UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-K/A


AMENDMENT NO. 1


ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For
the fiscal year ended January 3, 2009




Commission
file number 1-12551









CENVEO,
INC.


(Exact
name of Registrant as specified in its charter.)




COLORADO
            84-1250533(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer Identification No.)ONE
      CANTERBURY GREEN
              201
      BROAD STREETSTAMFORD,
      CT
            06901(Address
      of principal executive offices)
            (Zip
      Code)203-595-3000(Registrant’s
      telephone number, including area
code)







Securities
Registered Pursuant to Section 12(b) of the Act:
  Title of Each
      Class
                      Name of Each Exchange on Which
      RegisteredCommon
      Stock, par value $0.01 per share
                      New
      York Stock Exchange
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes oNo x
 
 Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Exchange Act. Yes oNo x
 
 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 period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes 
x No 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. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.  Large accelerated filer o Accelerated filer x Non-accelerated filer
o 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 x
 
 As of
June 27, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $467,307,231 based on the closing sale
price as reported on the New York Stock Exchange.
 
 As of
March 6, 2009 the registrant had 54,585,241 shares of common stock, par value
$0.01 per share, outstanding.
  DOCUMENTS
INCORPORATED BY REFERENCE
 
 Certain information required by Part II
(Item 5) and Part III of this form (part of Item 11, Items 12, 13 and 14, and
part of Item 10) is incorporated by reference from the Registrant’s Proxy
Statement to be filed pursuant to Regulation 14A with respect to the
Registrant’s Annual Meeting of Shareholders held on April 30, 2009.





CENVEO,
INC.
 
 FORM
10-K/A
 
 AMENDMENT
NO. 1
 
 FOR THE
FISCAL YEAR ENDED JANUARY 3, 2009
 
 EXPLANATORY
NOTE
 
 This Form
10-K/A is being filed in response to a request in a Securities and Exchange
Commission (“SEC”) staff comment letter that we enhance certain disclosures, as
outlined below, in our Annual Report on Form 10-K
    1.
                Item
      1 – Business.●
                under the heading
      “The Company” to provide total assets for our reportable segments for the
      year ended December 30, 2006.●
                under the heading
      “Our Products and Services” to provide methods of distribution for our
      reportable segment’s principal products.●
                under the heading
      “Patents, Trademarks and Trade Names” to further clarify the duration of
      our patents and trademarks.2.
                Item 7 –
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.●
                under the heading
      “Introduction and Executive Overview” revise our disclosure to provide an
      understanding of the matters with which management is concerned primarily
      in evaluating our financial condition and operating results.●
                under the heading
      “Business Strategy” to clarify significant opportunities that exist in
      enhancing our supply chain.●
                under the heading
      “Consolidated Operating Results” and subheading “Restructuring, Impairment
      and Other Charges” to expand our disclosure on the facts and circumstances
      that led to the goodwill impairment of our reporting units.●
                under the heading
      “Liquidity and Capital Resources” to indicate our estimated capital
      expenditures for the upcoming fiscal year as well as to provide the
      sources for our capital expenditures.●
                under the heading
      “Liquidity and Capital Resources” and subheading “Debt Covenant
      Compliance” to provide our actual debt compliance calculation results
      versus the permitted requirements and to detail the covenants that
      limit debt assumed from acquisitions or capital expenditures, if
      any.●
                under the heading
      “Critical Accounting Matters” and subheading “Provision for Impairment of
      Goodwill and Indefinite Lived Intangible Assets” to expand our disclosure
      to include our determination of fair value, qualitative and quantitative
      description of material assumptions used, a sensitivity analysis of those
      assumptions and how the increase in our discount rate impacted the
      valuation of our indefinite lived intangible assets.3.
                Item
      9A – Controls and Procedures under the heading “Evaluation of Disclosure
      Controls and Procedures” to provide additional language regarding
      disclosure controls and procedures.4.
                Item
      11 – Executive Compensation under the heading “Non-Management
      Directors’ Compensation for Fiscal 2008” by providing a revised director
      compensation table, which originally appeared on page 9 of the proxy
      statement for Cenveo’s 2009 annual meeting of shareholders that was filed
      with the SEC on April 6, 2009 (the “Proxy Statement”), and by revising the
      disclosure that originally appeared on pages 12-17 of the Proxy Statement
      under the heading “Compensation of Executive Officers” to read as set
      forth below.
  As
required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended,
new certifications by our Principal Executive Officer and Principal Financial
Officer are being filed as exhibits to this Amendment under Item 15(a)(3) -
Exhibits.
 
 Except
for the changes contained in this Amendment that are noted above, this Amendment
continues to speak as of the date of the Original Form 10-K, does not reflect
any subsequent information or events, and does not modify, amend or update in
any way any other item or disclosure in the Original Form 10-K. All
references in this Amendment to “this Annual Report on Form 10-K” or words of
similar import refer to the Original 10-K, as amended by this
Amendment.


PART
I








Item 1.  Business





The
Company





We are
the third largest diversified printing company in North America, according to
the December 2008 Printing Impressions 400 report. Our broad portfolio of
products includes envelope, form, and label manufacturing, commercial printing
and packaging and publisher offerings. We operate from a global network of 76
printing and manufacturing, content management and distribution facilities,
which we refer to as manufacturing facilities, serving a diverse base of over
100,000 customers. Since 2005, we have significantly improved profitability by
consolidating and closing plants, centralizing and leveraging our purchasing
spend, seeking operational efficiencies, and reducing corporate and field staff.
In addition, we have made investments in our businesses through acquisitions of
highly complementary companies and capital expenditures, while also divesting
non-strategic businesses.  We were incorporated in Colorado in 1997 as
the successor to Mail-Well, Inc., a Delaware corporation.





We
operate our business in two complementary segments: envelopes, forms and labels
and commercial printing.





Envelopes,
Forms and Labels





Our
envelopes, forms and labels segment operates 36 manufacturing facilities in
North America and annually produces approximately 34 billion envelopes and
approximately 540,000 custom label orders. In 2007, we grew our envelopes, forms
and labels business with the acquisition of Commercial Envelope Manufacturing
Co. Inc., which we refer to as Commercial Envelope, and PC Ink Corp., which we
refer to as Printegra. Envelopes, forms and labels had net sales of $916.1
million, $897.7 million and $780.7 million and operating income (loss) of
$(41.0) million, $117.3 million and $82.8 million, in 2008, 2007 and 2006,
respectively. Total assets for envelopes, forms and labels were $624.8 million,
$833.3 million and $494.3 million as of January 3, 2009, December 29, 2007 and
December 30, 2006, respectively.


Commercial
Printing





Our
commercial printing segment operates 40 manufacturing facilities in the United
States, Canada, the Caribbean Basin and Asia.  The segment primarily
offers print, design and content management offerings covering a wide array of
products for a broad group of customers. In 2008, we expanded our commercial
printing business with the acquisition of Rex Corporation and its manufacturing
facility, which we refer to as Rex. In 2007, we grew our commercial printing
business with the acquisitions of Madison/Graham ColorGraphics, Inc., which we
refer to as ColorGraphics, and Cadmus Communications Corporation, which we refer
to as Cadmus. Commercial printing had net sales of $1.2 billion, $1.1 billion
and $730.5 million and operating income (loss) of $(136.8) million, $55.1
million and $13.6 million in 2008, 2007 and 2006, respectively. Total
assets for commercial printing were $863.2 million, $1.1 billion and $394.0
million as of January 3, 2009, December 29, 2007 and December 30, 2006,
respectively. On March 31, 2008, we acquired all of the stock of Rex, an independent
manufacturer of premium and high-quality packaging solutions. Prior to our
acquisition, Rex had annual revenues of approximately $40.0 million. The total
cash we paid for the Rex acquisition, excluding assumed debt of approximately
$7.4 million, was approximately $43.1 million, including approximately $1.0
million of related expenses.







Our
Products and Services





Envelopes, Forms and
Labels.We are a leading North American direct mail envelope
manufacturer, a leading forms and labels provider, and the largest North
American prescription labels manufacturer for retail pharmacy chains. Our
envelopes, forms and labels segment represented approximately 44% of our net
sales for the year ended January 3, 2009.This segment primarily
specializes in the design, manufacturing and printing of:





·
            direct
      mail and customized envelopes for advertising, billing and
      remittance;


·
            custom
      labels and specialty forms; and


·
            stock
      envelopes, labels and business
forms.





Our
envelopes, forms and labels segment serves customers ranging from Fortune 50
companies to small companies serving niche markets. We offer direct mail
products used for customer solicitations and custom envelopes used for billing
and remittance by end users including banks, brokerage firms and credit card
companies in addition to a broad group of other


1


customers
in varying industries.   We manufacture and print customized
envelopes used as inserts within wholesale and retail product
catalogs.  We print a diverse line of custom labels and specialty
forms for a broad range of industries including manufacturing, warehousing,
packaging, food and beverage, and health and beauty, which we sell through an
extensive network of resale distributors.  We produce a diverse line
of custom products for our small and mid-size business forms and labels
customers, including both traditional and specialty forms and labels for use
with desktop PCs and laser printers.  Our printed office products
include business documents, specialty documents and short-run secondary labels,
which are made of paper or film affixed with pressure-sensitive adhesive and are
used for mailing, messaging, bar coding and other applications by large through
smaller-sized customers across a wide spectrum of industries.  We
produce pressure-sensitive prescription labels for the retail pharmacy chain
market.  We also produce a broad line of stock envelopes, labels and
traditional business forms that are sold through independent distributors,
contract stationers, national catalogs for the office products market and office
products superstores.





Commercial
Printing.We are one of the leading commercial printing
companies in North America and one of the largest providers of editorial,
content processing and production assistance to scientific, technical and
medical, which we refer to as STM, journals.  Our commercial printing
segment represented approximately 56% of our net sales for the year ended
January 3, 2009.  Our commercial printing segment provides one-stop
print, design and content management offerings, including:





·
            high-end
      color printing of a wide range of premium products for national and
      regional customers;


·
            general
      commercial printing for regional and local
  customers;


·
            STM
      journals and special interest and trade magazines for not-for-profit
      organizations, educational institutions and specialty publishers;
      and


·
            specialty
      packaging and high quality promotional materials for multinational
      consumer products companies.





Our
commercial printing segment primarily caters to the financial services,
publishing, telecommunications, pharmaceutical, and consumer products industries
and serves customers ranging from Fortune 50 companies to small companies
operating in niche markets.  We provide a wide range of commercial
print offerings to our customers  including electronic prepress,
digital asset archiving, direct-to-plate technology, high-quality color printing
on web and sheet-fed presses and digital printing. The commercial printing
products we produce include annual reports, car brochures, direct mail products,
specialty packaging, journals and specialized periodicals, advertising
literature, corporate identity materials, financial printing, books,
directories, calendars, brand marketing materials, catalogs, and
maps.  In our journal and specialty magazine business, we offer
complete solutions, including editing, content processing, content management,
electronic peer review, production, distribution and reprint
marketing.  Our primary customers for our specialty packaging and
promotional products are pharmaceutical, apparel, technology and other large
multinational consumer product companies.




direct
shipment via express mail, the U.S. postal system and freight
carriers.




Our
Strategy


Our goals are to improve on profitability and pursue disciplined growth. The
principal features of our strategy are:




Improve our Cost Structure and
Profitability.In September 2005, we established our 2005 Cost
Savings and Restructuring Plan, which we refer to as the 2005 Plan, that, among
other things, consolidated our purchasing activities and manufacturing platform
with the closure of two manufacturing facilities in 2007 that were integrated
into existing operations, reduced corporate and field human resources,
streamlined our information technology infrastructure and eliminated
discretionary spending.  The 2005 Plan was completed in the fourth
quarter of 2007. In 2007, we initiated the 2007 Cost Savings and Integration
Plan, which we refer to as the 2007 Plan, in connection with our 2007
acquisitions of Commercial Envelope, ColorGraphics, Cadmus and Printegra, which
we refer to as the 2007 Acquisitions. Under the 2007 Plan, we closed seven
manufacturing facilities and integrated those operations into acquired and
existing operations. In 2008, we reduced our headcount by approximately 1,200.
We anticipate substantially completing the 2007 Plan in 2009.





We
continue to implement cost-savings initiatives that will improve our
profitability, both in connection with acquisitions and our ongoing
operations.  We regularly assess our operations with a view toward
eliminating operations that are not aligned with our core United States
operations or are underperforming. For example, we divested our Canadian
envelope manufacturing business, Supremex, Inc., and certain other assets, which
we refer to collectively as Supremex, through a series of transactions in 2007
and 2006.  In 2006, we also sold three small and non-strategic
businesses and closed three facilities that were underperforming.  We
continue to evaluate the sale or closure of facilities that do not meet our
strategic goals or performance targets.








2


Capitalize on Scale
Advantages.  We believe there are significant advantages to
being a large competitor in a highly fragmented industry.  We seek to
capitalize on our size, geographic footprint and broad product lines to offer
one-stop shopping and enhance our overall value proposition.  As we
grow in scale and increase our operating leverage, we seek to realize better
profit margins through improvements in manufacturing facility
utilization.





Enhance the Supply Chain.We
continue to work with our core suppliers to improve all aspects of our
purchasing and other logistics as well as to ensure a stable source of supply.
We seek to lower costs through more favorable pricing and payment terms, more
effective inventory management and improved communications with vendors. We
continue to consolidate our key suppliers of production inputs such as paper and
ink, and believe that significant opportunities continue to exist in optimizing
the rest of our supply chain. Such opportunities that still exist include, but
are not limited to: (1) consolidation of our carton, film, and related suppliers
to maximize our purchasing spend with a smaller supplier base, (2) reducing
warehousing related costs through better inventory management, and (3) modifying
and consolidating our current recycling agreements to increase operating
efficiencies.





Seek Products and Processing
Improvements.  We conduct regular reviews of our product
offerings, manufacturing processes and distribution methods to ensure that we
take advantage of new technology when practical and to meet the changing needs
of our customers and the demands of a global economy.  We actively
explore potential new product opportunities for expansion, particularly in
market sectors that are expected to grow at a faster pace then the broader
printing industry.  We also strive to enter new markets in which we
may have competitive advantages based on our existing infrastructure, operating
expertise and customer relationships.  Pharmaceutical labels, direct
mail, and specialty packaging are examples of growth areas into which we
recently expanded.  By expanding our product offerings, we intend to
increase cross-selling opportunities to our existing customer base and mitigate
the impact of any decline in a given market.





Pursue Strategic
Acquisitions.We continue to
selectively review opportunities to expand within growing niche markets, broaden
our product offerings and increase our economies of scale through acquisitions.
We intend to continue practicing acquisition discipline and pursue opportunities
for greater expected profitability and cash flow or improved operating
efficiencies, such as increased utilization of our assets. Since July 2006, we
have completed seven acquisitions that we believe will continue to enhance our
operating margins and deliver economies of scale.  We believe our
acquisition strategy will allow us to both realize increased revenue and
cost-saving synergies, and apply our management expertise to improve the
operations of acquired entities. For example, our acquisition of Commercial
Envelope strengthened our position in the envelope market and will allow us to
enhance our raw material purchasing power and rationalize our manufacturing
platform.  Our acquisition of Rx Technology Corporation, which we
refer to as Rx Technology, in July 2006, gave us an entry into the
pharmaceutical labels business, which has high barriers to entry, while also
allowing us to cross-sell a broader product platform to new and existing
customers.





Our
Industry





The
United States printing industry is large and highly fragmented with
approximately 35,000 participants as reported in the second quarter 2008 United
States Department of Labor Quarterly Census of Employment and Wages.  This
is down from the 39,000 participants as published in the 2006 PIA/GATF Print
Market Atlas at which time aggregate revenues for the printing industry was
approximately $165.0 billion.  These printing businesses operate in a broad
range of sectors, including commercial printing, envelopes, forms and labels,
specialty printing, trade publishing, and specialty packaging among others. The
printing industry is comprised of a few large companies with sales in excess of
$1 billion, several mid-sized companies with sales in excess of $100 million and
thousands of smaller operations. We estimate that the ten largest North American
commercial printers represent approximately 19% of the market in 2007, while we
estimate that the market sectors in which we primarily compete had total 2007
annual sales of approximately $115.0 billion serviced by over 25,000 printing
businesses.





