==============================================




                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-Q/A

                                 Amendment No. 2



(Mark One)

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

                   For the quarterly period ended July 4, 1997

                                       OR

 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
                              EXCHANGE ACT OF 1934


                           Commission File No. 0-9919

                                    PSC INC.
             (Exact name of Registrant as Specified in Its Charter)

              New York                                      16-0969362
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)


675 Basket Road, Webster, New York                            14580
(Address of principal executive offices)                    (Zip Code)

                                 (716) 265-1600
              (Registrant's telephone number, including area code)

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 12 months  preceding  (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 |X| No |_|

As  of  February  2,  1998,  there  were  11,498,753   shares  of  common  stock
outstanding.

 =============================================================================




<PAGE>




Explanatory Note:

The undersigned  registrant hereby amends Item 1 (Financial Statements) and Item
2  (Management's  Discussion and Analysis of Financial  Condition and Results of
Operations) in their entirety to correct an error in the computation of the loss
on the sale of the Company's TxCOM subsidiary during the second quarter of 1997.



                            PSC Inc. AND SUBSIDIARIES

                                      INDEX

                                                               PAGE NUMBER
PART I  FINANCIAL INFORMATION

         Item 1 -Financial Statements

                  Consolidated Balance Sheets as of
                  July 4, 1997 (Unaudited) and
                  December 31, 1996...................................3 - 4

                  Consolidated Statements of Operations and
                  Retained Earnings for the three
                  and six months ended:
                  July 4, 1997 (Unaudited) and
                  June 30, 1996 (Unaudited) ..........................5 - 6

                  Consolidated Statements of Cash Flows
                  for the six months ended:
                  July 4, 1997 (Unaudited) and
                  June 30, 1996 (Unaudited) ..............................7

                  Notes to Consolidated Financial
                  Statements (Unaudited) ............................8 - 11

         Item 2 -Management's Discussion and Analysis of
                            Financial Condition and Results of
                            Operations .............................12 - 14





<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1:  Financial Statements
<TABLE>

                            PSC Inc. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           (All amounts in thousands)
<CAPTION>

                                                           July 4, 1997         December 31, 1996
                                                            (Unaudited)

<S>                                                            <C>                    <C>      
ASSETS

CURRENT ASSETS
        Cash and cash equivalents                              $  1,897               $  10,838
        Accounts receivable, net of allowance
            for doubtful accounts of $1,382
           and $1,101, respectively                              27,099                  29,501
        Inventories                                              18,843                  18,306
        Prepaid expenses and other                                2,045                   1,244
                                                            -----------              ----------

       TOTAL CURRENT ASSETS                                      49,884                  59,889

PROPERTY, PLANT AND EQUIPMENT, net
        of accumulated depreciation of $10,030
        and $8,225, respectively                                 36,599                  35,612

DEFERRED TAX ASSETS                                              24,562                  24,773

INTANGIBLE AND OTHER ASSETS, net of accumulated
  amortization of $9,377 and $6,238 respectively                 60,834                  63,087
                                                             ----------              ----------


TOTAL ASSETS                                                  $ 171,879                $183,361
                                                             ==========               =========



</TABLE>




SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>

<TABLE>


                            PSC Inc. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           (All amounts in thousands)
                                   (Continued)
<CAPTION>
                                                         July 4, 1997            December 31, 1996
                                                         ------------            -----------------
                                                         (Unaudited)


<S>                                                            <C>                    <C>      
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

       Current portion of long-term debt                       $ 11,088               $   9,459
       Accounts payable                                          17,097                  15,681
       Accrued expenses                                           7,654                  11,448
       Accrued payroll and related employee benefits              6,274                   7,509
       Accrued acquisition related restructuring costs            1,672                   4,009
                                                            -----------               ---------

         TOTAL CURRENT LIABILITIES                               43,785                  48,106


LONG-TERM DEBT, less current maturities                         111,823                 117,994

OTHER LONG-TERM LIABILITIES                                       3,250                   1,960



SHAREHOLDERS' EQUITY
       Preferred Shares, par value $.01;
      10,000 authorized, none issued                                  0                       0
       Common shares, par value $.01;
         40,000 authorized, 11,196 and  11,161
          shares issued and outstanding                             112                     112
       Additional paid-in capital                                55,322                  54,891
       Retained earnings                                        (41,893)                (39,432)
       Cumulative translation adjustment                           (283)                    (33)

