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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

OR



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

For the transition period from  to

Commission File Number 333-133825





SGS INTERNATIONAL, INC.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 20-3939981                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                     |  |           
|---------------------------------------------------- |  | ----------
|626 West Main Street, Suite 500 Louisville, Kentucky |  | 40202     
|(Address of principal executive offices)             |  | (Zip Code)

(502) 637-5443

(Registrants telephone number, including area code)





SECURITIES REGISTERED
PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.    Yes   ̈    No  x

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

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 the 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.  x

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



|                           |  |                             
|-------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈        
|                           | 
|Non-accelerated filer  x   |  | Smaller reporting company   ̈

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

None of the registrants common stock is held by non-affiliates of the registrant.

As of March 14, 2008 there were 100 shares of the
registrants common stock, $0.01 par value, outstanding.









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TABLE OF CONTENTS



|                     |  |          |  |                                                                                                                  |  |     
|-------------------- |  | -------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|                     |  |          |  |                                                                                                                  |  | Page
|PART I               |  |         
|                     |  |          | 
|                     |  | Item 1.  |  | Business                                                                                                         |  | 4   
|                     |  |          | 
|                     |  | Item 1A. |  | Risk Factors.                                                                                                    |  | 13  
|                     |  |          | 
|                     |  | Item 1B. |  | Unresolved Staff Comments                                                                                        |  | 18  
|                     |  |          | 
|                     |  | Item 2.  |  | Properties                                                                                                       |  | 18  
|                     |  |          | 
|                     |  | Item 3.  |  | Legal Proceedings                                                                                                |  | 19  
|                     |  |          | 
|                     |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                              |  | 19  
|                     | 
|PART II              |  | 19      
|                     |  |          | 
|                     |  | Item 5.  |  | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 19  
|                     |  |          | 
|                     |  | Item 6.  |  | Selected Financial Data                                                                                          |  | 20  
|                     |  |          | 
|                     |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 22  
|                     |  |          | 
|                     |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk.                                                      |  | 29  
|                     |  |          | 
|                     |  | Item 8.  |  | Financial Statements and Supplementary Data                                                                      |  | 30  
|                     |  |          | 
|                     |  | Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                             |  | 30  
|                     |  |          | 
|                     |  | Item 9A. |  | Controls and Procedures                                                                                          |  | 30  
|                     | 
|PART III             |  | 31      
|                     |  |          | 
|                     |  | Item 10. |  | Directors, Executive Officers and Corporate Governance                                                           |  | 31  
|                     |  |          | 
|                     |  | Item 11. |  | Executive Compensation                                                                                           |  | 34  
|                     |  |          | 
|                     |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   |  | 46  
|                     |  |          | 
|                     |  | Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                        |  | 47  
|                     |  |          | 
|                     |  | Item 14. |  | Principal Accountant Fees and Services                                                                           |  | 49  
|                     | 
|PART IV              |  | 51      
|                     |  |          | 
|                     |  | Item 15. |  | Exhibits and Financial Statement Schedules                                                                       |  | 51  
|                     | 
|SIGNATURES           |  | 55      
|                     | 
|FINANCIAL STATEMENTS |  |         



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TABLE OF CONTENTS

(continued)



|                                                                                                                                    |  |     
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                    |  | Page
|EXHIBIT 10.37 FIRST AMENDMENT OF THE SOUTHERN GRAPHIC SYSTEMS, INC. DEFERRED COMPENSATION PLAN                                      |  |     
|                                                                                                                                    | 
|EXHIBIT 21.1 SUBSIDIARIES OF SGS INTERNATIONAL, INC.                                                                                |  |     
|                                                                                                                                    | 
|EXHIBIT 24.1 POWERS OF ATTORNEY                                                                                                     |  |     
|                                                                                                                                    | 
|EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO ANNUAL REPORTS              |  |     
|                                                                                                                                    | 
|EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REGARDING FACTS AND CIRCUMSTANCES RELATING TO ANNUAL REPORTS              |  |     
|                                                                                                                                    | 
|EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002 |  |     



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PART I

This Report on Form 10-K contains statements that constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which generally can be identified by the use of forward-looking terminology such as may,
will, expect, estimate, anticipate, believe, target, plan, project or continue or the negatives thereof or other variations thereon or
similar terminology. These statements appear in a number of places in this Report on Form 10-K and include statements regarding our intent, belief or current expectations that relate to, among other things, trends affecting our financial condition
or results of operations and our business and strategies. We may make additional written or oral forward-looking statements from time to time in filings with the Securities and Exchange Commission or otherwise. Forward-looking statements speak only
as of the date the statement is made. Readers are cautioned that these forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in
the forward-looking statements as a result of many important factors. Many of these important factors cannot be predicted or quantified and are outside of our control, including competitive factors, industry trends, changes in government regulation,
the cost of and our ability to integrate new acquisitions, and our ability to introduce new products, execute our business plan, retain existing customers and acquire new customers. The accompanying information contained in this Report on Form 10-K,
including, without limitation, the information set forth below under Item 1 regarding the description of our business and under Item 7 concerning Managements Discussion and Analysis of Financial Condition and Results of
Operations, identifies additional important factors that could cause these differences. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected
results expressed or implied in this Report on Form 10-K will not be realized. All subsequent written and oral forward-looking statements attributable to us or persons acting for or on our behalf are expressly qualified in their entirety by this
section.



|Item 1. | Business
|------- | --------

OVERVIEW

SGS International, Inc. (the Registrant) was incorporated in 2005 under the laws of the State of Delaware. In this report, we and
the Company mean the Registrant and its consolidated subsidiaries unless otherwise indicated.

We are a global leader in the
digital imaging and communication industry and offer design-to-print graphic services to the international consumer products packaging market. We offer a full spectrum of innovative digital solutions that streamline the capture, management,
execution and distribution of graphics information. Our brand development, creative design, prepress, image carriers and print support services are utilized in each of the three main printing processes: flexography, gravure and lithography. Our
customers, many of which we have served for over 20 years, include large branded consumer products companies, mass merchant retailers and the printers and converters that service them. Our services ensure that our customers are able to obtain or
produce consistent, high quality packaging materials often on short turnaround times.

HISTORY OF COMPANY

The Registrant was formed by Citigroup Venture Capital Equity Partners, LP in 2005. Southern Graphic Systems, Inc. (SGS) was established in
1946 as a single-facility gravure operation in Louisville, Kentucky. SGS and its affiliates were acquired by Reynolds Metals Company in 1957. In 1978, SGS adopted a growth strategy of strategically locating manufacturing operations based on
customers locations and service requirements. SGS opened its first dedicated prepress facility in 1991. In 1994, SGS expanded its geographic scope to include Canada, with the opening of a gravure facility just outside Toronto. In 1995, SGS
entered the growing flexographic market with the acquisition of Wilson Engraving Company. In 1998, SGS further expanded its geographic scope within North America by opening a graphics facility in Mexico City, Mexico. SGSs ownership changed in
2000 when its parent, Reynolds Metals Company, was acquired by Alcoa Inc. In November, 2005, SGS acquired MCG Graphics Limited (MCG), a UK-based provider of prepress graphics and flexographic image carriers serving customers in the UK
and Europe. The Registrant acquired SGS and its affiliated businesses from Alcoa Inc. on December 30, 2005 (the Acquisition). In connection with the Acquisition, the Registrant offered certain of its 12% senior subordinated notes
due 2013 and entered into a new senior secured credit facility. In 2006, the Company further expanded its global presence with acquisitions in the UK and the Netherlands and strengthened its Canadian business with the acquisition of a Quebec
pre-press company. In February 2007, the Company acquired the assets of C.M. Jackson Associates, Inc. (CMJ), a packaging graphics firm in the U.S. with an emphasis on store brands. In April 2007, the Company acquired McGurk
Studios Limited and Thames McGurk Limited (collectively McGurk), a UK-based provider of end-to-end digital design, artwork and reprographics for packaging solutions with locations in Hull and London, England, and Hong Kong. In January
2008, the Company acquired 1043497 Ontario Limited, Cooper & Williamson, Inc., Tri-Ad Graphic Communications Ltd. and Flex-Art Design Inc. (collectively Tri-Ad). Tri-Ad is a Canadian provider of packaging and retail graphics
services with locations in Toronto, Ontario and outside of Montreal, Quebec.



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INDUSTRY OVERVIEW

End markets served

We operate in the graphic services industry, which is estimated to be a $30.0 billion global industry.
Within this industry, we compete principally in the value-added packaging market, providing services to consumer products companies and to the converters and printers who serve them. We estimate that the North American market for graphic services
for consumer packaging products is approximately $2.0 billion and the global market for these services is approximately $6.0 billion. We focus on a variety of end markets, with food and beverage representing a large portion of our business. Other
key end markets include tobacco, personal care, household products, pet food and pharmaceutical. We estimate that the remainder of the global market in the graphic services industry is comprised of the $9.6 billion advertising and promotion market,
where we participate on a limited basis, and the $14.4 billion other market which includes catalogs, newspapers and magazines, where we do not participate.

