pricing and payment terms.

Judgment is required to record an allowance for future product returns. Our business model of configuring products to order for each customer and, in most cases, direct shipping to end users greatly reduces the amount of inventory in the channel, ~~effectively~~ reduces product return liability and aids in estimating future ~~product~~ returns. Each quarter, the adequacy of the recorded allowance for ~~product~~ returns is evaluated and a provision is recorded as a revenue reduction for the estimated amount of future returns, based upon historical experience, authorization the company has granted for significant pending returns and any other known factors. The allowance for ~~product~~ returns was $0.7 million, consisting of $0.6 million for sales returns and $0.9 1 million infor ~~fiscal~~spare returns for ~~years~~both ~~2006~~fiscal ~~and~~year ~~2005,~~2007 ~~respectively~~and 2006. Historically, customer returns ~~returns~~ have been within the range of estimates; however, we cannot ~~cannot~~ guarantee that we will continue to stay within the range of of estimates.

We reduce revenue at the time of sale for price protection, rebates and other sales incentives that occur under established sales programs. Judgment is required to record these estimated revenue reductions. Historically, the revenue reductions for these programs have been within the range of estimates; however, we cannot guarantee that we will continue to stay within the range of estimates. 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.

Allowance for Doubtful Accounts

We perform credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness. We maintain an allowance for doubtful accounts based upon a variety of factors. We review all open accounts and provide specific reserves for customer-collection issues when we believe the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. We also record a reserve for all customers, excluding those that have been specifically reserved for, based upon evaluation of the historical losses that exceeded the specific reserves we had established. Receivable losses are charged against the allowance when management believes the account is uncollectible. Subsequent recoveries, if any, are credited to the allowance. During fiscal year 2007 and 2006, we reduced the allowance for doubtful accounts by $0.1 million and $0.7 million, respectively, due to resolution of various specific customer issues. Although 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. Any significant change in estimates or circumstances could have a material adverse impact upon the operating results for the period or periods in which such information is known. The accounts receivable include substantial receivables from a few large resellers, and a significant change in the liquidity or financial position of any one of these resellers, or other significant changes in estimates or circumstances with other customers, could result in an additional allowance that could have a material adverse effect upon the operating results and financial condition for the period or periods in which such information is known.

The allowances presented on the face of the balance sheet as a reduction to accounts receivable also included the estimated allowance for sales returns as discussed above under Revenue Recognition.

the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. We also record a reserve for all customers, excluding those that have been specifically reserved for, based upon evaluation of the historical losses that exceeded the specific reserves we had established. Receivable losses are charged against the allowance when management believes the account is uncollectible. Subsequent recoveries, if any, are credited to the allowance. The annual provision for doubtful accounts has ranged from a $0.1 million provision to increase the allowance in fiscal year 2004 to a $0.1 million reduction in the allowance in fiscal year 2005. The allowance was reduced by $0.7 million in fiscal year 2006 due to resolution of various specific customer issues. Although 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. Any significant change in estimates or circumstances could have a material adverse impact upon the operating results for the period or periods in which such information is known. The accounts receivable include substantial receivables from a few large resellers, and a significant change in the liquidity or financial position of any one of these resellers, or other significant changes in estimates or circumstances with other customers, could result in an additional allowance that could have a material adverse effect upon the operating results and financial condition for the period or periods in which such information is known.

The allowances presented on the face of the balance sheet as a reduction to accounts receivable also included the estimated allowance for sales returns as discussed above under Revenue Recognition.

Inventories

Inventories include the costs of material, labor and factory overhead. A provision is recorded to value the inventory at the lower of the actual cost to purchase and/or manufacture the inventory using the first-in, first-out method (“FIFO”), or the current estimated market value of the inventory, based upon assumptions about future demand and market conditions. We review historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluate the impact of any anticipated changes in future demand, such as the release or potential release of new or modified products, or new competitive products, and any other known factors at the time. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Estimated future demand could prove to be inaccurate, in which case the company may experience product shortages, or may only be able to obtain the necessary components at a higher cost. Conversely, an inaccurate estimate of future demand may also result in additional charges for excess and obsolete inventories. The provision for specific inventory reserves has been charged to cost of sales and was $0.21 million ~~for~~and $0.2 million for fiscal ~~year~~years 2007 and 2006, respectively and was immaterial for ~~both~~ fiscal year 2005 ~~and 2004~~. Unanticipated changes in demand or changes in technology could have a material adverse effect upon the consolidated results of operations and the financial condition for the period or periods in which such information is known.

Warranties

Printronix offers warranties of various lengths to its customers, depending upon the specific product and terms of the customer purchase agreement. We generally offer either a 90-day on-site repair warranty or a 12-month to 36-month return-to-factory standard parts-and-labor warranty on printer and verifier products to most customers. The 90on-~~day~~site warranty covers the cost of the parts and the labor to replace these parts. The 12return-~~month~~to-factory warranty covers only the replacement parts. 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~~one ~~shelf life of the products, which can be up to two years~~year. An accrual is maintained for warranty obligations based upon the claims experience and other known factors. The warranty accrual requirements are evaluated and a provision for estimated warranty obligations is charged to cost of sales. The provision is determined for warranty charges by applying the estimated repair cost and estimated return rates to the outstanding units under warranty. Estimated repair costs are determined by reviewing the historical repair costs and factors in any known or anticipated changes in these costs. We also evaluate the historical return rate and include the effects of any known or expected future changes in these rates. The warranty provisions have ranged from $0.8 million to $1.0 million over the past three fiscal years. We engage in product-quality programs and processes, including evaluating the suppliers. Although warranty costs historically have been within 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 failure rates, product return rates, or a significant increase in the cost to repair the products, could have a material adverse impact upon the operating results and financial condition in the period or periods in which such information is known.

the same warranty return rates or repair costs that we have in the past. A significant increase in product failure rates, product return rates, or a significant increase in the cost to repair the products, could have a material adverse impact upon the operating results and financial condition in the period or periods in which such information is known.

Long-Lived Assets

Long-lived assets are assessed in accordance with accounting guidance under Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Judgment is required in ~~the application of the authoritative guidance and in~~ determining the recoverability of assets. We assess the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an ~~underlying~~ 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~~ unanticipated change in circumstances could have a significant impact upon the recoverability of long-lived assets and upon the ~~operating~~ operating results and financial condition.

Income Taxes

SFAS No. 109, “Accounting for Income Taxes” establishes financial accounting and reporting standards for the effect of income taxes. 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. Our~~ effective tax rate includes the impact of undistributed foreign earnings for which no U.S. taxes have been provided because we plan to reinvest such earnings indefinitely outside the United States. Repatriating eligible foreign earnings under the temporary provision of the American Jobs Creation Act of 2004 was not treated as an exception to our policy and intent of permanently investing such foreign earnings outside of the United States.

~~Judgment is required to determine if deferred tax assets will be~~ ~~realized by examining both the positive and negative evidence~~24 available to us, such as historical taxable income or losses, projected future taxable income or losses, and feasible, prudent tax planning strategies available. Judgment is also required to determine the expected timing of the reversals of existing temporary differences. Under SFAS No. 109, we must place greater reliance on our past history of domestic operating losses than on projected future domestic operating income in determining whether a valuation allowance is necessary. During the year ended March 31, 2006, we determined that our net deferred tax assets for our domestic operations were more likely than not to not be realizable. As a result, we recorded a $2.6 million charge to increase the valuation allowance against our deferred tax assets. 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 provision for current and deferred taxes is in excess of the amount eventually needed, or if we are able to realize additional deferred tax assets, or if tax laws change favorably, we could experience reduced income tax charges or realize a tax benefit.

recognized for tax purposes. Our effective tax rate includes the impact of undistributed foreign earnings for which no U.S. taxes have been provided because we plan to reinvest such earnings indefinitely outside the United States. Repatriating eligible foreign earnings under the temporary provision of the American Jobs Creation Act of 2004 was not treated as an exception to our policy and intent of permanently investing such foreign earnings outside of the United States.

Judgment is required to determine if deferred tax assets will be realized by examining both the positive and negative evidence available to us, such as historical taxable income or losses, projected future taxable income or losses, and feasible, prudent tax planning strategies available. Judgment is also required to determine the expected timing of the reversals of existing temporary differences. Under SFAS No. 109, we must place greater reliance on our past history of domestic operating losses than on projected future domestic operating income in determining whether a valuation allowance is necessary. As a result of the company’s recent losses in the United States, the company concluded that a full valuation allowance was required for its deferred tax assets in the United States as of March 30, 2007 and March 31, 2006, as required by SFAS No. 109. 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 provision for current and deferred taxes is in excess of the amount eventually needed, or if we are able to realize additional deferred tax assets, or if tax laws change favorably, we could experience reduced income tax charges or realize a tax benefit.

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 consolidated results of operations and financial condition in the period in which they are known.

~~Contingencies~~Stock-Based Compensation

~~Printronix~~On ~~accounts~~April 1, ~~for~~2006, ~~contingencies~~we inadopted ~~accordance~~Statement ~~with~~of ~~various~~Financial ~~accounting~~Accounting ~~guidance,~~Standards ~~including, but not limited to,~~ (“SFAS ”) No. 5123 ~~“Accounting for Contingencies”~~(Revised ~~and~~2004), ~~Financial~~“Share-Based ~~Accounting Standards Board Interpretation~~Payment” (“~~FIN~~SFAS 123(R)”) ~~No. 45~~, ~~“Guarantor’s~~which ~~Accounting~~requires compensation ~~and~~expense ~~Disclosure~~to ~~Requirements~~be recognized for ~~Guarantees,~~all ~~Including~~share-based ~~Indirect~~payments made to ~~Guarantees~~employees ofbased ~~Indebtedness~~on the fair value of ~~Others.”~~the ~~Judgment~~award isat ~~required~~the date of tothe ~~evaluate~~grant. ~~the~~As ~~degree~~required ofby ~~probability~~SFAS 123(R), share-based compensation expense, net of an ~~unfavorable~~estimated ~~outcome~~forfeiture rate, is ~~and~~recognized over the ~~ability~~requisite toservice ~~reasonably~~period ~~estimate~~(generally the vesting ~~loss~~period) ~~related~~of tothe ~~legal~~award. We adopted SFAS 123(R) using ~~claims,~~the ~~tax~~modified ~~related~~prospective ~~audits~~method, ~~guarantees,~~which ~~including~~results ~~indirect~~in the ~~guarantees~~recognition of ~~indebtedness~~compensation expense using the provisions of SFAS 123(R)for ~~others~~all share-based awards granted or modified after March 31, 2006 and ~~other~~the ~~known~~recognition ~~issues,~~of compensation ~~and~~expense using the ~~company~~provisions ~~will~~of ~~record~~SFAS 123, a“Accounting for ~~charge~~Stock-Based toCompensation” (“SFAS No. 123”), ~~earnings~~for ifall ~~appropriate~~unvested awards outstanding at the date of adoption. Under this transition ~~Any~~method, ~~significant~~the ~~change~~results inof ~~estimates~~operations orof ~~circumstances~~prior ~~could~~periods have not been arestated. ~~material~~Accordingly, ~~adverse~~we ~~impact~~will ~~upon~~continue ~~the~~to ~~operating~~provide ~~results~~pro forma financial information for prior periods to illustrate the effect ~~period~~on ornet ~~periods~~income in(loss) ~~which~~and ~~such~~net ~~information~~income is(loss) ~~known~~per share of applying the fair value recognition provisions of SFAS No. 123.

Prior to April 1, 2006, as permitted by SFAS No. 123, we accounted for employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related interpretations. Accordingly, we did not recognize any compensation expense for stock option grants where the exercise price was equal to the fair market value of our common stock on the grant date. In accordance with SFAS 123 and SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, we provided pro forma net income or loss and net income or loss per share disclosures for each period prior to the adoption of SFAS 123(R) as if we had applied the fair value-based method in measuring compensation expense for our stock-based compensation plans. Prior to the adoption of SFAS 123(R), we presented all tax benefits resulting from the exercise of stock options as operating cash flows in our consolidated statements of cash flows. SFAS 123(R) requires that the realized tax benefit related to the excess of the deductible amount over the compensation cost recognized (excess tax benefits) be classified in the statement of cash flow as a cash flow from financing activities rather than as a cash flow from operating activities.

On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” (“FSP 123(R)-3”). We have elected to adopt the alternative transition method provided in FSP 123(R)-3 for

calculating the tax effects of stock-based compensation pursuant to SFAS 123(R). The alternative transition method provides a simplified method for determining the beginning balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee stock-based compensation. It also provides guidance for recognizing the subsequent impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123(R). The adoption of FSP 123(R)-3 did not have an impact on our overall consolidated financial position, results of operations or cash flows.

For the fiscal year ended March 30, 2007, we did not grant or modify any stock options or restricted stock awards and, as of April 1, 2006, all outstanding options were fully vested. Therefore, no stock-based compensation expense was recognized under SFAS 123(R). We are currently evaluating alternatives to stock options to compensate our employees.

Contingencies

Printronix accounts for contingencies in accordance with various accounting guidance, including, but not limited to, SFAS No. 5 “Accounting for Contingencies” and Financial Accounting Standards Board Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Judgment is required to evaluate the degree of probability of an unfavorable outcome and the ability to reasonably estimate the loss related to legal claims, guarantees, including indirect guarantees of indebtedness of others, and other known issues, and the company will record a charge to earnings if appropriate. Any significant change in estimates or circumstances could have a material adverse impact upon the operating results for the period or periods in which such information is known.

Results of Operations

Message from the President

A message from the president regarding fiscal year ~~2006~~2007 and expectations for fiscal year ~~2007~~2008 can be found immediately preceding Item 1 of this Annual Report on Form 10-K.

Overview of Fiscal Year ~~2006~~2007 (52 weeks) Compared With ~~2005~~2006 (53 weeks)

Fiscal year ~~2006~~2007 revenue ~~decreased~~increased 3.0.5 percent. ~~While~~even ~~sales~~though ~~increased~~the inprior ~~both~~year ~~the~~period ~~Americas~~was ~~and~~53 weeks. ~~the~~Higher ~~Asia~~sales ~~Pacific regions,~~through ~~that~~the ~~growth~~distribution ~~was~~and ~~more~~direct ~~than~~channels were offset by alower sales ~~downturn in Western~~ ~~Europe~~through ~~due~~the toOEM achannel. ~~slowdown~~Recurring revenue increased, particularly in the ~~manufacturing~~Americas and ~~automotive~~EMEA, due to increased ribbon ~~sectors,~~sales ~~resulting~~related into ~~lower~~the ~~distribution~~P7000 ~~and~~printer ~~direct~~family ~~sales~~which ofwas introduced ~~line~~in ~~matrix~~fiscal ~~and~~year ~~thermal printers~~2006. ~~Although~~In ~~sales~~January ~~have~~2007, ~~declined~~IBM and Ricoh announced ~~across~~their ~~all~~intent ~~major~~to ~~product~~form ~~lines,~~a ~~due~~joint ~~entirely~~venture tocompany ~~lower~~which ~~sales~~would inacquire ~~EMEA,~~IBM’s wePrinting ~~have~~Systems ~~experienced a 21~~Division.~~4 percent~~ ~~increase~~Sales into ~~sales~~IBM declined ofduring ~~RFID~~the ~~products~~fourth ~~and~~quarter aof ~~6.7 percent~~fiscal ~~increase~~year in2007, ~~recurring~~which we believe ~~sales~~is toa ~~the~~result ~~installed~~of ~~base~~this transition.

Gross margins ~~declined~~increased ~~due~~as toa ~~lower~~result ~~sales~~of ~~volumes~~lower ~~and an~~worldwide ~~increase~~manufacturing incosts ~~inventory obsolescence~~ due to ~~the~~our product ~~transition~~cost reduction and cost ~~during~~containment ~~fiscal~~measures, ~~year~~which ~~2006~~more inthan ~~line~~offset ~~matrix~~the ~~and~~higher ~~thermal printers.~~product ~~Operating~~costs ~~expenses increased principally~~ due to ~~$2.5 million~~ ofRoHS ~~external~~compliance ~~consulting~~in ~~and~~EMEA. ~~audit~~Operating ~~costs for~~expenses ~~Sarbanes-Oxley~~decreased ~~compliance,~~also ~~offset~~as bya ~~the~~result ~~$0.7 million reduction~~of inour ~~the~~cost ~~allowance~~reduction ~~for~~measures, particularly ~~doubtful~~through ~~accounts~~reduced labor costs. Income tax expense ~~expense~~decreased ~~increased~~ from the prior fiscal year ~~due~~because to the prior fiscal year included charges related to the repatriation of foreign earnings under the AJCA Act and ~~due to~~ an increase in the valuation allowance against our deferred tax assets. Cash and short-term investment balances decreased by $23.82 million principally due to ~~the~~dividend ~~results~~payments ofto ~~operations~~stockholders during fiscal year 2007 and ~~dividend~~tax payments related to ~~stockholders~~the ~~during~~funds repatriated under the American Jobs Creation Act at the end of fiscal year 2006, partially offset by a cash inflow due to results of operations.

Overview of Fiscal Year ~~2005~~2006 (53 weeks) Compared With ~~2004~~2005 (52 weeks)

Fiscal year ~~2005~~2006 revenue ~~increased~~decreased 5.3.0 percent,. ~~partly~~While ~~due~~sales toincreased ~~line~~in ~~matrix~~both ~~growth~~the ofAmericas ~~3.2 percent~~ and ~~partly due to continued growth in~~ the ~~thermal~~Asia ~~printer~~Pacific ~~sales~~regions, ~~which were up~~ ~~32.2 percent~~that ~~over~~growth ~~the~~was ~~prior~~more ~~year.~~than Weoffset ~~attribute~~by ~~this increase~~a ~~in thermal printer~~ sales ~~partly~~downturn toin ~~RFID initiatives,~~Western ~~which~~Europe ~~were~~due ~~generating~~to ~~increased~~a ~~revenue~~slowdown ~~for~~in ~~both~~the ~~RFID~~manufacturing and automotive ~~non-RFID thermal products~~sectors, asresulting ~~Printronix~~in ~~gained~~lower ~~exposure~~distribution ~~to leading~~sales ~~CPG~~of ~~enterprises~~line ~~we had previously not sold to. The~~matrix ~~increase~~and inthermal ~~revenues~~printers. isAlthough ~~also~~sales ~~partially~~declined ~~due~~across toall ~~stronger sales in~~major ~~the~~product ~~European~~lines, ~~and Asian markets. This increase was partly~~ due entirely to lower sales in EMEA, ~~in the prior year due to IBM’s~~we ~~conversion~~experienced to a ~~direct~~21.4 percent ~~ship~~increase ~~method,~~in ~~partly~~sales ~~due~~of ~~to a stronger~~RFID ~~Euro,~~products and ~~partly~~a ~~due~~6.7 percent toincrease ~~geographic~~in ~~expansion~~recurring bysales ~~adding~~to ~~additional~~the ~~sales~~installed ~~personnel and channels in selected countries~~base.

Gross margins improved as a result of higher revenues, a stronger Euro, continuing manufacturing cost reductions and productivity improvements. Operating expenses increased principally to support the strategic initiatives to grow revenue that include adding sales personnel in selected countries, marketing efforts related to launching RFID, and demand-generation activities. Late in the fiscal year, Printronix obtained a 3-year extension of the favorable Singapore pioneer tax status, retroactive to the beginning of fiscal year 2005, resulting in a zero tax rate on Singapore earnings. Income tax expense increased from the prior fiscal year as that year benefited from a large federal research and development credit. Cash and short-term investment balances increased by $8.2 million principally due to the results of operations, asset-management programs, and stock option exercises.

Revenue — Fiscal Year 2006 Compared With 2005

Revenue Summary

Revenue for the fiscal year 2006 was $127.8 million, a decrease of $3.9 million, or 3.0 percent, compared with the prior fiscal year. The decrease in revenue in fiscal year 2006 was mainly attributable to a slowdown in the Western Europe’s manufacturing sector, certain end-customers completing major projects in fiscal year 2005, and a general decline of sales into the automotive industry in EMEA and, to a lesser extent, the Americas. Revenue increased in the Americas by 0.9 percent and in Asia Pacific by 4.2 percent, particularly in the line matrix and thermal product technology groups, but was lower by $5.4 million or 11.7 percent in EMEA in all the product technology groups. Sales grew in the Asia Pacific region in the India and Korea markets through better distribution partnerships.

~~Sales~~Gross ~~for~~margins ~~all~~declined ~~product~~due ~~lines,~~to ~~except~~lower ~~for~~sales ~~RFID,~~volumes ~~were~~and lower utilization inof the ~~current~~ ~~year~~manufacturing infrastructure due to the product ~~EMEA~~transition ~~region.~~during ~~RFID~~fiscal ~~sales grew 21.4 percent~~ year ~~over~~2006 ~~year.~~in ~~Line~~line matrix ~~sales decreased~~and 1thermal printers.~~4 percent~~ Operating expenses increased principally due to $~~91.~~2.5 million. ~~Unit~~of ~~sales~~external ofconsulting ~~line~~and audit costs for ~~matrix~~Sarbanes-Oxley ~~printers~~compliance, ~~decreased~~offset 6by the $0.37 ~~percent~~million reduction ~~compared~~in ~~with~~ the ~~prior~~ ~~fiscal~~allowance ~~year~~for doubtful accounts. ~~Unit~~Income ~~sales~~tax expense ofincreased ~~line~~from ~~matrix~~the ~~printers~~prior ~~were~~fiscal ~~down~~year due to the inrepatriation ~~both~~of ~~Americas~~foreign ~~and~~earnings ~~EMEA~~under ~~regions,~~the ~~partly~~AJCA ~~due~~Act toand ~~new~~due ~~products~~to ~~introduced~~an increase in the ~~second~~valuation ~~quarter~~allowance ofagainst ~~fiscal~~our ~~year~~deferred ~~2006, which~~tax ~~resulted~~assets. inCash ~~purchase~~and ~~deferments~~short-term investment balances decreased by $2.8 million principally due to the ~~end-customers,~~results ~~offsetting~~of operations ~~the~~and ~~growth~~dividend inpayments ~~recurring~~to ~~revenue~~stockholders during fiscal year 2006.

~~Thermal sales decreased $1.0 million, or 4.3 percent~~ mainly due to weak sales into the automotive sector in the EMEA region. Other regions showed higher thermal sales particularly due to channel expansion in Asia Pacific. RFID product sales increased $0.6Revenue ~~million or 21.4 percent compared to~~— ~~fiscal~~Fiscal ~~year~~Year ~~2005,~~2007 ~~due~~Compared toWith ~~continuing rollouts of RFID~~2006 installations and pilots by our end users. RFID initiatives allow us to gain access to leading CPG companies, which are generating increased revenue for both RFID and other printer products.

Revenue Summary

Revenue for the fiscal year 2007 was $128.4 million, an increase of $0.6 million, or 0.5 percent, compared with the prior fiscal year even though the prior year period was 53 weeks. The increase in revenue in fiscal year 2007 was mainly attributable to higher sales through the distribution and direct channels offset by lower sales through the OEM channel, particularly in the Americas and EMEA. The increase in the distribution channel sales was due to the addition of new distributors. The increases were primarily due to increased consumables and services revenue, particularly in the Americas and EMEA. The decline in sales through the OEM channel was primarily due to decreased sales through IBM. In January 2007, IBM and Ricoh announced the formation of a joint venture company, the InfoPrint Solutions Company, which will own IBM’s Printing Systems Division. The Printronix contract with IBM has been assigned to InfoPrint Solutions. As IBM’s Printing Systems Division is coping with the effects of this transition, sales to IBM during our fourth quarter of fiscal year 2007 declined $1.4 million when compared to the same quarter last year. The decline in sales to IBM was also partially due to a major sale in the prior year in the Americas that did not reoccur this fiscal year, as well as continued weakness in EMEA.

Revenue increased in the Americas by 0.6 percent and in EMEA by 1.5 percent, but was lower by 1.6 percent in Asia Pacific. Sales for the thermal product line increased by $1.3 million, or 5.6 percent, due to higher recurring revenue from the installed base, higher repairs and service contract revenue, and the introduction of the T4M and SL4M mid-range printers. Laser sales continue to show a decline. During the third quarter of fiscal year 2007, we introduced the L7032 laser printer, and we are continuing to focus our efforts on updating our laser product line.

