CAUTIONARY NOTE CONCERNING FACTORS THAT MAY INFLUENCE FUTURE RESULTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements which, to the extent they are not statements of historical or present fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are intended to provide management's current expectations or plans for the future operating and financial performance of the Company, based on assumptions currently believed to be reasonable. Forward-looking statements can be identified by the use of words such as "believe," "expect," "intend," "foresee," "may," "plan," "anticipate" and other words of similar meaning in connection with a discussion of future operating or financial performance. These include, among others, statements relating to:

· expected financial condition, future earnings, levels of growth, or other measures of financial performance, or the future size of market segments or geographic markets;

· economic conditions;

· planned cost reductions;

· future cash flows and uses of cash and debt reduction strategies;

· prospective product development and business growth opportunities, as well as competitor product developments;

· demand for the Company's products and services;

· methods of and costs associated with potential geographic expansion;

· regulatory and market developments and the impact of such developments on future operating results;

· potential impacts from credit market risk;

· future effective income tax rates;

· the outcome of contingencies;

· the availability and cost of raw materials; and

· pension plan assumptions and future contributions.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Some of these risks and uncertainties are set forth in Item 1A. "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2008 and in the Company's subsequent filings with the Securities and Exchange Commission. The Company cannot assure that its results of operations, financial condition, or cash flows will not be adversely affected by one or more of these factors. The Company does not undertake to update any forward-looking statement made in this report or that may from time to time be made by or on behalf of the Company, except as required by law.

OVERVIEW

Challenging economic conditions negatively impacted the Company's revenue and gross profit for the quarter and six months ended October 31, 2008. To mitigate these conditions, the Company controlled its selling, general and administrative costs through actions that included a reduction in workforce. The Company continued to invest in growth opportunity areas and completed two acquisitions during the second quarter of fiscal 2009, including Virtek Vision International, Inc. ("Virtek"). Virtek, whose common stock was publicly listed on the Toronto Stock Exchange, reported pre-acquisition annual revenue of approximately $50.0 million based on its most recently reported audited financial statements for its fiscal year ended January 31, 2008. The Company also acquired China-based Gamma Computer Tech, Ltd ("Gamma"), with pre-acquisition annual revenue of approximately $2.0 million.

Revenue for the second quarter of fiscal 2009 was $153.8 million, declining $7.0 million, or 4.3 percent, as compared with the second quarter of fiscal 2008. The net change in value of foreign currencies against the United States dollar lowered revenue by approximately $1.5 million, as compared with the same revenue base at prior year rates. The remaining decline in revenue for the quarter ended October 31, 2008 was within equipment, software and aftermarket product lines. This decline is believed to be attributable to customer hesitation in making capital equipment purchases caused by the current global economy. Partially offsetting these declines, revenue from key new products increased by $2.9 million to $12.7 million for the quarter ended October 31, 2008 as compared with the prior year same period. This increase was primarily attributable to sales of the Solara ion™ UV inkjet printer

and related inks within the Sign Making and Specialty Graphics segment. Additionally, revenue from the business acquisitions contributed approximately $2.4 million to the quarter ended October 31, 2008.

The Company has experienced a delay in orders from its customers and overall weaker demand during the quarter ended October 31, 2008, which the Company believes is attributable to uncertainty and turmoil in the global economy and financial markets. The Company plans to continue to focus on controlling costs and prudently managing all aspects of its business through this economic downturn to mitigate the impacts. The Company anticipates that its long-term growth prospects will be fueled by its portfolio of new products and expansion, both geographically and business expansions.

