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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2010Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Period
From                  to                  .


Commission File Number: 333-110441

THE SHERIDAN GROUP, INC.(Exact name of Registrant as specified in its charter)

Maryland(State or other jurisdiction of
incorporation or organization)

52-1659314(I.R.S. employer
identification number)


11311 McCormick Road, Suite 260
Hunt Valley, Maryland 21031-1437(Address of principal executive offices and zip code)

(410) 785-7277(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark whether the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ý    No o

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes o    No ý

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý

Smaller reporting company o


Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.) Yes o    No ý

None of the Registrant's common stock is held by non-affiliates of the Registrant.

There
was 1 share of the Registrant's Common Stock outstanding as of March 29, 2011.



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THE SHERIDAN GROUP, INC.  ANNUAL REPORT ON FORM 10-K  FOR THE YEAR ENDED DECEMBER 31, 2010  INDEX



PagesITEM 1. BUSINESS


3ITEM 1A. RISK FACTORS


8ITEM 1B. UNRESOLVED STAFF COMMENTS


15ITEM 2. PROPERTIES


16ITEM 3. LEGAL PROCEEDINGS


16ITEM 4. RESERVED


17ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


17ITEM 6. SELECTED FINANCIAL DATA


17ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


18ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK


33ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


34ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE


63ITEM 9A. CONTROLS AND PROCEDURES


63ITEM 9B. OTHER INFORMATION


63ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


63ITEM 11. EXECUTIVE COMPENSATION


69ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS


83ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


87ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES


89ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


90


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes "forward-looking statements." Forward-looking statements are those that do
not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. They may
contain words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "plan," "predict," "project," "should," "will," "would" or words or phrases of
similar meaning. They may relate to, among other things:



Forward-looking
statements involve risks and uncertainties that may cause actual results to differ materially from the forward-looking statements, might cause us to modify our plans or
objectives, may affect our ability to pay timely amounts due under our notes and/or may affect the value of our notes. These risks and uncertainties may include, but are not limited to, those
discussed in Part I, Item 1A, "Risk Factors." New risk factors can emerge from time to time. It is not possible for us to predict all of these risks, nor can we assess the extent to
which any factor, or combination of factors, may cause actual results to differ from those contained in forward-looking statements. Given these risks and uncertainties, we urge you to read this Annual
Report on Form 10-K completely with the understanding that actual future results may be materially different from what we plan or expect. We caution you that any forward-looking
statement reflects only our belief at the time the statement is made. We will not update these forward-looking statements even if our situation changes in the future.

PART I

ITEM 1.    BUSINESS

Overview

We are a leading specialty printer offering a full range of printing and value-added support services for the journal, catalog,
magazine and book markets. We believe that we enjoy strong and long-standing relationships with our customers, which include publishers, catalog merchants, associations and university
presses. We provide a wide range of printing services and value-added support services that supplement the core printing operations such as page composition, electronic copy-editing,
digital proofing, electronic publishing systems, subscriber services, digital media distribution, custom publishing and back issue fulfillment. We are focused on short production runs for small to
medium sized customers who rely heavily on our world class prepress operations to prepare, edit and publish content for electronic or printed distribution. We utilize a decentralized management
structure, which provides our customers with access to the resources of a large company, while maintaining the high level of service and flexibility of a smaller company. We operate in three business
segments: Publications, Specialty Catalogs and Books. For the year ended December 31, 2010, we generated net sales of $266.2 million, operating income of $9.4 million and a net
loss of $5.9 million.

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As
used in this Annual Report on Form 10-K, the terms "we," "us," "our" and other similar terms refer to the consolidated businesses of The Sheridan Group, Inc. and all of
its subsidiaries.

History

We trace our roots back to The Sheridan Press, the predecessor of which was founded in 1915. We entered the short-run
journal market in 1980, targeting the printing of scientific, technical, medical and scholarly journals for publishers. The Sheridan Group, Inc. was formed in 1988 to complete the acquisition
of Braun-Brumfield, Inc., a short-run book printer located in Michigan. In 1994, we entered the specialty magazine market with the acquisition of United Litho, Inc., a
printer of specialty magazines serving the Washington, D.C. metro area. In conjunction with our recapitalization in 1998, we acquired Dartmouth Printing Company, a specialty magazine printer in New
Hampshire, and Capital City Press ("CCP"), a journal printer in Vermont. In 1999, we acquired BookCrafters, Inc., a short-run book printer in Chelsea, Michigan and consolidated it
with Braun-Brumfield to form Sheridan Books, Inc. In 2004, we acquired The Dingley Press (the "Dingley Acquisition"), a specialty catalog printer in Maine. In 2006, we shut down the operations
of CCP and consolidated the production of short-run journals at The Sheridan Press. Currently, we are comprised of six specialty printing companies operating in the domestic scientific,
technical, medical and scholarly journal, specialty catalog, short-run book and specialty magazine markets: The Sheridan Press in Pennsylvania; Sheridan Books in Michigan; Dartmouth
Printing Company in New Hampshire; United Litho in Virginia; Dartmouth Journal Services in Vermont; and The Dingley Press in Maine. During the first quarter of 2011, we announced the shutdown of the
operations of United Litho and the consolidation of the production of specialty magazines at Dartmouth Printing Company. We anticipate that the shutdown and consolidation will be completed by the
fourth quarter of 2011.

Printing Services

Our printing services include transferring content onto printing plates in pre-press, printing the content on press,
binding the printed pages into the finished product and distributing the finished product to either the customer or the ultimate end user. Pre-press processes, which include digital
techniques, as well as computer-to-plate technology, are critical front-end elements of our printing services which ready the content for printing on our presses.
Sheet-fed and web presses are used, depending on run length, to produce the printed product. We also offer ultra-short-run printing services for books and journals. During
2008, we launched a new product offering to digitally print books and journals on demand. We utilize three types of binding techniques for the printed product: perfect binding, saddle stitching and
case binding. The product is then labeled and packaged prior to mailing. The majority of journals and magazines are mailed to the subscribers; the remainders are shipped to the publisher. All of our
books are shipped in cases to the customer. Catalogs are drop-shipped to various locations throughout the U.S. and placed into the mail stream close to the recipient.

Technology Services

We continue to develop new services and solutions to help our customers and prospects thrive in the evolving printing industry. Through
our extensive experience as a journal printer supporting the sophisticated technology requirements of journal publishers and our deep understanding of our customers' needs, we believe we are well
positioned to bring innovative technology-based services and solutions to the journal, book, magazine, and catalog market segments. In order to accelerate our technology development, we have added
technology resources throughout the organization and increased spending on software development. The result of these efforts includes the introduction of on-demand digital printing, custom
publishing, interactive content for mobile applications and electronic content warehousing. We process significant amounts of our customers' intellectual property and play a critical role in helping
customers meet demands for electronic and printed media.

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Value-Added Support Services

In addition to providing printing services to our customers, we offer a full range of value-added support services. While sales of
these services constitute a relatively small percentage of total revenues, they are critical to meeting the customer's needs. These services are highly customized for each customer's specifications
and logistics requirements. Examples of the value-added support services we provide are page composition, electronic copy-editing, digital proofing, electronic publishing systems,
subscriber services, digital media distribution, custom publishing and back issue fulfillment.

Printing Segments

As a leading publications printer, we offer a broad range of products and services, including the printing of scientific, technical,
medical and scholarly journals, specialty catalogs, short-run books, specialty magazines, article reprints and an extensive array of value-added support services. Our products are sold to
a diverse set of customers, including publishers, catalog merchants, university presses and associations.

The
following table presents the percentage of net sales contributed by each segment during the past three fiscal years.

Net sales %

2010

2009

2008Publications


56


57


54Specialty Catalogs


23


23


27Books


21


20


19Total


100


100


100


Our
net sales attributable to customers in the United States were $261.1 million, $287.5 million and $343.5 million for the years ended December 31, 2010,
2009 and 2008, respectively. Our net sales attributable to customers in foreign countries were $5.1 million, $5.8 million and $4.5 million for the years ended December 31,
2010, 2009 and 2008, respectively. Additional financial information about our segments is set forth in Note 17 to our consolidated financial statements set forth in Part II,
Item 8 of this report.

Assets by Segment

The following table presents the total assets by segment for each of the fiscal years ended December 31, 2010, 2009 and 2008:

(Dollars in thousands)

Year ended
December 31,
2010

Year ended
December 31,
2009

Year ended
December 31,
2008AssetsPublications

$
140,566

$
146,047

$
165,194Specialty catalogs


51,669


54,186


65,403Books


46,519


46,173


51,386Corporate


2,757


2,594


3,114Consolidated total

$
241,511

$
249,000

$
285,097


Publications

The Publications segment provides products and services for journals and specialty magazines to publishers, university presses and
associations.

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Journals

The
journal market includes journals for the scientific, technical, medical and scholarly communities. We compete in both the short-run and
medium-run portions of the journal market. We define short-run journals as journals produced on sheet-fed and digital presses with typical production runs of less
than 5,000. We consider medium-run journals to be journals with production runs between 5,000 and 100,000 copies. Medium-run journals are typically produced on web presses due
to economies of scale versus sheet-fed presses. Publishers, associations and university presses comprise the customers in the journals market. In 2010, we printed over 2,500 journal
titles.

Our
journals are primarily black and white with a small amount of color for photographs, diagrams and advertisements. They are printed on schedules that range from weekly to annually.
Journal printing typically results in a high level of repeat business due to the periodic nature and complexity of these publications. The vast majority of journals are perfect bound, with the
remainder saddle-stitched. Our journal customers rely on our consistency and on-time reliability to meet the demands of their own customers.

Originally
developed as an ancillary product from the base journal business, we produce article reprints on sheet-fed and digital presses. Article reprints are produced for
customers who require reprints of an individual article from a journal or magazine for marketing or other purposes. Historically, we have primarily reprinted journal and magazine articles for which we
were the original printer. We have expanded our business by winning article reprint business on publications for which we were not the original printer. We are a full-service reprint
printer, producing black and white as well as color reprints for publishers, university presses and associations.

Specialty
Magazines

We
characterize specialty magazines as magazines having production runs of less than 100,000 copies. Our customers in this market are publishers and
associations. Specialty magazines also have a high level of repeat business due to the periodic nature of the publications. This is largely a regional market defined by proximity to the customer. In
2010, we printed about 380 magazine titles.

We
produce short-run magazines with average run lengths of about 25,000 copies. The majority of these magazines are printed in four-color. The magazines are bound
using the saddle-stitching and perfect binding techniques. The magazines are produced in frequencies that range from weekly to annually. These magazines are produced on web presses. Although specialty
magazine customers do not require composition services, they do demand high levels of customer service focused on distribution and mailing services, where managing the customer's subscriber database
is critical to customer satisfaction.

Specialty Catalogs

We entered the specialty catalog segment in 2004 with our purchase of The Dingley Press. We characterize Specialty Catalogs as catalogs
distributed by specialty catalog merchant companies, which are often smaller entrepreneurial firms with high service requirements. We produce catalogs with run lengths between 50,000 and 8,500,000
copies, most of which are printed in four-color and are bound using the saddle stitching technique. Multiple versions of each catalog are distributed during the year requiring high levels
of customer service and extensive distribution services. In 2010, we printed about 160 catalog titles.

Books

We print books for publishers, associations and university presses. Sales to this market include both the initial printing of titles
and subsequent reprints. In 2010, we printed over 9,100 book titles.

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We
produce books in run lengths that average about 2,100 copies and range from 100 to 10,000 copies. The majority of these books are black and white. Books are produced on both
sheet-fed and web presses. In 2010, about 61% of our books had soft covers (perfect bound) and about 39% had hard covers (case bound).

Competition

The printing industry in the United States is fragmented and highly competitive in most product categories and geographic regions. We
compete in sub segments of the overall printing market. Competition is largely based on price, quality, range of services offered, distribution capabilities, ability to service the specialized needs
of customers, availability of printing time on appropriate equipment and use of state-of-the-art technology. Competitive price pressure continues to be strong in
the product segments in which we compete.

Customers

We benefit from a highly diversified customer base. The majority of our business comes from publishers, followed by catalog merchants,
associations and university presses. The average length of our relationship with our top 50 customers is approximately 16 years. During 2010, 2009 and 2008, we had no customer that accounted
for more than 10% of our net sales.

Sales and Marketing

We have developed a knowledgeable and experienced sales management team, which has successfully cultivated and maintained strong
relationships with customers across the U.S. Our products are sold through internal direct sales professionals and a dedicated network of sales representatives. Across all of our companies, external
representatives augment an internal customer
service and sales staff, providing our customers with multiple touch points. Our sales representatives are paid a commission based on sales volume growth targets.

Raw Materials

The principal raw material used in our business is paper, which represents a significant portion of our cost of materials. Due to the
significance of paper in our business, we are dependent upon the availability of paper. In periods of high demand, certain paper grades have been in short supply, including grades we use in our
business. In addition, during periods of tight supply, many paper producers allocate shipments of paper based upon historical purchase levels of customers. Historically, however, we generally have not
experienced significant difficulty in obtaining adequate quantities of paper. We do not have any long-term paper supply agreements. We also use a variety of other raw materials including
ink, film, offset plates, chemicals and solvents, glue, wire and subcontracted components. In general, we have not experienced any significant difficulty in obtaining these raw materials.

Technology and Operations

Our capital investments have been focused on productivity improvement, more efficient material usage and incremental capacity.
Additionally, our investments in technology have been critical in helping achieve improved workflow and reduced cycle times.

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Employees

We had approximately 1,450 employees as of December 31, 2010. We focus heavily on fostering enthusiastic and positive cultures
at each of our locations, evidenced by the fact that we have been recognized with numerous "Best Workplace in America" awards presented by Printing Industries of America. In addition, we closely
monitor our employees' level of job satisfaction with comprehensive surveys on a regular basis. Management believes our compensation and benefits packages are competitive within the industry and local
markets.

Regulatory Matters

We are subject to a broad range of federal, state and local laws and regulations relating to the pollution and protection of the
environment, health and safety and labor. Based on currently available information, we do not anticipate any material adverse effect on our operations, financial condition or competitive position as a
result of our efforts to comply with
environmental, health and safety or labor requirements, and we do not anticipate needing to make any material capital expenditures to comply with such requirements.

ITEM 1A.    RISK FACTORS

Risk Factors

Senior Secured Notes MaturingOur senior secured notes mature on August 15, 2011. We do not have sufficient funds to repay our senior secured notes and
may not be able to refinance them prior to their maturity.

We do not have sufficient funds, nor do we anticipate generating sufficient funds from operations, to repay our senior secured notes,
which mature on August 15, 2011. In order to enable us to meet our debt repayment obligations, we are currently seeking to refinance our senior secured notes. There can be no assurance that we
will be able to do so on terms and conditions satisfactory to us within the period needed to meet our repayment obligations. Our ability to refinance senior secured notes on commercially reasonable
terms may be materially and adversely impacted by the current credit market conditions and our financial condition. The uncertainty associated with our ability to repay the outstanding debt raises
substantial doubt about our ability to continue as a going concern. If we were unable to continue as a going concern, we would need to liquidate our assets and we might receive significantly less than
the values at which they are carried on our consolidated financial statements. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of
recorded assets or the amounts and classification of liabilities that might result from the uncertainty associated with our ability to meet our debt obligations as they come due.

Working Capital Facility MaturingAlthough we anticipate that we will be able to refinance our working capital facility prior to its termination on
May 25, 2011, there can be no assurance that we will be able to do so.

Our working capital facility is scheduled to terminate on May 25, 2011. As of December 31, 2010 we had no borrowings
outstanding under our working capital facility, although we have borrowed under the facility from time to time in the past. We anticipate that we will be able to replace the current facility prior to
its termination, but there can be no assurances that we will be able to do so on similar terms or at all. If we are not able to replace our working capital facility on similar terms it could adversely
impact our ability to fund our liquidity needs.

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Additional CapitalWe may need additional capital in the future and it may not be available on acceptable terms.

We may require more capital in the future to:



We
cannot assure you that additional financing will be available on terms favorable to us, or at all. The terms of available financing may place limits on our financial and operating
flexibility. If adequate funds are not available on acceptable terms, we may be forced to reduce our operations or delay, limit or abandon expansion opportunities. Moreover, even if we are able to
continue our operations, the failure to obtain additional financing could reduce our competitiveness as our competitors may provide better maintained networks or offer an expanded range of services.

Substantial LeverageOur substantial indebtedness could adversely affect our financial health and prevent us from meeting our obligations under our indebtedness.

We have a significant amount of indebtedness. On December 31, 2010, we had total indebtedness of approximately
$142.9 million.

Our
substantial indebtedness could have important consequences. For example, it could:



In
addition, agreements governing our indebtedness contain financial and other restrictive covenants that will limit our ability to engage in activities that may be in our
long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.

Technological ChangeThe evolution of technology may decrease the demand for our products and services.

The technology we use in our operations is rapidly evolving. We could experience delays or difficulties in responding to changing
technology, in addressing the increasingly sophisticated needs of our customers or in keeping pace with emerging industry standards. In addition, the cost required to respond to and integrate changing
technologies may be greater than we anticipate. If we do not respond adequately to the need to integrate changing technologies in a timely manner, or if the investment required to so respond is
greater than anticipated, our business, financial condition, results

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of
operations, cash flow and ability to make payments on the notes may be adversely affected. We remain largely dependent on the distribution of scientific, technical, medical and other scholarly
information in printed form. Usage of the Internet and other electronic media continues to grow. We cannot assure you that the acceleration of the trend toward such electronic media will not decrease
the demand for our products which could result in lower profits and reduced cash flows.

Changes
in technology could also result in digital printing methods becoming more cost effective for printing short-run publications. If the use of digital printing were
expanded in this manner, it could allow smaller printers to compete against us in our specialized market, which could cause a decrease in the demand for our services or could force us to lower our
prices to remain competitive. Such a decrease in demand or price could result in decreased profitability and have a material adverse effect on our business, financial condition and results of
operations. Similarly, if our new product offering in the digital printing market is not successful, the same adverse impacts previously mentioned could result.

CompetitionThe printing industry is competitive and rapidly evolving and competition may adversely affect our business.

The printing industry is extremely competitive. We compete with numerous companies, some of which have greater financial resources than
we do. We compete on the basis of ongoing customer service, quality of finished products, range of services offered, distribution capabilities, use of state of the art technology and price. We cannot
assure you that we will be able to compete successfully with respect to any of these factors. In certain circumstances, due primarily to factors such as freight rates and customer preference for local
services, printers with better access to certain regions of the country may have a competitive advantage in such regions. Our failure to compete successfully could cause us to lose existing business
or opportunities to generate new business and could result in decreased profitability, adversely affecting our business.

ConsolidationIndustry consolidation of customers and increased competition for those customers may result in increased expenses and reduced revenue and market
position.

The continuing consolidation of publishing companies has shrunk the pool of available customers. Large publishing companies often have
preferred provider arrangements with specific printing companies. As smaller publishing companies are consolidated into the larger companies, the smaller publishing companies are often required to use
the printing company with which the acquiring company has established an arrangement. If our customers were to merge or consolidate with publishing companies utilizing other printing companies, we
could lose our customers to competing printing companies. If we were to lose a significant portion of our current base of customers to competing printing companies, our business, financial condition,
results of operations and cash flow could be materially adversely affected.

Customer ConcentrationThe increase in business from a top customer may make our net sales and profitability more sensitive to the loss of such a customer's
business.

During 2010 we did not derive more than 10% of our net sales from any single customer. However, we derived a significant portion of our
net sales from our ten largest customers. In the future, an increase in business from a large customer could result in net sales to that customer comprising more than 10% of our total net sales. We
cannot assure you that our large customers will continue to use our printing services. The loss of any of our large customers could cause our net sales and profitability to decline materially.

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Our financial results could be negatively impacted by impairments of goodwill and other long-lived assets.

On an annual basis or as circumstances dictate, we review goodwill and other long-lived assets, consisting primarily of
property, plant and equipment and identified intangibles subject to amortization, and evaluate events or other developments that may indicate impairment in the carrying amount. A decline in
profitability at one of our reporting units could result in non-cash impairment charges. Any impairment charge could have a significant negative effect on our reported results of
operations. In the fourth quarter of 2010, due primarily to the longer and more sustained deterioration of the magazine business through the fourth quarter of 2010, and the unlikely prospect of a
meaningful recovery in the near term, our assessment indicated that goodwill at Dartmouth Printing Company was fully impaired, resulting in a non-cash charge of $7.0 million. Also,
in the fourth quarter of 2008, as the result of a decline in profitability at United Litho, Inc. and The Dingley Press, Inc., due to the downturn in the economic environment, our
assessment indicated that goodwill and certain other intangibles were fully impaired at such entities. This resulted in a non-cash charge of $3.4 million and $2.2 million for
goodwill and customer relationship assets, respectively.

Cost and Availability of Paper and Other Raw MaterialsIncreases in prices of paper and other raw materials and postal rates as well as changes in postal
delivery schedules could cause disruptions in our services to customers.

The principal raw material used in our business is paper, which represents a significant portion of our cost of materials. Although we
believe that we have been successful in negotiating favorable price relationships with our paper vendors, prices in the overall paper market are beyond our control. Historically, we have generally
been able to pass increases in the cost of paper on
to our customers. If we are unable to continue to pass any price increases on to our customers, future paper price increases could adversely affect our margins and profits.

Due
to the significance of paper in our business, we are dependent upon the availability of paper. In periods of high demand, certain paper grades have been in short supply, including
grades we use in our business. In addition, during periods of tight supply, many paper producers allocate shipments of paper based upon historical purchase levels of customers. Although we generally
have not experienced significant difficulty in obtaining adequate quantities of paper, unforeseen developments in the overall paper markets could result in a decrease in the supply of paper and could
cause either or both of our revenues or profits to decline.

We
use a variety of other raw materials including ink, film, offset plates, chemicals and solvents, glue, wire and subcontracted components. In general, we have not experienced any
significant difficulty in obtaining these raw materials. We cannot assure you, however, that a shortage of any of these raw materials will not occur in the future or will not potentially adversely
affect the financial results of our business.

Our
journals, magazines and catalogs are mailed, either by us or our customers, to subscribers. As a result, an increase in postal rates may cause our customers to decrease the size and
number of their publications. Although we generally have not experienced significant decreases in mailings in the past due to postal rate increases, we cannot assure you that such a decrease will not
occur in the future or will not potentially adversely affect the financial results of our business. In addition, the U.S. Postmaster General has proposed reducing the delivery of mail from six days to
five days per week. If this change is adopted we cannot assure you how our customers will react and whether or not this will adversely affect the financial results of our business.

We
require energy products, primarily natural gas and electricity, in our operating facilities. We also depend on gasoline and diesel fuel for our delivery vehicles and the vehicles of
the carriers we utilize to deliver our products. Possible disruption of supplies or an increase in the prices of energy products could adversely affect the financial results of our business.

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Fluctuations
in the markets for paper and raw materials could adversely impact the market for our recycled materials, such as paper, cardboard and used plates. This could have a negative
effect on the income we generate from such sales.

Economic ConditionsCurrent and future economic conditions could adversely affect our business and financial performance.

Our operating results and performance are impacted by general economic conditions, both domestic and abroad. The printing industry
realized a significant contraction between 2008 and 2010 due to the severity of the most recent recession. The current global economic downturn and credit crisis may continue to negatively and
materially affect demand for our products and services and our financial performance. Examples of how our business and financial performance may continue to be adversely affected by current and future
economic conditions include:



Key EmployeesOur ability to attract, train and retain executives and other qualified employees is crucial to results of operations and future growth.

We rely to a significant extent on our executive officers and other key management personnel. There can be no assurance that we will be
able to continue to retain our executive officers and key management personnel or attract additional qualified management in the future. In addition, the success of any acquisition by us may depend,
in part, on our ability to retain management personnel of the acquired companies. There can be no assurance that we will be able to retain such management personnel.

In
addition, to provide high-quality printed products in a timely fashion we must maintain an adequate staff of skilled technicians, including pre-press
personnel, pressmen, bindery operators and fulfillment personnel. Accordingly, our ability to maintain and increase our productivity and profitability will depend, in part, on our ability to employ,
train and retain the skilled technicians necessary to meet our commitments. From time-to-time:



If
any of these events were to occur, it could adversely affect our business.

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Business InterruptionOur printing facilities may suffer business interruptions which could increase our operating costs, decrease our sales or cause us to lose
customers.

The reliability of our printing facilities is critical to the success of our business. Our facilities might be damaged or interrupted
by fire, flood, power loss, telecommunications failure, break-ins, earthquakes, terrorist attacks, war or similar events. Equipment malfunctions, computer viruses, physical or electronic
break-ins and similar disruptions might cause interruptions and delays in our printing services and could significantly diminish our reputation and brand name and prevent us from providing
services. Although we believe we have taken adequate steps to address these risks, damage to, or unreliability of, our printing facilities could have a material adverse effect on our business,
financial condition, results of operations and cash flow.

Research FundingDecreases in the types and amount of research funding could decrease the demand for our journal printing services.

In our journal business, we provide printing services primarily to scientific, technical, medical and other scholarly journals. The
supply of research papers published in these journals is related to the amount of research funding provided by the federal government and private companies. In the future, the federal government or
private companies could decrease the type and amount of funding that they provide for scientific, technical, medical and other scholarly research. A significant decrease in research funding might
decrease the number or length of journals that we print for our customers, which would decrease our cash flow. A reduction in the investment value of university endowments in the current economic
environment could also result in less demand by university libraries for printed journals.

Environmental MattersOur printing and other facilities are subject to environmental laws and regulations, which may subject us to liability or require us to
incur costs.

We use various materials in our operations which contain substances considered hazardous or toxic under environmental laws. In
addition, our operations are subject to federal, state and local environmental laws and regulations relating to, among other things, air emissions, waste generation, handling, management and disposal,
waste water treatment and discharge and remediation of soil and groundwater contamination. Permits are required for the operation of certain of our businesses, and these permits are subject to
renewal, modification and, in some circumstances, revocation. Our operations also generate wastes which are disposed of off-site. Under certain environmental laws, including the
Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA," commonly referred to as "Superfund") and similar state laws and regulations, we may be liable for costs and
damages relating to soil and groundwater contamination at these off-site disposal locations, or at our own facilities. In the past, such matters have not had a material impact on our
business or operations. We
are not currently aware of any environmental matters that are likely to have a material adverse effect on our business, financial condition, results of operations and cash flow. However, we cannot
assure you that such matters will not have such an impact on us. Furthermore, future changes to environmental laws and regulations may give rise to additional costs or liabilities that could have a
material adverse impact on us.

Health and Safety RequirementsWe could be adversely affected by health and safety requirements.

We are subject to requirements of federal, state and local occupational health and safety laws and regulations. These requirements are
complex, constantly changing and have tended to become more stringent over time. It is possible that these requirements may change or liabilities may arise in the future in a manner that could have a
material adverse effect on our business, financial condition, results of operations and cash flow. We cannot assure you that we have been or will be at all times in complete compliance with all those
requirements or that we will not incur material costs or liabilities in connection with those requirements in the future.

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Intellectual PropertyWe may not protect our technology effectively, which would allow competitors to duplicate our products and services, or our products and
services may infringe on claims of intellectual property rights of third parties.

Our success and ability to compete depend, in part, upon our technology. Among our significant assets are our proprietary information
and intellectual property rights. We rely on a combination of copyright and trademark laws, confidentiality procedures and contractual provisions and other intellectual property safeguards to protect
these assets. Unauthorized use and misuse of our intellectual property could have a material adverse effect on our business, financial condition and results of operations, and there can be no
assurance that our legal remedies would adequately compensate us for the damages caused by unauthorized use. In addition, licenses for a number of software products have been granted to us. Some of
these licenses, individually and in the aggregate, are material to our business. Although we believe that the risk that we will lose any material license is remote, any loss could have a material
adverse effect on our business, financial condition, results of operations and cash flow.