Revenue by Geographic Region

Revenue by geographic region, related percent changes and percent of total revenue for fiscal years ~~2006~~2007 and ~~2005~~2006 were as follows:

	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	March 30,		March 31,		Percent			March 30,			March 31,
	2006		2005		Change			2006			2005
	2007		2006		Change			2007			2006
	($ in thousands)
Geographic Region:
Americas	$	63,~~011~~366	$	6263,~~419~~011		0.96	%		49.3	%		4749.43	%
EMEA		41,~~213~~820		4641,~~651~~213		~~(11~~1.75	)%		32.26	%		3532.42	%
Asia Pacific		23,~~597~~230		2223,~~641~~597		4(1.26	)%		18.51	%		1718.25	%
	$	~~127~~128,~~821~~416	$	~~131~~127,~~711~~821		~~(3.~~0.5	)%		100.0	%		100.0	%

Americas sales increased 0.96 percent to $63.04 million, principally as a result of an increase in distribution and direct sales offset by a decrease in OEM sales. Americas distribution sales increased 32.54 percent to $3637.87 million, primarily due to ~~the~~increased ~~addition~~consumables ~~of a two-tier~~sales ~~distribution~~for ~~partner~~the inP7000 ~~late~~printer ~~fiscal~~family ~~year~~introduced ~~2005.~~in ~~During~~ fiscal year 2006~~, our largest distributor was acquired by a private equity group that restructured its business~~. ~~However, the~~The ~~transitional~~P7000 ~~distraction~~printer ~~had~~family auses ~~negative impact to the distributor’s performance from~~ a ~~year-over-year perspective.~~ ~~Direct~~unique ~~sales~~print inmanagement ~~Americas~~system ~~increased 8.7 percent~~which tohas ~~$4.5 million.~~been ~~Americas~~very ~~OEM~~well ~~sales~~received ~~decreased 4.5 percent~~by toour ~~$21~~customers.~~7 million,~~ ~~principally~~As ~~due~~a ~~to lower sales to an OEM that sells into the automotive industry. This past year~~result, ~~the automotive industry continued to struggle and~~line ~~production plants have been moved overseas. This had a negative effect on both the line~~ matrix ~~and~~ribbon ~~thermal product~~ sales ~~into this~~are ~~industry.~~growing ~~Americas~~significantly ~~sales~~as ~~through~~more ~~IBM, the largest OEM~~legacy ~~customer,~~printers ~~was~~are ~~slightly~~converted ~~down by 1.7 percent in fiscal year 2006 compared~~ to the ~~prior~~P7000 ~~fiscal year~~family. ~~We believe the demand~~ ~~generation programs performed by Printronix on behalf of IBM and sales teaming with IBM has allowed us to stop the decline, which we have experienced in past years within this channel.~~

~~EMEA~~Direct sales ~~decreased~~in ~~11.7 percent~~Americas toincreased ~~$41~~21.25 ~~million across all channels and product technology groups. EMEA OEM sales decreased $1.2 million, or 8.0~~ percent, to $135.4 million, ~~principally~~ due to ~~several~~increased ~~small~~sales ~~OEM partners~~to ~~going~~one ~~out~~ of ~~business~~our ~~and completion of major projects~~largest incustomers ~~fiscal~~as ~~year~~they ~~2005.~~refurbished ~~This~~a ~~was~~distribution ~~offset~~center byin the ~~IBM/Printronix sales~~first ~~teaming program completing its first full year in~~ fiscal ~~year 2006 resulting in an increase in revenues of 2.1 percent or $0.2 million. EMEA distribution sales were $26.1 million~~quarter, ~~down~~and ~~from~~due ~~$29.6 million~~to ~~a year ago. Distribution~~ sales ~~were lower due~~ to a ~~slowdown~~new indirect ~~the~~customer ~~Western~~added ~~Europe’s manufacturing sector, cutbacks~~ in the ~~automotive industry~~third ~~and~~quarter ~~end-customer completion~~ of ~~major projects in~~ fiscal year ~~2005~~2007. ~~EMEA~~Americas ~~direct~~OEM sales decreased ~~were $1~~6.78 ~~million,~~percent ~~down~~to ~~from~~ $220.62 million ~~a year ago. Changes in the value of the Euro~~, ~~had a small negative impact to EMEA revenue of $81 thousand.~~

Asia Pacific sales increased $1.0 million, or 4.2 percent, to $23.6 million. Asia Pacific OEM sales increased by $0.5 million, or 27.3 percent, to $2.3 million, due to greater sales teaming programs with IBM. Distribution sales increased 7.4 percent to $20.9 million due to increased emphasis on recurring revenues, line matrix and RFID growth initiatives in Korea, and a strengthened relationship with the distribution channels in India. Direct sales were $0.4 million, down from $1.4 million in fiscal year 2005 due to the purchasing pattern of a major customer.

principally due to lower sales to IBM. In January 2007, IBM and Ricoh announced the formation of a joint venture company, the InfoPrint Solutions Company, which will own IBM’s Printing Systems Division. Sales to IBM decreased as they entered this period of transition. In addition, the first quarter of fiscal year 2006 included a major sale through IBM which did not reoccur in the current fiscal year.

EMEA sales increased 1.5 percent to $41.8 million, principally due to higher consumables sales, partially offset by a decrease in services and other sales. EMEA distribution sales increased 14.0 percent to $29.8 million. The increase in the distribution channel sales was the result of increased sales to the automotive industry and the addition of new distributors. The increase was also partly due to increased consumables sales for the P7000 printer family introduced in fiscal year 2006. EMEA direct sales were $0.9 million, down from $1.7 million in the prior fiscal year due to changes in the purchasing pattern of a major customer. EMEA OEM sales decreased $2.2 million, or 16.8 percent, to $11.1 million, principally due to a decrease in sales to IBM, as explained above. Changes in the value of the Euro had a favorable impact to EMEA revenue of $0.4 million.

Asia Pacific sales decreased 1.6 percent to $23.2 million. Asia Pacific distribution sales decreased 2.2 percent to $20.4 million due to two large government contract sales in the prior fiscal year that did not reoccur in the current fiscal year. These declines were partially offset by an increase in consumables sales for the P7000 printer family introduced in fiscal year 2006 and due to sales into India. Asia Pacific direct sales were $1.0 million, up from $0.4 million in fiscal year 2006, as a large customer completed a few major refurbishment projects in the first fiscal quarter. Asia Pacific OEM sales decreased 19.3 percent, to $1.9 million, due to lower sales to IBM, as discussed above.

Revenue by Product Technology

Revenue by product technology, related percent changes and percent of total revenue for fiscal years ~~2006~~2007 and ~~2005~~2006 were as follows:

	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	March 30,		March 31,		Percent			March 30,			March 31,
	2006		2005		Change			2006			2005
	2007		2006		Change			2007			2006
	($ in thousands)
Product Technology:
Line matrix	$	91,~~176~~366	$	9291,~~463~~176		(10.42	)%		71.31	%		7071.23	%
Thermal (includes RFID)*		23,201		24,249		(4.3	)%		18.2	%		18.4	%
Thermal		24,494		23,201		5.6	%		19.1	%		18.2	%
Laser		1110,~~406~~689		1211,~~874~~406		(116.43	)%		8.93	%		9.8.9	%
Verification products		2,038		2,125		(4.1	)%		1.6	%		1.6	%
Verification		1,867		2,038		(8.4	)%		1.5	%		1.6	%
	$	~~127~~128,~~821~~416	$	~~131~~127,~~711~~821		~~(3.~~0.5	)%		100.0	%		100.0	%
*RFID	$	3,214	$	2,647		21.4	%		2.5	%		2.0	%

The ~~reduction~~increase in line matrix sales was primarily due to ~~lower~~increased consumables sales into the ~~EMEA~~Americas ~~region.~~and ~~Line~~EMEA, ~~matrix~~offset ~~hardware sales was negatively impacted~~ by a decline in printer sales into ~~the~~Asia ~~automotive~~Pacific. The increase in ~~industry,~~consumables ~~continued~~sales ~~migration~~was due to ~~Laser~~the ~~and~~introduction ~~other~~of ~~technologies,~~the P7000 asprinter ~~well~~family asin ~~the~~fiscal ~~introduction~~year of2006. The P7000 printer family uses a ~~new~~unique ~~line~~print ofmanagement ~~line~~system ~~matrix~~which ~~printer~~has been very well ~~during~~received ~~the~~by ~~current~~our ~~fiscal~~customers. ~~year~~As ~~which~~a ~~resulted~~result, inline ~~customers~~matrix ribbon sales ~~testing~~are ~~these~~growing ~~models~~significantly ~~before~~as ~~deploying~~more ~~into~~legacy ~~mission~~printers ~~critical~~are converted ~~situations~~to the P7000 family. The decline in ~~line~~printer ~~matrix~~ sales ~~was~~into ~~partially~~Asia ~~offset~~Pacific bywas andue ~~increase~~to inseveral ~~recurring~~large ~~revenues,~~sales ~~particularly~~ in ~~the~~fiscal year 2006 into ~~Americas,~~the asSouth aEast ~~result~~Asia ofmarket ~~continued~~that ~~focus~~did not reoccur in ~~this~~the ~~area~~current fiscal year.

Thermal printer sales, inincreased ~~particular~~due ~~barcode~~to ~~applications, showed~~higher arecurring ~~reduction~~ revenue from the ~~prior~~installed ~~fiscal~~base ~~year~~as ~~due~~well toas a higher ~~level~~ ofrepairs ~~significant~~and ~~sales~~service contract inrevenue. ~~fiscal~~Also, ~~year~~printer ~~2005~~revenues ~~than~~increased in ~~fiscal~~the latter ~~year~~part ~~2006,~~of ~~and~~the ~~also~~year due to ~~weak~~higher ~~sales~~revenues into the EMEA automotive industry. ~~RFID~~The ~~continued~~increase towas ~~grow~~also inthe ~~all~~result ~~regions,~~of ~~although~~ the ~~EMEA~~ ~~region in particular continues to lag in adoption. The~~introduction ~~addition~~ of athe ~~new~~T4M ~~thermal~~and ~~channel~~SL4M tomid-range ~~market~~thermal inprinters ~~Americas,~~during ~~which was added in~~ the fourth quarter of fiscal year ~~2005~~2007, ~~made significant~~increasing ~~revenue~~sales ~~contribution and was among the top three~~by ~~Americas customers~~$0.7 million.

Laser sales continue to show year-over-year decline due to the emphasis on bringing new products to market in the RFID, thermal, and line matrix product lines. WeDuring ~~intend~~the third quarter of fiscal year 2007, we introduced the L7032 laser printer, and we are continuing to ~~refocus~~focus our efforts on updating our laser ~~sales~~product ~~in fiscal year 2007~~line.

Recurring Revenue

Recurring revenue from the installed base was $54.5 million and 42.7 percent of total sales for fiscal year 2006, up from $51.1 million and 38.8 percent of total sales a year ago, we believe as a result of the demand-generation programs, particularly in the Americas. Recurring revenue includes line matrix ribbons, laser consumables, spares sales, sales under the advance exchange program, labels, printer maintenance and depot repair services. We will continue to focus on this strategic growth initiative by marketing to the installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.

Recurring Revenue

Recurring revenue from the installed base was $56.2 million and 43.7 percent of total sales for fiscal year 2007, up from $54.5 million and 42.7 percent of total sales a year ago. The increase was partly due to higher maintenance and service sales to an OEM customer, and partly due to increased consumables sales related to the introduction of the P7000 printer. Recurring revenue includes line matrix ribbons, laser consumables, spares, sales under the advance exchange program, labels, printer maintenance and depot repair services. We will continue to focus on this strategic growth initiative by marketing to the installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.

Revenue by Channel

Revenue by channel, related percent changes and percent of total revenue for fiscal years ~~2006~~2007 and ~~2005~~2006 were as follows:

	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	March 30,		March 31,		Percent			March 30,			March 31,
	2006		2005		Change			2006			2005
	2007		2006		Change			2007			2006
	($ in thousands)
Channel:
OEM	$	3733,~~405~~229	$	3937,~~093~~405		(411.32	)%		2925.39	%		29.73	%
Distribution		8387,~~796~~872		8483,~~530~~796		(04.9	)%		6568.54	%		6465.25	%
Direct		67,~~620~~315		86,~~088~~620		~~(18~~10.25	)%		5.27	%		65.12	%
	$	~~127~~128,~~821~~416	$	~~131~~127,~~711~~821		~~(3.~~0.5	)%		100.0	%		100.0	%

Sales through the OEM channel decreased 411.32 percent to $3733.42 million. InAs ~~the~~discussed ~~Americas~~above, ~~and~~we ~~EMEA,~~believe the ~~OEM channel~~decline ~~decline~~ was ~~primarily~~mainly ~~due~~attributable to ~~the~~IBM ~~decline~~and in the ~~automotive industry,~~transition ~~the~~it ~~completion of several major projects in fiscal~~is ~~year~~experiencing ~~2005,~~related ~~and~~to ~~some~~the ~~small~~announced ~~OEMs~~joint ~~going~~venture ~~out~~with ~~of business~~Ricoh. ~~IBM, the~~ ~~largest~~In ~~OEM reseller~~addition, ~~showed~~the anfirst ~~overall~~quarter ~~slight revenue increase~~ of ~~1.6 percent.~~fiscal Weyear ~~expect~~2006 ~~continued~~included ~~growth with IBM in the~~a ~~next~~major ~~fiscal~~sale ~~year~~through asIBM wewhich ~~believe~~did wenot ~~have~~reoccur ~~stopped the revenue declines~~ in the ~~Americas and have instituted greater sales~~current ~~teaming~~fiscal ~~programs in the EMEA and Asia Pacific regions~~year.

Sales through the distribution channel ~~decreased~~increased 04.9 percent to $8387.89 million, primarily due to an increase in recurring revenue in EMEA. The ~~decline~~increase was indue ~~the~~to ~~EMEA~~the ~~region~~addition asof asome ~~result~~new ofdistributors. ~~the~~The ~~decline~~increase inwas ~~sales~~also partly due to increased consumables sales for the P7000 printer ~~automotive~~family ~~industry~~introduced in ~~the~~fiscal ~~Germany~~year ~~market~~2006.

Direct sales ~~decreased~~increased 1810.25 percent to $67.63 million. ~~The~~due ~~decline~~to ~~was~~increased ~~due~~sales toin the ~~purchasing~~Americas ~~patterns~~and ofAsia Pacific as a large customer completed a few major refurbishment projects in the first fiscal quarter, and due to sales to a new direct customer added in the third quarter of fiscal year 2007.

Revenue by Customer

Revenue by customer, related percent changes and percent of total revenue for fiscal years ~~2006~~2007 and ~~2005~~2006 were as follows:

	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	March 30,		March 31,		Percent			March 30,			March 31,
	2006		2005		Change			2006			2005
	2007		2006		Change			2007			2006
	($ in thousands)
Customer:
Largest customer — IBM	$	2825,~~807~~636	$	28,~~367~~807		1(11.60	)%		2220.50	%		2122.5	%
Second largest customer		96,~~335~~491		109,~~426~~335		(1030.5	)%		75.31	%		7.93	%
Top ten customers		6358,~~473~~713		6663,~~479~~473		(47.5	)%		4945.7	%		5049.57	%

Sales to IBM ~~were higher~~ in ~~EMEA~~the ~~and~~Americas ~~Asia~~decreased ~~Pacific~~ by $01.20 million, or 2 6.13 percent, ~~and~~in EMEA by $01.57 million, or ~~or 27~~16.2 percent, ~~respectively.~~and ~~The increase~~ in ~~sales~~Asia ~~was~~Pacific ~~a result of the growth in sales teaming around the world that began in the prior fiscal year. However, sales to IBM in the Americas decreased~~ by $0.35 million., ~~We believe the teaming~~or ~~with~~20.4 percent, ~~IBM~~for ~~has stopped~~ the ~~revenue~~reasons ~~declines~~already westated ~~had noted earlier in the fiscal year~~above.

The second largest customer was acquired by a private-equity group during the current fiscal year. The acquisition caused some distraction and disruption in their sales.

International Revenue

Revenue from United States customers was 46.4 percent and 44.9 percent of total revenue, while revenue from international customers was 53.6 percent and 55.1 percent of total revenue for fiscal years 2006 and 2005, respectively. We expect international revenue to grow and continue to be a large percentage of total revenue.

The second largest customer underwent a restructuring, due to ~~Revenue — Fiscal~~new ownership, and has undergone a reduction of its sales force. ~~Year~~Part ~~2005~~of ~~Compared~~the ~~With~~company ~~2004~~was sold to a two-tier reseller, with which we are currently doing business. During fiscal year 2007, sales to the two-tier reseller were $1.6 million.

International Revenue

Revenue from United States customers was 45.9 percent and 46.4 percent of total revenue, while revenue from international customers was 54.1 percent and 53.6 percent of total revenue for fiscal years 2007 and 2006, respectively. We expect international revenue to grow and continue to be a large percentage of total revenue.

Revenue — Fiscal Year 2006 Compared With 2005

Revenue Summary

Revenue for the fiscal year ~~2005~~2006 was $~~131~~127.78 million, ana ~~increase~~decrease of $63.69 million, or 5.3.0 percent, compared with the prior fiscal year. The ~~increase~~decrease in revenue in fiscal year ~~2005~~2006 was mainly attributable to ~~unit~~a ~~sale~~slowdown ~~increases~~in asthe noWestern ~~major~~Europe’s ~~modifications~~manufacturing ~~were~~sector, ~~made~~certain toend-customers completing ~~pricing.~~major ~~Revenue~~projects ~~was up~~ in ~~EMEA and~~fiscal ~~Asia~~year ~~Pacific~~2005, and ~~down~~a ~~slightly in the Americas. The~~general ~~increased~~decline of sales ininto ~~EMEA are~~ the ~~result~~automotive ofindustry ~~higher~~in ~~sales~~EMEA toand, ~~IBM due~~ to ~~IBM’s conversion to~~ a ~~direct ship method in the~~ ~~prior~~lesser ~~year~~extent, athe ~~strong~~Americas. ~~Euro,~~Revenue ~~and~~ increased ~~sales~~in tothe ~~a major direct~~Americas ~~account~~by 0.9 percent ~~Sales~~and ~~grew~~ in ~~the~~ Asia Pacific ~~region~~by ~~from a rebounding~~4.2 percent, ~~economy,~~ particularly in ~~China.~~the ~~Sales~~line ofmatrix and thermal ~~products~~product technology ~~increased~~groups, ~~sharply~~but inwas ~~the~~lower ~~Americas~~by ~~but~~$5.4 million ~~decreased~~or ~~line matrix~~11.7 percent ~~sales~~in ~~resulted~~EMEA in ~~lower~~all ~~overall~~the ~~revenues~~product intechnology ~~the region~~groups. Sales ofgrew in the ~~line~~Asia ~~matrix~~Pacific ~~grew~~region ~~3.2 percent~~in ~~over~~ the ~~prior~~India ~~fiscal~~and ~~year,~~Korea markets through ~~mainly~~better indistribution ~~the Asia Pacific region~~partnerships.

~~RFID~~Sales ~~initiatives~~for ~~allowed~~all usproduct tolines, ~~gain~~except ~~access~~for toRFID, ~~leading~~were ~~CPG~~lower in ~~companies,~~fiscal ~~which~~year ~~generated~~2006 ~~increased~~due ~~revenue~~to ~~for~~the ~~both~~EMEA region. RFID ~~and~~sales grew ~~non-RFID~~21.4 percent ~~thermal~~year ~~products~~over year. ~~Thermal~~Line matrix sales ~~increased~~decreased 1.4 percent to $591.92 million,. orUnit 32sales of line matrix printers decreased 6.23 percent. ~~RFID~~compared ~~product~~with fiscal year 2005. Unit sales of line matrix printers were down in both ~~$2.6 million~~Americas and EMEA regions, partly due to new products introduced in the second quarter of fiscal year ~~2005~~2006, ~~its~~which ~~first~~resulted ~~full~~in purchase ~~year~~deferments ofby the end-customers, offsetting the growth ~~implementation~~in recurring revenue.

Thermal sales decreased $1.0 million, or 4.3 percent, mainly due to weak sales into the automotive sector in the EMEA region. Other regions showed higher thermal sales particularly due to channel expansion in Asia Pacific. RFID product sales increased $0.6 million or 21.4 percent compared to fiscal year 2005, due to continuing rollouts of RFID installations and pilots by our end users.

Revenue by Geographic Region

Revenue by geographic region, related percent changes and percent of total revenue for fiscal years ~~2005~~2006 and ~~2004~~2005 were as follows:

	Year Ended							Percent of Total Sales
	March 25,		March 26,		Percent			March 25,			March 26,
	March 31,		March 25,		Percent			March 31,			March 25,
	2005		2004		Change			2005			2004
	2006		2005		Change			2006			2005
	($ in thousands)
Geographic Region:
Americas	$	6263,~~419~~011	$	6362,~~579~~419		(10.89	)%		4749.43	%		5047.94	%
EMEA		4641,~~651~~213		4246,~~183~~651		10(11.67	)%		3532.42	%		3335.74	%
Asia Pacific		2223,~~641~~597		1922,~~308~~641		174.32	%		1718.25	%		1517.42	%
	$	~~131~~127,~~711~~821	$	~~125~~131,~~070~~711		5.(3.0	)%		100.0	%		100.0	%

Americas ~~OEM~~ sales ~~decreased~~increased 4.0.9 percent to $2263.70 million, principally as a result of ~~lower~~an ~~sales~~increase toin distribution and ~~our~~direct ~~largest~~sales ~~customer,~~offset ~~IBM~~by a decrease in OEM sales. Americas distribution sales ~~were~~increased ~~flat~~3.5 percent to at $3536.78 million, ~~for~~due to the addition of a two-tier distribution partner in late fiscal ~~years~~year 2005. ~~and~~During ~~2004~~fiscal year 2006, our largest distributor was acquired by a private equity group that restructured its business. However, the transitional distraction had a negative impact to the distributor’s performance from a year-over-year perspective. Direct sales in Americas increased 8.7 percent ~~direct~~to $4.5 million. Americas OEM sales decreased 4.85 percent to $421.07 million, ~~for~~principally due to lower sales to an OEM that sells into the automotive industry. During fiscal year ~~2005.~~2006, the

EMEA OEM sales increased $1.2 million, or 9.2 percent, to $14.5 million, principally due to increased sales to IBM. EMEA distribution sales were $29.6 million, up from $27.4 million a year ago. EMEA direct sales were $2.6 million, up from $1.5 million a year ago. Changes in the value of the Euro contributed $1.9 million to EMEA revenue.

Asia Pacific sales increased $3.3 million, or 17.3 percent, to $22.6 million, primarily as a result of the strong growth throughout the year in the distribution-channel, mainly in China, where sales were up $2.1 million.

automotive industry continued to struggle and production plants were moved overseas. This had a negative effect on both the line matrix and thermal product sales into this industry. Americas sales through IBM, the largest OEM customer, was slightly down by 1.7 percent in fiscal year 2006 compared to the prior fiscal year.

EMEA sales decreased 11.7 percent to $41.2 million across all channels and product technology groups. EMEA OEM sales decreased $1.2 million, or 8.0 percent, to $13.4 million, principally due to several small OEM partners going out of business and completion of major projects in fiscal year 2005. This was offset by the IBM/Printronix sales teaming program completing its first full year in fiscal year 2006 resulting in an increase in revenues of 2.1 percent or $0.2 million. EMEA distribution sales were $26.1 million, down from $29.6 million a year ago. Distribution sales were lower due to a slowdown in the Western Europe’s manufacturing sector, cutbacks in the automotive industry and end-customer completion of major projects in fiscal year 2005. EMEA direct sales were $1.7 million, down from $2.6 million a year ago. Changes in the value of the Euro had a small negative impact to EMEA revenue of $81 thousand.

Asia Pacific sales increased $1.0 million, or 4.2 percent, to $23.6 million. Asia Pacific OEM sales increased by $0.5 million, or 27.3 percent, to $2.3 million, due to greater sales teaming programs with IBM. Distribution sales increased 7.4 percent to $20.9 million due to increased emphasis on recurring revenues, line matrix and RFID growth initiatives in Korea, and a strengthened relationship with the distribution channels in India. Direct sales were $0.4 million, down from $1.4 million in fiscal year 2005, due to the purchasing pattern of a major customer.

Revenue by Product Technology

Revenue by product technology, related percent changes and percent of total revenue for fiscal years ~~2005~~2006 and ~~2004~~2005 were as follows:

	Year Ended							Percent of Total Sales
	March 25,		March 26,		Percent			March 25,			March 26,
	March 31,		March 25,		Percent			March 31,			March 25,
	2005		2004		Change			2005			2004
	2006		2005		Change			2006			2005
	($ in thousands)
Product Technology:
Line matrix	$	9291,~~463~~176	$	8992,~~620~~463		3(1.24	)%		7071.23	%		7170.62	%
Thermal (includes RFID) *		24,249		18,345		32.2	%		18.4	%		14.7	%
Thermal		23,201		24,249		(4.3	)%		18.2	%		18.4	%
Laser		1211,~~874~~406		1412,~~715~~874		(1211.54	)%		9.8.9	%		119.8	%
Verification products		2,125		2,390		(11.1	)%		1.6	%		1.9	%
Verification		2,038		2,125		(4.1	)%		1.6	%		1.6	%
	$	~~131~~127,~~711~~821	$	~~125~~131,~~070~~711		5.(3.0	)%		100.0	%		100.0	%
* RFID	$	2,647	$	294		800.3	%		2.0	%		0.2	%

The ~~increase~~reduction in line matrix ~~printer~~sales was primarily due to lower sales into the EMEA region. Line matrix hardware sales was negatively ~~partly~~impacted by a decline in ~~EMEA~~sales into the automotive industry, ascontinued migration to Laser and other technologies, as well as the introduction of a ~~result~~new line of ~~the~~line ~~prior~~matrix printer during fiscal year ~~conversion~~2006 which resulted in customers testing these models before deploying them into mission critical situations. The decline in line matrix sales was partially offset by ~~IBM~~an toincrease ain ~~direct~~recurring ~~ship~~revenues, particularly in the ~~method~~Americas, ~~and~~as ~~partly~~a result of continued focus in ~~Asia~~this ~~Pacific~~area.

Thermal printer sales, ~~growth~~in ~~reflected~~particular ~~our~~bar ~~growing~~code ~~market share~~applications, ofshowed a reduction from the ~~high-performance~~prior ~~thermal~~fiscal ~~market~~year ~~and~~due ~~the~~to ~~continued~~a ~~early~~higher ~~successes~~level of significant sales in ~~RFID~~fiscal ~~printing~~year ~~primarily~~2005 than in ~~the~~fiscal year ~~Americas~~2006, and ~~EMEA~~also due to weak sales into the automotive industry. RFID continued to grow in all regions, although the WeEMEA ~~also~~region ~~added~~in particular continues to lag in adoption. The addition of a new thermal channel to market, ~~ScanSource,~~in ~~Inc.~~Americas, ~~for~~which ~~thermal~~was ~~printers~~added ~~late~~ in the fourth quarter of fiscal year 2005, made significant revenue contribution and was among the top three Americas customers.

Laser sales ~~are~~continued ~~down~~to ~~primarily~~show year-over-year decline due to anthe emphasis on bringing new products to market ~~capitalizing~~in on the ~~opportunities~~RFID, ~~presented~~thermal, byand ~~RFID~~line matrix product lines.