OUR SERVICE OFFERINGS

General overview

The packaging graphic services we provide include the preparatory steps that precede the actual printing of an image onto packaging material. We are one
of the very few participants in the industry capable of providing the full range of services from design-to-print.

Creative services and
brand development

The process begins with creative services, where we work with the customer to develop brand strategy,
conceptualize the marketing campaign and ensure an accurate and consistent brand image and design packaging that takes advantage of technological improvements in the printing process. Product packaging and graphics play a key role in a consumer
products companys marketing efforts and the on-shelf appeal of its products. Our creative services at this creation and design phase of the process enable our consumer products customers to realize the full potential of synergies between high
quality graphics and a brands core value. The creative services we provide include brand identity, concept, naming and logo development, package design, interactive development, photography, illustration and copywriting.

Prepress graphics and image carrier services

Our
prepress services then convert the creative idea and design into an image suitable for volume printing, a key step in speeding brands to market. The steps taken in this phase of the process include (i) graphics activities such as
production art, composition and typesetting, creative retouching, image assembly, file creation, color separation and digital/film output, and (ii) image carrier preparation. Our prepress process is key to ensuring that our consumer products
customers brands and graphics are reproduced accurately and with uniform color using different package printing processes and substrates, in a timely and cost-effective manner. While color separation and other prepress services were in the
past performed by hand (i.e., the conventional method), our employees today use MacIntosh computers and software programs such as Barco, ArtPro and Collage to provide digital imaging services. It has become typical for customers to
forward designs to us in digital format for image manipulation, layout and assembly. We work closely with the customer during this process and we offer a wide spectrum of proofing services, including soft proofing, online proofing and digital
proofing, to facilitate customer involvement and approval. We provide extensive graphics prepress services for the flexographic, gravure and lithographic industries.

At the final step of the prepress process, an image carrier is produced that transfers ink in the form of the image to the packaging substrate in the printing process. As with prepress graphics, image
carrier technology has transitioned from an analog to a digital process. Laser technology in both flexography and gravure has improved resolution and quality while reducing the cost to produce image carriers. We offer a wide variety of image
carriers for the flexographic, gravure and lithographic printing processes.

All the major printing processes have similar steps in the
prepress stage, except for image carrier preparation, and are distinguished by the method of image transfer and the kind of image carrier utilized in the process. We have particular expertise in image carriers and believe we are the clear leader in
this important part of the value chain.

Other services

In addition to the packaging graphics and image carrier production services we provide, our offerings in support of other stages of the value chain are crucial elements of the overall proposition to the customer and
necessary to generate the graphics and image carrier business.



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The enterprise solutions we offer comprise a secure Web-based suite of enterprise tools that can help
automate production art services, manage digital graphic assets, review graphics online and track the entire production process, all via a standard Web browser. We design and implement systems to manage workflow, and enable clients to host,
organize, search and retrieve brand assets. In addition, we provide process audits and prepress, color management, printing and IT consulting services.

We also have significant competencies in interactive media and offer short run reproduction service to our clients through our digital printing studio.

PRINTING MARKETS SERVED

Flexography

Flexography uses an imager carrier (plate) made of rubber, plastic or any other flexible material. The fast-drying inks used in flexography make it ideal
for printing on materials like plastics and foils. This method is most suitable for printing flexible bags, wrappers and similar packaging. The soft photopolymer image carriers are also well-suited for printing on thick, compressible surfaces such
as cardboard packaging, or corrugated material. We are a leading flexographic plate producer in North America with 18 state-of-the art flexographic imaging facilities (16 of which have digital capability). We have two flexographic imaging facilities
in the UK, both of which have digital capability. Virtually all of our locations can provide prepress graphics for the flexography process.

We estimate the North American flexography market at approximately $800 million. We believe this market is growing at approximately 2% to 4% annually, a higher rate of growth than we estimate for the gravure and lithography markets.
Flexographic printers continue to add flexographic printing capacity to handle the growth. Flexographic plates can be manufactured faster and more inexpensively than gravure cylinders, and allow for faster problem resolution and change-outs in the
printing process. The quality and speed of flexographic printing has continued to improve over the years, allowing it to become a cost-effective alternative to the gravure process in many situations.

Gravure

In gravure printing, the image carriers are
generally copper coated cylinders that are protected from wear by the application of a thin electroplate of chromium. Gravure is generally suitable for long runs of high quality printing, such as point-of-sale advertisements and cartons for
cosmetic, pharmaceutical and tobacco packaging. We are the leading packaging gravure producer in North America with nine state-of-the-art gravure engraving facilities. Virtually all of our locations can provide prepress for the gravure process.

We believe the growth rate in the gravure packaging market is flat to 2% annually. While the flexography process has lowered
gravures share of the printing market, gravure is, and we believe will continue to be, a viable market. The gravure process can be used for any type of packaging where flexography can be used, but flexography is not always an alternative to
gravure. Gravures characteristics make it the preferred process in certain applications, such as tobacco packaging (where we estimate approximately 90% of the cartons manufactured in North America use gravure printing), fluorescent and
metallic substrates, package converting involving the attachment of another layer to the substrate (such as labels), and generally where a long run involving high quality printing is necessary or desirable. The trend in the gravure printing industry
is away from wide-web and toward narrower-web printing, helping to reduce the flexographic processs cost advantage over gravure.

Lithography

Lithographic image carriers range from paper (a lower quality end-product) to aluminum (the best quality possible). Lithography is
typically used for point-of-sale advertisements and labels. We have three lithographic plate facilities offering high quality digital plates. Virtually all of our locations can provide prepress graphics for the lithography process.



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The North American lithography market is the largest of the three markets we serve. Most of our
lithography sales are attributable to prepress graphics rather than image carriers. Lithographic plates typically are produced by the printer as they are low cost and relatively easy to manufacture. The limited number of lithographic plates we
produce are for very few of our customers. The lithography process has more limited applications than flexography and gravure and is not as suited to long runs. However, lithography is generally preferred to gravure for printing on rough substrate
surfaces.

COMPETITION

The packaging
graphic services industry for consumer products is highly fragmented with several national firms and hundreds of regional and local participants. Only a small number of the regional and local firms have annual revenue exceeding $20.0 million. To
remain competitive, each firm must maintain client relationships and recognize, develop and exploit state-of-the-art technology and contend with the customers increasing demand for speed-to-market. We believe that most of the firms in the
industry are family-owned and lack the scale and service breadth to effectively serve the premier consumer products companies demands for consistent brand graphics, faster turnaround times, improved speed-to-market and customized services on a
national and global basis.

Some converters with graphics service capabilities compete with us by performing such services in connection
with printing work. However, these firms must still match our technical capabilities, image quality control and speed of delivery. Converters often use our services because of the rigorous demands being placed on them by clients who are requiring
faster turnaround times. Increasingly, converters are being required to invest in technology to improve speed in the printing process and many have avoided spending on graphics technology.

We compete on the basis of offering our clients creative design capabilities, production art expertise, high quality customized imaging capabilities,
rapid turnaround, cost of image carriers and delivery times, up-to-date knowledge of the printing press specifications of converters and printers, color expertise, digital asset management and workflow management. We have grown from a one-facility
gravure cylinder engraver to an integrated strategic partner for our customers with a broad array of services.

INDUSTRY TRENDS

Our revenues are primarily driven by demand for graphics services from consumer products companies and the printers and converters that service them. In
addition to growth in packaging volume, demand for our services is generated by new product launches, brand portfolio changes that result from either consolidations or divestitures, design refreshing, promotional or seasonal events (e.g., events
such as the Kentucky Derby, Super Bowl, World Series and Olympics), changes in labeling requirements (e.g., government-required tobacco warnings and consumer-driven preferences for heart healthy, low in carbohydrates, and
low in saturated fat products), changes in packaging products and changes in consumer tastes. Other demand drivers include customer consolidation, changes in brand ownership, changes in packaging printers, and changes in packaging
structures, substrates and formats. Key trends within the industry include:

Outsourcing. For many consumer products companies,
prepress graphics and related services do not constitute a core competency and they have increasingly been outsourcing this function as graphics services providers can provide design-to-print services on a more cost-efficient basis. This
trend of outsourcing, while advanced, continues to play a significant role in shaping the industry and has created further opportunities for graphic service providers to expand their offerings and customer base. Further, by offering design and other
creative services to our customers, we become involved in our customers operations at an earlier stage of the graphics process which provides a greater opportunity for downstream sales.

