TROY Group, Inc. Posts Second Quarter 2008 Results

COSTA MESA, Calif., July 3  /PRNewswire-FirstCall/ -- TROY Group, Inc. (OTC:TROY.PK) announced today that financial results for the second quarter of fiscal 2008, which ended May 31, 2008, have been posted on the company's web-site at http://www.troygroup.com/. To access the report, click on About TROY Group then click on Financials. TROY's financial results are also posted at http://www.pinksheets.com/. Enter TROY in the symbol field then click on Financial Report.

Revenue for the three months ended May 31, 2008 decreased to $11.3 million compared to revenue for the three months ended May 31, 2007 of $11.8 million largely due to decreased supplies sales. Earnings from continuing operations for the three months ended May 31, 2008 decreased to $0.07 per share compared to $0.11 per share for the three months ended May 31, 2007.

Revenue for the six months ended May 31, 2008 decreased to $21.8 million compared to revenue for the six months ended May 31, 2007 of $24.9 million largely due to the one time purchase of printers by one customer included in the first three months of 2007 and a decline in supplies sales. Earnings from continuing operations for the six months ended May 31, 2008 decreased to $0.14 per share compared to $0.25 per share for the six months ended May 31, 2007.

As of July 2, 2008 a substantial portion of the Company's current assets consisted of $10 million in investments that are auction rate securities. These auction rate securities consist of preferred stock of various closed-end mutual funds which have an AAA credit rating. The auctions for these securities have failed since February 13, 2008 resulting in the investment being illiquid. There has been no default on the underlying securities, and investment income continues to be received in a timely manner while we wait for a return of the market. However, a market for auction rate securities may not return before the Company has a need to sell its investments, which would result in TROY having to borrow on its line of credit or other lending sources. In addition, a prolonged decline in marketability could result in a reduced value of the securities. There can be no assurance when or if the market for these securities will return.

On June 23, 2008, the Orange County Water District filed a lawsuit against 17 companies including TROY and 400 unnamed companies in the Superior Court of the State of California, Orange County.  The complaint asserts claims for these alleged hazardous releases under the Orange County Water District Act and the California Superfund Act.  The complaint further asserts common law claims for negligence, trespass and nuisance.  The complaint seeks various forms of legal and equitable relief, including without limitation unspecified compensatory damages, attorneys' fees and costs, and declaratory relief.

The consolidated balance sheet and consolidated statement of income are attached to this press release. Please refer to the quarterly report including financial statements for more detailed information.

                             TROY GROUP, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS

               Assets                           May 31,        November 30,
                                                 2008              2007
                                              (unaudited)
  Current assets:
  Cash and cash equivalents                    $3,170,000          $782,000
  Investment in available-for-sale securities  11,475,000        11,400,000
  Accounts receivable, net of allowances
   2008 $307,000; 2007 $293,000                 5,211,000         6,302,000
  Inventories                                   3,502,000         3,050,000
  Prepaid expenses and other                      945,000           840,000
  Deferred tax assets                             421,000           734,000
  Current assets of discontinued
   operations held for sale                             -           311,000
  Total current assets                         24,724,000        23,419,000
  Equipment and leasehold improvements, net     1,611,000         1,725,000
  Goodwill                                        281,000           281,000
  Other assets, including receivables from
   stockholders; $1,899,000 in
   2008 and $1,903,000 in 2007                  3,595,000         3,535,000
  Total assets                                $30,211,000       $28,960,000

            Liabilities and Stockholders' Equity

  Current liabilities:
  Accounts payable                             $2,969,000        $2,645,000

  Accrued expenses                              2,282,000         2,085,000
  Deferred revenue                              1,289,000         1,286,000
  Current liabilities of discontinued
   operations held for sale                             -         1,976,000
  Total current liabilities                     6,540,000         7,992,000
  Non-current liabilities                       1,275,000           881,000
  Total liabilities                             7,815,000         8,873,000

  Commitments and contingencies
  Stockholders' equity:
  Preferred stock, no par value, authorized
   100,000 shares; issued none                          -                 -
  Common stock, par value $0.01 per
   share; authorized 13,000,000
   shares; issued  9,763,235 shares
   in 2008 and 10,563,701 shares in
   2007; outstanding 9,713,235 in
   2008 and 9,948,235 in 2007                      98,000           106,000
  Additional paid-in capital                   18,082,000        21,587,000
  Retained earnings                             4,416,000         1,441,000
  Less cost of treasury stock; 2008
  50,000 shares, 2007 615,466
   shares                                        (200,000)       (3,047,000)
  Total stockholders' equity                   22,396,000        20,087,000
  Total liabilities and
   stockholders' equity                       $30,211,000       $28,960,000