Recurring Revenue

Recurring revenue from ~~the~~our installed base was $5154.15 million and 3842.87 percent of total sales for fiscal year ~~2005~~2006, up from $5051.41 million and 4038.38 percent of total sales a year ago,. weWe believe asthis increase is a result of the demand-~~generation~~ ~~programs. Recurring revenue includes line matrix ribbons, laser consumables, spares sales, sales under the advance exchange program, labels, printer maintenance and depot repair services.~~

Revenue by Channel

Revenue by channel, related percent changes and percent of total revenue for fiscal years 2005 and 2004 were as follows:

	Year Ended							Percent of Total Sales
	March 25,		March 26,		Percent			March 25,			March 26,
	2005		2004		Change			2005			2004
	($ in thousands)
Channel:
OEM	$	39,093	$	39,093		0.0	%		29.7	%		31.3	%
Distribution		84,530		78,962		7.1	%		64.2	%		63.1	%
Direct		8,088		7,015		15.3	%		6.1	%		5.6	%
	$	131,711	$	125,070		5.3	%		100.0	%		100.0	%

Sales through the OEM channel were flat at $39.1 million in both fiscal years 2005 and 2004 as increases in EMEA in fiscal year 2005 were offset with declines elsewhere. The growth in the distribution channel was due to strong performance in EMEA and Asia Pacific. Direct sales were up 15.3 percent as we continued the direct marketing to major accounts.

generation programs, particularly in the Americas. Recurring revenue includes line matrix ribbons, laser consumables, spares sales, sales under the advance exchange program, labels, printer maintenance and depot repair services. We will continue to focus on this strategic growth initiative by marketing to the installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.

Revenue by Channel

Revenue by channel, related percent changes and percent of total revenue for fiscal years 2006 and 2005 were as follows:


	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	2006		2005		Change			2006			2005
	($ in thousands)

Channel:
OEM	$	37,405	$	39,093		(4.3	)%		29.3	%		29.7	%
Distribution		83,796		84,530		(0.9	)%		65.5	%		64.2	%
Direct		6,620		8,088		(18.2	)%		5.2	%		6.1	%

	$	127,821	$	131,711		(3.0	)%		100.0	%		100.0	%

Sales through the OEM channel decreased 4.3 percent to $37.4 million. In the Americas and EMEA, the OEM channel decline was primarily due to the decline in the automotive industry, the completion of several major projects in fiscal year 2005, and some small OEMs going out of business. IBM, the largest OEM reseller, showed an overall slight revenue increase of 1.6 percent.

Sales through the distribution channel decreased 0.9 percent to $83.8 million. The decline was in the EMEA region as a result of the decline in sales to the automotive industry in the Germany market.

Direct sales decreased 18.2 percent to $6.6 million. The decline was due to the changes in purchasing patterns of a major customer.

Revenue by Customer

Revenue by customer, related percent changes and percent of total revenue for fiscal years ~~2005~~2006 and ~~2004~~2005 were as follows:

	Year Ended							Percent of Total Sales
	March 25,		March 26,		Percent			March 25,			March 26,
	March 31,		March 25,		Percent			March 31,			March 25,
	2005		2004		Change			2005			2004
	2006		2005		Change			2006			2005
	($ in thousands)
Customer:
Largest customer — IBM	$	28,~~367~~807	$	2728,~~929~~367		1.6	%		2122.5	%		2221.35	%
Second largest customer		109,~~426~~335		1110,~~090~~426		(610.05	)%		7.93	%		87.9	%
Top ten customers		6663,~~479~~473		6466,~~234~~479		3(4.5	)%		5049.57	%		5150.35	%

Sales to IBM were higher in EMEA byand Asia Pacific by $10.82 million, or 2.1 percent, and $0.5 million, 21or 27.42 percent, asrespectively. aThe increase in sales was a result of the ~~conversion~~growth toin ~~direct~~sales ~~ship~~teaming around the world that began in the prior fiscal year. ~~Sales~~However, sales to IBM in the Americas decreased by $10.13 million.

The second largest customer was acquired by a private-equity group during the fiscal year 2006. The acquisition caused some distraction and disruption in their sales.

International Revenue

Revenue from United States customers was 4446.94 percent and 4844.49 percent of total revenue, while revenue from international customers was 5553.16 percent and 5155.61 percent of total revenue for fiscal years ~~2005~~2006 and ~~2004~~2005, respectively. We expect international revenue to grow and continue to be a large percentage of total revenue.

Gross Margin

Fiscal Year 2007 Compared with 2006

Gross margin for the fiscal year 2007 was $50.1 million compared to $48.2 million for the prior fiscal year and was 39.0 percent and 37.7 percent of revenue, respectively. The increase in gross margin is a result of lower worldwide manufacturing costs due to our product cost reduction and cost containment measures, which was partly offset by higher product costs due to RoHS compliance in EMEA. Continuing efficiencies in the manufacturing process has enabled an 11 percent decrease in manufacturing personnel in fiscal year 2007 compared with fiscal year 2006. The changes in the value of the Euro increased gross margin by $0.2 million in fiscal year 2007.

Fiscal Year 2006 Compared with 2005

Gross margin for the fiscal year 2006 was $48.2 million compared to $51.5 million for the prior fiscal year and was 37.7 percent and 39.1 percent of revenue, respectively. Lower revenue in fiscal year 2006 of $3.9 million resulted in lower gross margins, due to volume, of $2.6 million or 2.0 percent of revenue for the year including the impact from lower utilization of the manufacturing infrastructure. Inventory obsolescence costs were also higher in fiscal year 2006 by $0.3 million due to the product transition during the year on the line matrix and thermal product lines. The changes in the value of the Euro only increased gross margin by $13 thousand in fiscal year 2006. We ~~have~~ realigned manufacturing operations throughout the year to lower ~~lower~~ the cost base and increase productivity.

Fiscal Year 2005 Compared with 2004

Gross margin as a percentage of sales was 39.1 percent in fiscal year 2005 compared with 37.9 percent in fiscal year 2004 and increased due to the strengthening of the Euro, higher sales volumes, and continuing manufacturing cost reductions and productivity improvements. The changes in the value of the Euro added $1.4 million, or 110 basis points, to the gross margin in fiscal year 2005.

Operating Expenses

Operating expenses consist of engineering and development, sales and marketing, and general and administrative costs. Operating expenses were $5148.61 million, $4851.86 million and $4648.48 million for fiscal years ~~2006~~2007, ~~2005~~2006 and ~~2004~~2005, respectively. Operating expenses, related percent changes and percent of total sales for fiscal years ~~2006~~2007 and ~~2005~~2006 were as follows:


	Year Ended							Percent of Total Sales
	March 30,		March 31,		Percent			March 30,			March 31,
	2007		2006		Change			2007			2006
	($ in thousands)

Engineering and development	$	12,415	$	14,344		(13.4	)%		9.7	%		11.2	%
Sales and marketing		23,774		25,370		(6.3	)%		18.5	%		19.8	%
General and administrative		11,950		11,931		0.2	%		9.3	%		9.3	%

	$	48,139	$	51,645		(6.8	)%		37.5	%		40.3	%

Operating expenses, related percent changes and percent of total sales for fiscal years 2006 and 2005 were as follows:


	Year Ended							Percent of Total Sales
	March 31,		March 25,		Percent			March 31,			March 25,
	2006		2005		Change			2006			2005
	($ in thousands)

Engineering and development	$	14,344	$	15,762		(9.0	)%		11.2	%		12.0	%
Sales and marketing		25,370		24,414		3.9	%		19.8	%		18.5	%
General and administrative		11,931		8,622		38.4	%		9.3	%		6.5	%

	$	51,645	$	48,798		5.8	%		40.3	%		37.0	%

Operating expenses, related percent changes and percent of total sales for fiscal years 2005 and 2004 were as follows:

	Year Ended							Percent of Total Sales
	March 25,		March 26,		Percent			March 25,			March 26,
	2005		2004		Change			2005			2004
	($ in thousands)
Engineering and development	$	15,762	$	15,885		(0.8	)%		12.0	%		12.7	%
Sales and marketing		24,414		22,269		9.6	%		18.5	%		17.8	%
General and administrative		8,622		8,249		4.5	%		6.5	%		6.6	%
	$	48,798	$	46,403		5.2	%		37.0	%		37.1	%

Engineering and Development

We believe it is critical to continue to invest in engineering and development to ensure technology leadership in line matrix, thermal and RFID printing solutions. Engineering expenses consist mostly of labor, ~~and~~ test materials and infrastructure costs. In fiscal year ~~2006~~2007, we spent $1412.34 million on engineering and development, compared with $1514.83 million in fiscal year ~~2005~~2006 and $15.98 million for fiscal year ~~2004~~2005. As a percentage of revenue, engineering and development expenses decreased in fiscal year ~~2006~~2007 to 119.27 percent from 12 11.02 percent in fiscal year ~~2005~~2006, mostly as a ~~result of increased cost reduction~~ ~~efforts. Engineering and development expenses as a percentage of revenue were 12.7 percent in fiscal year 2004.~~

Fiscal year 2006 was a significant year for new product introductions in line matrix, thermal, RFID and Print/Encode/Apply technologies. For line matrix, we introduced a new printing platform, the P7000 family. This family is characterized by many user advantages, including lowered cost of printing, improved print quality, ease of use and improved reliability. A new Zero-Tear model of the P7000 was also introduced, providing single sheet printing capability with no forms loss. New platforms and printer models were also introduced for the thermal, RFID and print/apply product lines. In the thermal product line, we introduced the new T5000r platform, which included many industry-leading features, including easy upgrade to RFID capability. The RFID printer line was enhanced with a new platform, the SL5000r MP2. The SLPA7000 family was upgraded to Gen 2 capability and its performance enhanced to accommodate up to 60 cartons per minute for applications on CPG conveyor systems.

During fiscal year 2005, we increased the focus on the development of RFID printing solutions in support of Wal«Mart, the DOD and other retailers’ initiatives. We introduced the second generation of EPC RFID Smart Label printers. This printer platform was further enhanced with new frequencies and protocols and launched in Europe during fiscal year 2006. Building on the general-purpose interface released in the prior fiscal year, we co-developed and launched the EPC RFID Encode/Print/Apply system, which automatically applies encoded smart labels to cases and pallet with no manual intervention.

In fiscal year 2004, the most significant change from prior years was a strategic shift to develop a new line of thermal printers to support Wal«Mart and the DOD’s RFID initiatives. In addition, the T5000 thermal family was further enhanced to add additional data stream interpreters to work in TEC, Intermec and Sato applications, and a general-purpose interface was released to support a broad base of post-processing external devices including print and apply applicators. To address the market need for industrial grade transaction printing, a zero tear version of the P5000 line matrix pedestal printer was developed and launched late in fiscal year 2004. To facilitate regional expansion, the P5000 line sold into Asian markets received a new high-speed controller coupled with regional-specific enhancements for both distribution and OEM version printers.

Sales and Marketing

Sales and marketing expenses for fiscal year 2006 increased to $25.4 million, compared with $24.4 million for fiscal year 2005 and $22.3 million for fiscal year 2004. As a percentage of revenue, sales and marketing expenses increased to 19.8 percent in fiscal year 2006 from 18.5 percent in fiscal year 2005 and 17.8 percent in fiscal year 2004. Spending increased primarily due to an increase in labor costs of $0.7 million, consulting costs of $0.1 million

~~and~~result ~~travel~~of lower labor costs ofresulting ~~$0.1~~from a 13 ~~million~~percent decrease ~~related~~in topersonnel ~~our~~for ~~continuing~~fiscal year 2007 compared with fiscal ~~geographic~~year ~~expansion~~2006. Engineering and ~~new~~development ~~product~~expenses, ~~launches~~as a percentage of ~~the~~revenue, ~~P7000~~were ~~line~~12.0 percent in fiscal year 2005. We ~~matrix~~expect to continue to invest in engineering and ~~the~~development ~~T5000~~at levels ~~thermal~~consistent ~~printers~~with fiscal year 2007 spending.

Fiscal year 2007 was a significant year for new product introductions in line matrix, thermal, RFID, Print/Encode/Apply and laser technologies. For line matrix, we introduced enhancements to the P7000 family. The P7000HD, introduced in the first quarter of fiscal year 2007, is a new high-definition line matrix printer designed for use in Windows environments, enabling near laser quality printed output on a very wide variety of forms. New printer models were also introduced for the thermal, RFID, and print/apply product lines. The SL4M and T4M, launched worldwide in the fourth quarter of fiscal year 2007, form a new mid-range light-industrial platform with full PSA system compatibility. Like the higher-end T5000 family, the T4M family models are all RFID ready, allowing easy field upgrade when a customer later needs RFID capability. The SLPA8000r, a new model in the SLPA print and apply product line, was launched in North America in the third quarter of fiscal year 2007 and was launched in Europe in the fourth quarter of fiscal year 2007. The LaserLine printer family was also enhanced in fiscal year 2007 with the launch of the L7032. This product complements our existing LaserLine printers and provides the lowest cost per page printing of the family.

Fiscal year 2006 was also a significant year for new product introductions. For line matrix, we introduced a new printing platform, the P7000 family. This family is characterized by many user advantages, including lowered cost of printing, improved print quality, ease of use and improved reliability. A new Zero-Tear model of the P7000 was also introduced, providing single sheet printing capability with no forms loss. New platforms and printer models were also introduced for the thermal, RFID and print/apply product lines. In the thermal product line, we introduced the new T5000r platform, which included many industry-leading features, including easy upgrade to RFID capability. The RFID printer line was enhanced with a new platform, the SL5000r MP2. The SLPA7000 family was upgraded to Gen 2 capability and its performance enhanced to accommodate up to 60 cartons per minute for applications on CPG conveyor systems.

During fiscal year 2005, we increased the focus on the development of RFID printing solutions in support of Wal «Mart, the DOD and other retailers’ initiatives. We introduced the second generation of EPC RFID Smart Label printers. This printer platform was further enhanced with new frequencies and protocols and launched in Europe during fiscal year 2006. Building on the general-purpose interface released in the prior fiscal year, we co-developed and launched the EPC RFID Encode/Print/Apply system, which automatically applies encoded smart labels to cases and pallets with no manual intervention.

Sales and Marketing

Sales and marketing expenses for fiscal year 2007 decreased to $23.8 million, compared with $25.4 million for fiscal year 2006 and $24.4 million for fiscal year 2005. As a percentage of revenue, sales and marketing expenses decreased to 18.5 percent in fiscal year 2007 from 19.8 percent in fiscal year 2006. Sales and marketing spending decreased primarily due to increased focus on cost containment, including reductions in marketing of $0.8 million, consulting costs of $0.2 million, and travel costs of $0.3 million. Sales and marketing expenses as a percentage of revenue were 18.5 percent in fiscal year 2005.

Spending increased primarily in fiscal year 2006 compared to the prior year due to an increase in labor costs of $0.7 million, consulting costs of $0.1 million and travel costs of $0.1 million related to our continuing geographic expansion and new product launches of the P7000 line matrix and the T5000 thermal printers.

Sales and marketing expenses increased in fiscal year 2005 from the prior fiscal year due to higher costs for geographic expansion and increased spending for marketing. Marketing spending increased partially to launch RFID in EMEA and partially to support the geographic expansion.

In fiscal year 2004, new sales offices were opened in Australia, Mexico, and China and additional sales resources were added in Europe, resulting in additional sales compensation, facilities and related costs. Fiscal year 2004 sales and marketing expenses were also up over the prior year due to increased spending for marketing programs, including the creation of a telesales program to market to the installed base in the United States.

General and Administrative

General and administrative expenses for fiscal year ~~2006~~2007 were $1112.90 million compared with $811.69 million for fiscal year ~~2005~~2006 and $8.26 million for fiscal year ~~2004~~2005. As a percentage of revenue, general and administrative ~~expenses were~~ 9.3 percent, 6.5 percent, and 6.6 percent in fiscal years 2006, 2005, and 2004, respectively. General and administrative expenses increased during fiscal year 2006 from the prior fiscal year due to increased audit and consulting costs for Sarbanes-Oxley compliance. The fiscal year 2006 external consulting and audit fees to comply with Sarbanes-Oxley were approximately $2.5 million, or 1.9 percent of revenue, compared with $0.5 million for fiscal year 2005. In addition, financial audit fees for fiscal year 2006 increased approximately $0.6 million over fiscal year 2005. This increase was offset by a $0.7 million reduction in the allowance for doubtful accounts.

expenses were 9.3 percent, 9.3 percent, and 6.5 percent in fiscal years 2007, 2006, and 2005, respectively. The current fiscal year reflects a reduction in the provision for bad debts of $0.1 million for recovery on receivables previously determined to be uncollectible compared with a $0.7 million reduction in fiscal year 2006. Also, there was a $0.7 million increase in expense due to an increase in information technology and management services costs in Asia Pacific and higher labor costs resulting from a 4 percent increase in personnel for fiscal year 2007 compared to fiscal year 2006. These increases were partially offset by a $1.3 million reduction in consulting costs related to Sarbanes-Oxley compliance.

General and administrative expenses increased during fiscal year 2006 from the prior fiscal year due to increased audit and consulting costs for Sarbanes-Oxley compliance. The fiscal year 2006 external consulting and audit fees to comply with Sarbanes-Oxley were approximately $2.5 million, or 1.9 percent of revenue, compared with $0.5 million for fiscal year 2005. In addition, financial audit fees for fiscal year 2006 increased approximately $0.6 million over fiscal year 2005. This increase was offset by a $0.7 million reduction in the allowance for doubtful accounts.

General and administrative expenses increased during fiscal year 2005 from the prior fiscal year due to increased consulting costs for Sarbanes-Oxley compliance and legal and patent costs.

~~General~~The ~~and~~effects ~~administrative~~of ~~expenses~~changes ~~decreased~~in ~~during~~the ~~fiscal~~value ~~year 2004~~of ~~from~~ the ~~prior~~Euro ~~fiscal~~resulted ~~year~~in ~~due to lower labor costs, lower~~an ~~provision~~increase ~~for~~in ~~doubtful~~operating ~~accounts~~expenses ~~resulting~~of ~~from~~$0.1 million ~~resolution~~for ~~of an~~fiscal ~~outstanding~~year ~~customer~~2007, ~~collection~~a ~~issue~~decrease ~~during~~in ~~the~~operating ~~fourth~~expenses ~~quarter, and lower amortization~~ of ~~intangibles,~~$36 ~~partially~~thousand ~~offset by~~in ~~increased~~fiscal ~~consulting~~year ~~costs~~2006, ~~for~~and ~~Sarbanes-Oxley~~an ~~compliance~~increase ~~and~~in ~~the~~operating expenses of ~~research~~$0.3 million ~~and~~for ~~development~~fiscal ~~tax~~year ~~credit study~~2005.

~~The effects of changes in the value of the Euro resulted in a~~ ~~decrease in operating expenses of $36 thousand in fiscal year~~Foreign ~~2006~~Currency ~~and~~(Gains) ~~increases in operating expenses of $0.3 million~~Losses, ~~and~~ ~~$0.8 million for fiscal years 2005 and 2004,~~Net ~~respectively.~~

Foreign currency transaction and re-measurement resulted in net ~~Currency~~gains ~~Losses~~of ~~(Gains)~~$87 thousand in fiscal year 2007 compared with net losses of $21 thousand and $98 thousand for fiscal years 2006 and 2005, ~~Net~~respectively, principally due to the effect of changes in the value of the Euro. The future effect of changes in the value of the Euro or other foreign currencies upon the consolidated results of operations or financial condition is difficult to predict.

Foreign currency transaction and remeasurement losses from all foreign currencies were $21 thousand, $98 thousand and $8 thousand for fiscal years 2006, 2005 and 2004, respectively, principally due to the effect of changes in the value of the Euro. The future effect of changes in the value of the Euro or other foreign currencies upon the consolidated results of operations or financial condition is difficult to predict.

Interest Income, Interest Expense, and Other (Income) Expense, Net

Interest income, interest expense and other (income) expense, net are as follows:

	March 31,			March 25,			March 26,
	March 30,			March 31,			March 25,
	2006			2005			2004
	2007			2006			2005
	($ in thousands)
Interest income	$	(1,~~446~~846	)	$	(~~639~~1,446	)	$	(~~294~~639	)
Interest expense		~~745~~926			~~505~~745			~~554~~505
Other (income) expense, net		(1247	)		(1012	)		45(10	)

Interest ~~expense~~income for fiscal year 2007 increased ~~$0.2 million~~compared ~~and~~to the prior fiscal year primarily due to higher interest ~~income~~rates. In the ~~increased~~second ~~$0.8 million~~quarter inof fiscal year 2006, aswe engaged a ~~result of~~professional ~~higher~~investment ~~interest~~manager ~~rates~~which resulted in better investment performance. ~~The~~Interest ~~increase~~expense inincreased ~~interest~~compared ~~income~~to ~~was~~the ~~also~~prior fiscal year due to ~~investments~~higher weinterest ~~made~~rates inand ~~short-term~~due ~~investments~~to ~~during~~interest ~~part~~we ofrecorded ~~2006,~~related ~~which~~to ~~increased~~ the ~~yields~~sales ~~over~~and ~~2005~~use tax assessment.

Interest expense ~~increased~~for fiscal year 2006 increased $0.12 million and interest income increased ~~increased~~ $0.38 million ~~in fiscal year 2005~~ as a result of higher interest rates. ~~and~~The increase ~~higher~~in ~~cash~~interest ~~and~~income was also due to investments in short-term ~~investment~~investments ~~balances. Other~~during ~~(income)~~part ~~expense~~of 2006, ~~net~~which ~~changed~~increased the yields over 2005.

Sales 34Tax

We underwent a California state sales and use tax audit for the period of October 2001 through September 2004. Subsequent to the audit we accrued $145 thousand for sales and use taxes and interest. Of the $145 thousand, $133 thousand related to prior years. We concluded that these adjustments are not quantitatively or qualitatively material to results for the current year, or to any prior years’ earnings, earnings trends or financial statement line items. Subsequently, we reduced the amount of expense by $44 thousand as a result of a revised assessment from the State Board of Equalization.

from a $45 thousand expense in fiscal year 2004 to income of $10 thousand in fiscal year 2005 due to a one-time benefit related to resolving a federal income tax credit.

Provision for Income Taxes

The income tax provision was $50.21 million for fiscal year ~~2006~~2007 on a pretax ~~loss~~income of $23.80 million, principally due to ~~the~~foreign ~~U.S.~~income and ~~foreign~~withholding ~~income~~ taxes ~~related~~on toincome ~~the~~earned ~~repatriation~~outside of ~~$32.0 million~~the ofUnited ~~foreign~~States ~~earnings~~and ~~under~~ the ~~provisions~~reduction of the American Jobs Creation Act of(“the ~~2004,~~Act”) ~~the~~tax ~~increase~~liability. The reduction of this tax liability is due to further clarification in the ~~valuation~~interpretation ~~allowance~~of ~~against~~the ~~our~~existing ~~deferred~~laws ~~tax~~surrounding ~~assets,~~the ~~and~~use ~~foreign~~of net ~~income~~operating ~~taxes~~loss oncarryforwards ~~income~~against ~~earned~~a ~~outside~~portion of the ~~United~~tax liability ~~States~~generated from the dividend repatriation.

OnThe ~~October~~effective tax rate for fiscal year 2006 was negative 189.1 22percent, ~~2004,~~which differs from the ~~American~~federal ~~Jobs~~statutory rate ~~Creation~~principally ~~Act~~as a result of ~~2004~~the tax expense on the (repatriated dividend pursuant to the “Act”), foreign income taxes, and the additional valuation allowance recorded against the company’s deferred tax assets. The effective tax rate for fiscal year 2005 was ~~passed~~30.0 percent. ~~This~~The ~~Act~~fiscal ~~creates~~year a2005 rates ~~temporary~~included the benefit from the federal and state research ~~incentive~~and ~~for~~development tax credit. Differences between the effective tax rate and the U.S. ~~multinational~~federal ~~companies~~statutory torate ~~repatriate~~for all fiscal ~~accumulated~~years ~~income~~presented ~~earned~~include ~~abroad~~the byeffects ~~providing~~of anincreases ~~85 percent~~in the ~~dividends~~valuation ~~received~~allowance, ~~deduction~~domestic ~~for~~operating ~~certain~~losses, ~~dividends~~and ~~from~~pre-tax ~~controlled~~earnings ~~foreign~~by ~~corporations,~~subsidiaries that operate within lower-tax jurisdictions for which ~~results~~no inU.S. taxes ahave ~~reduced~~been provided ~~federal~~because ~~tax~~the ~~rate~~earnings onare planned to be indefinitely reinvested outside the ~~repatriated~~United ~~earnings~~States.

During the fourth quarter of fiscal year ~~2006~~2005, the company ~~repatriated~~obtained ~~$32.0 million~~a 3-year extension of its favorable pioneer tax status in ~~cash~~Singapore, which ~~dividends~~had ~~subject~~expired toat the end of fiscal year 2004. This favorable ~~elective~~pioneer 85tax ~~percent~~status ~~dividend~~began ~~received~~in ~~deduction.~~April ~~Accordingly,~~1996 and exempts income generated from the ~~company~~manufacture ~~recognized~~and asale ~~related~~of ~~income~~the Printronix P5000 and P7000 series line matrix and T5000 thermal products by its Singapore subsidiary from tax ~~expense~~liability. ~~for~~This ~~federal~~extension was retroactive to the beginning of fiscal year 2005 and ~~state~~expired ~~taxes~~at the end of $1fiscal year 2007.~~0 million~~ The extension was subject to certain capital spending investments and ~~foreign~~human ~~withholding~~capital investments, ~~tax~~which have been met. We are evaluating the ~~expense~~possibility of receiving an additional extension. The pioneer status reduced foreign taxes by $10.13 million, $0.6 million ~~Also~~and $0.3 million for fiscal years 2007, 2006 inand ~~the~~2005, ~~fourth~~respectively. ~~quarter~~The effect of this pioneer status ~~fiscal~~increased ~~year~~diluted ~~2006,~~net weincome ~~recorded~~per ashare ~~charge~~by of5 ~~$2.6 million~~cents tofor fiscal ~~increase~~year ~~the~~2007, ~~valuation~~reduced ~~allowance~~diluted ~~against~~net ~~our~~loss ~~deferred~~per ~~tax~~share ~~assets~~by 10 cents for asfiscal ayear ~~result~~2006, ofand ~~large~~increased ~~domestic~~diluted ~~operating~~net ~~losses~~income inper ~~that~~share ~~quarter~~by 5 cents for fiscal year 2005.