Raw
Materials





The
primary materials used in our businesses are paper, ink, film, offset plates,
chemicals and cartons, with paper accounting for the majority of total material
costs.  We purchase these materials from a number of key suppliers and
have not experienced any significant difficulties in obtaining the raw materials
necessary for our operations, though, in times of limited supply, we have
occasionally experienced minor delays in delivery.  We believe that we
purchase our materials and supplies at competitive prices primarily due to the
size and scope of our purchasing power.





The
printing industry continues to experience pricing pressure related to increases
in the cost of materials used in the manufacture of our
products.  Industry prices for most of the raw materials we use in our
business, including uncoated freesheet paper, coated freesheet paper, ink,
window film, adhesives and printing plates, have increased in both 2007 and
2008, yet are forecasted to remain relatively stable in 2009.


3


While we
expect to continue to be able to pass on a substantial portion of the price
increases we receive for raw materials through the pricing of our products, any
price increase carries the risk of an offsetting decrease in demand for our
products.





Patents,
Trademarks and Trade Names





We market
products under a number of trademarks and trade names. We also hold or have
rights to use various patents relating to our businesses. Our
patents expire between 2011 and 2023 and our trademarks expire between 2010 and
2019.Our sales do not materially depend upon any single patent or group
of related patents.





Competition





In
selling our envelope products, we compete with a few multi-plant and many
single-plant companies that primarily service regional and local markets. The
state of the U.S. and global economy affect the needs and buying capacity of our
customers that influence our sales volume. We also face competition from
alternative sources of communication and information transfer such as electronic
mail, the internet, interactive video disks, interactive television, electronic
retailing and facsimile machines. Although these sources of communication and
advertising may eliminate some domestic envelope sales in the future, we believe
that we will experience continued demand for envelope products due to: (i) the
ability of our customers to obtain a relatively low-cost information delivery
vehicle that may be customized with text, color, graphics and action devices to
achieve the desired presentation effect; (ii) the ability of our direct mail
customers to penetrate desired markets as a result of the widespread delivery of
mail to residences and businesses through the U.S. Postal Service; and (iii) the
ability of our direct mail customers to include return materials inside their
mailings. Principal competitive factors in the envelope business are quality,
service and price. Although all three are equally important, various customers
may emphasize one or more over the others.  In selling our printed
business forms and labels products, we compete with other document and label
print facilities with nationwide manufacturing locations, and regional and local
printers, which typically sell within a 100- to 300-mile radius of their plants.
Printed business forms and labels competition is based mainly on quick-turn
customization quality of products and customer service levels.





Our
commercial printing segment provides offerings designed to give customers
complete solutions for communicating their messages to targeted audiences. The
environment is highly competitive in most of our product categories and
geographic regions, while also influenced by the current U.S. and global
economic conditions. Competition is based largely on price, quality and
servicing the special needs of customers. We believe that overcapacity exists in
most commercial printing markets, therefore, competition is intense. In this
competitive pricing environment, companies have focused on reducing costs in
order to preserve operating margins. We believe this environment will continue
to lead to more consolidation within the commercial print industry as companies
seek economies of scale, broader customer relationships, geographic coverage and
product breadth to overcome or offset excess industry capacity and pricing
pressures.





Seasonality





Our
commercial printing plants experience seasonal variations.  For
example, revenues from annual reports are generally concentrated from February
through April.  Revenues associated with consumer publications, such
as holiday catalogs and automobile brochures; tend to be concentrated from July
through October.  Revenues associated with the educational and
scholarly market and promotional materials tend to decline in the
summer.  As a result of these seasonal variations, some of our
commercial printing operations operate at or near capacity at certain times
throughout the year.





In
addition, certain sectors of the envelope and direct mail markets experience
seasonality with a higher percentage of volume of products sold to these markets
occurring during the fourth quarter of the year.  This seasonality is
due to the increase in sales to the direct mail market due to holiday
purchases.





Backlog





At
January 3, 2009 and December 29, 2007, the backlog of customer orders to be
produced or shipped was approximately $89.9 million and $127.2 million,
respectively.





Employees





We
employed approximately 9,700 people worldwide as of January 3, 2009,
approximately 15% of whom were members of various local labor
unions.  Collective bargaining agreements, each of which cover the
workers at a particular facility,
expire from time to time and are negotiated separately. Accordingly, we believe
that no single collective bargaining agreement is material to our operations as
a whole.


4


Environmental
Regulations





Our
operations are subject to federal, state and local environmental laws and
regulations including those relating to air emissions; waste generation,
handling, management and disposal; and remediation of contaminated sites. We
have implemented environmental programs designed to ensure that we operate in
compliance with the applicable laws and regulations governing environmental
protection. Our policy is that management at all levels be aware of the
environmental impact of operations and direct such operations in compliance with
applicable standards. We believe that we are in substantial compliance with
applicable laws and regulations relating to environmental protection. We do not
anticipate that material capital expenditures will be required to achieve or
maintain compliance with environmental laws and regulations. However, there can
be no assurance that newly discovered conditions, or new or more stringent
interpretations of existing laws and regulations, will not result in material
expenses.





Executive
Officers





The
following is a list of our executive officers and their age, present position,
the year elected to their present position and other positions they have held
during the past five years.  No family relationships exist among any
of the executive officers named, nor is there any undisclosed arrangement or
understanding pursuant to which any person was selected as an officer. This
information is presented as of the date of the Form 10-K filing.





Name
                  
                  Age
                  
                  Position
                  
                  Year
                    Elected
      to
                    Present
                    PositionRobert
      G. Burton,
      Sr.
                  69
                  
                  Chairman
      and Chief Executive Officer
                  2005Mark
      S.
      Hiltwein
                  45
                  
                  Chief
      Financial Officer
                  2007Dean
      Cherry
                  48
                  
                  President,
      Envelope and Commercial Print Operations
                  2008Timothy
      M.
      Davis
                  54
                  
                  Senior
      Vice President, General Counsel and Secretary
                  2006Harry
      Vinson
                  48
                  
                  President,
      Publisher Services and Packaging Operations
                  2007







Robert G.
Burton,Sr.Mr. Burton, 69,
has been Cenveo’s Chairman and Chief Executive Officer since September 2005. In
January 2003, he formed Burton Capital Management, LLC, a company that invests
in middle market manufacturing companies, and has been its Chairman, Chief
Executive Officer and sole managing member since its formation. From December
2000 through December 2002, Mr. Burton was the Chairman, President and Chief
Executive Officer of Moore Corporation Limited, a leading printing company with
over $2.0 billion in revenue for fiscal year 2002.  Preceding his
employment at Moore, Mr. Burton was Chairman, President, and Chief Executive
Officer of Walter Industries, Inc., a diversified holding company.  From
April 1991 through October 1999, he was the Chairman, President and Chief
Executive Officer of World Color Press, Inc., a leading commercial printing
company. From 1981 through 1991, he held a series of senior executive positions
at Capital Cities/ABC, including President of ABC Publishing.  Mr. Burton
was also employed for 10 years as a senior executive of SRA, the publishing
division of IBM.




Mark S.
Hiltwein Mr. Hiltwein, 45, has served as Cenveo’s Chief Financial Officer
since July 2007.  From July 2005 to July 2007, he was President of
Smartshipper.com, an online third party logistics company.  From
February 2002 through July 2005, Mr. Hiltwein was Executive Vice President and
Chief Financial Officer of Moore Wallace Incorporated, a $3.5 billion printing
company.  Prior to that, he served as Senior Vice President and
Controller from December 2000 to February 2002.  Mr. Hiltwein served
in various financial positions from 1992 through 2000 with L.P. Thebault
Company, a commercial printing company, including Chief Financial Officer from
1997 through 2000.  Mr. Hiltwein began his career at Mortenson and
Associates, a regional public accounting firm where he held various positions in
the audit department.  He is a CPA and received his bachelor’s degree
in accounting from Kean University.





Dean Cherry  Mr. Cherry, 48, has been Cenveo’s President of Commercial
Print Operations since July 2008 and Envelope Operations since February
2008.  From October 2006 through January 2008, he was a private
investor in Renovatio Ventures, LLC. From 2004 to 2006, he was RR Donnelley’s
Group President of Short-Run Commercial, and Group President of Integrated Print
Communications and Global Solutions, a $4.5 billion division of RR Donnelley. In
this position, Mr. Cherry had global P&L responsibility for Direct Mail,
Commercial Print, Global Capital Markets, Business Communication Services, Forms
and Labels and Astron (outsourcing), as well as RR Donnelley’s Latin American
business.  From 2001 to 2004, he held the positions of President,
International & Subsidiary Operations and President, Commercial and
Subsidiary Operations, for Moore Corporation Limited, a division of RR
Donnelley. From 1991 to 1998 he held various management positions at World Color
Press, Inc. From 1985 to 1991, he held various financial positions at Capital
Cities/ABC Publishing


5




division
including Vice President, Finance and Operations.  Mr. Cherry is a
member of the Dean’s Advisory Council for the College of Business of Murray
State University, and a Trustee for the Murray State University
Foundation.





Timothy M.
Davis   Mr. Davis, 54, has served as Cenveo’s Senior Vice
President, General Counsel and Secretary since January 2006.  From
July 1989 until he joined Cenveo, he was Senior Vice President, General Counsel
and Secretary of American Color Graphics, Inc., a commercial printing
company.





Harry
Vinson   Mr. Vinson, 48, has served as Cenveo’s President
of Publisher Services Operations since March 2007 and Packaging Operations since
November 2008. Prior to that, Mr. Vinson served as Cenveo’s Senior Vice
President, Purchasing and Logistics since September 2005. From October 2003
until September 2005 he was the General Manager of Central Region Sheetfed
Operations at MAN Roland, a printing press manufacturer. From February 2002
until July 2003, Mr. Vinson served as Senior Vice President and General Manager
of the Publication and Directory Group at Moore Wallace (formerly Moore
Corporation Limited). From February 1990 until February 2002, he served in
various senior sales positions at Quebecor World (formerly World Color
Press).





Cautionary
Statements





Certain
statements in this report, particularly statements found in “Risk Factors,”
“Business” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” may constitute “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements generally can be identified by the use of terminology such as “may,”
“will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,”
“believe” or “continue” and similar expressions, or as other statements that do
not relate solely to historical facts. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that are
difficult to predict. Management believes these statements to be reasonable when
made. However, actual outcomes and results may differ materially from what is
expressed or forecasted in these forward-looking statements. As a result, these
statements speak only as of the date they were made. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In view of such uncertainties,
investors should not place undue reliance on our forward-looking
statements.





Such
forward-looking statements involve known and unknown risks, including, but not
limited to, those identified in Item 1A. Risk Factors along with changes in
general economic, business and labor conditions. More information regarding
these and other risks can be found below under “Risk Factors,” “Business,”
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and other sections of this report.





Available
Information





Our
Internet address is: www.cenveo.com. References to our website address do not
constitute incorporation by reference of the information contained on the
website, and the information contained on the website is not part of this
document. We make available free of charge through our website our annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed pursuant to Section 13 (a) or 15 (d) of the
Exchange Act as soon as reasonably practicable after such documents are filed
electronically with the Securities and Exchange Commission, which we refer to as
the SEC. Our Code of Business Conduct and Ethics is also posted on our website.
In addition, our earnings conference calls are archived for replay on our
website, and presentations to securities analysts are also included on our
website. In June 2008, we submitted to the New York Stock Exchange a certificate
of our Chief Executive Officer certifying that he is not aware of any violation
by us of New York Stock Exchange corporate governance listing standards. We also
filed as exhibits to our annual report on Form 10-K for the fiscal year ended
December 29, 2007 certificates of the Chief Executive Officer and Chief
Financial Officer as required under Section 302 of the Sarbanes-Oxley
Act.





The
public may read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may
obtain information about the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC.


6




Item
7 of the Original 10-K is amended to read in its entirety as
follows:




Item 7.      Management’s Discussion
and Analysis of Financial Condition and Results of Operations





This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, which we refer to as MD&A, of Cenveo, Inc. and its subsidiaries,
which we refer to as Cenveo, should be read in conjunction with our consolidated
financial statements included elsewhere herein. Certain statements we make under
this Item 7 constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. See Cautionary Statements regarding
forward-looking statements in Item 1 and Risk Factors in Item 1A.





Introduction
and Executive Overview





We are
the third largest diversified printing company in North America, according to
the December 2008 Printing Impressions 400 report. Our broad portfolio of
products includes envelope, form, and label manufacturing, commercial printing
and packaging and publisher offerings. We operate from a global network of 76
printing and manufacturing, content management and distribution facilities,
which we refer to as manufacturing facilities, serving a diverse base of over
100,000 customers. Since 2005, we have significantly improved profitability by
consolidating and closing plants, centralizing and leveraging our purchasing
spend, seeking operational efficiencies and reducing corporate and field staff.
In addition, we have made investments in our businesses through acquisitions of
highly complementary companies and capital expenditures, while also divesting
non-strategic businesses.




Our
management team is primarily focused on two main areas affecting our business:
(i) printing industry challenges, primarily pricing pressures experienced
throughout our operations and overcapacity in certain of the markets that we
operate in, and (ii) financial flexibility, which includes servicing our current
debt level, investing in our business through strategic acquisition and capital
expenditures, and increasing our economies of scale to help improve the
performance of our current operations.
 
 The
United States printing industry is highly fragmented, with a broad range of
sectors, including commercial printing and envelopes and forms and labels, among
others. The printing industry has excess capacity and continues to be highly
competitive with many of our customers focusing on price as a key decision
driver. We believe that given the current economic downturn, our customers will
increasingly focus on price. We continue to pursue cost savings measures in an
effort to align our cost structure with our anticipated revenues and mitigate
the impact of pricing pressures. Such measures could require additional plant
closures and/or consolidation and employee headcount reductions throughout our
operating platform.
 
 Our
financial flexibility depends heavily on our ability to maintain existing
customers, attract new financially viable customers and maximize our operating
profits, all of which are vital to our ability to service our current debt
level. Our level of indebtedness, which requires significant principal and
interest payments, could potentially impact our ability to reinvest cash flows
from operations into our business via capital expenditures or niche
acquisitions. We therefore closely monitor working capital, including the credit
we extend to and the collections we receive from customers, inventory levels,
and vendor pricing and sales terms, while continuously seeking improvements to
increase our cash flow.
 
 We offer
our customers a wide range of print products and have recently experienced
certain of our key customers providing us the opportunity to become the single
source supplier for their printed product needs. This trend benefits our
customers as they seek to leverage their buying power and helps us improve
operating efficiencies in our plants with increased throughput. We believe that
our manufacturing platform, strategically located facilities and our industry
experienced management team will help enable us to improve our operating
margins. We also continue to work with our vendors and focus on supply chain
enhancements to lower our input costs and improve our operating
margins.
  We
operate in two complementary segments: Envelopes, Forms and Labels and
Commercial Printing.





Envelopes, Forms and
Labels.We are a leading
North American direct mail envelope manufacturer, a leading forms and labels
provider, and the largest North American prescription labels manufacturer for
the retail pharmacy chains. In 2007, we grew our envelopes, forms and labels
business with the acquisition of Commercial Envelope Manufacturing Co. Inc.,
which we refer to as Commercial Envelope, and PC Ink Corp., which we refer to as
Printegra.  Prior to our acquisition, Commercial Envelope and
Printegra had annual revenues of approximately $160.0 million and approximately
$90.0 million, respectively. Our envelopes, forms and labels segment represented
approximately 44% of our net sales for the year ended January 3, 2009. The
segment operates 36 manufacturing facilities in North America and primarily
specializes in the design, manufacturing and printing of:





·
            direct
      mail and customized envelopes for advertising, billing and
      remittance;


·
            custom
      labels and specialty forms; and


·
            stock
      envelopes, labels and business
forms.





Our
envelopes, forms and labels segment serves customers ranging from Fortune 50
companies to small companies serving niche markets. We offer direct mail
products used for customer solicitations and custom envelopes used for billing
and remittance by end users including banks, brokerage firms and credit card
companies in addition to a broad group of other customers in varying industries.
We manufacture and print customized envelopes used as inserts within wholesale
and retail product catalogs.  We print a diverse line of custom labels
and specialty forms for a broad range of industries including manufacturing,
warehousing, packaging, food and beverage, and health and beauty, which we sell
through an extensive network of resale distributors.  We produce a
diverse line of custom products for our small and mid-size business forms and
labels customers, including both traditional and specialty forms and labels for
use with desktop PCs and laser printers.  Our printed office products
include business documents, specialty documents and short-run secondary labels,
which are made of paper or film affixed with pressure sensitive adhesive and are
used for mailing, messaging, bar coding and other applications by large through
smaller-sized customers across a wide spectrum of industries.  We
produce pressure-sensitive prescription labels for the retail pharmacy chain
market.  We also produce a broad line of stock envelopes, labels and
traditional business forms that are sold through independent distributors,
contract stationers, national catalogs for the office products market and office
products superstores.





