UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~December~~September 2928, ~~2006~~2007


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		95-2903992 (I.R.S. Employer
Delaware (state or other jurisdiction of incorporation or organization)		95-2903992 (I.R.S. Employer Identification No.)
incorporation or organization)		Identification No.)
14600 Myford Road P.O. Box 19559, Irvine, California (Address of principal executive offices)		92623 (Zip Code)
14600 Myford Road		92623
P.O. Box 19559, Irvine, California		(Zip Code)
(Address of principal executive offices)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12(b)-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 (as defined in Rule 12(b)-2 of the Exchange Act).

YES o NO þ

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

Class of Common Stock		Outstanding at ~~January~~October 3126, 2007
$0.01 par value		6,~~607~~675,~~295~~457

PRINTRONIX, INC.

INDEX TO FORM 10-Q

	PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		3
Condensed Consolidated Balance Sheets as of December 29, 2006 and March 31, 2006		3
Condensed Consolidated Balance Sheets as of September 28, 2007 and March 30, 2007		3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 29, 2006 and December 23, 2005		4
Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 28, 2007 and September 29, 2006		4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 29, 2006 and December 23, 2005		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 28, 2007 and September 29, 2006		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2014
Item 3. Quantitive and Qualitative Disclosures About Market Risk		3324
Item 4. Controls and Procedures		3425
PART II: OTHER INFORMATION
Item 1. Legal Proceedings		3526
Item 1A. Risk Factors		3526
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3526
Item 3. Defaults Upon Senior Securities		3526
Item 4. Submission of Matters to a Vote of Security Holders		3526
Item 5. Other Information		3526
Item 6. Exhibits		3526
SIGNATURES		3627
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PRINTRONIX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of ~~December~~September 2928, ~~2006~~2007 and March 3130, ~~2006~~2007 (Unaudited)

(Unaudited)


	September 28,			March 30,
	2007			2007
	($ in thousands except share and per
	share data)
ASSETS
Current assets:
Cash and cash equivalents	$	23,205		$	26,847
Short-term investments		5,817			12,015
Accounts receivable, net of allowances for doubtful accounts and sales returns of $1,086 as of September 28, 2007, and $1,105 as of March 30, 2007		17,906			20,776
Inventories:
Raw materials		7,881			8,082
Subassemblies		3,477			3,605
Work in process		255			251
Finished goods		4,149			3,343

Total inventory		15,762			15,281
Prepaid expenses and other current assets		1,535			1,901
Deferred income tax assets, net		110			146

Total current assets		64,335			76,966


Property, plant, and equipment, at cost:
Machinery and equipment		25,239			25,119
Furniture and fixtures		21,580			21,641
Buildings and improvements		23,179			23,179
Land		8,100			8,100
Leasehold improvements		793			788

		78,891			78,827
Less: Accumulated depreciation and amortization		(51,245	)		(49,714	)

Property, plant and equipment, net		27,646			29,113
Long-term deferred income tax assets, net		336			283
Other assets		749			665

Total assets	$	93,066		$	107,027


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable	$	7,831		$	9,452
Accrued liabilities:
Payroll and employee benefits		4,196			4,225
Warranty		708			767
Deferred revenue		2,779			2,744
Professional fees		847			1,155
Other		1,548			2,137
Income taxes		167			130
Current portion of long-term debt		—			12,775

Total current liabilities		18,076			33,385


Deferred revenue, net of current portion		1,456			1,542
Long-term income tax liabilities		579			—
Long-term deferred income tax liabilities, net		110			146

Stockholders’ equity:
Common stock, $0.01 par value (Authorized 30,000,000 shares; shares issued and outstanding 6,675,457 as of September 28, 2007, and 6,679,564 as of March 30, 2007)		67			67
Additional paid-in capital		37,549			37,504
Accumulated other comprehensive income		1			8
Retained earnings		35,228			34,375

Total stockholders’ equity		72,845			71,954

Total liabilities and stockholders’ equity	$	93,066		$	107,027

	December 29,			March 31,
	2006			2006
	($ in thousands except share and per
	share data)
ASSETS
Current assets:
Cash and cash equivalents	$	24,254		$	41,546
Short-term investments		13,281			547
Accounts receivable, net of allowances for doubtful accounts and sales returns of $1,308 as of December 29, 2006, and $1,483 as of March 31, 2006		22,113			19,292
Inventories:
Raw materials		7,852			7,881
Subassemblies		2,955			3,420
Work in process		287			186
Finished goods		3,480			2,895
Total inventory		14,574			14,382
Prepaid expenses and other current assets		2,182			1,780
Deferred income tax assets, net		124			196
Total current assets		76,528			77,743
Property, plant, and equipment, at cost:
Machinery and equipment		25,224			26,744
Furniture and fixtures		21,554			22,889
Buildings and improvements		23,172			23,172
Land		8,100			8,100
Leasehold improvements		806			754
		78,856			81,659
Less: Accumulated depreciation and amortization		(48,956	)		(50,041	)
Property, plant and equipment, net		29,900			31,618
Long-term deferred income tax assets, net		110			110
Other assets		557			513
Total assets	$	107,095		$	109,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	12,968		$	700
Accounts payable		9,297			8,427
Accrued liabilities:
Payroll and employee benefits		5,034			4,552
Warranty		798			865
Deferred revenue		2,478			3,925
Professional fees		1,203			1,964
Other		1,892			2,522
Income taxes		113			2,273
Total current liabilities		33,783			25,228
Long-term debt, net of current portion		109			12,775
Deferred revenue, net of current portion		1,542			1,214
Long-term deferred income tax liabilities, net		124			196
Other long-term liabilities		—			331
Commitments and contingencies (Note 10)		—			—
Stockholders’ equity:
Common stock, $0.01 par value (Authorized 30,000,000 shares; shares issued and outstanding 6,607,295 as of December 29, 2006, and 6,587,519 as of March 31, 2006)		66			66
Additional paid-in capital		36,603			36,369
Accumulated other comprehensive income (loss)		10			(24	)
Retained earnings		34,858			33,829
Total stockholders’ equity		71,537			70,240
Total liabilities and stockholders’ equity	$	107,095		$	109,984

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

PRINTRONIX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~For the Three and Nine Months Ended December 29, 2006 and December 23, 2005~~ ~~(Unaudited)~~

	Three Months Ended						Nine Months Ended
	December 29,			December 23,			December 29,			December 23,
	2006			2005			2006			2005
	($ in thousands, except share and per share data)
Revenue	$	34,883		$	33,851		$	95,796		$	94,597
Cost of sales		20,975			20,826			57,987			58,475
Gross margin		13,908			13,025			37,809			36,122
Operating expenses:
Engineering and development		3,182			3,274			9,413			10,753
Sales and marketing		6,176			6,167			17,624			18,398
General and administrative		3,036			2,782			8,617			7,781
Total operating expenses		12,394			12,223			35,654			36,932
Income (loss) from operations		1,514			802			2,155			(810	)
Foreign currency gains, net		(52	)		(2	)		(42	)		(85	)
Interest income		(473	)		(374	)		(1,377	)		(1,020	)
Interest expense		230			207			720			537
Other income, net		—			(13	)		(14	)		(43	)
Income (loss) before taxes		1,809			984			2,868			(199	)
Income tax (benefit) provision		(153	)		122			139			327
Net income (loss)	$	1,962		$	862		$	2,729		$	(526	)
Net income (loss) per share:
Basic	$	0.31		$	0.14		$	0.43		$	(0.08	)
Diluted	$	0.30		$	0.13		$	0.42		$	(0.08	)
Shares used in computing net income (loss) per share:
Basic		6,301,303			6,249,224			6,294,945			6,231,230
Diluted		6,449,578			6,445,029			6,449,708			6,231,230

For the Three and Six Months Ended September 28, 2007 and September 29, 2006
(Unaudited)


	Three Months Ended						Six Months Ended
	September 28,			September 29,			September 28,			September 29,
	2007			2006			2007			2006
	($ in thousands, except share and per share data)
Revenue	$	29,373		$	29,263		$	60,014		$	60,913
Cost of sales		17,741			17,761			36,027			37,012

Gross margin		11,632			11,502			23,987			23,901

Operating expenses:
Engineering and development		2,623			3,092			5,499			6,231
Sales and marketing		5,214			5,493			10,963			11,448
General and administrative		2,993			2,720			5,979			5,581

Total operating expenses		10,830			11,305			22,441			23,260


Income from operations		802			197			1,546			641

Foreign currency (gain) losses, net		(110	)		16			(231	)		10
Interest income		(328	)		(444	)		(767	)		(904	)
Interest expense		2			266			149			490
Other income, net		(5	)		(7	)		(14	)		(14	)

Income before taxes		1,243			366			2,409			1,059
Provision for income taxes		58			155			197			292

Net income	$	1,185		$	211		$	2,212		$	767


Net income per share:
Basic	$	0.19		$	0.03		$	0.35		$	0.12
Diluted	$	0.18		$	0.03		$	0.34		$	0.12

Shares used in computing net income per share:
Basic		6,388,412			6,299,942			6,386,931			6,291,767
Diluted		6,510,633			6,439,328			6,509,522			6,449,775

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

PRINTRONIX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~Nine~~Six Months Ended ~~December~~September 2928, ~~2006~~2007 and ~~December~~September 2329, ~~2005~~2006 (Unaudited)

(Unaudited)


	Six Months Ended
	September 28,			September 29,
	2007			2006
	($ in thousands)
Cash flows from operating activities:
Net income	$	2,212		$	767
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,934			2,195
Recovery of doubtful accounts		(29	)		(115	)
Loss on disposal of property and equipment		36			69
Changes in operating assets and liabilities:
Accounts receivable		2,899			5
Inventories		(481	)		(1,689	)
Prepaid expenses and other assets		275			(201	)
Accrued interest income		(113	)		(35	)
Accounts payable		(1,621	)		75
Payroll and employee benefits		(29	)		(447	)
Accrued warranty		(59	)		(62	)
Accrued professional fees		(308	)		(994	)
Accrued income taxes		37			(2,113	)
Deferred revenue		(51	)		(604	)
Other liabilities		(144	)		(407	)

Net cash provided by (used in) operating activities		4,558			(3,556	)


Cash flows from investing activities:
Purchases of property and equipment		(575	)		(1,083	)
Proceeds from disposition of property and equipment		72			44
Proceeds from sales of short-term investments		7,191			—
Purchases of short-term investments		(880	)		(3,409	)

Net cash provided by (used in) investing activities		5,808			(4,448	)


Cash flows from financing activities:
Payments made on long-term debt		(12,775	)		(350	)
Proceeds from employee stock incentive plans		45			212
Cash dividends declared and paid		(1,278	)		(1,070	)

Net cash used in financing activities		(14,008	)		(1,208	)

Net decrease in cash and cash equivalents		(3,642	)		(9,212	)
Cash and cash equivalents at beginning of period		26,847			41,546

Cash and cash equivalents at end of period	$	23,205		$	32,334


Supplemental disclosure of cash flow information:
Income tax paid	$	283		$	2,870
Interest paid	$	216		$	435

	Nine Months Ended
	December 29,			December 23,
	2006			2005
	($ in thousands)
Cash flows from operating activities:
Net income (loss)	$	2,729		$	(526	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		3,216			3,591
Recovery of doubtful accounts		(114	)		(639	)
Loss on disposal of property and equipment		123			—
Unrealized gain (loss) on marketable securities		10			(20	)
Changes in operating assets and liabilities:
Accounts receivable		(2,707	)		(1,514	)
Inventories		(192	)		(188	)
Prepaid expenses and other assets		(422	)		(79	)
Accrued interest income		(103	)		(73	)
Accounts payable		870			1,484
Payroll and employee benefits		482			(468	)
Accrued warranty		(67	)		(30	)
Accrued professional fees		(761	)		469
Accrued income taxes		(2,160	)		(36	)
Deferred revenue		(1,119	)		(899	)
Other liabilities		(961	)		(138	)
Net cash (used in) provided by operating activities		(1,176	)		934
Cash flows from investing activities:
Purchases of property and equipment		(1,543	)		(3,272	)
Proceeds from disposition of property and equipment		49			103
Proceeds from sales of short-term investments		3,464			17,866
Purchases of short-term investments		(16,095	)		(18,197	)
Net cash used in investing activities		(14,125	)		(3,500	)
Cash flows from financing activities:
Payments made on long-term debt		(525	)		(525	)
Proceeds from employee stock incentive plans		234			653
Cash dividends declared and paid		(1,700	)		(1,296	)
Net cash used in financing activities		(1,991	)		(1,168	)
Net decrease in cash and cash equivalents		(17,292	)		(3,734	)
Cash and cash equivalents at beginning of period		41,546			35,405
Cash and cash equivalents at end of period	$	24,254		$	31,671
Supplemental disclosure of cash flow information:
Income tax paid	$	3,018		$	480
Interest paid	$	656		$	514
Supplemental disclosure of noncash investing and financing activities:
Capital lease obligation	$	127		$	—

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

~~As of December 29~~PRINTRONIX, ~~2006~~INC. ~~and~~AND ~~March 31, 2006, and for the Three and Nine Months Ended~~SUBSIDIARIES ~~December 29, 2006 and December 23, 2005 (Unaudited)~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 28, 2007 and March 30, 2007, and for the Three and Six Months Ended
September 28, 2007 and September 29, 2006
(Unaudited)

Note 1 Basis of Presentation

Printronix, Inc. has prepared the unaudited condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations and cash flows as of and for the periods presented. These condensed consolidated financial statements are unaudited and should be read in conjunction with the consolidated financial statements and footnotes thereto included in our latest Annual Report on Form 10-K for the fiscal year ended March 3130, ~~2006~~2007, as filed with the Securities and Exchange Commission. The consolidated balance sheet as of March 3130, ~~2006~~2007, presented herein has been derived from the audited consolidated balance sheet contained in our latest Annual Report on Form 10-K, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of the results for the full fiscal year.

Certain amounts for the prior periods have been reclassified to conform to the fiscal year 2007 presentation.

We underwent a state sales tax audit for the period of October 2001 through September 2004 and received a notice of determination in October 2006. During the second quarter of fiscal year 2007, we accrued $156 thousand related to this matter for taxes, interest and penalties through September 2006, of which $38 thousand was recorded to cost of sales, $38 thousand was recorded to engineering and development, $37 thousand was recorded to general and administrative, and $43 thousand was recorded to interest expense and other income, net. Of the $156 thousand, $144 thousand related to prior years. We concluded during the second quarter of fiscal year 2007 that these adjustments are not quantitatively or qualitatively material to the three and six month periods ended September 29, 2006, our projected results for the current year, or to any prior years’ earnings, earnings trends or financial statement line items. During the third quarter of fiscal year 2007, we received notification from the State of California Board of Equalization that penalties of $11 thousand would not be assessed; accordingly, we reduced our accrual. Also, during the third quarter of fiscal year 2007, we made payments of $79 thousand against the liability. As of December 29, 2006, our remaining accrual related to this matter was $66 thousand.

Unless the context otherwise requires, the terms “we,” “our,” “us,” “company” and “Printronix” refer to Printronix, Inc. and its consolidated subsidiaries.

~~Note 2 Short-Term Investments~~Reclassifications

WeCertain ~~evaluate~~amounts ~~our short-term investments in marketable debt securities in accordance with SFAS No. 115, “Accounting~~ for ~~Certain~~the ~~Investments~~prior inperiods ~~Debt and Equity Securities,” and~~ have ~~determined that~~been ~~all~~reclassified ~~of the investments in marketable debt securities should be classified as available-for-sale as of December 29, 2006 and held-~~to~~-maturity~~ asconform ~~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. The income tax rate is zero for these transactions due to domestic operating losses and the ~~effect~~fiscal ~~of valuation allowances. Realized gains and losses are~~year ~~included~~2008 ~~in interest income~~presentation. ~~The cost basis for realized gains and losses on available-for-sale~~ ~~securities is determined on a specific identification basis.~~

~~The~~Recently ~~fair~~Adopted ~~value~~Accounting ~~of the investments in marketable debt securities is based on quoted market~~Standards prices that approximate fair value. 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.

Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes – an Interpretation of FASB statement No. 109” (“FIN 48”). The company adopted FIN 48 on March 31, 2007, the first day of the 2008 fiscal year. FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. FIN 48 also provided guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. In May 2007, the FASB issued FASB Staff Position No. FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48” (“FSP FIN 48-1”). FSP FIN 48-1 provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of operations. The effect of adoption of FIN 48 on our condensed consolidated balance sheet as of September 28, 2007 is summarized in Note 6, Income Taxes.