The effective tax rate for fiscal year 2005 and fiscal year 2004 was 30.0 percent and 7.6 percent, respectively. The effective tax rate increased in fiscal year 2005 compared with fiscal year 2004 mainly because the company was able to benefit a portion of the federal research and development credits against net operating loss carryforwards in fiscal year 2004. Differences between the effective tax rate and the U.S. federal statutory rate for all fiscal years presented include the effects of increases in the valuation allowance, domestic operating losses, and pre-tax earnings by subsidiaries that operate within lower-tax jurisdictions for which no U.S. taxes have been provided because the earnings are planned to be indefinitely reinvested outside the United States.

During the fourth quarter of fiscal year 2005, the company obtained a 3-year extension of its favorable pioneer tax status in Singapore, which had expired at the end of fiscal year 2004. This favorable pioneer tax status began in April 1996 and exempts income generated from the manufacture and sale of the Printronix P5000 Series line matrix and T5000 thermal products by its Singapore subsidiary from tax liability. This extension was retroactive to the beginning of fiscal year 2005 and expires at the end of fiscal year 2007. The extension is subject to certain capital spending investments and human capital investments, which have been met. The pioneer status reduced foreign taxes by $0.6 million, $0.3 million and $0.8 million for fiscal years 2006, 2005 and 2004, respectively. The effect of this pioneer status was to reduce diluted net loss per share by 10 cents for fiscal year 2006, and increase diluted net income per share by 5 cents and 13 cents for fiscal years 2005 and 2004, respectively.

Liquidity and Capital Resources

Overview

The primary source of liquidity historically has been cash generated from operations, which was $20.54 million, $112.45 million, and $611.4 million for fiscal years ~~2006~~2007, ~~2005~~2006 and ~~2004~~2005, respectively. We ended fiscal year ~~2006~~2007 with $4238.19 million in cash, cash equivalents and short-term investments, a decrease of $23.82 million ~~over~~from the prior fiscal year end.

Cash generated from operations has been sufficient to allow the company to fund its working capital needs, invest in capital expenditures as needed, repurchase shares of its common stock during fiscal year 2004 and pay dividends starting in fiscal year 2005. Should we need to obtain additional sources of funds, we believe we could obtain such funds through additional credit facilities.

The long-term debt of $1312.58 million, collateralized by the Irvine facility, iswas ~~repayable~~paid in June 2007. ~~Current expectations are that the company will refinance the debt before that time. We believe we will be able to refinance the debt at acceptable terms or, alternatively, repay the debt~~ using existing cash balances.

3536

Liquidity

The following table summarizes the ending cash, cash equivalents, and short-term investments and the results of the consolidated statements of cash flows for the past three fiscal years:

	March 31,			March 25,			March 26,
	March 30,			March 31,			March 25,
	2006			2005			2004
	2007			2006			2005
	($ in thousands)
Cash, cash equivalents and short-term investments:
Cash and cash equivalents	$	4126,~~546~~847		$	3541,~~405~~546		$	3635,~~671~~405
Short-term investments		~~547~~12,015			~~9,500~~547			—9,500
Cash, cash equivalents and short-term investments	$	4238,~~093~~862		$	4442,~~905~~093		$	3644,~~671~~905
Net cash flow provided by (used in):
Operating activities	$	~~2,459~~377		$	112,~~429~~459		$	611,~~398~~429
Investing activities		5(13,~~297~~178	)		~~(13~~5,~~124~~297	)		(213,~~965~~124	)
Financing activities		(1,~~615~~898	)		~~429~~(1,615	)		~~3,621~~429
Net increase (decrease) in cash and cash equivalents	$	6,141		$	(1,266	)	$	7,054
Net (decrease) increase in cash and cash equivalents	$	(14,699	)	$	6,141		$	(1,266	)

Operating activities

Cash flows provided by operating activities amounted to $20.54 million in fiscal year ~~2006~~2007 compared to $112.45 million in fiscal year ~~2005~~2006 and $611.4 million in fiscal year ~~2004~~2005. The decline in net cash from operating activities ~~during~~was ~~fiscal~~primarily ~~year~~due ~~2006~~to ~~principally~~payment ~~reflects the net loss, increase~~ of ~~inventories~~taxes ~~and prepaid assets, and an~~of ~~increase in the professional fees liability. We experienced a net loss of~~ $82.05 million induring fiscal year ~~2006~~2007 ~~compared~~related to the ~~net~~repatriation ~~income~~ of $132.90 million inof ~~fiscal~~dividends ~~year~~in ~~2005.~~the ~~The net~~fourth ~~loss~~quarter ~~was~~of ~~principally~~fiscal ~~due~~year to2006. ~~increased~~In ~~general~~addition, ~~and~~in ~~administrative expenses~~the ~~mainly~~current ~~due to higher audit and consulting fees for~~fiscal ~~Sarbanes-Oxley~~year ~~(“SOX”)~~we ~~compliance~~experienced ~~and~~a ~~tax charges of~~ $41.74 million. Weincrease ~~saw continued weakness~~ in ~~sales~~our ~~to the~~accounts ~~Europe,~~receivable ~~Middle~~balance ~~East~~due ~~and~~to ~~Africa~~higher ~~(EMEA)~~sales ~~region, particularly~~ in ~~the~~ ~~automotive sector. As a result of~~ the ~~decline~~fourth inquarter ~~sales, we~~of ~~experienced~~fiscal anyear ~~increase~~2007 ~~in inventories of $1.3 million~~ compared to afiscal ~~decrease of inventories of $0.6 million in the prior~~ year. ~~Consulting~~2006, ~~and audit fees for SOX compliance~~a ~~were approximately~~ $20.58 million. ~~The~~decrease ~~increase~~ in ~~SOX related~~our ~~fees resulted in an increase in~~ accrued professional fees ~~fees~~liability ofdue ~~$1.4 million compared~~ to ~~the~~payment ~~prior~~of fiscal year~~. Also~~ ~~contributing~~2006 toaudit ~~the~~and consulting ~~net~~fees ~~loss~~for ~~were~~SOX ~~two~~compliance, ~~tax~~and ~~related~~a ~~charges totaling~~ $40.79 million~~. We elected to repatriate~~ ~~$32.0 million~~decrease ofin ~~foreign~~deferred ~~earnings~~revenue ~~under~~due ~~the~~to ~~American~~an ~~Jobs~~increased percentage of ~~Creation~~monthly ~~Act,~~service ~~resulting~~contracts in anrelation ~~income~~to ~~tax~~total ~~charge of approximately~~service $1contracts.~~0 million~~ ~~and~~We aexperienced ~~foreign~~net ~~withholding~~income ~~tax charge~~ of ~~approximately~~ $12.19 million. ~~Also,~~in fiscal weyear ~~increased~~2007 ~~the~~compared ~~tax valuation~~to ~~allowance~~a bynet loss of $28.60 million ~~due to cumulative~~in ~~operating~~fiscal ~~losses~~year ~~in our domestic operations~~2006.

The ~~increase~~decline in net cash from operating activities during fiscal year 2006 principally reflects the net loss, increase of inventories and prepaid assets, and an increase in the professional fees liability. We experienced a net loss of $8.0 million in fiscal year 2006 compared to net income of $1.9 million in fiscal year 2005. ~~was~~The net loss was principally due to increased general and administrative expenses mainly due to higher audit and consulting fees for Sarbanes-Oxley (“SOX”) compliance and tax charges of $4.7 million. We saw continued weakness in sales to the Europe, Middle East and Africa (EMEA) region, particularly in the automotive sector. As a result of ~~increased~~the ~~profitability~~decline in sales, we ~~capital~~experienced ~~asset~~an ~~activity~~increase ~~and~~in ~~receipt~~inventories of $1.3 million compared to a ~~cash~~decrease ~~refund~~of inventories of $0.6 million in the prior year. Consulting and audit fees for ~~federal~~SOX compliance ~~research~~were approximately $2.5 million. The increase in SOX related fees resulted in an increase in accrued professional fees of $1.4 million compared to the prior fiscal year. Also contributing to the net loss were two tax related charges totaling $4.7 million. We elected to repatriate $32.0 million of foreign earnings under the American Jobs Creation Act, resulting in an income tax charge of approximately $1.0 million and ~~development~~a ~~credits~~foreign withholding tax charge of approximately $1.1 million. Also, we increased the tax valuation allowance by $2.6 million due to cumulative operating losses in our domestic operations.

Investing activities

Net cash ~~provided~~used byin investing activities was $513.32 million in in fiscal year ~~2006~~2007 compared to cash ~~used~~provided inby investing activities of $135.13 million in fiscal year ~~2005~~2006 and cash used in investing activities of $313.01 million in fiscal year ~~2004~~2005. During fiscal year ~~2006~~2007, we sold $7.7 million of investments and purchased $19.0 million. During fiscal year 2006, we sold $27.5 million of investments and purchased $18.4 million. Inand in fiscal year 2005, we purchased $9.5 million in short-term investments~~, and in fiscal year 2004, we neither sold nor purchased any investments~~.

~~Financing~~ ~~activities~~37

Net cash used in financing activities was $1.6 million in fiscal year 2006 compared to cash provided by financing activities of $0.4 million in fiscal year 2005 and $3.6 million in fiscal year 2004. In fiscal year 2006, we paid $1.7 million in dividends to stockholders compared to $0.3 million in fiscal year 2005. Cash proceeds from the exercise of stock options were $0.8 million, significantly lower than the fiscal year 2005 proceeds of $1.5 million and fiscal year 2004 proceeds of $5.4 million, as a large number of options were exercised shortly before expiring in the prior fiscal years. Payments totaling $0.7 million were made on the long-term note. We ended fiscal year 2006

~~with debt of $13.5 million related to the long-term note,~~ ~~which consisted of $12.8 million long-term and~~Financing ~~$0.7 million for the current portion of the long-term debt.~~activities

~~The~~Net ~~remaining~~cash ~~shares~~used ~~that~~in ~~could~~financing beactivities ~~repurchased~~was at$1.9 million ~~the~~in fiscal ~~discretion~~year 2007 compared to cash used in financing activities of ~~management~~$1.6 million ~~under~~in ~~the~~fiscal ~~stock~~year ~~buyback~~2006 ~~program~~and ~~totaled~~cash provided by ~~227~~financing activities of $0.4 million in fiscal year 2005. In fiscal year 2007,~~395~~ we paid $2.3 ~~shares~~million asin dividends to stockholders compared to $1.7 million in fiscal year 2006. Cash proceeds from the exercise of ~~March~~stock options were $1.1 ~~31,~~million compared to $0.8 million in fiscal year 2006. A large number of options were exercised shortly before expiring during the current fiscal year. Payments totaling $0.7 million were made on the long-term note. We ended fiscal year 2007 with debt of $12.8 million which was due and paid in fiscal year 2008.

The remaining shares that could be repurchased at the discretion of management under the stock buyback program totaled 227,395 shares as of March 30, 2007.

Contractual Obligations, Commitments, and Off Balance Sheet Arrangements

The tables below illustrate the significant contractual obligations and other commercial commitments, based on year of maturity or settlement, as of March 3130, ~~2006~~2007:

	Payments Due
	2007		2008		2009		2010		2011		Thereafter		Total
	2008		2009		2010		2011		2012		Thereafter		Total
	($ in thousands)
Contractual obligations:
Operating leases	$	1,~~147~~383	$	~~701~~680	$	~~204~~361	$	97110	$	8789	$	1110,~~031~~560	$	13,~~267~~183
Long-term debt *		~~700~~12,775		~~12,775~~—		—		—		—		—		1312,~~475~~775
Pension obligation		—		—		—		—		—		331		331
Purchase obligation		515		—		—		—		—		—		515
Purchase obligation		1,003		—		—		—		—		—		1,003
Total contractual cash obligations	$	14,673	$	680	$	361	$	110	$	89	$	10,560	$	26,473
Total contractual cash obligations	$	2,850	$	13,476	$	204	$	97	$	87	$	11,362	$	28,076

* ~~Annual~~Remaining interest expense on our long-term debt, not included above, is estimated to be $0.7 1 million.

	Amount of Commitment Expiration Per Fiscal Year
	Amount of Commitment Expiration per Fiscal Year
	2007		2008		2009		2010		2011		Thereafter		Total
	2008		2009		2010		2011		2012		Thereafter		Total
	($ in thousands)
Commercial commitments:
Lines of credit	$	24,~~108~~530	$	—	$	—	$	—	$	—	$	—	$	24,~~108~~530
Commitment facility		2,~~402~~672		—		—		—		—		—		2,~~402~~672
Standby letters of credit		~~537~~355		—		—		—		—		—		~~537~~355
Total commercial commitments	$	57,~~047~~557	$	—	$	—	$	—	$	—	$	—	$	57,~~047~~557

Operating Leases

We utilize operating leases for various facilities as disclosed further in Note 7 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K, and intend to continue to do so. We also use operating leases for certain ~~of the~~ machinery and equipment. Should we decide to purchase such machinery and equipment outright, we do not believe it would have a material impact on the consolidated results of operations or capital resources.

Long-Term Debt

We have a long-term note with a United States bank for $1312.58 million secured by the Irvine facility. This note has scheduled principal repayments of $~~0.7 million annually through fiscal year 2007 and payments of $~~12.8 million in fiscal ~~fiscal~~ year 2008, including a balloon payment of $12.6 million (see Note 2 of the Notes to Consolidated Financial ~~Financial~~ Statements of this Annual Report on Form 10-K).

Credit Facilities

One of the subsidiaries maintains ~~unsecured~~ lines of credit with major ~~major~~ foreign banks totaling $24.15 million that are guaranteed by Printronix, Inc. We also maintain a commitment facility in the amount of $2.47 million with a foreign bank to support ~~the~~ hedging activities. We have a letter of credit related to our workers’ compensation program for

3738

~~program for~~ $0.54 million, which renews automatically and is secured by cash. During and as of the fiscal periods presented, no amounts were borrowed under these agreements.

Additional information on the obligations can be found in Note 2 and Note 7 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

Purchase Obligations

Purchase obligations in the above table represent the minimum obligation under an agreement with one of our suppliers. ~~We have~~In fiscal year 2006, we agreed to purchase a minimum of $1.0 million of product through March 2007, which we later extended through November 2007. As of March 30, 2007, we had a remaining purchase commitment of $0.5 million.

Guarantees

In connection with the standby letter of credit agreement obtained for the 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 agreements. We believe the fair value of this indemnification agreement is minimal and have not recorded a liability for it.

We have posted collateral in the form of a surety bond or other similar instruments, which are issued by independent insurance carriers (the “Surety”), to cover the risk of loss related to certain customs and employment activities. If any of the entities that hold these bonds should require payment from the Surety, we would be obligated to indemnify and reimburse the Surety for all costs incurred. As of March 3130, ~~2006~~2007, we had $01.90 million of these bonds outstanding.

In the normal course of business to facilitate sales of the products, we may indemnify customers and hold them harmless against losses arising from intellectual property infringement claims. 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.

New Pronouncements

In ~~November~~June ~~2004~~2006, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards Board (“~~FASB”) ~~issued~~Interpretation ~~SFAS~~ No. ~~151~~48, “~~Inventory~~Accounting ~~Costs — an~~for ~~Amendment~~Uncertainty ofin ~~ARB~~Income 43Taxes, an ~~Chapter 4.”~~interpretation ~~SFAS 151~~of ~~clarifies~~FASB ~~that~~Statement ~~abnormal~~No. 109” ~~amounts~~(“FIN 48”). ofThis ~~idle~~interpretation ~~facility~~clarifies ~~expense, freight, handling costs, and~~the ~~wasted~~accounting ~~materials~~for ~~(spoilage)~~uncertainty ~~should~~in beincome taxes recognized asin an ~~current-period~~enterprise’s ~~charges~~financial ~~and~~statements ~~requires~~in ~~the~~accordance ~~allocation~~with ~~of fixed~~FASB ~~production~~Statement ~~overheads~~No. 109, to“Accounting ~~inventory~~for beIncome ~~based on the normal~~Taxes.” ~~capacity~~The ofinterpretation ~~the~~prescribes ~~production~~a ~~facilities.~~recognition ~~SFAS 151~~threshold isand ~~effective~~measurement attribute for ~~fiscal~~a ~~years~~tax ~~beginning~~position ~~after~~taken ~~June 15,~~or ~~2005, and~~expected ~~will~~to be taken ~~adopted~~in bya ~~the~~tax ~~company~~return inand ~~the~~also ~~first~~provides ~~quarter~~guidance ofon ~~fiscal~~derecognition, ~~year~~classification, ~~2007.~~interest ~~The~~and ~~company~~penalties, accounting isin ~~currently~~interim ~~evaluating~~periods, ~~the~~disclosure, and transition. The ~~financial~~provisions ~~statement~~of ~~impact~~FIN 48 ofare ~~the~~effective ~~implementation~~for offiscal years ~~SFAS~~beginning after December ~~151~~31, 2006. We doare ~~not~~currently evaluating ~~expect~~what ~~the~~impact, ~~adoption~~if ofany, ~~SFAS 151~~this ~~to have~~statement awill ~~material~~have ~~impact~~ on ~~our~~ the consolidated financial ~~position~~statements ~~or results~~ of ~~operations~~the company.

In ~~December~~June ~~2004~~2006, the ~~FASB~~Emerging ~~issued~~Issues ~~SFAS No. 123 (revised~~Task ~~2004),~~Force ~~“Share-Based Payment”~~ (“~~SFAS 123R~~EITF”)~~, which replaces SFAS 123,~~ ~~“Accounting~~reached ~~for~~a ~~Stock-Based~~consensus ~~Compensation,”~~on ~~and~~Issue ~~supercedes APB Opinion~~ No. 2506-03, ~~“Accounting for Stock~~ ~~Issued~~“How toTaxes ~~Employees.”~~Collected ~~SFAS 123R~~from ~~requires~~Customers ~~that~~and ~~all share-based~~Remitted ~~payments~~ to ~~employees, including grants of stock~~ ~~options,~~Governmental beAuthorities ~~recognized~~Should inBe ~~the~~Presented ~~financial~~in ~~statements based on their fair value beginning with~~ the ~~first interim or annual~~Income ~~reporting~~Statement ~~period~~(That ~~that begins after June 15~~is, ~~2005.~~Gross Inversus ~~March~~Net Presentation),” ~~2005, the Securities and Exchange Commission~~ (“~~SEC~~EITF 06-03”). ~~issued~~EITF ~~Staff Accounting Bulletin No. 107~~06-03 ~~(“SAB 107”)~~concluded ~~regarding~~that the ~~SEC~~presentation ~~Staff’s interpretation~~ of ~~SFAS 123R~~taxes ~~and~~assessed ~~certain~~by ~~SEC rules and~~a ~~regulations~~governmental ~~and~~authority ~~provides~~that ~~interpretations~~is ofdirectly ~~the~~imposed ~~valuation~~on ofa ~~share~~revenue-~~based~~producing ~~payments~~transaction ~~for~~between ~~public~~a ~~companies.~~seller Inand ~~April~~a ~~2005~~customer, ~~the~~ ~~SEC~~such ~~amended Regulation S-X to~~as ~~amend~~sales, ~~the~~use, ~~date~~value ~~for~~added ~~compliance~~and ~~with~~certain ~~SFAS 123R~~excise ~~beginning~~taxes is an ~~with~~accounting ~~the~~policy ~~first~~decision ~~interim~~that orshould ~~annual~~be ~~period~~disclosed ofin ~~the registrant’s~~a ~~first~~company’s ~~fiscal~~financial ~~year~~statements. ~~beginning on or after June 15~~Additionally, ~~2005.~~companies ~~Printronix~~that ~~will~~record besuch ~~required~~taxes toon ~~adopt~~a ~~SFAS 123R~~gross ~~and SAB 107~~basis atshould ~~the~~disclose ~~beginning of~~ the ~~first quarter of fiscal~~ ~~year~~amounts ~~2007.~~of ~~During~~those ~~fiscal~~taxes ~~year~~in ~~2006,~~interim ~~the~~and ~~company~~annual ~~elected to~~financial ~~accelerate~~statements ~~all~~for ofeach ~~its~~period ~~remaining~~for ~~outstanding~~which ~~options~~an toincome ~~eliminate~~statement is ~~future~~presented ~~compensation~~if ~~expense~~those ~~that~~amounts ~~would~~are ~~have~~significant. ~~been~~EITF 06-03 ~~recorded over~~is ~~four~~effective ~~years~~for ~~beginning~~interim ~~fiscal~~and ~~year~~annual ~~2007~~periods ~~following~~beginning ~~the adoption of~~after ~~SFAS~~December ~~123R~~15, 2006. IfWe wedo ~~grant~~not ~~any~~expect ~~options~~this instatement ~~the~~to ~~future, the~~have ~~adoption of SFAS 123R may have~~ a material ~~unfavorable~~ impact on the consolidated ~~results~~financial ofstatements ~~operations and net income~~of ~~(loss)~~the ~~per share~~company.

In September 2006, the FASB issued SFAS No. 157, 38“Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” which replaces Accounting Principles Board Opinions No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle and the reporting of a correction of an error, unless it is impracticable to do so. When it is impracticable to determine the period-specific effects of an accounting change, SFAS 154 requires application of the new accounting principle as of the earliest period for which retrospective application is practicable. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS 154 requires application as if the accounting principle were adopted prospectively from the earliest date practicable. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after ~~December~~November 15, ~~2005 and is required to be adopted by Printronix in the first quarter of fiscal year~~ 2007. ~~Printronix~~We isdo ~~currently~~not ~~evaluating the effect~~expect ~~that~~this ~~the~~statement ~~adoption~~to ofhave ~~SFAS 154~~a ~~will~~material ~~have~~impact on ~~its~~the consolidated ~~results of operations and~~ financial ~~condition~~statements ~~but~~of ~~does~~the ~~not expect it to have a material impact~~company.

In ~~June~~February ~~2005~~2007, the FASB issued ~~EITF~~ SFAS ~~05-5~~No. 159, “~~Accounting~~The ~~for~~Fair ~~Early~~Value ~~Retirement~~Option orfor ~~Postemployment~~Financial ~~Programs~~Assets and Financial ~~with~~Liabilities — ~~Specific~~Including ~~Features,~~an ~~(Such~~Amendment ~~as Terms Specified in~~of ~~Altersteilzeit~~SFAS Statement ~~Early Retirement Arrangements)~~No. 115” (“SFAS 159”). ~~The~~SFAS 159 provides companies ~~Altersteilzeit~~with ~~arrangement~~an isoption anto ~~early~~report ~~retirement~~selected ~~program~~financial inassets and financial ~~Germany~~liabilities ~~designed~~at tofair ~~create~~value. anUnrealized ~~incentive~~gains ~~for~~and ~~employees,~~losses ~~within~~on aitems ~~certain~~for ~~age~~which ~~group,~~the tofair ~~transition~~value ~~from~~option ~~(full~~has orbeen ~~part-time) employment~~elected ~~into~~are ~~retirement~~reported ~~before~~in earnings ~~their~~at ~~legal~~each ~~retirement~~subsequent ~~age~~reporting date. ~~The~~ ~~EITF~~SFAS 159 is effective for fiscal years beginning after ~~December~~ November 15, ~~2005~~ 2007. ~~The~~We ~~company~~do ~~believes~~not ~~the~~expect ~~adoption of~~ this ~~EITF~~statement ~~will~~to have noa ~~impact~~material impact on the consolidated financial ~~position,~~ ~~results~~statements of ~~operations~~the ~~or cash flow~~company.


Item 7A.	*Qualitative and Quantitative Disclosures About Market Risk*

Foreign Currency Risk

The foreign operations may be impacted by foreign currency fluctuations. We are not aware of any significant risks with respect to the foreign business other than those inherent in the competitive nature of the business and fluctuations in foreign currency exchange rates. We have a foreign currency-hedging program in order to mitigate exposure to foreign currency rate movements. Under the 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. The contracts are marked-to-market and the resulting gains or losses are reflected in accumulated other comprehensive income (loss). Unrealized gains and losses on these contracts are deferred in other comprehensive income (loss) until the contracts are settled and the hedged sales are realized, at which time the deferred gains or losses will be reported as an increase or decrease to sales.

As of March 30, 2007, there were no outstanding forward exchange contracts. The following table reflects the total foreign currency forward contracts outstanding at March 31, ~~2006 and March 25,~~ ~~2005~~2006:

	March 31,			~~March 25,~~
	2006			~~2005~~
	(Dollar amounts in thousands)
	($ and €
Notional amount	€	900		€	4,800
	in thousands)
Average exchange rate		1.206			1.311
Notional amount	€	900
Carrying value of receivable/(payable)	$	(24	)	$	57
Average exchange rate		1.206
Carrying value of payable	$	(24	)

Foreign currency transaction and ~~remeasurement~~re-measurement ~~losses~~resulted in gains from all foreign currencies ~~were~~of $2187 thousand, for fiscal year 2007 and losses of $9821 thousand and $8 98 thousand for fiscal years 2006, ~~2005~~ and ~~2004~~2005, respectively, principally due to the effect of changes in the value of the Euro.

The effects of changes in the Euro’s value in fiscal year 2007, compared with fiscal year 2006, were as follows: an increase in revenue of $415 thousand, an increase in gross margin of $202 thousand, an increase in operating expenses of $128 thousand and foreign exchange losses of $11 thousand.

The effects of changes in the Euro’s value in fiscal year 2006, compared with fiscal year 2005, were as follows: a decrease in revenue of $81 thousand, an increase in gross margin of $13 thousand, a decrease in operating expenses of $36 thousand and foreign exchange gains of $0.5 million.

The effects of changes in the Euro’s value in fiscal year 2005, compared with fiscal year 2004, were as follows: an increase in revenue of $1.9 million, an increase in gross margin of $1.4 million and increases in operating expenses of $0.3 million and foreign exchange gains of $0.2 million.

The future effect of changes in the value of the Euro or other foreign currencies on the consolidated results of operations or financial condition is difficult to predict.

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 the bank borrowings is found in Note 2 of the Notes to Consolidated Financial Statements 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 of this Annual Report on Form 10-K. If interest rates were to increase by 10 percent (32 basis points on the long-term note), the impact on the pre-tax earnings would not be material.