       Less treasury stock, 39 shares
        repurchased, at cost                                       (237)                   (237)
                                                             -----------              ----------

         TOTAL SHAREHOLDERS' EQUITY                              13,021                  15,301
                                                              ---------                --------

TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                                    $171,879                $183,361
                                                               ========                ========
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>
<TABLE>

                            PSC Inc. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                (All amounts in thousands, except per share data)
                                   (Unaudited)
<CAPTION>

                                                                         Three Months Ended
                                                                    July 4,            June 30,
                                                                     1997              1996
                                                                     ----              ----
<S>                                                                 <C>                <C>    
NET SALES                                                           $ 47,301           $22,052

COST OF SALES                                                         29,388            13,488
                                                                    --------         ---------
         Gross profit                                                 17,913             8,564

OPERATING EXPENSES
         Engineering, research and development                         3,447             1,611
         Selling, general and administrative                          10,464             6,504
         Severance and other costs                                     4,191                 0
         Amortization of intangibles resulting
              from business acquisitions                               1,672               222
                                                                   ---------          --------
              Income/(loss) from operations                           (1,861)              227

INTEREST AND OTHER INCOME /(EXPENSE):
         Interest expense                                             (3,384)              (12)
         Interest income                                                 100               125
         Other income/(expense)                                           (8)               (5)
                                                                -------------       -----------
                                                                      (3,292)              108
                                                                   ----------        ---------
         Income/(loss) from continuing operations before
              income tax provision/(benefit)                          (5,153)              335

         Income tax provision/(benefit)                               (1,907)              124
                                                                      -------         --------
         Income/(loss) from continuing operations                     (3,246)              211
         Discontinued operations:
         Gain from discontinued operations, net of tax                   180                 0
         Loss on sale of discontinued operations, net of tax            (265)                0
                                                                   ----------     ------------
         Total loss from discontinued operations                         (85)                0
                                                                 ------------     ------------
         Net income/(loss)                                           ($3,331)        $     211
                                                                     ========        =========

NET INCOME/(LOSS) PER COMMON AND COMMON
        EQUIVALENT SHARE
         Continuing operations                                        ($0.29)       $   0.02
         Discontinued operations                                       (0.01)           0.00
                                                                     --------      ---------
         Net income/(loss)                                            ($0.30)        $  0.02
                                                                      =======        =======

WEIGHTED AVERAGE NUMBER OF
    COMMON AND COMMON EQUIVALENT
    SHARES OUTSTANDING                                                11,142            10,422

RETAINED EARNINGS/(ACCUMULATED DEFICIT):
         Retained earnings/(Accumulated deficit)
           beginning of period                                      ($38,562)         $  7,983
         Net income/(loss)                                            (3,331)              211
                                                                  -----------       ----------
         Retained earnings/(Accumulated deficit),
           end of period                                            ($41,893)         $  8,194
                                                                    =========         ========
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>

<TABLE>

                            PSC Inc. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                (All amounts in thousands, except per share data)
                                   (Unaudited)

<CAPTION>

                                                                       Six  Months Ended
                                                                    July 4,           June 30,
                                                                     1997               1996
                                                                     ----               ----
<S>                                                                 <C>                <C>    
NET SALES                                                           $101,537           $43,551

COST OF SALES                                                         60,923            25,831
                                                                     -------         ---------
         Gross profit                                                 40,614            17,720

OPERATING EXPENSES:
         Engineering, research and development                         6,888             3,391
         Selling, general and administrative                          23,540            13,027
         Severance and other costs                                     4,191                 0
         Amortization of intangibles resulting
              from business acquisitions                               3,348               445
                                                                   ---------          --------
              Income from operations                                   2,647               857

INTEREST AND OTHER INCOME /(EXPENSE):
         Interest expense                                             (6,754)              (25)
         Interest income                                                 251               236
         Other income/(expense)                                          108               (42)
                                                                   ---------         ----------
                                                                      (6,395)              169
                                                                    ---------        ---------
         Income/(loss) from continuing operations before
              income tax provision/(benefit)                          (3,748)            1,026