7





Commercial Printing. We are one of the leading
commercial printing companies in North America and one of the largest providers
of editorial, content processing and production assistance to scientific,
technical and medical, which we refer to as STM, journals.  In 2008,
we grew our commercial printing business with the acquisition of Rex Corporation
and its manufacturing facility, which we refer to as Rex. Prior to our
acquisition, Rex had annual revenues of approximately $40.0 million. In 2007, we
grew our commercial printing business with the acquisitions of Madison/Graham
ColorGraphics, Inc., which we refer to as ColorGraphics, and Cadmus
Communications Corporation, which we refer to as Cadmus. Prior to our
acquisition, ColorGraphics and Cadmus had annual revenues of approximately
$170.0 million and approximately $450.0 million, respectively. Our commercial
printing segment represented approximately 56% of our net sales for the year
ended January 3, 2009.  The segment operates 40 manufacturing
facilities in the United States, Canada, the Caribbean Basin and Asia and
provides one-stop print, design and content management offerings,
including:




·
            high-end color printing of a wide range of premium
      products for national and regional customers; ·
            general
      commercial printing for regional and local
  customers;





·
            STM
      journals and special interest and trade magazines for not-for-profit
      organizations, educational institutions and specialty publishers;
      and


·
            specialty
      packaging and high quality promotional materials for multinational
      consumer products companies.





Our
commercial printing segment primarily caters to the financial services,
publishing, telecommunications, pharmaceutical, and consumer products industries
and serves customers ranging from Fortune 50 companies to small companies
operating in niche markets.  We provide a wide array of commercial
print offerings to our customers including electronic prepress, digital asset
archiving, direct-to-plate technology, high-quality color printing on web and
sheet-fed presses and digital printing. The broad array of commercial printing
products we produce also includes annual reports, car brochures, direct mail
products, specialty packaging, journals and specialized periodicals, advertising
literature, corporate identity materials, financial printing, books,
directories, calendars, brand marketing materials, catalogs, and
maps.  In our journal and specialty magazine business, we offer
complete solutions, including editing, content processing, content management,
electronic peer review, production and reprint marketing.  Our primary
customers for our specialty packaging and promotional products are
pharmaceutical, apparel, technology and other large multi-national consumer
product companies.





Business Strategy. Our goals are to improve on
profitability and pursue disciplined growth. The principal features of our
strategy are:




·
            Improve our Cost Structure and
      Profitability.In September 2005, we established our
      2005 Cost Savings and Restructuring Plan, which we refer to as the 2005
      Plan, that among other things, included consolidating our purchasing
      activities and manufacturing platform with the closure of two
      manufacturing facilities in 2007 that were integrated into existing
      operations, reducing corporate and field human resources, streamlining our
      information technology infrastructure and eliminating discretionary
      spending.  The 2005 Plan was completed in the fourth quarter of
      2007. In 2007, we initiated the 2007 Cost Savings and Integration Plan,
      which we refer to as the 2007 Plan, in connection with our 2007
      acquisitions of Commercial Envelope, ColorGraphics, Cadmus and Printegra,
      which we refer to as the 2007 Acquisitions. Under the 2007 Plan, we closed
      seven manufacturing facilities and integrated those operations into
      acquired and existing operations. In 2008, we continued the implementation
      of our cost savings and integration plan initiatives throughout our
      operations and reduced our headcount during 2008 by approximately
      1,200.




We
continue to implement cost-savings initiatives that will improve our
profitability, both in connection with acquisitions and our ongoing
operations.  We regularly assess our operations with a view toward
eliminating operations that are not aligned with our core United States
operations or are underperforming. For example, we divested our Canadian
envelope manufacturing business, Supremex, through a series of transactions in
2007 and 2006.  In 2006, we also sold three small and non-strategic
businesses and closed three facilities that were underperforming.  We
continue to evaluate the sale or closure of facilities that do not meet our
strategic goals or performance targets.




·
              Capitalize
      on Scale Advantages. We believe there
      are significant advantages to being a large competitor in a highly
      fragmented industry. We seek to capitalize on our size, geographic
      footprint and broad product lines to offer one-stop shopping and enhance
      our overall value proposition. As we grow in scale and increase our
      operating leverage, we seek to realize better profit margins through
      improvements in manufacturing facility
  utilization.




·
            Enhance the Supply Chain.We continue to work with our core suppliers to improve all aspects
      of our purchasing and other logistics as well as to ensure a stable source
      of supply. We seek to lower costs through more favorable pricing and
      payment terms, more effective inventory management and improved
      communications with vendors. We continue to consolidate our key suppliers
      of production inputs such as paper and ink, and believe that significant
      opportunities continue to exist in optimizing the rest of our supply
      chain.Such
      opportunities that still exist include, but are not limited to: (1)
      consolidation of our carton, film, and related suppliers to maximize our
      purchasing spend with a smaller supplier base, (2) reducing warehousing
      related costs through better inventory management, and (3) modifying and
      consolidating our current recycling agreements to increase operating
      efficiencies.




















·
            Seek Products and Processing
      Improvements.  We
      conduct regular review of our product offerings, manufacturing processes
      and distribution methods to ensure that we take advantage of new
      technology when practical and meet the changing needs of our customers and
      the demands of a global economy. We actively explore potential new product
      opportunities for expansion, particularly in market sectors that are
      expected to grow at a faster pace than the broader printing industry. We
      also strive to enter new markets in which we may have competitive
      advantages based on our existing infrastructure, operating expertise and
      customer relationships.  Pharmaceutical labels, direct mail, and
      specialty packaging are examples of growth areas into


8




which
      we recently expanded.  By expanding our product offerings, we
      intend to increase cross-selling opportunities to our existing customer
      base and mitigate the impact of any decline in a given
    market.




·
            Pursue Strategic
      Acquisitions.  We
      continue to selectively review opportunities to expand within growing
      niche markets, broaden our product offerings and increase our economies of
      scale through acquisitions. We intend to continue practicing acquisition
      discipline and pursue opportunities for greater expected profitability and
      cash flow or improved operating efficiencies, such as increased
      utilization of our assets. Since July 2006, we have completed seven
      acquisitions that we believe will continue to enhance our operating
      margins and deliver economies of scale.  We believe our
      acquisition strategy will allow us to both realize increased revenue and
      cost-saving synergies, and apply our management expertise to improve the
      operations of acquired entities. For example, our acquisition of
      Commercial Envelope strengthened our position in the envelope market and
      will allow us to enhance our raw material purchasing power and rationalize
      our manufacturing platform.  Our acquisition of Rx Technology in
      July 2006 gave us an entry into the pharmaceutical labels business, which
      has high barriers to entry, while also allowing us to cross-sell a broader
      product platform to new and existing
customers.




See Part
1 Item 1 of this Annual Report on Form 10-K for a more complete description of
our business.




Consolidated
Operating Results





Management’s
Discussion and Analysis of Financial Condition and Results of Operations
includes an overview of our consolidated results for 2008, 2007 and 2006
followed by a discussion of the results of each of our business segments for the
same period. Our results for the year ended January 3, 2009 include the
operating results of Rex subsequent to its acquisition date. Our results for the
year ended December 29, 2007 include the operating results of the 2007
Acquisitions, subsequent to their respective acquisition dates, except for
ColorGraphics which was included in our operating results from July 1,
2007.





2008





In 2008,
the economic downturn that accelerated in the second half of the year
significantly impacted the results of our operations.  Our
commercial print reporting unit had volume declines in substantially all of the
markets we serve primarily due to excess capacity and intense pricing
pressures. Our envelope reporting unit had significant volume declines
primarily due to our financial services customers who historically reached
targeted customers via our direct mail capabilities. In addition, the cost of
paper, film and other raw materials for our products continued to increase in
2008. In order to compete effectively in this current environment, we continue
to focus on improving productivity and creating operating efficiencies by
reducing our costs. For example, in 2008, we reduced our employee headcount by
approximately 1,200 and closed a commercial printing plant in St. Louis,
Missouri.





During
the fourth quarter, we recorded $372.8 million of non-cash, pre-tax
charges on the impairment of goodwill related to our commercial print
($204.4 million) and envelope ($168.4 million) reporting units. These charges
reflect actual and expected declines in net sales, operating income and cash
flows, primarily as a result of the current economic downturn.





2009
Outlook


The
current U.S. and global economic conditions have affected and, most likely, will
continue to affect our results of operations and financial position. These
uncertainties about future economic conditions in a very challenging environment
make it more difficult for us to forecast our future operating
results.


We
anticipate the current economic environment continuing in 2009, and
therefore, we expect declines in net sales and operating income
in our businesses. We are pursuing additional cost savings opportunities in
an effort to mitigate the impacts of these expected declines. As a result,
we are developing plans for additional plant closures and/or consolidations and
employee headcount reductions to ensure our cost structure is aligned with
our estimated net sales.  We currently do not anticipate material
price increases for 2009. Further, our pension expense will increase by
approximately $4.3 million in 2009 primarily due to 2008 asset
returns being substantially lower than expected due to declines in the
capital markets.  However, our 2009 pension plan contributions will
remain relatively consistent with 2008.


9




A summary
of our consolidated statement of operations is presented below. The summary
presents reported net sales and operating income (loss). See Segment Operations
below for a summary of net sales and operating income (loss) of our operating
segments that we use internally to assess our operating performance. Division
net sales exclude sales of divested operations. Our reporting periods for 2008,
2007 and 2006 consisted of 53, 52 and 52 week periods, respectively, ending on
the Saturday closest to the last day of the calendar month and ended on January
3, 2009, December 29, 2007, and December 30, 2006, respectively. We refer to
such periods herein as (i) the year ended January 3, 2009 or 2008, (ii) the year
ended December 29, 2007 or 2007 and (iii) the year ended December 30, 2006 or
2006. All references to years and year-ends herein relate to fiscal years rather
than calendar years. We do not believe the additional week in 2008 had a
material impact on our consolidated results of operations.





Years
      EndedJanuary
      3, 2009
                                                                                                                                                                                      
                                                                                                                                                                                      December
      29, 2007
                                                                                                                                                                                      
                                                                                                                                                                                      December
      30, 2006(in
      thousands, except per share amount)Division
      net
      sales
                                                                                                                                                                                      $
                                                                                                                                                                                      2,098,694
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      2,046,716
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      1,501,869Divested
      operations
                                                                                                                                                                                      
                                                                                                                                                                                      —
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      —
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      9,355Net
      sales
                                                                                                                                                                                      $
                                                                                                                                                                                      2,098,694
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      2,046,716
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      1,511,224Operating
      income (loss):Envelopes,
      forms and
      labels
                                                                                                                                                                                      $
                                                                                                                                                                                      (40,979
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      117,342
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      82,753Commercial
      printing
                                                                                                                                                                                      
                                                                                                                                                                                      (136,828
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      55,085
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      13,606Corporate
                                                                                                                                                                                      
                                                                                                                                                                                      (45,739
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      (34,877
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      (32,964
                                                                                                                                                                                      )Total
      operating income
      (loss)
                                                                                                                                                                                      
                                                                                                                                                                                      (223,546
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      137,550
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      63,395(Gain)
      loss on sale of non-strategic businesses
                                                                                                                                                                                      
                                                                                                                                                                                      —
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (189
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      2,035Interest
      expense,
      net
                                                                                                                                                                                      
                                                                                                                                                                                      107,321
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      91,467
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      60,980(Gain)
      loss on early extinguishment of debt
                                                                                                                                                                                      
                                                                                                                                                                                      (14,642
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      9,256
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      32,744Other
      (income) expense,
      net
                                                                                                                                                                                      
                                                                                                                                                                                      (637
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      3,131
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (78
                                                                                                                                                                                      )Income
      (loss) from continuing operations before income taxes
                                                                                                                                                                                      
                                                                                                                                                                                      (315,588
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      33,885
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (32,286
                                                                                                                                                                                      )Income
      tax expense
      (benefit)
                                                                                                                                                                                      
                                                                                                                                                                                      (18,612
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      9,900
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (21,138
                                                                                                                                                                                      )Income
      (loss) from continuing operations
                                                                                                                                                                                      
                                                                                                                                                                                      (296,976
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      23,985
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (11,148
                                                                                                                                                                                      )Income
      (loss) from discontinued operations, net of taxes
                                                                                                                                                                                      
                                                                                                                                                                                      (1,051
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      16,796
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      126,519Net
      income (loss)
                                                                                                                                                                                      $
                                                                                                                                                                                      (298,027
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      40,781
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      115,371Income
      (loss) per share—basic:Continuing
      operations
                                                                                                                                                                                      $
                                                                                                                                                                                      (5.51
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      0.45
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      (0.21
                                                                                                                                                                                      )Discontinued
      operations
                                                                                                                                                                                      
                                                                                                                                                                                      (0.02
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      0.31
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.38Net
      income
      (loss)
                                                                                                                                                                                      $
                                                                                                                                                                                      (5.53
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      0.76
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      2.17Income
      (loss) per share—diluted:Continuing
      operations
                                                                                                                                                                                      $
                                                                                                                                                                                      (5.51
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      0.44
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      (0.21
                                                                                                                                                                                      )Discontinued
      operations
                                                                                                                                                                                      
                                                                                                                                                                                      (0.02
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      0.31
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.38Net
      income
      (loss)
                                                                                                                                                                                      $
                                                                                                                                                                                      (5.53
                                                                                                                                                                                      )
                                                                                                                                                                                      $
                                                                                                                                                                                      0.75
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      2.17


10


Net
Sales




Net sales
for 2008 increased $52.0 million, as compared to 2007. This increase was
primarily due to the $249.9 million of sales generated from the integration of
Rex and the 2007 Acquisitions into our operations, for which Rex was not
included in our results in 2007, and the 2007 Acquisitions were included in our
results for less than a full year in 2007. This increase was partially offset by
lower sales from our commercial printing and envelopes, forms and labels
segments of $138.7 million and $59.2 million, respectively, primarily due to
plant closures and lower volumes due to general economic conditions, partially
offset by price increases net of changes in product mix. See Segment Operations
below for a more detailed discussion of the primary factors for our net sales
changes.





Net sales
for 2007 increased $535.5 million, as compared to 2006. This increase was
primarily due to the $629.9 million of incremental sales generated by the 2007
Acquisitions, with no corresponding amounts in 2006 and the additional sales
generated by Rx Technology in 2007, since it was not included in our results for
a full year in 2006.  This increase was offset in part by lower sales
from our commercial printing segment of $51.8 million and lower sales from our
envelopes, forms and labels segment of $33.3 million. See Segment Operations
below for a more detailed discussion of the primary factors for our net sales
changes.





Operating
Income




Operating
income for 2008 decreased $361.1 million, as compared to 2007. This decrease was
primarily due to: (i) increased restructuring, impairment and other charges of
$359.0 million, primarily relating to non-cash goodwill impairment charges of
$372.8 million related to our commercial print and envelope reporting units, and
(ii) higher selling, general and administrative expenses of $13.0 million
primarily due to the acquisition of Rex in 2008, for which Rex was not included
in our results in 2007, and the 2007 Acquisitions, which were not included
in our results for a full year in 2007, offset in part by our cost savings
programs. These decreases were partially offset by: (i) increased gross margins
of $9.5 million primarily due to the acquisition of Rex, for which Rex was not
included in our results in 2007, and the 2007 Acquisitions, which were not
included in our results for a full year in 2007 and our cost savings programs,
offset in part by higher manufacturing costs primarily due to material price
increases and higher distribution costs and lower gross margins due to plant
closures, and (ii) lower amortization of $1.4 million. See Segment Operations
below for a more detailed discussion of the primary factors for the changes in
operating income by reportable segment.




Operating
income for 2007 increased $74.2 million, as compared to 2006. This increase was
primarily due to $49.2 million of incremental operating income generated by the
2007 Acquisitions, with no corresponding amounts in 2006, the additional
operating income generated by Rx Technology since it was not included in our
results for a full year in 2006 and the $23.7 million of increased operating
income primarily resulting from our cost savings initiatives. See Segment
Operations below for a more detailed discussion of the primary factors for the
changes in operating income by reportable segment.