~~Item~~ Interest Rate ~~8. Financial Statements and Supplemental Data~~Risk

We have financial instruments that are subject to interest rate ~~Index~~risk, principally debt obligations and short-term cash investments. At March 30, 2007, our interest-bearing investments totaled $31.9 million, and the related interest income on these investments was $1.6 million, (an annualized effective yield of 5.2 percent) for the fiscal year then ended. If interest rates were to decrease by 10 percent (53 basis points on the average investment balance), the impact on our annual interest income would be a decrease of $0.2 million. Information about the fair value of the financial instruments is found in Note 1 of the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K. Borrowings are at variable rates for periods that generally do not exceed 90 days. If interest rates were to increase by 10 percent (58 basis points on the long-term note), the impact on our annual interest expense would be an increase of $0.1 million. Information about the bank borrowings is found in Note 2 of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		42
Report of Independent Registered Public Accounting Firm — BDO Seidman, LLP		43
Consolidated Balance Sheets as of March 31, 2006 and March 25, 2005		44
Consolidated Statements of Operations For Each of the Three Fiscal Years in the Period Ended March 31, 2006		45
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) For Each of the Three Fiscal Years in the Period Ended March 31, 2006		46
Consolidated Statements of Cash Flows For Each of the Three Fiscal Years in the Period Ended March 31, 2006		47
Notes to Consolidated Financial Statements		48


Item 8.	*Financial Statements and Supplementary Data*

Index to Consolidated Financial Statements


	Page

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		43
Report of Independent Registered Public Accounting Firm — BDO Seidman, LLP		44
Consolidated Balance Sheets as of March 30, 2007 and March 31, 2006		45
Consolidated Statements of Operations For Each of the Three Fiscal Years in the Period Ended March 30, 2007		46
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) For Each of the Three Fiscal Years in the Period Ended March 30, 2007		47
Consolidated Statements of Cash Flows For Each of the Three Fiscal Years in the Period Ended March 30, 2007		48
Notes to Consolidated Financial Statements		49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of Printronix, Inc.

We have completed an integrated ~~audit~~audits of Printronix, Inc.’s 2007 and 2006 consolidated financial statements and of its ~~internal~~ internal control over financial reporting as of March 3130, ~~2006 in~~ 2007, in accordance with the standards of the Public Company ~~Accounting~~ Accounting Oversight Board (United States). Our opinions, based on our ~~audit~~ audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index appearing ~~under~~in Item 15 (a) (1) present fairly, in all material respects, the financial position of Printronix, Inc. and its subsidiaries at March 30, 2007 and March 31, 2006, and the results of their operations and their cash flows for the ~~year~~years ended ~~ended~~March 30, 2007 and March 31, 2006 in conformity with ~~accounting~~ accounting principles generally accepted in the United States of ~~America.~~ America. These financial statements are the responsibility of ~~the~~ the Company’s management. Our responsibility is to express an an opinion on these financial statements based on our ~~audit~~audits. We conducted our ~~audit~~audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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 of financial statements 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~~audits ~~provides~~provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of March 3130, ~~2006~~2007 based on criteria established in Internal Control — Integrated Framework issued ~~issued~~ by the Committee of Sponsoring Organizations of the Treadway ~~Treadway~~ Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the ~~the~~ Company maintained, in all material respects, effective internal ~~internal~~ control over financial reporting as of March 3130, 2007, ~~2006,~~ based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial ~~reporting,~~ reporting, evaluating management’s assessment, testing and ~~evaluating~~ evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orange County, California

June 216, ~~2006~~2007

4243

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Printronix, Inc.

Irvine, CA

We have audited the accompanying consolidated ~~balance~~statements ~~sheet~~ of ~~Printronix, Inc. and its subsidiaries as of March 25, 2005 and the related consolidated statements of~~ operations, ~~stockholders~~ stockholder’s equity and comprehensive income (loss), and cash flows ~~for each~~ of ~~the~~Printronix, ~~two~~Inc. ~~years~~and inits subsidiaries for the ~~period~~year ended March 25, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our ~~audits~~ audit.

We conducted our ~~audits~~audit in accordance with the standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our ~~audits~~audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. We believe that our ~~audits~~audit ~~provide~~provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the ~~financial~~results ~~position~~ of ~~Printronix,~~operations ~~Inc.~~ and ~~subsidiaries~~cash atflows ~~March 25, 2005, and the results~~ of ~~their~~Printronix, ~~operations~~Inc. and ~~their cash flows~~ subsidiaries for ~~each of~~ the ~~two~~year ~~years in the period~~ ended March 25, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

Costa Mesa, California

May 3, 2005

4344

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of March 3130, ~~2006~~2007 and March 2531, ~~2005~~2006

	March 31,			March 25,
	March 30,			March 31,
	2006			2005
	2007			2006
	($ in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	4126,~~546~~847		$	3541,~~405~~546
Short-term investments		~~547~~12,015			~~9,500~~547
Accounts receivable, net of allowances for doubtful accounts and sales returns of $1,483 in 2006 and $2,398 in 2005		19,292			18,207
Accounts receivable, net of allowances for doubtful accounts and sales returns of $1,105 in 2007 and $1,483 in 2006		20,776			19,292
Inventories:
Raw materials		78,~~881~~082			7,~~354~~881
Subassemblies		3,~~420~~964			23,~~518~~420
Work in process		~~186~~251			~~261~~186
Finished goods		2,~~895~~984			2,~~960~~895
Total inventory		1415,~~382~~281			1314,~~093~~382
Prepaid expenses and other current assets		1,~~780~~901			1,~~791~~780
Deferred income tax assets, net		~~196~~146			~~2,590~~196
Total current assets		7776,~~743~~966			8077,~~586~~743
Property, plant and equipment, at cost:
Machinery and equipment		2625,~~744~~119			2826,~~141~~744
Furniture and fixtures		2221,~~889~~641			2422,~~996~~889
Buildings and improvements		23,~~172~~179			23,~~139~~172
Land		8,100			8,100
Leasehold improvements		~~754~~788			~~730~~754
		81,659			85,106
		78,827			81,659
Less: accumulated depreciation and amortization		(5049,~~041~~714	)		(5250,~~180~~041	)
Property, plant and equipment, net		3129,~~618~~113			3231,~~926~~618
Long-term deferred income tax assets, net		~~110~~283			98110
Other assets		~~513~~665			~~308~~513
Total assets	$	~~109~~107,~~984~~027		$	~~113~~109,~~918~~984
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	~~700~~12,775		$	700
Accounts payable		89,~~427~~452			78,~~162~~427
Accrued liabilities:
Payroll and employee benefits		4,~~552~~225			54,~~275~~552
Warranty		~~865~~767			~~863~~865
Deferred revenue		32,~~925~~744			3,~~306~~925
Professional fees		1,~~964~~155			~~587~~1,964
Other		2,~~522~~137			2,~~228~~522
Income taxes		~~2,273~~130			~~145~~2,273
Total current liabilities		2533,~~228~~385			2025,~~266~~228
Long-term debt, net of current portion		~~12,775~~—			1312,~~475~~775
Deferred revenue, net of current portion		1,~~214~~542			1,~~021~~214
Long-term deferred income tax liabilities, net		~~196~~146			—196
Other long-term liabilities		~~331~~—			—331
Commitments and contingencies (Note 7)		—			—
Stockholders’ equity:
Common stock, $0.01 par value (Authorized 30,000,000 shares; issued and outstanding 6,587,519 shares in 2006 and 6,470,260 shares in 2005)		66			65
Common stock, $0.01 par value (Authorized 30,000,000 shares; issued and outstanding 6,679,564 shares in 2007 and 6,587,519 shares in 2006)		67			66
Additional paid-in capital		3637,~~369~~504			3536,~~537~~369
Accumulated other comprehensive income		(24	)		31
Accumulated other comprehensive income (loss)		8			(24	)
Retained earnings		3334,~~829~~375			4333,~~523~~829
Total stockholders’ equity		7071,~~240~~954			7970,~~156~~240
Total liabilities and stockholders’ equity	$	~~109~~107,~~984~~027		$	~~113~~109,~~918~~984

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

4445

PRINTRONIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For Each of the Three Fiscal Years in the Period Ended March 3130, ~~2006~~2007

	March 31,			March 25,			March 26,
	March 30,			March 31,			March 25,
	2006			2005			2004
	2007			2006(1)			2005
	($ in thousands, except share and
	($ in thousands, except share and per share data)
	per share data)
Revenue	$	128,416		$	127,821		$	131,711
Revenue	$	127,821		$	131,711		$	125,070
Cost of sales		78,360			79,621			80,189
Cost of sales		79,621			80,189			77,670
Gross margin		50,056			48,200			51,522
Gross margin		48,200			51,522			47,400
Operating expenses:
Engineering and development		1412,~~344~~415			1514,~~762~~344			15,~~885~~762
Sales and marketing		2523,~~370~~774			2425,~~414~~370			2224,~~269~~414
General and administrative		11,~~931~~950			811,~~622~~931			8,~~249~~622
Total operating expenses		5148,~~645~~139			4851,~~798~~645			4648,~~403~~798
(Loss) income from operations		(3,445	)		2,724			997
Income (loss) from operations		1,917			(3,445	)		2,724
Foreign currency losses, net		21			98			8
Foreign currency (gains) losses, net		(87	)		21			98
Interest income		(1,~~446~~846	)		(~~639~~1,446	)		(~~294~~639	)
Interest expense		~~745~~926			~~505~~745			~~554~~505
Other (income) expense, net		(1247	)		(1012	)		45(10	)
(Loss) income before income taxes		(2,753	)		2,770			684
Income (loss) before income taxes		2,971			(2,753	)		2,770
Provision for income taxes		~~5,206~~91			~~831~~5,206			52831
Net (loss) income	$	(7,959	)	$	1,939		$	632
Net income (loss)	$	2,880		$	(7,959	)	$	1,939
Net (loss) income per share:
Net income (loss) per share:
Basic	$	(10.2846	)	$	0(1.3128	)	$	0.1131
Diluted	$	(10.2845	)	$	0(1.3028	)	$	0.1130
Shares used in computing net (loss) income per share:
Shares used in computing net income (loss) per share:
Basic		6,~~240~~303,~~041~~342			6,~~356~~240,~~236~~041			56,~~734~~356,~~633~~236
Diluted		6,~~240~~452,~~041~~211			6,~~538~~240,~~321~~041			56,~~961~~538,~~035~~321


(1)		The fiscal year ended March 31, 2006 consisted of 53 weeks

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

PRINTRONIX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

For Each of the Three Fiscal Years in the Period Ended March 31, 2006

										Accumulated
										Other
	Common Stock						Additional			Comprehensive
	Number of						Paid-in			Income			Retained
	Shares			Amount			Capital			(Loss)			Earnings			Total
	($ in thousands, except share data)
Balance, March 28, 2003		5,611,480		$	56		$	29,248		$	(28	)	$	41,800		$	71,076
Exercise of stock options		525,039			5			5,377			—			—			5,382
Repurchase and retirement of shares of common stock		(106,700	)		(1	)		(533	)		—			(527	)		(1,061	)
Comprehensive income (loss):
Gain on foreign currency forward-exchange contracts		—			—			—			164			—			164
Net income		—			—			—			—			632			632
Total comprehensive income		—			—			—			—			—			796
Balance, March 26, 2004		6,029,819			60			34,092			136			41,905			76,193
Exercise of stock options		150,441			2			1,445			—			—			1,447
Restricted stock granted		290,000			3			3,956			—			—			3,959
Deferred compensation — restricted stock		—			—			(3,956	)		—			—			(3,956	)
Cash dividends paid		—			—			—			—			(321	)		(321	)
Comprehensive income (loss):
Loss on foreign currency forward-exchange contracts		—			—			—			(105	)		—			(105	)
Net income		—			—			—			—			1,939			1,939
Total comprehensive income		—			—			—			—			—			1,834
Balance, March 25, 2005		6,470,260			65			35,537			31			43,523			79,156
Exercise of stock options		92,859			1			819			—			—			820
Restricted stock granted		24,400			—			424			—			—			424
Deferred compensation — restricted stock		—			—			(424	)		—			—			(424	)
Stock-based compensation due to accelerated vesting of stock options		—			—			10			—			—			10
Cash dividends paid		—			—			—			—			(1,735	)		(1,735	)
Tax benefit on stock options		—			—			3			—			—			3
Comprehensive income (loss):
Loss on foreign currency forward-exchange contracts		—			—			—			(55	)		—			(55	)
Net loss		—			—			—			—			(7,959	)		(7,959	)
Total comprehensive (loss)		—			—			—			—			—			(8,014	)
Balance, March 31, 2006		6,587,519		$	66		$	36,369		$	(24	)	$	33,829		$	70,240

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

PRINTRONIX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ~~CASH~~STOCKHOLDERS’ EQUITY AND ~~FLOWS~~COMPREHENSIVE INCOME (LOSS) For Each of the Three Fiscal Years in the Period Ended March 3130, ~~2006~~2007

	March 31,			March 25,			March 26,
										Accumulated
	2006			2005			2004
										Other
	($ in thousands)
	Common Stock						Additional			Comprehensive
Cash Flows From Operating Activities:
	Number of						Paid-in			Income			Retained
Net (loss) income	$	(7,959	)	$	1,939		$	632
	Shares			Amount			Capital			(Loss)			Earnings			Total
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
	($ in thousands, except share data)
Depreciation and amortization		4,918			5,104			6,681
Balance, March 26, 2004		6,029,819		$	60		$	34,092		$	136		$	41,905		$	76,193
Stock-based compensation		10			—			—
Exercise of stock options		150,441			2			1,445			—			—			1,447
(Recovery) provision for doubtful accounts		(651	)		(120	)		127
Restricted stock granted		290,000			3			3,956			—			—			3,959
Deferred income tax provision		2,578			—			638
Deferred compensation — restricted stock		—			—			(3,956	)		—			—			(3,956	)
Loss (gain) on disposal of property, plant and equipment		176			468			(6	)
Cash dividends paid		—			—			—			—			(321	)		(321	)
Tax benefit from stock options		3			—			—
Comprehensive income (loss):
Changes in operating assets and liabilities:
Loss on foreign currency forward-exchange contracts		—			—			—			(105	)		—			(105	)
Accounts receivable		(434	)		321			206
Net income		—			—			—			—			1,939			1,939
Inventories		(1,289	)		610			(828	)
Total comprehensive income		—			—			—			—			—			1,834
Prepaid expenses and other assets		(249	)		1,980			(2,405	)
Balance, March 25, 2005		6,470,260			65			35,537			31			43,523			79,156
Accrued interest income		(130	)		—			—
Exercise of stock options		92,859			1			819			—			—			820
Accounts payable		1,265			197			445
Restricted stock granted		24,400			—			424			—			—			424
Payroll and employee benefits		(723	)		332			(100	)
Deferred compensation — restricted stock		—			—			(424	)		—			—			(424	)
Accrued warranty		2			(171	)		—
Stock-based compensation due to accelerated vesting of stock options		—			—			10			—			—			10
Accrued professional fees		1,377			(58	)		220
Cash dividends paid		—			—			—			—			(1,735	)		(1,735	)
Accrued income taxes		2,128			(70	)		186
Tax benefit on stock options		—			—			3			—			—			3
Deferred revenue		812			1,490			595
Comprehensive income (loss):
Other liabilities		625			(593	)		7
Loss on foreign currency forward-exchange contracts		—			—			—			(55	)		—			(55	)
Net cash provided by operating activities		2,459			11,429			6,398
Net loss		—			—			—			—			(7,959	)		(7,959	)
Cash Flows From Investing Activities:
Total comprehensive loss		—			—			—			—			—			(8,014	)
Purchases of property and equipment		(4,032	)		(3,922	)		(3,169	)
Balance, March 31, 2006		6,587,519			66			36,369			(24	)		33,829			70,240
Proceeds from disposition of property, plant and equipment		246			298			204
Exercise of stock options		112,045			1			1,135			—			—			1,136
Proceeds from sales of short-term investments		27,487			—			—
Restricted stock forfeited		(20,000	)		—			(258	)		—			—			(258	)
Purchases of short-term investments		(18,404	)		(9,500	)		—
Deferred compensation — restricted stock		—			—			258			—			—			258
Net cash provided by (used in) investing activities		5,297			(13,124	)		(2,965	)
Cash dividends paid		—			—			—			—			(2,334	)		(2,334	)
Cash Flows From Financing Activities:
Comprehensive income (loss):
Payments made on long-term debt		(700	)		(700	)		(700	)
Gain on foreign currency forward-exchange contracts		—			—			—			24			—			24
Repurchase and retirement of common stock		—			—			(1,061	)
Unrealized gain on short-term investments		—			—			—			8			—			8
Proceeds from employee stock incentive plans		820			1,450			5,382
Net income		—			—			—			—			2,880			2,880
Cash dividends declared and paid		(1,735	)		(321	)		—
Total comprehensive income		—			—			—			—			—			2,912
Net cash (used in) provided by financing activities		(1,615	)		429			3,621
Balance, March 30, 2007		6,679,564		$	67		$	37,504		$	8		$	34,375		$	71,954
Net increase (decrease) in cash and cash equivalents		6,141			(1,266	)		7,054
Cash and cash equivalents at beginning of period		35,405			36,671			29,617
Cash and cash equivalents at end of period	$	41,546		$	35,405		$	36,671
Supplementary Disclosures of Cash Flow Information:
Income tax paid	$	674		$	761		$	658
Interest paid	$	702		$	478		$	457

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

PRINTRONIX, INC. AND SUBSIDIARIES

~~NOTES TO~~CONSOLIDATED ~~CONSOLIDATED~~STATEMENTS ~~FINANCIAL~~OF ~~STATEMENTS~~CASH FLOWS

~~As of March 31, 2006 and March 25, 2005 and for~~For Each of the Three Fiscal Years in the Period Ended March 3130, ~~2006~~2007


	March 30,			March 31,			March 25,
	2007			2006			2005
	($ in thousands)

Cash flows from operating activities:
Net income (loss)	$	2,880		$	(7,959	)	$	1,939
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		4,245			4,918			5,104
Stock-based compensation		—			10			—
Recovery of doubtful accounts		(64	)		(651	)		(120	)
Deferred income tax provision		(173	)		2,578			—
Loss on disposal of property, plant and equipment		171			176			468
Tax benefit from stock options		—			3			—
Changes in operating assets and liabilities:
Accounts receivable		(1,420	)		(434	)		321
Inventories		(899	)		(1,289	)		610
Prepaid expenses and other assets		(249	)		(249	)		1,980
Accrued interest income		(193	)		(130	)		—
Accounts payable		1,025			1,265			197
Payroll and employee benefits		(327	)		(723	)		332
Accrued warranty		(98	)		2			(171	)
Accrued professional fees		(809	)		1,377			(58	)
Accrued income taxes		(2,143	)		2,128			(70	)
Deferred revenue		(853	)		812			1,490
Other liabilities		(716	)		625			(593	)

Net cash provided by operating activities		377			2,459			11,429

Cash flows from investing activities:
Purchases of property and equipment		(1,971	)		(4,032	)		(3,922	)
Proceeds from disposition of property and equipment		60			246			298
Proceeds from sales of short-term investments		7,728			27,487			—
Purchases of short-term investments		(18,995	)		(18,404	)		(9,500	)

Net cash (used in) provided by investing activities		(13,178	)		5,297			(13,124	)

Cash flows from financing activities:
Payments made on long-term debt		(700	)		(700	)		(700	)
Proceeds from employee stock incentive plans		1,136			820			1,450
Cash dividends declared and paid		(2,334	)		(1,735	)		(321	)

Net cash (used in) provided by financing activities		(1,898	)		(1,615	)		429

Net (decrease) increase in cash and cash equivalents		(14,699	)		6,141			(1,266	)
Cash and cash equivalents at beginning of period		41,546			35,405			36,671

Cash and cash equivalents at end of period	$	26,847		$	41,546		$	35,405

Supplementary disclosures of cash flow information:
Income tax paid	$	3,168		$	674		$	761
Interest paid	$	881		$	702		$	478

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

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 30, 2007 and March 31, 2006 and for Each of the Three Fiscal Years
in the Period Ended March 30, 2007


Note 1	Summary of Significant Accounting Policies

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.

Principles of Consolidation

The consolidated financial statements include the accounts of Printronix and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Accounting Period

We use a fifty-two or fifty-three week fiscal year ending on the last Friday of March. For the fiscal years presented, the year-end dates were March 3130, ~~2006~~2007, March 2531, ~~2005~~2006, and March 2625, ~~2004~~2005. ~~The~~Fiscal ~~fiscal~~ year ~~ended~~2007 ~~March 31, 2006~~ used a fifty-~~three~~two week fiscal year period, ~~while~~fiscal ~~the~~year 2006 used a fifty-three week fiscal ~~years~~year ~~ended March 25~~period, ~~2005~~ and ~~March 26,~~fiscal ~~2004~~ year 2005 used a fifty-two week fiscal year period.

Use of Estimates

The preparation of financial statements that conform with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ materially from those estimates.

Reclassification

Certain amounts for the prior years have been reclassified to conform to fiscal year 2006 financial statement presentation. The reclassification had no impact on stockholders’ equity or net (loss) income.

Cash Equivalents

We consider all highly liquid temporary cash investments with original maturities of three months or less at the time of purchase to be cash equivalents. The effect of exchange rate changes on cash balances held in foreign currencies was not material for the periods presented.

Fair Value of Financial Instruments

The consolidated balance sheets include the following financial instruments: cash, cash equivalents, short-term investments, accounts receivable, current portion of long-term debt, accounts payable, and long-term debt ~~and foreign exchange forward contracts~~. We consider the carrying amounts in the financial statements to approximate fair value for cash equivalents, short-term investments, accounts receivable and accounts payable because of the relatively short period of time between origination and their expected realization. The carrying values of the long-term debt and the current portion of long-term debt approximate fair value as they bear interest at current market rates.

Short-Term Investments

We evaluate the short-term investments in marketable debt securities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and have determined that all of the investments in marketable debt securities should be classified as available-for-sale as of March 30, 2007 and held-to-maturity as of March 31, 2006. Available-for-sale securities are carried at fair value and held-to-maturity securities are carried at amortized cost. The unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive income (loss). The income tax rate is zero for these transactions due to domestic operating losses and the effect of valuation allowances. Realized gains

4849

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Securities,”~~ and have determined that all of the investments in marketable debt securities should be classified as held-to-maturity as of March 31, 2006 and available-for-sale as of March 25, 2005. Held-to-maturity securities are carried at amortized cost and available-for-sale securities are carried at fair value. The unrealized gains and losses ~~on available-for-sale securities~~ are recorded in accumulated other comprehensive income. The income tax rate is zero for these transactions due to domestic operating losses and the effect of valuation allowances. Realized gains and losses are included in interest income. The cost basis for realized gains and losses on available-for-sale securities is determined on a specific identification basis.

The fair value of the investments in marketable debt securities is based on quoted market prices that approximate fair value ~~due to the frequent resetting of interest rates~~. We assess the investments in marketable debt securities for other-than-temporary declines in value by considering various factors that include, among other things, any events that may affect the creditworthiness of a security’s issuer, the length of time the security has been in a loss position, and our ability and intent to hold the security until a forecasted recovery of fair value.

At March 30, 2007, we had $31.5 million of investments in taxable corporate securities, asset-backed securities, repurchase agreements, master notes and money market funds. The following table reflects the amortized cost and estimated fair value of our marketable securities as of March 30, 2007, by contractual maturity:


	Amortized		Estimated
	Cost		Fair Value
	($ in thousands)

Due in one year or less(1)	$	26,063	$	26,069
Due after one year through five years(2)		3,763		3,766
Due after five years through ten years		—		—
Due after ten years(2)		1,647		1,646

	$	31,473	$	31,481


(1)		At March 30, 2007, $19.7 million of these investments had maturities of three months or less when purchased and were included in cash and cash equivalents. In addition, $0.2 million were funds held in escrow, and were included in other assets.

(2)		Although contractual maturities of the asset-backed securities range from three to thirty years, the investments are classified as current assets in the consolidated balance sheets due to the expected holding period of less than one year.

At March 30, 2007, the estimated fair value of each investment resulted in unrealized gains of $8 thousand, which are included in accumulated other comprehensive income. During the fiscal year ended March 30, 2007, there were $7.7 million in proceeds from sales or maturities of marketable securities. We had no significant realized gains or losses as a result of those sales.

At March 31, 2006, we had $30.8 million of investments in mortgage-backed securities with original maturities of three months or less which were included in cash and cash equivalents on the balance sheet. At March 31, 2006, the estimated fair value of each investment approximated its amortized cost and, therefore, we had no unrealized gains or losses or any non-temporary losses. During the fiscal year ended March 31, 2006, there were $27.5 million in proceeds from sales or maturities of marketable debt securities. We had no significant realized gains or losses as a result of those sales.

~~Short~~At March 30, 2007 and March 31, 2006, short-term investments included $0.54 million inand $0.5 million, ~~certificates~~respectively, ofin ~~deposit~~certificates as of ~~March 31~~deposit, ~~2006~~ which are carried at cost.

At March 25, 2005, the company’s investments in marketable debt securities consisted of taxable corporate auction rate securities. At March 25, 2005, the estimated fair value of each investment approximated its amortized cost and, therefore, the company had no significant unrealized gains or losses or any non-temporary losses. There were no proceeds from sales or maturities of marketable debt securities in the fiscal year ended March 25, 2005. Although contractual maturities of the debt securities are due after five years, the investments are classified as current assets in the Consolidated Balance Sheets due to the expected holding period of less than one year.

Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. We perform credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness. We maintain an allowance for doubtful accounts based upon a variety of factors. We review all open accounts and provide specific reserves for customer-collection issues when we believe the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. We also record a reserve for all customers, excluding those that have been specifically ~~reserved~~ for, based upon evaluation of the historical losses, which exceeded the specific reserves we had established. Receivable losses are charged against the allowance when management believes the account is uncollectible. Subsequent recoveries, if any, are credited to the allowance.