~~At December 29~~PRINTRONIX, ~~2006, we had $29~~INC.~~9 million~~ ofAND ~~investments in taxable corporate securities,~~SUBSIDIARIES ~~asset-backed~~NOTES ~~securities,~~TO ~~repurchase~~CONDENSED ~~agreements~~CONSOLIDATED ~~and~~FINANCIAL ~~money~~STATEMENTS ~~market~~– ~~funds. At December 29, 2006, $16.8~~(Continued) million of these investments had maturities of three months or less when purchased and were included in cash and cash equivalents, $12.9 million had maturities of greater than three months, but an expected holding period of less than one year, and were included in short-term investments, and $0.2 million were funds held in escrow, and were included in other assets. During the three and nine months ended December 29, 2006, our investments earned an annualized effective yield of 5.3 percent and 5.2 percent, respectively.

AtSales ~~March 31,~~Tax ~~2006,~~Collected wefrom ~~had $30.8 million of investments in mortgage-backed securities with~~Customers maturities of three months or less when purchased which were included in cash and cash equivalents on the balance sheet. At December 29, 2006 and March 31, 2006, short-term investments also included $0.4 million and $0.5 million, respectively, in certificates of deposit, which are carried at cost.

~~Although~~In ~~contractual~~June 2006, ~~maturities~~the ofEmerging ~~the~~Issues ~~asset~~Task Force (“EITF”) reached a consensus on Issue No. 06-~~backed~~03, “How ~~securities~~Taxes ~~range~~Collected from ~~two~~Customers and Remitted to ~~thirty~~Governmental ~~years~~Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation),” (“EITF 06-03”). EITF 06-03 concluded that the ~~investments~~presentation ~~are~~of ~~classified~~taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer, such as ~~current~~sales, ~~assets~~use, value inadded and certain excise taxes is an accounting policy decision that should be disclosed. As a part of the ~~condensed~~company’s ~~consolidated~~normal ~~balance~~course ~~sheets~~of ~~due~~business, we collect sales taxes from customers. Sales taxes collected are remitted, in a timely manner, to the ~~expected~~appropriate ~~holding~~governmental ~~period~~tax authority on behalf of ~~less~~the ~~than~~customer. ~~one~~The ~~year~~company’s policy is to present revenue and costs, net of sales taxes.

AtNew ~~December 29,~~Accounting ~~2006~~Standards ~~and~~Not ~~March 31,~~Yet ~~2006, the estimated fair value of each investment~~Adopted ~~approximated its amortized cost and, therefore, we had no significant unrealized gains or losses or any non-temporary losses.~~

~~Note~~ In 3September 2006, ~~Accounts~~the ~~Receivable~~FASB issued SFAS No. 157, “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 years beginning after November 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

WeIn ~~maintain~~February 2007, anthe ~~allowance~~FASB ~~for~~issued ~~doubtful~~SFAS ~~accounts~~No. 159, ~~and~~“The anFair ~~allowance~~Value Option for ~~estimated~~Financial ~~sales returns,~~Assets ~~totaling~~and ~~$1.3 million~~Financial ~~and~~Liabilities ~~$1.5 million~~– asIncluding ofan ~~December 29,~~Amendment ~~2006~~of ~~and~~SFAS ~~March~~Statement No. ~~31,~~115” ~~2006,~~(“SFAS ~~respectively~~159”). SFAS ~~The~~159 ~~allowance~~provides ~~for~~companies ~~doubtful~~with ~~accounts~~an ~~was~~option ~~$0.6 million~~to ~~and~~report ~~$0.8 million~~selected asfinancial ofassets ~~December 29,~~and ~~2006~~financial ~~and~~liabilities ~~March 31,~~at ~~2006,~~fair ~~respectively~~value. ~~The~~Unrealized ~~allowance~~gains and losses on items for ~~estimated~~which ~~sales~~the ~~returns~~fair ~~was~~value $0option has been elected are reported in earnings at each subsequent reporting date.~~7 million~~ asSFAS of159 is effective for ~~December 29,~~fiscal ~~2006~~years ~~and~~beginning ~~March~~after November 3115, ~~2006,~~2007. ~~and~~We ~~was~~do ~~reflected~~not asexpect athis ~~reduction~~statement to ~~revenues~~have ina material impact on the ~~periods established~~condensed consolidated financial statements of the company.

~~Note~~ In 4June 2007, ~~Inventories~~the EITF reached a consensus on Issue No. 07-03, “Accounting for Advance Payment for Goods or Services to be Used in Future Research and Development,” (“EITF 07-03”). Under EITF 07-03, an entity is required to defer and capitalize non-refundable advance payments made for future research and development activities until the related goods are delivered or the related services are performed. EITF 07-03 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statement of the company.

WeNote ~~record~~2 aSubsequent ~~provision to value the inventory at the lower of the actual cost to purchase~~Event 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~~On ~~2002/95/EC~~October 1, onwe ~~the~~signed ~~restriction~~a ofdefinitive merger agreement (the ~~use~~“Merger Agreement”) to be acquired by Pioneer Holding Corp., an affiliate of ~~certain~~Vector ~~hazardous~~Capital, ~~substances~~a private equity firm specializing in ~~electrical~~buyouts and ~~electronic~~recapitalizations ~~equipment~~of ~~(“RoHS”)~~established ~~became~~technology ~~effective~~businesses, ~~throughout~~for ~~the~~$16.00 ~~European~~per ~~Community~~share in cash ~~starting~~and ~~July 1,~~a ~~2006.~~total ~~RoHS~~price ~~restricts~~of approximately $109 million. Upon the ~~use~~closing of ~~six~~the ~~substances:~~transaction ~~lead,~~contemplated by ~~mercury,~~the ~~cadmium~~Merger Agreement, ~~hexavalent~~we will become a wholly-owned subsidiary of Pioneer and each share of our ~~chromium,~~common ~~polybrominated~~stock ~~biphenyls~~will ~~(“PBB”)~~be orconverted ~~polybrominated~~into ~~diphenyl~~a ~~ethers~~right ~~(“PBDE”),~~to ~~within~~receive $16.00 in cash. The Federal Trade Commission ~~electrical~~has ~~and~~granted ~~electronic~~early ~~equipment~~termination to the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the transaction. AsThe closing of ~~June 30,~~the ~~2006,~~transaction was also conditioned on the ~~conversion~~delivery of ~~products~~satisfactory ~~targeted~~Phase ~~for~~I environmental reports on certain of the ~~RoHS~~company’s ~~compliance~~manufacturing ~~had~~sites and Vector Capital has confirmed that this condition has been satisfied. ~~completed~~The ~~without~~transaction anis ~~impact~~subject to ~~the~~additional ~~realizability~~closing conditions, including adoption of the Merger ~~inventory~~Agreement onby ~~hand~~our stockholders.

~~Note~~PRINTRONIX, 5INC. ~~Bank~~AND ~~Borrowings~~SUBSIDIARIES NOTES ~~and~~TO ~~Debt~~CONDENSED ~~Arrangements~~CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~Long-Term~~ Note ~~and~~3 ~~Capital Lease Obligations~~Investments

~~Long-term~~At ~~note~~September 28, 2007 and ~~capital~~March 30, ~~lease~~2007, ~~obligations~~the ~~consist~~company had total interest bearing investments of ~~the~~$21.6 million ~~following~~and $31.9 million, respectively, consisting primarily of available-for-sale marketable securities. The below table summarizes total interest bearing investments:

	December 29,			March 31,
	September 28,			March 30,
	2006			2006
	2007			2007
	($ in thousands)
Long-term note	$	12,950		$	13,475
Available for sale marketable securities:
Capital lease obligations		127			—
Commercial paper and money market	$	18,192		$	25,323
		13,077			13,475
Asset-backed securities		3,065			5,412
Less: current maturities		(12,968	)		(700	)
Repurchase agreements		—			144
	$	109		$	12,775
Taxable corporate securities		—			602
Total marketable securities		21,257			31,481
Other:
Certificates of deposit		363			382
Total interest bearing investments	$	21,620		$	31,863
Classified and reported as:
Cash equivalents	$	15,538		$	19,640
Short-term investments		5,817			12,015
Other assets		265			208
	$	21,620		$	31,863

AsThe offollowing ~~December 29,~~table ~~2006,~~reflects the ~~company~~estimated ~~has~~fair avalue ~~$13.0 million~~of ~~note~~our ~~with a United States bank collateralized by its Irvine property. The note requires monthly principal and~~ interest ~~payments, with~~bearing ainvestments ~~balloon payment of $12.6~~at September ~~million due June 1~~28, 2007., ~~Repayment~~by ofcontractual ~~the note is as follows~~maturity: ~~$0.2~~ million for fiscal year 2007, and $12.8 million, which includes the balloon payment, in fiscal year 2008. Because all remaining payments are due within one year, the $13.0 million balance on the note is classified in current liabilities. As of December 29, 2006, the Irvine property had a carrying value of $19.9 million.

The note contains customary default provisions and has no financial covenants. Interest on the note is at variable rates based upon the London Interbank Offered Rate (“LIBOR”) plus 1.25 percent, and is reset for periods from one month up to one year, at our discretion. The interest rate on the note was 6.6 percent as of December 29, 2006 and the weighted-average interest rate on the note was 6.6 percent and 6.5 percent for the three and nine months ended December 29, 2006, respectively. Total interest expense on the note was $0.2 million and $0.7 million, respectively, for the three and nine months ended December 29, 2006 and $0.2 million and $0.5 million, respectively, for the three and nine months ended December 23, 2005.


	Estimated
	Fair Value
	($ in thousands)
Due in 90 days or less	$	16,166
Due after 90 days through one year		2,389
Due after one year through five years		2,155
Due after ten years		910

	$	21,620

~~Line~~ Although contractual maturities of ~~Credit~~these investments range from less than ninety days to thirty years, they are classified primarily as current assets under cash equivalents and ~~Standby~~short-term investments ~~Letters~~in the condensed consolidated balance sheets due to expected holding periods of ~~Credit~~less than one year. In addition to the $21.6 million interest bearing investments, the company had $7.7 million of cash primarily held in interest bearing checking accounts at September 28, 2007.

InAt ~~May~~September ~~2006~~28, ~~one~~2007 of our foreign subsidiaries terminated its $1.8 million unsecured line of credit, which included a $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~~estimated ~~major~~fair ~~foreign~~value ~~bank. This line~~ of ~~credit~~ ~~provides~~each ~~for~~investment ~~trade~~approximated ~~financing~~its ~~and includes letters of credit, trust receipts, shipping~~amortized ~~guarantees,~~cost ~~banker’s guarantees~~ and atherefore ~~standby~~we ~~letter~~had ofno ~~credit~~significant ~~for~~unrealized agains ~~total~~or oflosses ~~$1.8 million,~~or ~~and~~any ~~a working~~non-temporary ~~capital line of credit for $2~~losses.~~4 million. Advances under the trade financing instruments~~ ~~generally~~Net ~~have~~unrealized agains ~~maximum term of one year, except~~ for the ~~letter~~periods ofending ~~credit and trust receipt~~September 28, ~~which have~~2007 ~~maximum terms of 30~~ and 90March ~~days~~30, ~~respectively.~~2007 Advances under the working capital line of credit are limited to 80% of 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 million. We were ~~in compliance with this financial covenant as of December 29, 2006. The line of credit is collateralized by our subsidiary’s manufacturing property. The property had a carrying value of~~ $~~2.6 million as of December 29, 2006. No fees are charged for the unused portion of the lines of credit. Any borrowings on the line of credit would be subject to interest rates at~~ 1~~.0 percent~~ ~~above the~~thousand ~~prime-lending~~and ~~rate.~~$8 ~~During the nine months ended December 29~~thousand, ~~2006 and fiscal year 2006 there were no cash borrowings against the new or terminated lines of credit~~respectively.

~~One~~Note of4 ~~our~~Product ~~foreign subsidiaries maintains a $0.3 million letter of credit with a major foreign~~Warranties bank. This credit facility provides for financing of trade shipments to Singapore. Any borrowings on this letter of credit are subject to interest rates at 0.25 percent above the prime-lending rate. During the nine months ended December 29, 2006 and fiscal year 2006, there were no cash borrowings against this letter of credit.

We maintain aan ~~$0.4 million~~accrual ~~standby~~for ~~letter~~warranty ofobligations ~~credit~~based ~~related~~upon to our ~~workers’~~claims ~~compensation~~experience and other ~~insurance~~known ~~program~~factors. ~~The~~We ~~standby~~evaluate ~~letter~~the ofwarranty ~~credit~~accrual isrequirements ~~secured~~and byrecord a ~~cash~~provision ~~deposit~~for ~~and~~estimated warranty isobligations ~~automatically renewed~~to ~~annually~~cost of sales. ~~Any~~We ~~borrowings~~determine ~~would~~the beprovision ~~subject~~for towarranty ~~interest~~charges by applying the estimated repair cost and estimated return rates atto 2the outstanding units under warranty.~~0 percent~~ ~~above~~We ~~the~~generally offer either a ~~prime~~90-~~lending~~day ~~rate,~~on-site ~~subject~~repair option or a 12-month or longer return-to-factory ~~certain~~option. ~~maximum~~The ~~limits~~on-site warranty covers the cost of the parts and the labor to replace these parts. The return-to-factory ~~During~~warranty covers only the ~~nine~~replacement ~~months~~parts. ~~ended~~If ~~December 29,~~a ~~2006~~defective ~~and~~product ~~fiscal~~cannot ~~year~~be ~~2006~~repaired, ~~there~~it ~~were~~is replaced at no ~~cash borrowings~~additional ~~against~~cost ~~this~~to ~~standby~~the ~~letter~~customer. ofSupplies ~~credit~~are warranted for one year.

PRINTRONIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following is a summary of our accrued warranty obligation for the periods presented:


	Six Months Ended
	September 28,			September 29,
	2007			2006
	($ in thousands)
Beginning balance, warranty reserve	$	767		$	865
Add warranty expense		412			421
Accrual adjustments to reflect actual experience		(75	)		(9	)
Deduct warranty charges incurred		(396	)		(474	)

Ending balance, warranty reserve	$	708		$	803

Note 5 Bank Borrowings and Debt Arrangements

Note

During the first quarter of fiscal year 2008, the company made its scheduled $12.8 million payment to a United States bank, at which time the note was paid in full. The company has no further obligation or commitment related to this note.

Lines of Credit and Standby Letters of Credit

At September 28, 2007, one of our foreign subsidiaries maintained unsecured lines of credit for $2.1 million with major foreign banks. These credit facilities are 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 parent company guarantees any amounts outstanding. 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.

We maintain a $0.4 million standby letter of credit related to our workers’ compensation insurance program. The standby letter of credit is secured by a cash deposit and is automatically renewed annually. Any borrowings would be subject to interest rates at 2.0 percent above the prime-lending rate, subject to certain maximum limits.

As of September 28, 2007 and March 30, 2007, there were no outstanding balances against any lines or letters of credit referred to above, nor were there any cash borrowings during the three or six months ended September 28, 2007.

Credit Agreement for Hedging Activity

We have a commitment facility for $2.68 million with a major foreign bank to support 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~~As ~~the~~of ~~nine~~September 28, ~~months~~2007 ~~ended~~and ~~December~~March 2930, ~~2006~~2007, ~~and~~there ~~fiscal~~were no ~~year~~outstanding ~~2006~~balances noagainst ~~amounts~~this commitment facility, nor were there any amounts borrowed ~~under~~during the ~~this~~three ~~commitment~~or ~~facility~~six months ended September 28, 2007.

Note 6 Employee Benefit Plans

In the third quarter of fiscal year 2007, we terminated our existing defined benefit pension plan in Germany and, to provide benefits for future services, we commenced contributions to a new defined contribution plan for the participants. We purchased annuity contracts for approximately $0.4 million to settle the pension obligation for the past services rendered by the four plan participants. In connection with these actions, we recorded a pension curtailment and settlement loss of approximately $25 thousand in the three months ended December 29, 2006. Under the new defined contribution plan, employer contributions are made annually to a reinsured support fund which establishes individual reinsurance contracts to secure the future benefits. The annual contributions are based on a percentage of the participant’s salary. For the three months ended December 29, 2006, we made an annual contribution of $61 thousand.

Note 7 Net Income (Loss) per Share

Basic net income (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of shares of common stock outstanding and potential shares outstanding during the period, if dilutive.