We
do not believe that any of our products, services or activities infringe upon the intellectual property rights of third parties in any material respect. There can be no assurance,
however, that third parties will not claim infringement by us with respect to current or future products, services or activities. Any infringement claim, with or without merit, could result in
substantial costs and diversion of
management and financial resources, and a successful claim could effectively block our ability to use or license products and services or cost us money.

Consummation of Future AcquisitionsWe may not be able to acquire other companies on satisfactory terms or at all.

Our business strategy includes pursuing acquisitions. Nonetheless, we cannot assure you that we will identify suitable acquisitions or
that such acquisitions can be made at an acceptable price. If we acquire additional businesses, those businesses may require substantial capital. Although we will be able to borrow under our working
capital facility under certain circumstances to fund acquisitions, we cannot assure you that such borrowings will be available in sufficient amounts or that other financing will be available in
amounts and on terms that we deem acceptable. In addition, future acquisitions could result in us incurring debt and contingent liabilities. We cannot assure you that we will be successful in
consummating future acquisitions on favorable terms or at all.

Integration of Acquired BusinessesThe integration of acquired businesses may result in substantial costs, delays and other problems.

Our future performance will depend on our ability to integrate the businesses that we may acquire. To integrate newly acquired
businesses we must integrate manufacturing facilities and extend our financial and management controls and operating, administrative and information systems in a timely manner and on satisfactory
terms and conditions. This may be more difficult with respect to significant acquisitions. We may not be able to successfully integrate acquired businesses or realize projected cost savings and
synergies in connection with those acquisitions on the timetable contemplated or at all.

Furthermore,
the costs of businesses that we may acquire could significantly impact our short-term operating results. These costs could include:



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The
integration of newly acquired businesses will require the expenditure of substantial managerial, operating, financial and other resources and may also lead to a diversion of
management's attention from our ongoing business concerns.

Finally,
although we conduct and intend to conduct what we believe to be a prudent level of investigation regarding the businesses we purchase, in light of the circumstances of each
transaction, an unavoidable level of risk remains regarding the actual condition of these businesses. Until we actually assume operating control of such business assets and their operations, we may
not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations. Once we acquire a business, we are faced with risks,
including:



We
may not be successful in overcoming these risks.

Principal StockholdersOur principal stockholders could exercise their influence over us.

As a result of their stock ownership of TSG Holdings Corp., our parent, Bruckmann, Rosser, Sherrill & Co., L.L.C.
("BRS"), Jefferies Capital Partners ("JCP") and their respective affiliates together beneficially own about 84.6% of TSG Holdings Corp.'s outstanding capital stock. By virtue of the ownership
interests of these funds and affiliates and the terms of our securities holders' agreement, these entities have significant influence over our management and will be able to determine the outcome of
all matters required to be submitted to the stockholders for approval, including the election of our directors and the approval of mergers, consolidations and the sale of all or substantially all of
our assets. The interests of the funds managed by BRS and JCP and their respective affiliates may differ from the interests of our noteholders and the lenders under our working capital facility, and,
as such, BRS and JCP may take actions which may not be in the interest of such noteholders and lenders. For example, if we encounter financial difficulties or are unable to pay our debts as they
mature, the interests of our equity owners might conflict with the interests of our noteholders and the lenders under our working capital facility. In addition, our equity owners may have an interest
in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to our
noteholders and the lenders under our working capital facility.

Effectiveness of our internal controlsFailure to comply with the Sarbanes-Oxley Act could impact our business.

There can be no assurance that the periodic evaluation of our internal controls required by the Sarbanes-Oxley Act will not result in
the identification of significant control deficiencies. Failure to comply may have consequences for our business. These consequences could include increased risks of financial statement misstatements,
investigations or sanctions by regulatory authorities, such as the SEC, and negative capital market reactions.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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Table of Contents

ITEM 2.    PROPERTIES

We operate a network of 12 manufacturing, warehousing and office facilities located throughout the East Coast and Midwest that occupy,
in total, about 1.1 million square feet. We maintain approximately 1.0 million square feet of production space consisting of manufacturing and publication services. We own about 85% of
the square footage we use. The following table provides an overview of our manufacturing, warehousing and office facilities.

Location

Function(s)

Ownership
Structure

Total Size
(Sq. Feet)Hunt Valley, MD

Corporate Headquarters


Leased


8,340Hanover, PA

Manufacturing (Publications)


Owned
(1)

172,250Chelsea, MI

Manufacturing (Books)


Owned
(1)

160,569Hanover, NH

Manufacturing (Publications)


Owned
(1)

147,830Ashburn, VA

Manufacturing (Publications)


Owned
(1)

70,159Lisbon, ME

Manufacturing (Specialty catalogs)


Owned
(1)

276,787Ann Arbor, MI

Manufacturing and Distribution (Books)


Owned
(1)

124,726Hanover, PA

Warehousing (Publications)


Leased


70,000Orford, NH

Warehousing (Publications)


Leased


4,330Waterbury, VT

Publication Services (Publications)


Leased


13,000Lewiston, ME

Warehousing (Specialty catalogs)


Leased


68,286Lisbon, ME

Warehousing (Specialty catalogs)


Leased


3,200Total


1,119,477


(1)Subject
to liens in favor of the holders of our outstanding senior secured notes and the lenders under our working capital facility.


Some
of our office and warehouse leases are on yearly renewals. The lease of our corporate headquarters expires in December 2011, subject to a renewal option. We believe that our office,
manufacturing and warehousing facilities are adequate for our immediate needs and that additional or substitute space is available at a reasonable cost if needed to accommodate future growth and
expansion.

On
February 3, 2011, we entered into a contract to sell the Ashburn, Virginia facility as a result of the consolidation of this business. Consummation of the transaction is
conditioned upon satisfaction of specific terms and conditions and delivery of specific documents, which are customary for similar transactions. The closing is scheduled for October 31, 2011.

We
are continuing our efforts to sell the Ann Arbor, Michigan book facility. We may consolidate this facility with our Chelsea, Michigan operation, pending a firm offer from a third
party at an acceptable price.

ITEM 3.    LEGAL PROCEEDINGS

We currently are involved in various litigation proceedings as a defendant and are from time to time involved in routine litigation.
Accruals for litigation have not been provided because information available at this time does not indicate that it is probable that a liability has been incurred. In the opinion of our management,
these matters are not expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

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ITEM 4.    RESERVED

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

We are wholly-owned by TSG Holdings Corp, a privately owned corporation. There is no public trading market for our equity securities or
for those of TSG Holdings Corp. As of March 29, 2011, there were 34 holders of TSG Holdings Corp. common stock.

Our
working capital facility contains customary restrictions on our ability and the ability of certain of our subsidiaries to declare or pay any dividends or repurchase stock. The
indenture governing our 10.25% Senior Secured Notes due 2011 also contains customary terms restricting our ability and the ability of certain of our subsidiaries to declare or pay any dividends or
repurchase stock. For further information related to the payment of dividends, see the discussion contained in Part III, Item 12, "Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters." Information with respect to shares of common stock that may be issued under our equity compensation plans is set forth in Part III, Item 12,
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

ITEM 6.    SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related
notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial data included elsewhere in this annual report on Form 10-K. The
consolidated statement of operations and balance sheet data for all periods presented is derived from the audited consolidated financial statements included elsewhere in this annual report on
Form 10-K or in annual reports on Form 10-K for prior years on file with the Commission.

(Dollars in thousands)

Year ended
December 31,
2010

Year ended
December 31,
2009

Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Statement of Income Data:Net sales

$
266,188

$
293,349

$
348,027

$
344,240

$
337,540Gross profit


53,677


60,401


66,647


70,050


65,376Selling and administrative expenses


35,799


37,115


42,175


41,746


40,339Operating income


9,392


21,390


12,757


26,308


5,489Net (loss) income


(5,941
)

8,217


(5,872
)

4,847


(8,343
)Balance Sheet Data (at end of period):Cash and cash equivalents

$
13,717

$
4,110

$
16,397

$
20,517

$
7,800Property, plant and equipment, net


112,044


117,757


127,064


126,709


129,666Total assets


241,511


249,000


285,097


298,968


291,567Total debt


142,924


142,949


164,946


164,930


164,915Total stockholder's equity


38,099


44,012


44,882


50,845


46,688Other Financial Data:Depreciation and amortization

$
20,864

$
18,674

$
18,400

$
17,834

$
18,991Capital expenditures


13,671


9,654


17,597


15,158


26,296


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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our historical
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The discussions in this section contain forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from those discussed below. See "Special Note Regarding Forward-Looking Statements" and Part I, Item 1A, "Risk
Factors" for a discussion of some of the risks that could affect us in the future.

Introduction

We are a leading specialty printer offering a full range of printing and value-added support services for the journal, catalog,
magazine, book and article reprint markets. We provide a wide range of printing services and value-added support services, such as digital proofing, preflight checking, offshore composition, copy
editing, subscriber services, mail sortation, distribution and back issue fulfillment. We utilize a decentralized management structure, which provides our customers with access to the resources of a
large company, while maintaining the high level of service and flexibility of a smaller company.

Acquisition transactions

On August 21, 2003, TSG Holdings Corp ("Holdings" or our "Parent") purchased 100% of the outstanding capital stock of The
Sheridan Group, Inc. from its existing stockholders (the "Sheridan Acquisition") for total cash consideration of $142.0 million less net debt (as defined in the stock purchase
agreement), resulting in cash of $79.9 million being paid to the selling stockholders. The accounting purchase price was $186.6 million, which was comprised of the $79.9 million
of cash paid to the selling stockholders, $51.4 million of assumed liabilities and $55.3 million of refinanced debt. We funded the acquisition price and the related fees and expenses
with the proceeds of the sale of $105.0 million aggregate principal amount of our 10.25% Senior Secured Notes due 2011 (the "2003 Notes") and equity investments in Holdings.

On
May 25, 2004, The Sheridan Group, Inc., through a newly formed subsidiary, purchased substantially all of the assets and business of The Dingley Press (the "Dingley
Acquisition"). The accounting purchase price was $95.4 million, which was comprised of cash paid of $65.5 million, $26.0 million of assumed liabilities and $3.9 million of
financing costs. We funded the acquisition price and the related fees and expenses with the proceeds of the sale of $60.0 million aggregate principal amount of our 10.25% Senior Secured Notes
due 2011 (the "2004 Notes"), available cash and equity investments in Holdings. The 2003 Notes and the 2004 Notes are fully and unconditionally guaranteed on a joint and several basis by all of our
subsidiaries.

Restructuring costs and facility shutdown

In January 2009, we announced our plan to consolidate some administrative and production operations at our DPC facility in Hanover, New
Hampshire. Approximately 20 positions at our ULI facility in Ashburn, Virginia were eliminated as a result of this
action. We recorded $0.3 million of restructuring costs during 2009. The costs relate primarily to guaranteed severance payments and employee health benefits. We recorded an additional
$0.1 million of restructuring costs in connection with this consolidation during 2010.

Due
to continued adverse trends in the specialty magazine business as a result of the weak economy, our Board of Directors, on January 19, 2011, approved a restructuring plan to
consolidate all specialty magazine printing operations into one site. We will consolidate the printing of specialty magazines at Dartmouth Printing Company in Hanover, New Hampshire and close the

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United Litho, Inc.
facility in Ashburn, Virginia. Approximately 80 positions will be eliminated as a result of the closure. It is expected that approximately 20 employees in the Customer
Service and Sales areas will be retained by Dartmouth Printing Company.

Charges
related to this restructuring will be recorded as the plan is implemented. We estimate approximately $2.2 million ($1.3 million after tax) of restructuring charges
resulting in future cash expenditures will be incurred, including $1.5 million of charges related to severance and other personnel costs and $0.7 million of other exit costs. We expect
to record these costs in 2011.

On
February 3, 2011, we entered into a contract to sell the Ashburn, Virginia facility for $4.2 million. Sales commissions, transfer taxes, fees and other closing costs are
expected to reduce the net proceeds to approximately $3.9 million which should result in a negligible gain. Consummation of the transaction is conditioned upon satisfaction of specific terms
and conditions and delivery of specific documents, which are customary for similar transactions. The purchaser under the contract may, in its sole discretion in accordance with the terms of the
agreement, terminate the agreement to purchase the facility prior to the expiration of a 75-day due diligence period. Additionally, after such period, the purchaser may elect not to consummate the
transaction by forfeiting its deposit of approximately $0.4 million. The closing is scheduled for October 31, 2011.

We
estimate that we will incur non-cash charges of $1.6 million in 2011 associated with the accelerated amortization of the United Litho trade name which is reflected
in the estimated future amortization expense as disclosed in Note 6 of our financial statements.

We
also expect that we will incur non-cash charges of approximately $3.0 million associated with the accelerated depreciation of equipment, based on updated estimates
of remaining useful life and estimated residual value, equal to the lower of carrying value or best estimate of selling price, less costs to sell.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates, and the differences could be material. We consider the following accounting policies to be critical policies which involve various estimation
processes:





Our policy with respect to trade accounts receivable is to maintain an adequate allowance or reserve for doubtful accounts for
estimated losses from the inability of our customers to make required payments. The process to estimate the collectibility of our trade accounts receivable balances consists of two steps. First, we
evaluate specific accounts for which we have information that the customer may have an inability to meet its financial obligations (e.g., bankruptcy). In these cases, using our judgment based
on available facts and circumstances, we record a specific allowance for that customer against the receivable to reflect the amount we expect to ultimately collect. Second, we then establish an
additional reserve for all customers based on a range of percentages applied to aging categories, based on

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management's
best estimate. If the financial condition of our customers were to deteriorate and result in an impairment of their ability to make payments, additional allowances may be required.



On an annual basis or as circumstances dictate, we review goodwill and evaluate events or other developments that may indicate
impairment in the carrying amount. We test goodwill for impairment using the two-step process as prescribed by the appropriate guidance. The initial step requires us to determine the fair
value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However, if the
carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount, if any, of the impairment is then measured in the second step by comparing the
implied fair value of goodwill to the carrying value of goodwill for each reporting unit. To determine the implied fair value of goodwill, we make a hypothetical allocation of the reporting unit's
estimated fair value to the tangible and intangible assets (other than goodwill) of the reporting unit.

The
determination of the fair value of our reporting units and the allocation of fair value to assets and liabilities within the reporting units requires management to make significant
estimates and assumptions. We derive an estimate of fair values for each of our reporting units using a combination of an income approach and appropriate market approaches, each based on an applicable
weighting. We assess the applicable weighting based on such factors as current market conditions and the quality and reliability of the data. Absent an indication of fair value from a potential buyer
or similar specific transactions, we believe that the use of these methods provides a reasonable estimate of a reporting unit's fair value. Fair value computed by these methods is arrived at using a
number of factors,
including projected future operating results, anticipated future cash flows, effective income tax rates, comparable marketplace data within a suitable industry grouping, control premiums appropriate
for acquisitions in our industry and the cost of capital. There are inherent uncertainties related to these factors and to our judgment in applying them to this analysis. Nonetheless, we believe that
the combination of these methods provides a reasonable approach to estimate the fair value of our reporting units. The allocation requires several analyses to determine the fair value of assets and
liabilities including, among others, customer relationships, trade names, technology and property, plant and equipment. Although we believe our estimates of fair value are reasonable, actual financial
results could differ from those estimates due to the uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could
have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both.

Due
primarily to the longer and more sustained deterioration of the magazine business through the fourth quarter of 2010, and the unlikely prospect of a meaningful recovery in the near
term, the December 31, 2010 assessment indicated that goodwill related to our Dartmouth Printing Company reporting unit, a component of the Publications segment, was fully impaired resulting in
a write-down of goodwill totaling $7.0 million which was recorded during the fourth quarter of 2010. The fair values of our remaining reporting units for goodwill impairment
purposes were substantially in excess of their carrying values as of December 31, 2010. No impairments were noted for any of our reporting units as a result of these tests performed on
December 31, 2009. The December 31, 2008 assessment indicated that goodwill related to our United Litho, Inc. reporting unit, a component of the Publications segment, was fully
impaired resulting in a write-down of goodwill totaling $3.4 million. At December 31, 2010, we had $34.0 million in goodwill. While significant judgment is required,
we believe that our estimates of fair value are reasonable. However, should our assumptions change in future years, our fair value models could result in lower fair values for goodwill, which could
materially affect the value of goodwill and our results of operations.

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We
review other long-lived assets, consisting primarily of property, plant and equipment and identified intangibles subject to amortization, for impairment by analyzing the
future undiscounted cash flows whenever events or changes in circumstances indicate that the carrying value of the long-lived assets, including goodwill, may not be recoverable. As a
result of the impairment analysis performed in 2008 for United Litho, Inc. (a component of the Publications segment) and The Dingley Press, Inc. (our Specialty Catalogs segment), we
concluded that the carrying value of the customer relationship assets exceeded their fair value. Therefore, during 2008, we recorded an impairment charge of $2.0 million and $0.2 million
for the customer relationship assets of United Litho, Inc. and The Dingley Press, Inc., respectively. We do not believe there was any impairment of intangible assets or other
long-lived assets as of December 31, 2010 and 2009. While significant judgment is required, we believe that our estimates of future undiscounted cash flows are reasonable. However,
should our assumptions change in future years, estimates of undiscounted cash flows could change, which could affect our conclusions regarding the recoverability of long-lived assets and
could materially affect the value of long-lived assets and our results of operations.



As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the
jurisdictions in which we operate. In addition to estimating the actual current tax liability, we must assess future tax effects of temporary differences between the tax basis of assets and
liabilities and amounts reflected on our consolidated balance sheets, and operating loss carryforwards. Such differences result in deferred tax assets and liabilities, which are recorded in our
consolidated balance sheets. We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and, to the extent recovery is not considered likely, establish a
valuation allowance against those assets. The valuation allowance is based on estimates of future taxable income in jurisdictions in which we operate and the period over which the deferred tax assets
will be recoverable. We use our best judgment in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against the net deferred tax
assets.

To
the extent that actual results differ from our estimates, new information results in changes to estimates or there is a material change in the actual tax rates or time periods within
which the underlying temporary differences become taxable or deductible, we may need to establish an additional valuation allowance, reduce our existing valuation allowance or adjust the effective tax
rate, all of which could materially impact our financial position and results of operations.

We
recognize liabilities for uncertain tax positions when it is more likely than not that the position will be sustained upon examination by tax authorities, including resolutions of any
related appeals or litigation processes, based on the technical merits. Although we believe our estimates are reasonable, the final outcome of uncertain tax positions may be different from what is
reflected in our consolidated financial statements. We adjust our uncertain tax positions based on changes in circumstances that would cause a change to the liability, upon settlement of the position
or upon the expiration of the statute of limitations during the period in which such events occur.

We
recognize interest and penalties related to uncertain tax positions as part of the income tax provision. We had accrued interest of $0.4 million and penalties of
$0.3 million as of December 31, 2010. Interest and penalties in the amount of $0.1 million were expensed during the years ended December 31, 2010, 2009 and 2008,
respectively. Interest and penalties will continue to accrue on certain issues in 2010 and forward.

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We are self-insured for healthcare and workers' compensation costs. We seek to mitigate the risk related to our ultimate
claims exposure under these self-insurance arrangements through the purchase of various levels of individual and aggregate claims stop-loss insurance coverage with third-party
insurers. We periodically review health insurance and workers' compensation claims outstanding and estimates of incurred but not reported claims with our third-party claims administrators and adjust
our reserves for self-insurance risk accordingly. Provisions for medical and workers' compensation claims are based on estimates, which are subject to differing financial outcomes based
upon the nature and severity of those claims. As a result, additional reserves may be required in future periods.

Results of Operations

The periods presented in this Form 10-K are reported on a comparable basis. The Publications business segment is
focused on the production of short-run journals, medium-run journals and specialty magazines and is comprised of the assets and operations of The Sheridan Press, Inc.,
Dartmouth Printing Company, Dartmouth Journal Services, Inc. and United Litho, Inc. We believe there are many similarities in the journal and magazine markets such as the equipment used
in the print and bind process, distribution methods, repetitiveness and frequency of titles and the level of service required by customers. Our Books segment is focused on the production of
short-run books and is comprised of the assets and operations of Sheridan Books, Inc. This market does not have the repetitive nature of our other products and does not require the
same level of customer service. The Specialty Catalogs segment, which is comprised of the assets and operations of The Dingley Press, Inc., is focused on catalog merchants that require run
lengths between 50,000 and 8,500,000 copies.

The
following tables set forth, for the periods indicated, information derived from our consolidated statements of income, the relative percentage that those amounts represent to total
net sales (unless

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otherwise
indicated), and the percentage change in those amounts from period to period. These tables should be read in conjunction with the commentary that follows them.



Year ended
December 31,

Increase (decrease)

Percent of
revenue
Year ended
December 31,(in thousands)

2010

2009

Dollars

Percentage

2010

2009Net salesPublications

$
148,758

$
165,872

$
(17,114
)

(10.3
)%

55.9
%

56.5
%Specialty catalogs


60,725


68,948


(8,223
)

(11.9
)%

22.8
%

23.5
%Books


56,776


58,554


(1,778
)

(3.0
)%

21.3
%

20.0
%Intersegment sales elimination


(71
)

(25
)

(46
)

(184.0
)%




Total net sales


266,188


293,349


(27,161
)

(9.3
)%

100.0
%

100.0
%Cost of sales


212,511


232,948


(20,437
)

(8.8
)%

79.8
%

79.4
%Gross profit


53,677


60,401


(6,724
)

(11.1
)%

20.2
%

20.6
%Selling and administrative expenses


35,799


37,115


(1,316
)

(3.5
)%

13.5
%

12.7
%Loss on disposition of fixed assets


9


146


(137
)

nm





Restructuring costs


78


312


(234
)

(75.0
)%




0.1
%Amortization of intangibles


1,398


1,438


(40
)

(2.8
)%

0.5
%

0.5
%Impairment charge


7,001





7,001


nm


2.7
%

Total operating expenses


44,285


39,011


5,274


13.5
%

16.7
%

13.3
%Operating incomePublications


8,070


17,312


(9,242
)

(53.4
)%

5.4
%

10.4
%Specialty catalogs


(1,485
)

1,491


(2,976
)

nm


(2.4
)%

2.2
%Books


4,339


4,039


300


7.4
%

7.6
%

6.9
%Corporate expenses


(1,532
)

(1,452
)

(80
)

(5.5
)%

N/A


N/ATotal operating income


9,392


21,390


(11,998
)

(56.1
)%

3.5
%

7.3
%Other (income) expenseInterest expense


15,791


17,229


(1,438
)

(8.3
)%

5.9
%

5.9
%Interest income


(49
)

(69
)

20


29.0
%




Gain on repurchase of notes payable





(7,194
)

7,194


100.0
%




(2.5
)%Other, net


23


(234
)

257


nm





(0.1
)%Total other expense


15,765


9,732


6,033


62.0
%

5.9
%

3.3
%(Loss) income before income taxes


(6,373
)

11,658


(18,031
)

nm


(2.4
)%

4.0
%Income tax (benefit) provision


(432
)

3,441


(3,873
)

nm


(0.2
)%

1.2
%Net (loss) income

$
(5,941
)
$
8,217

$
(14,158
)

nm


(2.2
)%

2.8
%


nmnot
meaningful


Commentary:

Net sales for 2010 decreased $27.2 million or 9.3% versus 2009, largely attributable to decreases in shipping and paper costs,
which are passed on to our customers, due principally to lower volumes being produced by us. The lower volumes are due primarily to reductions in print run lengths resulting from

23

---



Table of Contents

the
economic recession as well as the loss of work from certain customers due to pricing considerations. Net sales for the Publications segment decreased $17.1 million or 10.3% in 2010 compared
to a year ago due primarily to: (i) loss of a portion of our journal work from a specific customer due to pricing considerations; (ii) sales declines in magazines as reductions in print
advertising have led our customers to reduce run lengths, page counts and frequency of publication; and (iii) the conversion from offset to digital printing for journals as publishers seek
cost-effective methods for delivering content. Decreases in shipping and paper costs, which are passed on to our customers, accounted for a majority of the dollar sales decline in
Publications sales. Net sales for the Specialty Catalogs segment decreased $8.2 million or 11.9% in 2010 compared with a year ago due primarily to the impact of lower paper costs, coupled with
a reduction in print quantities for catalogs in
response to soft retail sales. Net sales for the Books segment decreased $1.8 million or 3.0% in 2010 compared with a year ago due primarily to fewer titles being produced due to the economic
recession as well as the loss of a portion of our book work from a specific customer due to pricing considerations, which were partially offset by higher paper pass through costs due to price
increases and product mix changes as well as increases in volume from new customers.

Gross
profit for 2010 decreased $6.7 million compared to 2009 as we were not able to adjust our cost structure sufficiently to offset the reduction in sales. A
one-time charge of $2.3 million for depreciation expense in connection with the write down of the value of a printing press, in the Publications segment, that was removed from
service accounted for slightly more than one-third of the gross profit decline. This was partially offset by a $1.8 million increase in revenue from recyclable materials. Gross
margin of 20.2% of net sales for 2010 reflected a 0.4 margin point decrease versus 2009 due primarily to the 0.8 margin point reduction associated with the one-time depreciation charge.

Selling
and administrative expenses for 2010 decreased $1.3 million or 3.5% versus 2009, due primarily to decreases in staffing and benefit costs (largely due to headcount
reductions and the suspension of the Company's contributions to the 401k plan) coupled with a decrease in bad debt expense and the non-recurrence in 2010 of non-capitalizable
costs associated with renewing our working capital facility in 2009.

We
evaluate possible impairment of goodwill on an annual basis at the reporting unit level. As a result of our impairment tests, we concluded that the carrying value of goodwill at
Dartmouth Printing Company exceeded its implied fair value. This resulted in a non-cash impairment charge of $7.0 million during the fourth quarter of 2010. In connection with our
annual assessment of goodwill and other intangibles in 2009, we concluded that there were no indications of impairment.

Operating
income of $9.4 million for 2010 represented a decrease of $12.0 million or 56.1% as compared to operating income of $21.4 million for 2009. The impact of
the $7.0 million goodwill impairment charge and the $2.3 million one-time charge for depreciation expense, mentioned above, accounted for a majority of the decrease in
operating income. The remainder of the decrease was due to lower sales only partially offset by cost reductions in staffing, materials and operating leases and higher recyclables revenue. Publications
operating income decreased $9.2 million in 2010 compared to 2009 due primarily to the $7.0 million goodwill impairment charge and the $2.3 million one-time charge for
depreciation expense. Specialty Catalogs realized an operating loss of $1.5 million during 2010 as compared to operating income of $1.5 million a year ago due to reductions in sales,
which outpaced reductions in our cost structure. The Books segment increased operating income by $0.3 million in 2010 compared to 2009 as lower costs, primarily staffing, benefits and
materials, coupled with increased revenue from recyclable materials more than offset the decrease in sales.

24

---



Table of Contents

Other expense of $15.8 million for 2010 represented a $6.1 million increase as compared to other expense of $9.7 million for 2009. This
increase was due primarily to the absence in 2010 of the $7.2 million gain on the repurchases of notes payable that occurred during 2009, partially offset by a corresponding reduction in
related interest expense of $1.4 million in 2010.