Supplier consolidation. There has been a significant shift by consumer products companies to decrease the number of suppliers used while still
embracing the model of outsourcing graphics services needs. Historically, consumer products companies would use separate specialists for each step in the graphic services value chain when bringing products to market. As demands, including cost
minimization, speed-to-market and product consistency, from consumer products companies have become increasingly important, the leading graphic services providers have responded by broadening their product and service offerings. Industry
leaders such as us, that have both the scale and capabilities to provide additional services along the value chain, have been the primary beneficiaries of this trend. We believe we have gained market share recently with important customers by
offering full service capabilities. We believe that our complementary digital asset management and consulting services enhance the value proposition to our customers, which further integrates us into their graphics packaging operations. We believe
that the number of participants in the graphics services business presents significant consolidation opportunities. Competitive forces, such as accelerating technological requirements for advanced systems, equipment and highly-skilled personnel, as
well as the growing customer demand for full-service capabilities, continue to create attractive acquisition opportunities for the larger players.



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Globalization. We believe that over the last 3 to 4 years several multi-national consumer products
companies have decided to globalize their brands. As these companies begin to globalize their brands, ensuring image consistency and continuity with package designs becomes critical. These companies are increasingly looking to their existing graphic
services providers, including us, to service them globally. In 2005, we expanded outside North America with the acquisition of MCG, adding facilities in Hull, Cambria and London, England, and significantly expanding our ability to serve our
multinational customers. In 2006, we continued our expansion outside North America with the acquisition of The Box Room Limited in the United Kingdom and the acquisition of a business supplying photographic and digital images for the packaging
printing industry in the Netherlands. During 2007, we increased our presence in Europe and expanded into Asia with our acquisition of McGurk. McGurk is a UK-based provider of end-to-end digital design, artwork and reprographics for packaging
solutions with locations in Hull and London, England and Hong Kong. We also have relationships with certain regional graphic services providers in continental Europe, India, and The Philippines. These acquisitions and relationships significantly
enhance our ability to provide services to our existing multi-national customers and to seek new business from other multi-national companies. We believe we are in an excellent position to leverage our North American experience in setting up on-site
locations, developing custom client workflow solutions and acquiring businesses outside North America. In addition, our secure web-based asset management system houses the brand imagery of many clients. This secure database is accessible from the
internet and contains digital artwork which can be searched and downloaded from anywhere in the world. See Item 1A. Risk Factors for a discussion of currency exchange, political, investment and other risks related to our foreign
operations.

Technological advances. New technologies have increased the array of value-added services that graphic services
companies are able to offer their customers. By providing technology solutions, such as automated workflow and digital asset management, we have been able to both increase ancillary revenue and strengthen our customer relationships. We also deploy
state-of-the art laser imaging and workflow technologies at our gravure locations. We believe that by integrating new technology with our customers and standardizing and automating the process related to their prepress services, we are able to
reduce costs and lower the time that it takes them to deliver their products to the marketplace.

Private label or store brands.In
recent years, there has been steady growth of private label or store brands within the United States, following similar trends in Europe, which has a very strong private label market. There is a trend in the industry for retailers to aggressively
grow their own store brand within their own retail environment to solidify customer loyalty, as well as offer more competitive pricing. Selling under their private label offers them an opportunity to do both. Retailers also enjoy a
meaningful profitability advantage when their private label products are sold to customers. We have undertaken a comprehensive initiative to systematically target private label business opportunities and are benefiting from these efforts. We
currently support the private label initiatives of several companies. Our recent acquisitions of CMJ and McGurk bolster our expertise and capabilities with respect to store brands.

We believe we are able to take advantage of these industry trends due to our strengths in the following areas:

Broad geographic reach with low-cost, strategically positioned footprint

We service our customers at a local level while maintaining quality standards appropriate for a global company. We have 31 locations in North America that are within close proximity to our customers plants. In
addition, in North America we also have multiple on-site locations at our customers facilities and multiple facility-managed locations. We entered the European market through our 2005 acquisition of MCG and continued to expand through
acquisitions in 2006 and 2007. We now have nine locations in Europe. In 2007, we entered the Asia market through our acquisition of McGurk, including their Hong Kong operations. Our on-site and facility-managed locations are characterized by the
deployment of our personnel at a customers location and are a component of our customer relations strategy. Additionally, we often provide unique or customized services based on customer specification and seek to deliver our image carriers to
converters and printers as soon as they are produced, requiring our locations to be at or near our customers.

Blue chip customer base with
long-standing relationships

We serve a blue chip client base of consumer products companies including Kraft, Procter & Gamble
and Nestlé, as well as the printers and converters that serve them, including Bemis, Smurfit Stone, and Mead Westvaco. We have 30-year relationships on average with our top ten customers. We typically service our customers as sole suppliers
on designated brands and service multiple brands at each customer. Additionally, we believe we can leverage our broad geographic footprint and relationships with global customers to further expand the services and offerings to blue chip customers
around the world.

Leading provider of graphic services

We believe we are the second largest domestic provider of digital imaging graphic services to the international consumer products packaging industry. We utilize the leading graphic technologies and standards and
retain the highest quality skilled



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technicians, thereby allowing us to meet our customers most exacting requirements. We believe our scale allows us to more effectively manage our cost
structure and optimize the efficiencies of our assets. We also believe our leading market position provides a competitive advantage which allows us to retain existing business and compete for new business.

Design-to-print service provider

We offer a full
spectrum of innovative digital solutions to our customers, including brand development, creative design, pre-press, image carriers and print support. We also offer our customers enterprise solutions including workflow management and digital asset
management. Our services support the three main printing processes, which are flexography, gravure and lithography. We believe our customers value our broad product offering and will increasingly rely on us to provide more of their graphic services
needs.

Stable, large-scale competitor

We believe we are one of three domestic graphic design services providers with revenues in excess of $100.0 million serving global packaging customers. Our size allows us to support our customers at multiple facilities, invest in and
implement the latest technologies and pursue acquisitions. We have also been able to consistently maintain EBITDA margins in excess of 18% since fiscal 2001 by implementing best practices across our facilities, efficiently allocating resources and
implementing synergies in acquired businesses. We believe our scale will allow us to continue to operate efficiently and benefit from the increasing importance of packaging in the global consumer branded products market. We also believe that our
services are somewhat resistant to economic cycles as our target end-markets exhibit relative stability, our services are a relatively small portion of our customers overall package cost and packaging and design changes are often viewed as
fixed costs within a customers marketing budget. Nevertheless, our 2007 personnel cost represented approximately 45% of our total costs and expenses and we believe we would be able to quickly react to a reduction in the demand for our
services.

Expertise in identifying and integrating acquisitions

We have completed 15 acquisitions since the beginning of 2003. We consummated these acquisitions for a variety of reasons, including obtaining additional scale, acquiring a specific design or technical skill,
achieving geographic diversification, strengthening existing customer relationships, forming new customer relationships or acquiring an underutilized asset that could more efficiently perform existing services within our organization. We have
successfully integrated these acquisitions, improving the financial and operational performance of these assets over time by optimizing workflows and implementing best practices.

Highly experienced management team

On average, our management team has been with us and our
predecessors for more than 14 years. Our management has instilled a culture that places an emphasis on cost consciousness, profitable growth and meeting targets. Additionally, our management team has consistently generated positive cash flow from
operations while maintaining our leadership in service and technology trends that shape our industry. Our management team is seasoned in identifying, negotiating and integrating acquisitions.

BUSINESS STRATEGY

Provide additional services on existing
business

We are a leading provider of digital imaging graphic services to the international consumer products packaging market. Our
customers entrust us with their brands by utilizing our services and we value and protect that relationship. We intend to further strengthen our existing relationships by offering more products and services to existing customers. The graphic work
attributable to a particular product represents a small overall percentage of the packaging cost but is disproportionately important in a packages impact and effectiveness. We believe we have been successful at increasing the amount of
services provided to customers over time by providing consistently high service levels. We also provide our customers complementary services, such as digital asset management and work flow management solutions. We believe our customers view many of
the graphic services functions they perform in-house as non-core and will seek to outsource them to a trusted partner such as us. We intend to aggressively pursue brand development and creative design services with our consumer products customers,
as well as image carrier and print support services with our printer and converter customers. We believe we have the capacity and personnel skills today to allow us to service more of our customers graphic services needs.

Pursue new business opportunities

We intend to
aggressively pursue new business opportunities. We believe our existing customers recognize our superior service levels and are looking to us to provide graphic services on brands that we do not currently service. We also believe we have



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developed strong customer recognition and that new customers will be attracted to our suite of service offerings. For example, we have recently experienced
significant growth in services to providers of private label or store brands and believe they will be an important customer base in the future as they increase their efforts to develop premium brands to compete with international brands.

Capitalize on dynamic industry trends

The
technological requirements and advanced systems and equipment necessary to meet customer needs continue to accelerate. The graphic services process is becoming an all-digital workflow from design through printing. These changes require an adaptive
organization that has the highly-skilled personnel to understand, implement and utilize this technology. Given the rapid pace of change in our industry, we believe our customers will continue to outsource their graphic services needs. We also
believe we are better positioned to service the needs of graphic services customers than our smaller competitors.