4950

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~The~~reserved ~~allowance~~ for, ~~doubtful~~based ~~accounts~~upon ~~was~~evaluation ~~$0.8 million and $1.5 million as~~ of ~~March 31,~~the ~~2006~~historical ~~and March 25~~losses, ~~2005,~~which ~~respectively.~~exceeded ~~We reduced~~ the ~~allowance~~specific ~~for~~reserves ~~doubtful accounts~~we byhad $0established.~~7 million during fiscal year 2006 due to~~ ~~changes~~Receivable inlosses ~~estimates~~are ~~related~~charged toagainst ~~resolution~~the ofallowance ~~various customer~~when ~~collection~~management ~~issues,~~believes ~~which~~the ~~resulted~~account inis ~~a decrease to general and administrative expense~~uncollectible. ~~The following table reflects the changes~~Subsequent inrecoveries, ~~the~~if ~~allowance~~any, ~~for~~are ~~doubtful~~credited ~~accounts~~to ~~during~~ the ~~three fiscal~~allowance. ~~years ended March 31, 2006:~~

	Balance at		Provisions/						Balance
	Beginning		(Credits) to						at End
	of Period		Income			Deductions			of Period
	($ in thousands)
Fiscal Year Ended March 31, 2006	$	1,481	$	(651	)	$	(70	)	$	760
Fiscal Year Ended March 25, 2005	$	1,675	$	(120	)	$	(74	)	$	1,481
Fiscal Year Ended March 26, 2004	$	2,610	$	127		$	(1,062	)	$	1,675

The allowance for doubtful accounts was $0.4 million and $0.8 million as of March 30, 2007 and March 31, 2006, respectively. We reduced the allowance for doubtful accounts by $0.1 million, $0.7 million, and $0.1 million during fiscal years 2007, 2006 and 2005, respectively, due to changes in estimates related to resolution of various customer collection issues, which resulted in a decrease to general and administrative expense. The following table reflects the changes in the allowance for doubtful accounts during the three fiscal years ended March 30, 2007:

Estimated sales returns were $0.7 million and $0.9 million as of March 31, 2006 and March 25, 2005, respectively, and are reflected as a reduction to revenues in the periods established.


	Balance at		Provisions/						Balance
	Beginning		(Credits) to						at End
	of Period		Income			Deductions			of Period
	($ in thousands)

Fiscal Year Ended March 30, 2007	$	760	$	(64	)	$	(264	)	$	432

Fiscal Year Ended March 31, 2006	$	1,481	$	(651	)	$	(70	)	$	760

Fiscal Year Ended March 25, 2005	$	1,675	$	(120	)	$	(74	)	$	1,481

The allowance for product returns was $0.7 million as of March 30, 2007 and March 31, 2006 and $0.9 million as of March 25, 2005, consisting of an allowance for sales and spares returns. Revenue is reduced in the period the allowance is established. The following tables reflect the changes in the sales allowance and spares returns:


	Balance at		Provisions/					Balance
	Beginning		(Credits) to					at End
Sales Returns	of Period		Income		Deductions			of Period
	($ in thousands)

Fiscal Year Ended March 30, 2007	$	623	$	2,192	$	(2,214	)	$	601

Fiscal Year Ended March 31, 2006	$	836	$	1,893	$	(2,106	)	$	623


	Balance at		Provisions/					Balance
	Beginning		(Credits) to					at End
Spares Returns	of Period		Income		Deductions			of Period
	($ in thousands)

Fiscal Year Ended March 30, 2007	$	99	$	1,727	$	(1,754	)	$	72

Fiscal Year Ended March 31, 2006	$	81	$	1,842	$	(1,824	)	$	99

The company records its sales returns on a gross basis in the accompanying consolidated balance sheets and statements of operations. Returns for spares are from the company’s largest customer and relate to spares not used within thirty days of purchase.

Inventories

We record a provision to value the 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 an evaluation of the 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.

Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment (“RoHS”) became effective throughout the European Community starting July 1, 2006. RoHS restricts the use of six substances: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (“PBB”) or

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

polybrominated diphenyl ethers (“PBDE”), within electrical and electronic equipment. The conversion of products targeted for RoHS compliance was completed without an impact to the realizability of the inventory on hand.

Property, Plant and Equipment

Depreciation of property, plant and equipment and amortization of leasehold improvements are provided using the straight-line method over the following estimated useful lives:

Machinery and equipment	2 to 15 years	~~2 to 15 years~~
Furniture and fixtures	2 to 20 years	~~2 to 20 years~~
Buildings and improvements	8 to 30 years	~~30 years~~
Leasehold improvements	Lesser of useful life or term of lease	~~Lesser of useful life or term of lease~~

Maintenance, repairs and minor renewals are charged directly to expense as incurred. Additions and betterments to property, plant and equipment are capitalized at cost. When we dispose of assets, the applicable costs and accumulated depreciation and amortization thereon are removed from the accounts and any resulting gain or loss is included in income from operations in the period incurred. Depreciation and amortization expense on property, plant and equipment was $4.92 million, $54.19 million and $65.71 million for fiscal years ~~2006~~2007, ~~2005~~2006 and ~~2004~~2005, respectively.

Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we assess the carrying value of long-lived 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.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition.” The application of the authoritative guidance requires judgment to determine whether revenue has been realized or is realizable and earned.

Revenue from product sales is recognized 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 persuasive evidence of a sales arrangement exists in the form of a contract or purchase order, the product has been shipped, the sales price is fixed or determinable and collection is reasonably assured. We have no further obligations after shipment of the product other than the warranty obligations. Sales are based upon written contractual agreements with our resellers that include established pricing and payment terms.

The printers contain embedded software, which we consider incidental to the sale of the printer, and no revenue is attributed to the software. We also sell standard “pre-packed” software to support bar code label printing applications and other software options. This software does not require customization, nor do we have any post-sale obligations. Revenue is recognized as this standard “pre-packed” software is shipped with the printer.

Revenue arrangements with multiple deliverables, such as the delivery of multiple products or performance of multiple services, are identified into separate units of accounting based on their fair value and are recognized as each unit of accounting is earned in accordance with Emerging Issues Task Force (“EITF”) Issue ~~Issue~~ 00-21, “Revenue Arrangements with Multiple Deliverables.” Occasionally, we install Print and Apply thermal printers. In instances in which we have determined installation to be inconsequential and perfunctory, revenue is recognized at the time of sale of the printer. In all other instances, the printer revenue and applicable installation revenue are deferred until customer acceptance is obtained. For the ~~year~~fiscal ~~ended March 31,~~years ~~2006~~presented, there were no instances in which we ~~determined~~ ~~installation to be inconsequential and perfunctory,~~determined ~~and there was an immaterial amount of revenue deferred under these arrangements.~~

~~We offer professional services, which are generally short-term~~ ~~in duration and are recognized as revenue upon completion and~~52 ~~acceptance of the service.~~

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

installation to be inconsequential and perfunctory. For fiscal year 2007, in all other instances, installation had been completed, and therefore, no revenue had been deferred under these arrangements. For fiscal years 2006 and 2005, there was an immaterial amount of revenue deferred under these arrangements.

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 commence upon expiration of the warranty period and 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. The maintenance service agreements are separately priced at fair value as defined in FASB Technical Bulletin (“FTB”) No. 90-1. Accordingly, for those transactions in which maintenance service agreements are purchased concurrently with the purchase of printers, we defer revenue based on the fair value for the maintenance services agreements. Revenue from maintenance service contracts is then recognized on a straight-line basis over the period of each individual contract, which approximates the manner in which costs are incurred.

We reduce revenue at the time of sale for estimated customer returns, price protection, rebates and other sales incentives that occur under established sales programs. Judgment is required to record these estimated revenue reductions.

Warranty 51Costs

We maintain an accrual for warranty obligations based upon our claims experience and other known factors. We evaluate the warranty accrual requirements and record a provision for estimated warranty obligations to cost of sales. We determine the provision for warranty charges by applying the estimated repair cost and estimated return rates to the outstanding units under warranty. We generally offer either a 90-day on-site repair option or a 12-month to 36-month return-to-factory option. The on-site warranty covers the cost of the parts and the labor to replace these parts. The return-to-factory warranty covers only the replacement parts. If a defective product cannot be repaired, it is replaced at no additional cost to the customer. Supplies are warranted for one year.

The following is a summary of the accrued warranty obligation for the two fiscal years in the period ended March 30, 2007:


	March 30,			March 31,
	2007			2006
	($ in thousands)

Beginning balance, warranty accrual	$	865		$	863
Add warranty expense		899			989
Accrual adjustments to reflect actual experience		(79	)		(6	)
Deduct warranty charges incurred		(918	)		(981	)

Ending balance, warranty accrual	$	767		$	865

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warranty Costs

We maintain an accrual for warranty obligations based upon our claims experience and other known factors. We evaluate the warranty accrual requirements and record a provision for estimated warranty obligations to cost of sales. We determine the provision for warranty charges by applying the estimated repair cost and estimated return rates to the outstanding units under warranty. We generally offer either a 90-day on-site repair option or a 12-month return-to-factory option. The 90-day warranty covers the cost of the parts and the labor to replace these parts. The 12-month warranty covers only the replacement parts. If a defective product cannot be repaired, it is replaced at no additional cost to the customer. Supplies are warranted for the shelf life of the products, which can be up to two years.

The following is a summary of the accrued warranty obligation for the two fiscal years in the period ended March 31, 2006:

	March 31,			March 25,
	2006			2005
	($ amounts in thousands)
Beginning balance, warranty accrual	$	863		$	1,033
Add warranty expense		989			1,002
Accrual adjustments to reflect actual experience		(6	)		(125	)
Deduct warranty charges incurred		(981	)		(1,047	)
Ending balance, warranty accrual	$	865		$	863

Engineering and Development

Engineering and development costs are expensed as incurred and consist of labor, supplies, consulting and other costs related to developing and improving our products ~~and solutions~~.

Advertising

We expense advertising costs, including promotional literature, brochures and trade shows, as incurred. Advertising expense was $21.68 million, $2.76 million and $2.57 million for fiscal years ~~2006~~2007, ~~2005~~2006 and ~~2004~~2005, respectively.

Foreign Currency Gains and Losses

The United States dollar is the functional currency for all of the foreign subsidiaries. Transactions that are recorded in currencies other than the United States dollar may result in transaction gains or losses at the end of the period and when the related receivable or payable is paid. For these subsidiaries, the assets and liabilities have been remeasured at the end of the period exchange rates, except inventories and property, plant and equipment, which have been remeasured at historical rates. The statements of income have been remeasured at average rates of exchange for the period, except cost of sales and depreciation, which have been remeasured at historical rates. We predominantly sell our products in United States dollars and in Euros.

Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires the use of the asset-and-liability method for financial accounting and reporting for income taxes, and further prescribes that current and deferred tax balances be determined based upon the difference between the financial statement ~~bases~~ and tax bases of assets and liabilities using tax ~~tax~~ rates in effect for the year in which the differences are expected to reverse. Our effective tax rate includes the impact of undistributed foreign earnings for which no U.S. taxes have been provided because we plan to reinvest such earnings indefinitely outside the United States. Repatriating eligible foreign earnings under the temporary provision of the American Jobs Creation Act of 2004 was not treated as an exception to our policy and intent of permanently investing such foreign earnings outside of the United States.

In assessing the realizability of deferred tax assets, 52SFAS No. 109 establishes a more likely than not standard. If it is determined that it is more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. We review our deferred tax assets for realization based upon historical taxable income, prudent and feasible tax planning strategies, the expected timing of the reversals of existing temporary differences and expected future taxable income. SFAS No. 109 further states that forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as losses in recent years. As a result of the company’s recent losses in the United States, the company concluded that a full valuation allowance was required for its deferred tax assets in the United States as of March 30, 2007 and March 31, 2006, as required by SFAS No. 109.

Contingencies

We account for contingencies in accordance with accounting guidance, including, but not limited to, SFAS No. 5 “Accounting for Contingencies” and Financial Accounting Standards Board Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). We evaluate the degree of probability of an unfavorable outcome and the ability to reasonably estimate the loss related to legal claims, environmental issues, guarantees, including indirect guarantees of the indebtedness of others, and other known issues, and record a charge to earnings if appropriate.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~States. Repatriating eligible foreign earnings under the~~ ~~temporary provision of the American Jobs Creation Act of 2004,~~Net asIncome ~~discussed~~(Loss) ~~below~~Per ~~in Note 5, would not be treated as an~~Share ~~exception to our policy and intent of permanently investing such foreign earnings outside of the United States.~~

WeBasic ~~review~~net ~~our~~income ~~deferred~~(loss) ~~tax~~per ~~assets~~share ~~for~~is ~~realization~~computed ~~based~~using ~~upon~~the ~~historical~~weighted-average ~~taxable~~number ~~income, prudent and feasible tax planning strategies, the expected timing~~ of ~~the~~shares ~~reversals~~ of ~~existing temporary~~common ~~differences~~stock ~~and expected future taxable income. We~~outstanding ~~record~~during ~~a valuation allowance to reduce our deferred tax assets to~~ the ~~amount~~period. ~~management~~Diluted ~~believes~~net ~~will~~income ~~more~~(loss) ~~likely~~per ~~than~~share ~~not be~~is ~~realized.~~computed Inusing the ~~fourth~~weighted-average ~~quarter~~number of ~~fiscal~~shares ~~year 2006, we recorded a charge~~ of ~~$2.6 million to increase the valuation~~common ~~allowance~~stock ~~against~~outstanding ~~our~~and ~~deferred~~potential ~~tax~~shares ~~assets~~outstanding asduring ~~a result of~~the ~~cumulative~~period, ~~domestic~~if ~~operating losses~~dilutive.

~~During~~Net ~~the~~income ~~fourth~~(loss) ~~quarter~~per ofshare ~~fiscal~~data ~~year~~for ~~2006,~~each of the ~~company~~three fiscal ~~repatriated~~years ~~$32.0 million~~ in ~~cash dividends subject to~~ the ~~elective~~ 85period ~~percent~~ended ~~dividend~~March 30, ~~received deduction. Accordingly~~2007, ~~the~~ ~~company~~is ~~recognized~~as ~~a related income tax expense for federal~~follows: ~~and state taxes of $1.0 million and foreign withholding taxes of $1.1 million (Note 5).~~

Contingencies


	March 30,		March 31,			March 25,
	2007		2006			2005
	($ in thousands, except share and per share data)

Net income (loss)	$	2,880	$	(7,959	)	$	1,939
Basic weighted-average shares outstanding		6,303,342		6,240,041			6,356,236

Basic net income (loss) per share	$	0.46	$	(1.28	)	$	0.31

Effect of dilutive securities:
Basic weighted-average shares outstanding		6,303,342		6,240,041			6,356,236
Dilutive effect of stock options		148,869		—			182,085

Dilutive weighted-average shares outstanding		6,452,211		6,240,041			6,538,321

Diluted net income (loss) per share	$	0.45	$	(1.28	)	$	0.30

WeThe ~~account~~dilutive ~~for~~weighted-average ~~contingencies~~shares inoutstanding ~~accordance~~do ~~with~~not ~~accounting~~include ~~guidance,~~the ~~including,~~antidilutive ~~but~~impact ~~not~~of ~~limited to~~119, ~~SFAS~~937 ~~No. 5~~shares, ~~“Accounting~~119,307 shares ~~for Contingencies”~~ and ~~Financial Accounting~~76,153 shares ~~Standards~~for ~~Board~~fiscal ~~Interpretation No. 45,~~years ~~“Guarantor’s~~2007, ~~Accounting~~2006 and ~~Disclosure~~2005, ~~Requirements for Guarantees~~respectively, ~~Including~~because ~~Indirect~~the ~~Guarantees~~exercise ofprice ~~Indebtedness~~ of ~~Others”~~the ~~(“FIN 45”).~~stock Weoptions ~~evaluate~~exceeded the ~~degree of~~average ~~probability~~market value of ~~an unfavorable outcome and~~ the ~~ability to~~stock ~~reasonably~~for ~~estimate~~that ~~the~~period. ~~loss~~In ~~related to legal claims~~addition, ~~environmental~~ ~~issues,~~the ~~tax~~dilutive ~~related~~weighted- ~~uncertainties, guarantees,~~average ~~including~~shares ~~indirect~~outstanding ~~guarantees~~do ofnot include the ~~indebtedness~~antidilutive ofimpact ~~others, and~~of ~~other~~205,981 shares ~~known~~for ~~issues,~~fiscal ~~and~~year ~~record~~2006 as a ~~charge~~result toof ~~earnings if~~net ~~appropriate~~losses.

~~Net~~Accounting ~~(Loss)~~for ~~Income~~Stock-Based ~~Per Share~~Compensation

~~Basic net (loss) income per share is computed using the weighted~~Adoption ~~average number~~ of ~~shares~~Statement of ~~common~~Financial ~~stock~~Accounting ~~outstanding~~Standards ~~during the period~~No. ~~Diluted net~~ 123(~~loss~~R) ~~income per share is computed using~~ ~~the~~(“SFAS 123(R)”) ~~weighted average number of shares of common stock outstanding~~ and ~~potential shares outstanding during the period,~~Transition ~~if dilutive.~~

~~Net~~On April 1, 2006, we adopted Statement of Financial Accounting Standards (~~loss~~“SFAS”) ~~income~~No. 123 ~~per~~(Revised 2004), ~~share~~“Share-Based ~~data~~Payment” (“SFAS 123(R)”), which requires compensation expense to be recognized for ~~each~~all share-based payments made to employees based on the fair value of the ~~three~~award ~~fiscal~~at the date of ~~years~~the ingrant. As required by SFAS 123(R), share-based compensation expense, net of an estimated forfeiture rate, is recognized over the requisite service period ~~ended~~(generally the vesting period) of the award. We adopted SFAS 123(R) using the modified prospective method, which results in the recognition of compensation expense using the provisions of SFAS 123(R) for all share-based awards granted or modified after March 31, 2006 and the recognition of compensation expense using the provisions of SFAS 123, is“Accounting for asStock-Based ~~follows:~~Compensation” (“SFAS No. 123”), for all unvested awards outstanding at the date of adoption. Under this transition method, the results of operations of prior periods have not been restated. Accordingly, we will continue to provide pro forma financial information for prior periods to illustrate the effect on net income (loss) and net income (loss) per share of applying the fair value recognition provisions of SFAS No. 123.

	March 31,			March 25,		March 26,
	2006			2005		2004
	($ in thousands, except share and per share data)
Net (loss) income	$	(7,959	)	$	1,939	$	632
Basic weighted average shares outstanding		6,240,041			6,356,236		5,734,633
Basic net (loss) income per share	$	(1.28	)	$	0.31	$	0.11
Effect of dilutive securities:
Basic weighted average shares outstanding		6,240,041			6,356,236		5,734,633
Dilutive effect of stock options		—			182,085		226,402
Dilutive weighted average shares outstanding		6,240,041			6,538,321		5,961,035
Diluted net (loss) income per share	$	(1.28	)	$	0.30	$	0.11

~~The dilutive weighted average shares outstanding do not include~~ ~~the antidilutive impact of 119,307 shares,~~55 76,153 shares, and 39,132 shares for fiscal years 2006, 2005 and 2004, respectively, because the exercise price of the stock options exceeded the average market value of the stock for that period. In addition, the dilutive weighted average shares outstanding do not include the antidilutive impact of 205,981 shares for fiscal year 2006 as a result of net losses.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expense for our stock-based compensation plans. Prior to the ~~Accounting~~adoption of SFAS 123(R), we presented all tax benefits ~~for~~resulting ~~Stock-Based~~from ~~Compensation~~the exercise of stock options as operating cash flows in our consolidated statements of cash flows. SFAS 123(R) requires that the realized tax benefit related to the excess of the deductible amount over the compensation cost recognized (excess tax benefits) be classified in the statement of cash flow as a cash flow from financing activities rather than as a cash flow from operating activities.

WeOn ~~account~~November 10, ~~for~~2005, ~~stock-based~~the ~~compensation~~Financial ~~issued~~Accounting ~~to employees~~Standards ~~using~~Board ~~the~~(“FASB”) issued FASB Staff Position ~~intrinsic~~No. FAS 123(R)-~~value-based~~3, “Transition Election Related to ~~method~~Accounting asfor ~~prescribed~~Tax byEffects ~~the~~of ~~Accounting~~Share-Based ~~Principles~~Payment ~~Board Opinion~~Awards” (“~~APB~~FSP 123(R)-3”) No. ~~25,~~ ~~“Accounting~~We ~~for~~have ~~Stock~~elected ~~Issued~~ to ~~Employees.”~~adopt ~~Under~~ the ~~intrinsic-value-based method,~~alternative ~~compensation~~transition ismethod ~~the~~provided ~~excess,~~in ifFSP 123(R)-3 ~~any,~~for calculating of the ~~fair~~tax ~~market value~~effects of ~~the~~ stock-based atcompensation ~~the~~pursuant to ~~grant~~SFAS 123(R). ~~date~~The oralternative ~~other~~transition ~~measurement~~method ~~date~~provides ~~over~~a ~~the~~simplified ~~amount~~method anfor ~~employee~~determining ~~must~~the ~~pay~~beginning tobalance ~~acquire~~of the ~~stock.~~ ~~Compensation~~additional ~~expense,~~paid-in ifcapital ~~any,~~pool is(“APIC ~~recognized~~Pool”) ~~over~~related to the ~~applicable service~~tax ~~period,~~effects ~~which~~of isemployee ~~usually~~stock-based ~~the~~compensation. ~~vesting~~It ~~period~~also ~~(Note 4).~~provides Weguidance ~~grant options~~ for ~~common~~recognizing ~~stock~~the atsubsequent animpact ~~option~~on the ~~price~~APIC ~~equal~~Pool toand ~~the~~consolidated ~~fair~~statements ~~market~~of ~~value~~cash flows of the tax effects of employee stock-based atcompensation ~~the~~awards ~~date~~that ofare ~~the~~outstanding ~~grant~~upon adoption of SFAS 123(R). ~~Accordingly,~~The weadoption doof FSP 123(R)-3 did not ~~record~~have ~~stock-based~~an impact on our overall ~~compensation~~consolidated ~~expense~~financial ~~for~~position, ~~these~~results ~~options~~of operations or cash flows.

~~The~~For ~~following~~the ~~table~~fiscal ~~illustrates~~year ~~the~~ended ~~effect~~March 30, on2007, ~~net~~we ~~(loss)~~did ~~income~~not grant ~~and~~or ~~net~~modify ~~(loss)~~any ~~income~~stock ~~per~~options ~~share~~or ifrestricted westock ~~had~~awards ~~applied~~and, ~~the fair value~~as ~~recognition provisions~~ of ~~SFAS~~April ~~No. 123~~1, ~~“Accounting~~ ~~for~~2006, ~~Stock-Based~~all ~~Compensation,”~~outstanding tooptions were fully vested. Therefore, no stock-based ~~employee~~ compensation ~~and~~expense ~~is provided in accordance~~was ~~with~~recognized under SFAS No123(R). ~~148,~~ ~~“Accounting~~We ~~for~~are ~~Stock-Based~~currently evaluating ~~Compensation — Transition~~alternatives ~~and~~to ~~Disclosure~~stock options to compensate our employees.”

	March 31,			March 25,			March 26,
	2006			2005			2004
	($ in thousands, except per share data)
Net (loss) income, as reported	$	(7,959	)	$	1,939		$	632
Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards		(670	)		(223	)		(315	)
Proforma net (loss) income	$	(8,629	)	$	1,716		$	317
Net (loss) income per share:
Basic — as reported	$	(1.28	)	$	0.31		$	0.11
Basic — pro forma	$	(1.38	)	$	0.27		$	0.06
Diluted — as reported	$	(1.28	)	$	0.30		$	0.11
Diluted — pro forma	$	(1.38	)	$	0.26		$	0.05

Pro Forma Information Under SFAS No. 123 for Periods Prior to April 1, 2006

InThe ~~December~~following ~~2005,~~table weillustrates ~~accelerated~~ the ~~vesting~~effect ofon ~~all~~net of(loss) ~~the~~income ~~company’s “out-of-the-money” stock~~and ~~options~~net (~~96,402 shares~~loss) atincome ~~a weighted average exercise price of $16.96~~ per share) ~~previously~~for ~~granted under~~ the ~~1994~~ ~~Stock~~fiscal ~~Incentive~~years ~~Plan. No compensation expense resulted from~~ended ~~the accelerated vesting of these options. In~~ March 31, 2006, ~~we accelerated~~and ~~the vesting of all remaining stock options (60,121~~March ~~shares~~25, at2005 aif ~~weighted~~we ~~average~~had ~~exercise price of~~applied ~~$12.11 per share) previously granted under~~ the ~~1994~~fair ~~Stock Incentive~~value ~~Plan~~recognition ~~and~~provision ~~the 2005 Stock Option Plan. As a result~~ of ~~the~~ ~~acceleration~~SFAS 123 ~~of the~~to ~~“in-the-money”~~ stock ~~options, approximately $10 thousand of stock~~-based ~~employee~~ compensation ~~cost is reflected in net loss for fiscal~~: ~~year 2006 in accordance with FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation — an interpretation of APB Opinion No. 25.”~~

We elected to accelerate the above options to eliminate future compensation expense that would have been recorded over four years beginning fiscal year 2007 following the adoption of SFAS 123R. The table above reflects the proforma expense of approximately $0.4 million associated with the accelerated vesting of these options.


	March 31,			March 25,
	2006			2005
	($ in thousands, except per share data)

Net (loss) income, as reported	$	(7,959	)	$	1,939
Deduct total stock-based employee compensation expense determined under fair value-based method for all awards		(670	)		(223	)

Pro forma net (loss) income	$	(8,629	)	$	1,716

Net (loss) income per share:
Basic — as reported	$	(1.28	)	$	0.31
Basic — pro forma	$	(1.38	)	$	0.27
Diluted — as reported	$	(1.28	)	$	0.30
Diluted — pro forma	$	(1.38	)	$	0.26

~~The~~In December 2005, we accelerated the vesting of all of the company’s “out-of-the-money” stock options (96,402 shares at a weighted-average ~~fair~~exercise price ~~value~~ of ~~options~~$16.96 per share) previously granted ~~during~~under ~~fiscal~~the ~~years~~1994 Stock Incentive Plan. No compensation expense resulted from the accelerated vesting of these options. In March 2006, ~~2005~~we accelerated ~~and~~the ~~2004~~vesting ~~was~~of all remaining stock options (60,121 shares at a weighted-average exercise price of $412.8011 per share) previously granted under the 1994 Stock Incentive Plan and the 2005 Stock Option Plan. As a result of the acceleration of the “in-the-money” stock options, approximately $510 thousand of stock-based employee compensation cost was reflected in the reported net loss for fiscal year 2006 in accordance with the Financial Accounting Standards Board (“FASB”) Interpretation No.70 44, ~~and~~“Accounting $5for Certain Transactions involving Stock Compensation — an interpretation of APB Opinion No.07 ~~per~~25.” The compensation cost is related to the ~~share,~~excess ~~respectively~~of the intrinsic value over the fair market value of the company’s stock on the acceleration date.