The
loss before income taxes of $6.4 million for 2010 represented an $18.0 million decrease as compared to last year. This change was due primarily to the absence in 2010
of the $7.2 million gain on the repurchases of notes payable that occurred during the same period of 2009, the $7.0 million charge for goodwill impairment in 2010, the
$2.3 million one-time charge for depreciation expense in 2010 and the reductions in sales which outpaced reductions in our cost structure.

Our
effective income tax rate in 2010 was 6.8% compared to 29.5% in 2009. The decrease in the effective tax rate was due primarily to the impact of the goodwill impairment charge in the
Publications segment, as this goodwill was not deductible for tax purposes.

Net
loss of $5.9 million for 2010 represented a $14.1 million decrease as compared to net income of $8.2 million for 2009 due to the factors mentioned previously.

25

---



Table of Contents



Year ended
December 31,

Increase (decrease)

Percent of revenue
Year ended
December 31,(in thousands)

2009

2008

Dollars

Percentage

2009

2008Net salesPublications

$
165,872

$
188,714

$
(22,842
)

(12.1
)%

56.5
%

54.2
%Specialty catalogs


68,948


92,218


(23,270
)

(25.2
)%

23.5
%

26.5
%Books


58,554


67,282


(8,728
)

(13.0
)%

20.0
%

19.3
%Intersegment sales elimination


(25
)

(187
)

162


86.6
%




Total net sales


293,349


348,027


(54,678
)

(15.7
)%

100.0
%

100.0
%Cost of sales


232,948


281,380


(48,432
)

(17.2
)%

79.4
%

80.9
%Gross profit


60,401


66,647


(6,246
)

(9.4
)%

20.6
%

19.1
%Selling and administrative expenses


37,115


42,175


(5,060
)

(12.0
)%

12.7
%

12.1
%Loss on disposition of fixed assets


146


1,223


(1,077
)

(88.1
)%




0.4
%Related party guaranty





3,000


(3,000
)

(100.0
)%




0.8
%Restructuring costs


312


137


175


127.7
%

0.1
%

Amortization of intangibles


1,438


1,715


(277
)

(16.2
)%

0.5
%

0.5
%Impairment charge





5,640


(5,640
)

(100.0
)%




1.6
%Total operating expenses


39,011


53,890


(14,879
)

(27.6
)%

13.3
%

15.4
%Operating incomePublications


17,312


12,481


4,831


38.7
%

10.4
%

6.6
%Specialty catalogs


1,491


(426
)

1,917


nm


2.2
%

(0.5
)%Books


4,039


5,524


(1,485
)

(26.9
)%

6.9
%

8.2
%Corporate expenses


(1,452
)

(4,822
)

3,370


69.9
%

N/A


N/ATotal operating income


21,390


12,757


8,633


67.7
%

7.3
%

3.7
%Other (income) expenseInterest expense


17,229


18,399


(1,170
)

(6.4
)%

5.9
%

5.3
%Interest income


(69
)

(172
)

103


59.9
%




(0.1
)%Gain on repurchase of notes payable


(7,194
)




(7,194
)

nm


(2.5
)%

Other, net


(234
)

1,269


(1,503
)

nm


(0.1
)%

0.4
%Total other expense


9,732


19,496


(9,764
)

(50.1
)%

3.3
%

5.6
%Income (loss) before income taxes


11,658


(6,739
)

18,397


nm


4.0
%

(1.9
)%Income tax provision (benefit)


3,441


(867
)

4,308


nm


1.2
%

(0.2
)%Net income (loss)

$
8,217

$
(5,872
)
$
14,089


nm


2.8
%

(1.7
)%


nmnotmeaningful


Commentary:

Net sales were $293.3 million in 2009, a $54.7 million or 15.7% decrease compared to net sales of $348.0 million
in 2008. The decrease in sales was due primarily to reductions in pricing, print run lengths and page counts resulting from the ongoing economic recession coupled with decreases in paper and shipping
costs, which are passed on to our customers. Net sales for the Publications segment decreased $22.8 million or 12.1% in 2009 as compared to the same period a year ago with the sales

26

---



Table of Contents

decline
largely due to lower paper and freight costs. The balance of the Publications sales decline was due to reductions in pricing, run lengths and frequency of publication for journal and magazine
customers along with a reduction in page counts from our magazine customers. Net sales for the Specialty Catalogs segment decreased $23.3 million or 25.2% in 2009 as compared to the same period
a year ago. A majority of the Specialty Catalogs sales decrease was due to lower paper and freight costs, including the impact of the segment's largest customer's decision to supply its own paper. The
remainder of the Specialty Catalogs sales decline is attributable to a reduction in print run lengths and page counts for catalogs reflecting reduced consumer spending. Net sales for the Books segment
decreased $8.7 million or 13.0% in 2009 as compared to the same period a year ago due primarily to fewer titles being produced coupled with shorter run lengths and page counts as book
publishers deal with the economic recession. Additionally, lower paper and freight costs contributed to the sales decline in Books.

Gross
profit for 2009 decreased by $6.2 million or 9.4% compared to 2008. The gross profit decrease was attributable primarily to the reduction in sales mentioned previously
coupled with lower revenue from recyclable materials partially offset by lower variable costs, reductions in healthcare and utility costs, and cost reductions pertaining to staffing, benefits and
discretionary spending. Additionally, the non-recurrence of 2008 start-up costs associated with the new digital product offering in the Publications segment also helped
partially offset the adverse impact of the decline in sales and recyclables revenue. Gross margin of 20.6% of net sales in 2009 reflected a 1.5 margin point increase versus 2008. The gross margin
increase was due principally to reductions in pass through costs of freight and paper as well as the reductions in health care, utility and variable costs combined with cost reduction efforts.

Operating
income of $21.4 million for 2009 represented an increase of $8.6 million or 67.7% as compared to operating income of $12.8 million for 2008. This increase
was primarily attributable to the non-recurrence of three items from 2008: (i) $5.6 million of impairment charges related to goodwill and intangibles at United
Litho, Inc. and The Dingley Press, Inc., (ii) $3.0 million of related party guaranty costs to satisfy obligations in connection with the shutdown of GPN Asia, a former
affiliate of our parent company and (iii) $0.8 million of losses on the disposition of fixed assets associated with our product offering in the digital printing market. We also realized
reductions in selling and administrative costs due to cost management of staffing, employee benefits and discretionary costs coupled with lower administrative costs associated with the new digital
product
initiative, partially offset by the gross profit reductions discussed previously. In the Publications segment, operating income increased by $4.8 million during 2009 as compared to the year ago
period due primarily to the non-recurrence of the impairment charges for goodwill and other intangibles and the losses on the disposition of fixed assets associated with the digital
product initiative mentioned previously. Additionally, reductions in Publications staffing, employee benefit plans and discretionary spending coupled with lower healthcare claims, lower material and
utility costs, and the absence of start-up costs associated with our product offering in the digital printing market more than offset the adverse impact of lower sales volume and lower
revenue from recyclable materials. In the Specialty Catalogs segment, operating income increased by $1.9 million in 2009 as a result of reductions in staffing and discretionary spending coupled
with lower utility costs which offset the impact of lower sales volume and the lower revenue from recyclable materials compared to the same period year ago. Operating income in the Books segment
decreased $1.5 million in 2009 as compared to 2008 due primarily to the decline in sales volume and lower revenue from recyclable materials. These adverse impacts were partially offset by
significant reductions in staffing and employee benefits in the Books segment.

During
2009, we recorded gains on the repurchase of notes payable of $7.2 million. There were no comparable transactions during 2008. The repurchase of notes payable was the
primary reason our interest expense decreased $1.2 million during 2009 as compared to the same period last year.

27

---



Table of Contents

Other
income was $0.2 million for 2009 as compared to other expense of $1.3 million during the same period last year. This increase was due primarily to the increase in the
market value of investments held in the deferred compensation plan during 2009. The market value of these investments decreased during the same period in 2008.

Income
before income taxes of $11.7 million for 2009 represented an $18.4 million increase as compared to the same period last year. The increase was due primarily to the
gains on the repurchases of notes payable and the non-recurrence of (i) impairment charges for goodwill and other intangibles, (ii) the related party guaranty costs in
connection with the shutdown of GPN Asia and (iii) the losses on the disposition of certain fixed assets associated with the digital product initiative. In addition, the reduction in
interest expense and the increase in the market value of investments held in the deferred compensation plan during the year also contributed to the increase in income before income taxes. These
increases were partially offset by the adverse impact of lower sales net of the operating cost reductions mentioned previously.

Our
effective income tax rate was 29.5% for 2009 compared to 12.9% for the same period in 2008. The effective tax rate was much lower in 2008 due primarily to the impact of the goodwill
impairment charge mentioned previously.

Net
income of $8.2 million for 2009 represented a $14.1 million increase as compared to a net loss of $5.9 million for 2008 due to the factors mentioned previously.

Liquidity and Capital Resources

Our 2003 Notes and 2004 Notes mature on August 15, 2011. We do not have sufficient funds, nor do we anticipate generating
sufficient funds from operations to repay these notes. We are actively engaged in the process of refinancing these notes prior to their maturity but we cannot assure you that we will be able to do so.
Our future operating performance and ability to extend or refinance our indebtedness will be dependent on future economic conditions and financial, business, and other factors that may be beyond our
control. If we fail to refinance the notes this would have a material adverse impact on our business, assets and ability to fund our liquidity needs. Our working capital facility is scheduled to
terminate on May 25, 2011. We are also actively engaged in the process of replacing the current facility prior to its termination, but we cannot assure you that we will be able to do so. If we
are not able to replace our working capital facility on similar terms, it could adversely impact our ability to fund our liquidity needs.

We
had cash of $13.7 million as of December 31, 2010 compared to $4.1 million as of December 31, 2009. During 2010, we utilized cash on hand to fund
operations, make investments in new plant and equipment and make the semi-annual interest payments on the senior secured notes.

Our
principal sources of liquidity are expected to be cash flow generated from operations and borrowings under our working capital facility. Our principal uses of cash are expected to be
to meet debt interest requirements, finance our capital expenditures and provide working capital. Additionally, we may from time to time fund cash distributions to our Parent, as we did in the first
quarter of 2009, in accordance with the limitations outlined in our bond indenture and our working capital facility.

We
are subject to liquidity risk, which is the potential that we will be unable to meet our obligations as they become due or capitalize on growth opportunities as they arise because of
an inability to liquidate assets, or obtain adequate funding on a timely basis at a reasonable cost and within acceptable risk tolerances. Our access to funding sources in amounts adequate to finance
our activities could be impaired by factors that affect us specifically or the printing industry in general, including a decrease in the level of our business activity due to a market downturn or the
insufficient access to liquidity. If we do not have sufficient liquidity to comply with the terms of the working capital facility and the 2003 and 2004 Notes, we could be in default under those
agreements, and the debt

28

---



Table of Contents

under
those instruments, together with the accrued interest, could then be declared immediately due and payable.

To
service our debt, we require a significant amount of cash. Our ability to generate cash, make scheduled payments or refinance our obligations depends on our successful financial and
operating performance. If our cash flow and capital resources are insufficient, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital
or restructure our debt. If we are required to take any such actions, it could have a material adverse effect on our business, financial condition, and results of operations. In addition, we cannot
assure that we would be able to take any of these actions on terms acceptable to us, or at all, that these actions would enable us to continue to satisfy our capital requirements or that these actions
would be permitted under the terms of our various debt agreements.



Net cash provided by operating activities was $22.7 million for 2010, virtually unchanged as compared to $23.0 million
for 2009. Our net cash provided by operating activities for 2010 was primarily due to our $5.9 million net loss adjusted for non-cash items of $28.8 million partially offset
by a $0.2 million decrease due to working capital changes. Our unfavorable working capital changes included (i) an increase in paper inventory at the end of 2010 as compared to 2009,
primarily in our Specialty Catalogs segment in advance of a price increase and (ii) a decrease in our accrued expenses, which included our payroll-related liability, primarily due to a lower
headcount at the end of 2010 as compared to the prior year and a decrease in the accrual for incentives paid to customers primarily due to lower sales in 2010 as compared to the prior year. These
unfavorable changes were partially offset by (i) a decrease in accounts receivable at the end of 2010 as compared to 2009 due primarily to a decrease in sales activity and (ii) an
increase in accounts payable at the end of 2010 as compared to 2009, due primarily to the timing of paper purchases and a change in payment terms with an ink supplier.

Net
cash provided by operating activities was $23.0 million for 2009, an increase of $8.3 million as compared to $14.7 million for 2008. The increase was primarily
due to favorable changes in working
capital and other assets and liabilities totaling $7.9 million. The working capital changes included (i) a decrease in accounts receivable at the end of 2009 as compared to 2008 due
primarily to decreases in sales activity, (ii) inventory levels at the end of 2009 were significantly lower as compared to the end of 2008 due primarily to efforts to reduce inventory balances
in line with our lower production and sales levels, (iii) a decrease in refundable income taxes at the end of 2009 as compared to 2008 due to the tax refunds we collected during the year and
(iv) the effect of the increase in income taxes payable to Holdings for federal and state jurisdictions where consolidated income tax returns are filed by Holdings. These favorable changes were
partially offset by unfavorable changes which included: (i) a decrease in accounts payable at the end of 2009 as compared to 2008 due primarily to our lower production levels, (ii) an
unfavorable change in other current assets due to the timing of cash received for rebates for materials and recyclables and (iii) an unfavorable change in other non-current assets
due to the increase in the market value of investments held in the deferred compensation plan at the end of 2009 as compared to the end of 2008 versus the decrease in these investments at the end of
2008 as compared to the end of 2007. We also realized an increase in net income of $14.1 million in 2009 as compared to 2008. Much of this increase did not result in additional cash flow
because it was due principally to decreases in non-cash charges consisting primarily of the reduction of impairment charges for goodwill and intangibles, the reduction in losses from the
disposition of fixed assets, the reduction in amortization of intangible assets as well as the non-cash nature of the gain on the repurchase of notes payable partially offset by increases
in depreciation expense and the provision for doubtful accounts.

29

---





Table of Contents



Net cash used in investing activities was $13.1 million for 2010 compared to $11.4 million for 2009. This
$1.7 million increase was primarily the result of a $4.0 million increase in plant and equipment purchased in the ordinary course of business partially offset by a $0.5 million
increase in proceeds received from the sale of fixed assets and a $1.7 million decrease in advances made to our parent company. The $4.0 million increase in plant and equipment was due
to spending associated with the purchase of a new press at DPC to accommodate future journal growth and provide capacity for magazines being transferred from ULI as we consolidate sites.

Net
cash used in investing activities was $11.4 million for 2009 compared to $18.7 million for 2008. This $7.3 million decrease was primarily the result of a
$7.9 million decrease in plant and equipment purchased in the ordinary course of business partially offset by a $0.6 million net increase in advances made to our parent and a former
affiliated company.



Net cash provided by financing activities was negligible in 2010. Net cash used in financing activities was $23.9 million in
2009 and consisted primarily of the $14.5 million we paid to repurchase our senior secured notes, the $9.1 million dividend paid to our parent company to enable it to repurchase its
capital stock in connection with the complete divestiture of its interest in Euradius International Dutch Bidco B.V. and the $0.3 million in deferred financing costs we paid in
connection with the amendment to our working capital facility

Net
cash used in financing activities during 2009 was $23.9 million compared to $0.1 million during 2008. The $23.8 million increase in cash used was primarily the
result of the $14.5 million we paid to repurchase our senior secured notes, the $9.1 million dividend paid to our parent company to enable it to repurchase its capital stock in
connection with the complete divestiture of its interest in Euradius International Dutch Bidco B.V. and the $0.3 million in deferred financing costs we paid in connection with the
amendment to our working capital facility.



As of December 31, 2010, we had total indebtedness of $142.9 million comprised entirely of amounts due under the 2003
Notes and the 2004 Notes, all with a scheduled maturity of August 2011. We have significant interest payments due on the outstanding notes as well as interest payments due on any borrowings under our
working capital facility, under which there were no amounts outstanding as of December 31, 2010. Total cash interest payments related to our working capital facility and the 2003 Notes and the
2004 Notes are expected to be in excess of $14.6 million on an annual basis.

Our
working capital facility provides for available credit of up to $20.0 million, subject to a borrowing base test, that we may repay and reborrow until the May 25, 2011
maturity date. Actual available credit under the working capital facility fluctuates because it depends on inventory and accounts receivable values that fluctuate and is subject to discretionary
reserves and revaluation adjustments that may be imposed by the agent from time to time and other limitations. Our working capital facility contains various covenants which limit our discretion in the
operation of our businesses. Among other things, our working capital facility restricts our ability to prepay other indebtedness, including the 2003 Notes and the 2004 Notes, incur other indebtedness
or pay dividends. We amended our working capital facility on June 16, 2009. The amended agreement prohibits us from repurchasing the 2003 Notes and the 2004 Notes unless certain conditions are
met, including that the amount expended for note repurchases after May 25, 2009 may not exceed $20.0 million in the aggregate, and that immediately after each note repurchase, there must
be at least $5.0 million available under the working capital facility. The working capital facility also requires us to satisfy an interest coverage ratio of at least 1.80 to 1.00 and to
maintain EBITDA (as defined in and calculated pursuant to our working

30

---



Table of Contents

capital
facility, such EBITDA being referred to hereinafter as "WCF EBITDA") of at least $33.0 million, both calculated for the period consisting of the four preceding consecutive fiscal
quarters. Failure to satisfy the financial tests in our working capital facility would constitute a default under our working capital facility. For the twelve months ended December 31, 2010,
our interest coverage ratio was 2.58 to 1.00 and our WCF EBITDA for purposes of our working capital facility was $38.2 million. As of December 31, 2010, we had no borrowings outstanding
under the working capital facility, had unused amounts available of $16.2 million and had $1.3 million in outstanding letters of credit.

WCF
EBITDA, as calculated pursuant to the working capital facility, generally consists of net income (loss) before interest expense, income taxes, depreciation, amortization,
restructuring charges and certain other non-cash items. WCF EBITDA is used below for purposes of calculating our compliance with the covenants in our working capital facility and to
evaluate our operating performance and determine management incentive payments. WCF EBITDA is not an indicator of financial performance or liquidity under generally accepted accounting principles and
may not be comparable to similarly captioned information reported by other companies. In addition, it should not be considered as an alternative to, or more meaningful than, income before income
taxes, cash flows from operating activities or other traditional indicators of operating performance.

WCF
EBITDA is reconciled directly to cash flow from operations as follows (in thousands):

Year ended
December 31,
2010

Year ended
December 31,
2009

Year ended
December 31,
2008Net cash provided by operating activities

$
22,740

$
22,968

$
14,640Accounts receivable


(2,994
)

(3,646
)

660Inventories


2,104


(3,707
)

(1,141
)Other current assets


366


566


(1,056
)Refundable income taxes


(171
)

(2,755
)

2,117Other assets


16


124


(1,653
)Accounts payable


(1,057
)

7,149


3,130Accrued expenses


2,157


4,181


3,642Income taxes payable


(413
)

(3,140
)

73Other liabilities


156


112


1,049Provision for doubtful accounts


(918
)

(1,239
)

(863
)Provision for inventory realizability and LIFO value


(285
)

(107
)

(199
)Deferred income tax benefit


1,200


470


297Loss on disposition of fixed assets, net


(9
)

(146
)

(1,223
)Income tax (benefit) provision


(432
)

3,441


(867
)Cash interest expense


14,848


16,112


17,102Management fees


763


894


767Non cash adjustments:Adjustments to LIFO value


30


13


137(Increase) decrease in market value of investments


(29
)

(85
)

319Amortization of prepaid lease costs


4


76


90Loss on disposition of fixed assets


120


174


1,318Interest income


(49
)

(69
)

Related party guaranty








3,000Restructuring costs


78


313


137Bank fees for abandoned line of credit renewal





308


WCF EBITDA

$
38,225

$
42,007

$
41,476


31

---



Table of Contents

The
indenture governing the 2003 Notes and the 2004 Notes also contains various restrictive covenants. It, among other things: (i) limits our ability and the ability of our
subsidiaries to incur additional indebtedness, issue shares of preferred stock, incur liens and enter into certain transactions with affiliates; (ii) places restrictions on our ability to pay
dividends or make certain other restricted payments; and (iii) places restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of our assets.

Our
principal sources of liquidity are expected to be cash flow generated from operations and borrowings under our working capital facility. Our principal uses of cash are expected to be
to meet debt service requirements, finance our capital expenditures and provide working capital. We may from time to time fund cash distributions to our Parent, as we did in the first quarter of 2009,
in accordance with the limitations outlined in our bond indenture and our working capital facility. We estimate that our capital expenditures for 2011 will total about $18.8 million. Based on
our current level of operations, we believe that our cash flow from operations, available cash and available borrowings under our working capital facility will not be adequate to meet our future
short-term liquidity needs due to the pending maturity of our notes. Our 2003 Notes and 2004 Notes mature on August 15, 2011. We do not have sufficient funds, nor do we anticipate
generating sufficient funds from operations, to repay these notes. We are actively engaged in the process of refinancing these notes prior to their maturity but we cannot assure you that we will be
able to do so. Our future operating performance and ability to extend or refinance our indebtedness will be dependent on future economic conditions and financial, business and other factors that may
be beyond our control.

Contractual Obligations

The following table summarizes our future minimum non-cancelable contractual obligations as of December 31, 2010.
The information presented in the table below reflects management's estimates of the contractual maturities of our obligations. These maturities may differ significantly from the actual maturities of
these obligations:

Remaining Payments Due by Period(in thousands)

Total

2011

2012 to
2013

2014 to
2015

2016 and
beyondLong term debt, including interest(1)

$
157,547

$
157,547

$


$


$
Operating leases


4,531


2,232


1,636


591


72Purchase obligations(2)


8,759


8,548


208


3


Other long-term obligations(3)


315


151


164





Total(4)

$
171,152

$
168,478

$
2,008

$
594

$
72


(1)Includes
the $142.9 million aggregate principal amount due on the 2003 Notes and the 2004 Notes plus interest at 10.25% payable
semi-annually through August 15, 2011.(2)Represents
payments due under purchase agreements for consumable raw materials and commitments for construction projects and equipment acquisitions.(3)Represents
payments due under a non-compete arrangement with our former Chairman of the Board.(4)At
December 31, 2010, we have recognized $1.9 million of liabilities for unrecognized tax benefits. There is a high degree of uncertainty with
respect to the timing of future cash outflows associated with our unrecognized tax benefits because they are dependent on various matters including tax examinations, changes in tax laws or
interpretation of those laws, expiration of statutes of limitation, etc. Due to these uncertainties, our unrecognized tax benefits have been excluded from the contractual obligations table above.


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Off-Balance Sheet Arrangements

At December 31, 2010 and 2009, we did not have any relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Effect of Inflation

Inflation generally affects us by increasing our costs of labor, equipment and new materials. We do not believe that inflation has had
any material effect on our results of operations during 2010, 2009 and 2008.

Recently Issued Accounting Pronouncements

On January 1, 2010, we adopted authoritative guidance issued by the Financial Accounting Standards Board ("FASB") related to the
accounting and disclosure requirements for transfers of financial assets. This guidance requires greater transparency and additional disclosures for transfers of financial assets and the entity's
continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, the guidance eliminates the concept of a qualifying special-purpose entity. The adoption
of this guidance did not have a material impact on our financial position, results of operations or cash flows.

In
June 2009, the accounting standard regarding the requirements of consolidation accounting for variable interest entities was updated by the FASB to require an enterprise to perform an
analysis to determine whether the entity's variable interest or interests give it a controlling interest in a variable interest entity. The adoption of this guidance by us on January 1, 2010,
did not have a material impact on our financial position, results of operations or cash flows.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in results of our operations and cash flows. In the ordinary course of
business, we are exposed to foreign currency and interest rate risks. These risks primarily relate to the purchase of products and services from foreign suppliers and changes in interest rates on our
long-term debt.

Foreign Exchange Rate Market Risk

We consider the U.S. dollar to be the functional currency for all of our entities. All of our net sales and virtually all of our
expenses in fiscal years 2010, 2009 and 2008 were denominated in U.S. dollars. Therefore, foreign currency fluctuations had a negligible impact on our financial results in those periods.

Interest Rate Market Risk

We could be exposed to changes in interest rates. Our working capital facility is variable rate debt. Interest rate changes, therefore,
generally do not affect the market value of such debt but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. We
did not have any borrowings under our working capital facility during 2010. We do not currently utilize derivative financial instruments to hedge changes in interest rates. All of our other debt
carries fixed interest rates.

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Table of Contents

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To
the Board of Directors and the Stockholder
of The Sheridan Group, Inc.