Continue our North American
acquisition strategy

Since the beginning of 2003, we have completed 11 acquisitions in North America, including our acquisition of
Tri-Ad in January 2008. We will continue to strategically acquire North American businesses in our industry. We will typically look to acquire businesses with less than $20.0 million in annual revenue that offer additional scale, broaden our
geographic footprint, provide a specific design or technical skill, strengthen existing customer relationships, create new customer relationships, or have underutilized assets that could more efficiently perform existing services within our
organization. Our management team will continue to apply strict standards in evaluating acquisition opportunities including the businesses leadership, customer retention probability, employee satisfaction, strategic fit, financial targets,
synergies, and time and costs of integration.

Pursue international acquisition opportunities

We believe many of our customers are in the early stages of implementing brand globalization strategies. These strategies are intended to provide
consistency within their brands, including, for example, packaging, coloring and text setting. We believe these customers may look to fulfill their graphic services needs with a single provider in order to aid in the effort of providing brand
consistency across regions and overseas. We acquired UK-based MCG in 2005, acquired UK-based The Box Room Limited in 2006, acquired a business supplying photographic and digital images for the packaging printing industry in the Netherlands in 2006,
and acquired McGurk, a UK-based provider of end-to-end digital design, artwork and reprographics for packaging solutions with locations in Hull and London, England and Hong Kong in 2007, with the intention of further strengthening our relationship
with some of our top customers and servicing them on a global level. We will continue to evaluate acquisition opportunities in Europe and Asia and look to acquire assets that will fulfill the needs of our customers as they implement their
globalization strategies.

ACQUISITION HISTORY

The highly fragmented nature of the packaging graphics industry, the desire of consumer products companies to consolidate their supplier base and the pressure on smaller suppliers to meet consumer products companies increasing demands
have presented many opportunities for us to grow through acquisitions. Since 2003, we have completed 15 acquisitions.

The following table summarizes our
acquisitions from 2003 through February 2008:



|                                     |  |                    |  |                                  
|------------------------------------ |  | ------------------ |  | ---------------------------------
|Acquisition                          |  | Year ofacquisition |  | Key capabilities                 
|LiveWire                             |  | 2003               |  | Graphics                         
|Hobbs                                |  | 2003               |  | Graphics                         
|Wetzel                               |  | 2003               |  | Gravure                          
|Smurfit Stone (Winston-Salem assets) |  | 2003               |  | Gravure                          
|Mozaic Group (51% acquired)          |  | 2004               |  | Creative/Photography/ Interactive
|MacKay (Florence facility)           |  | 2004               |  | Gravure                          
|Smurfit Stone (Dayton operations)    |  | 2004               |  | Graphics                         
|LImage Creo                         |  | 2005               |  | Graphics/Flexo                   
|MCG                                  |  | 2005               |  | Graphics/Flexo                   
|The Box Room Limited                 |  | 2006               |  | Graphics                         
|Lukkein Packaging Department         |  | 2006               |  | Graphics                         
|Synnoflex                            |  | 2006               |  | Graphics/Flexo                   
|C.M. Jackson                         |  | 2007               |  | Creative/Store Brands            
|McGurk                               |  | 2007               |  | Graphics / Flexo                 
|Tri-Ad                               |  | 2008               |  | Graphics / Flexo                 



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CUSTOMERS

Our customers consist of end-use consumer packaged goods manufacturers, mass merchant retailers, and the printers and converters that supply them. We serve a significant number of customers with no one customer accounting for more than 7%
of fiscal 2007 revenue. Our ten largest customers accounted for approximately 33% of our revenues in fiscal 2007. Over the course of our 60 year history, we have established close and stable relationships with our customers. On average, we have
enjoyed 30-year relationships with our top ten customers.

While consumer products companies have continued to outsource their graphics services needs,
they are increasingly focused on consolidation of their supplier base. They often single-source their graphics work with respect to a particular product line to assure brand consistency and quality, improve speed-to-market and procure a full range
of services. This supplier consolidation trend continues to play a significant role in shaping the graphics services industry and has created further market opportunities for full-service industry leaders, such as us, to expand our services and
customer base and gain market share. Consistent with the supplier consolidation and single sourcing trends, consumer products companies are increasingly moving towards doing business with their graphic service providers under long-term supply
contracts. Historically, this business has been done on a purchase order basis, with services purchased for discrete projects on an as needed basis. For an industry leader such as us, the move towards written contracts covering ongoing business and
multiple projects over a number of years further strengthens our already consistent and stable business relationships and improves predictability. Roughly half of our revenue currently is generated under long-term contracts with our customers. These
contracts typically provide that we are the sole supplier of services related to a product for an initial three to five year period. However, most of these contracts may be terminated by the customer without cause upon 30 to 90 days notification and
do not provide that our customers have to purchase a minimum amount of our services.

Our employees have developed a network of
relationships at all levels of the various customer organizations and value chain partners. These relationships not only facilitate optimal day-to-day operations but also help us to remain abreast of evolving industry trends and anticipate upcoming
changes.

Over the last several decades, we have established strong working relationships with various design houses and printers. Our
personnel are familiar with the equipment and software at these value chain partners and have developed close relationships with their counterparts at these organizations. This knowledge and familiarity provide us with a significant competitive
advantage in meeting customer demands. In addition, these longstanding relationships help generate repeat business, both through referrals from the printers and design houses to packaged goods companies, as well as through the selection of us for
their discretionary work.

MARKETING AND SALES

We have one team of sales people and client service technicians who call on consumer packaging companies and a separate team of sales people and print support specialists who call on printers/converters. Recently, we have added experienced
industry sales people to actively pursue new business, primarily in the United States. We assess category opportunities in current and adjacent markets to focus on optimizing the marketing and sales effort with regard to our product and services
portfolio. Category assessment and management is an optimization process that takes place on the level of a cluster of product and service offerings tailored to a specific category. We assess the percentage of companies in a specific category market
in which we currently enjoy business relationships, versus the percentage where we can focus resources on developing new opportunities and relationships. While we may not have a single source relationship (all branding media) with all the companies
in a specific category, the assessment demonstrates which areas could produce the greatest benefit and where synergies may deliver incremental value.

Our account managers have built strong relationships with internationally renowned companies, such as Kraft, Nestlé and Procter & Gamble, through years of hard work and today these customers rely on us
to provide graphic services for several of their brands. We believe that one key to the longevity and success of these relationships has been our ability to support our account managers with superior execution. Our technical specialists have
strengthened many customer relationships by helping introduce new graphics that differentiate customers products in stores.



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RESEARCH AND DEVELOPMENT

We utilize state-of-the-art information technology to support our service offerings to our customers as well as our internal operations. Our IT team comprises experts focused on information systems, manufacturing
technologies, plant engineering systems, shop floor systems and enterprise solutions.

Our manufacturing technologies team includes a
unique and dedicated group of regional technology experts with a focus on research and analysis of new technologies, standardization of technology and designing/implementing smooth workflows. This group concentrates its efforts on understanding the
systems and equipment available in the marketplace and creating solutions using off-the-shelf products, customized to meet a variety of specific client and internal requirements. This team has a combined experience of 100 years in the graphics
services industry and has become an extension of many of our technology vendors, providing them with valuable feedback that helps improve product quality and capabilities.

INTELLECTUAL PROPERTY

Our customers own the designs and graphics images that are the subject of our
services and own the gravure image carriers used in the pre-printing process. Our only significant intellectual property assets are the names we operate under: Southern Graphic Systems and SGS in North America, and SGS
Europe in the United Kingdom and the Netherlands.

RAW MATERIALS

Our primary raw material purchases include sheet photopolymer for flexographic plates, photographic film, chemicals, storage media, ink, colorants, plate materials, proofing and various other supplies and chemicals.
We purchase our most commonly used raw materials under long-term contracts and are not impacted by short-term movements in raw material prices. In fiscal 2007, material and supply costs represented approximately 17% of our cost of goods sold.

BUSINESS CYCLES AND SEASONALITY

Our
business is not generally seasonal because of the number of design changes that we are able to process as a result of our speed-to-market and emphasis on digital technology. There may be some decline in December as any holiday-specific design
changes have been executed, and there may be similar, more modest slowdowns in conjunction with other holidays.

BACKLOG

The amount of backlog orders is immaterial to the Company due to the quick turn-around time of orders customary in the industry.

EMPLOYEES

As of December 31, 2007, we had 1,733
employees, 1,089 of whom are located at United States production facilities, 91 of whom are United States corporate employees, 229 of whom are located in Canada, and 20 of whom are located in Mexico. We have an additional 253 employees in the UK, 17
employees in the Netherlands, and 34 employees in Hong Kong. All of our employees in the United States, Canada, Mexico, the Netherlands, and Hong Kong are non-union. A number of our employees in the UK are members of the Graphical, Paper &
Media Union (GPMU), although the GPMU is not a bargaining agent for the employees at our facilities.