Net income (loss) per share for the three and nine months ended December 29, 2006, and December 23, 2005, is set forth in the following table:

	Three Months Ended				Nine Months Ended
	December 29,		December 23,		December 29,		December 23,
	2006		2005		2006		2005
	($ in thousands, except share and per share data)
Net income (loss)	$	1,962	$	862	$	2,729	$	(526	)
Basic weighted-average shares outstanding		6,301,303		6,249,224		6,294,945		6,231,230
Basic net income (loss) per share	$	0.31	$	0.14	$	0.43	$	(0.08	)
Effect of dilutive securities:
Basic weighted-average shares outstanding		6,301,303		6,249,224		6,294,945		6,231,230
Dilutive effect of stock options		148,275		195,805		154,763		—
Dilutive weighted-average shares outstanding		6,449,578		6,445,029		6,449,708		6,231,230
Diluted net income (loss) per share	$	0.30	$	0.13	$	0.42	$	(0.08	)

The dilutive weighted-average shares outstanding do not include the antidilutive impact of 118,335 and 120,471 shares for the three and nine months ended December 29, 2006, respectively, and 120,035 and 120,198 shares for the three and nine months ended December 23, 2005, respectively, because the exercise price of the stock options exceeded the average market value of the stock in the periods presented. In addition, the dilutive weighted-average shares outstanding do not include the antidilutive impact of 219,993 shares for the nine months ended December 23, 2005, due to net losses for the period.

~~Note~~PRINTRONIX, 8INC. ~~Stockholders’~~AND ~~Equity~~SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~Stock~~Note ~~Incentive~~6 ~~Plan~~Income ~~– Common Stock Options~~Taxes

The ~~1994~~tax ~~Stock~~provision ~~Incentive~~for ~~Plan (~~the ~~“1994~~three ~~Plan”)~~and ~~expired~~six inmonths ~~August 2005.~~ended ~~As of December~~September 2928, ~~2006,~~ ~~there~~2007 ~~were~~reflects ~~480,248~~state ~~stock~~minimum franchise ~~options~~taxes, ~~outstanding~~state ~~that~~franchise ~~were~~tax ~~previously~~refund, ~~granted~~foreign ~~subject~~income totaxes, ~~the rights of that plan~~ and noan ~~stock~~adjustment ~~options available~~ to ~~grant.~~prior ~~The company’s shareholders approved~~year ~~the~~foreign ~~Printronix,~~deferred ~~Inc.~~tax ~~2005 Stock Option Plan (the “2005 Plan”) during the second quarter of fiscal year 2006~~asset. The ~~2005 Plan authorizes the sale of up to a total of 600,000 shares of the company’s~~ ~~common~~following ~~stock~~table ~~pursuant~~summarizes toour ~~either~~tax ofprovision ~~two types of “Stock Awards”:~~ (1benefit) ~~stock~~for ~~options; and (2) shares of stock acquired pursuant to stock purchase agreements containing certain restrictions (“restricted stock”). Individuals are granted options under~~ the ~~2005~~three ~~Plan at terms (purchase price, expiration date~~ and ~~vesting~~six ~~schedule)~~months ~~established by a committee of the Board of Directors.~~ended ~~Under the 2005 Plan~~September 28, ~~options~~2007 ~~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~~ and ~~generally vest over a four year period. Under restricted stock purchase agreements~~September 29, ~~individuals purchase shares when the Stock Award is granted; the shares are restricted~~2006: ~~as the rights to full beneficial ownership vest only upon achievement of certain performance criteria.~~

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.


	Three Months Ended				Six Months Ended
	September 28,		September 29,		September 28,			September 29,
	2007		2006		2007			2006
	($ in thousands)
State	$	9	$	5	$	(5	)	$	10
Foreign		49		150		202			282

Total	$	58	$	155	$	197		$	292

A full valuation allowance was recorded against all deferred tax assets, including net operating loss carryforwards generated in the United States since it is more likely than not that such deferred tax assets will not be realized. In the first quarter of fiscal year ~~2006~~2007, we ~~accelerated~~paid $2.5 million in taxes related to the ~~vesting~~$32.0 million of ~~all~~dividends ~~remaining~~repatriated ~~stock~~during ~~options,~~the ~~as described~~fourth ~~below~~quarter of fiscal year 2006 under the American Jobs Creation Act (AJCA).

AThe ~~summary~~company adopted FASB Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes – an Interpretation of FASB statement No. 109” (“FIN 48”) on March 31, 2007, the ~~status~~first day of the 2008 fiscal year. At March 31, 2007, unrecognized tax benefits and related accrued interest and penalties totaled $0.5 million. As a result of the ~~company’s~~cumulative ~~stock~~effect ~~option~~of ~~activity~~the ~~for~~adoption, the company ~~nine~~recorded ~~months~~an ~~ended~~additional tax liability of $81 thousand as a decrease to retained earnings. ~~December~~As of September 2928, ~~2006~~2007, istotal unrecognized tax benefits were $0.6 million, which includes accrued interest and penalties of $96 thousand. In addition, our long-term deferred tax assets are reduced by unrecognized tax benefits of $2.7 million. Estimated interest and penalties related to the underpayment of income taxes are classified as ~~follows:~~a component of income tax provision in the condensed consolidated statement of operations. Recognition of these unrecognized tax benefits would impact our effective tax rate.

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
				Exercise		Term		Value
Common Stock Options	Shares			Price		(in years)		($ in thousands)
Outstanding, March 31, 2006		526,724		$	10.20
Granted		—			—
Exercised		(29,776	)		7.91
Forfeited and expired		(8,200	)		17.01
Outstanding, December 29, 2006		488,748		$	10.23		2.73	$	1,584
Exercisable at December 29, 2006		488,748		$	10.23		2.73	$	1,584

We have subsidiaries in various countries and are therefore subject to varying income tax rates. We had a favorable pioneer tax status in Singapore which exempted income generated from the manufacture and sale of the Printronix P5000 and P7000 Series line matrix and T5000 thermal products by our Singapore subsidiary from income tax liability. The pioneer status expired at the end of our prior fiscal year on March 30, 2007. The effect of this pioneer status was to increase diluted net income per share by zero and 2 cents for the three and six months ended September 29, 2006.

~~The~~During ~~total~~the ~~intrinsic~~current ~~value~~quarter ofthe ~~options~~Company ~~exercised~~recorded ~~during~~an adjustment to increase its foreign deferred tax assets in the ~~three~~amount ~~and~~of ~~nine~~$89,000. ~~months~~Of ~~ended~~this ~~December 29~~amount, ~~2006~~$106,000 ~~was~~relates to fiscal 2006, ($615,000) relates ~~thousand~~to fiscal 2007 and the remaining ($~~187~~2,000) ~~thousand~~relates to fiscal 2008. Management concluded that no period was materially misstated; accordingly, ~~respectively~~these adjustments have been recorded in the current quarter.

~~Stock~~ During ~~Incentive~~fiscal ~~Plan~~year –2006, ~~Restricted~~we ~~Stock~~filed a protest and amended state income tax returns with the State of California Franchise Tax Board (“FTB”) to claim previously unclaimed research tax credits related to tax years ending March 1994 through March 2003. In September 2006, we received a notice from the FTB that it was conducting a review of our amended returns for the tax years March 1998 through March 2000. During the first quarter of fiscal 2008 the FTB completed their review resulting in a refund in the amount of $30 thousand.

~~Under~~As ~~the~~of ~~1994 Plan~~September 28, ~~grants of restricted stock can be made at any price. During fiscal year 2005~~2007, wethe ~~reserved~~major ~~366,722~~tax ~~shares~~jurisdictions for ~~future issuance as restricted stock under~~ the ~~1994~~company ~~Plan.~~are Of the ~~total~~United ~~reserved~~States, Netherlands, 56Germany,~~722~~ ~~shares were reserved for future issuance to~~ the ~~non-employee~~United ~~members~~Kingdom, ~~of the~~France ~~Board of Directors~~ and ~~key employees~~Singapore. ~~The~~Of ~~restricted~~the ~~stock~~major ~~shares~~tax ~~are~~jurisdictions, ~~performance based and~~we ~~vest~~may ~~only~~be ifsubject ~~the~~to ~~company~~examination ~~achieves~~for ~~certain~~the ~~financial~~fiscal ~~targets~~years ~~over~~2001 ato ~~period of six fiscal years~~2006.

~~During~~Note ~~the~~7 ~~first~~Cash ~~quarter of fiscal year 2005, we granted 290,000 of the 310,000 shares and in~~Dividends ~~July 2005, we issued 24,400 of the 56,722 shares. In addition, 20,000 shares were not issued but could be purchased by an employee if certain performance criteria were met.~~

During both the first and second quarters of fiscal year 2008, the company declared and paid cash dividends of $639 thousand per quarter at $0.10 per share, based on 6.4 million shares outstanding, for a total of $1.3 million year to date.

Note 8 Net Income per Share

Basic net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding and potential shares outstanding during the period, if dilutive.

APRINTRONIX, ~~summary~~INC. ofAND ~~the~~SUBSIDIARIES NOTES ~~status~~TO ofCONDENSED ~~the~~CONSOLIDATED ~~company’s~~FINANCIAL ~~restricted~~STATEMENTS ~~stock~~– ~~activity for the nine months ended~~(Continued) ~~December 29, 2006 is as follows:~~

				Weighted
				Average
				Grant Date
Restricted Stock	Shares			Fair Value
Nonvested, March 31, 2006		314,400		$	13.94
Granted		—			—
Vested		—			—
Forfeited and expired		(10,000	)		13.65
Nonvested, December 29, 2006		304,400		$	13.95

Net income per share for the three and six months ended September 28, 2007, and September 29, 2006 is set forth in the following table:

The company has not met, nor is it probable any of the performance targets will be met as of December 29, 2006. Accordingly, stock-based compensation expense for the restricted stock has not been recorded during any of the periods presented.


	Three Months Ended				Six Months Ended
	September 28,		September 29,		September 28,		September 29,
	2007		2006		2007		2006
	($ in thousands, except share and per share data)
Net income	$	1,185	$	211	$	2,212	$	767
Basic weighted-average shares outstanding		6,388,412		6,299,942		6,386,931		6,291,767
Basic net income per share	$	0.19	$	0.03	$	0.35	$	0.12
Effect of dilutive securities:
Basic weighted-average shares outstanding		6,388,412		6,299,942		6,386,931		6,291,767
Dilutive effect of stock options		122,221		139,386		122,591		158,008

Dilutive weighted-average shares outstanding		6,510,633		6,439,328		6,509,522		6,449,775
Diluted net income per share	$	0.18	$	0.03	$	0.34	$	0.12

~~Common~~ The ~~Share~~dilutive ~~Purchase~~weighted-average ~~Rights~~shares outstanding do not include the antidilutive impact of 112,958 and 114,867 shares for the three and six month periods ended September 28, 2007, respectively, and 118,335 and 121,538 shares for the three and six months ended September 29, 2006, respectively, because the exercise price of the stock options exceeded the average market value of the stock in the periods presented.

OnNote ~~March 16,~~9 ~~1989,~~Other weComprehensive ~~declared a dividend payable on April 4, 1989, of 10,311,603 Common Share~~Income 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 an 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~~ Other ~~Repurchases~~comprehensive 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 is reported in the equity portion of the condensed consolidated balance sheets as accumulated other comprehensive income. Unrealized net gains on short-term investments at September 28, 2007 were $1 thousand. There were no unrealized gains or losses related to foreign currency forward exchange contracts at September 28, 2007.

~~During~~The ~~fiscal~~following ~~year~~table ~~2002,~~reconciles ~~the~~net ~~Board~~income ~~of Directors authorized the company~~ to ~~purchase~~other upcomprehensive ~~to 500,000~~income shares of the company’s outstanding common stock. Purchases may be made from time-to-time in the open market. During fiscal years 2002 through 2004, we repurchased 272,605 shares of common stock at prices ranging from $9.03 to $11.87 for ~~a total cost of $2.8 million. No shares of common stock were repurchased during fiscal years 2005 and 2006 or during~~ the ~~first nine months of~~ fiscal ~~year~~ ~~2007. Future purchases of 227,395 shares of common stock may be made at our discretion.~~periods presented:

Cash Dividends


	Three Months Ended				Six Months Ended
	September 28,		September 29,		September 28,			September 29,
	2007		2006		2007			2006
	($ in thousands)
Net income	$	1,185	$	211	$	2,212		$	767
Unrealized holding gains (losses) arising from available-for-sale securities during the period		—		3		(7	)		7
Realized gain on foreign currency forward-exchange contracts		—		1		—			24

Total Comprehensive Income	$	1,185	$	215	$	2,205		$	798

OnNote ~~May 23, 2006, we declared a cash dividend of $440 thousand, or $0.07 per share, which was paid on June 19, 2006. On August 22, 2006, we declared a cash dividend of $630 thousand, or $0.~~10 ~~per~~ ~~share,~~Segment ~~which~~and ~~was~~Concentration ~~paid on September 19, 2006. On November 21, 2006, we declared a cash dividend~~ of ~~$630 thousand, or $0.10 per share, which was paid on December 19, 2006.~~Risk

~~Stock-Based~~ We ~~Compensation~~manufacture and sell a variety of printers and associated products and conduct business in a single operating segment.

~~Adoption~~ IBM, ofour ~~Statement~~largest ofcustomer, ~~Financial~~and ~~Accounting~~Ricoh ~~Standards~~formed ~~No. 123(R)~~a joint venture company, InfoPrint Solutions Company (“~~SFAS~~InfoPrint ~~123(R)~~Solutions”), to acquire IBM’s Printing System Division as of June 2007. The Printronix contracts with IBM have been assigned to InfoPrint Solutions. InfoPrint Solutions accounted for approximately 19.3 percent and ~~Transition~~21.8 percent of our consolidated revenue for the three months ended September 28, 2007 and September 29, 2006, respectively and 19.7 percent of our consolidated revenue for both six month periods ended September 28, 2007 and September 29, 2006. No other customer accounted for more than 10.0 percent of our consolidated net revenue.

On April 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires compensation expense to be recognized for all share-based payments made to employees based on the fair value of the award at the date of the grant. As required by SFAS 123(R), share-based compensation expense, net of an estimated forfeiture rate, is recognized over the requisite service period (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~~PRINTRONIX, ~~“Accounting for Stock-Based Compensation” (“SFAS No~~INC. ~~123”),~~ ~~for~~AND ~~all~~SUBSIDIARIES ~~unvested~~NOTES ~~awards~~TO ~~outstanding~~CONDENSED atCONSOLIDATED ~~the~~FINANCIAL ~~date~~STATEMENTS 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~~Continued) ~~and net~~ ~~income (loss) per share of applying the fair value recognition provisions of SFAS No. 123.~~

~~Prior~~InfoPrint toSolutions ~~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~~23.3 ~~25,~~percent “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~~accounts ~~stock~~receivable onbalance ~~the~~at ~~grant date. In accordance with SFAS 123 and SFAS~~September ~~148~~28, ~~“Accounting for Stock-Based Compensation – Transition and Disclosure”~~2007, ~~we provided pro forma net income or loss~~ and ~~net~~20.3 percent ~~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)~~March 30, we2007. ~~presented all~~No ~~tax~~other ~~benefits~~single ~~resulting~~customers ~~from~~represented ~~the~~more ~~exercise of stock options as operating cash flows in our~~than ~~consolidated statements of cash flows~~10.0 percent ~~SFAS 123(R) requires that the realized tax benefit related to the excess~~ of ~~the~~our ~~deductible~~consolidated ~~amount~~accounts ~~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~~receivable.

~~For~~Note ~~the~~11 ~~nine~~Commitments ~~months ended December 29, 2006, 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.~~Contingencies ~~Therefore, no stock-based compensation expense was recognized under SFAS 123(R). We are currently evaluating alternatives to stock options to compensate our employees.~~

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

~~The~~With ~~following~~the ~~table~~exception ~~illustrates~~of ~~the~~Singapore ~~effect~~and onIrvine ~~net~~California, ~~income~~we ~~(loss)~~ conduct our foreign operations and some ~~net~~United ~~income~~States ~~(loss) per~~sales operations outside of California using leased facilities under ~~share~~non-cancelable ~~for~~operating ~~the~~leases ~~three~~that ~~and~~expire ~~nine~~at ~~months~~various ~~ended~~dates ~~December 23,~~from ~~2005~~fiscal ifyear we2008 ~~had~~through ~~applied~~fiscal year 2010. We own the ~~fair~~building ~~value~~in Singapore and have a land lease that expires in fiscal year ~~recognition~~2057. ~~provision~~There were no material changes in our operating lease commitments as of ~~SFAS~~September 28, ~~123~~2007 from tothose ~~stock-based~~reported ~~compensation:~~in our Annual Report on Form 10-K.