Interest Expense. Interest expense increased
$15.9 million to $107.3 million in 2008, from $91.5 million in 2007, primarily
due to additional debt incurred to finance Rex and the 2007 Acquisitions, offset
in part by lower interest rates. Interest expense in 2008 reflected average
outstanding debt of approximately $1.4 billion and a weighted average interest
rate of 7.2%, compared to the average outstanding debt of approximately $1.2
billion and a weighted average interest rate of 7.5% in 2007. We expect interest
expense in 2009 to be fairly consistent with 2008.





Interest
expense increased $30.5 million to $91.5 million in 2007, as compared to $61.0
million in 2006, primarily due to the additional debt we incurred to finance the
2007 Acquisitions. This increase was offset in part by lower interest expense
resulting from reduced interest rates from amending and refinancing our senior
credit facilities in March 2007, and lower interest rates due to market
conditions in the fourth quarter of 2007. Interest expense in 2007 reflects
average outstanding debt of approximately $1.2 billion and a weighted average
interest rate of 7.5%, as compared to average outstanding debt of $721.5 million
and a weighted average interest rate of 8.1% in 2006.





(Gain) Loss on Early Extinguishment
of Debt.  In 2008, we: (i)
repurchased $31.8 million of our $125.0 million 83⁄8% senior subordinated notes
due 2014, which we refer to as the 83⁄8% Notes, and $16.6 million of our $320.0
million 77⁄8% senior subordinated notes, due 2013, which we refer to as the 77⁄8%
Notes, and recognized a gain on early extinguishment of debt of $18.5 million,
and (ii) converted our $175.0 million senior unsecured loan due 2015, which we
refer to as the Senior Unsecured Loan, into our $175.0 million 101⁄2% senior
notes, due 2016, which we refer to as the 101⁄2% Notes, and recognized a $4.2
million loss on early extinguishment debt.




In 2007,
we: (i) retired the remaining $10.5 million of our 95⁄8% senior notes due 2012,
which we refer to as the 95⁄8% Notes, (ii) executed a tender offer for repayment
on March 19, 2007 of $20.9 million of our 83⁄8% Notes, and (iii) the refinancing
of our existing $525.0 million senior secured credit facilities, which we refer
to as the Credit Facilities, in connection with the Cadmus acquisition, for
which we incurred losses on early extinguishment of debt of $9.3
million.




11


In June
2006, we incurred a $32.7 million loss on early extinguishment of debt related
to our debt refinancing.




Income
Taxes





Years
      EndedJanuary
      3, 2009
                              
                              December
      29, 2007
                              
                              December
      30, 2006(in
      thousands)Income
      tax expense (benefit) for U.S. operations
                              $
                              (17,969
                              )
                              $
                              11,903
                              
                              $
                              (21,418
                              )Income
      tax (benefit) expense for foreign operations
                              
                              (643
                              )
                              
                              (2,003
                              )
                              
                              280Income
      tax expense (benefit)
                              $
                              (18,612
                              )
                              $
                              9,900
                              
                              $
                              (21,138
                              )Effective
      income tax rate
                              
                              (5.9
                              )%
                              
                              29.2
                              %
                              
                              (65.5
                              )%




In 2008,
we had an income tax benefit of $18.6 million, which primarily relates to the
$42.1 million income tax benefit recorded in connection with the non-cash
goodwill impairment charges, offset in part by taxes on our domestic operations.
Our effective tax rate in 2008 was lower than the federal statutory rate,
primarily due to non-deductible goodwill, offset in part by state
taxes.




In 2007,
we had income tax expense of $9.9 million, which primarily relates to taxes on
our domestic operations.  Our effective tax rate in 2007 was lower
than the statutory rate primarily due to release of valuation allowances. See
the Critical Accounting Matters section of this MD&A.





In 2006,
we had an income tax benefit of $21.1 million, which included $0.2 million of
taxes on our Canadian operations, $3.2 million of taxes relating to the
deconsolidation of our U.S. income tax group, $0.4 million of state and local
taxes and the recognition of deferred tax assets of $24.9 million. During 2006,
we provided income taxes for our Canadian operations at an effective rate of
approximately 34.0%.




Income (Loss) from Discontinued
Operations, net of taxes. Income from discontinued
operations for 2007 includes the $17.0 million gain on sale of our remaining
interest in the Supremex Income Fund, which we refer to as the Fund, on March
13, 2007, net of taxes of $8.4 million, and equity income related to our
retained interest in the Fund from January 1, 2007 through March 13, 2007.
Income from discontinued operations for 2006 primarily represents the revenues
and expenses of Supremex, which we sold to the Fund on March 31, 2006, and does
not include an allocation of interest expense on our debt. Income from
discontinued operations for 2006 includes the gain on the sale of Supremex of
$113.5 million, net of taxes of $22.5 million and equity income pertaining to
our retained interest in the Fund from April 1, 2006 through December 30,
2006.





Segment
Operations





Our Chief
Executive Officer monitors the performance of the ongoing operations of our two
reportable segments. We assess performance based on net sales and operating
income. The summaries of net sales and operating income of our two reportable
segments have been presented to show each segment without the sales of divested
operations, as applicable, and to show the operating income of each reportable
segment.





Envelopes,
Forms and Labels


Years
      EndedJanuary
      3,
                2009
              
              December
      29, 2007
              
              December
      30, 2006(in
      thousands)Segment
      net
      sales
              $
              916,145
              
              $
              897,722
              
              $
              780,696Segment
      operating income
      (loss)
              $
              (40,979
              )
              $
              117,342
              
              $
              82,753Operating
      income (loss)
      margin
              
              (4.5
              )%
              
              13.1
              %
              
              10.6
              %Items
      included in segment operating income:Restructuring
      and impairment charges
              $
              174,178
              
              $
              11,350
              
              $
              18,336





Segment
Net Sales





Segment
net sales for our envelopes, forms and labels segment increased $18.4 million,
or 2.1% in 2008, as compared to 2007. This increase was primarily due to: (i)
the $77.6 million of sales generated from the integration of Commercial Envelope
and Printegra into our operations in 2008, including the impact of sales changes
for work transitioned into these acquired operations from other legacy plants,
as Printegra and Commercial Envelope were not included in our results for a full
year in 2007, and (ii) higher sales of approximately $31.6 million, primarily
due to material price increases that have historically been passed onto our
customers, net of changes in product mix. This increase was offset in part by


12


lower
sales volume of approximately $90.8 million, primarily due to general economic
conditions which have had a significant impact on our envelope, forms and labels
business and the closing of plants in connection with the integration of
Printegra and Commercial Envelope into our operations.





Segment
net sales for our envelopes, forms and labels segment increased $117.0 million,
or 15.0%, in 2007, as compared to the same period in 2006. This increase was
primarily due to $150.3 million of incremental sales generated by Commercial
Envelope and Printegra in 2007, including the impact of sales changes for work
transitioned primarily from a plant closure as a result of the Commercial
Envelope acquisition, with no corresponding amounts in 2006 and additional sales
generated by Rx Technology, which was not included in our results for a full
year in 2006. This increase was offset in part by: (i) lower sales volume of
approximately $21.7 million, primarily from our envelope operations due to the
reorganization and closing of operations and the retirement of less efficient
assets to maximize profitability, a decline in the overall market due in part to
the U.S. Postal Service’s rate increases in the middle of the second quarter of
2007, the closure of a forms plant in connection with the integration of
Printegra’s operations, and an overall decline in the traditional documents
business, mainly as a result of customers’ improved ability to print high
quality documents on their own, offset in part by higher sales volume from the
office product retail superstore market due to a shift toward generic products
from custom products, and (ii) lower pricing and product mix of approximately
$11.6 million, primarily from our envelope operations and the office product
retail superstore market due to a shift toward generic products, offset in part
by improvement in the product mix from our documents operation to higher value
added products.





Segment
Operating Income




Segment
operating income for our envelopes, forms and labels segment decreased $158.3
million, or 134.9%, in 2008, as compared to 2007. This decrease was primarily
due to: (i) increased restructuring and impairment charges of $162.8 million,
primarily due to the $168.4 million goodwill impairment charge, (ii) higher
selling, general and administrative expenses of $3.2 million primarily due to
the acquisition of Commercial Envelope and Printegra, which were not included in
our results for a full year in 2007, offset in part by our cost reduction
programs, and (iii) higher amortization expense of $1.9 million primarily due to
the acquisition of Commercial Envelope and Printegra. These decreases were
partially offset by increased gross margins of $9.6 million primarily due to the
acquisition of Commercial Envelope and Printegra, which were not included in our
results for a full year in 2007, and our cost savings programs, offset in part
by higher material costs primarily due to material price increases and higher
distribution costs.




Segment
operating income for our envelopes, forms and labels segment increased $34.6
million, or 41.8%, in 2007, as compared to 2006. This increase was primarily due
to $16.1 million of operating income generated by Commercial Envelope and
Printegra in 2007, with no corresponding amounts in 2006 and additional
operating income generated by Rx Technology since it was not included in our
results for a full year in 2006, improved gross margins of $3.4 million and
reduced selling, general and administrative expenses of $8.1 million from plant
consolidations and our cost reduction programs and reduced restructuring and
impairment charges of $7.0 million.





Commercial
Printing


Years
      EndedJanuary
      3,
                  2009
                
                December
      29, 2007
                
                December
      30, 2006(in
      thousands)Segment
      net
      sales
                $
                1,182,549
                
                $
                1,148,994
                
                $
                730,528Divested
      operations
                
                —
                
                
                —
                
                
                (9,355
                )Division
      net
      sales
                $
                1,182,549
                
                $
                1,148,994
                
                $
                721,173Segment
      operating income
      (loss)
                $
                (136,828
                )
                $
                55,085
                
                $
                13,606Operating
      income (loss)
      margin
                
                (11.6
                )%
                
                4.8
                %
                
                1.9
                %Items
      included in segment operating income:Restructuring
      and impairment charges
                $
                217,568
                
                $
                28,279
                
                $
                21,560Operating
      loss from divested operations
                
                —
                
                
                —
                
                
                (1,375
                )





Division
Net Sales




Division
net sales for our commercial printing segment increased $33.6 million, or 2.9%,
in 2008, as compared to 2007. This increase was primarily due to the $172.3
million of sales generated from the integration of Rex, ColorGraphics and Cadmus
into our operations in 2008, including the impact of sales changes for work
transitioned into these acquired operations from other legacy plants, including
two plants we closed in 2007, as Rex was not included in our results in 2007 and
Cadmus and ColorGraphics were not included in our results for a full year in
2007. This increase was partially offset by lower sales of approximately: (i)
$41.7 million resulting from other plant closures in 2007, and (ii) $97.0
million resulting


13




from
pricing pressures, volume declines, and changes in product mix, primarily due to
the general economic conditions, and foreign currency fluctuations, offset in
part by higher sales due to material price increases.




Division
net sales for our commercial printing segment increased $427.8 million, or
59.3%, in 2007, as compared to 2006. This increase was primarily due to the
$479.6 million of incremental sales generated by ColorGraphics and Cadmus in
2007, including the impact of sales changes for work transitioned primarily from
two plants that we closed as a result of the ColorGraphics acquisition, with no
corresponding amounts in 2006. This increase was offset by the impact of closed
plants in 2007 and 2006 of approximately $37.8 million and lower sales due to
pricing and product mix and lower sales volume, partially offset by paper price
increases and foreign currency fluctuations.





Segment
Operating Income





Segment
operating income for our commercial printing segment decreased $191.9 million,
or 348.4%, in 2008, as compared to 2007. This decrease was primarily due to: (i)
increased restructuring and impairment charges of $189.3 million, primarily due
to the $204.4 million goodwill impairment charge, (ii) higher selling, general
and administrative expenses of $1.3 million, primarily due to the acquisition of
Rex, ColorGraphics and Cadmus, for which Rex was not included in our results in
2007 and for which ColorGraphics and Cadmus were not included in our
results for a full year in 2007, offset in part by our cost savings programs,
and (iii) higher manufacturing costs due to material price increases and higher
distribution costs, offset in part by decreased gross margins of $4.7 million,
primarily due to the acquisition of Rex, ColorGraphics and Cadmus, as Rex was
not included in our results in 2007 and for which Cadmus and ColorGraphics were
not included in our results for a full year in 2007, and lower gross margins due
to plant closures. These decreases were offset in part by lower amortization
expense of $3.3 million.





Segment
operating income for our commercial printing segment increased $41.5 million, or
304.9%, in 2007, as compared to 2006. This increase was primarily due to: (i)
$33.1 million of operating income generated by ColorGraphics and Cadmus during
2007, with no corresponding amounts in 2006, (ii) improved gross margins of
approximately $8.1 million and reduced selling, general and administrative
expenses of $5.9 million from our cost reduction programs at our ongoing
operations, and (iii) reduced costs of approximately $1.1 million from plants we
closed or divested in 2006. These increases were partially offset by increased
restructuring and impairment charges of $6.7 million.





Corporate Expenses. Corporate expenses include
the costs of running our corporate headquarters. Corporate expenses were higher
in 2008, as compared to 2007, primarily due to increased stock-based
compensation, and the $6.7 million non-recurring charge incurred for
professional fees in connection with the internal review conducted by our audit
committee, offset in part by other lower net costs.  Corporate
expenses in 2007 were fairly consistent with 2006.





Restructuring, Impairment and Other
Charges. In 2008,
we continued our 2007 Plan. We anticipate substantially completing the
integration of those operations into our operations in 2009. As a result of
actions taken to date under this plan, we closed seven manufacturing facilities.
In 2008 under this plan, we reduced headcount by approximately 1,200. In the
fourth quarter 2007, we completed our 2005 Plan, that among other things,
included consolidating our purchasing activities and manufacturing platform with
the closure of two manufacturing facilities in 2007 that were integrated into
existing operations, reducing corporate and field human resources, streamlining
our information technology infrastructure and eliminating discretionary
spending.  As of January 3, 2009, our total restructuring liability
was $13.7 million.





2008.During 2008, we incurred
$399.1 million of restructuring, impairment and other charges, which included
non-cash goodwill impairment charges of $372.8 million, a $6.7 million
non-recurring charge for professional fees related to the internal review
initiated by our audit committee, $9.2 million of employee separation costs,
asset impairment charges, net of $2.3 million, equipment moving expenses of $1.5
million, lease termination expenses of $2.9 million, pension withdrawal income
of ($0.2) million and building clean-up and other expenses of $3.9 million. We
anticipate lower restructuring and impairment charges in 2009.


During
the fourth quarter of 2008, our reporting units experienced declines in their
net sales, gross profit and operating income on a comparable basis with the
third quarter of 2008. Historically, the fourth quarter has been our strongest
quarter for net sales, gross profit and operating income for our reporting
units.  These declines primarily resulted from reduced sales volume
across our business platform due to the effects of the current economic downturn
that exacerbated in late 2008, as our customers began reducing their print
related spend and pricing pressure that intensified from competitors who began
pricing print work at or below breakeven levels. As a result of these volume
declines, we lowered our estimates of future cash flows for our reporting
units.





2007. During 2007, we incurred
$40.1 million of restructuring and impairment charges, which included $10.2
million of employee separation costs, $12.0 million of asset impairment charges,
net, equipment moving expenses of $3.9 million, a pension withdrawal liability
of $2.1 million, lease termination expenses of $5.4 million, and building
clean-up and other expenses of $6.5 million.





2006. During 2006, we incurred
$41.1 million of restructuring and impairment charges, which included $19.9
million of employee separation costs, $3.6 million of asset impairments, net,
equipment moving expenses of $6.4 million, lease termination costs of $4.0
million and building clean-up and other expenses of $7.2
million.


14




Liquidity
and Capital Resources




Net Cash Provided by Continuing
Operating Activities. Net cash provided by
continuing operating activities was $209.8 million in 2008, which was primarily
due to net income adjusted for non-cash items of $141.3 million and a source of
cash from a decrease in our working capital of $74.1 million. The decrease in
our working capital primarily resulted from a decrease in receivables, primarily
due to the timing of collections from our customers and lower sales in the
fourth quarter of 2008 as compared to the same period in 2007.





Net cash
provided by continuing operating activities was $86.2 million in 2007, which was
primarily due to net income adjusted for non-cash items of $146.6 million,
offset in part by a use of cash from an increase in our working capital of $50.6
million. The increase in our working capital primarily resulted from an increase
in receivables primarily due to the timing of collections and increased sales
from our 2007 Acquisitions, lower accrued compensation and related liabilities
and the timing of payments for restructuring activity.