ENVIRONMENTAL MATTERS

As with most manufacturers, our facilities and operations are subject to federal, state, local and foreign environmental laws, regulations and ordinances,
including those that:



| |  |  | govern activities or operations that may adversely affect the environment, such as discharges to air and water, as well as handling and disposal practices for solid
and hazardous wastes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | seek to protect occupational safety and health; and
| | - |  | ---------------------------------------------------



| |  |  | impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous substances.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

The violation of such laws and regulations can result in substantial civil and criminal fines and penalties. We do not
currently anticipate any material adverse effect on our operations or financial condition as a result of our efforts to comply with, or our



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liabilities under, these requirements. We will, from time to time, incur costs to attain or maintain compliance with frequently changing regulatory
requirements under environmental law, but do not currently expect any such costs to be material.

We may be required to obtain or update
air permits under state or federal laws at certain of our facilities. We do not believe we will require any additional pollution reduction or capital improvements, nor do we believe we will be subject to fines or penalties, the costs of which, in
the aggregate, are reasonably likely to be material.

Certain of our facilities are known to have low levels of contaminants from hazardous
substances. Additional contamination could be detected at other current or former facilities. In connection with the purchase of SGS from Alcoa Inc. on December 30, 2005, Alcoa Inc. provided an indemnity for certain of these conditions, subject
to certain limitations, and based on the nature of the environmental impacts and such indemnity, we do not believe our liability for these conditions is likely to be material. Although we do not believe that we are currently subject to any material
environmental liabilities, the operations of manufacturing plants entail risks in these areas and there can be no assurance that we will not discover previously unknown environmental non-compliance or contamination.

We have not made any material expenditures during the last three fiscal years in order to comply with environmental laws or regulations. Based on our
experience to date, we believe that the future costs of compliance with existing environmental laws and regulations (and liability for known environmental conditions) are not reasonably likely to have a material adverse effect on our business,
consolidated financial condition, results of operations or liquidity. However, we cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be
enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to future environmental claims and
liabilities.

GEOGRAPHIC FINANCIAL INFORMATION

The sales and long-lived asset information by geographic area presented within Footnote B in Item 15, Exhibits and Financial Statement Schedules is incorporated herein by reference.

AVAILABLE INFORMATION

A copy of the Companys
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, is available on the Companys website at www.sgsintl.com without charge.



|Item 1A. | Risk Factors
|-------- | ------------

The risks described below are not the
only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially adversely
affect our business, financial condition or results of operations.

Our indebtedness is substantial, which could adversely affect our financial health
and limit our ability to obtain financing in the future and to react to changes in our business.

As of December 31, 2007, our
total consolidated indebtedness was $363.1 million and we had $35.0 million of additional borrowings available under our senior credit facility. Our large amount of debt could have important consequences, including, but not limited to, the
following:



| |  |  | it will require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, which will reduce the funds available for working
capital, capital expenditures, acquisitions and other general corporate expenses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it could make it more difficult for us to satisfy our obligations under our senior secured credit facility and our senior subordinated notes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it could place us at a disadvantage compared to our competitors that have proportionately less debt; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | it could limit our ability to borrow additional funds in the future, if needed, because of applicable financial and restrictive covenants of our indebtedness.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our debt agreements have restrictions that limit our flexibility in operating our business.

Our senior secured credit facility and the indenture under which our senior subordinated notes were issued have a number of significant covenants that, among other
things, restrict our ability to:



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | issue or sell capital stock;
| | - |  | ----------------------------



| |  |  | sell assets or consolidate or merge with or into other companies;
| | - |  | -----------------------------------------------------------------



| |  |  | pay dividends or repurchase or redeem capital stock;
| | - |  | ----------------------------------------------------



| |  |  | make certain investments;
| | - |  | -------------------------



| |  |  | make loans, incur liens and transfer property; and
| | - |  | --------------------------------------------------



| |  |  | enter into certain types of transactions with our affiliates.
| | - |  | -------------------------------------------------------------

These covenants, as well as our level of indebtedness, could have the effect of limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete.

In addition, under the senior secured credit facility, we are required to satisfy and maintain specified financial ratios and tests. Events beyond our
control may affect our ability to comply with those provisions and we may not be able to meet those ratios and tests, which would result in a default under the senior secured credit facility. In the event of a default, the lenders under the senior
secured credit facility could elect to declare all amounts borrowed under the senior secured credit facility, together with accrued interest, to be due and payable and could proceed against the collateral securing that indebtedness. Borrowings under
the senior secured credit facility are senior in right of payment to the senior subordinated notes. If any of our indebtedness were to be accelerated, our assets may not be sufficient to repay in full that indebtedness and the senior subordinated
notes.

We are subject to competitive pressures.

We compete with other providers of graphic products and related services. The market for such products and services is highly fragmented, with several national and many regional participants. We face, and will
continue to face, competition in our business from many sources, including national and large regional companies, some of which have greater financial, marketing and other resources than we do. In addition, local and regional firms specializing in
particular markets compete on the basis of established long-term relationships or specialized knowledge of such markets. The introduction of new technologies may create lower barriers to entry that may allow other firms to provide competing
services.

There can be no assurance that competitors will not introduce services or products that achieve greater market acceptance than,
or are technologically superior to, our current service offerings. There is no assurance that we will be able to continue to compete successfully or that competitive pressures will not adversely affect our business, financial condition and results
of operations.

Our business is sensitive to general economic conditions. An economic decline or other circumstances that result in reductions in our
customers marketing and advertising budgets could negatively impact our sales volume and revenues and our ability to respond to competition or take advantage of business opportunities.

Our revenues are derived from many customers in a variety of industries and businesses, some of whose spending levels can be cyclical in nature and
subject to significant reductions based on changes in, among other things, general economic conditions. Our operating results may reflect our customers order patterns or the effects of economic downturns on their businesses. In addition,
because we conduct our operations in a variety of markets, we are subject to economic conditions in each of these markets. We are subject to downward price pressures in certain of the markets we serve. Accordingly, general economic downturns,
localized downturns, or downward price pressures in markets where we have operations could have a material adverse effect on our business, results of operations and financial condition.

Our operations may be subject to quarterly and cyclical fluctuations.

The timing of particular jobs
or types of jobs at particular times of year may cause significant fluctuations in the operating results of our various operations in any given quarter. We are subject to factors that are beyond our control, including changes in interest costs,
currency exchange rates and tax rates, costs associated with compliance with legal and regulatory requirements and the health of the consumer products industry. We also depend, to some extent, on sales to certain industries, such as the food and
beverage and tobacco industries. To the extent these industries experience downturns, the results of our operations may be adversely affected.



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We are dependent on certain key customers and are subject to unpredictable order flows.

Our ten largest customers accounted for approximately 33% of our revenues in fiscal 2007. In fiscal 2007, no one customer accounted for more than 7% of
our total revenues. While we seek to build long-term customer relationships, revenues from any particular customer can fluctuate from period to period due to such customers purchasing patterns. Further, our services and related business
activity generally have been characterized by individual assignments from customers on a project-by-project basis, and continued engagements for successive jobs are primarily dependent upon our customers satisfaction with services previously
provided. While technological advances have enabled us to shorten considerably our production cycle to meet our customers increasing speed-to-market demands, we may in turn receive less advance notice from our customers of upcoming projects.
Any termination or significant disruption of our relationships with any of our principal customers could have a material adverse effect on our business, financial condition and results of operations.

We have long-term contracts with certain key customers. The terms of most of our largest contracts are initially between two and five years. However,
most of these contracts may be terminated by the customer without cause upon 30 to 90 days notification. While terms and conditions in our customer contracts vary, in general the contracts do not obligate our customers to purchase any specific
minimum volume or dollar amount of product from us. Any cancellation, deferral or significant reduction in sales to these principal customers or a significant number of smaller customers could have a material adverse effect on our business,
financial condition and results of operations.

We are dependent on certain key suppliers. Any problem or interruption in our supply of primary raw
materials could delay production and adversely affect our sales.

Our primary raw material purchases include sheet photopolymer for
flexographic plates, photographic film, chemicals, storage media, ink, colorants, plate materials, proofing paper and various other supplies and chemicals. We purchase the majority of our raw materials based on long-term contracts with our key
supplier. Although we believe we could find other suppliers, our continued supply of raw materials is subject to a number of risks, some of which are beyond our control, which could delay production and adversely affect our sales. In fiscal 2007,
materials and supplies costs accounted for approximately 17% of our cost of goods sold.

We may be unable to effectively integrate acquired businesses.

Since the beginning of 2003, we have completed 15 graphic services acquisitions. As part of our long-term strategy, we will seek to
make other graphic services acquisitions. While management has experience acquiring companies and integrating their operations into our existing operations, we may not be able to find additional attractive acquisition candidates or succeed at
effectively integrating acquired businesses into our existing business.