5456

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~For~~We ~~purposes~~elected ofto ~~calculating~~accelerate the ~~compensation~~above ~~cost~~options ~~consistent~~to eliminate ~~with~~recognizing ~~SFAS No~~approximately $0.4 ~~123,~~million ~~the fair value~~ of ~~each option~~future ~~granted~~compensation toexpense ~~employees~~in isour ~~estimated~~consolidated ~~using~~statement ~~the~~of ~~Black-Scholes~~operations ~~option-pricing~~that ~~model~~would onhave ~~the~~been ~~date~~recorded ofover ~~grant~~four ~~using~~years ~~the~~beginning ~~following~~fiscal ~~assumptions~~year ~~for~~2007 ~~each~~following of the ~~three~~adoption ~~fiscal~~of ~~years in the period ended March~~SFAS ~~31, 2006:~~123(R).

	March 31,		March 25,		March 26,
	2006		2005		2004
Average volatility		43%		42%		63%
Weighted average risk-free interest rate		4.4%		3.4%		1.9%
Dividend yield		1.2%		0.2%		0.0%
Average expected life		3.4 years		3.4 years		3.6 years

Determining Fair Value

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatility is based upon the historical volatility of our stock for a period approximating the expected life. The risk-free interest rate is estimated using the U.S. Treasury rates corresponding to the grant date and expected life. Dividend yield is based on our history of dividend payouts. The expected life of options granted is estimated based on historical exercise patterns, and represents the period of time the options are expected to be outstanding.

For purposes of calculating the compensation cost consistent with SFAS No. 123, the fair value of each option granted to employees is estimated using the Black-Scholes option-pricing model on the date of grant using the following assumptions for the fiscal years ended March 31, 2006 and March 25, 2005:


	March 31,			March 25,
	2006			2005

Expected volatility		43	%		42	%
Weighted-average risk-free interest rate		4.4	%		3.4	%
Dividend yield		1.2	%		0.2	%
Average expected life (in years)		3.4			3.4
Weighted-average grant-date fair value	$	4.87		$	5.70

Assumptions are not presented for the fiscal year ended March 30, 2007 because stock options were not granted during this period.

Foreign Currency Hedging

We have a foreign currency-hedging program in order to mitigate currency rate fluctuation exposure related to foreign currency cash inflows. Under the program, we ~~can~~ enter into foreign currency ~~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. WeAs ~~had~~of March 30, 2007, there were no outstanding forward exchange contracts. As of March 31, 2006, we had outstanding forward-exchange contracts with a notional amount of €0.9 million, approximately $1.1 million~~, and €4~~.~~8 million,~~ ~~approximately $6.3 million at~~Based ~~March 31, 2006, and March 25, 2005, respectively. Based~~ on the fair value of these contracts at March 31, 2006, we recorded a liability of $24 thousand, which is included in the accrued expenses — ~~other~~ ~~portion of the Consolidated Balance Sheet. At March 25, 2005, we recorded an asset of $0.1 million, which is included in the prepaid expenses and~~ other ~~current assets~~ portion of the Consolidated Balance Sheet. For the three fiscal years in the period ended March 3130, ~~2006~~2007, the hedges were effective and, as a result, there was no charge to earnings for any ineffective portion of the change in fair value of the hedges.

Other Comprehensive Income (Loss) ~~Income~~

Other comprehensive income (loss) ~~income~~ represents unrealized gains and losses on the Euro foreign currency forward-exchange contracts that qualify for hedge accounting and unrealized gains and losses on short-term investments. The aggregate amount of such gains or losses that have not yet been recognized in net income (loss) ~~income~~ is reported in the equity portion of the Consolidated Balance Sheets as accumulated other comprehensive income (loss) ~~income~~.

Concentration of Credit Risk

Our accounts receivable include substantial receivables from a few large resellers, and a significant change in the liquidity or financial position of any one of these resellers, or other significant changes in estimates or ~~circumstances with other~~ customers, could result in an additional allowance that could have a material adverse effect upon the operating results and financial condition for the period or periods in which such information is known.

~~Printronix’s largest customer’s (IBM) receivable~~ balance represented 24.7 percent and 20.9 percent of total accounts receivable at March 31, 2006, and March 25, 2005, respectively. The two largest customers’ receivable balances combined represented 34.2 percent and 25.1 percent of total accounts receivable at March 31, 2006, and March 25, 2005, respectively. The 10 largest customers’ receivable balances collectively represented 57~~.7 percent and 44.6 percent~~ of total accounts receivable at March 31, 2006, and March 25, 2005, respectively. Credit risk with respect to other accounts receivable is generally diversified because of the large number of entities comprising the customer base and their dispersion across many geographical regions. We continuously evaluate the creditworthiness and the financial condition of the resellers and other customers. We require collateral, such as letters of credit, in certain circumstances.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

circumstances with other customers, could result in an additional allowance that could have a material adverse effect upon the operating results and financial condition for the period or periods in which such information is known.

Printronix’s largest customer’s (IBM) receivable balance represented 20.3 percent and 24.7 percent of total accounts receivable at March 30, 2007 and March 31, 2006, respectively. The two largest customers’ receivable balances combined represented 25.5 percent and 34.2 percent of total accounts receivable at March 30, 2007 and March 31, 2006, respectively. The 10 largest customers’ receivable balances collectively represented 47.2 percent and 57.7 percent of total accounts receivable at March 30, 2007 and March 31, 2006, respectively. Credit risk with respect to other accounts receivable is generally diversified because of the large number of entities comprising the customer base and their dispersion across many geographical regions. We continuously evaluate the creditworthiness and the financial condition of the resellers and other customers. We require collateral, such as letters of credit, in certain circumstances.

Concentration of credit risk also exists in the short-term investments. Short-term investments are made with high-quality banks or brokerage firms in investment grade securities and highly liquid cash equivalents.

New Pronouncements

In ~~November~~June ~~2004~~2006, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards Board (“~~FASB”) ~~issued~~Interpretation ~~SFAS~~ No. ~~151~~48, “~~Inventory~~Accounting ~~Costs — an~~for ~~Amendment~~Uncertainty ofin ~~ARB~~Income 43Taxes, an ~~Chapter 4~~interpretation of FASB Statement No. 109” ~~SFAS~~ (“FIN ~~151~~48”). ~~clarifies~~This ~~that~~interpretation ~~abnormal~~clarifies the ~~amounts~~accounting offor ~~idle~~uncertainty ~~facility~~in ~~expense,~~income ~~freight,~~taxes ~~handling~~recognized ~~costs,~~in ~~and~~an ~~wasted~~enterprise’s ~~materials~~financial ~~(spoilage)~~statements ~~should~~in beaccordance ~~recognized~~with asFASB ~~current-period~~Statement ~~charges~~No. 109, ~~and~~“Accounting ~~requires~~for ~~the~~Income ~~allocation of fixed~~Taxes.” ~~production~~The ~~overheads~~interpretation toprescribes ~~inventory~~a berecognition ~~based~~threshold ~~on the normal~~and ~~capacity~~measurement ofattribute ~~the~~for ~~production~~a ~~facilities.~~tax ~~SFAS 151~~position istaken or expected to be ~~effective~~taken ~~for~~in ~~fiscal~~a ~~years~~tax ~~beginning~~return ~~after~~and ~~June 15,~~also ~~2005,~~provides guidance on ~~and~~derecognition, ~~will~~classification, beinterest ~~adopted~~and bypenalties, accounting ~~the~~in ~~company~~interim inperiods, ~~the~~disclosure, ~~first~~and ~~quarter~~transition. ofThe ~~fiscal~~provisions ~~year~~of ~~2007.~~FIN 48 We are ~~currently~~effective ~~evaluating~~for ~~the~~fiscal ~~financial~~years ~~statement~~beginning ~~impact~~after ~~of the implementation of SFAS~~December ~~151~~31, 2006. We doare currently ~~not~~evaluating ~~expect~~what ~~the~~impact, ~~adoption~~if ofany, ~~SFAS 151~~this tostatement will have ~~a material impact~~ on the consolidated financial ~~position~~statements orof ~~results~~the ~~of operations~~company.

In ~~December~~June ~~2004~~2006, the ~~FASB~~Emerging ~~issued~~Issues ~~SFAS No. 123 (revised~~Task ~~2004),~~Force ~~“Share-Based Payment”~~ (“~~SFAS 123R~~EITF”)~~, which replaces SFAS 123,~~ ~~“Accounting~~reached ~~for~~a ~~Stock-Based~~consensus ~~Compensation,”~~on ~~and~~Issue ~~supercedes APB Opinion~~ No. 2506-03, ~~“Accounting for Stock~~ ~~Issued~~“How toTaxes ~~Employees.”~~Collected ~~SFAS 123R~~from ~~requires~~Customers ~~that~~and ~~all share-based~~Remitted ~~payments~~ to ~~employees, including grants of stock~~ ~~options,~~Governmental beAuthorities ~~recognized~~Should inBe ~~the~~Presented ~~financial~~in ~~statements based on their fair value beginning with~~ the ~~first interim or annual~~Income ~~reporting~~Statement ~~period~~(That ~~that begins after June 15~~is, ~~2005.~~Gross Inversus ~~March~~Net Presentation),” ~~2005, the Securities and Exchange Commission~~ (“~~SEC~~EITF 06-03”). ~~issued~~EITF ~~Staff Accounting Bulletin No. 107~~06-03 ~~(“SAB 107”)~~concluded ~~regarding~~that the ~~SEC~~presentation ~~Staff’s interpretation~~ of ~~SFAS 123R~~taxes ~~and~~assessed ~~certain~~by ~~SEC rules and~~a ~~regulations~~governmental ~~and~~authority ~~provides~~that ~~interpretations~~is ofdirectly ~~the~~imposed ~~valuation~~on ofa ~~share~~revenue-~~based~~producing ~~payments~~transaction ~~for~~between ~~public~~a ~~companies.~~seller Inand ~~April~~a ~~2005~~customer, ~~the~~ ~~SEC~~such ~~amended Regulation S-X to~~as ~~amend~~sales, ~~the~~use, ~~date~~value ~~for~~added ~~compliance~~and ~~with~~certain ~~SFAS 123R~~excise ~~beginning~~taxes is an ~~with~~accounting ~~the~~policy ~~first~~decision ~~interim~~that orshould ~~annual~~be ~~period~~disclosed ofin ~~the registrant’s~~a ~~first~~company’s ~~fiscal~~financial ~~year~~statements. ~~beginning on or after June 15~~Additionally, ~~2005.~~companies ~~Printronix~~that ~~will~~record besuch ~~required~~taxes toon ~~adopt~~a ~~SFAS 123R~~gross ~~and SAB 107~~basis atshould disclose the amounts ~~beginning~~ of ~~the~~those ~~first~~taxes ~~quarter~~in ofinterim ~~fiscal~~and annual financial ~~year~~statements ~~2007.~~for Ineach ~~fiscal~~period ~~year~~for ~~2006,~~which ~~the~~an ~~company~~income ~~elected~~statement tois ~~accelerate~~presented ~~all~~if ~~remaining~~those ~~outstanding~~amounts ~~options~~are tosignificant. ~~eliminate future~~EITF ~~compensation~~06-03 ~~expense that would have been recorded over four~~is ~~years~~effective ~~beginning~~for ~~fiscal~~interim ~~year~~and ~~2007~~annual ~~following~~periods ~~the~~beginning ~~adoption of~~after ~~SFAS~~December ~~123R~~15, 2006. IfWe wedo ~~grant~~not ~~any~~expect ~~options~~this instatement ~~the~~to ~~future, the~~have ~~adoption of SFAS 123R may have~~ a material ~~unfavorable~~ impact on the consolidated ~~results~~financial ofstatements ~~operations and net income~~of ~~(loss)~~the ~~per share~~company.

In ~~May~~September ~~2005~~2006, the FASB issued SFAS No. ~~154~~157, “~~Accounting~~Fair ~~Changes~~Value ~~and Error Corrections~~Measurements” ~~which replaces Accounting Principles Board Opinion No. 20~~ (“~~Accounting Changes” and~~ SFAS No157”). 3, ~~“Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.”~~ SFAS ~~No. 154~~157 ~~provides~~defines ~~guidance~~fair ~~on the~~value, ~~accounting for and reporting of accounting changes and error corrections. It~~ establishes ~~retrospective application as the required method for reporting~~ a ~~change~~framework in accounting principle and the reporting of a correction of an error, unless it is impracticable to do so. When it is impracticable to determine the period-specific effects of an accounting change, SFAS 154 requires application of the new accounting principle as of the earliest period for ~~which retrospective~~ ~~application~~measuring isfair ~~practicable.~~value ~~When~~in itaccordance iswith ~~impracticable~~generally toaccepted ~~determine the cumulative effect of applying a change in~~ accounting ~~principle to all prior periods~~principles, ~~SFAS 154 requires~~and ~~application~~expands asdisclosures ifabout ~~the~~fair ~~accounting principle were adopted~~value ~~prospectively from the earliest date practicable~~measurements. SFAS ~~154~~ 157 is effective for ~~accounting changes and corrections of errors made in~~ fiscal years beginning after ~~December~~November 15, ~~2005 and is required to be adopted by Printronix in the first quarter of fiscal year~~ 2007. ~~Printronix~~We isdo ~~currently~~not ~~evaluating~~expect ~~the effect~~this ~~that~~statement ~~the~~to ~~adoption~~have ofa ~~SFAS 154~~material ~~will~~impact ~~have~~ on ~~its~~the consolidated ~~results of operations and~~ financial ~~condition~~statements ~~but~~of ~~does~~the ~~not expect it to have a material impact~~company.

In ~~June~~February ~~2005~~2007, the FASB issued ~~EITF~~ SFAS ~~05-5~~No. 159, “~~Accounting~~The ~~for~~Fair ~~Early~~Value ~~Retirement~~Option orfor ~~Postemployment~~Financial ~~Programs~~Assets and Financial ~~with~~Liabilities — ~~Specific~~Including ~~Features,~~an ~~(Such~~Amendment ~~as Terms Specified in~~of ~~Altersteilzeit~~SFAS Statement ~~Early Retirement Arrangements)~~No. 115” ~~The~~ ~~Altersteilzeit~~(“SFAS 159”). ~~arrangement~~SFAS 159 isprovides companies with an ~~early~~option ~~retirement~~to ~~program~~report inselected financial assets and financial ~~Germany~~liabilities ~~designed~~at tofair ~~create~~value. anUnrealized ~~incentive~~gains ~~for~~and ~~employees,~~losses ~~within~~on aitems ~~certain~~for ~~age~~which ~~group,~~the tofair ~~transition~~value ~~from~~option ~~(full~~has orbeen ~~part-time) employment~~elected ~~into~~are ~~retirement~~reported ~~before~~in earnings ~~their~~at ~~legal~~each ~~retirement~~subsequent ~~age~~reporting date. ~~The~~ ~~EITF~~SFAS 159 is effective for fiscal years beginning after ~~December~~ November 15, ~~2005~~ 2007. We ~~believe~~do ~~the~~not ~~adoption~~expect of this ~~EITF will~~statement to have noa ~~impact~~material impact on the consolidated financial ~~position, results~~statements of ~~operations~~the ~~or cash flow~~company.

5658

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 2	Bank Borrowings and Debt Arrangements

Long-Term Note

As of March 3130, ~~2006~~2007, the company has a $1312.58 million ~~long-term~~ note with a United States bank collateralized by its ~~Irvine~~ ~~facility. As of March 31, 2006, the~~ Irvine ~~facility~~ ~~had a carrying value of $20~~property.~~4 million.~~ The note ~~contains customary default provisions and has no financial covenants. The note~~ 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~~which ~~rates~~time ~~based upon~~ the ~~London Interbank~~note ~~Offered~~was ~~Rate~~paid ~~(“LIBOR”)~~in ~~plus~~full. ~~1.25 percent,~~Because ~~and~~all isremaining ~~reset~~payments ~~for~~are ~~periods~~due ~~from~~within one ~~month up to one~~ year, ~~at our discretion~~the $12.8 million ~~The~~balance ~~interest rate~~ on the note ~~was~~is classified in current 6liabilities.~~1 percent~~ asAs of March 3130, ~~2006. During fiscal years 2006~~2007, ~~2005 and 2004,~~ the ~~weighted~~Irvine ~~average~~facility ~~interest rate on the~~had ~~note~~a ~~was~~carrying ~~5.2 percent,~~value ~~3.2 percent~~of ~~and 2~~$19.48 ~~percent, respectively~~million.

WeThe ~~ended~~note ~~fiscal~~contains ~~year~~customary ~~2006~~default ~~with~~provisions aand ~~balance~~has ~~of $13.5 million~~no financial covenants. Interest on the note, ~~which~~is ~~consisted~~at ofvariable ~~long-term~~rates based ~~debt~~upon ofthe London Interbank Offered Rate (“LIBOR”) ~~$12~~plus 1.825 ~~million~~percent, and ~~the~~is ~~current~~reset ~~portion~~for ofperiods ~~long-term~~from ~~debt~~one ofmonth $0up to one year, at our discretion.~~7 million.~~ ~~Repayment~~The ofinterest rate on the note was is6.6 percent as ~~follows: $0.7~~of March ~~million~~30, ~~for~~2007. During fiscal years ~~year~~ 2007, 2006 and ~~$12.8 million~~2005, ~~which~~ ~~includes~~the weighted-average interest rate on the ~~balloon~~note ~~payment~~was 6.6 percent, in5.2 percent ~~fiscal~~and 3.2 percent, ~~year 2008~~respectively.

Lines of Credit and Standby Letters of Credit

AtIn ~~March 31,~~May 2006, one of ~~the~~our foreign subsidiaries terminated its ~~maintained~~$1.8 million unsecured ~~lines~~line of credit, ~~for~~which included a $2.1.5 million standby letter of credit, with a major foreign bank and entered into a new line of credit for $4.2 million with the same major ~~foreign~~bank. ~~banks~~This line of credit provides for trade financing and includes letters of credit, ~~which~~trust ~~included~~receipts, shipping guarantees, banker’s guarantees and a standby letter of credit for a total of $1.8 million, and a working capital line of credit for $12.54 million. ~~These~~Advances under the trade financing instruments generally have a maximum term of one year, except for the letter of credit ~~facilities~~and trust receipt, which have maximum terms of 30 and 90 days, respectively. Advances under the working capital line of credit are ~~subject~~limited to 80% aof the market value of our subsidiary’s manufacturing property, or $2.4 million whichever is lower. The parent company guarantees any amounts outstanding up to the $4.2 million credit limit. The entire credit facility is subject to a financial covenant, which requires that we maintain a net worth of not less than $64.0 million. We were in compliance with this financial covenant for all fiscal ~~periods presented. The~~years ~~parent~~presented ~~company~~for ~~guarantees~~the ~~any~~new ~~amounts~~and ~~outstanding~~terminated uplines ~~to $1.8 million on one~~ of ~~the~~credit. ~~lines~~The line of credit. ~~There~~is ~~were~~collateralized noby our subsidiary’s ~~cash~~manufacturing ~~borrowings~~property. ~~against~~The ~~these~~property ~~lines~~had ofa ~~credit~~carrying ~~for~~value ~~the fiscal~~of ~~periods~~$2.6 million ~~presented~~as of March 30, 2007. 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 percent~~ to 1.0 percent above the prime-lending rate. There were no cash borrowings against the new or terminated lines of credit for the fiscal years presented.

WeOne ~~maintain a standby letter~~ of ~~credit related to~~ our ~~workers’~~ ~~compensation~~foreign ~~program~~subsidiaries ~~for~~maintains a $0.53 million~~. The~~ ~~standby~~ letter of credit iswith ~~secured~~a bymajor aforeign ~~cash~~bank. ~~deposit~~This ~~and~~credit isfacility ~~automatically~~provides ~~renewed~~for ~~annually.~~financing ~~There~~of ~~were~~trade noshipments ~~cash~~to ~~borrowings~~Singapore. Any ~~against~~borrowings on this letter of credit ~~for~~are ~~the fiscal periods presented. Any borrowings would be~~ subject to interest rates at 2. 0.25 percent above the prime-lending rate,. ~~subject~~There were tono cash borrowings against this letter of credit during the ~~certain~~fiscal ~~maximum~~years ~~limits~~presented.

We maintain a standby letter of credit related to our workers’ compensation program for $0.4 million. The standby letter of credit is secured by a cash deposit and is automatically renewed annually. There were no cash borrowings against this letter of credit for the fiscal years presented. Any borrowings would be subject to interest rates at 2.0 percent above the prime-lending rate, subject to certain maximum limits.

Credit Agreement for Hedging Activity

We have a commitment facility for $2.47 million with a major foreign bank to support ~~the~~our hedging activities. This commitment facility 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 administrative compliance requirements. There are no annual fees under this agreement. Any borrowings under this agreement would be subject to interest rates available at that time. ~~During~~There ~~fiscal~~were ~~years 2006, 2005 and 2004,~~ no amounts ~~were~~ borrowed under this commitment facility during the fiscal years presented.

~~Interest~~ ~~Expense~~59

Interest expense was $0.7 million, $0.5 million and $0.6 million for fiscal years 2006, 2005 and 2004, respectively.

Note 3 Employee Benefit Plans

Savings and Investment Plan

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~established~~Note by3 the Internal Revenue Code, on a tax-deferred basis through a “salary reduction” arrangement. We match employee contributions up to a maximum of 1 percent of salary, or $1,000 per year, whichever is less. Employee ~~contributions~~ ~~are~~Benefit always 100 percent vested. The contributions become fully vested after four full years of employment. The contributions to the 401(k) Plan were $246 thousand, $254 thousand and $43 thousand for the fiscal years 2006, 2005 and 2004, respectively. Plans

Savings and Investment Plan

We have a 401(k) Savings and Investment Plan (the “401(k) Plan”), for all eligible employees, which is designed to be tax deferred in accordance with the provisions of Section 401(k) of the Internal Revenue Code. All United States employees (including officers, but not outside directors) may make contributions up to certain limits established by the Internal Revenue Code, on a tax-deferred basis through a “salary reduction” arrangement. We match employee contributions up to a maximum of 1 percent of salary, or $1,000 per year, whichever is less. Employee contributions are always 100 percent vested. The Company contributions become fully vested after four full years of employment. The Company contributions to the 401(k) Plan were $230 thousand, $246 thousand and $254 thousand for the fiscal years 2007, 2006 and 2005, respectively.

Profit Sharing Plan

We also maintain a discretionary worldwide quarterly profit-sharing plan for qualified employees. Employees who have been with Printronix for 90 days of continuous service are eligible to participate in the profit-sharing plan. We allocate a percentage of pre-tax operating ~~profit~~income to a profit-sharing pool, which we then distribute to eligible employees pro-rata based upon quarterly salary. In addition, certain executives are eligible to participate in a quarterly bonus plan, which is contingent upon achieving specific operating performance targets established by the compensation/stock option committee of the Board of Directors. The contributions to both of these plans totaled $0.26 million, $0.72 million, and $0.47 million for the fiscal years ~~2006~~2007, ~~2005~~2006 and ~~2004~~2005, respectively.

Defined ~~Benefit~~Contribution ~~Pension~~ Plan

WeIn ~~sponsor~~the athird ~~defined~~quarter ~~benefit~~of ~~pension~~fiscal ~~plan~~year in2007, ~~Germany~~we ~~for~~terminated our ~~employees.~~existing ~~The~~defined benefit pension ~~benefits~~plan ~~are~~in ~~based~~Germany onand, ~~length~~to ~~of service,~~provide ~~wage~~benefits ~~level,~~for ~~and~~future ~~position~~services, inwe ~~the~~commenced ~~company.~~contributions Asto ~~of March 31,~~a ~~2006~~new ~~and~~defined ~~March 25,~~contribution ~~2005,~~plan ~~there~~for ~~were four participants in~~ the ~~plan~~participants. ~~During~~We ~~the fourth quarter of fiscal year 2006, we~~purchased ~~applied~~annuity ~~SFAS~~contracts Nofor approximately $0.4 ~~87,~~million ~~“Employers’~~to ~~Accounting for~~settle ~~Pensions”~~the ~~using~~pension ~~March 31~~obligation asfor the ~~measurement~~past ~~date.~~services Asrendered aby the ~~result,~~four weplan ~~recorded~~participants. ~~service~~In ~~cost~~connection ofwith ~~$29 thousand~~these actions, ~~interest~~we ~~cost~~recorded ofa ~~$14 thousand,~~pension ~~foreign~~curtailment ~~exchange~~and ~~gains~~settlement loss of approximately $18 25 thousand, ~~and~~during anfiscal ~~adjustment~~year of2007. ~~$142 thousand~~Under the ~~related~~new todefined ~~prior~~contribution ~~years.~~plan, Weemployer ~~concluded~~contributions ~~that~~are ~~the impact on the~~made ~~prior~~annually ~~years~~to ~~and~~a ~~current~~reinsured ~~year~~support ~~for~~fund ~~this~~which ~~$142 thousand~~establishes ~~increase~~individual inreinsurance ~~the~~contracts ~~pension~~to ~~obligation~~secure ~~was~~the ~~not~~future ~~material to the~~benefits. ~~consolidated~~As ~~financial~~of ~~statements.~~March 30, We2007, ~~have~~there ~~elected~~were tofour ~~record~~participants in the ~~change~~plan. inThe ~~the~~annual ~~pension~~contributions ~~benefit~~are ~~obligation~~based ason ~~our~~a ~~net~~percentage ~~periodic~~of the ~~benefit~~participant’s ~~cost~~salary. AsFor ofthe ~~March 31,~~fiscal ~~2006~~year ~~and March 25~~2007, ~~2005,~~we made an ~~the~~annual ~~pension~~contribution ~~benefit~~of ~~obligation recorded was~~ $~~331 thousand and~~61 ~~$164~~ thousand~~, respectively~~.