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in the stockholder's equity and of cash flows present
fairly, in all material respects, the financial position of The Sheridan Group, Inc. and Subsidiaries (the "Company") at December 31, 2010 and 2009, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has a significant amount of current debt maturing within the next twelve months and will need to raise additional capital in order to settle these obligations, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 29, 2011

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The Sheridan Group, Inc. and Subsidiaries        Consolidated Balance Sheets        At December 31, 2010 and 2009

December 31,
2010

December 31,
2009AssetsCurrent assetsCash and cash equivalents

$
13,717,082

$
4,109,740Accounts receivable, net of allowance for doubtful accounts of $2,261,252 and $2,055,569, respectively


25,470,633


29,382,142Inventories, net


15,809,053


13,989,631Other current assets


4,389,986


4,023,966Refundable income taxes


8,457


179,473Deferred income taxes


1,564,076


1,700,168Total current assets


60,959,287


53,385,120Property, plant and equipment, net


112,044,062


117,757,008Intangibles, net


32,168,520


33,566,535Goodwill


33,978,641


40,979,426Deferred financing costs, net


516,286


1,483,423Other assets


1,843,739


1,828,173Total assets

$
241,510,535

$
248,999,685LiabilitiesCurrent liabilitiesAccounts payable

$
16,305,544

$
14,621,067Accrued expenses


15,541,858


17,698,876Current portion of notes payable


142,923,740


Due to parent, net


534,440


121,044Total current liabilities


175,305,582


32,440,987Notes payable





142,948,652Deferred income taxes


24,612,025


25,935,903Other liabilities


3,494,135


3,662,574Total liabilities


203,411,742


204,988,116Commitments and contingenciesStockholder's EquityCommon stock, $0.01 par value; 100 shares authorized;1 share issued and outstanding





Additional paid-in capital


42,075,908


42,047,938(Accumulated deficit) retained earnings


(3,977,115
)

1,963,631Total stockholder's equity


38,098,793


44,011,569Total liabilities and stockholder's equity

$
241,510,535

$
248,999,685


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

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries        Consolidated Statements of Operations        Years Ended December 31, 2010, 2009 and 2008

Year Ended
December 31,
2010

Year Ended
December 31,
2009

Year Ended
December 31,
2008Net sales

$
266,187,753

$
293,349,196

$
348,026,720Cost of sales


212,510,439


232,947,797


281,380,147Gross profit


53,677,314


60,401,399


66,646,573Selling and administrative expenses


35,799,291


37,115,289


42,175,411Loss on disposition of fixed assets


9,385


146,146


1,222,918Related party guaranty








3,000,000Restructuring costs


78,335


312,556


136,965Amortization of intangibles


1,398,015


1,437,852


1,714,628Impairment charges


7,000,785





5,639,613Total operating expenses


44,285,811


39,011,843


53,889,535Operating income


9,391,503


21,389,556


12,757,038Other (income) expenseInterest expense


15,790,421


17,228,454


18,398,974Interest income


(48,869
)

(69,485
)

(172,549
)Gain on repurchase of notes payable





(7,193,906
)

Other, net


22,906


(233,698
)

1,269,162Total other expense


15,764,458


9,731,365


19,495,587(Loss) income before income taxes


(6,372,955
)

11,658,191


(6,738,549
)Income tax (benefit) provision


(432,209
)

3,441,405


(866,658
)Net (loss) income

$
(5,940,746
)
$
8,216,786

$
(5,871,891
)


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

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries        Consolidated Statements of Changes in Stockholder's Equity        Years Ended December 31, 2010, 2009 and
2008

Common StockAdditional
Paid-In
Capital

(Accumulated Deficit)
Retained Earnings

Total
Stockholder's
EquityShares

AmountBalance as of December 31, 2007


1




$
51,043,554

$
(198,261
)
$
50,845,293Cash dividend











(183,003
)

(183,003
)Capital contribution from parent companystock options exercised








20,400





20,400Income tax benefit from stock options exercised








62,610





62,610Share-based compensation








9,000





9,000Net loss











(5,871,891
)

(5,871,891
)Balance as of December 31, 2008


1




$
51,135,564

$
(6,253,155
)
$
44,882,409Cash dividend








(9,105,226
)




(9,105,226
)Share-based compensation








17,600





17,600Net income











8,216,786


8,216,786Balance as of December 31, 2009


1




$
42,047,938

$
1,963,631

$
44,011,569Capital contribution from parent companystock options exercised








2,970





2,970Share-based compensation








25,000





25,000Net loss











(5,940,746
)

(5,940,746
)Balance as of December 31, 2010


1




$
42,075,908

$
(3,977,115
)
$
38,098,793


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

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The Sheridan Group, Inc. and Subsidiaries        Consolidated Statements of Cash Flows        Years Ended December 31, 2010, 2009 and 2008

December 31,
2010

December 31,
2009

December 31,
2008Cash flows provided by operating actvities:Net (loss) income

$
(5,940,746
)
$
8,216,786

$
(5,871,891
)Adjustments to reconcile net (loss) income to net cash provided by operating activitiesDepreciation


19,466,429


17,236,045


16,684,883Amortization of intangible assets


1,398,015


1,437,852


1,714,628Impairment of goodwill and intangibles


7,000,785





5,639,613Provision for doubtful accounts


917,857


1,238,625


862,897Provision for inventory realizability and LIFO value


284,829


106,747


198,755Stock-based compensation


25,000


17,600


9,000Amortization of deferred financing costs and debt discount, included in interest expense


942,225


1,116,566


1,296,573Deferred income tax benefit


(1,199,846
)

(470,043
)

(297,475
)Gain on repurchase of notes payable





(7,193,906
)

Loss on disposition of fixed assets


9,385


146,146


1,222,918Changes in operating assets and liabilitiesAccounts receivable


2,993,652


3,645,521


(659,767
)Inventories


(2,104,251
)

3,706,707


1,140,705Other current assets


(366,020
)

(566,094
)

1,056,253Refundable income taxes


171,016


2,755,337


(2,116,829
)Other assets


(15,566
)

(124,182
)

1,653,164Accounts payable


1,057,415


(7,149,268
)

(3,129,729
)Accrued expenses


(2,157,018
)

(4,181,219
)

(3,642,227
)Income tax payable


413,396


3,140,527


(72,513
)Other liabilities


(156,379
)

(111,824
)

(1,048,915
)Net cash provided by operating activities


22,740,178


22,967,923


14,640,043Cash flows used in investing activities:Purchases of property, plant and equipment


(13,671,287
)

(9,654,334
)

(17,596,886
)Proceeds from sale of fixed assets


535,481


38,640


108,330Advances to affiliated companies





(1,734,539
)

(1,172,064
)Net cash used in investing activities


(13,135,806
)

(11,350,233
)

(18,660,620
)Cash flows provided by (used in) financing activities:Borrowing of revolving line of credit





42,931,000


Repayment of revolving line of credit





(42,931,000
)

Repayment of long term debt





(14,539,500
)

Payment of deferred financing costs in connection with long term debt





(259,852
)

Proceeds from capital contribution from parent company


2,970





20,400Realized income tax benefit from stock options exercised








62,610Payment of dividend





(9,105,226
)

(183,003
)Net cash provided by (used in) financing activities


2,970


(23,904,578
)

(99,993
)Net increase (decrease) in cash and cash equivalents


9,607,342


(12,286,888
)

(4,120,570
)Cash and cash equivalents at beginning of period


4,109,740


16,396,628


20,517,198Cash and cash equivalents at end of period

$
13,717,082

$
4,109,740

$
16,396,628Supplemental disclosure of cash flow informationCash paid (received) during the year forInterest paid

$
14,822,816

$
16,966,542

$
17,076,499Income taxes paid (received), net

$
181,237

$
(1,872,697
)
$
1,120,816Non-cash investing activitiesAsset additions in accounts payable

$
787,993

$
160,932

$
1,682,000


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

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries        Notes to Consolidated Financial Statements        Years Ended December 31, 2010, 2009 and 2008

1. Business Organization

The Sheridan Group, Inc. ("TSG") is one of the leading specialty printers in the United States, offering a full range of printing and value-added support services for the journal,
magazine, book, catalog and article reprint markets. We provide a wide range of printing services and value-added support services, such as digital proofing, preflight checking, offshore composition,
copy editing, subscriber services, mail sortation, distribution and back issue fulfillment. We operate seven wholly-owned subsidiaries: The Sheridan Press, Inc. ("TSP"), Dartmouth Printing
Company ("DPC"), United Litho, Inc. ("ULI"), Dartmouth Journal Services, Inc. ("DJS"), Sheridan Books, Inc. ("SBI"), The Dingley Press, Inc. ("TDP") and The Sheridan Group
Holding Company. As used in the notes to the consolidated financial statements, the terms "we," "us," "our" and other similar terms refer to the consolidated businesses of The Sheridan
Group, Inc. and all of its subsidiaries.

On
August 21, 2003, we became a wholly-owned subsidiary of TSG Holdings Corp. ("Holdings"), when Holdings purchased 100% of the outstanding capital stock of TSG from its existing
stockholders (the "Sheridan Acquisition"). Holdings funded the acquisition price and the related fees and expenses with the proceeds of the sale of $105.0 million aggregate principal amount of
10.25% Senior Secured Notes due 2011 (the "2003 Notes") and equity investments in Holdings. On May 25, 2004, we acquired all of the assets and business of The Dingley Press of Lisbon, Maine
(the "Dingley Acquisition"). We funded
the acquisition price and the related fees and expenses with the proceeds of the sale of $65.0 million aggregate principal amount of 10.25% Senior Secured Notes due 2011 (the "2004 Notes") and
equity investments in Holdings.

2. Liquidity

All of our outstanding debt matures on August 15, 2011, with a balance due at maturity of $142.9 million. We do not have sufficient funds, nor do we anticipate generating
sufficient funds from operations to repay the notes. Additionally, our working capital facility, for which we had no borrowings outstanding as of December 31, 2010, is scheduled to terminate on
May 25, 2011. Our future operating performance and ability to extend or refinance our indebtedness will be dependent on future economic conditions and financial, business, and other factors
that may be beyond our control. If we fail to refinance the notes and extend the working capital facility this would have a material adverse impact on our business, assets and ability to fund our
liquidity needs.

The
conditions described above raise substantial doubt about our ability to continue as a going concern. If we were unable to continue as a going concern, we would need to liquidate our
assets and we might receive significantly less than the values at which they are carried on our consolidated financial statements. The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue
as a going concern. We are actively engaged in the process of refinancing our notes prior to their maturity and replacing our current working capital facility but we cannot assure you that we will be
able to do so.

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of The Sheridan Group, Inc. and its wholly-owned subsidiaries, TSP,
DPC, ULI, DJS, SBI, TDP and The Sheridan Group Holding Company. All material intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

We record revenue when realized or realizable and earned when all of the following criteria are met:



As
such, substantially all revenue is recognized when a product is shipped and title and risk of loss transfers to the customer. Shipping and handling fees billed to customers are
included in net sales and any cost of shipping and handling is included in cost of sales. A liability is recognized when cash is received from customers in advance of the shipment of their products.

Cash and Cash Equivalents

Cash and cash equivalents include amounts invested in accounts which are readily convertible to known amounts or have original
maturities of three months or less when purchased.

Business and Credit Concentrations

Our customers are not concentrated in any specific geographic region, but are concentrated in the journal, magazine, book, specialty
catalog and article reprint markets. There were no significant accounts receivable from a single customer. We establish an allowance for doubtful accounts based upon factors surrounding the credit
risk of specific customers, historical trends and other information.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best
estimate of probable credit losses in our existing accounts receivable. We review the allowance for doubtful accounts on a regular basis. Past due balances over

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

120 days
are reviewed for collectibility and form the basis of our reserve. When we determine that a particular customer poses a credit risk, a specific reserve is established. Account balances
are charged off against the allowance when we feel it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers.
During 2010, we wrote off reserves we had provided during 2009 for a specific customer which was deemed to be insolvent.

A
rollforward of the allowance for doubtful accounts is as follows:

Year Ended
December 31,
2010

Year Ended
December 31,
2009

Year Ended
December 31,
2008Balance at beginning of period

$
2,055,569

$
1,080,208

$
616,869Charged to expense


917,857


1,238,625


862,897Deductions


(712,174
)

(263,264
)

(399,558
)Balance at end of period

$
2,261,252

$
2,055,569

$
1,080,208


Inventories

Inventories are stated at the lower of cost or market with the cost of TSP's paper inventory and SBI's
work-in-process inventory determined by the last-in, first-out ("LIFO") cost method. The cost of the remaining inventory (approximately 90% and 88% of
inventories at December 31, 2010 and 2009, respectively) is determined using the first-in, first-out ("FIFO") method.

Property and Equipment

Property, plant and equipment are recorded at cost, except those assets acquired through acquisitions, in which case they are recorded
at fair value. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, as follows: 3-11 years for machinery and equipment;
and 10-40 years for buildings and land improvements. Leasehold improvements are amortized over their estimated useful lives or the term of the underlying lease, whichever is
shorter. Upon disposal of property, plant and equipment, the cost of the asset and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in
earnings.

Expenditures
for improvements which extend the original estimated lives of the assets are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred.

We
review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to future net cash flows expected to be generated by the assets. If such assets are
considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are
reported at the lower of the carrying amount or fair value less costs to sell. We do not believe there was any impairment of property and equipment as of December 31, 2010.

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

Income Taxes

Deferred income taxes are recognized for the tax consequences of applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. A valuation allowance is recorded against deferred tax assets when it is more likely
than not that a deferred tax asset will not be realized.

We
record a liability for uncertain tax positions when it is more likely than not that a tax position that has been taken will not be sustained under audit. The respective probability is
evaluated based on relevant facts and tax law. Although we believe that our estimates are reasonable, the final outcome of uncertain tax positions may be materially different from that which is
reflected in the consolidated financial statements. We adjust our reserves upon changes in circumstances that would cause a change to the estimate of the ultimate liability, upon effective settlement
or upon the expiration of the statute of limitations, in the period in which such event occurs.

Goodwill

Goodwill is tested for impairment at the reporting unit level at least annually or whenever circumstances indicate that the carrying
value of the reporting unit's net assets may not be recoverable, utilizing a two-step methodology. The initial step requires us to determine the fair value of each reporting unit and
compare it to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However, if the carrying value of the reporting unit
exceeds its fair value, the goodwill of this unit may be impaired. The amount, if any, of the impairment is then measured in the second step by comparing the implied fair value of goodwill to the
carrying value of goodwill for each reporting unit. To determine the implied fair value of goodwill, we make a hypothetical allocation of the reporting unit's estimated fair value to the tangible and
intangible assets (other than goodwill) of the reporting unit. Based on this methodology, we concluded that $3.4 million of ULI goodwill (a component of our Publications segment) was fully
impaired and was required to be expensed as a non-cash charge to continuing operations during 2008. In connection with our annual assessment of goodwill in 2009, we concluded that there
was no impairment. In connection with our annual assessment of goodwill in 2010, we concluded that $7.0 million of DPC goodwill (a component of our Publications segment) was fully impaired and
was required to be expensed as a non-cash charge to continuing operations during the fourth quarter of 2010.

Identified Intangible and Other Long-Lived Assets

Identified intangible assets, which primarily consist of customer relationships and trade names, were valued at fair value, effective
with acquisitions. All long-lived assets are amortized over the estimated useful lives. We review long-lived assets for impairment using undiscounted future cash flows whenever
events or changes in circumstances indicate that the carrying values of the long-lived asset groups (including goodwill) may not be recoverable. If the sum of undiscounted cash flows are
less than the carrying values, the difference between the fair value of the long-lived asset group, using discounted cash flows, and the carrying value is recognized as impairment to the
extent of the individual fair values of the long-lived assets (except goodwill). As a result of the impairment analysis performed in 2008 for ULI (a component of our Publications segment)
and TDP (our Specialty Catalogs segment), we concluded that the carrying value of the customer relationship assets exceeded their fair value.

42

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

Therefore,
during 2008, we recorded an impairment charge of $2.0 million and $0.2 million for the customer relationship assets of ULI and TDP, respectively. We do not believe there was
any impairment of intangible assets or other long-lived assets as of December 31, 2010 and 2009.

Deferred Financing Costs

Deferred financing costs incurred in connection with the 2003 Notes and the 2004 Notes are being amortized over the term of the related
debt using the effective interest method. Deferred financing costs incurred in connection with establishing our working capital facility are being amortized over the term of the agreement using the
straight-line method. During 2009, we wrote off $0.3 million of deferred financing costs in connection with the repurchase of our senior secured notes and incurred
$0.3 million of deferred financing costs in connection with an agreement to amend our working capital facility (see Note 9). Accumulated amortization as of December 31, 2010 and
2009 was $10.2 million and $9.3 million, respectively.

Accounting for Stock Based Compensation

Our parent company, Holdings, established the 2003 Stock-based Incentive Compensation Plan (the "2003 Plan"), pursuant to which
Holdings has reserved for issuance 55,500 shares of its Common Stock. There is currently no public trading market for the Common Stock. When necessary, we determine fair value through internal
valuations based on historical financial information and/or through a third party service provider. As of December 31, 2010, 640 shares were available for future grants. Stock options are
granted at exercise prices not less than the fair market value of the stock at the date of grant. Options generally vest ratably over a five-year period, except those options granted to
officers, portions of which vest ratably over five years, and the remainder of which vest upon the achievement of certain performance targets, the occurrence of certain future events, including the
sale of the Company or a qualified public offering, or after eight years from the date of grant, as specified in the 2003 Plan. Options expire ten years from the date of grant. We have a policy of
issuing new shares to satisfy share options upon exercise.

For
the years ended December 31, 2010, 2009 and 2008, we recognized non-cash stock-based compensation expense of approximately $25,000, $17,600 and $9,000,
respectively, which is included in selling and administrative expenses.

We
value options using the Black-Scholes option-pricing model which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting
restrictions. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected term of the options is an output of the option-pricing
model and estimates the period of time that options are expected to remain unexercised. We use historical data to estimate the timing and amount of option exercises and forfeitures. The expected
volatility is calculated by averaging the volatility, over a period equal to the expected term of the options, for five peer group companies and a small-cap index. There were no stock
options granted during the years ended December 31, 2008 and

43

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

2009.
The following summarizes the assumptions used for estimating the fair value of stock options granted during the year ended December 31, 2010:

Risk-free interest rate

2.87%-3.44%Average expected years until exercise

7.75 yearsExpected volatility

52.13%-54.37%Weighted-average expected volatility

53.25%Dividend yield

0%


The
following is a summary of option activity for the years ended December 31, 2008, 2009 and 2010:

Weighted averageNumber of
shares

Exercise
price

Remaining term
(in years)

Aggregate
intrinsic
valueOptions outstanding at December 31, 2007


55,150

$
12.23


6.7

$
5,851,600Granted





Exercised


(2,040
)

10.00Forfeited


(4,910
)

10.00Options outstanding at December 31, 2008


48,200

$
12.55


5.4

$
Granted


Exercised


Forfeited


(2,600
)

12.27Options outstanding at December 31, 2009


45,600

$
12.56


4.3

$
487,000Granted


7,660


23.24Exercised


(120
)

24.75Forfeited


(640
)

16.45Options outstanding at December 31, 2010


52,500

$
14.05


4.2

$
Options exercisable at December 31, 2010


26,300

$
11.24


3.1

$



The
following is a summary of non-vested option activity for the years ended December 31, 2010, 2009 and 2008:

Number of shares

Weighted average grant date fair valueYears ended December 31,

Years ended December 31,2010

2009

2008

2010

2009

2008Non vested options outstanding at beginning of year


19,800


25,500


34,920

$
4.13

$
4.79

$
4.11Granted


7,660








13.80





Vested


(620
)

(4,060
)

(4,960
)

10.60


3.70


3.19Forfeited


(640
)

(1,640
)

(4,460
)

5.60


9.09


2.49Non vested options outstanding at end of year


26,200


19,800


25,500

$
6.63

$
4.13

$
4.79


44

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

The
total compensation cost related to nonvested awards not yet recognized as of December 31, 2010 is approximately $0.1 million and will be recognized over a weighted
average period of approximately 5.2 years.

During
the year ended December 31, 2010, 120 options to purchase Holdings Common Stock were exercised and $2,970 of proceeds was received. The total intrinsic value, the
difference between the exercise price and the fair value of Holdings Common Stock on the date of exercise of options exercised during the year ended December 31, 2010, was negligible. During
the year ended December 31, 2009, no options to purchase Holdings Common Stock were exercised. During the year ended December 31, 2008, 2,040 options to purchase Holdings Common Stock
were exercised and $20,400 of proceeds was received. The total intrinsic value, the difference between the exercise price and the fair value of Holdings Common Stock on the date of exercise of options
exercised during the year ended December 31, 2008, was $215,100.

Fair Value Measurements

Certain of our assets and liabilities must be recorded at fair value. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accounting guidance outlines a valuation framework and creates a fair
value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures and prioritizes the inputs used in measuring fair value as follows:



Our
financial instruments consist of long-term investments in marketable securities (held in trust for payment of non-qualified deferred compensation) and
long-term debt. We are permitted to measure certain financial assets and financial liabilities at fair value that were not previously required to be measured at fair value. We have elected
not to measure any financial assets or financial liabilities, including long-term debt, at fair value which were not previously required to be measured at fair value. We classify the
investments in marketable securities within level 1 of the hierarchy since quoted market prices are available in active markets.

We
believe that the carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses reported in the consolidated balance sheets
approximate their fair values due to the short maturity of these instruments. The estimated fair value of our publicly traded debt, based on quoted market prices, was approximately
$140.8 million and $133.4 million as of December 31, 2010 and 2009, respectively.

45

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

3. Summary of Significant Accounting Policies (Continued)

Advertising Costs

We expense advertising costs as the advertising occurs in accordance with the authoritative guidance. Advertising expense, included in
selling and administrative expenses in the consolidated statements of operations, was approximately $0.2 million, $0.2 million and $0.3 million, for the years ended
December 31, 2010, 2009 and 2008, respectively.

New Accounting Standards

On January 1, 2010, we adopted authoritative guidance issued by the Financial Accounting Standards Board ("FASB") related to the
accounting and disclosure requirements for transfers of financial assets. This guidance requires greater transparency and additional disclosures for transfers of financial assets and the entity's
continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, the guidance eliminates the concept of a qualifying special-purpose entity. The adoption
of this guidance did not have a material impact on our financial position, results of operations or cash flows.

In
June 2009, the accounting standard regarding the requirements of consolidation accounting for variable interest entities was updated by the FASB to require an enterprise to perform an
analysis to determine whether the entity's variable interest or interests give it a controlling interest in a variable interest entity. The adoption of this guidance by us on January 1, 2010,
did not have a material impact on our financial position, results of operations or cash flows.

Reclassifications

Certain previously reported amounts have been reclassified to conform to the current year presentation.

4. Inventories

Inventories consist of the following:

December 31,
2010

December 31,
2009Work-in-process

$
6,617,642

$
7,367,236Raw materials (principally paper)


9,494,521


6,895,27916,112,163


14,262,515Excess of current cost over LIFO inventory value


(303,110
)

(272,884
)$
15,809,053

$
13,989,631


46

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

4. Inventories (Continued)

We maintained a reserve for the realizability of inventory in the amounts of $70,227 and $193,991 for the years ended December 31, 2010 and 2009, respectively, which are included
in the amounts in the table above relating to work-in-process and raw materials. A rollforward of this inventory reserve is as follows:

Year Ended
December 31,
2010

Year Ended
December 31,
2009

Year Ended December 31, 2008Balance at beginning of period

$
193,991

$
116,433

$
83,363Charged to expense


254,603


93,616


61,602Deductions


(378,367
)

(16,058
)

(28,532
)Balance at end of period

$
70,227

$
193,991

$
116,433


5. Property, Plant and Equipment

Property, plant and equipment consist of the following:

December 31,
2010

December 31,
2009Land

$
4,742,111

$
4,742,111Buildings and improvements


44,097,744


43,833,998Machinery and equipment


163,026,420


154,397,889211,866,275


202,973,998Accumulated depreciation


(99,822,213
)

(85,216,990
)Property, plant and equipment, net

$
112,044,062

$
117,757,008


Depreciation expense for the years ended December 31, 2010, 2009 and 2008, was $19.5 million, $17.2 million, and
$16.7 million, respectively.

6. Intangible Assets

In conjunction with previous acquisitions, we acquired intangible assets relating to customer relationships, trade names and technology. The customer relationships, trade names and
technology are being amortized using the straight-line method over their estimated useful lives as described below. Amortization expense for the years ended December 31, 2010, 2009
and 2008, related to customer relationships, trade names and technology intangible assets was $1.4 million, $1.4 million and $1.6 million, respectively. Accumulated impairments,
in the table below, consists of impairment charges we recorded in 2008 related to customer relationships at ULI and TDP. Other, in the table below, represents the realization of the tax goodwill
benefit in connection with the Dingley Acquisition (see Note 12). In the years 2008 through 2009, this benefit was applied to reduce intangibles related to the Dingley Acquisition since there
was no book goodwill related to this previous acquisition as of the beginning of 2008. Intangible assets as of December 31, 2010 and 2009 consisted of the following:

47

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

6. Intangible Assets (Continued)

December 31, 2010Useful
Life

Gross Carrying
Amount

Accumulated
Amortization

Accumulated
Impairments

Other

Net Carrying
AmountCustomerrelationships

25 years

$
27,800,000

$
7,612,683

$
2,202,626

$
2,135,806

$
15,848,885Trade names

40 years


20,400,000


3,721,262





359,103


16,319,635Technology

5 years


300,000


243,416





56,584


$
48,500,000

$
11,577,361

$
2,202,626

$
2,551,493

$
32,168,520




December 31, 2009Useful
Life

Gross Carrying
Amount

Accumulated
Amortization

Accumulated
Impairments

Other

Net Carrying
AmountCustomerrelationships

25 years

$
27,800,000

$
6,714,668

$
2,202,626

$
2,135,806

$
16,746,900Trade names

40 years


20,400,000


3,221,262





359,103


16,819,635Technology

5 years


300,000


243,416





56,584


$
48,500,000

$
10,179,346

$
2,202,626

$
2,551,493

$
33,566,535


We estimate that we will incur a charge of $1.6 million in 2011 associated with the accelerated amortization of the United Litho trade name
which will be disposed of as a result of the shutdown of this facility (see Note 20).

We
estimate annual amortization expense related to these intangibles as follows:

Years ended December 31,

Amortization
expense2011


2,980,3632012


1,348,4002013


1,348,4002014


1,348,4002015


1,348,400Thereafter


23,794,557Total

$
32,168,520


7. Goodwill

Goodwill, which arises from the purchase price exceeding the assigned value of the net assets of an acquired business, represents the value attributable to unidentifiable intangible
elements being acquired. Goodwill totaled $34.0 million and $41.0 million at December 31, 2010 and 2009, respectively. Goodwill resulted from the Sheridan Acquisition as a result
of a stock purchase and, therefore, is not
deductible for tax purposes and from the Dingley Acquisition as a result of an asset purchase and is deductible for tax purposes.

As
of December 31, 2008, the initial step in the annual test for goodwill impairment indicated potential impairment at ULI, one of the components of the Publications segment, as a
result of the

48

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

7. Goodwill (Continued)

worldwide
economic downturn and declining results. We completed the second step by comparing the implied fair value of goodwill to the carrying value of goodwill for ULI. As a result of the second
step, we determined that the carrying value of goodwill at ULI was fully impaired. There were no changes in the carrying amount of goodwill for the year ended December 31, 2009. As of
December 31, 2010, the initial step in the annual test for goodwill impairment indicated potential impairment at DPC, one of the components of the Publications segment, due primarily to the
longer and more sustained deterioration of the magazine business through the fourth quarter of 2010, and the unlikely prospect of a meaningful recovery in the near term. We completed the second step
by comparing the implied fair value of goodwill to the carrying value of goodwill for DPC. As a result of the second step, we determined that the $7.0 million carrying value of goodwill at DPC
was fully impaired. The changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2010 are as follows:

Publications

Specialty
Catalogs

Books

ConsolidatedBalance at December 31, 2008Goodwill

$
35,493,565

$
12,774,931

$
8,922,848

$
57,191,344Accumulated impairment losses


(3,436,987
)

(12,774,931
)




(16,211,918
)32,056,578





8,922,848


40,979,426Balance at December 31, 2009Goodwill


35,493,565


12,774,931


8,922,848


57,191,344Accumulated impairment losses


(3,436,987
)

(12,774,931
)




(16,211,918
)$
32,056,578

$


$
8,922,848

$
40,979,426Impairment charge


(7,000,785
)







(7,000,785
)Balance at December 31, 2010Goodwill


35,493,565


12,774,931


8,922,848


57,191,344Accumulated impairment losses


(10,437,772
)

(12,774,931
)




(23,212,703
)$
25,055,793

$


$
8,922,848

$
33,978,641


8. Other Assets

Other assets consist of the following:

December 31,
2010

December 31,
2009Other receivables

$
1,914,147

$
1,407,591Prepaid expenses and deposits


2,526,121


2,616,375Deferred compensation plan assets


1,630,694


1,731,265Other


162,763


96,908Total


6,233,725


5,852,139Less: current portion


4,389,986


4,023,966Long-term portion

$
1,843,739

$
1,828,173


49

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

9. Notes Payable and Working Capital Facility

In conjunction with the Sheridan Acquisition, on August 21, 2003, we completed a private debt offering of 10.25% senior secured notes totaling $105.0 million, priced to
yield 10.50%, that mature August 15, 2011 (the "2003 Notes"). In conjunction with the Dingley Acquisition, on May 25, 2004, we completed a private debt offering of 10.25% senior secured
notes totaling $60.0 million, priced to yield 9.86%, that mature August 15, 2011 (the "2004 Notes"). The 2004 Notes have identical terms to the 2003 Notes. The carrying value of the 2003
Notes and the 2004 Notes was $142.9 million as of December 31, 2010 and 2009.

The
2003 Notes and the 2004 Notes are collateralized by security interests in substantially all of our assets, subject to permitted liens. The capital stock, securities and other payment
rights of our subsidiaries will constitute collateral for the 2003 Notes and the 2004 Notes only to the extent that Rule 3-10 and Rule 3-16 of
Regulation S-X under the Securities Act do not require separate financial statements of a subsidiary to be filed with the SEC. Payment obligations under the 2003 Notes and the 2004
Notes are guaranteed jointly and severally, irrevocably and unconditionally, by all of our subsidiaries. The Sheridan Group, Inc. (the stand-alone parent company) owns 100% of the outstanding
stock of all of its subsidiaries and has no material independent assets or operations. There are no restrictions on the ability of The Sheridan Group, Inc. (the stand-alone parent company) to
obtain funds by dividend, advance or loan from its subsidiaries.