Future acquisitions could result in the incurrence of debt and
contingent liabilities and an increase in amortization expenses related to intangible assets, which could have a material adverse effect upon our business, financial condition and results of operations. Risks we could face with respect to
acquisitions include:



| |  |  | difficulties in the integration of the operations, technologies, products and personnel of the acquired company;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | risks of entering markets in which we have no or limited prior experience;
| | - |  | --------------------------------------------------------------------------



| |  |  | potential loss of employees;
| | - |  | ----------------------------



| |  |  | diversion of managements attention from other business concerns; and
| | - |  | ---------------------------------------------------------------------



| |  |  | expenses of any undisclosed or potential legal liabilities of the acquired company.
| | - |  | -----------------------------------------------------------------------------------

The risks associated with acquisitions could have a material adverse effect upon our business, financial condition and results of operations. We cannot
assure that we will be successful in consummating future acquisitions on favorable terms or at all.

Our foreign operations are subject to currency
exchange, political, investment and other risks that could hinder us from transferring funds out of a foreign country, delay our debt service payments, cause our operating costs to increase and adversely affect our results of operations.

We currently have operations in the United States, Mexico, Canada, the United Kingdom, the Netherlands, and Hong Kong, and our
long-term strategy contemplates having operations in other foreign jurisdictions. For the year ended December 31, 2007, total sales from operations outside the United States were approximately $91 million (excluding intercompany sales), which
represented approximately 30% of our consolidated net sales. We would expect this number and percentage to increase if we are successful in making additional foreign acquisitions. As a result of our current and contemplated foreign operations, we
are subject to certain risks which could disrupt our operations or force us to incur unanticipated costs and have an adverse effect on our ability to make payments on our debt obligations. See the table under Results of Operations in Item 7
summarizing the concentrations of sales, net income, and long-lived assets by major geographic region.



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Devaluations and fluctuations in currency exchange rates may affect our operating performance by
impacting revenues and expenses outside of the U.S. due to fluctuations in currencies other than the U.S. dollar or where we translate into U.S. dollars for financial reporting purposes the assets and liabilities of our foreign operations conducted
in local currencies.

We are subject to various other risks associated with operating in foreign countries, such as the following:



| |  |  | acts of terrorism;
| | - |  | ------------------



| |  |  | changes in government policies and regulations;
| | - |  | -----------------------------------------------



| |  |  | imposition of limitations on conversions of foreign currencies into dollars or remittance of dividends and other payments by foreign subsidiaries;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries; and
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | impositions or increase of investment and other restrictions or requirements by foreign governments.
| | - |  | ----------------------------------------------------------------------------------------------------

The loss of key personnel could adversely affect our current operations and our ability to achieve continued growth.

We are highly dependent upon the continued service and performance of our senior management team and other key employees. Although we generally have been
successful in our recruiting efforts, we compete for qualified individuals with companies engaged in our business lines and with other companies. Accordingly, we may be unable to attract and retain suitably qualified individuals, and our failure to
do so could have an adverse effect on our ability to implement our business plan. If, for any reason, these officers or key employees do not remain with us, our operations could be adversely affected until suitable replacements with appropriate
experience can be found.

If we do not keep pace with technological changes, we will not be able to maintain our competitive position.

We believe our ability to develop and exploit emerging technologies has contributed to our success and has demonstrated to our customers the value of
using our services rather than attempting to perform these functions in-house or through lower-cost, reduced-service competitors. We believe our success also has depended in part on our ability to adapt our business as technology advances in our
industry have changed the way graphics projects are produced. These changes include a shift from traditional production of images to offering more consulting and project management services to customers. Accordingly, our ability to grow will depend
upon our ability to keep pace with technological advances and industry evolutions on a continuing basis and to integrate available technologies and provide additional services commensurate with customer needs in a commercially appropriate manner.
Our business may be adversely affected if we were unable to keep pace with relevant technological industry changes or if the technologies that we adopt or services we promote do not receive widespread market acceptance.

We are subject to strict environmental laws and regulations that may lead to significant, unforeseen expenses.

We are subject to various federal, state, local and foreign environmental laws, regulations and ordinances, including those that:



| |  |  | govern activities or operations that may adversely affect the environment, such as discharges to air and water, as well as handling and disposal practices for solid
and hazardous wastes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | seek to protect occupational safety and health; and
| | - |  | ---------------------------------------------------



| |  |  | impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous substances.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

The violation of such laws and regulations can result in substantial civil and criminal fines and penalties. We may not
be, at all times, in compliance with all such requirements. As is the case with manufacturers in general, we have made and will continue to make capital expenditures to comply with environmental requirements. Although we do not believe that we are
currently subject to any material environmental liabilities, the operation of manufacturing plants entails risks in these areas and there can be no assurance that we will not discover previously unknown environmental non-compliance or contamination.
Noncompliance with or liability for cleanup under the environmental laws applicable to us could have a material adverse effect on our results of operations and financial condition. In addition, changes in environmental laws and regulations, or the
interpretation or enforcement thereof, the discovery of previously unknown contamination or other liabilities relating to our current or former properties and operations, developments in environmental litigation or technological advances could
increase the amount of future expenditures and could have a material adverse effect on our results of operations and financial condition.



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We may be subject to losses that might not be covered in whole or in part by our insurance coverage. These uninsured
losses could result in substantial liabilities to us that would negatively impact our financial condition.

We carry comprehensive
liability, fire and extended coverage insurance on all of our facilities, and other specialized coverages, including errors and omissions coverage, with policy specifications and insured limits which we believe to be reasonable for similar
properties and purposes. However, there are certain types of risks and losses, such as losses resulting from wars or acts of God, that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured
loss or a loss in excess of insured limits occur, we could incur significant liabilities, and if such loss affects property we own, we could lose capital invested in that property or the anticipated future revenues derived from the activities
conducted at that property, while remaining liable for any lease or other financial obligations related to the property. In addition to substantial financial liabilities, an uninsured loss or a loss that exceeds our coverage could adversely affect
our ability to replace property or capital equipment that is destroyed or damaged, and our productive capacity may diminish.

Our ability to report our
financial results or prevent fraud is dependent on our ability to maintain an effective system of internal controls.

Effective internal
controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. Beginning in 2008, the Sarbanes-Oxley Act of 2002 will
require our auditors to evaluate and assess the effectiveness of our internal controls, in addition to managements evaluation and assessment. If we fail to remedy or maintain the adequacy of our internal controls, as such standards are
modified, supplemented or amended from time to time, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to maintain adequate internal control could result in financial statements
that do not accurately reflect our financial condition. We might not be able to complete the work necessary to fully comply with the requirements of the Sarbanes-Oxley Act, which could prevent our auditors from completing their review and assessment
of our internal controls in a timely manner. Finally, our management and our auditors might not conclude that our internal controls are effective.

To
service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness, including the senior subordinated notes, and to fund planned capital expenditures, acquisitions and research and development efforts will depend on our ability to generate
cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our senior secured
credit facility will be adequate to meet our future liquidity needs for at least the next few years.

There is no assurance, however, that
our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our senior secured credit facility in an amount sufficient to enable us to pay our indebtedness, including the senior
subordinated notes, or to fund our other liquidity needs or that there will not be material adverse developments in our business, liquidity or capital requirements. If we are unable to generate sufficient cash flow from operations in the future to
service our indebtedness and to meet our other commitments, we may need to refinance or restructure all or a portion of our indebtedness, sell material assets or operations or obtain additional debt or equity capital. There is no assurance that we
would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, the terms of our existing or future debt
agreements, including the senior subordinated notes and our senior secured credit facility, may limit our ability to pursue any of these alternatives.

With our indebtedness levels, we may still be able to incur substantial additional debt, which could exacerbate the risks associated with our substantial leverage.

We may be able to incur additional debt in the future, including debt that is senior to or equal in right of payment to the senior subordinated notes.
Although the indenture governing the senior subordinated notes and our senior secured credit facility contain restrictions on our ability to incur indebtedness, those restrictions are or will be subject to a number of exceptions. Additional
indebtedness we incur may be senior to or equal in right of payment with the senior subordinated notes. Adding new debt to current debt levels could intensify the related risks that we now face.



17



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Indebtedness under our senior secured credit facility is subject to floating interest rates, which may cause our
interest expense to increase.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest
expense and reducing our funds available for operations and other purposes. A 1% increase in market interest rates would result in an annual increase in our interest expense and a decrease in our earnings before income taxes, of approximately $0.9
million. Any borrowings under our senior secured revolving credit facility and under our senior secured acquisition facility would be subject to similar fluctuations.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

Not applicable.



|Item 2. | Properties
|------- | ----------

We began operations in Louisville,
Kentucky and continue to maintain our headquarters there. We have a broad geographic reach through our network of 39 low cost production facilities located across the United States, Canada, Mexico, the United Kingdom, the Netherlands, and Hong Kong.
Virtually all of these production facilities provide prepress graphics services; 20 of them produce flexographic plates; and nine of them produce gravure cylinders. Due to shipping costs, proximity to the customer is particularly important with
respect to image carriers. While graphic services can be provided at a greater distance from the customer, it is still a competitive advantage to be able to have face-to-face contact with the customer on short notice when necessary or desirable. We
are evaluating potential acquisition opportunities to expand our footprint on the west coast of the United States.