         Income tax provision/(benefit)                               (1,388)              380
                                                                      -------         --------
         Income/(loss) from continuing operations                     (2,360)              646
         Discontinued operations:
         Gain from discontinued operations, net of tax                   164                 0
         Loss on sale of discontinued operations, net of tax            (265)                0
                                                                        -----        ---------
         Total loss from discontinued operations                        (101)                0
                                                                  -----------      -----------
         Net income/(loss)                                           ($2,461)         $    646
                                                                     ========         ========

NET INCOME/(LOSS) PER COMMON AND COMMON
        EQUIVALENT SHARE:
         Continuing operations                                        ($0.21)       $   0.06
         Discontinued operations                                      ( 0.01)           0.00
                                                                     --------      ---------
         Net income/(loss)                                            ($0.22)        $  0.06
                                                                      =======        =======

WEIGHTED AVERAGE NUMBER OF
    COMMON AND COMMON EQUIVALENT
    SHARES OUTSTANDING                                                11,139            10,412

RETAINED EARNINGS/(ACCUMULATED DEFICIT):
         Retained earnings/(Accumulated deficit)
           beginning of period                                      ($39,432)         $  7,548
         Net income/(loss)                                            (2,461)              646
                                                                  -----------       ----------
         Retained earnings/(Accumulated deficit),
           end of period                                            ($41,893)         $  8,194
                                                                    =========         ========

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

</TABLE>

<PAGE>
<TABLE>


                            PSC INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)
                                   (Unaudited)
<CAPTION>

                                                                           Six Months Ended
                                                                       July 4,        June 30,
                                                                        1997            1996
                                                                        ----            ----

<S>                                                                  <C>             <C>      
CASH FLOWS FROM OPERATING ACTIVITIES: 
   Net Income /(loss)                                               ($2,461)        $     646
       Adjustments to reconcile net income/(loss)
       to net cash provided by (used in) operating activities:
         Depreciation and amortization                                 7,112             2,170
         Loss on disposition of assets                                   109                37
         Loss on disposition of discontinued operations                  265                 0
         Deferred tax assets                                             211               128
         Decrease (increase) in assets:
             Accounts receivable                                       1,290               665
             Inventories                                                (539)           (1,880)
             Prepaid expenses and other                                 (357)           (2,132)
         Increase (decrease) in liabilities:
             Accounts payable                                          1,564             2,081
             Accrued expenses                                         (4,112)             (523)
             Accrued payroll and commissions                          (1,230)             (648)
             Accrued acquisition related restructuring costs          (2,605)             (331)
                                                                    ---------        ----------

                Net cash (used in) provided by
                   operating activities                                 (753)              213
                                                                   ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures, net                                         (4,693)             (967)
    Additions to intangible and other assets                            (104)             (780)
    Proceeds from sale of investments                                      0             4,167
                                                                ------------         ---------
                Net cash (used in) provided by  investing activities   (4,797)           2,420
                                                                    ----------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Additions to long-term liabilities                                 1,938                 0
    Principal repayments of long-term debt                            (4,542)              (63)
    Payment of other long-term liabilities                              (296)                0
    Exercise of stock options and sale of common stock                   431               627
    Tax benefit from exercise or early disposition
        of certain stock options                                           0                70
                                                                 -----------       -----------
                Net cash (used in) provided by financing activities   (2,469)              634
                                                                    ---------       ----------

FOREIGN CURRENCY TRANSLATION                                            (922)              (23)

NET INCREASE/(DECREASE)  IN CASH                                                         _____
                                                                 -----------
         AND CASH EQUIVALENTS                                         (8,941)            3,244

CASH AND CASH EQUIVALENTS:
         Beginning of period                                          10,838             5,538
                                                                    --------           -------

         End of period                                              $  1,897           $ 8,782
                                                                    ========           =======
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>


                            PSC Inc. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 1996
                (All amounts in thousands, except per share data)
                                   (Unaudited)

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The accompanying  consolidated  financial statements have been prepared by
      the Company without audit.  In the opinion of management,  these financial
      statements  include  all  adjustments  necessary  to  present  fairly  the
      Company's financial position as of July 4, 1997, the results of operations
      for the three and six months  ended July 4, 1997 and June 30, 1996 and its
      cash flows for the six months  ended July 4, 1997 and June 30,  1996.  The
      results of operations  for the three and six months ended July 4, 1997 are
      not  necessarily  indicative  of the results to be  expected  for the full
      year.