Net Cash Provided by Discontinued
Operating Activities. Represents the net cash
provided from the cash dividends of $2.2 million and $6.2 million received from
the Fund in 2007 and 2006, respectively, and the operations of Supremex through
March 31, 2006.




Net Cash (Used in) Provided by
Investing Activities.Net cash used in investing
activities was $82.1 million in 2008, primarily resulting from capital
expenditures of $49.2 million and the cost of business acquisitions of $47.4
million, primarily for Rex, offset in part by $18.3 million of proceeds from the
sale of property, plant and equipment.


Our debt
agreements limit capital expenditures to $65 million in 2009 plus any unused
permitted amounts from 2008. We estimate that we will spend approximately $25
million on capital expenditures in 2009, before considering proceeds from the
sale of property, plant and equipment.  Our primary sources for our
capital expenditures are cash generated from operations, proceeds from the sale
of property, plant and equipment, and financing capacity within our current debt
arrangements.  These sources of funding are consistent with prior
years’ funding of our capital expenditures.


Net cash
used in investing activities was $579.5 million in 2007, primarily resulting
from the $627.3 million cost of the 2007 Acquisitions and capital expenditures
of $31.5 million, offset in part by $73.6 million of cash proceeds from the sale
of our remaining interest in the Fund and proceeds from the sale of property,
plant and equipment of $8.9 million.




Net Cash Provided by (Used in)
Financing Activities. Net cash used in financing
activities was $132.5 million in 2008, primarily resulting from the conversion
of the Senior Unsecured Loan, net repayments under our $200.0 million six-year
revolving credit facility, which we refer to as the Revolving Credit Facility,
of $83.2 million, repurchases of $19.6 million of our 83⁄8% Notes, payments of our
other long-term debt of $18.9 million, repurchases of $10.6 million of our 77⁄8%
Notes, repayments of our $600.0 million six-year term loan facility due 2013,
which we refer to as the Term Loan C, and our $125.0 million delayed-draw term
loan facility, which facility collectively with the Term Loan C we refer to as
the Term Loans, of $7.2 million and $5.3 million for the payment of debt
issuance costs on the issuance of our 101⁄2% Notes, which was offset in part by
the proceeds from the issuance of our $175.0 million 101⁄2% Notes and $12.9
million of borrowings of other long-term debt.





Net cash
provided by financing activities was $496.2 million in 2007, primarily due to
the increased borrowings to finance the acquisition of Cadmus, ColorGraphics and
Commercial Envelope and our refinancing, using proceeds from our Term Loans of
$720.0 million, the Senior Unsecured Loan and net borrowings under our Revolving
Credit Facility of $75.7 million, offset in part by the repayment of: (i) our
$325.0 million seven-year term loan facility, which we refer to as the Term Loan
B, of $324.2 million, (ii) the Cadmus revolving senior bank credit facility of
$70.1 million, (iii) $20.9 million of our 83⁄8% Notes, (iv) $10.5 million of our
95⁄8% Notes, (v) $4.9 million of Term Loans, and (vi) $29.1 million of other
long-term debt and $8.0 million of payments of refinancing fees, redemption
premiums and expenses on the extinguishment of debt and $5.9 million of debt
issuance cost payments in connection with our debt refinancing and the issuance
of debt.





Cash
provided by continuing operating activities is generally sufficient to meet
daily disbursement needs.  On days when our cash receipts exceed
disbursements, we reduce our Revolving Credit Facility balance or place excess
funds in conservative, short-term investments until there is an opportunity to
pay down debt.  On days when our cash disbursements exceed cash
receipts, we use invested cash balances and/or our Revolving Credit Facility to
fund the difference. As a result, our daily Revolving Credit Facility balance
fluctuates depending on working capital needs.  Regardless, at all
times we believe we have sufficient liquidity available to us to fund our cash
needs.





15


Contractual Obligations and
Commitments. The
following table details our significant contractual obligations and commitments
as of January 3, 2009 (in thousands):





Payments
      Due
              
              Long-Term
                Debt(1)
              
              Operating
                Leases
              
              Other
                Long-Term
                Obligations(2)
              
              Purchase
                Commitments
                and
      Other(3)
              
              Total2009
              
              $
              115,127
              
              $
              29,779
              
              $
              29,101
              
              $
              10,631
              
              $
              184,6382010
              
              
              99,801
              
              
              21,651
              
              
              21,411
              
              
              —
              
              
              142,8632011
              
              
              86,397
              
              
              16,357
              
              
              20,796
              
              
              —
              
              
              123,5502012
              
              
              82,020
              
              
              11,236
              
              
              1,869
              
              
              —
              
              
              95,1252013
              
              
              1,043,287
              
              
              9,392
              
              
              1,511
              
              
              —
              
              
              1,054,190Thereafter
              
              
              282,801
              
              
              22,493
              
              
              78,171
              
              
              —
              
              
              383,465Total
              
              $
              1,709,433
              
              $
              110,908
              
              $
              152,859
              
              $
              10,631
              
              $
              1,983,831





(1)
            Includes
      estimated interest expense over the term of long-term debt with variable
      rate debt having an average interest rate of approximately
      3.4%.


(2)
            Includes
      pension and other postretirement benefit obligations, anticipated worker’s
      compensation claims, restructuring liabilities, including interest expense
      on lease terminations, income tax contingencies and derivative
      liabilities.


(3)
            Purchase
      commitments and other consists primarily of payments for equipment and
      incentive payments to customers.




Long-Term Debt. Our total
outstanding long-term debt, including current maturities, was approximately $1.3
billion as of January 3, 2009, a decrease of $138.3 million from December 29,
2007. This decrease was primarily due to: (i) paying down our debt with cash
flows provided by operating activities and proceeds from the sale of assets, and
(ii) the repurchase of a portion of our 77⁄8% Notes and 83⁄8% Notes during the
fourth quarter of 2008. As of January 3, 2009, approximately 90% of our
outstanding debt was subject to fixed interest rates. From time to time we may
seek to retire our outstanding debt through open market purchases, privately
negotiated transactions or otherwise. Such repurchases, if any, will depend on
prevailing market conditions, our liquidity requirements, contractual
restrictions and other factors. See the remainder of this Long-Term Debt section
that follows. As of March 6, 2009, we had approximately $103.5
million borrowing availability under our revolving credit
facility.




101⁄2%
Notes




On June
13, 2008, we issued our 101⁄2% Notes upon the conversion of our Senior Unsecured
Loan.  The 101⁄2% Notes were then sold to qualified institutional buyers
in accordance with Rule 144A under the Securities Act of 1933, and to certain
non-U.S. persons in accordance with Regulation S under the Securities Act of
1933.  We did not receive any net proceeds as a result of this
transaction.




The 101⁄2%
Notes were issued pursuant to an indenture among us, certain subsidiary
guarantors and U.S. Bank National Association, as trustee. The 101⁄2% Notes pay
interest semi-annually on February 15 and August 15, commencing August 15, 2008.
The 101⁄2% Notes have no required principal payments prior to their maturity on
August 15, 2016.  The 101⁄2% Notes constitute senior unsecured
obligations and are guaranteed by us and substantially all of our subsidiaries.
We can redeem the 101⁄2% Notes, in whole or in part, on or after August 15, 2012,
at redemption prices ranging from 100% to 1051⁄4%, plus accrued and unpaid
interest. In addition, at any time prior to August 15, 2011, we may redeem up to
35% of the aggregate principal amount of the notes originally issued at a
redemption price of 1101⁄2% of the principal amount thereof, plus accrued and
unpaid interest with the net cash proceeds of certain public equity offerings.
Each holder of the 101⁄2% Notes has the right to require us to repurchase such
holder’s notes at a purchase price of 101% of the principal amount thereof, plus
accrued and unpaid interest thereon, upon the occurrence of certain events
specified in the indenture that constitute a change in control. The 101⁄2% Notes
contains covenants, representations, and warranties substantially similar to our
77⁄8% Notes and our 83⁄8% Notes, and also include a senior secured debt to
consolidated cash flow covenant.




Senior
Unsecured Loan





On August
30, 2007, we borrowed $175.0 million under an eight-year unsecured loan facility
with a group of lenders. Proceeds from the Senior Unsecured Loan along with
borrowings from the Revolving Credit Facility, and available cash were used to
fund the acquisition of Commercial Envelope, including retiring certain acquired
debt, and to pay certain fees and expenses incurred in connection with the
acquisition. The Senior Unsecured Loan had a floating interest rate based on the
London Interbank Offered Rate, which we refer to as LIBOR, plus an interest rate
margin. The Senior Unsecured Loan provided for the conversion by the lenders
into senior or senior subordinated exchange notes, which we refer to as the
Exchange Notes, similar to the existing indenture relating to our 77⁄8% Notes, or
a substantially similar indenture.  The Senior Unsecured Loan
contained covenants, representations, and warranties substantially similar to
our existing $925.0 million senior
secured credit facilities, which we refer to as the Amended Credit Facilities,
and included provisions for an underwriting/purchase agreement and a
registration rights agreement relating to the resale of the Exchange
Notes.


16




Term
Loan and Revolving Credit Facility




On March
7, 2007, in connection with the Cadmus acquisition, we amended and refinanced
our Credit Facilities. The Credit Facilities, established in June 2006, were
comprised of the Revolving Credit Facility, and the Term Loan B. The Credit
Facilities were amended by increasing the overall borrowing availability from
$525.0 million to $925.0 million to create the Amended Credit Facilities,
allowing us to: (i) retire the Term Loan B, (ii) acquire Cadmus, including
retiring and extinguishing the Cadmus revolving senior bank credit facility
which had an outstanding balance of $70.1 million, using the Revolving Credit
Facility and the Term Loan C, and (iii) retire any and/or all of the 83⁄8% Notes,
tendered to us using the Term Loans. Several of the customary financial
covenants within the Amended Credit Facilities, including maximum consolidated
leverage ratio and minimum consolidated interest coverage ratio, were modified
to provide for the incremental funded debt levels and larger company operations.
The Amended Credit Facilities are secured by substantially all of our
assets.




On July
9, 2007, we increased our then outstanding balance of our Term Loans that are
part of the Amended Credit Facilities by borrowing an incremental $100.0 million
on the existing financial terms and financial covenants.  Proceeds
from this borrowing along with available cash were used to fund the acquisition
of ColorGraphics, including retiring certain acquired debt, and to pay certain
fees and expenses incurred in connection with the acquisition.





83⁄8%
Notes




On March
5, 2007, we commenced a cash tender offer and consent solicitation, which we
refer to as the Cadmus Tender Offer, for any and all of the outstanding 83⁄8%
Notes at total consideration equal to 101.5% of outstanding principal plus any
accrued and unpaid interest thereon for 83⁄8% Notes validly tendered and not
withdrawn by March 16, 2007. Interest on the 83⁄8% Notes is payable semi-annually
on June 15 and December 15 with no required principal payments prior to maturity
on June 15, 2014. In connection with the acquisition of Cadmus, we recorded a
$2.8 million increase to the value of the 83⁄8% Notes to record them at their fair
value, which fair value increase is being amortized over the life of the 83⁄8%
Notes.




On March
19, 2007, we paid approximately $20.9 million for the 83⁄8% Notes tendered in the
Cadmus Tender Offer, using $20.0 million of delayed-draw term loan funding under
the Amended Credit Facilities and cash on hand. The merger of Cadmus into Cenveo
was a “change of control” of Cadmus under the 83⁄8% Notes indenture. On March 23,
2007 and in connection with the foregoing change of control, we extended the
scheduled expiration of the Cadmus Tender Offer until April 18, 2007, modified
the offer to purchase each 83⁄8% Note tendered for a price equal to 101.0% of
outstanding principal plus any accrued and unpaid interest, and waived certain
consent-related conditions, which we refer to as the Change of Control Offer. On
April 23, 2007, we settled payment on all 83⁄8% Notes tendered under the Change of
Control Offer, and terminated the remaining amount of the delayed-draw term loan
facility under the Amended Credit Facilities.




During
the fourth quarter of 2008, we purchased in the open market approximately $31.8
million of our 83⁄8% Notes and retired them for $19.6 million plus accrued and
unpaid interest.  In connection with the retirement of these 83⁄8%
Notes, we recorded a gain on extinguishment of debt of $12.6 million, which
included the write off of $0.5 million of above noted fair value increase to the
83⁄8% Notes and $0.1 million of fees.   These open market purchases
were made within permitted restricted payment limits under our debt
agreements.




77⁄8%
Notes




In 2004,
we issued our 77⁄8% Notes, which have semi-annual interest payments due on June 1
and December 1, and no required principal payments prior to maturity on December
1, 2013. We may redeem these notes currently, in whole or in part, at redemption
prices from 103.938% to 100%, plus accrued and unpaid interest.




During
the fourth quarter of 2008, we purchased in the open market approximately $16.6
million of our 77⁄8% Notes and retired them for $10.6 million plus accrued and
unpaid interest.  In connection with the retirement of these 77⁄8%
Notes, we recorded a gain on extinguishment of debt of $5.8 million, which
included the write off of $0.2 million of unamortized debt issuance costs. These
open market purchases were made within permitted restricted payment limits under
our debt agreements.




Supplemental
Indentures




We
entered into supplemental indentures, dated April 16, 2008 and August 20, 2008
to the indenture dated June 15, 2004, among Cadmus, each of the subsidiary
guarantors (as defined therein) and U.S. Bank National Association (as successor
trustee), as trustee, pursuant to which the 83⁄8% Notes were issued.
Simultaneously, we entered into supplemental indentures, dated April 16, 2008
and August 20, 2008 to the indenture dated February 4, 2004 among us, the
guarantors named therein and U.S. Bank National Association, as trustee,
pursuant to which our 77⁄8% Notes were issued. Additionally, on August 20, 2008 we
entered into a supplemental indenture among us, the guarantors named therein and
U.S. Bank


17


National
Association, as trustee, pursuant to which the 101⁄2% Notes were
issued.  These supplemental indentures provide for the addition of
acquisition subsidiaries as guarantors of the 83⁄8%, 77⁄8% and 101⁄2%
Notes.




Other
Debt




Other
debt as of January 3, 2009 primarily consisted of equipment loans. Of this debt,
$9.5 million had variable interest rates with an average interest rate of 3.3%,
while $29.0 million had an average fixed interest rate of 4.9%.




Interest
Rate and Forward Starting Interest Rate Swaps




We enter
into interest rate swap agreements to hedge interest rate exposure of our
notional floating rate debt.  As of January 3, 2009 and December 29,
2007, we had $595.0 million of such interest rate swaps. In June 2009, $220.0
million of these interest rate swaps mature. As a result, in the fourth quarter
of 2008, we entered into $75.0 million notional amounts of forward starting
interest rate swap agreements to partially replace the maturing swap agreements.
As of January 3, 2009, we do not anticipate reclassifying any ineffectiveness
into our results of operations for the next twelve months.




Letters of Credit




On
January 3, 2009, we had outstanding letters of credit of approximately $18.0
million and a de minimis amount of surety bonds related to performance and
payment guarantees. Based on our experience with these arrangements, we do not
believe that any obligations that may arise will be significant.




Debt Covenant
Compliance




As of
January 3, 2009, we were in compliance with all covenants under our debt
agreements. Our
Amended Credit Facilities contain two financial covenants, a maximum
consolidated leverage covenant, which we refer to as our Leverage Covenant and a
minimum consolidated interest coverage ratio, which we refer to as our Interest
Coverage Covenant. As of January 3, 2009 our Leverage Covenant could not exceed
5.25:1.00 and as calculated was 5.06:1.00, while our Interest Coverage Covenant
could not be less than 2.25:1.00 and as calculated was
2.65:1.00. Our Leverage Covenant threshold steps down at the end of
the second quarter of 2009. See Notes
1 and 9 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K.




Under our
current action plans, which include the repayment of debt, we expect to be
compliant with our debt covenants under our debt agreements at the end of each
quarter in 2009 without an amendment.  However, we have decided that
exploring an amendment to our Amended Credit Facilities is a prudent course of
action given the significant economic turmoil and unprecedented uncertainty in
the financial markets. We are currently in discussions with our lead bank about
modifying the terms of our Amended Credit Facilities. Based on discussions with
our lead bank, we expect that an amendment could be concluded in the second
quarter of 2009; however, there can be no assurance that such amendment will be
obtained within that time frame, if at all. We expect any such amendment to
result in upfront fees and higher interest costs. An amendment could also
involve other changes to our Amended Credit Facilities that, while not directly
related to changing the relevant financial covenant measures, may restrict our
operating flexibility.