	Three Months			Nine Months
	Ended			Ended
	December 23,			December 23,
	2005			2005
	($ in thousands, except per share data)
Net income (loss), as reported	$	862		$	(526	)
Deduct total stock-based employee compensation expensedetermined under fair value-based method for all awards		(412	)		(607	)
Pro forma net income (loss)	$	450		$	(1,133	)
Net income (loss) per share:
Basic – as reported	$	0.14			($0.08	)
Basic – pro forma	$	0.07			($0.18	)
Diluted – as reported	$	0.13			($0.08	)
Diluted – pro forma	$	0.07			($0.18	)

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 exercise price of $16.96 per share) previously granted under the 1994 Stock Incentive Plan. No compensation expense resulted from the accelerated vesting of these options. In March 2006, we accelerated the vesting of all remaining stock options (60,121 shares at a weighted-average exercise price of $12.11 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 $10 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. 44, “Accounting for Certain Transactions involving Stock Compensation — an interpretation of APB Opinion No. 25.” The compensation cost is related to the excess of the intrinsic value over the fair market value of the company’s stock on the acceleration date.

We elected to accelerate the above options to eliminate recognizing approximately $0.4 million of future compensation expense in our consolidated statement of operations that would have been recorded over four years beginning fiscal year 2007 following the adoption of SFAS 123(R).

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 three and nine months ended December 23, 2005:

	Three Months			Nine Months
	Ended			Ended
	December 23,			December 23,
	2005			2005
Expected volatility		41.9	%		43.2	%
Weighted-average risk-free interest rate		4.39	%		4.10	%
Dividend yield		1.2	%		1.2	%
Average expected life (in years)		3.38			3.53
Weighted-average grant-date fair value	$	4.61		$	5.18

Assumptions are not presented for the three and nine months ended December 29, 2006 because stock options were not granted during these periods.

Note 9 Product Warranties and Guarantees

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.

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

	Nine Months Ended
	December 29,			December 23,
	2006			2005
	($ in thousands)
Beginning balance, warranty reserve	$	865		$	863
Add warranty expense		636			671
Accrual adjustments to reflect actual experience		(21	)		8
Deduct warranty charges incurred		(682	)		(709	)
Ending balance, warranty reserve	$	798		$	833

Guarantees

InWe ~~connection~~have ~~with~~posted ~~the~~collateral ~~standby~~in ~~letter~~the form of ~~credit~~a ~~agreement~~surety ~~obtained~~bond ~~for~~or ~~the~~other ~~workers’ compensation~~similar ~~insurance program~~instruments, wewhich ~~have~~are issued ~~agreed~~by toindependent ~~indemnify~~insurance carriers (the ~~bank~~“Surety”), ~~from~~to ~~any~~cover ~~third~~the ~~party~~risk ~~claims~~ of loss related to certain ~~its~~customs ~~performance~~and onemployment ~~our behalf~~activities. ~~The~~If ~~term~~any of ~~this~~the ~~indemnification~~entities ~~agreement~~that ~~extends~~hold ~~beyond~~such bonds should ~~the~~require ~~term~~payment offrom the ~~standby~~Surety, ~~letter~~we ofwould ~~credit~~be ~~agreements.~~obligated Weto ~~believe~~indemnify ~~the~~and ~~fair~~reimburse ~~value~~the ofSurety ~~this~~for ~~indemnification~~all ~~agreement~~costs isincurred. ~~minimal~~As ~~and~~of ~~have~~September 28, ~~not~~2007, ~~recorded~~we ahad ~~liability~~$1.0 million ~~for~~of itthese bonds outstanding.

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 December 29, 2006, we had $1.0 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.

Note 10 Commitments and Contingencies

Contractual Obligations and Commercial Commitments

We are obligated under certain borrowing, purchase and lease commitments. Additional information on our borrowing obligations can be found in Note 5. There were no material changes in our operating lease commitments as of December 29, 2006 from those reported in our Annual Report on Form 10-K.

Purchase Obligations

WeAt ~~have~~September 28, a2007, we have non-cancelable purchase ~~obligation~~obligations ~~under an agreement~~ with ~~one of~~ our suppliers. Wetotaling ~~have agreed to purchase a minimum of~~ $12.0 million ~~of product through March 2007~~. AsWe ofexpect ~~December 29,~~to ~~2006,~~fulfill wethese ~~had~~obligations athrough ~~remaining~~the ~~purchase~~normal ~~commitment~~course of ~~$0.6~~business by December ~~million~~2012.

~~Operating~~Capital ~~Leases~~Commitment

~~With~~The ~~the~~company ~~exception~~has ofan ~~Singapore,~~equity wecapital ~~conduct~~commitment ~~our~~totaling ~~foreign~~$670 ~~operations~~thousand ~~and~~with ~~some~~respect ~~United~~to ~~States sales~~our ~~operations using leased facilities under non-cancelable operating leases that expire at~~China ~~various~~legal ~~dates~~entity ~~from~~to ~~fiscal~~be ~~year~~fulfilled between October 2007 ~~through fiscal year 2010. We own the building in Singapore~~ and ~~have~~ ~~a land lease that expires in fiscal year 2057~~August 2009.

Environmental Assessment

Barranca Parkway Sites

In January 1994 and March 1996, we were notified by the California Regional Water Quality Control Board — Santa Ana Region (the “Board”) that ground under one of 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, we 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. During fiscal year 2006, the Department agreed to include the prior tenant of the site in the ongoing inquiry. We have agreed to perform an initial environmental test, which we believe will further support our claim that we did not use the VOCs in question. InDuring ~~May 2006,~~fiscal year 2007, 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 required 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~~By ~~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, 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.

PRINTRONIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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 selected an environmental consulting firm to conduct the PEA on their behalf. The preliminary testing result from the PEA indicates a continuing presence of the contaminants. Final testing results are expected to be received before the end of next fiscal quarter.

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 ~~December~~September 2928, ~~2006~~2007 and March 3130, ~~2006~~2007, we had accrued $~~141~~91 thousand and $~~224~~118 thousand, respectively, which we believe is a reasonable estimate to cover expenses for environmental tests, which we are prepared to undertake. The accrual is included in accrued liabilities – other on the condensed 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 was $32 thousand, which we paid in May 2006. At December 29, 2006 we had no further liability regarding this matter.

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~~A supplier to our subsidiary in ~~France~~Singapore ~~was~~filed ~~party~~a tocomplaint afor ~~wrongful~~non-payment ~~termination~~of ~~dispute~~parts ~~with~~purchased in aprior ~~former~~fiscal ~~employee~~years. ~~The~~ ~~former~~Our ~~employee~~subsidiary ~~claimed~~in ~~damages~~Singapore ofwithheld ~~124,500~~payments ~~euros~~for ~~(approximately~~the ~~$158~~parts ~~thousand),~~due ~~which~~to ~~represented~~significant ~~approximately~~quality ~~18 months~~issues in the design of ~~salary~~the ~~and~~product. ~~legal~~The ~~fees~~supplier has claimed damages of $140 thousand under this complaint. As of ~~December~~September 2928, ~~2006~~2007, we ~~had~~ have recorded an accrual related to this matter.

~~Note 11~~ Other ~~Comprehensive Income (Loss)~~Contingencies

~~Other~~In ~~comprehensive~~the ~~income~~normal ~~(loss) represents~~course ~~unrealized~~of ~~gains~~business to facilitate sales of its products, the company may indemnify customers and hold them harmless against losses onarising ~~the~~from ~~Euro~~intellectual ~~foreign~~property ~~currency~~infringement ~~forward~~claims. ~~exchange~~The ~~contracts~~term ~~that~~of ~~qualify~~these ~~for~~indemnification ~~hedge~~agreements ~~accounting~~is ~~and~~generally ~~unrealized~~perpetual ~~gains~~any ~~and~~time ~~losses~~after onexecution ~~short-term~~of ~~investments~~the agreement subject to statute of limitations restrictions. The ~~aggregate~~maximum potential amount of ~~such~~future ~~gains~~payments orwe ~~losses~~could ~~that~~be ~~have~~required ~~not~~to ~~yet~~make under these agreements is ~~been~~unlimited. ~~recognized~~We inhave ~~net~~never ~~income~~incurred ~~(loss) is~~costs ~~reported~~to indefend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the ~~equity~~estimated ~~portion~~fair value of ~~the~~these ~~condensed~~agreements ~~consolidated~~is ~~balance~~minimal ~~sheets~~and ashave ~~accumulated~~not ~~other~~recorded ~~comprehensive~~a ~~income~~liability ~~(loss)~~for these agreements.

15 In addition, 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 agreement. We believe the fair value of this indemnification agreement is minimal and have not recorded a liability.

During fiscal year 2007, one of our suppliers claimed we owed past due amounts under a licensing agreement dated in December 1990. As of March 30, 2007, we had recorded $54 thousand for the amount we believed was contractually owed to the vendor. As of September 28, 2007 we have recorded an additional accrual expected to be sufficient to settle this matter.

Unrealized net gains on short-term investments at December 29, 2006 were $10 thousand.

Under our foreign currency-hedging program, we can enter into foreign currency forward exchange contracts with maturities from 30 to 180 days with a major financial institution. We do not use the contracts for speculative or trading purposes. As of December 29, 2006, there were no outstanding forward exchange contracts.

The following table reconciles net income (loss) to other comprehensive income (loss) for the fiscal periods presented:

	Three Months Ended					Nine Months Ended
	December 29,		December 23,			December 29,		December 23,
	2006		2005			2006		2005
			($ in thousands)
Net income (loss)	$	1,962	$	862		$	2,729	$	(526	)
Other comprehensive income (loss)		3		(47	)		34		(56	)
	$	1,965	$	815		$	2,763	$	(582	)

Note 12 Segment and Customer Data

We manufacture and sell a variety of printers and associated products and conduct business in a single operating segment.

Sales by Customer

Percent of total sales by customer for the fiscal periods presented were as follows:

	Three Months Ended						Nine Months Ended
	December 29,			December 23,			December 29,			December 23,
Customer	2006			2005			2006			2005
Largest customer — IBM		22.3	%		21.5	%		20.7	%		22.8	%
Second largest customer		4.7	%		6.4	%		5.3	%		7.5	%
Top ten customers		47.9	%		51.5	%		46.6	%		49.2	%

IBM accounted for 27.4 percent of our accounts receivable balance at December 29, 2006, and 24.7 percent as of March 31, 2006.

Note 13 Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 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 are determined based upon the difference between the financial statement and tax bases of assets and liabilities using 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.

In assessing the realizability of deferred tax assets, SFAS 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 the assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, historical and projected future

taxable income and tax planning strategies when making this assessment. 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 31, 2006, as required by SFAS No. 109.

We have subsidiaries in various countries and are therefore subject to varying income tax rates. We have a favorable pioneer tax status in Singapore which exempted income generated from the manufacture and sale of the Printronix P5000 and P7000 Series line matrix and T5000 thermal products by our Singapore subsidiary from income tax liability. The pioneer status in Singapore resulted in foreign tax savings of $0.2 and $0.3 million for the three and nine months ended December 29, 2006, respectively, and $0.2 million and $0.5 million for the three and nine months ended December 23, 2005, respectively. The effect of this pioneer status was to increase diluted net income per share by 3 cents and 5 cents for the three and nine months ended December 29, 2006, respectively, and 3 cents and 8 cents for the three and nine months ended December 23, 2005, respectively. The pioneer status expires at the end of fiscal year 2007.

As a matter of course, various taxing authorities may conduct regular audits on the company which may result in additional tax assessments. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters. During fiscal year 2006, we filed a protest and amended state income tax returns with the State of California Franchise Tax Board (“FTB”) to claim previously unclaimed research tax credits related to tax years ending March 1994 through March 2003. In September 2006, we received a notice from the FTB that it was conducting a review of our amended returns for the tax years ending March 1998 through March 2000. There is no impact to the consolidated financial statements for the claimed research tax credits due to our conclusion that it is more likely than not that such deferred tax assets will not be realized.

The tax benefit for the three months ended December 29, 2006 consisted of $289 thousand in federal tax benefit, $7 thousand in current state tax benefit and $143 thousand in foreign tax expense. The tax provision for the nine months ended December 29, 2006 consisted of $289 thousand in federal tax benefit, $3 thousand in current state tax expense and $425 thousand in foreign tax expense. The tax provision (benefit) for the three and nine months ended December 29, 2006 reflected a $305 thousand reduction of the American Jobs Creation Act (“AJCA”) tax liability due to further clarification in the interpretation of the existing laws surrounding the use of net operating loss carryforwards against a portion of the tax liability generated from the dividend repatriation.

In the first quarter of fiscal year 2007, we paid $2.5 million in taxes related to the repatriation under the AJCA of $32.0 million of dividends in the fourth quarter of fiscal year 2006.

The tax provision for the three months ended December 23, 2005 consisted of foreign tax expense of $122 thousand. The tax provision for the nine months ended December 23, 2005 included $20 thousand in current state tax expense and $307 thousand in foreign tax expense.

Note 14 New Pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs — an Amendment of ARB 43, Chapter 4” (“SFAS 151”). SFAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory be based on the normal capacity of the production facilities. SFAS 151 was effective for fiscal years beginning after June 15, 2005, and was adopted by the company in the first quarter of fiscal year 2007. The adoption of SFAS 151 did not have a material impact on the condensed consolidated financial statements of the company.

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 was effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and was adopted by the company in the first quarter of fiscal year 2007. The adoption of SFAS 154 did not have a material impact on the condensed consolidated financial statements of the company.

In June 2005, the FASB issued EITF 05-5, “Accounting for Early Retirement or Postemployment Programs with Specific Features, (Such as Terms Specified in Altersteilzeit Early Retirement Arrangements)”. The Altersteilzeit arrangement is an early retirement program in Germany designed to create an incentive for employees, within a certain age group, to transition from full or part-time employment into retirement before their legal retirement age. The EITF is effective for fiscal years beginning after December 15, 2005 and was adopted by the company in the first quarter of fiscal year 2007. The adoption of this EITF did not have a material impact on the condensed consolidated financial statements of the company.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. We are currently evaluating what impact, if any, this statement will have on the consolidated financial statements of the company.

In June 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation),” (“EITF 06-03”). EITF 06-03 concluded that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer, such as sales, use, value added and certain excise taxes is an accounting policy decision that should be disclosed in a company’s financial statements. Additionally, companies that record such taxes on a gross basis should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 is effective for interim and annual periods beginning after December 15, 2006. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

In September 2006, Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretative guidance on how public companies quantify financial statement misstatements. There have been two common approaches used to quantify such errors. Under an income statement approach, the “roll-over” method, the error is quantified as the amount by which the current year income statement is misstated. Alternatively, under a balance sheet approach, the “iron curtain” method, the error is quantified as the cumulative amount by which the current year balance sheet is misstated. In SAB 108, the SEC established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods. SAB 108 is effective for fiscal years ending after November 15, 2006. We are currently assessing the impact of adopting SAB 108 but do not expect that it will have a material effect on the condensed consolidated financial statements of the company.

In September 2006, the FASB issued SFAS No. 157, “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 years beginning after November 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pensions and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158 requires companies to 1) fully recognize, as an asset or liability, the overfunded or underfunded status of defined benefit and other post-retirement plans; 2) recognize changes in the funded status in the year in which the changes occur through comprehensive income; 3) measure the funded status of defined pension and other post-retirement benefit plans as of the date of the company’s fiscal year end; and 4) provide enhanced disclosures. The provisions of SFAS 158 are effective for fiscal years ending after December 15, 2006, except for the requirement to measure the funded status of retirement benefit plans as of our fiscal year end, which is effective for fiscal years ending after December 15, 2008. We do not expect the adoption of this statement to have a material impact on the condensed consolidated financial statements of the company.

PART I. FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

PRINTRONIX, INC. AND SUBSIDIARIES

Forward-Looking Statements

Except for historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” about Printronix, within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as “objectives,” “believes,” “expects,” “plans,” “intends,” “should,” “estimates,” “anticipates,” “forecasts,” “projections,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including: adverse business conditions and a failure to achieve growth in the computer 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 production capability in its Singapore plant or obtain 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 ~~the~~ requirements for radio frequency identification (“RFID”) products by 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; the ability of the company to continue to develop and market new and innovative products superior to those of the competition and to keep pace with technological change; ~~and~~ 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; and the uncertainties associated with effecting the acquisition of Printronix by Pioneer Holding Corp., ~~The~~an affiliate of Vector Capital Corporation, including the necessity of receiving Printronix shareholders’ approval and satisfaction of other closing conditions. 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

The ~~third~~second quarter of fiscal year ~~2007~~2008 resulted in net income of $0.3018 per diluted share on sales of $3429.94 million. This compares with net income of $0.1303 per diluted share on sales of $3329.~~9 million~~3 million for the same quarter last year. ~~Net~~Earnings ~~income~~in ~~for~~ the first ~~nine~~six months of fiscal year ~~2007~~2008 resulted ~~was~~in net income of $0.42 34 per diluted share ~~compared~~on ~~with~~sales ~~a net loss~~ of $60.0 million.08 ~~per~~Earnings ~~share~~in ~~for~~ the ~~same~~first six ~~period~~months ~~last~~of fiscal year~~, reflecting~~ ~~higher~~2007 ~~gross~~resulted ~~margins~~in ~~(39.5 percent~~net ~~compared~~income ~~with~~of 38$0.~~2 percent)~~12 ~~and~~per ~~lower~~diluted ~~operating expenses~~share ~~(37.2 percent~~on ~~compared~~sales ~~with~~of 39$60.~~0 percent)~~9 million. WeOur ~~were~~profitability ~~able~~increased toover ~~increase~~the ~~our~~same ~~profitability over~~periods ~~last~~for ~~year~~the byprior ~~increasing~~fiscal ~~productivity~~year ~~and~~through ~~continuing~~a continued ~~our~~ focus on cost containment, reduced interest expense, and favorable foreign exchange rate changes against the U.S. Dollar.