In
connection with the offerings of the 2003 Notes and the 2004 Notes (the "Offerings"), we entered into registration rights agreements pursuant to which we were required to register the
2003 Notes and the 2004 Notes with the SEC. We filed Registration Statements on Form S-4 with the SEC in connection with exchange offers of our outstanding 2003 Notes and 2004 Notes
for like principal amounts of new senior secured notes. The Registration Statement covering the 2003 Notes was declared effective on October 13, 2004. The Registration Statement covering the
2004 Notes was declared effective on October 25, 2004. The new senior secured notes are identical in all material respects to the 2003 Notes and the 2004 Notes, except that the new senior
secured notes do not bear legends restricting the transfer thereof.

In
an event of default, the holders of at least 25% in aggregate principal amount of the 2003 Notes and the 2004 Notes, may declare the principal, premium, if any, and accrued and unpaid
interest on the 2003 Notes and the 2004 Notes to be due and payable immediately. Concurrent with the offering of the 2003 Notes, we entered into a working capital facility agreement. The working
capital facility was amended concurrent with the offering of the 2004 Notes. Terms of the working capital facility allowed for revolving debt of up to $30.0 million, including letters of credit
commitments of up to $5.0 million, subject to a borrowing base test. Borrowings under the working capital facility bore interest at the bank's base rate or the LIBOR rate plus a margin of 1.75%
at our option and matured in June 2009. Interest was payable monthly in arrears. We agreed to pay an annual commitment fee on the unused portion of the working capital facility at a rate of 0.35%. In
addition, we agreed to pay an annual fee of 1.875% on all letters of credit outstanding.

During
2009, we paid $15.0 million, which included $0.5 million of accrued interest, to redeem senior secured notes with a face value of $22.1 million. Deferred
financing costs and unamortized debt discount attributable to these notes, along with commission fees, totaled $0.4 million. As a result of the repurchases, we recognized a net gain of
$7.2 million.

50

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

9. Notes Payable and Working Capital Facility (Continued)

On
June 16, 2009, we executed an agreement to amend our working capital facility. Terms of the working capital facility allow for revolving debt of up to $20.0 million,
including letters of credit commitments of up to $5.0 million, subject to a borrowing base test. The interest rate on borrowings under the working capital facility is a fluctuating rate equal
to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the bank's prime rate, and (c) the LIBOR rate plus a margin of 3.75%. At our option, we can elect a LIBOR option for a
specified period. Any such borrowings bear interest at the specified LIBOR rate plus a margin of 3.75%. We have agreed to pay an annual commitment fee on the unused portion of the working capital
facility at a rate of 0.50%. In addition, we have agreed to pay an annual fee of 3.875% on all letters of credit outstanding. The working capital facility was amended on January 5, 2011 to
extend the maturity date from March 25, 2011 to May 25, 2011. As of December 31, 2010, we had no borrowings outstanding under the working capital facility, had unused amounts
available of $16.2 million and had $1.3 million in outstanding letters of credit.

Borrowings
under the working capital facility are collateralized by the assets of the Company and our subsidiaries, subject to permitted liens. The working capital facility contains
various covenants including provisions that restrict our ability to incur or prepay indebtedness, including the 2003 Notes and the 2004 Notes, or pay dividends. It also requires us to satisfy
financial tests, such as an interest coverage ratio and the maintenance of a minimum amount of earnings before interest, taxes, depreciation and amortization (as defined in the working capital
facility agreement). We have complied with all of the restrictive covenants as of December 31, 2010. In an event of default, all principal and interest due under the working capital facility
shall be immediately due and payable.

10. Accrued Expenses

Accrued expenses consist of the following:

December 31,
2010

December 31,
2009Payroll and related expenses

$
3,177,493

$
3,639,665Profit sharing accrual


435,874


476,151Accrued interest


5,517,147


5,516,678Customer prepayments


3,298,520


3,727,548Self-insured health and workers' compensation accrual


1,631,830


1,933,529Other


1,480,994


2,405,305$
15,541,858

$
17,698,876


51

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

11. Other Liabilities

Other liabilities consist of the following:

December 31,
2010

December 31,
2009Deferred compensation

$
1,396,887

$
1,471,953Uncertain tax positions


1,939,416


1,884,992Other


157,832


305,629Total

$
3,494,135

$
3,662,574


12. Income Taxes

The components of the income tax (benefit) provision are as follows:

December 31,
2010

December 31,
2009

December 31,
2008CurrentFederal

$
387,886

$
3,308,339

$
(1,198,197
)State


379,751


603,109


629,014767,637


3,911,448


(569,183
)DeferredFederal


(757,806
)

(14,884
)

118,837State


(442,040
)

(455,159
)

(416,312
)(1,199,846
)

(470,043
)

(297,475
)$
(432,209
)
$
3,441,405

$
(866,658
)


52

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

12. Income Taxes (Continued)

Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets and liabilities were as follows:

December 31,
2010

December 31,
2009Deferred tax assetsIncentive and vacation accrual

$
767,652

$
920,512Bad debt reserve


827,647


762,203Self insurance accrual


299,477


451,661Intangible assets


213,773


276,813Amortization of financing costs


109,751


266,538Inventory-additional costs capitalized for tax


272,168


264,321Net operating loss carryforwards-Federal





13,854Net operating loss carryforwards-States


790,981


777,540Capital loss carryforward-Federal


151,899


161,969Goodwill


3,530,848


3,959,844Federal benefit related to State uncertain tax positions


451,431


463,491Other


232,193


302,888Valuation allowance


(774,154
)

(758,393
)Total deferred tax assets


6,873,666


7,863,241Deferred tax liabilitiesIntangible assets


11,873,249


12,611,090Inventory basis difference


156,706


208,855Property and equipment


16,777,859


18,138,947Land


1,002,839


1,022,911Prepaid insurance


110,962


117,173Total deferred tax liabilities


29,921,615


32,098,976Net deferred tax liabilities

$
23,047,949

$
24,235,735




December 31,
2010

December 31,
2009Included in the balance sheetNoncurrent deferred tax liabilities in excess of assets

$
24,612,025

$
25,935,903Current deferred tax assets in excess of liabilities


1,564,076


1,700,168Net deferred tax liability

$
23,047,949

$
24,235,735


53

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

12. Income Taxes (Continued)

We will realize a tax benefit associated with the amount of tax goodwill in excess of book goodwill associated with the Dingley Acquisition. We only recognize the benefit when realized
on future tax returns and have previously applied the benefit first to reduce book goodwill associated with the acquisition to zero, second to reduce to zero other noncurrent intangible assets related
to the acquisition, and third to reduce income tax expense. During 2010 and 2009, we realized a tax benefit of $0.8 million in both years associated with the realization of tax deductible
goodwill in excess of book goodwill. For the year ended December 31, 2010, this benefit was recorded as a reduction to the tax provision. For the year ended December 31, 2009, the
majority of this benefit was recorded as a reduction to the tax provision and a negligible amount of the benefit was recorded as a reduction to intangible assets which resulted in reducing these
intangible assets to zero.

As
of December 31, 2009, we had a minimal amount of U.S. Federal net operating loss ("NOL") deduction carryforwards. We fully utilized the benefit of the deduction
during 2010.

As
of December 31, 2010 and 2009, we had state NOLs with a tax effected value of approximately $0.8 million in various jurisdictions, which begin to expire in 2012. We have
determined that substantially all of the state NOLs require a full valuation allowance as of December 31, 2010 and 2009, due to the uncertainty of their realization.

We
utilized NOLs against Federal and state taxable income, which reduced tax expense by a negligible amount and $0.2 million for 2010 and 2009, respectively.

A
rollforward of our valuation allowance is as follows:

Year Ended
December 31,
2010

Year Ended
December 31,
2009

Year Ended
December 31,
2008Balance at beginning of period

$
758,393

$
762,906

$
686,924Charged to expense


25,790


54,185


112,134Other, net


(10,029
)

(58,698
)

(36,152
)Balance at end of period

$
774,154

$
758,393

$
762,906


54

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

12. Income Taxes (Continued)

Our
income tax provision differs from taxes computed using the U.S. Federal statutory tax rate as follows:

Year ended
December 31,
2010

Year ended
December 31,
2009

Year ended
December 31,
2008(Loss) income before income taxes

$
(6,372,955
)
$
11,658,191

$
(6,738,549
)U.S. Federal statutory tax rate

$
(2,166,805
)
$
3,963,785

$
(2,291,106
)Increase (decrease) in tax expense resulting from
Tax reserves


(4,346
)

5,301


430,127Non-deductible meals and entertainment


54,669


50,198


75,874Change in valuation allowance


25,790


54,185


112,134Goodwill impairment


2,380,267





1,168,576Tax goodwill in excess of book goodwill


(451,516
)

(445,171
)

State income taxes, net of U.S. Federal income tax benefit


228,887


523,180


79,376Change in state tax apportionment and rates


(443,213
)

(637,582
)

(453,892
)Domestic production activity deduction


(35,415
)

(171,107
)

Other, net


(20,527
)

98,616


12,253Income tax (benefit) provision

$
(432,209
)
$
3,441,405

$
(866,658
)


We
reported a decrease in our deferred state tax liabilities and our deferred state tax provision of approximately $0.4 million, $0.5 million and
$0.5 million during the years ended December 31, 2010, 2009 and 2008, respectively, to properly reflect the lower anticipated state effective income tax rates due to decreased
apportionment of our taxable income to states with high tax rates. We recognized a minimal increase during the years ended December 31, 2010 and 2009 and an increase of $0.3 million
during the year ended December 31, 2008, respectively, in our effective rate related to the accounting for uncertain tax positions.

We
file consolidated tax returns with Holdings for Federal and certain state jurisdictions. We classify these current tax liabilities as "Due to parent, net" on the consolidated balance
sheet. The tax liabilities owed to Holdings were $0.5 million and $0.1 million as of December 31, 2010 and 2009, respectively.

55

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

12. Income Taxes (Continued)

Our
uncertain tax positions relate primarily to state nexus and other related state tax issues. The total amount of net unrecognized tax benefits that, if recognized, would affect the
effective tax rate is $0.9 million. Our uncertain tax positions, excluding interest and penalties, are as follows:

Year Ended
December 31,
2010

Year Ended
December 31,
2009

Year Ended
December 31,
2008(Dollars in thousands)Balance at beginning of period

$
1,359

$
1,445

$
1,093Increases for current year tax positions


19


19


192Increases for prior year tax positions


163


25


251Decreases for prior year tax positions





(7
)

Lapse in statute of limitations


(91
)

(123
)

(91
)Settlement of tax positions


(126
)




Balance at end of period

$
1,324

$
1,359

$
1,445


We
continue to recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. We had accrued interest of
$0.4 million and penalties of $0.3 million as of December 31, 2010 and $0.5 million and $0.4 million as of December 31, 2009. Interest and penalties in the
amount of $0.1 million were expensed during the years ended December 31, 2010, 2009 and 2008, respectively. Interest and penalties will continue to accrue on certain issues in 2011 and
forward.

We
are subject to U.S. federal income tax as well as income tax of multiple state and local jurisdictions. The statute of limitations related to the consolidated U.S. federal income tax
return and most state income tax returns are closed for all tax years up to and including 2006. During the first quarter of 2010, we reached a settlement in connection with an audit conducted by the
state of Maryland. As a result of this audit, all tax years are closed with the state of Maryland through 2008. No federal or state income tax returns are under examination by the respective taxing
authorities.

13. Commitments

We lease warehouse, plant and office space, printing equipment, computer equipment and delivery equipment under non-cancelable operating leases. Rental expense relating to
these leases was approximately $3.5 million, $4.5 million and $5.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31,
2010 approximate minimum future rental payments under non-cancelable operating leases are as follows:

Years Ended December 31,

(in thousands)2011


2,2322012


1,0882013


5482014


3002015


291Thereafter


72Total

$
4,531


56

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

13. Commitments (Continued)

We
have also entered into agreements to acquire raw materials and additional plant and equipment. As of December 31, 2010, approximate future payments related to these agreements
are as follows:

Years Ended December 31,

Raw
materials

Plant and
equipment(in thousands)2011


315


8,2332012


136


2013


72


2014


3


2015





Thereafter





Total

$
526

$
8,233


14. Employee Benefit Plans

We sponsor a 401(k) retirement plan (the "Plan"). Substantially all of our employees are eligible to participate in the Plan on the first day of the month in which the employee has
attained 18 years of age and 30 days of employment. Employees may make pre-tax contributions of their eligible compensation under the Plan and may direct their investments
among various pre-selected investment alternatives. We determine discretionary and matching contributions to the Plan. No contributions were charged to operations in 2010. Contributions of
approximately $0.8 million and $4.5 million were charged to operations for the years ended December 31, 2009 and 2008, respectively.

We
maintain a non-qualified deferred compensation plan for certain employees which allows participants to annually elect (via individual contracts) to defer a portion of
their compensation on a pre-tax basis and which allows for make-whole contributions for participants whose pre-tax deferrals are limited under our 401(k) Plan and
other discretionary contributions. Contributions made by us and our employees are maintained in an irrevocable trust. Legally, the assets remain ours; however, access to the trust assets is severely
restricted. The trust cannot be revoked by the employer or an acquirer, but the assets are subject to the claims of our general creditors. The employee has no right to assign or transfer contractual
rights in the trust. The participants are fully vested in their compensation deferred; however, the make-whole contributions and any employer discretionary contributions are subject to
vesting requirements. As of December 31, 2010 and 2009, we recorded a deferred compensation liability of approximately $1.4 million and $1.5 million, respectively, in other
non-current liabilities in the accompanying consolidated balance sheets. We account for the assets as trading securities. The change in the fair value of the assets held in trust is
recorded within "Other, net" in the accompanying consolidated statements of operations. The change in the deferred compensation obligation related to changes in the fair value of the vested assets is
recorded as income (loss) in compensation expense. The assets held in trust were approximately $1.6 million and $1.7 million as of December 31, 2010 and 2009, respectively, and
are recorded at their fair value, based on quoted market prices, as discussed in "Fair Value Measurements" in Note 2. The assets held in trust are included in "Other assets" in the accompanying
consolidated balance sheets.

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

15. Related Party Transactions

On January 5, 2009, we executed a waiver to our working capital facility to allow for payment of a cash dividend and a loan to Holdings, which is not a registrant with the
Securities and Exchange Commission, in the aggregate amount of up to $14.0 million, provided that Holdings used the entire cash proceeds of such dividend and loan solely to purchase capital
stock issued by Holdings (the "Stock Purchase") from Participatiemaatschappij Giraffe B.V. ("Giraffe") and to pay related expenses in connection therewith. On January 5, 2009, we paid a
dividend in the aggregate amount of $8.0 million to Holdings and made a loan in the principal amount of $2.0 million to Holdings. The loan had an original maturity on January 4,
2012 and accrued interest at the rate of 1.36% per year. The loan was subsequently settled against the income tax obligations due to Holdings, which is presented within "Due to parent, net" in the
consolidated balance sheets as of December 31, 2010 and 2009 (as discussed in Note 12).

Additionally,
subsequent to January 5, 2009, we paid an additional dividend in the amount of $1.1 million to Holdings to pay expenses and other amounts in connection with
the Stock Purchase. In connection with the Stock Purchase, Euradius Acquisition Co., a majority owned subsidiary of Holdings, sold all of the outstanding stock of Euradius International Dutch
Bidco B.V. ("Euradius") to Giraffe. This resulted in Holdings fully divesting its interest in Euradius, which was Holdings' only investment other than The Sheridan Group, Inc. Neither
Euradius nor its subsidiaries were guarantors of the 2003 or 2004 Notes. Neither Euradius nor its subsidiaries were subsidiaries of ours and their financial results were not included in our
consolidated financial statements.

In
connection with the Sheridan Acquisition, we entered into a 10-year management agreement with our principal equity sponsors, Bruckmann, Rosser,
Sherrill & Co. LLC and Jefferies Capital Partners. The management fee is equal to the greater of $0.5 million or 2% of earnings before
interest, taxes depreciation and amortization (as defined in the management agreement), plus reasonable out-of-pocket expenses. We incurred and paid approximately
$0.8 million, $0.9 million and $0.8 million in such fees for the years ended December 31, 2010, 2009 and 2008, respectively.

During
2008, we guaranteed certain obligations of GPN Asia Pte. Ltd. ("GPN Asia"), an affiliate of our parent company, related to a lease agreement, up to a maximum of
$4.0 million, and established a $0.3 million letter of credit to secure a working capital facility for GPN Asia. In August 2008, GPN Asia began the process of shutting down
operations. In connection with this shutdown, we estimated our liabilities to be $3.0 million which was charged to operations during 2008. We paid $2.6 million and $0.4 million
during 2008 and 2009, respectively, to satisfy the obligations under the lease agreement, the letter of credit and other costs related to the shutdown including severance payments and professional
fees. We expect that any future payments in connection with this shutdown will be negligible and are provided for in our consolidated balance sheet as of December 31, 2010.

Pierce
Atwood LLP serves as legal counsel for The Dingley Press. A partner at Pierce Atwood LLP is the brother of Christopher A. Pierce, one of our officers in his role as
Chairman of The Dingley Press. The fees incurred and paid for the years ended December 31, 2010 and 2009 were negligible. We incurred and paid approximately $0.1 million in fees to
Pierce Atwood LLP during the year ended December 31, 2008. We believe the fees were reasonable based upon the services rendered.

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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

16. Contingencies

We are party to legal actions as a result of various claims arising in the normal course of business. Accruals for litigation have not been provided because information available at this
time does not
indicate that it is probable that a liability has been incurred. We believe that the disposition of these matters will not have a material adverse effect on our financial condition, results of
operations or cash flows.

17. Business Segments

We are a specialty printer in the United States offering a full range of printing and value  added support services for the journal, magazine, book and catalog markets. The
Publications business segment is focused on the production of short-run journals, medium-run journals and specialty magazines and is comprised of the assets and operations of
The Sheridan Press, Dartmouth Printing, United Litho and Dartmouth Journal Services. We believe there are many similarities in the journal and magazine markets such as the equipment used in the print
and bind process, distribution methods, repetitiveness and frequency of titles and the level of service required by customers. The Books segment is focused on the production of short-run
books and is comprised of the assets and operations of Sheridan Books. This market does not have the repetitive nature of our other products and does not require the same level of customer service.
The Specialty Catalogs segment, which is comprised of the assets and operations of The Dingley Press, is focused on catalog merchants that require run lengths between 50,000 and 8,500,000 copies.

The
accounting policies of the operating segments are the same as those described in the Summary of Significant Accounting Policies. The results of each segment include certain
allocations for general, administrative and other shared costs. However, certain costs, such as corporate profit sharing and bonuses, are not allocated to the segments. Our customer base resides
primarily in the continental United States and our manufacturing, warehouse and office facilities are located throughout the East Coast and Midwest.

We
had no customers which accounted for 10.0% or more of our net sales for the years ended December 31, 2010, 2009 and 2008.

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The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

17. Business Segments (Continued)

The
following table provides segment information for continuing operations (in thousands):

Year ended December 31, 2010

Year ended December 31, 2009

Year ended December 31, 2008Net salesPublications

$
148,758

$
165,872

$
188,714Specialty catalogs


60,725


68,948


92,218Books


56,776


58,554


67,282Intersegment eliminations


(71
)

(25
)

(187
)Consolidated total

$
266,188

$
293,349

$
348,027Operating income (loss)Publications

$
8,070

$
17,312

$
12,481Specialty catalogs


(1,485
)

1,491


(426
)Books


4,339


4,039


5,524Corporate


(1,532
)

(1,452
)

(4,822
)Consolidated total

$
9,392

$
21,390

$
12,757Depreciation and amortizationPublications

$
11,505

$
9,248

$
9,284Specialty catalogs


5,767


5,878


6,193Books


3,419


3,365


2,769Corporate


173


183


154Consolidated total

$
20,864

$
18,674

$
18,400Capital expendituresPublications

$
10,326

$
7,027

$
5,480Specialty catalogs


1,628


1,335


3,715Books


1,234


1,146


7,870Corporate


483


146


532Consolidated total

$
13,671

$
9,654

$
17,597AssetsPublications

$
140,566

$
146,047Specialty catalogs


51,669


54,186Books


46,519


46,173Corporate


2,757


2,594Consolidated total

$
241,511

$
249,000GoodwillPublications

$
25,056

$
32,056Books


8,923


8,923Consolidated total

$
33,979

$
40,979Intangible assetsPublications

$
30,393

$
31,733Books


1,776


1,834Consolidated total

$
32,169

$
33,567


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Table of Contents

The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

17. Business Segments (Continued)

A reconciliation of total segment operating income to consolidated (loss) income before income taxes is as follows:

Years ended December 31,2010

2009

2008(in thousands)Total operating income (as shown above)

$
9,392

$
21,390

$
12,757Interest expense


(15,791
)

(17,229
)

(18,399
)Interest income


49


69


172Gain on repurchase of notes payable





7,194


Other, net


(23
)

234


(1,269
)(Loss) income before income taxes

$
(6,373
)
$
11,658

$
(6,739
)


18. Restructuring Costs

In January 2009, we announced our plan to consolidate some administrative and production operations at our DPC facility in Hanover, New Hampshire. Approximately 20 positions at our ULI
facility in Ashburn, Virginia were eliminated as a result of this action. We recorded $0.3 million of restructuring costs during 2009. The costs relate primarily to guaranteed severance
payments and employee health benefits. We recorded an additional $0.1 million of restructuring costs in connection with this consolidation during 2010. There was no liability outstanding as of
December 31, 2010 related to this restructuring.

19. Quarterly Financial Information (unaudited)

Quarterly financial information for the years ended December 31, 2010 and 2009 is as follows (in thousands):

2010

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterNet sales

$
68,298

$
64,418

$
67,867

$
65,605Gross profit


14,774


13,990


11,335


13,578Operating income


4,936


5,026


2,006


(2,576
)Net income (loss)

$
1,546

$
606

$
(1,206
)
$
(6,887
)


2009

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterNet sales

$
76,976

$
70,702

$
73,341

$
72,330Gross profit


13,927


14,828


15,587


16,059Operating income


4,095


4,965


6,174


6,156Net income (loss)

$
(743
)
$
1,806

$
5,207

$
1,947


The
results for the third quarter of 2010 reflect the impact of a charge of $2.3 million for depreciation expense in connection with the write down of the value of a printing
press that was removed from service. The results for the fourth quarter of 2010 reflect the impact of a charge of

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The Sheridan Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Years Ended December 31, 2010, 2009 and 2008

19. Quarterly Financial Information (unaudited) (Continued)

$7.0 million
in connection with the impairment of goodwill at DPC (see Note 7). The results for the second and third quarters of 2009 reflect the impact of the gain on repurchase of
notes payable of $5.4 million and $1.8 million, respectively (see Note 9).

20. Subsequent Events (unaudited)

Due to continued adverse trends in the specialty magazine business as a result of the weak economy, our Board of Directors, on January 19, 2011, approved a restructuring plan to
consolidate all specialty magazine printing operations into one site. We will consolidate the printing of specialty magazines at Dartmouth Printing Company in Hanover, New Hampshire and close the
United Litho facility in Ashburn, Virginia. Approximately 80 positions will be eliminated as a result of the closure. It is expected that approximately 20 employees in the Customer Service and Sales
areas will be retained by Dartmouth Printing Company. As of December 31, 2010, we have not recorded any charges related to this restructuring plan.

Charges
related to this restructuring will be recorded as the plan is implemented in 2011. We estimate approximately $2.2 million ($1.3 million after tax) of restructuring
charges resulting in future cash expenditures will be incurred, including $1.5 million of charges related to severance and other personnel costs and $0.7 million of other exit costs. We
expect to record these costs in 2011.

On
February 3, 2011, we entered into a contract to sell the Ashburn, Virginia facility for $4.2 million. Sales commissions, transfer taxes, fees and other closing costs are
expected to reduce the net proceeds to approximately $3.9 million which will result in a negligible gain. Consummation of the transaction is
conditioned upon satisfaction of specific terms and conditions and delivery of specific documents, which are customary for similar transactions. The closing is scheduled for October 31, 2011.

We
estimate that we will incur non-cash charges of $1.6 million in 2011 associated with the accelerated amortization of the United Litho trade name which is reflected
in the estimated future amortization expense as disclosed in Note 6.

We
also expect that we will incur non-cash charges of approximately $3.0 million associated with the accelerated depreciation of equipment, based on updated estimates
of remaining useful life and estimated residual value, equal to the lower of carrying value or best estimate of selling price, less costs to sell.

On
February 24, 2011, we commenced a cash tender offer and consent solicitation for any and all of our outstanding 2003 and 2004 Notes. As of March 25, 2011, approximately
$136.6 million, or 95.6%, of the aggregate principal amount of the notes had been tendered. The closing of the tender offer is conditioned on, among other things, the receipt of debt financing
sufficient to pay the total consideration in respect of the notes.

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Table of Contents

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.    CONTROLS AND PROCEDURES



As
of the end of the period covered by this Annual Report on Form 10-K, we conducted an evaluation, under the supervision and with the
participation of the principal executive officer ("CEO") and principal financial officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation and as of the end of the period for which this
report is made, the CEO and CFO concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports
that we file or submit under the Exchange Act is accumulated and communicated to our management, including the CEO and CFO, to allow timely decisions regarding required disclosure.



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as that term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)). To evaluate the effectiveness of our internal control over financial reporting, we use the framework in "Internal
ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Framework"). Using the COSO Framework, our management, including the
CEO and CFO, evaluated our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of December 31, 2010. Because of the
inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



There
was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

Not applicable.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We are a wholly-owned subsidiary of TSG Holdings Corp., whose stockholders include affiliates of Bruckmann, Rosser,
Sherrill & Co., LLC and Jefferies Capital Partners and members of our senior management.

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Table of Contents

Our Equity Sponsors

Bruckmann, Rosser, Sherrill & Co., LLC, or BRS, is a New York-based private equity investment firm
with over $1.4 billion under management. BRS was founded in 1995 and has since invested in over 20 companies in the following industries: restaurants, consumer goods, specialty retail,
recreation/leisure, apparel, home furnishings, industrial and commercial services (including equipment rental), commercial equipment manufacturing, wholesale distribution and healthcare services.
BRS's strategy is to make leveraged buyout, recapitalization/restructuring and growth capital investments in companies with superior management,
predictable cash flow, strong market share and growth potential. BRS and its affiliates are collectively referred to as "BRS."

Jefferies
Capital Partners, or JCP, is a New York-based private equity investment firm with over $1.3 billion in equity commitments under management. Since 1994, JCP's
professionals have invested in over 50 companies in a variety of industries. JCP focuses on partnering with entrepreneurs and management teams in industries in which JCP has expertise. JCP invests in
management buyouts, recapitalizations, industry consolidations and growth equity. JCP and its affiliates are collectively referred to as "JCP."