      Certain  information  and  disclosures   normally  included  in  financial
      statements  prepared in  accordance  with  generally  accepted  accounting
      principles  have been  condensed or omitted.  The  accompanying  financial
      statements should be read in conjunction with the financial statements and
      notes thereto included in the Company's December 31, 1996 annual report on
      Form 10-K.

      NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

      The Company accounts for net income per common and common equivalent share
      in accordance with the provisions of Accounting  Principles  Board Opinion
      No. 15 (APB No. 15).  In March 1997,  Statement  of  Financial  Accounting
      Standards No. 128 (SFAS No. 128),  "Earnings  per Share" was issued.  SFAS
      No. 128 replaces  primary  Earnings Per Share (EPS) with basic EPS.  Basic
      EPS  is  computed  by  dividing  reported  earnings  available  to  common
      stockholders  by weighted  average  shares  outstanding.  No dilution  for
      common  share  equivalents  is  included.  Fully  diluted  EPS, now called
      diluted EPS, is still required.  The Company is required to adopt SFAS No.
      128  retroactively  for periods  ending after  December 15, 1997. On a pro
      forma basis,  basic EPS and diluted EPS for the three and six months ended
      July 4, 1997 were ($0.30) and ($0.22),  respectively, the same as reported
      EPS.

      INVENTORIES

      Inventories are stated at the lower of cost (first-in,  first-out  method)
      or market.  Elements of cost  include  materials,  labor and  overhead and
      consist of the following:

                                            July 4, 1997     December 31, 1996
                                            ------------     -----------------
         Raw materials                      $12,347                $ 10,688
         Work-in-process                      3,219                   3,547
         Finished goods                       3,277                   4,071
                                          ---------               ---------
                                            $18,843                 $18,306
                                            =======                 =======


<PAGE>


                            PSC Inc. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 1996
                (All amounts in thousands, except per share data)
                                   (Unaudited)


 (2)  LONG-TERM DEBT

      Long-term debt consists of the following:

                                       July  4, 1997           December 31, 1996
                                       -------------           -----------------
     Senior Term Loan A                    $51,000                       $55,000
     Senior Term Loan B                     24,500                        25,000
     Senior revolving credit                12,500                        12,500
     Subordinated term loan                 29,443                        29,428
     Subordinated promissory note            5,000                         5,000
     Other                                     468                           525
                                          --------                   -----------
                                           122,911                       127,453
     Less:  current maturities              11,088                         9,459
                                         ---------                     ---------
                                          $111,823                      $117,994
                                          ========                      ========

(3)   SHAREHOLDERS' EQUITY

      During  the six month  period  ended  July 4,  1997,  employees  purchased
      approximately  67 shares at $5.81 per share  under the  provisions  of the
      Company's Employee Stock Purchase Plan.

      Changes in the status of options  under the  Company's  stock option plans
are summarized as follows:
<TABLE>
<CAPTION>

                                    January 1, 1997     Weighted   January 1, 1996     Weighted
                                          to             Average         to            Average
                                      July  4, 1997       Price    Dec. 31, 1996        Price
                                      -------------       -----    -------------        -----

      
<S>                                    <C>                <C>          <C>              <C>  
      Options outstanding
         at beginning of period        2,818              $8.33        2,138            $8.41
      Options granted                    369               6.55          953             7.78
      Options exercised                   (7)              6.06         (173)            6.27
      Options forfeited/canceled        (542)              9.05         (100)            8.06
                                      -------                           -----
      Options outstanding at
         end of period                 2,638               7.94         2,818             8.33

      Number of options at end
         of period:
         Exercisable                   1,725                            1,630
         Available for grant             957                              784


</TABLE>

<PAGE>


                            PSC Inc. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 1996
                (All amounts in thousands, except per share data)
                                   (Unaudited)


(4)   PRO FORMA RESULTS OF OPERATIONS

      The following  unaudited pro forma condensed results of operations combine
      the operations of the Company with those of PSC Scanning,  Inc.  (formerly
      Spectra-Physics Scanning Systems, Inc.), TxCOM S.A. and related businesses
      ("Spectra")  as  adjusted  for the  acquisition  on July  12,  1996 by the
      Company of certain of the assets and liabilities of Spectra. The pro forma
      results of operations are presented as if the  acquisition was consummated
      on January 1, 1996.