~~Line~~Worldwide ~~matrix~~revenue ~~sales~~for ~~during~~ the ~~third~~second quarter of fiscal year ~~2007~~2008 increased 20.94 percent over the ~~prior~~same ~~year~~period ~~quarter~~last ~~to $25~~year.~~3 million~~ ~~due~~Line ~~to higher printer sales as our customers upgrade to the new P7000 series line~~ matrix ~~printers. Regionally, Americas~~ sales ~~increased~~decreased 47.53 percent to $1719.1 6 million ~~and~~primarily ~~EMEA~~due ~~sales~~to the ~~increased~~disruption ~~6.5 percent~~in sales to ~~$11.3 million~~InfoPrint ~~due~~Solutions to(JV ~~higher~~of ~~line~~IBM/Ricoh) ~~matrix~~ and ~~thermal printer~~a ~~sales~~decrease ~~through~~in ~~the~~service ~~distribution~~and maintenance ~~channel~~revenue. ~~Asia~~Thermal ~~Pacific~~ sales ~~decreased~~increased ~~by 5~~37.85 percent ~~from~~ over the prior year quarter to $67.4 6 million primarily due to ~~lower~~sales ~~line~~of ~~matrix~~the ~~printer~~recently ~~sales, particularly~~launched inT4M ~~China.~~mid-range ~~Overall~~thermal printer, ~~worldwide~~ increased sales ~~through~~in the ~~distribution~~EMEA ~~channel~~automotive ~~increased~~sector, byand ~~4.1 percent~~continued ~~over~~improvement ~~the~~in ~~prior~~distribution ~~year~~sales. ~~quarter~~Regionally, Americas sales decreased 13.2 percent to $2312.37 million., ~~Worldwide~~EMEA sales ~~for~~increased ~~the~~9.7 percent ~~first~~to ~~nine~~$10.2 million ~~months~~and ~~of fiscal~~Asia ~~year~~Pacific ~~2007~~sales increased 1by 21.38 percent ~~over~~to ~~the~~$6.5 million ~~same~~from ~~period~~the ~~last~~prior year quarter.

IBM, our largest customer, ~~representing 22.3% of our third quarter sales,~~ and Ricoh ~~announced the~~formed ~~formation of~~ a joint venture company, ~~the~~InfoPrint Solutions Company (“InfoPrint Solutions” ~~Company,~~or ~~which~~“JV ~~will~~of ~~own~~IBM/Ricoh”), to acquire IBM’s Printing ~~Systems~~System Division. ~~IBM~~as of ~~has~~June 2007. ~~informed~~The usPrintronix ~~that~~contracts ~~the contract~~ with IBM ~~will~~have bebeen assigned to InfoPrint Solutions,. ~~and~~We will ~~business~~continue isto ~~expected~~report toand ~~continue~~compare assales ~~before~~to ~~with~~InfoPrint ~~all~~Solutions with our ~~current~~prior year sales to IBM’s ~~products~~Printing ~~and~~System ~~services~~Division.

2014

Cash and short-term investments were $3729.50 million at ~~December~~September 2928, ~~2006~~2007 compared with $4238.1 9 million at the end of fiscal year ~~2006~~2007, primarily due to ~~payment~~repayment of the $112.78 million note, a payment of ~~dividends~~$1.3 million in dividends to stockholders, and partly offset by the operating cash flow generated during the first ~~nine~~six months of this fiscal year. We ~~2007~~believe ~~and~~that ~~$2.5 million~~this instrong ~~taxes~~cash ~~related~~ position can continue to ~~the~~fund ~~funds~~future ~~repatriated~~growth ~~under~~opportunities. ~~the~~The pending ~~American~~acquisition ~~Jobs~~of ~~Creation~~Printronix ~~Act.~~by WePioneer ~~believe~~Holding ~~that~~Corp., ~~this~~an ~~strong~~affiliate ~~cash position~~of ~~can~~Vector ~~continue~~Capital, restricts tothe ~~fund~~payment of dividends ~~and~~prior ~~future~~to ~~growth~~the ~~opportunities~~closing of this transaction.

Transaction Update

On October 1, we signed a definitive merger agreement (the “Merger Agreement”) to be acquired by Pioneer Holding Corp., an affiliate of Vector Capital, a private equity firm specializing in buyouts and recapitalizations of established technology businesses, for $16.00 per share in cash and a total price of approximately $109 million. Upon the closing of the transaction contemplated by the Merger Agreement, we will become a wholly-owned subsidiary of Pioneer and each share of our common stock will be converted into a right to receive $16.00 in cash. The Federal Trade Commission has granted early termination to the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the transaction. The closing of the transaction was also conditioned on the delivery of satisfactory Phase I environmental reports on certain of the company’s manufacturing sites and Vector Capital has confirmed that this condition has been satisfied. The transaction is subject to additional closing conditions, including adoption of the Merger Agreement by our stockholders.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed 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 periods 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. Information with respect to the company’s critical accounting policies, which the company believes could have the most significant effect on the company’s reported results and require subjective or complex judgments by management, is contained on pages 22-26 in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the company’s Annual Report on Form 10-K for the year ended March 30, 2007. Management believes that as of September 28, 2007 there has been no material change to this information, except as described below.

Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes — an Interpretation of FASB statement No. 109” (“FIN 48”). The company adopted FIN 48 on March 31, 2007, the first day of the 2008 fiscal year. FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. FIN 48 also provided guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. In May 2007, the FASB issued FASB Staff Position No. FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48” (“FSP FIN 48-1”). FSP FIN 48-1 provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of operations. The effect of adoption of FIN 48 on our condensed consolidated balance sheet as of September 28, 2007 is summarized in Note 6, Income Taxes, under Part I, Item 1 of this report.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “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 years beginning after November 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of SFAS Statement No. 115” (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

In June 2007, the EITF reached a consensus on Issue No. 07-03, “Accounting for Advance Payment for Goods or Services to be Used in Future Research and Development,” (“EITF 07-03”). Under EITF 07-03, an entity is required to defer and capitalize non-refundable advance payments made for future research and development activities until the related goods are delivered or the related services are performed. EITF 07-03 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2007. We do not expect this statement to have a material impact on the condensed consolidated financial statement of the company.

RESULTS OF OPERATIONS

Revenue

Compared with the Prior Year Quarter ~~— Overview~~

~~Revenue~~Sales for the ~~current~~second quarter ~~was $34.9 million, an increase~~ of ~~$1.0 million,~~fiscal ~~or 3.0 percent, over the same period last~~ year. ~~The~~2008 ~~increase in revenue for the current quarter was mainly attributable to higher line matrix~~ and ~~thermal~~2007 ~~printer~~were ~~sales,~~as ~~principally through the~~follows: distribution channel. Revenue increased in the Americas by $0.7 million, or 4.5 percent, due to higher line matrix and thermal printer sales. Revenue increased in EMEA by $0.7 million, or 6.5 percent, primarily due to higher line matrix and thermal printer sales through the distribution channel. Revenue decreased in the Asia Pacific region by $0.4 million, or 5.8%, principally due to lower line matrix printer sales through the distribution channel.

Revenue by Geographic Region


	Three Months Ended										Percent of Total Sales
	September 28,		September 29,		Change						September 28,			September 29,
	2007		2006		$			%			2007			2006
	($ in thousands)
Geographic Region
Americas	$	12,742	$	14,684	$	(1,942	)		-13.2	%		43.4	%		50.2	%
EMEA		10,178		9,279		899			9.7	%		34.6	%		31.7	%
Asia Pacific		6,453		5,300		1,153			21.8	%		22.0	%		18.1	%

	$	29,373	$	29,263	$	110			0.4	%		100.0	%		100.0	%


Product Technology
Line matrix	$	19,570	$	21,119	$	(1,549	)		-7.3	%		66.6	%		72.2	%
Thermal (includes RFID)		7,628		5,548		2,080			37.5	%		26.0	%		19.0	%
Laser		2,175		2,596		(421	)		-16.2	%		7.4	%		8.8	%

	$	29,373	$	29,263	$	110			0.4	%		100.0	%		100.0	%


Channel
OEM	$	6,873	$	8,334	$	(1,461	)		-17.5	%		23.4	%		28.5	%
Distribution		21,190		19,753		1,437			7.3	%		72.1	%		67.5	%
Direct		1,310		1,176		134			11.4	%		4.5	%		4.0	%

	$	29,373	$	29,263	$	110			0.4	%		100.0	%		100.0	%

~~Revenue~~Worldwide bysales ~~geographic~~for ~~region~~the second quarter of fiscal year 2008 were $29.4 million, ~~related~~an ~~percent~~increase ~~changes~~of $0.1 million ~~and~~or 0.4 percent ofover ~~total~~the ~~revenue~~same ~~for~~period last year. The overall increase in sales was the ~~third~~result ~~quarter~~of an increase in thermal sales of ~~fiscal~~$2.1 million, ~~year~~offset ~~2007~~with decreases in line matrix and laser ~~2006~~sales ~~were~~of as$1.5 million ~~follows:~~and $0.4 million, respectively. The Euro currency changes increased sales by $0.3 million compared to the second quarter of prior fiscal year.

	Three Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Geographic Region	2006		2005		Change			2006			2005
	($ in thousands)
Americas	$	17,116	$	16,385		4.5	%		49.1	%		48.4	%
EMEA		11,345		10,652		6.5	%		32.5	%		31.5	%
Asia Pacific		6,422		6,814		-5.8	%		18.4	%		20.1	%
	$	34,883	$	33,851		3.0	%		100.0	%		100.0	%

Americas sales increased by 4.5 percent to $17.1 million principally as a result of an increase in line matrix printer sales through IBM into the automotive industry. EMEA sales increased 6.5 percent to $11.3 million principally due to higher line matrix and thermal printer sales, primarily through the distribution channel and into the automotive industry. Changes in the value of the Euro had a positive impact on EMEA revenue of $0.3 million during the current quarter compared to the prior year quarter. Asia Pacific sales decreased 5.8 percent to $6.4 million principally due to a decrease in line matrix sales through the distribution channel as a result of fewer large sales to the China banking industry in the current quarter.

~~Revenue~~ Line matrix sales worldwide decreased $1.5 million or 7.3 percent from the comparable quarter last year primarily due to a $2.1 million decrease in Americas, offset by ~~Product~~a ~~Technology~~$0.6 million increase in Asia Pacific. The $2.1 million decrease in Americas was due to a decrease in repair and maintenance service revenue and the disruption in sales to InfoPrint Solutions (JV of IBM/Ricoh) as they transition into the new entity. The $0.6 million increase in line matrix sales in Asia Pacific was due to a general increase in sales through the distribution channel.

~~Revenue~~Thermal bysales ~~product~~worldwide ~~technology,~~increased ~~related~~$2.1 million or 37.5 percent ~~changes~~from the comparable quarter last year due to a $1.1 million increase in EMEA, a $0.4 million increase in Americas, and ~~percent~~a of$0.6 million ~~total~~increase ~~revenue~~in Asia Pacific. The primary factor for the ~~third~~ ~~quarter~~worldwide increase is the successful launch of ~~fiscal~~our new T4M mid-range thermal printer since fourth quarter last year. ~~2007~~Other ~~and~~contributing factors ~~2006~~to ~~were~~the asincrease ~~follows~~include: an increase in sales to the EMEA automotive sector, higher recurring sales and post sale service revenue from the installed customer base in Americas, and a general increase in thermal sales through the distribution channel in Asia Pacific.

	Three Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Product Technology	2006		2005		Change			2006			2005
	($ in thousands)
Line matrix	$	25,287	$	24,569		2.9	%		72.5	%		72.6	%
Thermal (includes RFID)*		6,529		5,675		15.0	%		18.7	%		16.8	%
Laser		2,669		3,081		-13.4	%		7.7	%		9.1	%
Verification		398		526		-24.3	%		1.1	%		1.5	%
	$	34,883	$	33,851		3.0	%		100.0	%		100.0	%
* RFID	$	707	$	830		-14.8	%		2.0	%		2.5	%

Overall laser sales continue to show a decline, which was primarily the result of a combined $0.4 million decline in the Americas and EMEA regions. We continue to focus our efforts on updating our laser product line.

~~Line~~Sales ~~matrix~~through ~~sales~~the ~~increased~~distribution ~~from~~channel ~~the~~worldwide ~~prior~~increased ~~year~~7.3 percent ~~quarter~~to ~~principally~~$21.2 million due to a ~~higher~~$1.1 million ~~printer sales~~or 24.5 percent increase in ~~the~~Asia ~~Americas~~Pacific ~~and~~distribution ~~EMEA~~sales, ~~partially~~a ~~offset~~$0.8 million byor ~~lower~~12.5 percent ~~services~~increase in EMEA distribution sales, and ~~other~~a ~~revenue~~$0.5 million ~~Thermal~~or 5.9 percent decrease in distribution sales ~~increased~~in Americas. Sales through the OEM channel decreased primarily due to ~~higher~~the decrease in sales ofto ~~printers,~~InfoPrint ~~repairs~~Solutions and ~~service~~lower ~~contracts,~~maintenance asand ~~well~~service asrevenue. ~~printer and~~Direct ~~services~~ sales increased 11.4 percent to a$1.3 million ~~new~~due ~~direct~~to ~~customer.~~increased ~~Laser~~ sales ~~continue~~in toEMEA ~~show~~and aAsia ~~decline.~~Pacific Weto ~~are~~one ~~focusing~~significant ~~our~~customer ~~efforts~~as onthey ~~updating~~outfitted ~~our~~their ~~laser~~China ~~product~~distribution ~~line~~center ~~during~~and ~~fiscal~~increased ~~year~~their ~~2007~~thermal consumable purchases in EMEA.

~~Revenue~~ Recurring sales from the installed base were $12.6 million, or 42.9 percent of total sales in the current quarter, down from the $13.9 million or 47.5 percent of total sales, for the same period a year ago. The decrease was primarily attributable to a $0.6 million decrease in maintenance and service revenue in Americas and a $0.5 million decrease in laser consumable sales worldwide. Recurring sales include line matrix ribbons, laser consumables, spares, sales under advance exchange programs, labels, printer maintenance and depot repair services. We will continue to focus on this strategic growth initiative by ~~Channel~~marketing to our installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.

~~Revenue by channel, related percent changes, and percent of total sales for the third quarter~~17 ~~of fiscal year 2007 and 2006 were as follows:~~

	Three Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Channel	2006		2005		Change			2006			2005
	($ in thousands)
OEM	$	9,754	$	9,857		-1.0	%		28.0	%		29.1	%
Distribution		23,295		22,382		4.1	%		66.7	%		66.1	%
Direct		1,834		1,612		13.8	%		5.3	%		4.8	%
	$	34,883	$	33,851		3.0	%		100.0	%		100.0	%

Sales through the OEM channel decreased 1.0 percent to $9.8 million due to slight decreases in EMEA and Asia Pacific offset by a slight increase in the Americas. Sales through the distribution channel increased 4.1 percent to $23.3 million primarily due to an increase in line matrix printer sales in the Americas and EMEA, resulting from increased sales due to new distributor relationships, as well as increased efforts to work with our distributors on demand-generation programs. The increase in the Americas and EMEA was partially offset by a decrease in Asia Pacific line matrix printer sales resulting from a decrease in sales in China within the banking industry. Direct sales increased 13.8 percent to $1.8 million primarily due to an increase in thermal printer and services sales to a new direct customer.