Operating income for the quarter ended October 31, 2008 was $5.4 million, as compared with $5.2 million for the same period of fiscal 2008, which represented an increase of $0.2 million, or 3.7 percent. Operating income for the six months ended October 31, 2008 was $7.0 million, as compared with $9.6 million for the same period of fiscal 2008, which represented a decrease of $2.6 million, or 27.0 percent. The decrease in operating profit for the six month period ended October 31, 2008, as compared with the same period in the prior year, was primarily attributable to the weakened economic conditions and the related impact of lower volume on gross profit. To mitigate the gross profit decline, the Company reduced its workforce. The global workforce reduction actions taken in August and October 2008 are expected to result in cost savings of more than $6.0 million in fiscal 2009, net of severance costs of $1.0 million, and over $10.0 million of cost savings on an annual basis thereafter. The Company did not record any incentive compensation expense for the quarter and six months ended October 31, 2008 as the Company did not meet its performance objectives. Operating income for the six months ended October 31, 2007 included professional fees of $1.0 million related to external assistance associated with the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN 48") and incentive compensation expense of $2.2 million. The Company is in the process of identifying further opportunities to reduce both spending and its cost structure and has taken additional workforce reduction actions in December 2008. The Company expects that these additional actions will generate additional salary and wage savings over the remainder of the fiscal year of approximately $2.4 million, net of approximately $1.4 million in severance charges. Annualized savings from these actions should be an additional $6.8 million. These actions, combined with the actions discussed above, are expected to produce approximately $16.8 million on an annualized basis.

During the second quarter of fiscal 2009, the Company finalized the merger of its two French subsidiaries in order to avoid redundant administrative costs and streamline the capital structure of the entities. Based on the projected future income of the merged entity, a valuation reserve against French loss carryforwards of approximately $3.4 million was reversed and recorded as an income tax benefit, as it is more likely than not that the tax benefits from these carryforwards will be realized.

RESULTS OF OPERATIONS

Revenue

                                                      For the Fiscal Quarters Ended                    For the Six Months Ended
                                                               October 31,                                   October 31,
                                                                                   Percent                                     Percent
In thousands                                            2008           2007         Change           2008          2007         Change
Equipment and software                          $     46,778      $  50,927           (8.1 %)   $  89,901     $  98,370           (8.6 %)
Aftermarket supplies                                  88,016         91,168           (3.5 %)     184,700       179,015            3.2 %
Service                                               18,964         18,621            1.8 %       38,015        36,998            2.7 %
Total revenue                                   $    153,758      $ 160,716           (4.3 %)   $ 312,616     $ 314,383           (0.6 %)

The decrease in consolidated revenue for both periods was primarily a result of the weakened global economic environment. Additionally, foreign currency translation lowered revenue for the quarter ended October 31, 2008 by approximately $1.5 million as compared with the quarter ended October 31, 2008 as a result of the United States dollar strengthening against several other currencies in which the Company transacts business. Revenue for the six months ended October 31, 2008 included a $9.7 million benefit from favorable foreign currency translation, as the United States dollar weakened against the primary currencies in which the Company transacts business.

The table below presents revenue by operating segment for the quarter and six months ended October 31:

                                                              For the Fiscal Quarters Ended          For the Six Months Ended October
                                                                      October 31,                                 31,
 In thousands                                                         2008                  2007              2008               2007
Sign Making and Specialty Graphics                         $        92,190       $        90,755      $    186,559       $    176,635
Apparel and Flexible Materials                                      45,932                51,440            94,881            100,919
Ophthalmic Lens Processing                                          15,636                18,521            31,176             36,829
Total revenue                                              $       153,758       $       160,716      $    312,616       $    314,383

For the quarter and six months ended October 31, 2008, the consolidated revenue decrease was attributable to lower equipment and software volume from the Apparel and Flexible Materials and the Ophthalmic Lens Processing segments, which the Company believes resulted from the current adverse economic conditions. For the quarter ended October 31, 2008, the Ophthalmic Lens Processing segment also experienced a decline in aftermarket products volume. The Company believes that the lower volume within the Apparel and Flexible Materials and Ophthalmic Lens Processing segments is attributable to the current economic conditions rather than a loss of market share in the respective markets. Partially offsetting the decline in revenue, the acquisitions completed in the second quarter contributed approximately $2.4 million to revenue for the Apparel and Flexible Materials segment. The Sign Making and Specialty Graphics segment reported a revenue increase of $1.4 million which was attributable to incremental key new product revenue from the Solara ion and associated consumable products, though partially offset by declining sales from thermal graphic solutions equipment and associated aftermarket products.