Directors and Executive Officers

We have provided information below about our directors and executive officers, including their ages, term of service, business
experience, and service on other boards of directors. We have also included information about each director's specific experience, qualifications, attributes or skills that led the board to conclude
that he should serve as a director of the Company, in light of our business and structure. Our executive officers and directors are as follows:

Name

Age

PositionJohn A. Saxton

61

President and Chief Executive Officer and DirectorRobert M. Jakobe

57

Executive Vice President and Chief Financial Officer and SecretaryDouglas R. Ehmann

54

Executive Vice President and Chief Technology OfficerDale A. Tepp

54

Vice PresidentHuman ResourcesJoan B. Davidson

49

Group PresidentPatricia A. Stricker

46

President and Chief Operating OfficerThe Sheridan Press, Inc. ("TSP")Gary J. Kittredge

60

President and Chief Operating OfficerDartmouth Journal Services ("DJS")Michael J. Seagram

54

President and Chief Operating OfficerSheridan Books, Inc. ("SBI")G. Paul Bozuwa

50

President and Chief Operating OfficerDartmouth Printing Company ("DPC") and United Litho, Inc. ("ULI")Eric D. Lane

51

President and Chief Operating OfficerThe Dingley Press, Inc. ("TDP")Thomas J. Baldwin

52

DirectorNicholas Daraviras

37

DirectorCraig H. Deery

63

DirectorGary T. DiCamillo

60

DirectorJames L. Luikart

65

DirectorNicholas R. Sheppard

36

DirectorGeorge A. Whaling

74

Director


John A. Saxton, President, Chief Executive Officer and Director.Mr. Saxton joined us in 1995 as our President and Chief
Executive Officer and
has served on our board of directors since 1991. Prior to joining us, Mr. Saxton held various positions during 24 years at The Procter & Gamble Company, most

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Table of Contents

recently
serving as President of the Noxell Corporation following its acquisition by The Procter & Gamble Company in 1990. Mr. Saxton is a member of the National Association for Printing
Leadership's Walter E. Soderstrom Society, which honors individuals in the printing industry who have significantly contributed to the development and the progress of the graphic arts.
Mr. Saxton holds a B.S. from Bucknell University. Mr. Saxton is the only director who is also one of our officers. The board believes that Mr. Saxton has a deep knowledge of our
business gained throughout his 16 years as Chief Executive Officer of the Company and adds a valuable perspective for board decision making.

Robert M. Jakobe, Executive Vice President and Chief Financial Officer and Secretary.Mr. Jakobe joined us in 1994 as Vice
President and Chief
Financial Officer of TSG. He has served as Secretary of TSG since 2003. Effective January 1, 2007, he began serving as Executive Vice President and Chief Financial Officer and Secretary. Prior
to joining us, he worked at various positions within The Procter & Gamble Company, most recently serving as Division Comptroller and Vice President of Finance for the Noxell Corporation.
Mr. Jakobe holds a B.A. from the University of Notre Dame.

Joan B. Davidson, Group President.Ms. Davidson joined us in 1995, and effective January 1, 2007, began serving as
Group President.
Ms. Davidson served as President and Chief Operating Officer of TSP from 1996 through 2006. From 1995 to 1996, she served as Finance Manager of TSP. Prior to joining us, Ms. Davidson
worked in various positions in the marketing and finance departments of The Procter & Gamble Company, most recently serving as a Finance Manager. Ms. Davidson is active in the industry
as former Chairman of the National Association for Printing Leadership and as past Secretary and past Treasurer of the Print and Graphic Scholarship Foundation of the Graphic Arts. She is a member of
the National Association for Printing Leadership's Walter E. Soderstrom Society and was inducted into the Printing Industry Hall of Fame in 2010. Ms. Davidson holds a B.S. from the College of
Notre Dame of Maryland and an M.B.A. from Loyola College in Maryland.

Douglas R. Ehmann, Executive Vice President and Chief Technology Officer.Mr. Ehmann joined us in 1998 as our Vice
President and Chief
Technology Officer. He was promoted to Executive Vice President and Chief Technology Officer on January 1, 2009. Prior to joining us, he worked at Northrop Grumman Corporation as a Sector Chief
Information Officer for Information Systems from 1995 to 1998 and in the Management Systems Division at the Procter & Gamble Company from 1981 to 1995. He holds a B.S., an M.E. and an M.B.A.
from Cornell University.

Dale A. Tepp, Vice PresidentHuman Resources.Ms. Tepp joined us in September 2006 as Vice President, Human Resources.
Prior to
joining us, she worked in various Human Resources positions with Great Northern Nekoosa Corporation, Georgia-Pacific Corporation, Color-Box and Cenveo, most recently serving as Executive
Director of Human Resources. She holds a B.S. from the University of Wisconsin.

Patricia A. Stricker, President and Chief Operating OfficerTSP.Ms. Stricker joined us in 1998 and effective
January 1,
2007, began serving as President and Chief Operating Officer of TSP. Ms. Stricker served as Vice President, Operations and Human Resources for TSG from January 2003 through 2006. From 2000 to
2003, she served as President of SBI. Ms. Stricker served as our Vice President, Corporate Development from 1999 to 2000, and as our Projects Manager from 1998 to 1999. Prior to joining us,
Ms. Stricker held various positions at General Physics Corporation, most recently serving as Vice President, Finance and Administration. She holds a B.A. from the College of Notre Dame of
Maryland.

Ms. Stricker,
President and Chief Operating Officer of TSP, and Ms. Davidson, Group President, are sisters.

Gary J. Kittredge, President and Chief Operating OfficerDJS.Mr. Kittredge joined us in 2000, and effective
September 1,
2009 began serving as President and Chief Operating Officer of DJS. From

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January
2008 to August 2009 he served as President and Chief Operating Officer of DPC, DJS, and ULI. From April 2006 to 2008, he served as President and Chief Operating Officer of DPC and DJS. From
2002 to 2006, he served as President and Chief Operating Officer of CCP. From 2000 to 2002, he served as Executive Vice President of CCP. Prior to joining us, Mr. Kittredge was the General
Manager and Vice President of Manufacturing for IPD Printing. Prior to that, he served as a Business Unit Manager and Manager of Technical Development of Litho-Krome Co., a subsidiary of
Hallmark Cards, Incorporated. He holds a B.S. and an M.S. from Rochester Institute of Technology.

Michael J. Seagram, President and Chief Operating OfficerSBI.Mr. Seagram joined us in 2003, and since April 1,
2006 has
served as President and Chief Operating Officer of SBI. From 2003 to 2006, he served as Vice President of Sales and Marketing of SBI. Before joining SBI, Mr. Seagram was Owner and President of
Aristoplay, Ltd., a publisher of children's games, from 1997 to 2003. He was also the Owner and President of the marketing firm, Seagram & Singer, Inc. from 1986 to 1998.
Mr. Seagram holds a B.S. from Wayne State University.

G. Paul Bozuwa, President and Chief Operating OfficerDPC and ULI.Mr. Bozuwa joined us in 1991 and effective
September 2009 began
serving as President and Chief Operating Officer of DPC and ULI. From January 2007 to August 2009 Mr. Bozuwa served as Vice President, Global Business Development. Mr. Bozuwa served as
President of DJS from 2002 to 2006. From 1995 to 2002, he served as President and Chief Operating Officer of CCP. From 1991 to 1995, he served as Chief Financial Officer of CCP. Mr. Bozuwa is
active in industry affairs serving as past Chairman of the Finance Committee and past Treasurer of the Council of Science Editors. He was also the Chairman of the task force on Science, Journals,
Poverty and Human Development. Prior to joining us, he was an Associate of Kearsarge Ventures, a venture fund, from 1989 to 1991. Mr. Bozuwa holds a B.A. from Dartmouth College and an M.B.A.
from the University of New Hampshire.

Eric D. Lane, President and Chief Operating OfficerTDP.Mr. Lane joined us in 1986 and effective October, 2008 began
serving as
President and Chief Operating Officer of TDP. From 2000 to 2008 he served as Vice President of Finance of TDP. From 1986 to 2000 he served as Controller of TDP. Mr. Lane holds an A.S. in
Accounting from Andover College.

Thomas J. Baldwin, Director.Mr. Baldwin has been a member of our board of directors since 2003. Mr. Baldwin is a
Managing Director of
BRS. He joined BRS in 2000. From 1996 to 2000, Mr. Baldwin was a Principal at PB Ventures, Inc. From 1988 to 1995, he served as Vice President and then Managing Director of The INVUS
Group, Ltd., a private equity investment firm. Prior to that he was a consultant with the Boston Consulting Group, a strategy consulting firm. Mr. Baldwin holds a B.B.A. from Siena
College and an M.B.A. from Harvard Business School. From 2005 to 2006 Mr. Baldwin also held Directorship of Eurofresh, Inc., Lazy Days, Inc., and Totes Isotoner Corp.
Mr. Baldwin brings to the board extensive experience advising portfolio companies of BRS and provides valuable insight regarding strategic, financing, acquisition and management issues.

Nicholas Daraviras, Director.Mr. Daraviras has been a member of our board of directors since August 2003.
Mr. Daraviras is a Managing
Director of JCP. Mr. Daraviras joined JCP in 1996. Mr. Daraviras holds a B.S. and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr. Daraviras is also a
Director of Carrols Restaurant Group. He has served as director of Edgen Murray II, L.P. or of its predecessor companies since February 2005 and various private companies in which JCP has an
interest. Mr. Daraviras brings to the board extensive experience advising portfolio companies of JCP and provides valuable insight regarding strategic, financing, acquisition and management
issues.

Craig H. Deery, Director.Mr. Deery has been a member of our board of directors since August 2003. He was also a member of
our board of
directors from 1991 through 2001. Mr. Deery was a Managing Director of JCP from 2002 to 2003. From 1987 to 2002, Mr. Deery was a Managing Director

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at
BancBoston Capital, where he served on the management committee of BancBoston Capital. While at BancBoston Capital, Mr. Deery supervised a direct investment portfolio of $500 million,
including mezzanine securities and equity as a minority, co-invest, and control investor. Prior to 1987, Mr. Deery spent fifteen years at BancBoston, serving as a team leader in
domestic lending and as Deputy Managing Director and Senior Credit Officer of BancBoston Australia, Ltd. Mr. Deery holds a B.A. from Bucknell University and an M.B.A. from New York
University. He served as Director of First Ipswich Bancorp from 2005-2007. Mr. Deery has a broad knowledge of our business gained throughout his 18 years as a director of the
Company. Mr. Deery brings to the board extensive experience advising portfolio companies of BancBoston Capital and JCP and he provides valuable insight to the board regarding strategic,
financial, acquisition, and management issues.

Gary T. DiCamillo, Director.Mr. DiCamillo has been a member of our board of directors since 1989. Mr. DiCamillo has
been a partner for
Eaglepoint Advisors, LLC, since January 2010. He served as
President and Chief Executive Officer of RADIA International in Dedham, Massachusetts from 2005 to 2009. From 2002 to 2005, Mr. DiCamillo served as President, Chief Executive Officer, and
Director of TAC Worldwide Companies. From 1995 to 2002, he was Chairman and Chief Executive Officer of Polaroid Corporation (which filed a voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code on October 12, 2001), and from 1993 to 1995 he was President of Worldwide Power Tools for Black & Decker Corporation. Mr. DiCamillo holds a B.S.
from Rensselaer Polytechnic Institute and an M.B.A. from Harvard Business School. Mr. DiCamillo is also a director of 3Com Corporation from 2000 to April 2010, Whirlpool Corporation from 1997
to the present and Pella Corporation from 1993 to 2007 and from January 2010 to the present. Mr. DiCamillo has a broad knowledge of our business gained throughout his 22 years as a
director of the Company and brings to the board his vast experience as a chief executive, non-executive director, and audit committee chair with a variety of both public and private
companies. These experiences have provided Mr. DiCamillo with a depth of knowledge in such areas as finance, general management, marketing, risk management and strategic development.

James L. Luikart, Director.Mr. Luikart has been a member of our board of directors since 2003. Mr. Luikart is
Executive Vice President
of JCP. Mr. Luikart joined JCP in 1994 after spending over twenty years with Citicorp, the last seven years of which were as a Vice President of Citicorp Venture Capital, Ltd.
Mr. Luikart holds a B.A. from Yale University and an M.I.A. from Columbia University. He served as director of W&T Offshore, Inc. from 2002 to 2006; Edgen Murray II, L.P. or of
its predecessor companies since February 2005, United Maritime Group LLC in 2010, and various private companies in which JCP has an interest. Mr. Luikart brings to the board extensive
experience advising portfolio companies of JCP and provides valuable insight regarding strategic, financing, acquisition and management issues.

Nicholas R. Sheppard, Director.Mr. Sheppard was a member of our board of directors from 2003 to 2007, rejoining our board
in March 2009.
Mr. Sheppard is a Managing Director of BRS. Prior to joining BRS in 2000, he worked as a Consultant in the London and New York offices of Marakon Associates, a strategy consulting firm.
Mr. Sheppard received his BSc from the London School of Economics and Political Science and his MBA from The Wharton School of the University of Pennsylvania. Mr. Sheppard was a director
of Lazy Days R.V. Center, Inc. from 2005 to 2009 and was Director of Penhall International, Inc. in 2005 to 2006. Mr. Sheppard brings to the board extensive experience advising
portfolio companies of BRS and provides valuable insight regarding strategic, financing, acquisition and management issues.

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George A. Whaling, Director.Mr. Whaling has been a member of our board of directors since 1998 and is Chairman of Kingston
Capital
Corporation in New York. From 1980 to 1997, he was Chairman and owner of the Petty Printing Company, a commercial web printer. Mr. Whaling holds a B.A. from Colgate University.
Mr. Whaling served as Director of Colgate University, Hamilton Initiative LLC and Augusta Glenn Partners LLC from 2005 to 2006. Mr. Whaling has a broad knowledge of our
business gained throughout his 12 years as a director of the Company and his 30 years of experience in the printing industry and he provides valuable insight to the board regarding
operational, sales, and management issues.

Board Composition and Director Independence

The securities holders' agreement among BRS, JCP and the other stockholders of TSG Holdings Corp. provides that TSG Holdings Corp.'s
and our board of directors will consist of eight members, including four designees of BRS (who currently are Messrs. Baldwin, DiCamillo, Sheppard and Saxton) and four designees of JCP (who
currently are Messrs. Daraviras, Deery, Luikart and Whaling). Pursuant to the securities holders' agreement, we may not take certain significant actions without the approval of each of BRS and
JCP. Although our securities are not listed on the New York Stock Exchange, for purposes of this item we have adopted the definition of
"independence" applicable under the listing standards of the New York Stock Exchange. Using such definition, the board of directors has determined that each of Messrs. DiCamillo, Deery and
Whaling is independent. If we were listed on the New York Stock Exchange, we would be exempt from certain independence requirements with respect to our board of directors and board committees under
the "controlled company" exemption. See Part III, Item 13, "Certain Relationships and Related TransactionsSecurities Holders' Agreement."

Audit Committee

The board of directors has an audit committee. The audit committee consists of Messrs. Daraviras, DiCamillo and Sheppard. The
audit committee reviews our financial statements and accounting practices, selects our independent registered public accounting firm and oversees our internal audit function. The responsibilities of
the Audit Committee are defined in a charter, which has been approved by the Board of Directors. In carrying out their responsibilities, the Committee has reviewed and discussed our audited financial
statements with management, and it has discussed the matters which are required to be discussed by AU Section 380 (The Auditor's Communication with Those Charged With Governance), as adopted by
the Public Company Accounting Oversight Board, with our Independent Registered Public Accounting Firm. In addition, the Committee has reviewed the written disclosures required by the Public Company
Accounting Oversight Board, which were received from our Independent Registered Public Accounting Firm, and has discussed the Independent Registered Public Accounting Firm's independence with them.
The Audit Committee has reviewed the fees of the Independent Registered Public Accounting Firm for non-audit services and believes that such fees are compatible with the independence of
the Independent Registered Public Accounting Firm.

Based
on these reviews and discussions, the Committee recommended to the Board of Directors that our audited financial statements be included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2010.

The
Board of Directors has determined that Mr. DiCamillo, the chairman of the audit committee, is the "audit committee financial expert" as defined in applicable SEC rules and
regulations. Mr. DiCamillo is "independent" as defined in the listing standards of the New York Stock Exchange.

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Code of Business Conduct

Our Code of Business Conduct applies to all employees of The Sheridan Group, Inc. and all its wholly-owned subsidiaries. Each
supervisor and above has been required to sign annually that they have read, understand and will comply with the Code. Our Code of Business Conduct is included on our internet website at
www.sheridan.com. If any substantive amendments are made to the Code of Business Conduct or the Board of Directors grants any waiver from a provision of the Code to any officers of The Sheridan
Group, Inc. or its wholly-owned subsidiaries, the nature of such amendment or waiver will be disclosed on our website.

ITEM 11.    EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis ("CD&A") provides an overview of our executive compensation program together with a
description of the material factors underlying the decisions which resulted in the compensation provided to our Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and certain other
executive officers (collectively, the named executive officers) for 2010 (as presented in the tables which follow this CD&A).

Compensation Committee

The board of directors has a compensation committee. The compensation committee consists of three members, Messrs. Baldwin,
Deery and Luikart. The compensation committee has responsibility for establishing, implementing and continually monitoring adherence with our compensation philosophy. The role of the compensation
committee is to make recommendations to our board of directors concerning salaries, incentive compensation and employee benefit programs. The compensation committee reviews and approves employment
agreements and compensation programs or benefit plans for all of our executive officers, including the named executive officers, and certain other management employees. The compensation committee
periodically compares our executive compensation levels with those of companies with which we believe that we compete in recruitment and retention of senior executives. The compensation committee also
reviews and makes recommendations with respect to succession planning and management development. The CEO recommends changes in compensation for his direct reports, including each of the named
executive officers, to the compensation committee for approval. The compensation committee recommends changes in compensation for the CEO to the full board for approval.

Compensation Philosophy and Objectives

In reviewing our compensation programs, the compensation committee applies a philosophy which is based on the premise that our
achievements result from the coordinated efforts of all individuals working toward common objectives. We have developed a compensation policy that is designed to attract and retain qualified senior
executives, reward executives for actions that result in the long-term enhancement of stockholder value and reward results with respect to our financial and operational goals.

Setting Executive Compensation

Based on the foregoing philosophy, the company's annual and long-term incentive-based cash and non-cash
executive compensation has been structured to (a) pay competitive levels of compensation in order to attract and retain qualified executives, (b) motivate executives to achieve the
short-term and long-term business goals set by us and reward the executives for achieving such goals and (c) reward

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long-term
performance. We compete with many larger companies for top executive-level talent. Competitors include RR Donnelley, WorldColor, Cenveo (previously Cadmus), Quad Graphics,
Edwards Brothers, and numerous other printing companies. We consider these our primary competitors because we compete against these companies in each of our market segments. Accordingly, we generally
consider the compensation paid to similarly situated executives at these larger corporations, together with individual experience, performance and cost-of-living factors, when
determining the overall compensation available to our named executive officers. A significant percentage of total compensation is allocated to incentive compensation. However, there is no
pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. Rather, market
data, internal pay equity and performance are the factors considered in determining the appropriate level and mix of incentive compensation.

Compensation Policies and Practices as they Relate to Risk Management

We conducted an assessment of potential risks arising from our compensation policies and practices and concluded that these risks are
not reasonably likely to have a material adverse effect on the Company.

2010 Executive Compensation Components

For the fiscal year ending December 31, 2010, the principal components of compensation considered by the compensation committee
for named executive officers were:



We
have also entered into employment agreements and/or change in control arrangements with all of the named executive officers. In addition to the compensation components listed above,
these agreements provide for post-employment severance payments and benefits in the event of a termination of employment under certain circumstances. The terms of these agreements are
described in more detail below (see the section entitled "Potential Payments on Termination or a Change in Control"). We believe that these agreements provide an incentive to the named executive
officers to remain with us and serve to align the interests of the executives and the stockholders in the event of a potential acquisition. Additionally, a retention award, made to the Deferred
Compensation Plan described below, was provided to a certain named executive officer whose retention is determined by our board of directors to be critical to our ongoing success.

Base Salary

We provide the named executive officers with base salaries to compensate them for services rendered during the fiscal year. The base
salaries for our CEO, Messrs. Jakobe and Bozuwa, and Mss. Davidson and Stricker are contained in their respective employment agreements and are subject to increase at the discretion of
our board of directors. Base salary levels are intended to reflect an individual's responsibilities, performance and expertise and are designed to be competitive with salary levels in effect at other
manufacturing companies, and in particular, companies within the printing industry. Accordingly, we establish salaries for the named executive officers on the basis of personal performance and by
reviewing available national and printing industry compensation data from time to time, including published salary surveys regarding compensation of officers of larger and smaller

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companies,
both within and outside the printing industry. Our CEO annually reviews and provides his subjective assessment of the performance of each of our named executive officers and recommends
whether any adjustment to base salary for any named executive officer should be considered by the compensation committee. The compensation committee generally affords significant consideration to the
CEO's recommendations based on his proximity to the other named executive officers and understanding of their day-to-day performance and responsibilities. Based on the CEO's
recommendations and the compensation committee's review of available market data, the compensation committee set base salaries for 2010 at the levels reported in the Summary Compensation Table, below.
The compensation committee believes such salaries are in line with market data and reflect the responsibilities, performance and expertise of our named executive officers.

Annual Incentive Compensation

Management Performance Incentive Plan.Annual cash bonuses are generally considered for inclusion in our executive compensation program
because we
believe that a significant portion of each named executive officer's compensation should be contingent on our annual performance, as well as the individual contribution of the executive. Accordingly,
our named executive officers have historically participated in a management performance incentive plan, which compensated them for achievement of certain objectives established annually by our board
of directors. Historically, these objectives have been based on our earnings before interest, taxes, depreciation and amortization ("EBITDA"), the EBITDA of each executive's operating subsidiary and
individual performance. For purposes of our management performance incentive plan and our profit sharing plan (discussed below), our EBITDA is
calculated the same way WCF EBITDA is calculated as described in Management's Discussion and Analysis of Financial Condition and Results of Operations, above. To the extent applicable with respect to
any named executive officer's award, the same EBITDA calculation is performed for the applicable operating subsidiary.

The
management performance incentive plan was suspended for 2009 as a cost-savings measure to offset revenue reductions brought on by the economic recession. This plan was
reinstated for 2010 and the following is a summary of how the management performance incentive plan operated for 2010.

Under
the management performance incentive plan, our executive officers are eligible to receive a maximum award of 50% of base salary, except Mr. Saxton, whose maximum award is
100% of base salary. Maximum award amounts are developed based on market data but also set at a level to insure that a significant portion of potential compensation is tied to delivering results.
Management performance incentive awards are based upon achievement of corporate EBITDA financial objectives and individual performance objectives. Upon completion of the fiscal year, the compensation
committee assesses our performance for each corporate financial objective, comparing actual year-end results to the objectives. Then individual performance is evaluated and an overall
award is calculated.

The
board of directors establishes the financial performance objectives for our named executive officers and designates the portion of each named executive officer's annual bonus that
would be eligible to be paid based on a subjective assessment of such individual's performance, in the board's discretion. There is no calculation or metric used for determining the subjective
individual performance score; it is determined in the Board's discretion based on the input of the CEO and the board's view of the individual named executive officer's contribution to our success. The
individual component was capped at 50% of maximum potential for 2010.

The
financial objectives are set based on the annual plan that is approved by the Board of Directors. The maximum target is set to be approximately 2-4% above the target and
the minimum is set to be approximately 8-10% below the target. EBITDA is the primary measure that private equity investors like ours often use to determine the success of their portfolio
companies. TSG and operating company subsidiary EBITDA targets, consistent with the company's annual financial plan that is

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approved
by the board of directors, are set at levels to incent improvement over previous year operating results and are designed to be relatively challenging to achieve and very difficult to exceed.
Accordingly, the Board of Directors sets financial performance goals at levels that it expects will be achieved, at least in part, for a fiscal year. TSG financial targets have not been achieved in
any of the last three fiscal years. Operating company subsidiary EBITDA targets have been achieved at least at the threshold level in two of the last three years.

Mr. Saxton
was eligible for a maximum award of 100% of base salary in 2010. 75% of this award was based on attainment of TSG financial objectives and 25% was discretionary based
on individual performance. TSG financial objectives were not achieved in 2010 and only 50% of the discretionary award was earned ($76,100). There is no minimum threshold for the discretionary portion
of the bonus. It is totally discretionary based on the board's view of an individual's contribution to our success. The management performance incentive plan was suspended for 2009. Mr. Saxton
was eligible for a maximum award of 100% of base salary in 2008. 50% of this award was based on attainment of TSG financial objectives, 25% was based on attainment of Sheridan Europe financial
objectives, and 25% was discretionary based on individual performance. The TSG and Sheridan Europe financial objectives were not achieved; therefore, no award was earned for these components. There
was no discretionary award earned in 2008.

Mr. Jakobe
was eligible for a maximum award of 50% of base salary in 2010. 75% of this award was based on attainment of TSG financial objectives and 25% was discretionary based on
individual performance. TSG financial objectives were not achieved in 2010 and only 50% of the discretionary award was earned ($19,100). There is no minimum threshold for the discretionary portion of
the bonus. It is totally discretionary based on the board's view of an individual's contribution to our success. The management performance incentive plan was suspended for 2009. Mr. Jakobe was
eligible for a maximum award of 50% of base salary in 2008. 50% of this award was based on attainment of TSG financial objectives, 25% was based on attainment of Sheridan Europe financial objectives,
and 25% was discretionary based on individual performance. The TSG and Sheridan Europe financial objectives were not achieved; therefore, no award was earned for these components. There was no
discretionary award earned in 2008.

Ms. Davidson
was eligible for a maximum award of 50% of base salary in 2010. 50% of this award was based on Publications financial objectives, 25% of the award was based on TSG
EBITDA and 25% was discretionary based on individual performance. Ms Davidson received an incentive award equal to 27.5% of the of the maximum award as follows: 15% for achieving Publications
EBITDA targets ($24,700) and 12.5% as a discretionary award for individual performance ($20,600) based on the board's view of her effectiveness as Group President. There is no minimum threshold for
the discretionary portion of the bonus. It is totally discretionary based on the board's view of an individual's contribution to our success. TSG financial objectives were not achieved in 2010,
therefore, no award was earned for this component. The total 2010 award was equal to $45,300, or approximately 13.7% of her base salary. The management performance incentive plan was suspended for
2009. Ms. Davidson was eligible for a maximum award of 50% of base salary in 2008. 50% of this award was based on attainment of Publications financial objectives, 25% was based on attainment of
Sheridan US (TSG) financial objectives, and 25% was discretionary based on individual performance. Ms. Davidson received an incentive award equal to 42.5% of the maximum award as follows: 27.5%
for achieving Publications EBITDA financial targets ($44,647) and 15% as a discretionary award ($24,353) for individual performance. The TSG financial objectives were not attained; therefore, no award
was earned for this component. The total 2008 award was equal to $69,000, or approximately 21.2% of her base salary.

Mr. Bozuwa
was eligible for a maximum award of 50% of base salary in 2010. 50% of this award was based on attainment of DPC and ULI financial objectives, 25% was based on TSG
EBITDA, and 25% was discretionary based on individual performance. DPC/ULI financial objectives and TSG

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EBITDA
were not achieved in 2010. Only 40% of the discretionary award was earned for individual performance in 2010 ($15,900). There is no minimum threshold for the discretionary portion of the bonus.
It is totally discretionary based on the board's view of an individual's contribution to our success. The management performance incentive plan was suspended for 2009. Mr. Bozuwa was eligible
for a maximum award of 50% of base salary in 2008. 100% of this award was based on attainment of Global Print Network (GPN) EBITDA objectives. GPN EBITDA objectives were not achieved;
therefore, no bonus was earned in 2008.