In the
event we are unable to obtain an amendment, we may need to implement additional
plans, including further reducing our costs and expenditures, improving our cash
flows and paying down additional debt to remain in compliance with our covenants
in 2009.





As of
January 3, 2009, there was no limitation on acquisition debt provided we were in
compliance with our Amended Credit Facilities. As our Amended Credit
Facilities have senior secured position in our capital structure and the most
restrictive covenants, then provided we are in compliance with our Amended
Credit Facilities we also would be in compliance with the senior secured debt to
consolidated cash flow covenant within our 101⁄2% Notes indenture and the debt
incurrence tests within the three subordinated notes indentures. 77⁄8%
Notes, 83⁄8% Notes, 101⁄2% Notes




Credit Ratings





Our
current credit ratings are as follows:


Rating
      Agency
              
              Corporate
                Rating
              
              Amended
                Credit
                Facilities
              
              101⁄2%
                Notes
              
              77⁄8%
                Notes
              
              83⁄8%
                Notes
              
              Outlook
              
              
              Last
      UpdateStandard
      & Poor’s
              
              BB-
              
              BB+
              
              BB-
              
              B
              
              B
              
              Negative
              
              
              October
      2008Moody’s
              
              B1
              
              Ba2
              
              B2
              
              B3
              
              B3
              
              Negative
              
              
              June
      2008





In
October 2008, Standard & Poor's Ratings Services, which we refer to as
Standard & Poor’s, revised its rating outlook on us to negative from stable
while affirming all of our credit ratings. Moody’s Investors Services, which we
refer to as Moody’s, placed us on negative ratings outlook prior to our
acquisition of Cadmus in 2007. We believe the primary factors behind such rating
agency outlooks are our business strategy of pursuing strategic acquisitions and
our debt covenant calculations.





The terms
of our existing debt do not have any rating triggers that impact our funding
availability or influence our daily operations, including planned capital
expenditures. We do not believe that our current ratings will unduly influence
our ability to raise additional capital. Some of our constituents closely track
rating agency actions and would note any raising or lowering of our credit
ratings; however, we believe that along with reviewing our credit ratings,
additional quantitative and qualitative analyses must be performed to accurately
judge our financial condition.




The
current credit markets downturn that began in 2007 and continues through the
date hereof makes raising additional capital expensive for any issuer. We do not
have plans to enter the current credit market for new financing given that we
have no significant debt maturities until 2013. Further, we expect that our
internally generated cash flows and financing available under our Revolving
Credit Facility will be sufficient to fund our working capital needs through
2009; however, this cannot be assured.


18


Since
January 3, 2009, we purchased in the open market $5.0 million of each of our
101⁄2% Notes and 77⁄8% Notes and $17.0 million of our 83⁄8% Notes for $3.3 million,
$3.1 million, and $10.8 million, respectively, plus accrued and unpaid
interest.  In connection with these purchases, in the first quarter of
2009 we will record a gain on early extinguishment of debt of approximately
$10.0 million. These open market purchases were made within permitted restricted
payment limits under our debt agreements.





Share Repurchase Plan. On July
31, 2008, our Board of Directors authorized a program for the repurchase of up
to $15.0 million of our common stock, which we refer to as the Share Repurchase
Plan. The Share Repurchase Plan is effective for 12 months and may be limited or
terminated at any time without prior notice. Share repurchases under the Share
Repurchase Plan may be made through open-market and privately negotiated
transactions within the governing limits of our credit agreement and bond
indentures. The timing and actual number of shares, if any, that we actually
repurchase will depend on a variety of factors including price, Cenveo and/or
regulatory requirements, and market conditions. No purchases had been made under
the Share Repurchase Plan as of January 3, 2009.





Off-Balance Sheet
Arrangements. It
is not our business practice to enter into off-balance sheet arrangements.
Accordingly, as of January 3, 2009 and December 29, 2007, we do not have any
off-balance sheet arrangements.





Guarantees. In connection with the
disposition of certain operations, we have indemnified the purchasers for
certain contingencies as of the date of disposition. We have accrued the
estimated probable cost of these contingencies.





Critical
Accounting Matters





The
preparation of our consolidated 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 the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. We
evaluate these estimates and assumptions on an ongoing basis based on historical
experience and on various other factors which we believe are reasonable under
the circumstances.





We
believe that the following represent our more critical estimates and assumptions
used in the preparation of our consolidated financial statements:





Allowance for Losses on Accounts
Receivable. We
maintain a valuation allowance based on the expected collectability of our
accounts receivable, which requires a considerable amount of judgment in
assessing the current creditworthiness of customers and related aging of past
due balances. As of January 3, 2009 and December 29, 2007, the allowance
provided for potentially uncollectible accounts receivable was $6.0 million and
$9.9 million, respectively. Charges for bad debts recorded to the statement of
operations were $4.7 million in 2008, $5.4 million in 2007 and $4.3 million in
2006. We cannot guarantee that our current credit losses will be consistent with
those in the past. These estimates may prove to be inaccurate, in which case we
may have overstated or understated the allowance for losses required for
uncollectible accounts receivable.





Provision for Impairment of
Long-Lived Assets. We evaluate long-lived
assets, including property, plant and equipment and intangible assets other than
goodwill and indefinite lived intangible assets, for impairment whenever events
or changes in circumstances indicate that the carrying amounts of specific
assets or group of assets may not be recoverable. When an evaluation is
required, we estimate the future undiscounted cash flows associated with the
specific asset or group of assets. If the cost of the asset or group of assets
cannot be recovered by these undiscounted cash flows, we would assess the fair
value of the asset or asset group and if necessary, an impairment charge would
be recorded. Our estimates of future cash flows are based on our experience and
internal business plans. Our internal business plans require judgments regarding
future economic conditions, product demand and pricing. During 2008, 2007 and
2006, in connection with our restructuring and integration programs, we recorded
impairment charges, net on long-lived assets of $2.3 million, $12.0 million and
$3.6 million, respectively. Although we believe our estimates are appropriate,
significant differences in the actual performance of an asset or group of assets
may materially affect our evaluation of the recoverability of the asset values
currently recorded. Additional impairment charges may be necessary in future
years.





Provision for Impairment of Goodwill
and Indefinite Lived Intangible Assets.We evaluate the carrying
value of our goodwill and indefinite lived intangible assets annually at
the beginning of December and whenever events or circumstances make it more
likely than not that an impairment may have occurred. Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets,
prescribes a two-step method for determining goodwill impairment. In the first
step, we compare the estimated fair value of each reporting unit to its carrying
amount, including goodwill. If the carrying amount of a reporting unit exceeds
the estimated fair value, step two is completed to determine the amount of the
impairment loss. Step two requires the allocation of the estimated fair value of
the reporting unit to the assets, including any unrecognized intangible assets,
and liabilities in a hypothetical purchase price allocation. Any remaining
unallocated fair value represents the implied fair value of goodwill, which is
compared to the corresponding carrying value of


19


goodwill
to compute the goodwill impairment amount. In 2008, we recorded non-cash
goodwill impairment charges of $204.4 million and $168.4 million related to our
commercial print and envelope reporting units, respectively. In 2007 and 2006,
we did not record any goodwill impairment charges.





As part
of our 2008 impairment analysis for each reporting unit, we estimated the fair
value of each unit, primarily using the income approach. The income
approach requires management to estimate a number of factors for each reporting
unit, including projected future operating results, economic projections,
anticipated future cash flows, discount rates, and the allocation of shared or
corporate items. The market approach was used as a test of reasonableness of the
conclusions reached in the income approach. The market approach estimates fair
value using comparable marketplace fair value data from within a comparable
industry grouping.




The
determination of the fair value of the reporting units and the allocation of
that value to individual assets and liabilities within those reporting units
requires management to make significant estimates and assumptions. These
estimates and assumptions primarily include, but are not limited to: the
selection of appropriate peer group companies; control premiums appropriate for
acquisitions in the industries in which we compete; the discount rate; terminal
growth rates; and forecasts of net sales, operating income, depreciation and
amortization and capital expenditures. The allocation requires several analyses
to determine the fair value of assets and liabilities including, among others,
trade names, customer relationships, 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 inherent 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. We also compared the sum of the estimated fair
values of the reporting units to our total enterprise value as implied by the
market value of our equity securities. This comparison indicated that, in
total, our assumptions and estimates were not unreasonable. However, future
declines in the overall market value of our equity securities may indicate that
the fair value of one or more reporting units has declined below their carrying
value.





One
measure of the sensitivity of the amount of goodwill impairment charges to key
assumptions is the amount by which each reporting unit had fair value in excess
of its carrying amount or had carrying amount in excess of fair value for the
first step of the goodwill impairment test. For the two reporting units that had
fair value in excess of carrying value, fair value exceeded the carrying amount
by 17% and 171% of their respective estimated fair values. For the two
units that had carrying amount in excess of fair value, the carrying amount
exceeded fair value by 18% and 20% of their respective estimated fair
values. Generally, changes in estimates of expected future cash flows would have
a similar effect on the estimated fair value of the reporting unit. That is, a
1% change in estimated future cash flows would decrease the estimated fair value
of the reporting unit by approximately 1%. Of the other key assumptions that
impact the estimated fair values, most reporting units have the greatest
sensitivity to changes in the estimated discount rate. The discount rate for
each reporting unit was estimated to be 11.0%. A 50 basis point increase in our
estimated discount rates would not have resulted in any additional reporting
units failing step one.





Determining
whether an impairment of indefinite lived intangible assets has occurred
requires an analysis of the fair value of each of the related tradenames.
We determined that there was no impairment of our indefinite lived intangible
assets; however, if our estimates of the valuations of our tradenames prove to
be inaccurate, an impairment charge could be necessary in future
periods.




Our
annual impairment analysis for trade names utilizes a relief-from-royalty method
in which the hypothetical benefits of owning each respective trade name are
valued by discounting hypothetical royalty revenue over projected revenues
covered by the trade names.  We utilized royalty rates of 1.5% to 2.5% for
the use of the subject trade names based on comparable market rates, the
profitability of the product employing the trade name, and qualitative factors,
such as the strength of the name and years in usage.  We utilized a
discount rate of between 12% and 13%, which was based on the weighted average
cost of capital for the respective business plus a premium to account for the
relative risks of the subject trade name.
 
 In order to evaluate the sensitivity
of the fair value calculations for all of our indefinite-lived trade names, we
applied hypothetical 5%, 10% and 15% decreases to the estimated fair value
of our trade names.  Such hypothetical decreases in fair value could
be due to changes in discount rates and/or assumed royalty rates.  These
hypothetical 5%, 10% and 15% decreases in estimated fair value would not have
resulted in an impairment of any of our identifiable indefinite-lived trade
names other than our ColorGraphics trademark, which has a carrying value of
$18.8 million.  The hypothetical estimated fair value decreases for our
ColorGraphics trademark would have resulted in an impairment charge on a pre-tax
basis of approximately $0.8 million at a 10% decrease and $1.8 million at a 15%
decrease.
 Self-Insurance
Reserves. We are
self-insured for the majority of our workers’ compensation costs and health
insurance costs, subject to specific retention levels. We rely on claims
experience and the advice of consulting actuaries and administrators in
determining an adequate liability for self-insurance claims. Our self-insurance
workers’ compensation liability is estimated based on reserves for claims that
are established by a third-party administrator. The estimate of these reserves
is adjusted from time to time to reflect the estimated future development of the
claims. Our liability for workers’ compensation claims is the estimated total
cost of the claims on a fully-developed and discounted basis that considers
anticipated payment patterns. As of January 3, 2009 and December 29, 2007, the
undiscounted liability was $12.4 million and $14.2 million, respectively, and
the discounted liability was $10.5 million and $12.2 million, respectively,
using a 4% discount rate. Workers’ compensation expense incurred in 2008, 2007
and 2006 was $3.2 million, $4.1 million and $5.3 million, respectively, and were
based on actuarial estimates.








20




29, 2007,
respectively, and was estimated based on an analysis of actuarial completion
factors that estimated incurred but unreported liabilities derived from the
historical claims experience. The estimate of our liability for employee
healthcare represents between 45 and 50 days of unreported claims.





While we
believe that the estimates of our self-insurance liabilities are reasonable,
significant differences in our experience or a significant change in any of our
assumptions could materially affect the amount of workers’ compensation and
healthcare expenses we have recorded.





Accounting for Income
Taxes. We are
required to estimate our income taxes in each jurisdiction in which we operate
which includes the U.S., Canada and India. This process involves estimating our
actual current tax expense, together with assessing temporary differences
resulting from differing treatment of items for tax and financial reporting
purposes. The tax effects of these temporary differences are recorded as
deferred tax assets or deferred tax liabilities. Deferred tax assets generally
represent items that can be used as a tax deduction or credit in our tax return
in future years for which we have already recorded an expense in our
consolidated financial statements. Deferred tax liabilities generally represent
tax items that have been deducted for tax purposes, but have not yet been
recorded as an expense in our consolidated financial statements. As of January
3, 2009, we had net deferred tax assets of $3.9 million and as of December 29,
2007, we had net deferred tax liabilities of $32.9 million from our U.S.
operations. The change in U.S. net deferred taxes is primarily due to the $42.1
million deferred tax benefit recorded in connection with our goodwill impairment
charges. As of January 3, 2009 and December 29, 2007, we had foreign net
deferred tax liabilities of $2.0 million and $4.3 million,
respectively.





We assess
the recoverability of our deferred tax assets and, to the extent recoverability
does not satisfy the “more likely than not” recognition criteria under SFAS 109,
record a valuation allowance against the deferred tax assets. We record
valuation allowances to reduce our deferred tax assets to an amount that is more
likely than not to be realized. We considered our recent operating results and
anticipated future taxable income in assessing the need for our valuation
allowance. As a result, in the fourth quarter of 2008 and 2007, we adjusted our
valuation allowance by approximately $1.3 million and approximately $4.6
million, respectively, to reflect the realization of deferred tax
assets.  In connection with the acquisitions of Printegra and
Commercial Envelope, we released valuation allowance against goodwill in the
amounts of $7.4 million and $21.5 million, respectively.  In
connection with the acquisitions of Cadmus and ColorGraphics, we increased our
valuation allowance by $26.6 million and $0.1 million, respectively. In the
fourth quarter of 2007, we released all but $7.5 million of these valuation
allowances against goodwill.





In 2006,
we decreased our valuation allowance by approximately $58.1 million, primarily
as a result of utilizing our net operating loss carryforwards principally
against the gain on sale of Supremex, which is reflected in discontinued
operations. As of December 30, 2006, the total valuation allowance on our net
U.S. deferred tax assets was $55.7 million.





The
remaining portion of our valuation allowance will be maintained until there is
sufficient positive evidence to conclude that it is more likely than not that
our remaining deferred tax assets will be realized. When sufficient positive
evidence occurs, our income tax expense will be reduced to the extent we
decrease the amount of our valuation allowance. The increase or reversal of all
or a portion of our tax valuation allowance could have a significant negative or
positive impact on future earnings. Any reversal of the valuation allowance
related to stock-based compensation will be reflected as a component of
shareholders’ equity and will not affect the future effective income tax
rate.





New
Accounting Pronouncements





We are
required to adopt certain new accounting pronouncements. See Note 1 to the
consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K.


21




Item 9A
of the Original 10-K is amended to read in its entirety as follows:


Item 9A.  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures




Disclosure
controls and procedures are the controls and other procedures of an issuer that
are designed to provide reasonable assurance that information required to be
disclosed by the issuer in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission’s
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that material information required to
be disclosed by an issuer in the reports that it files or submits under the
Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
 
 We have
evaluated, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of
the end of the fiscal year covered by this annual report. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were effective at the
reasonable assurance level, as of the fiscal year end covered by this Annual
Report on Form 10-K.
 
 Management’s
Report on Internal Control Over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange
Act. The Company’s internal control over financial reporting is a process
designed under the supervision of the Company’s Chief Executive Officer and
Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Company’s
financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States. Our internal
control over financial reporting includes policies and procedures that pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of assets; provide reasonable assurances
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the
United States and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of the Company;
and provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.





Management
has conducted an assessment of the effectiveness of the Company’s internal
control over financial reporting based on the framework established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this assessment, management has determined
that the Company’s internal control over financial reporting as of January 3,
2009 is effective.