The weighted-average assumptions used to determine the net periodic benefit cost for both fiscal years 2006 and 2005 were as follows: discount rate of 4.5 percent, rate of increase in compensation levels of 2.5 percent, and rate of increase in benefit payments of 1.5 percent. No estimated future benefit payments are expected to be paid during fiscal years 2007 through 2011. During fiscal years 2012 through 2016, the estimated future benefit payments expected to be paid is $5 thousand.

Plan assets as of March 31, 2006 and March 25, 2005 were approximately $5 thousand and $4 thousand, respectively.


Note 4	Stockholders’ Equity

Stock Incentive Plan — Common Stock Options

The 1994 Stock Incentive Plan (the “1994 Plan”) expired in August 2005. As of March 3130, ~~2006~~2007, there were ~~518~~387,~~224~~504 stock options outstanding that were previously granted subject to the rights of that plan and no stock options available to grant. The company’s shareholders approved the Printronix, Inc. 2005 Stock Option Plan (the “2005 Plan”) during the second quarter of fiscal year 2006. The 2005 Plan authorizes the sale of up to a total of 600,000 shares of the company’s common stock pursuant to either of two types of “Stock Awards”: (1) stock options; and (2) shares of stock acquired pursuant to stock purchase agreements containing certain restrictions (“restricted stock”). Individuals are granted options under the 2005 Plan at terms (purchase price, expiration date and vesting schedule) established by a committee of the Board of Directors. Under the 2005 Plan, options are granted either in accordance with contractual arrangements or at a price that is equal to fair market value on the date of grant. Such options expire up to ten years after the grant date. ~~Under~~and generally vest over a four year period. Under restricted stock purchase agreements, individuals purchase shares when the Stock Award is granted; the shares are restricted as the rights to full beneficial ownership vest only upon achievement of certain performance criteria. As of

5860

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~individuals~~March 30, ~~purchase~~2007, ~~shares~~there ~~when~~were ~~the~~8,500 ~~Stock~~stock ~~Award~~options ~~is granted; the~~outstanding ~~shares~~that ~~are~~were ~~restricted~~previously asgranted ~~the~~subject ~~rights~~ to ~~full~~the ~~beneficial~~rights ~~ownership vest only upon achievement~~ of ~~certain~~the ~~performance criteria~~2005 Plan.

When the 2005 Plan was approved by the company’s stockholders, the company’s ability to grant new awards under the 1994 Plan terminated, but did not affect awards then outstanding under the 1994 Plan. In fiscal year 2006, we accelerated the vesting of all remaining stock options as described in Note 1.

A summary of the ~~status of the~~ company’s stock option ~~grants~~ activity for ~~each of~~ the ~~three fiscal years in the period ended~~ year ended March 3130, ~~2006~~2007 is presented below:

	March 31, 2006					March 25, 2005					March 26, 2004
						Weighted-
				Weighted					Weighted					Weighted
						Average
				Average					Average					Average
				Weighted-		Remaining
				Exercise					Exercise					Exercise
				Average		Contractual			Aggregate
Common Stock Options	Shares			Price		Shares			Price		Shares			Price
				Exercise		Term			Intrinsic
Beginning, outstanding		622,748		$	10.04		695,952		$	9.28		1,335,812		$	9.78
Common Stock Options	Shares			Price		(in years)			Value
Granted		13,800			15.08		121,835			16.94		9,300			11.16
									($ in thousands)
Exercised		(92,859	)		8.83		(150,441	)		9.61		(525,039	)		10.25
Outstanding, March 31,2006		526,724		$	10.20
Forfeited and expired		(16,965	)		15.82		(44,598	)		18.41		(124,121	)		10.72
Granted		—			—
Ending, outstanding		526,724		$	10.20		622,748		$	10.04		695,952		$	9.28
Exercised		(112,045	)		10.17
Options exercisable		526,724					391,537					417,805
Forfeited and expired		(18,675	)		14.21
Outstanding, March 30, 2007		396,004		$	10.02		2.95		$	1,811
Exercisable at March 30, 2007		396,004		$	10.02		2.95		$	1,811

AsThe total intrinsic value of stock options exercised during the years ended 2007, 2006 and 2005 was $0.3 million, $0.6 million and $1.1 million, respectively. As of March 3130, ~~2006~~2007, there were 591,500 shares available to grant.

A detail of options outstanding and exercisable as of March 31, 2006, is presented below:

	Options Outstanding						Options Exercisable
			Weighted		Weighted				Weighted
			Remaining		Average				Average
	Number		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life in Years		Price		Exercisable		Price
$ 5.30 - $ 8.90		234,621		5.02	$	5.57		234,621	$	5.57
$ 9.70 - $11.85		144,083		1.08	$	11.70		144,083	$	11.70
$11.98 - $17.73		148,020		3.34	$	16.09		148,020	$	16.09
$ 5.30 - $17.73		526,724		3.47	$	10.20		526,724	$	10.20

Stock Incentive Plan — Restricted Stock

Under the 1994 Plan, grants of restricted stock can be made at any price. During fiscal year 2005, we reserved 366,722 shares for future issuance as restricted stock under the 1994 Plan. Of the total reserved, 56,722 shares were reserved for future issuance to the non-employee Board of Directors and key employees. The restricted stock shares are performance based and vest only if the company achieves certain financial targets over a ~~total~~period of 6six fiscal years.

AsDuring the first quarter of ~~March 25,~~fiscal year 2005, ~~none~~we granted 290,000 of the 56310,~~722~~000 shares ~~were issued~~ and ~~outstanding.~~in InJuly ~~addition~~2005, ~~290,000~~we ofgranted ~~the~~24,400 ~~310~~of the 56,~~000~~722 shares, ~~were~~bringing ~~issued~~the ~~and~~total ~~outstanding~~restricted ~~and~~stock granted to 314,400 shares. In addition, 20,000 shares were not issued but could be purchased by an employee if certain performance criteria were met.

~~The~~A ~~weighted-average~~summary ~~grant~~of ~~date~~the ~~fair~~company’s ~~value~~restricted onstock ~~the~~activity ~~restricted~~for ~~stock~~the ~~granted~~year ~~during~~ended ~~fiscal~~March 30, ~~2006~~2007 ~~and~~is ~~2005~~presented ~~was $17.40 and $13.65,~~below: ~~respectively.~~

During fiscal year 2006, we issued 24,400 of the 56,722 shares, bringing the total restricted stock issued to 314,400 shares. In addition, 20,000 shares were not issued but could be purchased by an employee if certain performance criteria were met.


				Weighted-
				Average
				Grant Date
Restricted Stock	Shares			Fair Value

Nonvested, March 31, 2006		314,400		$	13.94
Granted		—			—
Vested		—			—
Forfeited and expired		(20,000	)		13.65

Nonvested, March 30, 2007		294,400		$	13.96

We did not grant restricted stock during the year ended 59March 30, 2007. The weighted-average grant date fair value on the restricted stock granted during fiscal year 2006 and 2005 was $17.40 and $13.65, respectively.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The company has not met, nor is it probable any of the performance targets will be met as of March 3130, ~~2006~~2007. Accordingly, nostock-based compensation expense ~~has been recorded~~ for the restricted ~~two~~stock ~~fiscal~~has ~~years~~not inbeen ~~the~~recorded ~~period~~for ~~ended~~any ~~March 31,~~of ~~2006~~the periods presented.

See Accounting for Stock-Based Compensation in Note 1 for the pro forma disclosures of net (loss) income and net (loss) income per share required under SFAS No. 123.

Common Share Purchase Rights

On March 16, 1989, we declared a dividend payable on April 4, 1989, of 10,311,603 Common Share Purchase Rights. Each right, when exercisable, entitles a stockholder to buy one share of common stock at an exercise price of $15.55, subject to adjustment. The rights become exercisable ten days after certain persons or groups announce acquisition of 20 percent or more, or announce an offer for 30 percent or more, of the common stock. The rights are nonvoting, originally expired in ten years and may be redeemed prior to becoming exercisable. In the event we are acquired in a merger or other business combination, each outstanding right would entitle a holder to purchase, at the current exercise price, that number of shares of common stock of the surviving company having a market value equal to two times the exercise price of the right. Prior to expiration of the rights, the plan under which the rights were granted was amended to, among other things, extend the plan for an additional ten years and change the exercise price to $70.00. The rights expire at the earlier of April 4, 2009, or the exchange or redemption as described above.

Stock Repurchases

During 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. No shares of common stock were repurchased during fiscal years ~~2006 and~~ 2005. Inthrough ~~fiscal years 2004 and 2003, 106,700 and 161,967 shares, respectively, of common stock were repurchased at prices ranging from $9~~2007.03 ~~to $11.87 per~~As ~~share for a total cost~~ of ~~$1.1~~March ~~million in~~30, ~~fiscal~~2007, ~~year~~future ~~2004 and $1.7 million in fiscal year 2003. Future~~ purchases of 227,395 shares of common stock may be made at our discretion.

Cash Dividends

During fiscal year 2005, we announced the first quarterly cash dividend ~~totaling~~of $0.05 per share, or $0.3 million, based on 6.5 million shares outstanding. During fiscal year 2006, we paid quarterly dividends of $0.07 per share, or $1.7 million, based on 6.6 million shares outstanding. During the first quarter of fiscal year 2007 we paid quarterly dividends of $0.07 per share. In the second, third and fourth quarters, we paid quarterly dividends of $0.10 per share. Total dividends paid for fiscal year 2007 was $2.3 million, based on 6.6 million shares outstanding.

~~Note 5 Income Taxes~~ 62

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes for each of the three fiscal years in the period ended March 31, 2006 consisted of the following:

	March 31,		March 25,			March 26,
	2006		2005			2004
	($ in thousands)
Current provision (benefit):
Federal	$	—	$	—		$	(1,229	)
Tax repatriation charge		1,011		—			—
State		27		(15	)		105
Tax repatriation charge		24		—			—
Foreign		1,566		846			538
Deferred provision		2,578		—			638
Provision for income taxes	$	5,206	$	831		$	52

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~The~~Note ~~amounts~~5 ~~for~~Income ~~the tax provision (benefit) above are classified by the location of the taxing authority and not geographical region.~~ Taxes

~~Components~~Provision offor ~~(Loss)~~ Income ~~Before~~ Taxes

The ~~components~~provision offor ~~(loss)~~ income ~~before~~ taxes, ~~based upon the tax jurisdiction,~~ for each of the three fiscal years in the period ended March 3130, ~~2006~~2007 consisted of the following:

	March 31,			March 25,		March 26,
	March 30,			March 31,		March 25,
	2006			2005		2004
	2007			2006		2005
	($ in thousands)
United States	$	(5,054	)	$	1,290	$	2,434
Current provision (benefit):
Foreign		2,301			1,480		(1,750	)
Federal tax repatriation charge	$	(289	)	$	1,011	$	—
(Loss) income before taxes	$	(2,753	)	$	2,770	$	684
State		11			27		(15	)
State tax repatriation charge		—			24		—
Foreign		542			1,566		846
Deferred provision		(173	)		2,578		—
Provision for income taxes	$	91		$	5,206	$	831

~~During~~The ~~fiscal~~amounts ~~year~~for ~~2004,~~ the ~~company completed a federal income~~ tax ~~audit~~provision ~~that~~above ~~resulted~~are inclassified ~~additional~~by ~~one-time United States~~the ~~income~~location of ~~$6.0 million~~the ~~and~~taxing ~~additional~~authority ~~charges~~and tonot ~~foreign subsidiaries~~geographical ~~of $6~~region.~~0 million. The completion of this audit~~ ~~had no effect on consolidated net income.~~

Components of Income (Loss) Before Taxes

The components of income (loss) before taxes, based upon the tax jurisdiction, for each of the three fiscal years in the period ended March 30, 2007 consisted of the following:


	March 30,		March 31,			March 25,
	2007		2006			2005
	($ in thousands)

United States	$	1,973	$	(5,054	)	$	1,290
Foreign		998		2,301			1,480

Income (loss) before taxes	$	2,971	$	(2,753	)	$	2,770

American Jobs Creation Act

On October 22, 2004, the American Jobs Creation Act of 2004 (the “Act”) was passed. This Act ~~creates~~created a temporary incentive for U.S. multi-national companies to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The deduction results in a reduced federal tax rate on the repatriated earnings.

During the fourth quarter of fiscal year 2006, the Board of Directors and Chief Executive Officer approved a domestic reinvestment plan as required by the Act and the company repatriated $32.0 million in cash dividends subject to the elective 85 percent dividend received deduction. Accordingly, the company recognized a related income tax expense for federal and state taxes of $1.0 million. Moreover, there was a $1.1 million foreign withholding tax expense pursuant to the dividend payment. Uses of the repatriated funds included funding of worker hiring, training and other compensation, as well as other permitted activities under the Act.

Deferred Income Tax Provision

Deferred income taxes result from differences in the timing of reporting income and expenses for financial statement and income tax reporting purposes.

6163

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The deferred income tax provision (benefit) for each of the three fiscal years in the period ended March 31, 2006 consisted of the following:

	March 31,			March 25,			March 26,
	2006			2005			2004
	($ in thousands)
Capitalized research and development	$	66		$	36		$	35
Tax depreciation over (under) depreciation for financial reporting purposes		(418	)		180			(271	)
Inventory costs capitalized for tax, expensed for financial reporting purposes		(51	)		492			251
(Increases) decreases in reserves		(52	)		218			601
Net operating loss carryforwards		(949	)		(164	)		(2,007	)
Credit carryforwards		961			(6,497	)		(1,668	)
Valuation allowance		3,021			5,735			3,697
Deferred income tax provision	$	2,578		$	—		$	638

We review our deferred tax assets for realization based upon historical taxable income, prudent and feasible tax planning strategies, the expected timing of the reversals of existing temporary differences and expected future taxable income. We record a valuation allowance to reduce our deferred tax assets to the amount management believes will more likely than not be realized.

We recorded a benefit of $0.2 million in fiscal year 2007 to increase our deferred tax assets in Singapore. We recorded a charge of $2.6 million in fiscal year 2006 to increase the valuation allowance against our U.S. deferred tax assets. Management ~~believed~~believes ~~that~~ it ~~will~~is not be feasible for the company to implement the intellectual property tax planning strategy due to changes in circumstances that occurred during the fourth quarter of fiscal year 2006.

Deferred income taxes are not provided for the undistributed earnings of the foreign subsidiaries, which totaled approximately $2022.50 million as of March 3130, ~~2006~~2007, as we intend to reinvest these earnings indefinitely outside of the United States. Should we be required to repatriate these funds, the deferred tax liability would be approximately $7.05 million. Repatriating eligible foreign earnings under the temporary provision of the American Jobs Creation Act of 2004 was not treated as an exception to our policy and intent of permanently investing such foreign earnings outside of the United States.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Income Tax Assets and Liabilities

The deferred income tax assets and liabilities as of March 3130, ~~2006~~2007 and March 2531, ~~2005~~2006 consisted of the following:

	March 31,			March 25,
	March 30,			March 31,
U.S. Deferred Income Tax Assets and Liabilities	~~2006~~2007			~~2005~~2006
	($ in thousands)
Inventory costs capitalized for tax, expensed for financial reporting purposes	$	~~505~~1,015		$	~~453~~505
Reserves		1,~~975~~108			1,~~925~~975
California manufacturing investment credit		264			~~212~~264
Valuation allowance		(2,~~548~~241	)		—(2,548	)
Deferred income tax assets — current	$	~~196~~146		$	~~2,590~~196
Capitalized research and development	$	~~404~~370		$	~~469~~404
Net operating loss carryforwards		3,~~972~~457			23,~~787~~972
Credit carryforwards		810,~~739~~466			98,~~752~~739
Excess of tax depreciation over financial reporting depreciation		(1,~~131~~022	)		(1,~~548~~131	)
Valuation allowance		(1213,~~180~~417	)		(1112,~~473~~180	)
Deferred income tax liabilities — long-term	$	(~~196~~146	)	$	(13196	)

	March 31,		March 25,
	March 30,		March 31,
Foreign Deferred Income Tax Assets and Liabilities	~~2006~~2007		~~2005~~2006
	($ in thousands)
Excess of financial reporting depreciation over tax depreciation	$	~~110~~283	$	~~111~~110
Valuation allowance		—		—
Deferred income tax assets — long-term	$	~~110~~283	$	~~111~~110

In fiscal year ~~2006~~2007, the total change in the valuation allowance was $30.39 million. This included the tax-~~affected~~effected amount of $0.31 million related to non-qualified stock options exercised and the $20.68 million charge to increase the valuation allowance related to net operating loss carryforwards and current deferred tax assets.

~~In fiscal year 2005, we recorded an increase of~~ ~~$5.1 million for state research and development credit~~64 carryforwards. The total change in the valuation allowance was $6.1 million. This included the tax-affected amount of $0.4 million related to non-qualified stock options exercised and the $5.7 million charge to increase the valuation allowance related to certain tax carryforwards.

In fiscal year 2004, the total change in the valuation allowance was $4.7 million. This included the tax-affected amount of $1.0 million related to non-qualified stock options exercised and the $3.7 million charge to increase the valuation allowance related to certain tax carryforwards.

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~The~~In ~~following~~fiscal ~~table~~year ~~reflects~~2006, the ~~changes~~total change in the valuation allowance ~~allowance~~was ~~during~~$3.3 million. This included the ~~three~~tax-effected ~~fiscal~~amount ~~years~~of $0.3 million ~~ended~~related ~~March~~to non-qualified stock options exercised and the $2.6 ~~31,~~million charge to increase the ~~2006~~valuation ~~(amounts~~allowance inrelated ~~thousands):~~to net operating loss carryforwards and current deferred tax assets.

Valuation allowance at March 28, 2003	$	602
Additional provision for valuation allowance		4,715
Utilization of valuation allowance		—
Valuation allowance at March 26, 2004	$	5,317
Additional provision for valuation allowance		6,156
Utilization of valuation allowance		—
Valuation allowance at March 25, 2005	$	11,473
Additional provision for valuation allowance		3,255
Utilization of valuation allowance		—
Valuation allowance at March 31, 2006	$	14,728

In fiscal year 2005, we recorded an increase of $5.1 million for state research and development credit carryforwards. The total change in the valuation allowance was $6.1 million. This included the tax-effected amount of $0.4 million related to non-qualified stock options exercised and the $5.7 million charge to increase the valuation allowance related to certain tax carryforwards.

The following table reflects the changes in the valuation allowance during the three fiscal years ended March 30, 2007 (amounts in thousands):


Valuation allowance at March 26, 2004	$	5,317
Additional provision for valuation allowance		6,156
Utilization of valuation allowance		—

Valuation allowance at March 25, 2005	$	11,473

Additional provision for valuation allowance		3,255
Utilization of valuation allowance		—

Valuation allowance at March 31, 2006	$	14,728

Additional provision for valuation allowance		929
Utilization of valuation allowance		—

Valuation allowance at March 31, 2007	$	15,657

The tax effected federal and state net operating losses and credit carryforwards expire as follows:

	Amount		Fiscal Years
	($ in thousands)
Net operating losses:
Federal	$	3,~~854~~274	2023 to 2027	~~2023 to 2026~~
State		~~118~~183	2014 to 2017	~~2013 to 2016~~
	$	3,~~972~~457
Credit carryforwards:
Federal foreign tax credit	$	2,~~588~~947	2011 to 2017	~~2011 to 2016~~
Federal research and development credit		23,~~826~~436	2018 to 2027	~~2018 to 2026~~
California research and development credit		34,~~449~~206	Indefinite	~~Indefinite~~
California manufacturing investment credit		140	2007 to 2013	~~2006 to 2013~~
	$	910,~~003~~729

The net operating losses include losses related to the exercise of non-qualified stock options, totaling $1.56 million, which will not be available to offset earnings but must be charged to equity upon realization.

6465

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reconciliation of Effective Tax Rate to Statutory Federal Tax Rate

Reconciliation of the effective tax rate to the statutory federal tax rate for the three fiscal years in the period ended March 3130, ~~2006~~2007 consisted of the following:

	March 31,						March 25,						March 26,
	March 30,						March 31,						March 25,
	2006			%			2005			%			2004			%
	2007			%			2006			%			2005			%
	($ in thousands)
Provision computed at statutory rates	$	~~(936~~1,010	)		34.0	%	$	~~942~~(936	)		34.0	%	$	~~233~~942			34.0	%
State income tax provision, net of federal tax benefit		~~(191~~91	)		63.91	%		(10191	)		(06.39	)%		69(10	)		10(0.13	)%
Difference in effective foreign tax rates		(~~689~~329	)		25(11.01	)%		(~~159~~689	)		(525.70	)%		(~~1,254~~159	)		(~~183~~5.47	)%
Foreign withholding taxes		~~1,112~~—			~~(40.4~~—	)%		—1,112			—(40.4	)%		—			—
Jobs Act tax repatriation charge		~~1,034~~(289	)		(379.67	)%		—1,034			—(37.6	)%		—			—
Jobs Act tax — State NOL		~~525~~(15	)		(190.15	)%		—525			—(19.1	)%		—			—
Research and development credits		(~~739~~880	)		26(29.86	)%		(~~5,994~~739	)		~~(216~~26.48	)%		(25,~~600~~994	)		(~~380~~216.14	)%
Valuation allowance		~~3,021~~795			~~(109~~26.78	)%		53,~~735~~021			~~207~~(109.07	)%		35,~~697~~735			~~540~~207.50	%
Change in state tax credits		~~2,110~~(360	)		(7612.61	)%		—2,110			—(76.6	)%		—			—
Change in estimates		~~(144~~138	)		54.26	%		~~260~~(144	)		95.42	%		—260			—9.4	%
Other		~~103~~(70	)		(32.64	)%		57103			2(3.06	)%		~~(93~~57	)		~~(13~~2.50	)%
Income tax provision	$	~~5,206~~91			~~(189~~3.1	)%	$	~~831~~5,206			30(189.01	)%	$	52831			730.60	%

We have subsidiaries in various countries and therefore are subject to varying income tax rates. The worldwide effective tax rate for fiscal year ~~2006~~2007 was ~~a negative 189~~3.1 percent, which differs from the federal statutory rate principally as a result of the ~~result~~reduction of the ~~tax~~American ~~expenses~~Jobs onCreation Act of 2004 (the “Act”) ~~repatriated~~tax ~~dividend~~liability. ~~pursuant~~The reduction of this tax liability is due to further clarification in the ~~Act,~~interpretation of ~~foreign~~the ~~income~~existing ~~taxes,~~laws ~~and~~surrounding the ~~additional~~use ~~valuation~~of net operating loss ~~allowance~~carryforwards ~~recorded~~ against ~~the~~a ~~company’s~~portion ~~deferred~~of the tax liability generated ~~assets.~~from ~~The~~the ~~other~~dividend ~~primary~~repatriation. ~~reconciling~~The ~~items~~worldwide ~~include~~effective ~~changes~~tax inrate ~~rate~~also ~~benefiting~~differs from the ~~state~~federal ~~research~~statutory ~~and~~rate ~~development~~as ~~credits,~~a result of the increase in the valuation allowance related to certain tax carryforwards, and pre-tax earnings of subsidiaries that operate within lower-tax jurisdictions.

The effective tax ~~rates~~rate for fiscal ~~years~~year ~~2005~~2006 ~~and~~was ~~2004 were~~negative 30189.01 percent, ~~and~~which ~~7.6 percent~~differs from the federal statutory rate principally as a result of the tax expense on the repatriated dividend pursuant to the Act, ~~respectively~~foreign income taxes, and ~~which~~the additional valuation allowance recorded against the company’s deferred tax assets. The effective tax rate for fiscal year 2005 was 30.0 percent which differs from the federal statutory rate principally as a result of domestic operating losses, increases in the valuation allowance and pre-tax earnings by subsidiaries that operate within lower-tax jurisdictions. In addition, the fiscal year 2005 ~~and 2004~~ rates included the benefit from the federal and state research and development tax credit.

We have a favorable pioneer tax status that began in April 1996 in Singapore which exempted income generated from the manufacture and sale of the Printronix P5000 ~~Series~~and ~~line~~P7000 ~~matrix~~series line matrix and T5000 thermal products by our Singapore subsidiary from income tax liability. The pioneer status ended in March 26, 2004. In the third ~~fiscal~~ quarter of fiscal year 2005, we received an extension which was retroactive to the beginning of fiscal year 2005 and which ~~now~~expired ~~expires~~ at the end of fiscal year 2007. The pioneer status mandates that we meet certain capital spending and human capital requirements that have been met. We are currently applying for an additional extension of the pioneer status.

The pioneer status ~~in Singapore~~ resulted in foreign tax savings of of$0.3 million, $0.6 million ~~for~~and ~~fiscal year 2006,~~ $0.3 million for fiscal ~~year~~years ~~2005~~2007, 2006 and ~~$0.8 million~~2005, ~~for fiscal year 2004~~respectively. The effect of this pioneer status was to ~~reduce~~increase diluted net ~~loss~~ income per share by 5 cents for fiscal year ~~2006~~2007, byreduce ~~10 cents. The~~ diluted net loss ~~income~~ per share ~~effect~~by of10 ~~this~~cents ~~pioneer~~for ~~status~~fiscal ~~was~~year an2006, and increase diluted ofnet 5income ~~cents~~per ~~and~~share 13by 5 cents for fiscal ~~years~~year 2005 ~~and 2004, respectively~~.

6566

PRINTRONIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 6	Segment and Customer Data

We manufacture and sell a variety of printers and associated products and conduct business in a single operating segment. Geographical data based upon the principal location of the operations for each of the three fiscal years in the period ended March 3130, ~~2006~~2007, is as follows:

Europe,

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Filing Compare · PRINTRONIX INC