Revenue by Customer

Revenue by customer, related percent changes and percent of total revenue for the third quarter of fiscal year 2007 and 2006 were as follows:

	Three Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Customer	2006		2005		Change			2006			2005
	($ in thousands)
Largest customer — IBM	$	7,788	$	7,294		6.8	%		22.3	%		21.5	%
Second largest customer		1,656		2,154		-23.1	%		4.7	%		6.4	%
Top ten customers		16,725		17,419		-4.0	%		47.9	%		51.5	%

~~Sales~~Compared towith ~~IBM increased by $0.5 million, or 6.8 percent, to $7.8 million, primarily due to increased printer unit sales in~~ the ~~Americas~~Prior ~~into~~Year ~~the automotive industry. Sales~~ to ~~our second~~Date largest customer decreased 23.1 percent. The decrease was because our second largest customer underwent a restructuring, due to new management. Part of the company was sold to a two-tier reseller, with which we are currently doing business. Combined sales to both of these companies during the quarter ended December 29, 2006 was $2.1 million.

~~Recurring~~ Sales ~~Revenue~~for the first six months of fiscal year 2008 and 2007 were as follows:

Recurring revenue from the installed base was $14.1 million, or 40.5 percent of total sales, in the current quarter, down slightly from $14.2 million, or 42.0 percent of total sales, for the same period a year ago. The decrease was primarily due to a decrease in laser consumables sales, partially offset by an increase in maintenance and service sales. 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 our installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.


	Six Months Ended										Percent of Total Sales
	September 28,		September 29,		Change						September 28,			September 29,
	2007		2006		$			%			2007			2006
	($ in thousands)
Geographic Region
Americas	$	27,311	$	30,872	$	(3,561	)		-11.5	%		45.5	%		50.7	%
EMEA		20,652		19,458		1,194			6.1	%		34.4	%		31.9	%
Asia Pacific		12,051		10,583		1,468			13.9	%		20.1	%		17.4	%

	$	60,014	$	60,913	$	(899	)		-1.5	%		100.0	%		100.0	%


Product Technology
Line matrix	$	40,679	$	43,867	$	(3,188	)		-7.3	%		67.8	%		72.0	%
Thermal (includes RFID)		14,710		11,792		2,918			24.7	%		24.5	%		19.4	%
Laser		4,625		5,254		(629	)		-12.0	%		7.7	%		8.6	%

	$	60,014	$	60,913	$	(899	)		-1.5	%		100.0	%		100.0	%


Channel
OEM	$	14,273	$	16,186	$	(1,913	)		-11.8	%		23.8	%		26.6	%
Distribution		43,014		40,873		2,141			5.2	%		71.7	%		67.1	%
Direct		2,727		3,854		(1,127	)		-29.2	%		4.5	%		6.3	%

	$	60,014	$	60,913	$	(899	)		-1.5	%		100.0	%		100.0	%

~~Compared~~ Worldwide sales for the six months ended September 28, 2007 were $60.0 million, a decrease of ~~with~~$0.9 million or 1.5 percent from the ~~Prior~~same ~~Year~~period tolast ~~Date~~year. –The ~~Overview~~overall decrease in sales was the result of decreases in line matrix and laser sales of $3.2 million and $0.6 million, respectively, offset by an increase in thermal sales of $2.9 million. The Euro currency changes increased sales by $0.6 million over the comparable prior year period.

~~Revenue~~Line ~~for~~matrix ~~the~~sales ~~first~~worldwide ~~nine~~decreased ~~months of fiscal year 2007 was~~ $953.82 million, ~~an increase of $1.2 million,~~ or 17.3 percent, ~~over~~from the ~~same~~comparable six month period last year. ~~The~~primarily ~~increase~~due into ~~revenue~~a ~~for~~$4.1 million ~~the~~decrease ~~first nine~~in ~~months~~Americas, ofoffset ~~fiscal~~by ~~year~~a ~~2007~~$0.8 million ~~was~~increase ~~mainly~~in ~~attributable~~Asia toPacific. ~~higher~~The ~~sales~~$4.1 million ~~through~~decrease ~~the~~in ~~distributor~~Americas ~~and direct~~was ~~channels~~due ~~offset~~to by lower sales ~~through~~to one ~~the~~major ~~OEM~~customer ~~channel,~~that ~~particularly~~finished inoutfitting ~~EMEA.~~their ~~Revenue increased~~two innew ~~the~~distribution ~~Americas~~centers byin ~~$1.4 million,~~the orprior ~~3.0 percent~~year, ~~particularly~~a disruption in ~~the~~second ~~line~~quarter ~~matrix technology~~sales ~~area~~to InfoPrint Solutions, and ~~increased~~a decrease in ~~EMEA~~repair byand maintenance service revenue. The $0.48 million, orincrease ~~1.2 percent,~~ in ~~the~~line ~~thermal~~matrix ~~product technology~~sales ~~area. Revenue decreased~~ in ~~the~~ Asia Pacific ~~region~~was bydue ~~$0.5 million,~~to ora general ~~3.1 percent,~~increase in ~~the~~ ~~line~~sales ~~matrix~~through ~~technology~~the ~~area~~distribution channel.

~~Revenue~~ Thermal bysales ~~Geographic~~worldwide ~~Region~~increased $2.9 million or 24.7 percent from the comparable six month period last year due to a $1.4 million increase in EMEA, a $0.7 million increase in Americas, and a $0.7 million increase in Asia Pacific. The primary factor for the worldwide increase is the successful launch of our new T4M mid-range thermal printer since fourth quarter last year. Other contributing factors to the increase include: an increase in sales to the EMEA automotive sector, higher first quarter service and printer sales to one significant EMEA customer, higher recurring sales and post sale service revenue from the installed customer base in Americas, and a general increase of thermal sales through the Asia Pacific distribution channel.

~~Revenue~~Overall bylaser ~~geographic~~sales ~~region,~~continue ~~related~~to ~~percent~~show ~~changes~~a ~~and~~decline. ~~percent~~The decrease was primarily the result of ~~total~~a combined ~~revenue~~$0.5 million ~~for~~decline in the ~~first~~ ~~nine~~Americas ~~months~~and ofEMEA ~~fiscal~~regions. ~~year~~We ~~2007~~continue ~~and~~to ~~2006~~focus ~~were~~our asefforts on ~~follows:~~updating our laser product line.

	Nine Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Geographic Region	2006		2005		Change			2006			2005
	($ in thousands)
Americas	$	47,989	$	46,603		3.0	%		50.1	%		49.3	%
EMEA		30,803		30,445		1.2	%		32.2	%		32.2	%
Asia Pacific		17,004		17,549		-3.1	%		17.7	%		18.5	%
	$	95,796	$	94,597		1.3	%		100.0	%		100.0	%

Sales through the distribution channel worldwide increased 5.2 percent to $43.0 million due to a $1.6 million or 18.0 percent increase in Asia Pacific distribution sales, a $1.6 million or 11.8 percent increase in EMEA distribution sales, and a $1.1 million or 6.1 percent decrease in Americas distribution sales. Sales through the OEM channel decreased primarily due to lower maintenance and service revenues in EMEA and Americas regions and a decrease in sales to InfoPrint Solutions. Direct sales decreased 29.2 percent to $2.7 million due to a decrease in sales to one major customer compared to the first six months last year when they outfitted their two new distribution centers for operation.

~~Americas sales increased by 3.0 percent to $48.0 million principally as a result of an~~18 increase in direct sales. Americas direct sales increased 37.3 percent to $4.1 million due to increased sales to one of our largest customers as they refurbished a distribution center in the first fiscal quarter, and due to sales to a new direct customer added in the third quarter of fiscal year 2007.

EMEA sales increased 1.2 percent to $30.8 million principally due to higher consumables sales, partially offset by a decrease in services and other sales. Changes in the value of the Euro had a favorable impact on year-to-date EMEA revenue of $23 thousand compared with the same period a year ago.

Asia Pacific sales decreased 3.1 percent to $17.0 million principally due to a decrease in line matrix printer sales through the distribution channel as a result of increased competition and two large government contract sales during the prior nine month period, offset by an increase in direct sales.

~~Revenue~~ Recurring sales from the installed base were $25.9 million, or 43.1 percent of total sales, in the recent six month period, down from the $27.7 million or 45.6 percent of total sales, for the same period a year ago. The decrease was primarily attributable to a $1.1 million decrease in maintenance and service revenue in Americas and a $0.7 million decrease in laser consumable sales worldwide. Recurring sales include line matrix ribbons, laser consumables, spares, sales under advance exchange programs, labels, printer maintenance and depot repair services. We will continue to focus on this strategic growth initiative by ~~Product~~marketing ~~Technology~~to our installed base of customers, continuing to add channels to market, and targeting the maintenance and repair business.

Revenue by product technology, related percent changes and percent of total revenue for the first nine months of fiscal year 2007 and 2006 were as follows:

	Nine Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Product Technology	2006		2005		Change			2006			2005
	($ in thousands)
Line matrix	$	69,155	$	67,631		2.3	%		72.2	%		71.5	%
Thermal (includes RFID)*		17,289		16,876		2.4	%		18.0	%		17.9	%
Laser		7,921		8,541		-7.3	%		8.3	%		9.0	%
Verification		1,431		1,549		-7.6	%		1.5	%		1.6	%
	$	95,796	$	94,597		1.3	%		100.0	%		100.0	%
* RFID	$	2,103	$	2,565		-18.0	%		2.2	%		2.7	%

Line matrix sales increased 2.3 percent to $69.2 million principally due to higher recurring revenue from the installed base. Thermal printer sales increased 2.4 percent to $17.3 million due to higher recurring revenue from the installed base as well as higher repairs and service contract revenue. Laser sales continue to show a decline. We are focusing our efforts on updating our laser product line during fiscal year 2007.

Revenue by Channel

Revenue by channel, related percent changes, and percent of total sales for the first nine months of fiscal year 2007 and 2006 were as follows:

	Nine Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Channel	2006		2005		Change			2006			2005
	($ in thousands)
OEM	$	25,939	$	27,551		-5.9	%		27.1	%		29.2	%
Distribution		64,169		62,568		2.6	%		67.0	%		66.1	%
Direct		5,688		4,478		27.0	%		5.9	%		4.7	%
	$	95,796	$	94,597		1.3	%		100.0	%		100.0	%

Sales through the OEM channel decreased 5.9 percent to $25.9 million. In the Americas and EMEA, the OEM channel decline was primarily due to lower sales through IBM. The decline in the Americas was partially offset by higher sales under a maintenance contract with one of our OEM customers. The decline in sales to IBM was due to a major sale in the prior year in the Americas which did not reoccur this fiscal year and continued weakness in EMEA. Sales through the distribution channel increased 2.6 percent to $64.2 million primarily due to an increase in EMEA recurring revenue, offset by a decrease in Asia Pacific sales resulting from aggressive competitor pricing in certain smaller countries. Direct sales increased 27.0 percent to $5.7 million primarily due to increased sales in the Americas and Asia 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 the first nine months of fiscal year 2007 and 2006 were as follows:

	Nine Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
Customer	2006		2005		Change			2006			2005
	($ in thousands)
Largest customer — IBM	$	19,782	$	21,564		-8.3	%		20.7	%		22.8	%
Second largest customer		5,110		7,125		-28.3	%		5.3	%		7.5	%
Top ten customers		44,644		46,573		-4.1	%		46.6	%		49.2	%

Sales to IBM in the Americas decreased by $0.7 million, or 5.8 percent, and in EMEA by $1.0 million, or 13.8 percent, for the reasons already stated above. Sales to our second largest customer decreased 28.3 percent. The decrease was because our second largest customer underwent a restructuring, due to new management. Part of the company was sold to a two-tier reseller, with which we are currently doing business. During the nine months ended December 29, 2006, sales to the two-tier reseller were $1.0 million.

Recurring Revenue

Recurring revenue from the installed base was $41.9 million, or 43.7 percent of total sales, in the current year-to-date period, up from $39.5 million, or 41.7 percent of total sales, for the same period a year ago. The increase is due partly to higher maintenance and service sales to an OEM customer and, we believe, is also partly a result of the demand-generation programs, particularly in the Americas. 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 our installed base of customers, continuing to add channels to market and targeting the maintenance and repair business.

Gross Margin

~~Compared~~ Gross ~~with~~margin percentage for the ~~Prior~~quarter ~~Year~~ended ~~Quarter~~September 28, 2007 was 39.6 percent of revenue, increased from 39.3 percent for the comparable period a year ago. Gross margin percentage for the six months ended September 28, 2007 was 40.0 percent of revenue, reflecting an increase from 39.2 percent for the comparable period a year ago. The increase in gross margin percentages for the three and the six months ended September 28, 2007 was primarily the result of price increases on certain products and favorable foreign exchange rate changes, partly offset by an adverse shift in product mix. Changes in the value of the Euro had favorable impacts of $0.2 million and $0.4 million on the current quarter and year to date gross margins, respectively.

Gross margin for the current quarter was $13.9 million compared with $13.0 million for the same period a year ago and was 39.9 percent and 38.5 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. Continuing efficiencies in the manufacturing process has enabled a 12 percent decrease in manufacturing personnel for the quarter ended December 29, 2006 compared with the quarter ended December 23, 2005. Changes in the value of the Euro had a favorable impact on gross margin of $0.2 million, or 0.6 percent of revenue.

Compared with the Prior Year-to-Date

Gross margin for the first nine months of fiscal year 2007 was $37.8 million compared with $36.1 million for the same period a year ago and was 39.5 percent and 38.2 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 more than offset the higher product costs due to RoHS compliance in EMEA. Continuing efficiencies in the manufacturing process has enabled a 10 percent decrease in manufacturing personnel for the nine months ended December 29, 2006 compared with the nine months ended December 23, 2005. Changes in the value of the Euro had an unfavorable impact of $47 thousand on year-to-date gross margin.

Operating Expenses

~~Compared~~ Operating expenses consist of engineering and development, sales and marketing, and general and administrative costs. Operating expenses were $10.8 million for the current quarter and $11.3 million for the prior year quarter. Operating expenses were $22.4 million for the first six months of fiscal year 2008 compared with $23.3 million for the ~~Prior~~same ~~Year~~period ~~Quarter~~last year. During the quarter ended September 28, 2007, the company received a $0.3 million return of excess workers compensation insurance premiums from our captive insurance program related to policy years 2003 to 2005. The $0.3 million was credited to manufacturing, engineering and development, sales and marketing, and general and administrative expenses during the current quarter. The effect of changes in Euro value increased operating expenses by $60 thousand and $0.1 million for the three and six months ended September 28, 2007, respectively, compared to the same periods prior year.

Operating expenses ~~consist of engineering and development, sales and marketing and general and administrative costs. Operating expenses were $12.4 million~~ for the ~~current~~first ~~quarter~~three and ~~$12.2 million~~six ~~for~~months ~~the~~of ~~prior~~fiscal year ~~quarter.~~2008 ~~Operating expenses, related percent changes~~ and ~~percent~~2007 ~~of total sales~~ were as follows:

	Three Months Ended							~~Percent of Total Sales~~			Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
	September 28,		September 29,		Change						September 28,			September 29,
	2006		2005		Change			2006			2005
	2007		2006		$			%			2007			2006
	($ in thousands)
Engineering and development	$	32,~~182~~623	$	3,~~274~~092	$	~~-2.8~~(469	%)		9-15.12	%		98.79	%		10.5	%
Sales and marketing		65,~~176~~214		65,~~167~~493		~~0.1~~(279	%)		17-5.71	%		1817.28	%		18.8	%
General and administrative		32,~~036~~993		2,~~782~~720		~~9.1~~273	%		810.70	%		810.2	%		9.3	%
	$	1210,~~394~~830	$	1211,~~223~~305	$	~~1.4~~(475	%)		35-4.52	%		36.19	%		38.6	%

Engineering and Development


	Six Months Ended										Percent of Total Sales
	September 28,		September 29,		Change						September 28,			September 29,
	2007		2006		$			%			2007			2006
	($ in thousands)
Engineering and development	$	5,499	$	6,231	$	(732	)		-11.7	%		9.2	%		10.2	%
Sales and marketing		10,963		11,448		(485	)		-4.2	%		18.2	%		18.8	%
General and administrative		5,979		5,581		398			7.1	%		10.0	%		9.2	%

	$	22,441	$	23,260	$	(819	)		-3.5	%		37.4	%		38.2	%

~~Engineering expenses consist mostly of labor, test materials and infrastructure costs. In the~~19 current quarter, we spent $3.2 million on engineering and development, compared with $3.3 million for the same period last year. As a percentage of revenue, engineering and development expenses decreased in the current quarter to 9.1 percent from 9.7 percent in the same quarter last year. Engineering and development expenses for the current quarter decreased due to lower labor costs resulting from a 9 percent decrease in personnel for the quarter ended December 29, 2006 compared with the quarter ended December 23, 2005. Engineering expenses were higher in the prior year quarter due to the P7000 and T5000 product development.