      The pro forma  information  is presented  after  giving  effect to certain
      adjustments for depreciation,  amortization,  interest expense and related
      income tax effects.  The pro forma results do not purport to be indicative
      of the results that actually  would have been achieved  during the periods
      indicated and are not intended to be indicative of future results.
<TABLE>
<CAPTION>

                                            Pro Forma Three Months Ended         Pro Forma Six Months Ended
                                                   June 30,1996                         June 30, 1996
<S>                                                    <C>                                   <C>     
        Net sales                                      $51,487                               $104,504
        Income from operations                           3,409                                  8,976
        Income from continuing operations                  206                                  1,818
        Net income                                         206                                  1,818

        Net income per common and common equivalent share:
        Continuing operations                             $0.02                                 $0.16
        Discontinued operations                            0.00                                  0.00
                                                       --------                                ------
        Net income                                        $0.02                                 $0.16
                                                        =======                                 =====

        Weighted average shares outstanding              11,424                                11,389

</TABLE>


<PAGE>



(5)  DERIVATIVES

     The Company  monitors  its exposure to interest  rate and foreign  currency
exchange risk. The Company has limited  involvement  with  derivative  financial
instruments  and does  not use  them for  trading  purposes.  The  Company  uses
derivative instruments solely to reduce the financial impact of these risks.

     Interest Rate Risk:

     The Company has entered into interest rate swap  agreements with its senior
lending banks in accordance with the terms of the senior loans. The Company uses
these  interest rate swap  agreements to reduce its exposure to variable  rates.
The  differentials  to be  received  or paid  under  these  interest  rate  swap
agreements are recognized as a component of interest expense in the consolidated
income statement.

     Foreign Currency Exchange Rate Risk:

     The Company  enters into  forward  foreign  exchange  contracts  as a hedge
against  currency   fluctuations   relating  to  net  foreign  transactions  and
commitments  denominated in foreign  currencies.  The foreign exchange contracts
generally have  maturities of  approximately  30 days and require the Company to
exchange foreign currencies for U.S. dollars at maturity,  at rates agreed to at
the inception of the contracts. Gains and losses on forward contracts are offset
against the foreign exchange gains or losses on the underlying  hedged items and
are recorded as a component of Selling,  general and administrative  expenses in
the consolidated income statement.



<PAGE>



Item 2:  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations
General

The following  discussion and analysis  should be read in  conjunction  with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
of the Company's December 31, 1996 annual report on Form 10-K.

Results of Operations:  Three Months ended July 4, 1997 and June 30, 1996
-------------------------------------------------------------------------

Net Sales.  Consolidated  net sales  during the three  months ended July 4, 1997
increased  $25.2  million or 115%  compared  with the same  period in 1996.  The
increase is due to the inclusion of Spectra  product  sales and increased  sales
volumes of the Company's QuickScan handheld scanner products.  International net
sales  increased 327% primarily due to the Spectra  acquisition  and represented
approximately  44% of net sales in the second  quarter of 1997 versus 22% of net
sales in the second quarter of 1996.

Gross  Profit.  Consolidated  gross profit during the three months ended July 4,
1997  increased $9.3 million or 109% compared with the same period in 1996. As a
percentage of sales, gross profit decreased from 38.8% to 37.9%. The decrease in
gross profit  percentage  is due to a $1.0 million  inventory  write-off for the
discontinuation  of certain  products to streamline  the Company's  handheld and
fixed position product lines. Excluding the inventory write-off,  the 1997 gross
margin  would have been 40.0%.  This  increase  in gross  profit  percentage  is
primarily due to the acquisition of Spectra and a change in the sales mix of the
Company's handheld and fixed position scanner products.