For the six months ended October 31, 2008, the decline in revenue was primarily attributable to the global economic conditions experienced during the second quarter of fiscal 2009. This decline was partially offset by the favorable impact of foreign currency translation of $9.7 million, which primarily benefited the Sign Making and Specialty Graphics segment during the first quarter of fiscal 2009. The decline was also mitigated by a $4.7 million net increase in key new product revenue. This increase was primarily attributable to the fiscal 2009 Sign Making and Specialty Graphics segment's introduction of the Solara ion and associated consumable products and the Apparel and Flexible Materials introduction of the GERBERcutter® Z7. Spandex also contributed to the revenue increase for the Sign Making and Specialty Graphics segment for the six months ended October 31, 2008 from increased sales of aftermarket materials from organic growth. Contribution from the recent acquisitions benefited revenue $2.4 million within the Apparel and Flexible Materials segment. The Ophthalmic Lens Processing segment recently introduced the Advanced Lens Processing System. Customer interest in the system remains high; however, order rates have been slow which is considered to also be related to the current economic conditions.

International markets are significant to the Company's revenue base. The Company generates approximately three-quarters of its revenue annually from sales to non-U.S. markets. Further geographic expansion is considered an opportunity for the Company to expand its customer base both into new and existing markets. Total revenue within greater China was $5.2 million for the fiscal quarter and $11.1 million for the six months ended October 31, 2008, a decrease of $3.4 million and $5.3 million, respectively from the same periods in the prior year. Although the Company continues to believe that this geographic region represents significant long-term growth opportunities, these decreases reflected the weakened Chinese economy during the quarter and six months ended October 31, 2008. The Company acquired Gamma within China during the second quarter of fiscal 2009 to leverage certain supply chain capabilities and expand its product offering.

Orders by geographic region for the quarter and six months ended October 31, 2008 were lower from each geographic region, though the Rest of World region orders declined the most significantly, primarily within greater China. The Company attributes the decline in orders to uncertainty and customer hesitation in making capital equipment purchases within the global economy and financial markets.

The following table provides the Company's backlog as of October 31, 2008 and April 30, 2008, and includes acquired backlog from the Virtek acquisition of approximately $3.9 million, which is reflected in the Apparel and Flexible Materials segment. The decrease in backlog from April 30, 2008 reflects the current business environment. As a result of the current economic conditions and the related uncertainty regarding when conditions will improve, the Company is unable to determine when backlog will return to more expected levels, from the depressed levels as of October 31, 2008.

                                         October 31,       April 30,
In thousands                                    2008            2008
Backlog:
  Sign Making and Specialty Graphics    $      1,922     $     3,462
  Apparel and Flexible Materials              29,084          33,770
  Ophthalmic Lens Processing                   1,576           1,440
                                        $     32,582     $    38,672

Gross Profit / Margin

                                                     For the Fiscal Quarters Ended                  For the Six Months Ended
                                                              October 31,                                 October 31,
                                                                                  Percent                                   Percent
In thousands                                            2008          2007         Change          2008         2007         Change
Gross profit                                     $    43,594      $ 46,396           (6.0 %)   $ 85,638     $ 91,857           (6.8 %)
Gross profit margin                                     28.4 %        28.9 %                       27.4 %       29.2 %

Gross profit decreased in the fiscal quarter and six months ended October 31, 2008 by $2.8 million and $6.2 million, respectively, as compared with the same periods of the prior year.