Sales and Marketing

Sales and marketing expenses for both the current quarter and the prior year quarter were $6.2 million. As a percentage of revenue, sales and marketing expenses decreased in the current quarter to 17.7 percent from 18.2 percent in the same quarter last year. The decrease in sales and marketing spending as a percentage of revenue was a result of our focus on cost containment and efficiencies, including reductions in marketing, consulting, and travel expenditures compared with the same quarter last year.

General and Administrative

General and administrative expenses for the quarter increased to $3.0 million, compared with $2.8 million for the prior year quarter. As a percentage of revenue, general and administrative expenses increased in the current quarter to 8.7 percent from 8.2 percent in the same quarter last year. The current period reflects a $0.2 million increase in information technology and management services costs in Asia Pacific compared to the same quarter last year. In addition, the prior year quarter included a $0.1 million reduction in the provision for bad debts for recovery on receivables previously determined to be uncollectible.

The effects of changes in the Euro’s value in the current quarter, compared with the prior year quarter, increased operating expenses by $38 thousand.

Compared with the Prior Year-to-Date

Operating expenses consist of engineering and development, sales and marketing and general and administrative costs. Operating expenses were $35.7 million for the first nine months of fiscal year 2007 compared with $36.9 million for the same period last year. Operating expenses, related percent changes and percent of total sales were as follows:

	Nine Months Ended							Percent of Total Sales
	December 29,		December 23,		Percent			December 29,			December 23,
	2006		2005		Change			2006			2005
	($ in thousands)
Engineering and development	$	9,413	$	10,753		-12.5	%		9.8	%		11.4	%
Sales and marketing		17,624		18,398		-4.2	%		18.4	%		19.4	%
General and administrative		8,617		7,781		10.7	%		9.0	%		8.2	%
	$	35,654	$	36,932		-3.5	%		37.2	%		39.0	%

Engineering and Development

Engineering expenses consist mostly of labor, test materials and infrastructure costs. In the ~~first~~current ~~nine months of fiscal year 2007~~quarter, we ~~spent~~incurred $92.46 million onin engineering and development, compared with $103.8 1 million for the same period last year. As a percentage of revenue, engineering and development expenses decreased in the current ~~period~~quarter to 9.8.9 percent from 1110.45 percent in the same ~~period~~quarter last year. Engineering and development expenses for the current ~~period~~quarter decreased due to ~~lower~~a reduction in labor costs resulting from a 14.0 percent decrease in engineering personnel, ~~for~~$90 ~~the~~thousand ~~nine~~return ~~months ended~~of ~~December 29,~~excess ~~2006~~workers ~~compared~~compensation ~~with~~insurance ~~the nine months ended December 23~~premiums, ~~2005. Also, outside consulting costs~~ and ~~product~~a ~~certification costs decreased by~~ $0.31 million inreimbursement ~~the~~from ~~current period. Engineering~~InfoPrint ~~expenses~~Solutions ~~were~~for ~~higher~~costs inand ~~the~~services ~~prior~~incurred ~~year~~relating ~~due~~ to ~~the P7000 and T5000~~ product ~~development, resulting in new products coming to market in the prior year~~re-branding.

In the first six months of fiscal year 2008, we incurred $5.5 million in engineering and development, compared with $6.2 million for the same period last year. As a percentage of revenue, engineering and development expenses decreased in the current period to 9.2 percent from 10.2 percent in the same period last year. Engineering and development expenses decreased due to a 9.8 percent reduction in engineering personnel, $90 thousand return of excess workers compensation insurance premiums, the $0.2 million reimbursement from InfoPrint Solutions as discussed above, and other reductions in the areas of product conversion costs associated with RoHS Compliance in EMEA and product development costs related to the mid-range thermal printer.

Sales and Marketing

~~Sales~~Current quarter sales and marketing expenses ~~for the first nine months of fiscal year 2007~~ decreased to $175.6 2 million, compared with $185.4 5 million ~~for~~in the ~~same~~prior ~~period last~~ year quarter. As a percentage of revenue, sales and marketing expenses decreased in the current ~~period~~quarter to 1817.48 percent from 1918.48 percent in the same ~~period~~quarter ~~last~~prior year. The ~~Sales~~decrease in sales and marketing ~~spending~~expenses was ~~lower~~primarily ~~in the current period~~ due to ~~increased~~ ~~focus~~a on2.1 percent ~~cost~~reduction ~~containment, including reductions~~ in ~~marketing, consulting, and travel~~ ~~expenditures.~~personnel ~~In addition, the prior year included higher consulting~~ and ~~travel~~$77 ~~related~~thousand ~~expenses attributable~~return toof ~~the~~excess ~~P7000~~workers ~~and~~compensation ~~T5000 product launches~~premiums.

Sales and marketing expenses for the first six months of fiscal year 2007 decreased to $11.0 million, compared with $11.4 million for the same period last year. As a percentage of revenue, sales and marketing expenses decreased in the current six month period to 18.2 percent from 18.8 percent in the same period last year. Sales and marketing spending was lower in the current six month period due to a 4.1 percent reduction in sales and marketing personnel, $77 thousand return of excess workers compensation insurance premiums and continued focus on cost containment, including reductions in marketing, consulting, and travel expenditures.

General and Administrative

General and administrative expenses for the ~~first~~quarter ~~nine~~ended ~~months~~September 28, ~~of fiscal year~~ 2007 increased to $83.6 0 million, compared with $72.87 million for the ~~same~~comparable ~~period~~prior ~~last~~ year quarter. As a percentage of revenue, general and administrative expenses increased in the current ~~period~~quarter to 910.02 percent from 89.23 percent in the same ~~period~~quarter last year. The current ~~period~~quarter ~~reflects~~increase awas ~~reduction~~primarily indue ~~the provision for bad debts of $0.1 million for recovery on receivables previously determined~~ to ~~be uncollectible compared with~~ a $0.63 million ~~reduction~~increase in ~~the~~legal ~~same~~costs ~~period~~and ~~last year. Also, there was~~ a $0.4 1 million increase in ~~expense~~provision ~~due~~for tobad andebts. ~~increase~~The inprior ~~information~~year ~~technology~~bad ~~and~~debt ~~management~~provision ~~services costs~~reflected ~~in Asia Pacific, increased audit costs of~~ a $0.31 million, ~~and~~reduction ~~higher labor costs resulting from a 2 percent increase in personnel~~ for the ~~nine~~recovery ~~months~~of ~~ended~~receivables ~~December 29,~~previously ~~2006~~determined ~~compared~~to ~~with~~be ~~the nine months ended December 23, 2005~~uncollectible. These increases ~~were~~are ~~partially~~ offset by ~~lower~~a ~~consulting costs of~~ $0.7 1 million ~~related~~return toof ~~Sarbanes-Oxley~~excess ~~compliance~~workers compensation insurance premiums.

~~The~~General ~~effects~~and ofadministrative ~~changes~~expenses infor the ~~Euro’s value in the~~ first ~~nine~~six months of fiscal year ~~2007,~~2008 increased to $6.0 million, compared with $5.6 million for the same period last year. As a percentage of revenue, ~~decreased~~general ~~operating~~and administrative expenses increased in the current period to 10.0 percent from 9.2 percent in the same period last year. The current six month increase was primarily due to a $0.4 million increase in legal costs, a $0.1 million increase in provision for bad debts, and a $0.1 million increase in labor related expenses. The prior year bad debt provision reflected a $0.1 million reduction for the recovery of receivables previously determined to be uncollectible. These increases are offset by a $290.2 million ~~thousand~~decrease in audit and consulting fees.

Foreign Currency ~~Losses (~~Gains), Net

~~Foreign~~Gains from foreign currency ~~transaction~~transactions and ~~remeasurement~~remeasurements ~~gains~~were ~~from~~$110 ~~all~~thousand ~~foreign~~and ~~currencies~~$231 thousand for the three and ~~nine~~six months ended ~~December~~September 2928, ~~2006 were $52 thousand and $42 thousand~~2007, respectively, ~~principally~~ ~~due~~increasing tofrom losses ~~the effect~~ of ~~changes~~$16 inthousand ~~the value of the Euro. Foreign currency transaction~~ and ~~remeasurement~~$10 ~~gains~~thousand ~~from all foreign currencies~~ for the three and ~~nine~~six months ended ~~December~~September 2329, ~~2005~~2006. ~~were $2 thousand and $85~~The ~~thousand,~~increases ~~respectively,~~were principally due to the effect of changes in the value of ~~the~~ Euro.

2720

Interest and Other (Income), Net

Interest income, interest expense and other income, net ~~are~~were as follows:

	Three Months Ended						~~Nine~~Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	September 28,			September 29,			September 28,			September 29,
	2006			2005			2006			2005
	2007			2006			2007			2006
	~~($ in thousands)~~			($ in thousands)
Interest expense	$	~~230~~2		$	~~207~~266		$	~~720~~149		$	~~537~~490
Interest income		(~~473~~328	)		(~~374~~444	)		(~~1,377~~767	)		(~~1,020~~904	)
Other income, net		—(5	)	$	(137	)		(14	)	$	(4314	)

~~Interest~~Repayment ~~income~~of ~~increased~~our ~~compared~~note toin the ~~prior~~amount ~~fiscal~~of ~~year~~$12.8 million ~~primarily~~reduced ~~due to higher~~ interest ~~rates.~~ Inexpense ~~addition,~~for inboth the three ~~second~~and ~~quarter~~six ofmonths ~~fiscal~~ending ~~year 2006~~September 28, we2007 ~~engaged~~compared ato ~~professional investment~~the ~~manager~~same ~~which~~prior ~~resulted~~year ~~in better investment performance~~periods. ~~Interest expense increased~~The ~~compared~~decrease toin ~~the~~interest ~~prior~~expense ~~fiscal~~was ~~year~~offset ~~due~~by tothe ~~higher~~decrease in interest ~~rates~~income ~~and~~ due to ~~interest~~a ~~we recorded~~smaller ~~related~~investment toportfolio ~~the~~after ~~sales~~repayment ~~and~~of ~~use~~the ~~tax audit assessment~~note.

Sales Tax

We underwent a California state sales tax audit for the period of October 2001 through September 2004 and received a notice of determination in October 2006. During the second quarter of fiscal year 2007, we accrued $156 thousand related to this matter for taxes, interest and penalties through September 2006, of which $38 thousand was recorded to cost of sales, $38 thousand was recorded to engineering and development, $37 thousand was recorded to general and administrative, and $43 thousand was recorded to interest expense and other income, net. Of the $156 thousand, $144 thousand related to prior years. We concluded during the second quarter of fiscal year 2007 that these adjustments are not quantitatively or qualitatively material to the three and six month periods ended September 29, 2006, our projected results for the current year, or to any prior years’ earnings, earnings trends or financial statement line items. During the third quarter of fiscal year 2007, we received notification from the State of California Board of Equalization that penalties of $11 thousand would not be assessed; accordingly, we reduced our accrual. Also, during the third quarter of fiscal year 2007, we made payments of $79 thousand against the liability. As of December 29, 2006, our remaining accrual related to this matter was $66 thousand.

Income Taxes

~~We have subsidiaries in various countries and are therefore subject to varying income tax rates.~~ The tax ~~benefit~~provision for the three and six months ended ~~December~~September 2928, ~~2006~~2007 ~~consisted~~reflects ofstate ~~$289 thousand in~~minimum ~~federal~~franchise ~~tax benefit~~taxes, ~~$7 thousand in current~~ state franchise tax ~~benefit~~refund, ~~and $143 thousand in~~ foreign ~~tax expense.~~income ~~The tax provision for the nine months ended December 29~~taxes, ~~2006~~and ~~consisted~~an ofadjustment ~~$289~~to ~~thousand~~prior year inforeign ~~federal~~deferred tax ~~benefit,~~asset. $3The ~~thousand~~following intable ~~current~~summarizes ~~state~~our tax ~~expense and $425 thousand in foreign tax expense. The tax~~ provision (benefit) for the three and ~~nine~~six months ended ~~December~~September 2928, ~~2006 reflected~~2007 aand ~~$305~~September 29, ~~thousand reduction of the American Jobs Creation Act (“AJCA”) tax liability due to~~2006: further clarification in the interpretation of the existing laws surrounding the use of net operating loss carryforwards against a portion of the tax liability generated from the dividend repatriation.

In the first quarter of fiscal year 2007, we paid $2.5 million in taxes related to the repatriation under the AJCA of $32.0 million of dividends in the fourth quarter of fiscal year 2006.


	Three Months Ended				Six Months Ended
	September 28,		September 29,		September 28,			September 29,
	2007		2006		2007			2006
			($ in thousands)
State	$	9	$	5	$	(5	)	$	10
Foreign		49		150		202			282

Total	$	58	$	155	$	197		$	292

~~The~~A full valuation allowance was recorded against all deferred tax ~~provision~~assets, ~~for~~including net operating loss carryforwards generated in the ~~three~~United ~~months~~States ~~ended~~since ~~December 23,~~it ~~2005~~is ~~consisted~~more oflikely ~~foreign~~than ~~tax~~not that ~~expense~~such ofdeferred ~~$122~~tax ~~thousand.~~assets ~~The~~will ~~tax~~not ~~provision~~be ~~for~~realized. In the ~~nine~~first ~~months~~quarter ~~ended~~of ~~December 23~~fiscal year 2007, ~~2005~~we ~~included~~paid $202.5 million ~~thousand~~ in ~~current~~taxes ~~state~~related ~~tax~~to ~~expense~~the ~~and~~ $~~307~~32.0 million ~~thousand~~of individends ~~foreign~~repatriated ~~tax~~during ~~expense~~the fourth quarter of fiscal year 2006 under the American Jobs Creation Act (AJCA).

28 The company adopted FASB Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes — an Interpretation of FASB statement No. 109” (“FIN 48”) on March 31, 2007, the first day of the 2008 fiscal year. At March 31, 2007, unrecognized tax benefits and related accrued interest and penalties totaled $0.5 million. As a result of the cumulative effect of the adoption, the company recorded an additional tax liability of $81 thousand as a decrease to retained earnings. As of June 29, 2007, total unrecognized tax benefits were $0.6 million, which includes accrued interest and penalties of $96 thousand. In addition, our long-term deferred tax assets are reduced by unrecognized tax benefits of $2.7 million. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of income tax provision in the condensed consolidated statement of operations. Recognition of these unrecognized tax benefits would impact our effective tax rate.

During the current quarter the Company recorded an adjustment to increase its foreign deferred tax assets in the amount of $89,000. Of this amount, $106,000 relates to fiscal 2006, ($15,000) relates to fiscal 2007 and the remaining ($2,000) relates to fiscal 2008. Management concluded that no period was materially misstated; accordingly, these adjustments have been recorded in the current quarter.

During fiscal year 2006, we filed a protest and amended state income tax returns with the State of California Franchise Tax Board (“FTB”) to claim previously unclaimed research tax credits related to tax years ending March 1994 through March 2003. In September 2006, we received a notice from the FTB that it was conducting a review of our amended returns for the tax years March 1998 through March 2000. During the first quarter of fiscal 2008 the FTB completed their review resulting in a refund in the amount of $30 thousand.

As of June 29, 2007, the major tax jurisdictions for the company are the United States, Netherlands, Germany, the United Kingdom, France and Singapore. Of the major tax jurisdictions, we may be subject to examination for the fiscal years 2001 to 2006.

LIQUIDITY AND CAPITAL RESOURCES

Overview

The primary source of liquidity historically has been cash generated from operations. As of ~~December~~September 2928, ~~2006~~2007, cash, cash equivalents and short-term investments were $3729.50 million, a ~~decrease~~ decrease of $49.68 million from the beginning of the fiscal year. The decrease in net cash was due ~~primarily~~ primarily to payment ofin ~~taxes~~full of the $212.58 million ~~during the nine months ended December 29~~note, ~~2006 related to the~~a ~~repatriation~~payment of $321.03 million ofin dividends into ~~the~~stockholders, ~~fourth~~and ~~quarter~~partly ofoffset ~~fiscal~~by ~~year~~operating ~~2006~~cash ~~and~~flow ~~payment of~~generated ~~$1.7 million~~during inthe ~~dividends~~six tomonths ~~stockholders~~ended ~~during~~September 28, ~~the period~~2007.

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 for any working capital needs, we believe we could obtain such funds through additional credit facilities.