We also operate on-site
at numerous consumer products company locations and several printer locations. On-site services typically involve packaging graphics services and project management work. We also operate five facility-managed locations. This work typically involves
production of flexographic plates at printers. We have expanded our on-site and facility-managed presence to strengthen customer relationships, improve cost efficiencies, and increase speed and accuracy of the end-products. Image quality,
consistency and response times are becoming increasingly important to our customers and on-site and facility-managed locations help us to better serve our customers needs.

In 2005, we expanded outside North America with the acquisition of MCG, adding facilities in Hull, Cambria and London, England, and significantly
expanding our ability to serve our multinational customers. We also established a prepress facility in Nottingham, England in 2005. During 2006, we continued our expansion outside North America with the acquisition of The Box Room Limited in the
United Kingdom and the acquisition of a business supplying photographic and digital images for the packaging printing industry in the Netherlands. During 2007, we increased our presence in Europe and expanded into Asia with our acquisition McGurk.
McGurk is a UK-based provider of end-to-end digital design, artwork and reprographics for packaging solutions with locations in Hull and London, England and Hong Kong. We also have relationships with certain regional graphic services providers in
Europe, India, and The Philippines.

As of March 14, 2008, excluding our headquarters in Louisville, we have 39 operating facility
locations.



|                      |  |       |  |       
|--------------------- |  | ----- |  | ------
|Location              |  | Owned |  | Leased
|United States         |  |       |  |       
|Appleton, WI          |  |       |  | X     
|Atlanta, GA (Gravure) |  |       |  | X     
|Atlanta, GA (Flexo)   |  |       |  | X     
|Battle Creek, MI      |  |       |  | X     
|Charlotte, NC         |  |       |  | X     
|Cincinnati, OH        |  |       |  | X     
|Dallas, TX            |  |       |  | X     
|Elgin, IL             |  |       |  | X     
|Florence, KY          |  | X     |  |       
|Fulton, NY            |  | X     |  |       
|Greensboro, NC        |  |       |  | X     
|McBee, SC             |  |       |  | X     
|Milwaukee, WI         |  |       |  | X     
|Minneapolis, MN       |  |       |  | X     
|Philadelphia, PA      |  |       |  | X     
|Plymouth, MN          |  |       |  | X     
|Ramsey, NJ            |  |       |  | X     
|Reidsville, NC        |  |       |  | X     



18



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##### Table of Contents

|                                         |  |       |  |       
|---------------------------------------- |  | ----- |  | ------
|Location                                 |  | Owned |  | Leased
|Richmond, VA (Creative)                  |  |       |  | X     
|Richmond, VA (Prepress, Flexo, Gravure)  |  |       |  | X     
|St. Louis, MO                            |  |       |  | X     
|West Monroe, LA                          |  | X     |  |       
|Winston Salem, NC                        |  |       |  | X     
|Canada                                   |  |       |  |       
|Brampton, Ontario                        |  |       |  | X     
|Mississauga, Ontario (Gravure)           |  |       |  | X     
|Montreal, Quebec (Flexo)                 |  |       |  | X     
|Montreal, Quebec (Flex-Art Design)       |  |       |  | X     
|Toronto, Ontario (Tri-Ad Communications) |  |       |  | X     
|Toronto, Ontario (Tri-Ad Communications) |  |       |  | X     
|Toronto, Ontario (Evolution Design)      |  |       |  | X     
|Mexico                                   |  |       |  |       
|Mexico City                              |  |       |  | X     
|United Kingdom                           |  |       |  |       
|Hull (MCG Graphics Limited)              |  |       |  | X     
|Hull (SGS Studios)                       |  |       |  | X     
|London (SGS Thames)                      |  |       |  | X     
|London (Design Studio)                   |  |       |  | X     
|Nottingham                               |  |       |  | X     
|Tamworth                                 |  |       |  | X     
|The Netherlands                          |  |       |  |       
|Ede                                      |  |       |  | X     
|China                                    |  |       |  |       
|Hong Kong                                |  |       |  | X     



|Item 3. | Legal Proceedings
|------- | -----------------

Various lawsuits, claims and
proceedings have been or may be instituted or asserted against entities within the Company. While the amounts claimed may be substantial, the ultimate liability cannot be determined because of the considerable uncertainties that exist. Therefore, it
is possible that results of operations or liquidity in a particular period could be materially affected by certain contingencies. However, based on currently available facts and in light of legal and other defenses available to us, management
believes that the disposition of matters that are pending or asserted will not have a materially adverse effect on the Companys financial position, results of operations, and liquidity.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

No matters were submitted to a vote of the Registrants security holders during the fourth quarter of 2007.

PART II



|Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ----------------------------------------------------------------------------------------------------------------

PUBLIC TRADING MARKET

There is no established public
trading market for the Registrants Common Stock.

As of March 14, 2008, there was one holder of record of the Registrants
Common Stock.

DIVIDENDS

The
Registrant has never paid any cash dividends on its Common Stock and does not anticipate paying any cash dividends in the foreseeable future. The instruments governing the Registrants senior credit facility prohibit it from paying dividends
other than (i) dividends to Southern Graphics Inc. (Holdco), the Registrants parent, for out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead incurred by Holdco in the ordinary course
of its business, (ii) dividends to Holdco to permit Holdco to repurchase or redeem shares of its capital stock held by officers, directors or employees upon their death, disability, retirement, severance or termination of employment, in each
case up to an aggregate of $3,000,000 per year, (iii) payments to Holdco to allow it to pay applicable income taxes, and (iv) dividends to Holdco to enable it to repurchase or redeem its equity interests held by Citigroup Venture Capital
(CVC) or one of its related entities if Holdco concurrently issues a commensurate amount of equity



19



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##### Table of Contents

interests to Lyon Southern, Inc. or another equity investor reasonably satisfactory to the administrative agent and the arrangers under such facility. The
indenture governing the senior subordinated notes contains additional restrictions on paying dividends. The Registrant currently intends to retain future earnings to help fund the development and growth of its business and to reduce outstanding
indebtedness.

EQUITY COMPENSATION PLANS

The Registrant has no equity compensation plans under which equity securities of the Registrant are authorized for issuance. The following table provides information relating to the Southern Graphics Inc. Stock Incentive Plan as of
December 31, 2007:



|                                                           |  |                                                                      |  |                                                      |     |                                                                                           |       
|---------------------------------------------------------- |  | -------------------------------------------------------------------- |  | ---------------------------------------------------- | --- | ----------------------------------------------------------------------------------------- | ------
|                                                           |  | Number of securities tobe issued upon
exerciseof outstanding options |  | Weighted-averageexercise price ofoutstanding options |     | Number of securitiesremaining available forfuture issuance under equitycompensation plans
|Equity compensation plans approved by security holders1    |  | 7,600                                                                |  | $                                                    | 153 |                                                                                           | 23,400
|Equity compensation plans not approved by security holders |  |                                                                     |  |                                                      |    |                                                                                           |      
|                                                           |  |                                                                      |  |                                                      |     |                                                                                           |       
|Total                                                      |  | 7,600                                                                |  | $                                                    | 153 |                                                                                           | 23,400
|                                                           |  |                                                                      |  |                                                      |     |                                                                                           |       



|1 | Southern Graphics Inc. is the sole shareholder of the Registrants outstanding common stock. This plan was approved
by the Board of Directors of Southern Graphics Inc.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

RECENT SALES OF UNREGISTERED SECURITIES

The Registrant had no sales of unregistered securities in 2007.



|Item 6. | Selected Financial Data
|------- | -----------------------

On December 30, 2005,
Southern Graphic Systems (the Predecessor) was acquired by CVC from Alcoa Inc. As a result, this report reflects the financial position and results of operations of the Predecessor up to the date of acquisition and reflects the financial position
and results of operations of SGS International, Inc. and its subsidiaries (the Successor) after the date of acquisition.

The following
table presents selected consolidated / combined financial information and other data for the periods indicated. The historical statement of operations data and statement of cash flows data for the years ended December 31, 2007 and
December 31, 2006 and the one-day ended December 31, 2005, and the balance sheet data for December 31, 2007 and December 31, 2006 are derived from our audited consolidated financial statements of the Successor, included elsewhere
in this Form 10-K. The historical balance sheet data for December 31, 2005, is derived from our audited consolidated financial statements of the Successor not contained in this Form 10-K. The historical statement of operations data and
statement of cash flows data for the period ended December 30, 2005 are derived from our audited combined financial statements of the Predecessor included elsewhere in this Form 10-K. The historical statement of operations data and statement of
cash flows data for the years ended December 31, 2004 and December 31, 2003, and the historical balance sheet data for December 31, 2004 and December 31, 2003 are derived from other audited combined financial statements of the
Predecessor not contained in this Form 10-K.