                             TROY GROUP, INC.
                    CONDENSED CONSOLIDATED STATEMENTS
                                OF INCOME
                               (unaudited)

                             Three Months Ended        Six Months Ended
                            May 31,      May 31,      May 31,      May 31,
                              2008        2007         2008         2007

  Net sales               $11,267,000 $11,773,000  $21,820,000  $24,860,000
  Cost of goods sold        6,622,000   7,025,000   12,965,000   14,683,000
  Gross profit              4,645,000   4,748,000    8,855,000   10,177,000

  Operating expenses:
  Selling, general and
   administrative           2,871,000   2,347,000    5,580,000    5,069,000
  Research and development    756,000     632,000    1,378,000    1,213,000
  Total operating  expenses 3,627,000   2,979,000    6,958,000    6,282,000
  Operating income          1,018,000   1,769,000    1,897,000    3,895,000
  Interest income             149,000     142,000      327,000      288,000
  Income from continuing
   operations before income
   taxes                    1,167,000   1,911,000    2,224,000    4,183,000
  Provision for income
   taxes                      432,000     740,000      823,000    1,558,000
  Income from continuing
   operations                 735,000   1,171,000    1,401,000    2,625,000
  Loss from discontinued
   operations, net of tax           -    (307,000)     (73,000)    (602,000)
  Gains on disposal of
   discontinued operations,
   net of  tax                      -           -    1,647,000            -
  Discontinued operations,
   net of tax                       -    (307,000)   1,574,000     (602,000)
  Net income                 $735,000    $864,000   $2,975,000   $2,023,000

  Net income per share:
  Basic income from
   continuing operations        $0.07       $0.11        $0.14        $0.25
  Basic income (loss) from
   discontinued operations          -       (0.03)        0.16        (0.06)
  Basic income                  $0.07       $0.08        $0.30        $0.19
  Diluted income from
   continuing operations        $0.07       $0.11        $0.14        $0.25
  Diluted income (loss)
   from discontinued
   operations                       -       (0.03)        0.16        (0.06)
  Diluted income                $0.07       $0.08        $0.30        $0.19
  Weighted average shares
   outstanding:
  Basic
                             9,806,000 10,564,000    9,828,000   10,564,000
  Diluted
                             9,904,000 10,589,000    9,974,000   10,576,000



  About TROY Group


TROY Group, Inc. ("TROY") is a worldwide leader of secure on-demand printing solutions. TROY solutions manage, secure and simplify end-to-end enterprise printing environments. TROY offers application software, security printing hardware and specialized consumables for securely printing checks, money orders, transcripts, prescriptions and other important documents. TROY solutions are used by small and medium size businesses as well as large enterprises and governmental organizations to manage fraud, operational risk and comply with government regulations related to protecting information privacy. As a Gold Solutions Partner to Hewlett Packard, TROY is the only company in the world authorized by HP to enhance HP printers and consumables for use in secure printing workflows. Only TROY MICR and Security printers and HP compatible MICR Toner cartridges are certified by Hewlett Packard for quality and reliability.  We sell and service our products to major corporations, banks, key government accounts and distributors worldwide. Visit TROY at http://www.troygroup.com/

Forward-looking statements of TROY (statements that are not historical fact) in this news release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as believe, expect, may, will, could and should, and the negative of these terms or other similar expressions. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but, are not limited to, the ability to sell investments when needed, the ability to develop new products, the ability to hire and retain qualified management, technology and other personnel, the impact of competition from existing and new technologies and companies and the other factors set forth in our periodic reports and other documents that we distribute from time to time which are available in our financial statements under certain important factors on our website TROYgroup.com or pinksheets.com. Statements included in this news release are based upon information known to TROY as of the date of this release, and TROY assumes no obligation to update information contained in this news release.

   For More Information Contact:

   TROY Group, Inc.
   3535 Hyland Ave., Suite 200
   Costa Mesa, CA 92626
   [phone]
   [phone] Facsimile
   http://www.troygroup.com/
   Contact:
   Myra Erickson, Investor Relations


DATASOURCE: TROY Group, Inc.



CONTACT:  Myra Erickson, Investor Relations, [phone], fax,

[phone], for Troy Group, Inc.



Web site:  http://www.troygroup.com/ 

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