Ms. Stricker
was eligible for a maximum award of 50% of base salary in 2010. 50% of this award was based on attainment of TSP financial objectives, 25% was based on TSG EBITDA,
and 25% was discretionary based on individual performance. Ms. Stricker received an incentive award equal to 62.5% of the maximum award as follows: 50% for achieving TSP financial targets
($60,900) and a 12.5% discretionary award for individual performance ($15,300) based on the board's view of her effectiveness as President and Chief Operating Officer of TSP. There is no minimum
threshold for the discretionary portion of the bonus. It is totally discretionary based on the board's view of an individual's contribution to our success. TSG financial objectives were not achieved
in 2010, therefore, no award was earned for this component. The total 2010 award was equal to $76,200, or approximately 31.3% of her base salary. The management performance incentive plan was
suspended for 2009. Ms. Stricker was eligible for a maximum award of 50% of base salary in 2008. 50% of this award was based on attainment of TSP financial objectives, 25% was based on TSG
EBITDA, and 25% was discretionary based on individual performance. Ms. Stricker received an incentive award equal to 75% of the maximum award as follows: 50% for achieving TSP financial targets
($67,500) and a 25% discretionary award for individual performance ($22,500). The total 2008 award was equal to $90,000, or approximately 37.5% of her base salary.

Annual
incentive compensation awards for 2010 and 2008 appear as "Non-Equity Incentive Plan Compensation" in the Summary Compensation Table.

Profit Sharing Plan.The Sheridan Group Profit Sharing Plan is a broad-based incentive program provided to all eligible employees at
each location,
excluding TDP and DJS. The board of directors determines, on an annual basis, if a profit sharing contribution will be made for each participating company. The contribution, if any, is determined by a
formula approved by our board of directors.

The
profit sharing plan was suspended as a cost-savings measure for all locations other than TSP to offset revenue reductions brought on by the economic recession. Under the
formula approved for 2010, a guideline was established of 6.5% of EBITDA for TSP. If company EBITDA is a
positive number, the established percent of EBITDA is put into the profit sharing pool. The total dollar contribution for an operating subsidiary cannot exceed 6.5% of its total payroll for the year.
Additionally, a company must also meet a minimum threshold of an 8% net profit margin (before profit sharing) in order to be eligible for profit sharing. In 2009, all companies transitioned to payment
of profit sharing in cash; however, employees have the option of deferring their cash payment into their 401(k) accounts. Ms. Stricker was the only named executive officer eligible to receive a
profit sharing award for 2010. The $15,491 profit sharing award for Ms. Stricker is reported in the "All Other Compensation" column in the Summary Compensation Table shown below.

Stock-Based Incentive Compensation

TSG Holdings Corp., our parent company, adopted a Stock-Based Incentive Compensation Plan in October 2003. The purpose of the 2003
Stock-Based Incentive Compensation Plan is to provide long-term equity incentives to assist us in attracting and retaining valued management employees through the award of options to
purchase common stock of TSG Holdings Corp. Option grants are designed to align the interests of officers and employees with those of the stockholders, to provide each individual with a significant
incentive to manage our business from the perspective of an owner and to

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remain
employed by us. Eligible employees will receive options on terms determined by our board of directors. The compensation committee considers the level of responsibility, position, past and
expected performance, potential incentive payouts and annual base salary of each named executive officer when determining awards to be made under the Stock-Based Incentive Plan. The stock option
awards are recommended by the CEO to the compensation committee, who then makes a recommendation to our board of directors for approval.

Options
granted under the Stock-Based Incentive Compensation Plan have exercise prices equal to or above the fair market value of the underlying common stock (as determined under the
Stock-Based Incentive Compensation Plan) on the grant date and are equally split 50% between a time-based vesting schedule and a performance-based vesting schedule. Time-based
awards vest 20% per year over five years subject to the executive's continued employment with us. Performance-based awards vest 20% per year over five years based on us achieving a per share equity
value, as defined by the option agreements, each year as determined by the board. The per share equity value is calculated by multiplying our twelve month EBITDA by a pre-defined multiple,
then subtracting net debt, and then dividing by the number of issued and outstanding shares of TSG Holdings Corp. Common Stock. If an annual performance target is not met in any of the five years, but
is achieved by meeting subsequent year targets, shares will vest for all preceding plan years. The targets for the performance based options were established based upon the original objectives that
BRS and JCP established when they bought us in 2003 (as modified in connection with the Dingley Acquisition in 2004) and wanted to incent management to deliver the rate of return expected on their
investment in us.

Three
named executive officers received option awards in fiscal year 2010. Mr. Saxton received 4,060 shares, Ms. Davidson received 1,500 shares, and Ms. Stricker
received 300 shares.

We
do not require our named executive officers to maintain a minimum ownership interest in us or our affiliates.

Nonqualified Deferred Compensation

In General.Our nonqualified deferred compensation program serves primarily to attract and retain qualified executives by providing
them with
enhanced tax deferral opportunities and retirement benefits in addition to those provided under our broad-based 401(k) plan. Under the nonqualified deferred compensation plan, officers, directors and
certain management employees may annually elect (via individual contracts) to defer a portion of their compensation, on a pre-tax basis. The benefit is based on the amount of compensation
(salary and bonus) deferred, employer "make-whole" contributions, employer discretionary contributions and earnings on these amounts. Make-whole contributions are matching
contributions and profit sharing contributions which we would have made to the participants' accounts under the 401(k) plan were we not prohibited from making such contribution under the limits
applicable to the 401(k) plan under the Internal Revenue Code. Make-whole contributions are made early in the year following the year in which the applicable matching and profit sharing
contributions to our 401(k) plan were limited. Accordingly, such contributions for 2010 include a component relating to 2009's profit sharing plan even though such profit sharing plan was unavailable
to most of the named executive officers in 2010. Individuals are fully vested in deferred salary and bonus amounts; however, the make-whole contributions vest in full after two years of
employment, which is the same schedule applicable to employer contributions under the 401(k) plan. The employer discretionary contributions become vested pursuant to a vesting schedule as determined
by us.

Salary
and bonus amounts deferred by named executive officers in 2010 under the nonqualified deferred compensation plan are shown in the "Executive Contributions" column of the Deferred
Compensation Table below. Employer make whole and discretionary contributions for 2010 are shown in the "Registrant Contributions" column of the Deferred Compensation Table and in the "All Other
Compensation" column of the Summary Compensation Table.

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Retention Awards.Annual retention awards are employer discretionary contributions paid to certain management employees whose retention
is determined
by our board of directors to be critical to our ongoing success. These awards are deposited in the deferred compensation plan under the employee's name and vest after five years. Distribution is made
on a date previously elected by the executive. Other than the awards paid in accordance with the employment agreement of Ms. Davidson, these awards are solely awarded at the board of directors'
discretion. Any awards made outside of an employment agreement were equal to 10% of base salary.

In
2010, our board of directors provided a retention award to Ms. Davidson in the amount of $82,388 in accordance with the terms of her existing employment agreement. The
retention awards for our named executive officers are disclosed under "All Other Compensation" on the Summary Compensation Table and in the Nonqualified Deferred Compensation table under Registrant
Contributions.

Effective
as of September 1, 2010, the Company adopted the Change-of-Control Incentive Plan for Officers under which certain executives, including the
named executive officers, would be entitled to extended additional severance benefits in the event of a change of control with a specific strategic buyer. This plan was adopted because the Board felt
that is was necessary to incent such officers to remain in the employ of the Company notwithstanding any risks and uncertainties created by a potential change of control. The amounts of such
additional severance benefits are set forth under "Potential Payments Upon Termination or a Change in Control."

Other Compensation, Perquisites and Other Benefits

401(k) Plan.We sponsor a defined contribution plan, or 401(k) Plan, intended to qualify under section 401 of the Internal Revenue
Code.
Substantially all of our employees are eligible to participate in the 401(k) Plan on the first day of the month in which the employee has attained 18 years of age and 30 days of
employment. Employees may make pre-tax contributions of their eligible compensation, not to exceed the limits under the Internal Revenue Code. Employees may direct their
investments among various pre-selected investment alternatives. Employer matching contributions to the 401(k) plan vest after two years of employment. Employer matching contributions were
suspended as of July 2009.

Perquisites and Other Benefits.The named executive officers are not generally entitled to benefits that are not otherwise available to
all of our
employees. In this regard it should be noted that we do not provide pension arrangements (other than the 401(k) plan and the nonqualified deferred compensation plan), post-retirement
health coverage or similar benefits for our executives. However, some of the named executive officers are entitled to certain insurance benefits, relocation benefits and an executive physical program.
These perquisites are provided because we view the benefits as being very closely related to the services our named executive officers perform for us. Supplemental Long-Term disability
insurance is provided as an income security measure in the event of a catastrophic illness. Relocation benefits are provided to all management employees who are relocated at our request, including
named executive officers. The executive physical program benefit is provided to all of our key managers and officers, including the named executive officers, to ensure their continuing ability to
fulfill the responsibilities of their respective positions. These amounts are noted in the "All Other Compensation" column in the Summary Compensation Table. The Committee believes that these benefits
are consistent with the goal of attracting and retaining superior executive talent.

Tax and Accounting Implications

Deductibility of Certain Compensation.Section 162(m) of the Internal Revenue Code imposes a $1.0 million limit on the
deductibility of
compensation paid to certain executive officers of public companies, unless the compensation meets certain requirements for "performance-based" compensation. Although Section 162(m) does not
apply to companies that do not have registered

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common
equity securities, we generally consider the potential loss of deduction under Section 162(m) in designing certain types of compensation plans so that such plans may protect us from a
potential loss of deduction if our common equity securities become publicly traded. In determining executive compensation, the compensation committee considers, among other factors, the possible tax
consequences to us and to the executives. However, tax consequences, including but not limited to tax deductibility by us, are subject to many factors (such as changes in the tax laws and regulations
or interpretations thereof and the timing and nature of various decisions by executives regarding options and other rights) that are beyond our control. In addition, the compensation committee
believes that it is important for it to retain maximum flexibility in designing compensation programs that meet its
stated objectives. For all of the foregoing reasons, the compensation committee, while considering tax deductibility as one of its factors in determining compensation, will not limit compensation to
those levels or types of compensation that will be deductible. The compensation committee will, of course, consider alternative forms of compensation, consistent with its compensation goals, which
preserve deductibility.

Accounting Impact.The compensation committee does not consider potential accounting treatment in making decisions regarding
equity-based or
cash-based compensation.

Compensation Committee Report

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be
included in this annual report for the fiscal year ending December 31, 2010.

Thomas J. Baldwin
Craig H. Deery
James L. Luikart


The
following table summarizes compensation awarded or paid by us during 2010, 2009, and 2008 to our President and Chief Executive Officer, our Executive Vice President and Chief
Financial Officer, and our three next most highly compensated executive officers (our "named executive officers"). Perquisites and other benefits included in the All Other Compensation column are
disclosed and itemized in the "All Other Compensation" table below.

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Summary Compensation Table

Name and Principal Position

Year

Salary
($)

Bonus
($)(1)

Stock
Awards
($)

Option
Awards
($)(2)

Non-Equity
Incentive Plan
Compensation
($)(3)

All Other
Compensation
($)(4)

Total
($)John A. Saxton


2010


601,408








47,177


76,100


34,005


758,690President and Chief


2009


619,967














143,833


763,800Executive Officer


2008


599,567














108,136


707,703Robert M. Jakobe


2010


302,626











19,100


2,442


324,168Executive Vice President


2009


310,011














35,546


345,557and Chief Financial Officer


2008


299,694














78,160


377,854Joan B. Davidson


2010


328,994








17,430


45,300


84,275


475,999Group President


2009


335,800














121,509


457,3092008


324,596











69,000


136,238


529,834G. Paul Bozuwa(5)


2010


258,325


300








15,900


914


275,439President & COO


2009


255,399














222,555


477,954DPC/ULI


2008


81,736














94,307


176,043Patricia A. Stricker


2010


251,571


300





3,486


76,200


16,410


347,967President & COOTSP


2009


238,878














45,378


284,2562008


239,917


135








90,000


58,437


388,489


(1)Ms. Stricker
received a $135 Christmas bonus in 2008. Ms. Stricker and Mr. Bozuwa received a special incentive bonus of $300 in 2010.(2)Three
named executive officers received option awards in 2010. Mr. Saxton received 4,060 shares, Ms. Davidson received 1,500 shares, and
Ms. Stricker received 300 shares. The amounts shown represent the aggregate grant date fair value of awards during the year determined in accordance with FASB ASC Topic 718. The assumptions
made in determining the grant date fair values of the options are disclosed in Note 3 of our consolidated financial statements.(3)The
amounts reported as "Non-Equity Incentive Plan Compensation" for 2010, 2009, and 2008 consist of bonuses paid as management performance
incentive compensation.(4)The
amounts reported as "All Other Compensation" for 2010, 2009, and 2008 are itemized in the "All Other Compensation" table below.(5)Mr. Bozuwa
worked for an affiliate of our parent during a portion of 2008. Base salary for 2008 reflects only wages for services performed for the
Company.


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Table of Contents

All Other Compensation

Name

Year

Spousal
Travel

Taxable
Relocation
Income

Other Non
Cash

Retention
Awards

Additional
Disability
Coverage

Taxable
Term Life

Physical
Program

GTL
Taxable
Income

Profit
Sharing

Profit Sharing
Make Whole

401k
Match

401(k)
Fixed 1%

401(k)
Make
Whole

Total All
Other
Comp($)

($)

($)

($)

($)

($)

($)

($)

($)

($)

($)

($)

($)

($)John A. Saxton


2010


265





1,050





4,033


12,230


6,213


6,732














3,482


34,005President and


2009








850





4,000


12,230


2,784


6,732





92,957


7,569





16,711


143,833Chief


2008








850





4,000


12,230





4,390


23,000


43,666


4,600


2,300


13,100


108,136Executive OfficerRobert M. Jakobe


2010


341




















2,100

















2,442Executive Vice


2009




















3,047


2,100





20,469


5,526





4,404


35,546President


2008











30,000


2,735





3,731


2,069


23,000


7,481


4,600


2,300


2,244


78,160and ChiefFinancialOfficerJoan B. Davidson


2010


753








82,388











801














333


84,275Group President


2009











82,388








3,501


801





21,780


8,068





4,971


121,5092008


959








81,250


2,740








788


23,000


15,847


4,600


2,300


4,754


136,238Paul Bozuwa


2010























914

















914President &


2009





205,039

















596





12,315


4,605








222,555COO


2008











62,500











587


23,000


2,475


3,400


2,098


247


94,307DPC/ULIPatricia A. Stricker


2010























569


15,491











350


16,410President &


2009




















3,699


569


21,248


12,562


7,225





75


45,378COOTSP


2008











24,000











373


23,000


3,241


4,600


2,300


923


58,437


Retention awards and make-whole contributions are invested in the deferred compensation plan. Even though the profit sharing plan was
not available in 2010 for named executive officers other than Ms. Stricker, Mr. Saxton and Ms. Davidson's deferred compensation plan accounts were credited with a profit-sharing
make-whole contribution in 2010 due to the limitations applicable to our 401(k) plan for 2009. 401(k) match is invested in the 401(k) plan. Pre-2010 Profit sharing and 1% fixed
contributions are also invested in the 401(k) plan.

Grants of Plan-Based Awards

(1) Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards

Estimated Future Payouts
Under Equity Incentive
Plan Awards

All Other Option
Awards Number of
Securities
Underlying
Options

Exercise or
Base Price of
Option
Awards
($/sh)

Grant
Date Fair
Value of
Option
AwardsGrant
DateName

Threshold

Target

Maximum

Threshold

Target

Maximum($)

($)

($)

($)

($)

($)

($)

($)

($)John A. Saxton

N/A


76,054


190,100


304,214





47,177











47,177President and ChiefExecutive OfficerRobert M. Jakobe

N/A


19,015


47,500


76,060

















Executive Vice President andChief Financial OfficerJoan B. Davidson

N/A


20,597


48,100


82,388





17,430











17,430Group PresidentG. Paul Bozuwa

N/A


15,845


36,500


63,879

















President & COODPC/ULIPatricia A. Stricker

N/A


15,227


35,800


60,908





3,486











3,486President & COOTSP


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Table of Contents

Outstanding Equity Awards at Fiscal Year-End

Option AwardsName



Number of Securities
Underlying Unexercised
Options (#)
(Exercisable)

Number of
Securities
Underlying
Unexercised
Options (#)
(Unexercisable)

Equity Incentive
Plan Awards:
Number of Securities
Underlying
Unexercised
Unearned Options
(#)

Option
Exercise
Price ($)

Option
Expiration
DateJohn A. Saxton


(1
)

3,300





2,200


10.00


11/16/2013(2
)

0





4,060


23.24


2/3/2020Robert M. Jakobe


(1
)

3,300





2,200


10.00


11/16/2013Joan B. Davidson


(1
)

2,100





1,400


10.00


11/16/2013(2
)

0





1,500


23.24


2/3/2020G. Paul Bozuwa


(1
)

1,800





1,200


10.00


11/16/2013Patricia A. Stricker


(1
)

1,620





1,080


10.00


11/16/2013(2
)

0





300


23.24


2/3/2020


(1)Stock
option awards were awarded on October 16, 2003. The shares began vesting on January 1, 2004. Twenty percent (20%) of the
time-based shares vest each year on January 1st, i.e. 20% vested on January 1, 2005, 20% vested on January 1, 2006, 20% vested on January 1, 2007, 20%
vested on January 1, 2008, and the remaining 20% vested on January 1, 2009. As of December 31, 2009, 100% of the Named Executive Officers' time-based shares were
vested. Because our 2010 performance targets were not met, only 20% of performance shares vested through December 31, 2010. The established performance-based option targets (per share equity
values, as defined in the stock option agreements) are $20/share on 1/1/05, $52/share on 1/1/06, $86/share on 1/1/07, $118/share on 1/1/08, $148/share on 1/1/09, $178/share on 1/1/10.(2)Stock
option awards were awarded on February 4, 2010. The shares began vesting on January 1, 2011. Twenty percent (20%) of the
time-based shares vest each year on January 1st, i.e., 20% vested on January 1, 2011, 20% will vest on January 1, 2012, 20% will vest on
January 1, 2013, 20% will vest on January 1, 2014, and the remaining 20% will vest on January 1, 2015. The established performance-based option targets (per share equity values,
as defined in the stock option agreements) are $35/share on 1/1/11, $40/share on 1/1/12, $85/share on 1/1/13, $85/share on 1/1/14, and $85/share on 1/1/15.


See
Stock-Based Incentive Compensation under the Compensation Discussion and Analysis for details on the vesting schedule.

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Table of Contents

Option Exercises and Stock Vested in Last Fiscal Year

Option AwardsName

Number of
Shares
Acquired on
Exercise(1)

Value Realized
on Exercise ($)John A. Saxton





President and ChiefExecutive OfficerRobert M. Jakobe





Executive Vice Presidentand Chief Financial OfficerJoan B. Davidson





Group PresidentG. Paul Bozuwa





President & COODPC/ULIPatricia A. Stricker





President & COOTSP


(1)No
options were exercised during 2010.


Nonqualified Deferred Compensation

Name

Executive
Contributions
in last FY ($)

Registrant
Contributions in
Last FY ($)
(Retention Bonus
and Make-
Wholes)(1)

Aggregate
Earnings in Last
FY ($)

Aggregate
Withdrawals/
Distributions
($)

Aggregate
Balance at Last
FYE ($)John A. Saxton


0


3,482


15,337


0


184,762Robert M. Jakobe





0


5,111


74,218


47,139Joan B. Davidson


0


82,721


53


45,641


343,639G. Paul Bozuwa





0


33,892


57,471


232,854Patricia A. Stricker


0


350


4,541


14,751


71,638


(1)Registrant
contributions for Fiscal Years ending 2010, 2009, and 2008, respectively, that were included in the Summary Compensation Table are as follows:
Mr. SaxtonMake Whole Contributions of $3,482, $109,668, and $56,766; Mr. JakobeMake Whole Contributions of $0, $24,873, and $9,725 and Retention Awards of $0,
$0, $30,000; Ms. DavidsonMake Whole Contributions of $333, $26,751, and $20,601 and Retention Awards of $82,388, $82,388, and $81,250; Mr. BozuwaMake Whole
Contributions of $0, $12,315, and $2,722 and Retention Awards of $0, $0, and $62,500; and Ms. StrickerMake Whole Contributions of $350, $12,637, and $4,164 and Retention Awards of
$0, $0, and $24,000. Retention awards and employer make-whole contributions (described below) are reported in the Summary Compensation Table in the "All Other Compensation" column.


The
types of compensation that may be deferred under our nonqualified deferred compensation plan are salary, profit share and bonus (deferred at the employee's election), employee
retention awards, employer make-whole contributions, employer discretionary contributions and earnings on the

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deferrals.
The individuals are fully vested in the compensation they voluntarily defer; however, the make-whole contributions, the employer discretionary contributions and employee
retention awards are subject to vesting requirements. Make-whole contributions vest once the employee has attained two years of service. Employee retention awards cliff vest after five
years. Employees may defer up to 20% of their base salary and up to 100% of any earned bonus or profit share into the deferred compensation program on an annual basis. Earnings under the nonqualified
plan are calculated by reference to the return on investment of funds selected by the executives from a menu of investment fund options offered under the plan. These investment fund options are the
same options as are available to all participants under our 401(k) plan. Participants may change their investment fund elections at any time. A participant may elect distribution of their vested
account balance at a fixed payment date, no earlier than the third calendar year after the calendar year in which the initial election is made, five years after a previously-scheduled distribution is
to be made, or upon separation of service from the company.

The
table below shows the funds available under our 401(k) plan and their annual rate of return for the calendar year ended December 31, 2010:

Deferred Compensation Investment Options

Name of Fund

Rate of
Return

Name of Fund

Rate of
ReturnFidelity Advisor Freedom 2010 A


12.20

Fidelity Advisor Freedom 2025 A


14.68Fidelity Advisor Freedom 2020 A


13.78

Fidelity Advisor Freedom 2035 A


15.73Fidelity Advisor Freedom 2030 A


15.16

Fidelity Advisor Freedom 2045 A


16.24Fidelity Advisor Freedom 2040 A


15.86

Fidelity Advisor High Income Advantage


17.85Fidelity Advisor Freedom 2050 A


16.43

Legg Mason Value, FI


7.31Maxim Money Market Portfolio


0.00

Franklin Small-Mid-Cap Growth Fund A


28.43PIMCO Total Return A


8.36

Legg Mason Special Investment FI


19.85PIMCO Low Duration Fund A


4.56

Pennsylvania Mutual Fund Consultant CI


22.66Davis NY Venture Fund


12.11

American Funds EuroPacific A


9.40Hartford Capital Appreciation


12.87

RS Value Fund


25.47Fidelity Advisor Freedom 2015 A


12.41

American Funds Growth Fund of America


12.28Pennsylvania Mutual Fund Service


23.80


Potential Payments on Termination or Change of Control

Our employment agreements with Mr. Saxton, Mr. Jakobe, Ms. Davidson, Mr. Bozuwa and Ms. Stricker
provide that if the executive is terminated by us without "cause" or by the executive for "good reason," the executive will be entitled to receive the following amounts: (1) severance pay equal
to his or her annual base salary and average annual incentive bonus during the two years preceding the termination for a period of 18 months in the case of Messrs. Jakobe and Bozuwa and
Mss. Davidson and Stricker, and 24 months in the case of Mr. Saxton, (2) all amounts credited to the executive under our deferred compensation plan will fully vest and become
payable in a single lump sum and (3) the executive will continue to have coverage under our health insurance plan for 18 months, or 24 months in the case of Mr. Saxton. A
termination shall be for "cause," as defined in the agreements, if any one or more of the following has occurred: i) the employee shall have committed an act of fraud, embezzlement or
misappropriation against the employer, including, but not limited to, the offer, payment, solicitation or acceptance of any unlawful bribe or kickback with respect to the employer's business; or,
ii) the employee shall have been convicted by a court of competent jurisdiction of, or pleaded guilty or nolo contendere to, any felony or any crime involving moral turpitude; or,
iii) the employee shall have refused, after explicit written notice, to obey any lawful resolution of or direction by the Board which is consistent with his duties; or, iv) the employee
has been chronically absent from work (excluding vacations, illnesses or leaves of absence approved by the Board); or, v) the employee

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shall
have failed to perform the duties incident to his employment with the employer on a regular basis, and such failure shall have continued for a period of twenty (20) days after written
notice to the employee specifying such failure in reasonable detail (other than as a result of the employee's disability); or, vi) the employee shall have engaged in the unlawful use (including
being under the influence) or possession of illegal drugs on the employer's premises; or vii) the employee shall have breached any one or more of the provisions of the Stock Purchase Agreement,
dated as of August 1, 2003, among The Sheridan Group, Inc. and its stockholders as amended and in effect from time to time, and such breach shall have continued for a period of ten
(10) days after written notice to the employee specifying such breach in reasonable detail. "Good reason" is defined as the occurrence of: i) a material reduction in the employee's
status, position, scope of authority or responsibilities, the assignment to the employee of any duties or responsibilities which are materially inconsistent with such status, position, authority or
responsibilities; involuntary relocation of the employee to an extent requiring an increase in his commute to his normal place of employment of more than 50 miles; or any removal of the employee from
or failure to reappoint him to any of positions to which the employee has been appointed by the employer, except in connection with the termination of his employment; or, ii) a material
reduction by the employer in the employee's compensation or benefits, except in conjunction with a general reduction by the employer in the salaries of its executive level employees or the TSG site
management team.

The
employment agreements contain non-compete and non-solicitation language prohibiting such actions for the term of the severance period. Additionally, the
severed employee is prohibited from disclosing proprietary company information to any person, firm, corporation, association or entity, during or after their term of employment. Any breach of these
terms will be subject to appropriate injunctive and equitable relief.

The
following table summarizes potential benefits that each of the Named Executive Officers would have received under their employment agreements or change in control arrangements on
December 31, 2010, if a termination without cause or for good reason occurred, or they had been terminated following a change in control.

Named Executive Officer

Severance
Pay

Incentive
Pay

Deferred
Compensation

COBRA
(Employer's
Portion)John A. Saxton

$
1,977,392

$
123,666

$
184,762

$
32,468Robert M. Jakobe

$
836,662

$
26,262

$
47,139

$
27,473Joan B. Davidson

$
906,263

$
62,288

$
343,639

$
27,473G. Paul Bozuwa

$
697,170

$
21,863

$
232,854

$
38,074Patricia A. Stricker

$
669,989

$
104,775

$
71,638

$
38,074


Severance
payments for the named executive officers include the additional benefits that are described under "Retention Awards."


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Compensation of Directors

Beginning on January 1, 2010, each director who is not also one of our executive officers or an employee of BRS or JCP will
receive a fee of $30,000 per year for their service on our board of directors. The chairman of the audit committee (Mr. DiCamillo) will receive an additional fee of $5,000 per year. All
directors are reimbursed for any personal expenses incurred in the conduct of their duties as a director. There were no stock options awarded to directors during 2010. A summary of fees paid to our
directors in 2010 is as follows:

Name

Fees Earned or
Paid in Cash

All Other
Compensation

TotalGary T. DiCamillo

$
35,000




$
35,000Craig H. Deery

$
30,000




$
30,000George A. Whaling

$
30,000




$
30,000


Compensation Committee Interlocks and Insider Participation

In 2010, the compensation committee consisted of Messrs. Baldwin, Deery and Luikart. None of the members of the compensation
committee are currently, or have been at any time since the time of our formation, one of our officers or employees.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

We are a wholly-owned subsidiary of TSG Holdings Corp, which has pledged our shares as security for our obligations under our working
capital facility. The following table sets forth certain information regarding the beneficial ownership of TSG Holdings Corp., as of March 29, 2011, by (i) each person or entity known to
us to own more than 5% of any class of TSG Holdings Corp.'s outstanding securities, (ii) each member of our board of directors and each of our named executive officers and (iii) all of
the members of the board of directors and executive officers as a group. TSG Holdings Corp.'s outstanding securities consist of about 597,433 shares of TSG Holdings Corp. common stock and about 45,326
shares and 4,234 shares of TSG Holdings Corp. Series A and Series B preferred stock, respectively, the terms of which are described in more detail below. Additionally, there are 17,580
options to purchase common stock outstanding that are held by our executive officers. To our knowledge, each of such stockholders will have sole voting and investment power as to the stock shown
unless otherwise noted.