~~The~~At ~~note~~September 28, 2007, one of our foreign subsidiaries maintained unsecured lines of credit for $132.01 million ~~collateralized~~with bymajor ~~the~~foreign ~~Irvine~~banks. ~~property~~These iscredit ~~due~~facilities inare ~~June 2007.~~subject ~~The~~to a financial ~~balance~~covenant, onwhich ~~the~~requires ~~note~~that iswe ~~classified~~maintain ina ~~current~~net ~~liabilities~~worth ~~because~~of ~~all~~not ~~remaining~~less ~~payments~~than ~~are~~$64.0 million. ~~due~~We were in ~~within~~compliance ~~one~~with ~~year~~this financial covenant as of September 28, 2007. ~~Current~~We ~~expectations~~also ~~are~~maintain ~~that~~a commitment facility in the ~~company~~amount ~~will~~of ~~refinance~~$2.8 million ~~the~~with ~~debt~~a ~~before~~foreign ~~that time~~bank to support the hedging activities. We have ~~believe~~a weletter ~~will~~of becredit ~~able~~related to ~~refinance~~our ~~the~~workers’ ~~debt~~compensation ~~with~~program ~~acceptable~~for ~~terms or~~$0.4 million, ~~alternatively,~~which renews ~~repay~~automatically ~~the~~and ~~debt~~is ~~using~~secured ~~existing~~by cash. ~~balances~~During and as of the fiscal periods presented, no amounts were borrowed under these agreements.

~~One~~Additional ofinformation ~~our~~on ~~subsidiaries maintains a line of credit with a major foreign~~ bank ~~totaling~~borrowings ~~$4.2 million~~and ~~that~~debt isarrangements ~~guaranteed~~can bybe ~~the~~found ~~company.~~in ~~This~~Note ~~line of credit is collateralized by the subsidiary’s manufacturing property. The line of credit is subject to a financial covenant~~5, ~~which~~Bank ~~requires~~Borrowings ~~that~~and weDebt ~~maintain a net worth of not less than $64 million. We were in compliance with this financial covenant as of December 29~~Arrangements, ~~2006.~~under ~~One of our subsidiaries also maintains a letter of credit with a major foreign bank of $0.3~~Item ~~million.~~1 ~~We also maintain a commitment facility in the amount~~ of ~~$2.6~~Part ~~million~~I ~~with a foreign bank to support the hedging activities. We have a letter~~ of ~~credit~~ ~~related~~this ~~to our workers’ compensation program for $0~~report.~~4 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 bank borrowings and debt arrangements can be found in Note 5 of the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Operating Activities

Net cash ~~used~~provided inby operating activities ~~during~~for the ~~nine~~six months ended ~~December~~September 2928, ~~2006~~2007 was $14.26 million compared with net cash ~~provided~~used byin operating activities of $03.96 million during the ~~nine months~~six months ended ~~December~~September 2329, ~~2005~~2006. ~~The~~During ~~decrease~~the insix ~~net~~months ~~cash~~ended ~~from~~September 28, ~~operating~~2007, ~~activities~~we ~~was~~had ~~due primarily~~net toincome ~~payment~~ of $2.2 million ~~taxes~~compared ofwith $20.58 million during the ~~nine~~six months ended ~~December~~September 29, 2006. During the six months ended September 29, 2006, we paid $2.5 million of taxes related to ~~the~~ repatriation of $32.0 million of dividends in the fourth quarter of fiscal year 2006. Improved accounts receivable turnover and a decrease in cash spending for inventory purchases during the current six month period compared to same period prior year further contributed to the increase in cash flow from operating activities.

Investing Activities

Net cash ~~used~~provided inby investing activities during the ~~nine~~six months ended ~~December~~September 2928, ~~2006~~2007 was $145.1 8 million compared with net cash used in investing activities of $34.54 million during the ~~nine~~ six months ended ~~December~~September 2329, ~~2005~~2006. During the ~~nine~~ six months ended ~~December~~September 2928, ~~2006~~2007, we ~~purchased~~had ~~short-term~~net proceeds ~~investments~~ of $166.13 million ~~compared with $18.2 million during the nine months ended December 23, 2005. During the nine months ended December 29, 2006 proceeds~~ from sales of short-term investments ~~were $3.5 million~~ compared with net purchases of $173.9 4 million during the ~~nine~~six months ended ~~December~~September 2329, ~~2005~~2006. Purchases of property and equipment ~~were~~ were $10.56 million during the ~~nine~~six months ended ~~December~~September 2928, ~~2006~~2007 compared with $31.31 million during the six ~~nine~~ months ended ~~December~~September 2329, ~~2005~~2006.

Financing Activities

Net cash used in financing activities during the ~~nine~~six months ended ~~December~~September 2928, ~~2006~~2007 was $214.0 million compared with $1.2 million during the ~~nine~~six months ended ~~December~~September ~~23, 2005. During the nine months ended December~~ 29, 2006~~, we paid $1~~.~~7 million~~ ~~in dividends to stockholders compared with~~Payments totaling $112.38 million inwere ~~the~~made ~~nine~~on ~~months ended December 23, 2005. Cash proceeds from~~ the ~~exercise~~note ~~of stock options~~ during the ~~nine~~six months ended ~~December~~September 2928, ~~2006 were $0.2 million~~ 2007 compared ~~with~~to $0.74 million ~~during~~ ~~the~~for ~~nine months ended December 23, 2005. Payments totaling $0.5 million were made on~~ the ~~long-term note during the nine months~~six ~~ended December 29, 2006 and December 23, 2005.~~

2922

~~The~~months ~~remaining~~ended ~~shares~~September 29, ~~that~~2006. ~~could~~Additionally, beduring ~~repurchased~~the atsix ~~the~~months ~~discretion~~ended ofSeptember 28, 2007, ~~management~~we ~~under~~paid ~~the~~$1.3 million ~~stock buyback~~in ~~program~~dividends ~~totaled~~to ~~227,395~~stockholders ~~shares~~compared aswith of$1.1 million ~~December~~in the six months ended September 29, 2006. NoCash ~~shares~~proceeds ~~were~~from ~~repurchased~~the exercise of stock options during the six months ended September 28, 2007 were $45 thousand compared with $0.2 million during the ~~periods~~six ~~presented~~months ended September 29, 2006.

~~OFF-BALANCE~~ The ~~SHEET~~company ~~ARRANGEMENTS~~has a stock buyback program. The remaining shares that could be repurchased at the discretion of management under the stock buyback program totaled 227,395 shares as of September 28, 2007. No shares were repurchased during the periods presented.

~~The~~CONTRACTUAL ~~company’s off-balance sheet arrangements consist of operating leases, purchase obligations~~OBLIGATIONS and guarantees. There were no material changes in our operating lease agreements or guarantees as of December 29, 2006 from that reported in our Annual Report on Form 10-K. We have a non-cancelable purchase obligation under an agreement with one of our suppliers. We have agreed to purchase a minimum of $1.0 million of product through March 2007. As of December 29, 2006, we had fulfilled approximately $0.4 million of the commitment.

~~Additional~~The ~~information~~company’s ~~regarding~~contractual ~~our~~ obligations ~~can~~consist beof ~~found~~operating ~~in Note 5~~leases, ~~Note~~purchase 9obligations and guarantees. ~~Note~~There 10were ~~of the~~no ~~Notes~~material tochanges ~~the~~in ~~Condensed~~our ~~Consolidated~~operating ~~Financial~~lease ~~Statements~~agreements or guarantees as of September 28, ~~this~~2007 ~~Quarterly~~from that reported in our Annual Report on Form 10-QK.

~~CRITICAL~~ At ~~ACCOUNTING~~September 28, ~~POLICIES~~2007, ~~AND~~we ~~ESTIMATES~~had non-cancelable purchase obligations with our suppliers totaling $2.0 million. We expect to fulfill these obligations through the normal course of business by December 2012.

The ~~condensed~~company ~~consolidated~~has ~~financial~~an ~~statements~~equity ofcapital ~~Printronix~~commitment ~~are~~totaling ~~prepared~~$670 inthousand ~~conformity~~ with ~~accounting~~ ~~principles~~respect ~~generally accepted in the United States of America. As such, we are required~~ to ~~make~~our ~~certain estimates, judgments and assumptions that we believe are reasonable based upon the~~China ~~information~~legal ~~available~~entity to usbe atfulfilled ~~the~~between time. These estimates and assumptions affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities for the periods 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. Information with respect to the company’s critical accounting policies which the company believes could have the most significant effect on the company’s reported results and require subjective or complex judgments by management is contained on pages 23-25 in ItemOctober ~~7, Management’s~~2007 ~~Discussion~~ and ~~Analysis of Financial Condition and Results of Operations, of the company’s Annual Report on Form 10-K for the year ended March~~August ~~31, 2006~~2009. ~~Management believes that~~ ~~as of December 29, 2006 there has been no material change to this information, except as described below.~~

~~Stock-Based~~Additional ~~Compensation~~information regarding our obligations can be found in Note 4, Note 5 and Note 11 under Part I, Item 1 of this report.

~~On April 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123~~23 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires compensation expense to be recognized for all share-based payments made to employees based on the fair value of the award at the date of the grant. As required by SFAS 123(R), share-based compensation expense, net of an estimated forfeiture rate, is recognized over the requisite service period (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, “Accounting for Stock-Based 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.

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.

For the nine months ended December 29, 2006, 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.

NEW ACCOUNTING STANDARDS

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” which replaces Accounting Principles Board Opinion No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28” (“SFAS 154”). SFAS 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 was effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and was adopted by the company in the first quarter of fiscal year 2007. The adoption of SFAS 154 did not have a material impact on the condensed consolidated financial statements of the company.

should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 is effective for interim and annual periods beginning after December 15, 2006. We do not expect this statement to have a material impact on the condensed consolidated financial statements of the company.

PART I. FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures about Market Risk

PRINTRONIX, INC. AND SUBSIDIARIES

MARKET RISK

Our 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 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 ~~December~~September 2928, ~~2006~~2007 and March 30, 2007, there were no outstanding forward exchange contracts., ~~The~~and ~~following table~~no ~~reflects~~contracts ~~the~~were ~~total~~entered ~~foreign~~into ~~currency~~during ~~forward~~the ~~contracts~~six ~~outstanding~~months atended ~~March~~September 3128, ~~2006:~~2007.

	March 31,
	2006
	($ and € in thousands)
Notional amount	€	900
Average exchange rate		1.206
Carrying value of payable	$	(24	)

Foreign currency transaction and remeasurement gains from all foreign currencies for the three and six months ended September 28, 2007 were $110 thousand and $231 thousand, respectively, principally due to the effect of changes in the value of the Euro. Foreign currency transaction and remeasurement losses from all foreign currencies for the three and six months ended September 29, 2006 were $16 thousand and $10 thousand, respectively, principally due to the effect of changes in the value of the Euro.

~~Foreign~~The ~~currency~~effects ~~transaction~~of ~~and~~changes ~~remeasurement~~in ~~gains~~the ~~from~~Euro’s ~~all~~value ~~foreign currencies~~ for the three ~~and~~ ~~nine~~ months ended ~~December~~September 2928, ~~2006~~2007 compared ~~were~~with ~~$52~~the ~~thousand~~three ~~and~~months ~~$42~~ended ~~thousand~~September 29, ~~respectively, principally~~2006 ~~due~~were toas ~~the~~follows: ~~effect~~an ofincrease ~~changes~~ in ~~the~~revenue ~~value~~ of ~~the Euro~~ $0.3 million, ~~Foreign~~an ~~currency~~increase ~~transaction and~~in ~~remeasurement~~gross ~~gains~~margin ~~from~~of ~~all foreign currencies for the three and nine months ended December 23, 2005 were~~ $0.2 ~~thousand and $85 thousand~~ million, ~~respectively,~~an ~~principally~~increase ~~due~~in tooperating ~~the~~expenses ~~effect~~ of ~~changes~~$60 inthousand ~~the~~and ~~value~~foreign ofexchange ~~the~~gains ~~Euro~~of $0.3 million.

The effects of changes in the Euro’s value for the ~~three~~six months ended ~~December~~September 2928, ~~2006~~2007 compared with the ~~three~~six months ended ~~December~~September 2329, ~~2005~~2006 were as follows: an increase in revenue of $0.36 million, an increase in gross margin of $0.24 million, an increase in operating expenses of ~~$38~~ ~~thousand~~$0.1 million and foreign exchange gains of $0.24 million.

The effects of changes in the Euro’s value for the nine months ended December 29, 2006 compared with the nine months ended December 23, 2005 were as follows: an increase in revenue of $23 thousand, a decrease in gross margin of $47 thousand, a decrease in operating expenses of $29 thousand and foreign exchange losses 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

WeThe ~~have~~company ~~financial~~is ~~instruments~~exposed ~~that are subject~~ to interest rate risk, ~~principally~~for ~~debt obligations~~our ~~and~~investments ~~short-term~~in ~~cash~~marketable ~~investments~~securities. At ~~December~~ September 2928, ~~2006~~2007, our interest-bearing investments totaled $3021.36 million, and the related interest income on these investments was $10.26 million, (an annualized effective yield of 5.2 3 percent) for the ~~nine~~ six months then ended. IfImmediate ~~interest~~increase ~~rates~~in ~~were to decrease by 10 percent (54 basis points on the average investment balance), the impact on our annual~~ interest ~~income~~rates would benot ~~a decrease of $0.2~~materially ~~million.~~impact ~~Information about~~ the fair value of ~~the~~our ~~financial~~investment ~~instruments~~portfolio isas ~~found~~the inmajority ~~Note~~of 2our ofinvestment ~~the~~portfolio ~~Notes~~consists ~~to the Condensed Consolidated Financial Statements~~ of ~~this~~cash ~~Quarterly~~equivalents ~~Report~~and ~~on Form 10~~short-~~Q. Borrowings~~term ~~are~~securities atwith ~~variable~~expected ~~rates~~maturity ~~for~~terms ~~periods~~of ~~that~~less ~~generally do not exceed 90 days~~than one-year. If interest rates were to ~~increase~~decrease by 10 percent (5749 basis points on the ~~long-term~~average investment ~~note~~balance), the impact on our annual interest ~~expense~~income would be ana ~~increase~~decrease of $0.1 million. Information about the ~~bank borrowings~~fair isvalue ~~found in Note 5~~ of the ~~Notes~~financial toinstruments ~~Condensed~~is ~~Consolidated~~found ~~Financial~~in ~~Statements~~Note of3, ~~this~~Investments, ~~Quarterly~~under ~~Report~~Item 1 onof ~~Form~~Part I ~~10-Q~~of this report.

3324

PART I. FINANCIAL INFORMATION

Item 4. Controls and Procedures

PRINTRONIX, INC. AND SUBSIDIARIES

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal accounting and financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on their evaluation, our principal executive officer and principal accounting and financial officer concluded that our disclosure controls and procedures are effective. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended ~~December~~September 2928, ~~2006~~2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

3425

PART II. OTHER INFORMATION

PRINTRONIX, INC. AND SUBSIDIARIES

Item 1. Legal Proceedings

The information set forth under Note 1011 of the Notes to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in “Item 1A. ~~Risk~~ Risk Factors” reported in Part I of our Annual Report on Form 10-K for the fiscal year ended March ~~31,~~ ~~2006~~30, 2007, except for the update presented below.

The company anticipates that the acquisition of Printronix by Pioneer Holding Corp., an affiliate of Vector Capital Corporation, will occur before end of fiscal year 2008. The company cannot, however, assure the timing or termination of the transaction, its costs or the effects, will have on the company, its businesses, properties, employees, operations, and stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

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

~~None~~ The annual meeting of stockholders of the company was held on August 21, 2007. The following matters were acted upon at the meeting.

(a) The following directors were elected to serve until the next annual meeting of stockholders.


	For		Withheld
Robert A. Kleist		5,776,958		403,035
John R. Dougery		5,941,807		238,186
Chris W. Halliwell		6,098,430		81,563
Erwin A. Kelen		6,071,807		108,186
Charles E. Turnbull		6,098,430		81,563

(b) Proposal Number 2, a proposal to ratify appointment of PricewaterhouseCoopers as independent auditors of the company for fiscal year 2008, passed by the vote of a majority of shares presented and voting.

Item 5. Other Information

None

Item 6. Exhibits

31.1		Certification Pursuant to Rule 13a-14(a) and15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification Pursuant to Rule 13a-14(a) and15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31.1 Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

35 31.2 Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PRINTRONIX, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 7, 2007		PRINTRONIX, INC.
	PRINTRONIX, INC. (Registrant)
		(Registrant)
Date: November 6, 2007	By:	/s/ George L. Harwood
		By:	/s/ George L. Harwood
		George L. Harwood
			George L. Harwood
		Senior Vice President, Finance and Information Systems (IS), Chief Financial Officer and Corporate Secretary (Principal Accounting and Financial Officer)
			Senior Vice President, Finance and Information Systems
			(IS), Chief Financial Officer and Corporate Secretary
			(Principal Accounting and Financial Officer)

3627

EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification Pursuant to Rule 13a-14(a) and15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification Pursuant to Rule 13a-14(a) and15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31.1 Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification Pursuant to Rule 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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