For the second fiscal quarter of 2009, the impact of unfavorable foreign currency translation from international operations reduced gross profit by $0.9 million as compared with the prior year. The remaining decrease for the second quarter of fiscal 2009 was primarily from lower volume that negatively impacted gross profit by approximately $2.5 million. Incremental gross profit from the acquisitions partially offset these declines.

For the six months ended October 31, 2008, lower volume and an unfavorable product mix lowered gross profit by $4.4 million and $3.8 million, respectively, as compared with the six months ended October 31, 2007. The impact of favorable foreign currency translation from international operations of $1.9 million and incremental gross profit from the acquisitions partially offset the lower volume and unfavorable product mix for the first six months of fiscal 2009 as compared with the same period in the prior year.

The Company's gross profit margin declined 0.5 percentage points and 1.8 percentage points for the fiscal quarter and six months ended October 31, 2008, respectively, as compared with the fiscal quarter and six months ended October 31, 2007. The lower gross profit margin for the fiscal quarter ended October 31, 2008 was primarily attributable to lower equipment volume and an unfavorable product mix. The lower gross profit margin for the six months ended October 31, 2008 was attributable to a higher contribution of revenue from the Company's Spandex business unit, which is an international distribution business and realizes lower gross margins than the Company's manufacturing businesses, and from a lower contribution from software revenue. Additionally, the Company's manufacturing businesses reported a decline in gross profit margin as compared with the prior year as a result of lower equipment volume and product mix.

The Company continues to focus on cost reduction strategies within its manufacturing operations, including lean manufacturing and quality initiatives. Additionally, the Company's targeted workforce reductions and cost controls are expected to result in an improved cost structure. The Company believes that these programs should contribute to enhanced gross margin profitability. The Company expects that the two acquisitions completed during the second quarter of fiscal 2009 will also contribute to gross profit and improved margins.

Selling, General and Administrative Expenses

                                                    For the Fiscal Quarters Ended                 For the Six Months Ended
                                                             October 31,                                 October 31,
                                                                                 Percent                                  Percent
In thousands                                            2008          2007        Change          2008         2007        Change
Selling, general and administrative expenses     $    32,445      $ 34,658          (6.4 %)   $ 66,656     $ 69,281          (3.8 %)
Percentage of revenue                                   21.1 %        21.6 %                      21.3 %       22.0 %

Selling, general and administrative ("SG&A") expenses decreased $2.2 million for the quarter ended October 31, 2008. The impact of foreign currency translation reduced overall SG&A costs by approximately $0.2 million for the quarter ended October 31, 2008 as compared with the same period of the prior year. The reduction in SG&A expenses and the ratio of SG&A expenses to revenue reflected the impact of the Company's focused efforts on cost control measures. The Company initiated a reduction in workforce for the quarter ended October 31, 2008 and recorded severance costs of approximately $0.7 million in SG&A which partially offset these savings. The quarter ended October 31, 2007 included severance costs within SG&A of $0.3 million. The Company expects to realize continued cost savings for the remainder of fiscal 2009 and thereafter as a result of these actions.

The Company did not record any incentive compensation expense for the quarter ended October 31, 2008 as compared with $0.9 million of incentive compensation expense for the quarter ended October 31, 2007. Also included in SG&A for the quarter ended October 31, 2007 was $1.0 million of professional fees related to external assistance associated with the adoption of FIN 48.

The Company's SG&A expenses for the quarter and six months ended October 31, 2008 also include incremental expenses of approximately $0.7 million from the acquired businesses.

SG&A expenses decreased $2.6 million for the six months ended October 31, 2008 as compared with the six months ended October 31, 2007. The decrease reflected cost savings from the second quarter of fiscal 2009 workforce reduction actions. For the six months ended October 31, 2007, professional fees of $1.0 million and incentive compensation costs of $2.2 million negatively impacted SG&A expenses. The Company did not record incentive compensation costs for the second quarter and first six months of fiscal 2009, as performance objectives were not achieved. Partially offsetting these factors, the impact of foreign currency translation as compared with the same period of the prior year increased SG&A by approximately $1.8 million and incremental expenses from the Virtek and Gamma acquisitions increased SG&A by approximately $0.7 million.