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Beneficial
ownership of the securities listed in the table has been determined in accordance with the applicable rules and regulation promulgated under the Exchange Act.

Number and Percent of Shares of TSG Holdings Corp.(1)Preferred Stock

Common StockSeries A

Series BNumber

Percent

Number

Percent

Number

PercentGreater than 5% Stockholders:Bruckmann, Rosser, Sherrill & Co. II, L.P.(2)
126 East 56th Street, New York, NY, 10022


19,210


42.4
%

1,833


43.3
%

252,756


42.3
%Funds affiliated with Jefferies Capital Partners(3)
520 Madison Avenue, New York, NY 10022


19,210


42.4
%

1,833


43.3
%

252,756


42.3
%Christopher A. Pierce(4)(5)


3,096


6.8
%

289


6.8
%

42,577


7.1
%Named Executive Officers and Directors:John A. Saxton(4)(6)(7)


1,340


3.0
%

125


3.0
%

21,308


3.5
%Robert M. Jakobe(4)(8)(9)


108


0.2
%

10


0.2
%

4,721


0.8
%Joan B. Davidson(4)(10)


67


0.1
%

6


0.1
%

3,130


0.5
%G. Paul Bozuwa(4)(11)


268


0.6
%

25


0.6
%

5,320


0.9
%Patricia A. Stricker(4)(12)


91


0.2
%







2,730


0.5
%Thomas J. Baldwin(13)(14)


19,210


42.4
%

1,833


43.3
%

252,756


42.3
%Nicholas Daraviras(15)

















Craig H. Deery(4)


245


0.5
%

23


0.5
%

3,212


0.5
%Gary T. DiCamillo(4)


268


0.6
%

25


0.6
%

3,520


0.6
%James L. Luikart(15)(16)


19,210


42.4
%

1,833


43.3
%

252,756


42.3
%Nicholas R. Sheppard(13)

















George A. Whaling(4)


272


0.6
%

25


0.6
%

3,572


0.6
%All executive officers and directors as a group (15 persons)(17)


41,220


90.9
%

3,919


92.5
%

560,790


91.0
%


(1)Pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person has beneficial ownership of any securities as to
which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power and as to which such person has
the right to acquire such voting and/or investment power within 60 days. Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of
shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of shares as to which such person has the right to acquire voting and/or
investment power within 60 days.(2)The
Sheridan Group Holdings (BRS), LLC (the "BRSLLC") is controlled by Bruckmann, Rosser, Sherrill & Co. II, L.P. (the "BRS
Fund") which is a private equity investment fund managed by Bruckmann, Rosser, Sherrill & Co., LLC. BRSE, L.L.C. ("BRSE") is the general partner of the BRS Fund and by virtue of
such status may be deemed to be the beneficial owner of the shares owned by BRSLLC. BRSE has the power to direct BRSLLC as to the voting and disposition of shares held by BRSLLC. No single person
controls the voting and dispositive power of BRSE with respect to the shares owned by BRSLLC. Bruce Bruckmann, Harold O. Rosser, Stephen C. Sherrill, Paul D. Kaminski and Thomas J. Baldwin are the
managers of BRSE, and none of them individually has the power to direct or veto the voting or disposition of shares owned by BRSLLC. BRSE expressly disclaims beneficial ownership of the shares owned
by BRSLLC. Each of Messrs. Bruckmann, Rosser, Sherrill, Kaminski and Baldwin expressly disclaims beneficial ownership of the shares owned by BRSLLC.


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(3)The
Sheridan Group Holdings (Jefferies), LLC is controlled by ING Furman Selz Investors III L.P., ING Barings U.S. Leveraged Equity
Plan LLC and ING Barings Global Leveraged Equity Plan Ltd. which are private equity investment funds managed by Jefferies Capital Partners. Brian P. Friedman and Mr. Luikart are
the Managing Members of JCP and may be considered the beneficial owners of the shares owned by The Sheridan Group Holdings (Jefferies), LLC, but each of Messrs. Friedman and Luikart
expressly disclaim beneficial ownership of such shares, except to the extent of each of their pecuniary interests therein.(4)The
address of each of Mr. Pierce, Mr. Saxton, Mr. Jakobe, Ms. Davidson, Mr. Bozuwa, Ms. Stricker,
Mr. Deery, Mr. DiCamillo and Mr. Whaling is c/o The Sheridan Group, Inc., 11311 McCormick Road, Suite 260, Hunt Valley, Maryland 21031.(5)Includes
options to purchase 1,920 shares of TSG Holdings Corp. common stock exercisable within 60 days.(6)Includes
17,602 common shares, 1,340 Series A preferred shares and 125 Series B preferred shares which are owned by RBC Capital Markets Corp.
FBO John Saxton. Mr. Saxton may be deemed to beneficially own such shares.(7)Includes
options to purchase 3,706 shares of TSG Holdings Corp. common stock exercisable within 60 days.(8)Includes
1,288 common shares and 108 Series A preferred shares which are owned by CGM Custodian FBO Robert M. Jakobe Roll-over IRA.
Mr. Jakobe may be deemed to beneficially own such shares.(9)Includes
options to purchase 3,300 shares of TSG Holdings Corp. common stock exercisable within 60 days.(10)Includes
options to purchase 2,250 shares of TSG Holdings Corp. common stock exercisable within 60 days.(11)Includes
options to purchase 1,800 shares of TSG Holdings Corp. common stock exercisable within 60 days.(12)Includes
options to purchase 1,650 shares of TSG Holdings Corp. common stock exercisable within 60 days.(13)The
address of each of Mr. Baldwin and Mr. Sheppard is c/o Bruckmann, Rosser, Sherrill & Co., Inc., 126 East
56th Street, New York, New York 10022.(14)Consists
of 19,210 shares and 1,833 shares of TSG Holdings Corp. Series A and Series B preferred stock, respectively, and 252,756 shares of
TSG Holdings Corp. common stock owned and/or controlled by the BRSLLC. Mr. Baldwin may be deemed to share beneficial ownership of the shares owned of record and/or controlled by BRSLLC by
virtue of his status as a manager of BRSE, but he expressly disclaims such beneficial ownership of the shares owned and/or controlled by BRSLLC. The members and managers of BRSE share investment and
voting power with respect to securities owned and/or controlled by BRSE, but no individual controls such investment or voting power.(15)The
address of each of Mr. Daraviras and Mr. Luikart is c/o Jefferies Capital Partners, 520 Madison Avenue, 12th Floor, New
York, New York 10022.(16)Consists
of 19,210 shares and 1,833 shares of TSG Holdings Corp. Series A and Series B preferred stock, respectively, and 252,756 shares of
TSG Holdings Corp. common stock owned by The Sheridan Group Holdings (Jefferies), LLC. Mr. Luikart is a Managing Member of JCP and may be considered the beneficial owner of such shares,
but he expressly disclaims such beneficial


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ownership
of the shares owned by The Sheridan Group Holdings (Jefferies), LLC, except to the extent of his pecuniary interest therein. (17)Includes
options to purchase 18,626 shares of TSG Holdings Corp. common stock exercisable within 60 days.


TSG Holdings Corp. Preferred Stock

TSG Holdings Corp.'s Certificate of Incorporation provides that TSG Holdings Corp. may issue 200,000 shares of preferred stock, 50,000
of which is designated as 10%
Series A Cumulative Compounding Preferred Stock ("Series A"), 20,000 of which is designated as 10% Series B Cumulative Compounding Preferred Stock ("Series B") and 130,000
of which is undesignated. TSG Holdings Corp. preferred stock has a stated value of $1,000 per share for Series A and $1,428.89 per share for Series B and is entitled to annual dividends
when, as and if declared, which dividends will be cumulative, whether or not earned or declared, and will accrue at a rate of 10%, compounding annually. As of March 29, 2011, there are issued
and outstanding about 45,326 and 4,234 shares of Series A and Series B preferred stock, respectively.

Except
as otherwise required by law, the TSG Holdings Corp. preferred stock is not entitled to vote. TSG Holdings Corp. may not pay any dividend upon (except for a dividend payable in
Junior Stock, as defined below), or redeem or otherwise acquire shares of, capital stock junior to the TSG Holdings Corp. preferred stock (including the common stock) ("Junior Stock") unless all
cumulative dividends on the TSG Holdings Corp. preferred stock have been paid in full. Upon liquidation, dissolution or winding up of TSG Holdings Corp., holders of TSG Holdings Corp. Series A
and Series B preferred stock are entitled to receive out of the legally available assets of TSG Holdings Corp., before any amount shall be paid to holders of Junior Stock, an amount equal to
$1,000 per share and $1,428.89 per share, respectively, of TSG Holdings Corp. preferred stock, plus all accrued and unpaid dividends to the date of final distribution. If the available assets are
insufficient to pay the holders of the outstanding shares of TSG Holdings Corp. preferred stock in full, the assets, or the proceeds from the sale of the assets, will be distributed ratably among the
holders.

TSG Holdings Corp. Common Stock

The Certificate of Incorporation of TSG Holdings Corp. provides that TSG Holdings Corp. may issue 1,000,000 shares of TSG Holdings
Corp. common stock. About 597,553 shares of TSG Holdings Corp. common stock are issued and outstanding as of March 29, 2011. The holders of TSG Holdings Corp. common stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the stockholders.

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Equity Compensation Plan Information

The following table sets forth information as of December 31, 2010 regarding all of our existing compensation plans pursuant to
which equity securities are authorized for issuance to employees and non-employee directors.

Plan Category

Number of
securities to be
issued upon
exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights(1)

Number of
Securities remaining
available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))(a)

(b)

(c)Equity compensation plans approved by security holders


N/A


N/A


N/AEquity compensation plans not approved by security holders


52,500

$
14.05


640Total


52,500

$
14.05


640


(1)As
of December 31, 2010.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Dividend and Loan

On January 5, 2009, we executed a waiver to our working capital facility. The waiver allowed us to pay a cash dividend and make
a loan to our parent company, TSG Holdings Corp. ("Holdings"), which is not a registrant with the Securities and Exchange Commission, in the aggregate amount of up to $14.0 million, provided
that Holdings used the entire cash proceeds of such dividend and loan solely to purchase capital stock issued by Holdings (the "Stock Purchase") from Participatiemaatschappij Giraffe B.V. and
to pay related expenses in connection therewith. On January 5, 2009, we paid a dividend in the aggregate amount of $8.0 million and made a loan in the principal amount of
$2.0 million to Holdings. The loan had an original maturity on January 4, 2012 and accrued interest at the rate of 1.36% per year. The loan was subsequently settled against the income
tax obligations due to Holdings, which is presented within "Due to parent, net" in the consolidated balance sheets as of December 31, 2010 and 2009 (as discussed in Note 12 of our
financial statements). Additionally, subsequent to January 5, 2009, we paid an additional dividend in the amount of $1.1 million to Holdings to pay expenses and other amounts in
connection with the Stock Purchase.

Securities Holders' Agreement

The second amended and restated securities holders' agreement among BRS, JCP and the other stockholders of Holdings provides that
Holding's and our board of directors will consist of eight members, including four designees of BRS and four designees of JCP. Also pursuant to the securities holders' agreement, we may not take
certain significant actions, such as incurrence of indebtedness in excess of certain thresholds or a sale of all or substantially all of our assets, without the approval of each of BRS and JCP.

The
securities holders' agreement generally restricts the transfer of shares of Holding's common stock or Holding's preferred stock without the consent of BRS and JCP. Exceptions to this
restriction include transfers to affiliates and transfers for estate planning purposes, in each case so long as any transferee agrees to be bound by the terms of the agreement.

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Each of Holdings, BRS and JCP has a right of first refusal under the securities holders' agreement with respect to sales of shares of Holdings by management
investors. Under certain circumstances, the stockholders have "tag-along" rights to sell their shares on a pro rata basis with the selling stockholder in certain sales to third parties. If
BRS and JCP approve a sale of Holdings, they have the right to require the other stockholders of Holdings to sell their shares on the same terms. The securities holders' agreement also contains a
provision that gives Holdings the right to repurchase a management investor's shares upon termination of that management stockholder's employment or removal or resignation from the board of directors.

Registration Rights Agreement

Pursuant to the amended and restated registration rights agreement among BRS, JCP and the other stockholders of Holdings, upon the
written request of either BRS or JCP, Holdings has agreed to, on one or more occasions, prepare and file a registration statement with the SEC concerning the distribution of all or part of the
shares of Holding's common stock held by BRS or JCP or certain of their respective affiliates, as the case may be, and use its best efforts to cause the registration statement to become effective.
Following an initial public offering of Holdings, BRS, JCP and the management investors also have the right, subject to certain exceptions and rights of priority, to have their shares included in
certain registration statements filed by Holdings. Registration expenses of the selling stockholders (other than underwriting discounts and commissions and transfer
taxes applicable to the shares sold by such stockholders or the fees and expenses of any accountants or other representatives retained by a selling stockholder) will be paid by Holdings. Holdings has
also agreed to indemnify the stockholders against certain customary liabilities in connection with any registration.

Management Agreement

In connection with the Sheridan Acquisition, we entered into a management agreement with BRS and JCP pursuant to which BRS and JCP may
provide financial, advisory and consulting services to us. In exchange for these services, BRS and JCP will be entitled to an annual management fee. The total management fee will be equal to the
greater of 2% of EBITDA (as defined in the Management Agreement) or $0.5 million per year, plus reasonable out-of-pocket expenses and will be split equally between BRS
and JCP. In addition, BRS and JCP may negotiate with us to provide additional services in connection with any transaction in which we may be, or may consider becoming, involved. At the closing of the
Sheridan Acquisition, BRS and JCP also were paid a transaction fee of about $1.0 million, plus reasonable out-of-pocket expenses, pursuant to the management agreement.
The management agreement has an initial term of ten years. The agreement automatically renews for additional one year terms unless either we or BRS and JCP give written notice of termination within
90 days prior to the expiration of the initial term or any extension thereof. There are no minimum levels of service required to be provided pursuant to the management agreement. The management
agreement includes customary indemnification provisions in favor of BRS and JCP.

Policy for Approval of Related Transactions

We do not have a written policy for the treatment of transactions required to be disclosed under Item 404(a) of
Regulation S-K. Our securities holders' agreement described above generally prohibits entry into such transactions without the consent of BRS and JCP.

Director Independence

See Part III, Item 10, "Directors, Executive Officers and Corporate GovernanceBoard Composition and Director
Independence."

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ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The Company incurred fees for services performed by PricewaterhouseCoopers LLP as follows:

(Dollars in thousands)

Year ended
December 31,
2010

Year ended
December 31,
2009Audit fees (include the review of interim consolidated financial statements, annual audit of the consolidated financial statements and assistance with
SEC filings)

$
667

$
755Tax fees (include tax compliance, transactional consulting and advice for state tax issues )


201


182All other fees (include license fees for online financial reporting and assurance literature)


2


3Total

$
870

$
940


All
services that are performed by PricewaterhouseCoopers LLP for the Company, including those described herein, are pre-approved by the audit committee prior to
performance in accordance with legal requirements.

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PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Page No.Reports of Independent Registered Public Accounting Firm


34Consolidated balance sheets as of December 31, 2010 and 2009


35Consolidated statements of operations for the years-ended December 31, 2010, 2009 and 2008


36Consolidated statements of changes in stockholder's equity for the years-ended December 31, 2010, 2009 and 2008


37Consolidated statements of cash flows for the years-ended December 31, 2010, 2009 and 2008


38Notes to consolidated financial statements


39




All
schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements and the footnotes thereto.



The
following is a list of exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference.

2.1

Stock Purchase Agreement, dated as of August 1, 2003, by and among Sheridan Acquisition Corp., The Sheridan Group, Inc. and the shareholders, optionholders and warrantholders named therein.2.2

First Amendment to Stock Purchase Agreement, dated as of August 21, 2003, by and among Sheridan Acquisition Corp., The Sheridan Group, Inc. and BancBoston Ventures Inc. and John A. Saxton, on
behalf of and solely in their capacity as representatives of all of the Sellers (as defined in the Stock Purchase Agreement).2.3

Asset Purchase Agreement, dated as of March 5, 2004, by and among The Sheridan Group, Inc., Lisbon Acquisition Corp. and The Dingley Press.3.1.a

Third Amended and Restated Certificate of Incorporation of TSG Holdings Corp. (filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2007, filed on
March 28, 2008 and incorporated herein by reference).3.1.b

Amendment to Third Amended and Restated Certificate of Incorporation of TSG Holdings Corp. (filed as Exhibit 3.1.b to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2008,
filed on March 31, 2009 and incorporated herein by reference).3.2

Amended and Restated Bylaws of TSG Holdings Corp.3.3

Amended and Restated Articles of Incorporation of The Sheridan Group, Inc.3.4

Amended and Restated Bylaws of The Sheridan Group, Inc.3.5

Restated and Amended Articles of Association of Capital City Press, Inc.3.6

Restated and Amended By-laws of Capital City Press, Inc.3.7

Articles of Incorporation of Dartmouth Journal Services, Inc.


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3.8

Bylaws of Dartmouth Journal Services, Inc.3.9

Articles of Agreement of Dartmouth Printing Company, as amended.3.10

By-Laws of Dartmouth Printing Company.3.11

Certificate of Incorporation of Sheridan Books, Inc., as amended.3.12

By-laws of Sheridan Books, Inc.3.13

Certificate of Incorporation of The Sheridan Group Holding Company.3.14

By-Laws of The Sheridan Group Holding Company.3.15

Amended and Restated Articles of Incorporation of The Sheridan Press, Inc.3.16

By-Laws of The Sheridan Press, Inc.3.17

Amendment and Restatement of Articles of Incorporation of United Litho, Inc.3.18

By-Laws of United Litho, Inc.3.19

Amended and Restated Certificate of Incorporation of The Dingley Press, Inc.3.20

Amended and Restated Bylaws of The Dingley Press, Inc.^4.1

Indenture, dated as of August 21, 2003, among Sheridan Acquisition Corp. and The Bank of New York, as trustee and notes collateral agent.4.2

Supplemental Indenture, dated as of August 21, 2003, among Capital City Press, Inc., Dartmouth Printing Company, Dartmouth Journal Services, Inc., Sheridan Books, Inc., The Sheridan Group Holding
Company, The Sheridan Press, Inc., United Litho, Inc. and The Bank of New York, as trustee and notes collateral agent.4.3

Form of 10.25% Senior Secured Note Due 2011 (included in Exhibit 4.1).4.4

Registration Rights Agreement, dated as of August 21, 2003, by and between Sheridan Acquisition Corp. and Jefferies & Company, Inc.4.5

Joinder to the Registration Rights Agreement, dated as of August 21, 2003, by and among Capital City Press, Inc., Dartmouth Printing Company, Dartmouth Journal Services, Inc., Sheridan Books, Inc.,
The Sheridan Group Holding Company, The Sheridan Press, Inc., United Litho, Inc. and Jefferies & Company, Inc.4.6

Second Supplemental Indenture, dated as of May 11, 2004, by and among The Sheridan Group, Inc., Lisbon Acquisition Corp. and The Bank of New York, as trustee and notes collateral agent.4.7

Third Supplemental Indenture, dated as of May 11, 2004, by and among The Sheridan Group, Inc., Capital City Press, Inc., Dartmouth Printing Company, Dartmouth Journal Services, Inc., Lisbon
Acquisition Corp., Sheridan Books, Inc., The Sheridan Group Holding Company, The Sheridan Press, Inc., United Litho, Inc. and The Bank of New York, as trustee and notes collateral agent.4.8

Registration Rights Agreement, dated as of May 25, 2004, by and among The Sheridan Group, Inc., Capital City Press, Inc., Dartmouth Printing Company, Dartmouth Journal Services, Inc., Lisbon
Acquisition Corp., Sheridan Books, Inc., The Sheridan Group Holding Company, The Sheridan Press, Inc., United Litho, Inc. and Jefferies & Company, Inc.


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10.1.a

Second Amended and Restated Revolving Credit Agreement, dated as of June 16, 2009, by and among The Sheridan Group, Inc. and Bank of America, N.A., as agent, issuer and lender (filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, filed on June 17, 2009 and incorporated herein by reference).10.1.b

Amendment No. 1 to Amended and Restated Revolving Credit Agreement, dated as of January 5, 2011, by and among The Sheridan Group, Inc. and Bank of America, N.A., as agent, issuer and lender.10.2

Intercreditor Agreement, dated as of August 21, 2003, among Sheridan Acquisition Corp., The Sheridan Group, Inc., the guarantors signatory thereto, The Bank of New York, as trustee and collateral agent, and
Fleet National Bank.10.3

Second Amendment and Restatement to the Securities Holders Agreement and the Registration Rights Agreement by and among TSG Holdings Corp., The Sheridan Group Holdings (BRS) LLC and The Sheridan Group Holdings
(Jefferies) LLC, dated as of March 30, 2009 (filed as Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 31, 2009 and incorporated herein by
reference).10.5

Securities Purchase Agreement, dated as of August 21, 2003, by and among TSG Holdings Corp., Bruckmann, Rosser, Sherrill & Co. II, L.P., ING Furman Selz Investors III L.P., ING Barings
Global Leveraged Equity Plan Ltd. and ING Barings U.S. Leveraged Equity Plan LLC.10.6

Securities Purchase and Exchange Agreement, dated as of August 21, 2003, by and among TSG Holdings Corp. and the management investors named therein.10.7

Management Agreement, dated as of August 21, 2003, by and among Bruckmann, Rosser, Sherrill & Co., LLC, FS Private Investments III LLC (d/b/a Jefferies Capital Partners) and Sheridan
Acquisition Corp.10.11

TSG Holdings Corp. 2003 Stock-Based Incentive Compensation Plan.*10.12

The Sheridan Group, Inc. Executive and Director Deferred Compensation Plan.*10.13

The Sheridan Group, Inc. Change-of-Control Incentive Plan for Corporate Staff.~10.14

The Sheridan Group, Inc. Change-of-Control Incentive Plan for Key Management Employees.~10.15

Amendment No. 1 to Intercreditor Agreement, dated as of May 11, 2004, by and among The Sheridan Group, Inc., the guarantors signatory thereto, The Bank of New York, as trustee and collateral agent, and
Fleet National Bank.10.16

Securities Purchase Agreement, dated as of May 25, 2004, by and among TSG Holdings Corp. and the management investors named therein.10.20

Limited Liability Company Agreement dated as of May 10, 2005, of The Sheridan Group Holdings (BRS), LLC by and between Bruckmann, Rosser, Sherrill & Co. II, L.P. and
John A. Saxton.^^10.21

Limited Liability Company Agreement dated as of May 10, 2005, of The Sheridan Group Holdings (Jefferies), LLC by and among ING Furman Selz Investors III L.P., ING Barings U.S. Leveraged Equity
Plan LLC, ING Barings Global Leveraged Equity Plan Ltd. and John A. Saxton.^^


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10.27

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and Douglas R. Ehmann.*#10.28

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and Gary J. Kittredge.*#10.29

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and G. Paul Bozuwa.*#10.30

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and John A. Saxton*#10.31

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and Joan B. Davidson.*#10.32

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and Patricia A. Stricker.*#10.33

Employment and Non-Competition Agreement, dated as of March 29, 2007, between The Sheridan Group, Inc. and Robert M. Jakobe.*#10.35

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and Douglas R. Ehmann.*10.36

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and Gary J. Kittredge.*10.37

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and G. Paul Bozuwa.*10.38

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and John A. Saxton.*10.39

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and Joan B. Davidson.*10.40

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and Patricia A. Stricker.*10.41

Addendum to Employment and Non-Competition Agreement, dated as of February 18, 2008, between The Sheridan Group, Inc. and Robert M. Jakobe.*10.42

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and Douglas R. Ehmann.*##10.43

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and Gary J. Kittredge.*##10.44

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and G. Paul Bozuwa.*##10.45

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and John A. Saxton.*##10.46

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and Joan B. Davidson.*##10.47

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and Patricia A. Stricker.*##


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10.48

First Amendment to Employment and Non-Competition Agreement, dated as of April 1, 2007 between The Sheridan Group, Inc. and Robert M. Jakobe.*##10.49

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and Douglas R. Ehmann.*##10.50

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and Gary J. Kittredge.*##10.51

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and G. Paul Bozuwa.*##10.52

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and John A. Saxton.*##10.53

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and Joan B. Davidson.*##10.54

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and Patricia A. Stricker.*##10.55

Second Amendment to Employment and Non-Competition Agreement, dated as of August 31, 2010 between The Sheridan Group, Inc. and Robert M. Jakobe.*##10.56

Change-of-Control Incentive Plan for Officers, dated as of August 31, 2010.*21.1

Subsidiaries of The Sheridan Group, Inc.31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by John A. Saxton, President and Chief Executive Officer of The Sheridan Group,
 Inc. and Robert Jakobe, Chief Financial Officer of The Sheridan Group, Inc.


Filed
as a like numbered exhibit to the Registrant's Registration Statement on Form S-4 (File
No. 333-110441) and incorporated herein by reference.^Filed
as a like numbered exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 30,
2006 and incorporated herein by reference.^^Filed
as a like numbered exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, filed on
May 13, 2005 and incorporated herein by reference.~Filed
as a like numbered exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 31,
2005 and incorporated herein by reference.#Filed
as a like numbered exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 30,
2007 and incorporated herein by reference.Filed
as a like numbered exhibit to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2007, filed on March 28, 2008 and incorporated herein by reference.*Management
contract or compensatory plan or arrangement.


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##Filed
as a like numbered exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed on
November 10, 2010 and incorporated herein by reference.


Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to  Section 12 of the Act

No annual report or proxy material has been sent to security holders in the year ended December 31, 2010. The Registrant is a
wholly owned subsidiary of TSG Holdings Corp.

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SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

THE SHERIDAN GROUP, INC.By:

/s/ JOHN A. SAXTONName:

John A. SaxtonTitle:

President and Chief Executive Officer and
DirectorDate:

March 29, 2011


Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

Signature

Title

Date/s/ JOHN A. SAXTON John A. Saxton

President and Chief Executive Officer and Director (Principal Executive Officer)

March 29, 2011/s/ ROBERT M. JAKOBE Robert M. Jakobe

Chief Financial Officer (Principal Financial and Accounting Officer)

March 29, 2011/s/ THOMAS J. BALDWIN Thomas J. Baldwin

Director

March 29, 2011/s/ NICHOLAS DARAVIRAS Nicholas Daraviras

Director

March 29, 2011/s/ CRAIG H. DEERY Craig H. Deery

Director

March 29, 2011/s/ GARY T. DICAMILLO Gary T. DiCamillo

Director

March 29, 2011/s/ JAMES L. LUIKART James L. Luikart

Director

March 29, 2011


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Signature

Title

Date/s/ NICHOLAS R. SHEPPARD Nicholas R. Sheppard

Director

March 29, 2011/s/ GEORGE A. WHALING George A. Whaling

Director

March 29, 2011


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