Engineering,  Research and  Development.  Engineering,  Research and Development
(ER&D)  expenses  increased $1.8 million or 114%, as compared to the same period
in 1996. As a percentage of sales,  ER&D was 7.3% in the second  quarter of 1997
and 1996. The dollar increases were primarily due to the inclusion of Spectra.

Selling, General and Administrative.  Selling, General and Administrative (SG&A)
expenses  increased $4.0 million or 61%, as compared to the same period in 1996.
The increased  dollar amount is primarily due to the inclusion of Spectra.  As a
percentage  of sales SG&A was 22.1% in 1997 versus 29.5% in 1996. As a result of
the acquisition and integration of Spectra,  the Company has reduced its general
and administrative  expenses as a percentage of sales. In addition,  the Company
is now operating under the  Symbol-Spectra  license  agreement which has reduced
royalty expenses as a percentage of sales.

Severance  and Other  Costs.  During the second  quarter  of 1997,  the  Company
recorded a one-time pretax charge of $4.2 million for severance and other costs.
Of the  total  charge,  approximately  $2.3  million  was  associated  with  the
Severance Agreement with the former CEO, $1.2 million was for employee severance
and benefit costs for the elimination of  approximately  30 positions  including
several senior  executives,  and $0.7 million for the centralization of research
and development  efforts and the relocation of  manufacturing of certain product
lines between its two manufacturing facilities.

Acquisition  Related  Restructuring  and Other  Costs.  During  the 1994  fourth
quarter,  the Company  recorded a one-time pretax  restructuring  charge of $3.0
million.  The charge related to the integration of the Company's  existing fixed
position  scanner  product lines with those of LazerData,  which was acquired in
December  1994.  The  restructuring  program  in  part,  provided  for  employee
severance  and  benefit  costs  for  the   elimination   of   approximately   12
manufacturing  and  engineering  support  positions.  As of  July 4,  1997,  all
positions targeted in the restructuring program have been eliminated. The amount
of the  restructuring  accrual at July 4, 1997 was  approximately  $0.3 million.
Restructuring  actions  will be  substantially  completed  by December 31, 1997.
There have been no reallocations or reestimates to date.

During the third quarter of 1996, the Company recorded a one-time, pretax charge
of $10.0  million for the cost of  restructuring  its existing  operations  with
those of Spectra which was acquired in July 1996. The  restructuring  program in
part,  provided for employee  severance and benefit costs for the elimination of
certain  positions.   As  of  July  4,  1997,  all  positions  targeted  in  the
restructuring program have been eliminated. The amount of the
<PAGE>

restructuring   accrual  at  July  4,  1997  was  approximately   $2.2  million.
Restructuring  actions  will be  substantially  completed  by December 31, 1997.
There have been no reallocations or reestimates to date.

Interest Expense.  Interest expense increased $3.4 million versus the comparable
period in 1996. The interest  expense relates to the debt incurred in connection
with the acquisition of Spectra in July 1996.

Provision for Income Taxes.  The Company  recorded a $1.9 million tax benefit in
1997  primarily  due to the  severance  and other  costs  discussed  above.  The
Company's  effective tax rate was 37% in both 1997 and 1996. The Company expects
to  record  income  tax  expense  at or about  the  combined  federal  and state
statutory tax rate in 1997.

Discontinued Operations. During the third quarter of 1996, the Company adopted a
plan to  dispose  of its TxCOM  subsidiary.  TxCOM was  acquired  as part of the
Spectra  acquisition.  During the second quarter of 1997, the Company  completed
the sale of TxCOM for approximately  $1.0 million.  A loss of approximately $0.3
million, net of tax, was recorded.

Results of Operations:  Six Months ended July 4, 1997 and June 30, 1996
-----------------------------------------------------------------------

Net Sales.  Consolidated  net sales  during  the six  months  ended July 4, 1997
increased  $58.0  million or 133%  compared  with the same  period in 1996.  The
increase is due to the inclusion of Spectra  product  sales and increased  sales
volumes of the Company's QuickScan handheld scanner products.  International net
sales  increased 362% primarily due to the Spectra  acquisition  and represented
approximately 44% of net sales in the six months of 1997 versus 22% of net sales
in the first six months of 1996.