The
Company’s internal control over financial reporting as of January 3, 2009 has
been audited by Grant Thornton LLP, an independent registered public accounting
firm, as stated in their report appearing on page 80 of the Original
10-K.





Changes
in Internal Controls Over Financial Reporting





There
were no changes in our internal control over financial reporting during the
quarter ended January 3, 2009 that have materially affected or are reasonably
likely to materially affect, our internal control over financial
reporting.





Inherent
Limitations on Effectiveness of Controls





Our
management, including our Chief Executive Officer and our Chief Financial
Officer, does not expect that our disclosure controls or our internal control
over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be
met. Our disclosure controls and procedures are designed to provide reasonable
assurance of achieving their objectives. The design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.


22


PART
III




Item
11 of the Original 10-K is amended to read in its entirety as
follows:


Item 11.   Executive Compensation





Except as
set forth below, this information is included under the captions
“Compensation of Executive Officers,” “Compensation of Directors,” “Compensation
Committee Interlocks and Insider Participation” and “Compensation Committee
Report” in our 2009 Proxy Statement and is incorporated herein by
reference.


Cenveo hereby amends Item 11 (Executive
Compensation) of Part III of its Annual Report on Form 10-K for the year ended
December 31, 2008, which was originally filed by Cenveo with the SEC on March
29, 2009 (the “Original 10-K”), by providing a revised director compensation
table that includes the information called for by Item 402(k)(2) of Regulation
S-K and by amending and restating in its entirety the disclosure under the
caption “Compensation of Executive Officers” that originally appeared on pages
12-17 of the proxy statement for Cenveo’s 2009 annual meeting of shareholders
that was filed with the SEC on April 6, 2009 (the “Proxy
Statement”).  As permitted by SEC rules, the Original 10-K
incorporated the Proxy Statement by reference in order to include the
information called for by Item 11 (Executive Compensation) of Part
III.
  Non-Management
Directors’ Compensation for Fiscal 2008
  The
following table shows the cash compensation and value of equity compensation
received by each of our non-employee directors.
  Name
                    Fees
      Earned or
                      Paid
      in Cash
                      ($)(1)
                    Stock
      Awards
                      ($)(2)
                    Option
      Awards
                      ($)(3)
                    Non-Equity
      Incentive Plan Compensation
                      ($)
                    All
      Other Compensation
                      ($)(4)
                    Total
                      ($)Gerald
      S. Armstrong
                    $54,350
                    $30,376
                    $0
                    -
                    -
                    $84,726Leonard
      C. Green
                    $79,350
                    $101,214
                    $0
                    -
                    -
                    $180,564Mark
      J. Griffin
                    $55,550
                    $30,376
                    $0
                    -
                    -
                    $85,926Robert
      B. Obernier
                    $54,350
                    $30,376
                    $0
                    -
                    -
                    $84,726
 
 (1)
              This
      column reports the amount of cash compensation earned in 2008 for Board
      and committee service, including retainer and meeting
      fees.  Board members may elect to use Board fees to purchase
      Company stock at full purchase price under the terms of the ESPP
      plan.  During 2008, Board members used their Board fees to
      purchase stock at full purchase price as follows: Mr. Green spent $39,675,
      Mr. Griffin spent $55,550 and Mr. Obernier spent
  $54,350.
  (2)
              This
      column represents the dollar amount recognized for financial statement
      reporting purposes with respect to the 2008 fiscal year for the fair value
      of RSUs granted in 2008, in accordance with Financial Accounting Standards
      Board Statement of Financial Accounting Standard No. 123(R) (“FAS
      123R”).  Pursuant to SEC rules, the amounts shown exclude the
      impact of estimated forfeitures realted to service-based vesting
      conditions.  Fair value is calculated using the closing price of
      Cenveo stock on the date of grant.  The grant date fair value of
      the award of 14,226 RSUs granted to each non-management director during
      2008 was $135,005 (calculated using the closing price of Cenveo stock on
      the grant date of $9.49).  These awards were granted on
      September 12, 2008 and are scheduled to vest on the first anniversary of
      the date of grant.  The grant date fair value of an award of
      10,153 RSUs granted to Mr. Green during 2008 was $100,007. This award
      was granted on April 18, 2008 and is scheduled to vest on the first
      anniversary of the date of grant.  At January 3, 2009, with the
      exception of Mr. Green, each non-employee director had 14,226 unvested
      RSUs outstanding; Mr. Green had 24,379 unvested RSUs
      outstanding.  These amounts reflect the Company’s accounting
      expense for the awards and do not correspond to the actual value that will
      be recognized by the directors. Since the RSUs granted to our non-employee
      directors vest on the first anniversary of the date of grant, the fair
      market value of the awards is amortized during the one-year period
      following the date of grant. Accordingly, the amounts set forth in this
      column represent the pro rata portion of such amortization that is
      attributable to the year in which the grants were made. See Note 12 to the
      consolidated financial statements included in Item 8 of this Annual Report
      on Form 10-K.
  (3)
              This
      column represents the dollar amount recognized for financial statement
      reporting purposes with respect to the 2008 fiscal year for the fair value
      of stock options granted in 2008, in accordance with SFAS
      123R.  No options were granted in 2008.  At January 3,
      2009, Dr. Griffin and Mr. Obernier each had 10,000 vested options and zero
      unvested options outstanding; Mr. Green had 5,000 vested options and zero
      unvested options outstanding; and Mr. Armstrong had no option
      awards.
  (4)
              None
      of our non-employee directors received any perquisites or compensation in
      2008 other than cash fees and equity
awards.
 
 23
  COMPENSATION
OF EXECUTIVE OFFICERS
  Compensation
Discussion and Analysis
  Overview
  The goal
of our executive compensation program is the same as our goal for operating the
Company—to create long-term value for our shareholders.  Toward this
goal, we have designed and implemented our compensation programs with the
following objectives:
  ·
              PAY
      FOR PERFORMANCE
 ·
              establish
      a direct relationship between executive compensation and our financial and
      operating performance;
 ·
              provide
      performance-based compensation (including equity awards) that allow
      executive officers to earn rewards for maximizing shareholder
      value;
 ·
              align
      the interests of our executives with those of our
      shareholders;
 ·
              attract
      and retain the executives necessary for our long-term success;
      and
 ·
              reward
      individual initiative and the achievement of specified
    goals.
  Most of
our compensation elements simultaneously fulfill one or more of these
objectives.  The primary elements of our compensation program are
salary, annual incentive bonus, and equity.  We also offer an employee
stock purchase plan, a 401(k) plan, a Key Employee Retention Program (KERP),
severance protection, and certain personal benefits.  In deciding the
type and amount of compensation for each executive, we consider the Company’s
performance, the individual executive’s performance, compensation levels and
equity awards by our peers, the overall competitive environment for executives,
the level of compensation necessary to retain executive talent, our executives’
compensation at their prior employment, and the recommendations of senior
management.
  Base
salary is designed to be commensurate with the executive’s scope of
responsibilities and management experience.  Our annual bonus plan,
Management By Objectives (“MBO”), is designed to reward annual achievements and
effectiveness.  Our equity compensation focuses on motivating and
challenging the executive to achieve superior, longer-term and sustained
results.  It is our intent that more than one-half of the compensation
packages for our most senior executive officers, including the named executive
officers, be incentive-based.  No bonuses are paid unless key
financial objectives are achieved.
  Compensation
Objectives
  The
objectives of our compensation program can be summarized as performance,
alignment, and retention.  Our compensation program is designed to
achieve these goals as follows.
  Performance.Elements of
compensation that depend upon the executive’s and the Company’s performance
include:
  ·
              Bonus:
      Our annual bonus is based solely on achievement by the Company and the
      executive of pre-determined measures such as non-GAAP EPS, adjusted
      EBITDA, free cash flow, margins, and capital expenditures (as defined on
      page 16) that have been communicated to our investors.  No bonus
      is paid unless key financial targets for the award are
  met.
 ·
              Equity
      Awards: Equity incentive compensation in the form of stock options,
      restricted stock and restricted stock units (RSUs) will have a value that
      is contingent upon the performance of theCompany’s share
      price.In
      addition, no equity awards are granted unless we are on track to achieve
      our key financial goals.
 ·
              Key
      Employee Retention Program (KERP):  In 2008, the Company put in
      place a KERP to ensure that it retains the services of managers who the
      Board has determined are critical to the long-term performance of the
      Company.  Under the KERP, a participant is awarded a specified
      dollar award that is paid out in equal monthly installments over a minimum
      of two years.  KERP awards are not vested and any participant
      who leaves the Company forfeits the unpaid portion of the
      award.
   24
  Alignment.We
seek to align the interests of our executive officers with those of our
investors by evaluating executive performance on the basis of key financial
measurements that we believe closely correlate to shareholder value, including
non-GAAP EPS, and Adjusted EBITDA. These factors represent a major component of
the goals used to determine annual bonuses. The element of compensation that
most directly aligns the interests of our executive officers with shareholders
is equity incentive compensation, which links a significant portion of
compensation to shareholder value because the total value of those awards over
time corresponds to stock price appreciation.  The Company has a
policy requiring that named executive officers and other senior management of
the Company own a multiple of their salary in the Company’s stock. Such
alignment is also facilitated by our employee stock purchase plan, which allows
all of our employees and directors to purchase shares of the Company’s stock at
market prices, but without paying brokerage commissions, by means of deductions
from pay, and by our 401(k) plan, pursuant to which all employees may purchase
shares of the Company’s stock on a pre-tax basis.  We do not have a
401(k) match, except as required under existing collective bargaining
agreements.
  Retention.We
attempt to retain our executives who meet our performance standards by providing
competitive compensation packages and by having equity compensation awards vest
over a four-year period.  We also retain our executives with KERP
awards and by rewarding exceptional performance with advancement opportunities
within the Company.  Over 75 of our senior managers have worked with
Mr. Burton in other printing companies.
  Implementing
Our Objectives
  Determining
Compensation.The Compensation Committee (the “Committee”)
relies on its judgment in making compensation decisions, after reviewing the
performance of the Company and the recommendations of management and evaluating
an executive’s performance during the year against established goals,
operational performance, business responsibilities, current compensation
arrangements and long-term potential to enhance shareholder
value.  Specific factors affecting compensation decisions for our
executive officers, in accordance with the executive’s expected and accomplished
role in each, include:
  ·
              key
      financial measurements such as non-GAAP EPS and Adjusted EBITDA, which are
      the measures specifically used in our executive incentive bonus
      program;
 ·
              strategic
      objectives such as acquisitions and
  dispositions;
 ·
              promoting
      commercial excellence by continuously improving products and services,
      being a leading market player and attracting and retaining
      customers;
 ·
              achieving
      specific operational goals for the Company or particular business or
      business unit led by the named
executive;
 ·
              achieving
      excellence in their organizational structure and among their employees;
      and
 ·
              supporting
      our values by promoting a culture of integrity through compliance with law
      and our ethics policies, as well as commitment to
    diversity.
 
 Although
our compensation philosophy intends that more than one-half of the compensation
packages for our most senior executive officers be incentive-based, we
incorporate flexibility into our compensation programs and in the assessment
process to respond to and adjust for the evolving business
environment.  We consider competitive market compensation paid by
other companies, but we do not attempt to maintain a certain target percentile
within a peer group or otherwise rely on that data to determine executive
compensation. The companies we use to define the market for executive
compensation purposes include a broad range of printing and publishing companies
similar in revenue size to Cenveo, as well as certain other printing companies
that are our direct competitors.  In addition, comparative market
compensation data are collected from general industry compensation
surveys.
 
 We strive
to achieve an appropriate mix between equity incentive awards and cash payments
in order to meet our objectives.  Any apportionment goal is not
applied rigidly and does not control our compensation decisions; we use it as
another tool to assess an executive’s total pay opportunities and whether we
have provided the appropriate incentives to accomplish our compensation
objectives.  The magnitude and mix of compensation elements are
designed to reward recent results and motivate long-term performance through a
combination of cash and equity incentive awards.  We also seek to
balance compensation elements that are based on financial, operational and
strategic metrics with others that are based on the performance of the Company’s
stock.
  25
  Role of
Compensation Committee and CEO.  The Committee
oversees the design, development and implementation of the compensation program
for the CEO and the other named executives.  The Committee evaluates
the performance of the CEO and determines CEO compensation in light of the goals
and objectives of the compensation program.  Although the Committee
makes all compensation decisions regarding the named executive officers and
approves the measurements  relating to bonus payments and equity
awards, the Committee relies in part on the recommendations of the CEO in its
decision-making.  The CEO receives and reviews formal self-appraisals
and departmental personnel appraisals from department heads and submits them
with his comments to the Committee for decision-making. The financial goals for
participants in the executive bonus program include key financial targets for
the Company publicly announced to the market by our CEO in our year-end earnings
calls. These targets are approved by our full Board of Directors.  The
CEO also, in conjunction with senior human resource executives, annually reviews
the performance of each of the executives participating in the executive bonus
program, the results of which also are submitted to the Committee.
Notwithstanding the CEO’s active role in the Committee’s compensation process,
the Committee evaluates all information and recommendations submitted to it and
independently makes its compensation determinations.
  Role of
Compensation Consultant.Neither the Company nor the Committee
has formally used the services of any compensation consultant in matters
affecting senior executive or director compensation.
  Employment
and Severance Arrangements.Our CEO has an employment agreement
that provides for his employment by Cenveo through December 31, 2012, subject to
automatic one-year renewals absent notice of non-renewal by either party at
least 90 days before the end of the term. In order to assure continuity of
management while the Company pursues its goals over the next several years, the
employment agreement was amended on February 27, 2008 to extend Mr. Burton’s
employment by Cenveo through that date.  The employment agreement was
amended on December 30, 2008 in order to comply with regulations issued under
Section 409A of the Internal Revenue Code (IRC).  The employment
agreement, as amended, also provides for an annual base salary of at least
$1,100,000, a target bonus opportunity of 300% of base salary to be earned on an
“all or nothing” basis, so that our CEO will not be entitled to any bonus unless
all of the key financial goals are satisfied, and certain personal benefits.Our other named executives have
employment agreements that provide for severance in the event the Company
terminates their employment without cause or they terminate their employment for
good reason.   If the Company terminates a named executive’s
employment “without cause,” or if the named executive terminates his employment
for “good reason,” each as defined in the agreement, the executive’s severance
would include a lump sum severance payment, COBRA coverage for a specified
period and immediate vesting of all outstanding stock options and other equity
grants, each in the amounts specified under “Employment Agreements” onpage 23of the proxy statement for our 2009
annual meeting of shareholders.
 
