TROY Group, Inc. Posts Third Quarter 2008 Results

COSTA MESA, Calif., Oct. 7  /PRNewswire-FirstCall/ -- TROY Group, Inc. (Pink Sheets: TROY) announced today that financial results for the third quarter of fiscal 2008, which ended August 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 August 31, 2008 decreased to $10.7 million compared to revenue for the three months ended August 31, 2007 of $11.3 million largely due to a decline in printer sales partially offset by an increase in supplies sales. Earnings from continuing operations for the three months ended August 31, 2008 decreased to $0.08 per share compared to $0.11 per share for the three months ended August 31, 2007.

Revenue for the nine months ended August 31, 2008 decreased to $32.5 million compared to revenue for the nine months ended August 31, 2007 of $36.2 million largely due to a decline in printer and supplies sales. Earnings from continuing operations for the nine months ended August 31, 2008 decreased to $0.22 per share compared to $0.36 per share for the nine months ended August 31, 2007.

As of October 6, 2008 a substantial portion of the Company's current assets consisted of $8.6 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. The seller of these securities has announced its intention to repurchase these securities and has begun the repurchase process.  There is no assurance the repurchase will be completed.

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. With respect to these matters, we believe that we have valid defenses to claims asserted against us and we do not expect the outcome of these matters to have a material effect on our results of operations or financial position. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of claims asserted against us could adversely impact our results of operations or financial position.

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                    August 31,     November 30,
                                                   2008           2007
                                               (unaudited)
  Current assets:
  Cash and cash equivalents                     $4,021,000       $782,000
  Investment in available-for-sale
   securities                                   11,872,000     11,400,000
  Accounts receivable, net of
   allowances 2008 $266,000; 2007 $293,000       4,538,000      6,302,000
  Inventories                                    3,159,000      3,050,000
  Prepaid expenses and other                       904,000        840,000
  Deferred tax assets                              512,000        734,000
  Current assets of discontinued
   operations held for sale                             --        311,000
  Total current assets                          25,006,000     23,419,000
  Equipment and leasehold improvements, net      1,481,000      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                        3,577,000      3,535,000
  Total assets                                 $30,345,000    $28,960,000

        Liabilities and Stockholders' Equity

  Current liabilities:
  Accounts payable                             $ 2,379,000     $2,645,000
  Accrued expenses                               2,043,000      2,085,000
  Deferred revenue                               1,323,000      1,286,000
  Current liabilities of discontinued
   operations held for sale                             --      1,976,000
  Total current liabilities                      5,745,000      7,992,000
  Non-current liabilities                        1,230,000        881,000
  Total liabilities                              6,975,000      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                    18,307,000     21,587,000
  Retained earnings                              5,165,000      1,441,000
  Less cost of treasury stock;
   2008 50,000 shares, 2007 615,466 shares        (200,000)    (3,047,000)
  Total stockholders' equity                    23,370,000     20,087,000
  Total liabilities and stockholders' equity   $30,345,000   $ 28,960,000



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


                        Three Months Ended         Nine Months Ended
                      August 31,   August 31,   August 31,   August 31,
                        2008          2007         2008        2007
  Net sales          $10,684,000  $11,335,000  $32,504,000  $36,195,000

  Cost of goods
   sold                6,409,000    6,693,000   19,374,000   21,376,000
  Gross profit         4,275,000    4,642,000   13,130,000   14,819,000

  Operating expenses:
  Selling, general
   and administrative  2,462,000    2,391,000    8,041,000    7,460,000
  Research and
   development           753,000      523,000    2,132,000    1,736,000
  Total operating
   expenses            3,215,000    2,914,000   10,173,000    9,196,000
  Operating income     1,060,000    1,728,000    2,957,000    5,623,000
  Interest income        127,000      177,000      454,000      464,000
  Income from
   continuing
   operations before
   income taxes        1,187,000    1,905,000    3,411,000    6,087,000
  Provision for
   income taxes          438,000      695,000    1,261,000    2,252,000
  Income from
   continuing
   operations            749,000    1,210,000    2,150,000    3,835,000
  Loss from
   discontinued
   operations, net
   of tax                     --     (230,000)     (73,000)    (833,000)
  Gains on disposal
   of discontinued
   operations, net of
   tax                        --           --    1,647,000           --

  Discontinued
   operations, net of
   tax                        --     (230,000)   1,574,000     (833,000)
  Net income           $ 749,000     $980,000   $3,724,000   $3,002,000


  Net income
   per share:
  Basic income from
   continuing operations   $0.08        $0.11        $0.22        $0.36
  Basic income (loss)
   from discontinued
   operations                 --        (0.02)        0.16        (0.08)
  Basic income             $0.08        $0.09        $0.38        $0.28
  Diluted income from
   continuing operations   $0.08        $0.11        $0.22        $0.36
  Diluted income (loss)
   from discontinued
   operations                 --        (0.02)        0.16        (0.08)
  Diluted income           $0.08        $0.09        $0.38        $0.28
  Weighted average
   shares outstanding:
  Basic                9,713,000   10,564,000    9,790,000   10,564,000
  Diluted              9,749,000   10,631,000    9,899,000   10,595,000



  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.
   940 South Coast Dr., 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 of TROY Group, Inc.,

[phone], fax, [phone]



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

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