Gross Profit. Consolidated gross profit during the six months ended July 4, 1997
increased  $22.9  million or 129%  compared  with the same period in 1996.  As a
percentage  of sales,  gross profit  decreased  from 40.7% to 40.0%.  During the
second quarter of 1997, the Company took a $1.0 million inventory  write-off for
the discontinuation of certain products to streamline the Company's handheld and
fixed position product lines. Excluding the inventory write-off,  the 1997 gross
margin  would have been 41.0%.  This  increase  in gross  profit  percentage  is
primarily due to the acquisition of Spectra and a change in the sales mix of the
company's handheld and fixed position scanner products.

Engineering,  Research and  Development.  Engineering,  Research and Development
(ER&D)  expenses  increased $3.5 million or 103%, as compared to the same period
in 1996.  As a percentage  of sales,  ER&D was 6.8% in 1997 versus 7.8% in 1996.
The dollar increase is due to the inclusion of Spectra.

Selling, General and Administrative.  Selling, General and Administrative (SG&A)
expenses increased $10.5 million or 81%, as compared to the same period in 1996.
The increased  dollar amount is primarily due to the inclusion of Spectra.  As a
percentage  of sales SG&A was 23.2% in 1997 versus 29.9% in 1996. As a result of
the acquisition and integration of Spectra,  the Company has reduced its general
and administrative  expenses as a percentage of sales. In addition,  the Company
is now operating under the  Symbol-Spectra  license  agreement which has reduced
royalty expenses as a percentage of sales.

Interest Expense.  Interest expense increased $6.7 million versus the comparable
period in 1996. The interest  expense relates to the debt incurred in connection
with the acquisition of Spectra in July 1996.

Provision for Income Taxes.  The Company  recorded a $1.4 million tax benefit in
1997  primarily  due to the  severance  and other  costs  discussed  above.  The
Company's  effective tax rate was 37% in both 1997 and 1996. The Company expects
to  record  income  tax  expense  at or about  the  combined  federal  and state
statutory tax rate in 1997.

Discontinued Operations. During the third quarter of 1996, the Company adopted a
plan to  dispose  of its TxCOM  subsidiary.  TxCOM was  acquired  as part of the
Spectra  acquisition.  During the second quarter of 1997, the Company  completed
the sale of TxCOM for approximately  $1.0 million.  A loss of approximately $0.3
million, net of tax, was recorded.


<PAGE>


Liquidity and Capital Resources:

Current assets  decreased $10.0 million from December 31, 1996 due to a decrease
in cash  offset  in part by an  increase  to  inventories.  Current  liabilities
decreased $4.3 million  primarily due to a reduction in accrued  expenses offset
in part by an  increase  in  accounts  payable.  As a  result,  working  capital
decreased $5.7 million from December 31, 1996.

Property,  plant and  equipment  expenditures  totaled  $4.7 million for the six
months  ended July 4, 1997  compared  with $1.0 million for the six months ended
June  30,  1996.  The  1997  expenditures  primarily  related  to  manufacturing
equipment and new product tooling.

The long-term debt to capital  percentage was 89.6% at July 4, 1997 versus 88.5%
at December 31, 1996. At July 4, 1997,  liquidity  immediately  available to the
Company consisted of cash and cash equivalents of $1.9 million. In addition,  in
connection  with the  acquisition  of Spectra,  the Company  obtained new credit
facilities  totaling $130.0 million.  The Company has $7.5 million  available on
these  facilities.  The Company  believes that its cash  resources and available
credit  facilities,  in addition to its operating cash flows,  are sufficient to
meet its requirements for the next twelve months.





<PAGE>





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.

                                    PSC Inc.



DATE:    February 5, 1998     By:    /s/ Robert C. Strandberg
                                         --------------------
                                         Robert C. Strandberg
                                         President and Chief Executive Officer



DATE:    February 5, 1998     By:   /s/  William J. Woodard
                                         ------------------
                                         William J. Woodard
                                         Vice President and 
                                         Chief Financial Officer





DATE:    February 5, 1998     By:   /s/ Michael J. Stachura
                                        -------------------
                                        Michael J. Stachura
                                        Vice President of Finance
                                        (Principal Accounting Officer)