Research and Development

                                                     For the Fiscal Quarters Ended                  For the Six Months Ended
                                                              October 31,                                 October 31,
                                                                                 Percent                                   Percent
In thousands                                          2008             2007       Change           2008         2007        Change
Research and development                        $    5,769       $    6,552        (12.0 %)   $  12,002     $ 13,017          (7.8 %)
Percentage of revenue                                  3.8 %            4.1 %                       3.8 %        4.1 %

Research and development expenses in both the second quarter and first six months of fiscal 2009 were lower than the same periods of fiscal 2008, primarily related to significant investment in development activities associated with the Solara ion and the Advanced Lens Processing System in the prior fiscal year. These products were launched at the beginning of fiscal 2009.

Other Income (Expense), net

                                                        For the Fiscal Quarters Ended         For the Six Months Ended
                                                                 October 31,                         October 31,
In thousands                                                   2008                2007            2008               2007
Other income (expense), net                                $   (383 )          $   (386 )      $   (511 )          $   339

Other income (expense), net primarily includes interest income, bank fees and foreign currency transaction gains and losses.

For the quarter ended October 31, 2008, the Company incurred $0.6 million in net foreign currency transaction losses. This included a $0.7 million loss from a derivative transaction related to the Company's funding of the acquisition of Virtek. Partially offsetting foreign currency losses, the Company realized a gain of $0.6 million from the sale of an Australian facility during the second quarter of fiscal 2009.

For the six months ended October 31, 2008, the Company incurred $0.3 million in foreign currency transaction losses, which included a $0.7 million loss from a derivative transaction. For the quarter and six months ended October 31, 2007, the Company recorded foreign currency exchange losses of $0.3 million. Other income (expense), net also included a $1.0 million gain on the sale of certain assets in the Ophthalmic Lens Processing segment in the first six months of fiscal 2008.

Interest Expense

                                                      For the Fiscal Quarters Ended              For the Six Months Ended
                                                               October 31,                             October 31,
                                                                               Percent                                 Percent
In thousands                                        2008             2007       Change           2008        2007       Change
Interest expense                                 $   863       $    1,083        (20.3 %)   $   1,477     $ 2,072        (28.7 %)
Weighted-average credit facility interest rate       5.4 %            9.6 %                       5.3 %       9.6 %

Interest expense decreased in both the second quarter and first six months of fiscal 2009 as compared with fiscal 2008 primarily as a result of lower weighted-average credit facility interest rates from the January 2008 refinancing and lower market interest rates, partially offset by higher average credit facility balances. The Company's credit facility borrowings increased $42.0 million from April 30, 2008. This increase was primarily a result of borrowings used to fund the acquisitions and related transaction costs. Higher credit facility borrowings are expected to result in higher interest expense for the remainder of fiscal 2009.

Income Tax Expense

                                                          For the Fiscal Quarters Ended         For the Six Months Ended
                                                                  October 31,                         October 31,
                                                                 2008               2007            2008                2007
Effective tax rate                                              (47.4 %)            32.7 %         (35.7     %)         31.8 %

During the second quarter of fiscal 2009, the Company finalized the merger of its two French subsidiaries in order to avoid redundant administrative costs and solidify the capital structure of the entities. A valuation reserve against French loss carryforwards of the merged entity of approximately $3.4 million was reversed, as it is more likely than not that the tax benefits from these carryforwards will be realized. The Company's effective tax rate would have been 35.9 percent for the quarter ended October 31, 2008 and 33.3 percent for the six months ended October 31, 2008, excluding the non-recurring tax benefit from the reversal of the valuation reserve.

For the both fiscal 2009 periods, the Company's effective tax rates were lower than the statutory rate of 35.0 percent primarily attributable to the reversal . . .