 We
believe that providing this level of financial security is a key factor in
enabling us to attract and retain high-performing executives, and also serves as
protection to the Company upon termination of the named executives’ employment
with the Company.  The employment agreements each contain
non-competition and non-solicitation agreements on the part of the executives
that match or exceed the time period for which severance is paid.
  Stock Ownership
Requirements.In order to ensure that
the Company’s managers have a stake in the success of the Company, and to
further align management with the Company’s other shareholders, the Company has
instituted a policy requiring that named executive officers and other senior
management of the Company own specified values of the Company’s
stock.  The levels are calculated as a multiple of the manager’s base
salary, and managers are given five years to reach their ownership
levels.  The levels are as follows:  Chairman and CEO – five
times base salary; President, Executive Vice Presidents and Senior Vice
Presidents – three times base salary; and Vice Presidents – two times base
salary.
  In 2008 alone, our CEO purchased over
$4,397,000 in the Company’s stock.  Our other named executive officers
have also invested substantial amounts in the Company’s stock.  For
their current stock ownership, see Ownership of Voting Securitieson page 9of the
proxy statement for our 2009 annual meeting of
shareholders.
  Equity Grant
Practices.The exercise price of
each stock option awarded to our senior executives and other employees under our
long-term incentive plan is the closing price of the Company’s stock on the date
of grant.  We expect that annual grants will be made on the same day
of every year – September 12, the anniversary of the date the
   26
  current
management assumed control of Cenveo.  In 2008, the Company began
granting 50% of the MBO awards for senior management in stock in order to
further align the interests of management and shareholders.  The first
such grants were made in May 2008 and the Company expects that such grants will
continue to be made in May each year.  In addition, in 2008, the
Company awarded special grants to one director and three executives to
compensate them for extraordinary services.  We do not reprice stock
options.
  Tax Deductibility
of Compensation.Section 162(m) of the IRC imposes a $1
million limit on the amount that a public company may deduct for compensation
paid to the company’s CEO or any of certain other executive
officers.  This limitation does not apply to compensation that meets
the requirements under Section 162(m) for “qualifying performance-based”
compensation (i.e., compensation paid only if the individual’s performance meets
pre-established objective goals based on performance criteria approved by
shareholders).  We consider ways to maximize deductibility of
executive compensation, but the compensation committee retains the flexibility
to compensate executive officers in a manner commensurate with performance and
the competitive environment for executive talent regardless of the ultimate
deductibility of such compensation.  Our current long-term equity
incentive plan is structured to give the compensation committee the flexibility
to grant awards that qualify as performance-based under Section 162(m) as well
as awards that do not qualify.
  Elements
Used to Achieve Compensation Objectives
  Annual
Cash Compensation
  Base
Salary. The
Committee periodically reviews the base salary of the Chief Executive Officer
and his direct reports. The Committee considers various factors in assessing
specific salaries, including the executive’s historical performance and future
potential, job content, level of responsibility, comparisons with peers within
and outside the Company, salary before joining Cenveo, and accountability. Base
salaries for senior officers of the Company, including the named executive
officers, are not routinely increased, which is consistent with the Company’s
philosophy that a significant part of executives’ compensation should be
contingent on the achievement of performance objectives.
  Annual Incentive
Bonus – Management By Objectives.Potential payout amounts (expressed as
a percentage of salary) under our MBO bonus plan are established by the
Committee early in the fiscal year, after assessing recommendations of
management and considering the factors used to determine base
salary.  At that time, the Committee also approves the use of the
Company-based key financial goals that apply to all of the named executives, as
well as specific qualitative and quantitative goals within each executive’s area
of responsibility.  If shareholders approve the amendment of the 2007
Plan, the Committee intends to grant a portion of the performance-vested MBO
awards in Cenveo RSUs rather than in cash.  At the end of each year,
the CEO reviews the Company’s full-year financial results against the financial
and other goals set by the Committee for the year. No bonus is paid unless the Company-based key financial
goals for the award are satisfied. The CEO recommends to the Committee
the specific bonus payout for each of the named executives other than himself
based on the levels of achievement of the criteria established by the
Committee.  The Committee has the discretion to increase or decrease
the bonus from the CEO’s recommendation.  The Committee does not have
discretion to increase the bonus to an amount greater than the maximum amount
payable upon achievement of applicable performance targets.
  The
salaries and annual incentive bonuses paid to the named executive officers for
2008 are discussed below and shown in the Summary Compensation Table on page 18
of the proxy statement for our 2009 annual meeting of shareholders.
  Equity
Awards
  Stock Options,
Restricted Stock and RSUs.To further align
the interests of management with the interests of shareholders, our executive
compensation package includes stock option grants, restricted stock and RSU
awards. Equity awards outside the MBO bonus plan are made each September, but no
such stock awards will be made unless we are on track to achieve our annual
non-GAAP EPS and Adjusted EBITDA targets.
  27
  Options
have a per share exercise price of 100% of the fair market value of a share of
our common stock on the date of grant and, accordingly, the value of the option
is dependent on the future market performance of the common stock. The number of
shares of common stock subject to options granted to our executive officers is
generally based on the salary, responsibilities and performance of each
officer.  In addition, the compensation committee reviews the number
and value of options granted by selected peer companies in making option grants
to our executive officers.
  Restricted
shares are shares of common stock that are subject to forfeiture.  The
shares vest on the basis of performance and/or continued employment as
determined in advance by the Committee. The shares generally are forfeited by
participants if they leave Cenveo before the shares have vested.  A
participant who has received a grant of restricted shares will receive dividends
and the right to vote those shares. Restricted shares may not be transferred,
encumbered or disposed of until they have vested.
  Each RSU
has the fair market value of one share of common stock on the date specified in
the award agreement (generally the vesting date) and is paid in cash, shares or
other property as determined by the Committee.  The RSUs vest on the
basis of performance or continued employment, as determined by the
Committee.  A participant is credited with dividend equivalents on any
vested RSUs when dividends are paid to shareholders, but is not entitled to
dividend equivalents on unvested RSUs.  RSUs generally may not be
transferred prior to the delivery of the common stock.
  When
determining the appropriate combination of stock options, restricted stock and
RSUs, our goal is to weigh the cost of these grants with their potential
benefits as a compensation tool.  We believe that providing combined
grants of stock options, on the one hand, and restricted stock and/or RSUs, on
the other, effectively balances our objective of focusing the named executives
on delivering long-term value to our shareholders, with our objective of
providing value to the executives with the equity awards.  Stock
options only have value to the extent the price of the Company’s stock on the
date of exercise exceeds the exercise price on the grant date, and thus are an
effective compensation element only if the stock price increases over the term
of the award.  In this sense, stock options are a motivational
tool.  Unlike stock options, restricted stock and RSUs offer
executives the opportunity to receive shares of the Company’s stock on the date
the restriction lapses.  In this regard, RSUs serve both to reward and
retain executives, as some of the RSUs we have granted vest upon satisfaction of
performance targets and others vest over an extended period of time and the
value of the RSUs is linked to the price of the Company’s stock on the date the
RSU vests.  Unvested stock options and RSUs are forfeited if the
executive voluntarily leaves the Company and generally are vested upon a change
in control of the Company or if the Company terminates the executive’s
employment without cause.
  The
allocation of the number and mix of stock options, restricted shares and RSUs
issued to a particular executive is not based on a rigid formula, but rather is
determined on an individual basis based on the variety and mix of equity grants
by our peers, a consideration of the respective incentives created by the
various equity grants with respect to the particular executive, his particular
role at the Company and other factors.
  During
2008, Mr. Burton vested in 50,000 shares of restricted stock and 137,500
RSUs.  Also during 2008, Messrs. Hiltwein, Vinson and Davis vested in
11,250, 16,000 and 10,000 RSUs, respectively.  In addition, Messrs.
Burton, Hiltwein, Vinson and Davis vested in 175,000, 12,500, 51,250, and 35,000
in stock options, respectively, in 2008.  All of these awards were
granted in 2005, 2006 and 2007.  The value realized by each executive
upon such vesting is set forth in the Option Exercises and Stock Vested Table on
page 21 of the proxy statement for our 2009 annual meeting of
shareholders.  None of the named executives exercised stock options
during 2008. During 2008, each of the named executives was granted only
RSUs.  The number of shares subject to such awards and their full
value for financial reporting purposes are set forth in the Grants of Plan-Based
Awards Table on page 19 of the proxy statement for our 2009 annual meeting with
shareholders.
  Other
Elements
  Stock Purchase
Plan.In 2005,we adopted an employee
stock purchase plan that allows our employees, including executives, to purchase
our common stock at market prices on a monthly basis through payroll
deductions.  In 2007, we amended the plan to allow participation by
our non-employee directors.  Payroll deductions may not exceed $10,000
per month.  The Company does not subsidize the stock purchases under
the plan, except by payment of brokerage commissions.  Mr. Burton is purchasing stock through the plan at the
maximum level of $10,000 per month.
   28
  Other
Compensation.We provide our
named executives with other benefits, reflected in the All Other Compensation
column in the Summary Compensation Table on page 18 of the proxy statement for
our 2009 annual meeting of shareholders that we believe are reasonable,
competitive and consistent with the Company’s overall executive compensation
program.  We believe that these benefits generally allow our
executives to work more efficiently.  The costs of these benefits,
which include car allowances and life insurance premiums, constitute only a
small percentage of each named executive’s total compensation.
  Pension
and Retirement Benefits
  No Retirement
Compensation for Executives.  Our CEO and other named
executives receive no pension or other retirement payments or
contributions.
  No Deferred
Compensation Plan for Executives.We have no deferred
compensation plan for our named executives.
  401(k)
Plan.  We have a 401(k) plan to which all eligible employees
can contribute a portion of their compensation on a pre-tax basis.  A
plan participant can direct the investment of contributions into one of twenty
mutual funds and other investment vehicles, including the Company’s common
stock.  We do not match employee
contributions under this plan, except as required under existing collective
bargaining agreements.
  Compensation
for the Named Executives in 2008
  No Automatic
Increases.No named executive officer is entitled to any
automatic or contractual increase in compensation.  In light of the
strong performance of the Company against key financial and operational
measurements in 2008, the Committee made the following salary increases for its
named executive officers:  for Mr. Davis, $20,000 and for Mr. Vinson,
$25,000.  For 2008, bonus target amounts were increased to the
following levels:  for Mr. Davis, $277,500, and for Mr. Vinson,
$375,000.  A more detailed analysis of our financial and operational
performance is contained in the Management’s Discussion & Analysis
section of our 2008 Annual Report filed with the SEC.
  Amendment of CEO
Employment Agreement.Mr. Burton’s employment agreement was
amended on December 29, 2008 in order to comply with 409A
regulations.
 
 Goals.  In determining
the salary increases and bonus target increases referred to above, the Committee
considered the accomplishment of specific goals within each executive’s area of
responsibility.  For our CEO, these other goals included cost savings
requirements, building a management team that provides growth opportunities for
all, including women and minorities, and providing leadership to grow Cenveo to
be an industry leader in areas including customer service and stock price
performance.  For our Group President, Envelope, Commercial Print
& Packaging, and President, Cadmus Publisher Services Group, these goals
included operations-specific management, sales, and productivity
initiatives.  For our CFO, these goals included capital structure
improvements and development of the Company’s finance employees.  For
our General Counsel, these goals included resolution of disputes and
satisfaction of corporate governance and compliance objectives.
 
 2008
Bonuses.  Our named
executives’ annual bonus is 100% performance-based and is earned on an “all or
nothing”
basis under the guidelines of our MBO plan. That is, in order for each executive
to receive any bonus for 2008, Cenveo had to achieve all of the following
financial goals:
 
 •
              Adjusted
      EBITDA - $300 million
 •
              Adjusted
      EBITDA Margins - 12.6%
 •
              Non-GAAP
      EPS - $1.58/share
 •
              Free
      cash flow - $125 million
 •
              Revenues
      - $2.38 billion
 •
              Capital
      expenditures - no more than $35 - $40
million
  29
  Note
regarding non-GAAP financial measures: The Company defines Adjusted EBITDA as
earnings before interest, taxes, depreciation and amortization, excluding
integration, acquisition and other charges, stock-based compensation provision,
restructuring, impairment, and other charges, gain (loss) on early
extinguishment of debt, gain (loss) on sale of non-strategic businesses, and
income (loss) from discontinued operations, net of taxes. The Company defines
Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales. Non-GAAP EPS is
Non-GAAP net income (loss) per diluted share. Non-GAAP net income (loss)
excludes integration, acquisition and other charges, stock-based compensation
provision, restructuring, impairment and other charges, gain (loss) on sale of
non strategic businesses, (gain) loss on early extinguishment of debt, the
income tax expense (benefit) relating to the above non-GAAP adjustments, and
income (loss) from discontinued operations, net of taxes. The Company defines
free cash flow as Adjusted EBITDA less cash interest, cash taxes, and capital
expenditures, plus proceeds from the sale of property, plant and
equipment.
 
 Due to
the fact that Cenveo did not meet the above objectives, it did not pay any
bonuses to its named executive officers for 2008.  Even if the six
Company-wide financial targets had been met, a portion of the bonuses of our CEO
and other named executives was linked to the accomplishment of specific goals
within each executive’s area of responsibility.  For each named
executive officer, the following list describes the bonus opportunity and
specific goals that each named executive officer would have been required to
achieve in order to achieve his full bonus:
  •
              our
      CEO was entitled to a target bonus opportunity equal to 300% of his base
      salary, of which an aggregate of 25% was linked to the following
      goals:  (i) cost savings requirements (10% of his bonus
      opportunity); (ii) building a management team that provides growth
      opportunities for all, including women and minorities (5% of his bonus
      opportunity); (iii) continuing to seek out acquisition opportunities to
      grow Cenveo’s revenues and Adjusted EBITDA (5% of his bonus opportunity);
      and (iv) providing leadership to grow Cenveo to be an industry leader in
      areas including stock price performance and growth opportunities for
      employees (5% of his bonus
opportunity);
  •
              our Group President,
      Envelope, Commercial Print & Packaging Group was entitled to a target
      bonus opportunity equal to 110% of his base salary, of which an aggregate
      of 50% was linked to the following goals:  (i)
      operations-specific EBITDA target of $181.2 million and revenue target of
      $1.77 billion (25% of his bonus opportunity): (ii) cost savings
      requirements (10% of his bonus opportunity); (iii) integrating our
      Envelope, Commercial Print & Packaging Group (10% of his bonus
      opportunity); and (iv) continuing to seek out acquisition opportunities
      (5% of his bonus opportunity);
  •
              our President, Cadmus
      Publisher Services Group was entitled to a target bonus opportunity equal
      to 100% of his base salary, of which an aggregat of 50% was linked to the
      following goals:  (i) operations-specific EBITDA target of $50.5
      million (30% of his bonus opportunity); (ii) cost savings requirements
      (10% of his bonus opportunity); (iii) continuing to seek out acquisition
      opportunities (5% of his bonus opportunity); and (iv) achieving
      leadership-related goals for the Cadmus Publisher Services Group (5% of
      his bonus opportunity);
  •
              our CFO was entitled to a
      target bonus opportunity equal to 110% of his base salary, of which an
      aggregate of 50% was linked to the following goals:  (i) capital
      structure improvements (20% of his bonus opportunity); (ii) assisting in
      acquisition opportunities (10% of his bonus opportunity); (iii) enhancing
      opportunities for women and minorities (10% of his bonus opportunity); and
      (iv) development of Cenveo’s finance employees (10% of his bonus
      opportunity); and
  •
              our General Counsel was
      entitled to a target bonus opportunity equal to 75% of his base salary, of
      which an aggregate of 50% was linked to the following
      goals:  (i) providing leadership for field operations and
      resolving disputes and other matters (20% of his bonus opportunity); (ii)
      supporting integration of recent acquisitions (15% of his bonus
      opportunity); (iii) satisfaction of SEC-related filing requirements (10%
      of his bonus opportunity); and (iv) certain management-related objectives
      (5% of his bonus opportunity).
  30
  Compensation
Committee Interlocks and Insider Participation
 
 All
members of the Compensation Committee during fiscal year 2008 were independent
directors, and no member was an employee or former employee.  No
Compensation Committee member had any relationship requiring disclosure under
the section titled “Certain Relationships and Related Person Transactions” in
this proxy statement.  During fiscal year 2008, none of our executive
officers served on the Compensation Committee (or its equivalent) or board of
directors of another entity whose executive officer served on our Compensation
Committee.
 
 Compensation
Committee Report
 
 The
Compensation Committee has reviewed and discussed the above Compensation
Discussion and Analysis with the Company’s management.  Based on the
review and discussions, the Committee recommended to the Company’s Board of
Directors that the Compensation Discussion and Analysis be included in the
Company’s proxy statement.  This report is provided by the following
independent directors, who comprise the committee:
 
 THE
COMPENSATION COMMITTEE
 
 Gerald S.
Armstrong (Chair)
 Leonard
C. Green
 Dr. Mark
J. Griffin
 Robert B.
Obernier
 
  31




PART
IV




Item 15
of the Original 10-K is amended as follows:


Item 15.   Exhibits and Financial Statement
Schedules




Exhibit
                                                                          Number
                                                                        
                                                                        Description31.1*
                                                                        
                                                                        Certification
      by Robert G. Burton, Sr., Chief Executive Officer, pursuant to Section 302
      of  the Sarbanes-Oxley Act of 2002.31.2*
                                                                        
                                                                        Certification
      by Kenneth P. Viret, Chief Financial Officer, pursuant to Section 302 of
      the Sarbanes-Oxley Act of
2002.




32.1*
            
            Certification
      of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002, furnished as an exhibit to this report on Form
      10-K.32.2*
            
            Certification
      of the Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002, furnished as an exhibit to this report on Form
      10-K.


____________





*
            Filed
      herewith.








(b)
Exhibits Filed





Included
in Item 15(a)(3) of this Report.


32


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Englewood, State of
Colorado, on July 30, 2009.




CENVEO,
      INC.By:
            /S/  ROBERT
      G. BURTON, SR.Robert
      G. Burton, Sr., Chairman and
                Chief
      Executive Officer
                (Principal
      Executive Officer)By:
            /S/  KENNETH
      P. VIRETKenneth
      P. Viret,
              Chief
      Financial Officer
              (Principal
      Financial Officer and
              Principal
      Accounting Officer)