The information contained in this table should also be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated / combined financial statements and accompanying notes thereto included elsewhere in this Form 10-K.



20



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##### Table of Contents

|                                                                |                            |           |       |                            |             |   |                               |   |  |                              |        |   |                            |   |       |                            |  |   |       |   |  |   |       |  
|--------------------------------------------------------------- | -------------------------- | --------- | ----- | -------------------------- | ----------- | - | ----------------------------- | - |  | ---------------------------- | ------ | - | -------------------------- | - | ----- | -------------------------- |  | - | ----- | - |  | - | ----- | -
|                                                                |                            | Successor |       |                            | Predecessor |  
|                                                                | Year endedDecember 31,2007 |           |       | Year endedDecember 31,2006 |             |   | One-Day endedDecember 31,2005 |   |  | Period endedDecember 30,2005 |        |   | Year endedDecember 31,2004 |   |       | Year endedDecember 31,2003 | 
|                                                                | (dollars in millions)      |          
|Statement of Operations Data:                                   |                            |           |       |                            |             |   |                               |   |  |                              |        |   |                            |   |       |                            |  |   |       |   |  |   |       |  
|Sales                                                           |                            | $         | 308.8 |                            |             | $ | 276.3                         |   |  | $                            |       |   |                            | $ | 260.3 |                            |  | $ | 242.3 |   |  | $ | 226.4 |  
|Net sales growth                                                |                            |           | 11.8  | %                          |             |   | 6.1                           | % |  |                              | 0.0    | % |                            |   | 7.4   | %                          |  |   | 7.0   | % |  |   | 6.0   | %
|Costs of good sold (exclusive of depreciation)                  |                            |           | 205.1 |                            |             |   | 180.5                         |   |  |                              |       |   |                            |   | 170.9 |                            |  |   | 156.1 |   |  |   | 143.6 |  
|Selling, general and administrative expenses                    |                            |           | 46.6  |                            |             |   | 37.9                          |   |  |                              |       |   |                            |   | 32.6  |                            |  |   | 31.5  |   |  |   | 29.9  |  
|Depreciation and amortization                                   |                            |           | 23.7  |                            |             |   | 20.1                          |   |  |                              |       |   |                            |   | 16.4  |                            |  |   | 15.0  |   |  |   | 15.1  |  
|Income from (loss on) operations                                |                            |           | 33.4  |                            |             |   | 37.8                          |   |  |                              |       |   |                            |   | 40.4  |                            |  |   | 39.7  |   |  |   | 37.8  |  
|Related party interest expense                                  |                            |           |      |                            |             |   |                              |   |  |                              |       |   |                            |   | 6.4   |                            |  |   | 4.8   |   |  |   | 4.6   |  
|Interest expense                                                |                            |           | 36.9  |                            |             |   | 35.0                          |   |  |                              | 0.1    |   |                            |   |      |                            |  |   |      |   |  |   |      |  
|Other expense, net                                              |                            |           | 0.5   |                            |             |   | 0.2                           |   |  |                              |       |   |                            |   | 1.5   |                            |  |   |      |   |  |   | 0.2   |  
|Income from (loss on) continuing operations before income taxes |                            |           | (4.0  | )                          |             |   | 2.6                           |   |  |                              | (0.1   | ) |                            |   | 32.5  |                            |  |   | 34.9  |   |  |   | 33.0  |  
|Provision (benefit) for taxes on income                         |                            |           | (1.2  | )                          |             |   | 1.4                           |   |  |                              | (0.1   | ) |                            |   | 12.7  |                            |  |   | 13.9  |   |  |   | 12.8  |  
|Income from (loss on) continuing operations                     |                            |           | (2.8  | )                          |             |   | 1.2                           |   |  |                              |       |   |                            |   | 19.8  |                            |  |   | 21.0  |   |  |   | 20.2  |  
|Income from (loss on) discontinued operations                   |                            |           | 0.9   |                            |             |   | (0.5                          | ) |  |                              |       |   |                            |   | 0.1   |                            |  |   | (0.6  | ) |  |   |      |  
|Provision (benefit) for taxes on income                         |                            |           | 0.2   |                            |             |   | (0.2                          | ) |  |                              |       |   |                            |   | 0.1   |                            |  |   | (0.2  | ) |  |   |      |  
|Net income (loss)                                               |                            |           | (2.1  | )                          |             |   | 0.9                           |   |  |                              |       |   |                            |   | 19.8  |                            |  |   | 20.6  |   |  |   | 20.2  |  
|Balance Sheet Data:                                             |                            |           |       |                            |             |   |                               |   |  |                              |        |   |                            |   |       |                            |  |   |       |   |  |   |       |  
|Cash and cash equivalents                                       |                            |           | 34.5  |                            |             |   | 12.7                          |   |  |                              | 4.1    |   |                            |   | N/A   |                            |  |   | 0.8   |   |  |   |      |  
|Working capital                                                 |                            |           | 71.9  |                            |             |   | 50.7                          |   |  |                              | 37.8   |   |                            |   | N/A   |                            |  |   | (26.8 | ) |  |   | (39.7 | )
|Adjusted working capital1                                       |                            |           | 39.6  |                            |             |   | 41.6                          |   |  |                              | 35.6   |   |                            |   | N/A   |                            |  |   | 31.6  |   |  |   | 34.2  |  
|Properties, plant and equipment, net                            |                            |           | 53.4  |                            |             |   | 52.4                          |   |  |                              | 56.4   |   |                            |   | N/A   |                            |  |   | 44.6  |   |  |   | 40.8  |  
|Total assets                                                    |                            |           | 530.2 |                            |             |   | 469.5                         |   |  |                              | 461.5  |   |                            |   | N/A   |                            |  |   | 329.2 |   |  |   | 283.6 |  
|Total debt2                                                     |                            |           | 363.1 |                            |             |   | 322.0                         |   |  |                              | 320.4  |   |                            |   | N/A   |                            |  |   | 128.2 |   |  |   | 106.9 |  
|Enterprise capital                                              |                            |           |      |                            |             |   |                              |   |  |                              |       |   |                            |   | N/A   |                            |  |   | 139.8 |   |  |   | 116.9 |  
|Stockholders equity                                            |                            |           | 119.2 |                            |             |   | 110.3                         |   |  |                              | 106.9  |   |                            |   | N/A   |                            |  |   |      |   |  |   |      |  
|Statement of Cash Flows Data:                                   |                            |           |       |                            |             |   |                               |   |  |                              |        |   |                            |   |       |                            |  |   |       |   |  |   |       |  
|Net cash provided by operations                                 |                            |           | 23.8  |                            |             |   | 20.2                          |   |  |                              | 0.9    |   |                            |   | 14.6  |                            |  |   | 15.0  |   |  |   | 27.7  |  
|Net cash provided by (used in) financing activities             |                            |           | 36.4  |                            |             |   | (0.5                          | ) |  |                              | 414.5  |   |                            |   | 17.4  |                            |  |   | 5.2   |   |  |   | (17.4 | )
|Net cash used for investing activities                          |                            |           | (39.7 | )                          |             |   | (11.0                         | ) |  |                              | (412.5 | ) |                            |   | (28.8 | )                          |  |   | (19.3 | ) |  |   | (10.9 | )
|Other Financial Data:                                           |                            |           |       |                            |             |   |                               |   |  |                              |        |   |                            |   |       |                            |  |   |       |   |  |   |       |  
|Capital expenditures                                            |                            |           | 11.1  |                            |             |   | 8.7                           |   |  |                              |       |   |                            |   | 13.9  |                            |  |   | 5.6   |   |  |   | 5.6   |  
|Business acquisitions, net of cash acquired                     |                            |           | 29.3  |                            |             |   | 4.4                           |   |  |                              | 412.5  |   |                            |   | 15.4  |                            |  |   | 13.8  |   |  |   | 5.3   |  



|1 | Adjusted working capital is defined as current assets (excluding cash and cash equivalents and related party
receivables) less current liabilities (excluding short-term borrowings, current portion of long-term debt and related party payables). However, adjusted working capital is not a recognized measurement under GAAP, and when analyzing our financial
position, investors should use adjusted working capital in addition to, and not as an alternative for working capital, as defined in GAAP. The following table reconciles working capital to adjusted working capital:
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                      |  |                  |       |   |                  |   |       |                  |  |   |                  |   |  |                  |       |   |  |   |       |  
|------------------------------------- |  | ---------------- | ----- | - | ---------------- | - | ----- | ---------------- |  | - | ---------------- | - |  | ---------------- | ----- | - |  | - | ----- | -
|                                      |  | December 31,2007 |       |   | December 31,2006 |   |       | December 31,2005 |  |   | December 31,2004 |   |  | December 31,2003 |      
|Working capital                       |  | $                | 71.9  |   |                  | $ | 50.7  |                  |  | $ | 37.8             |   |  | $                | (26.8 | ) |  | $ | (39.7 | )
|Less cash                             |  |                  | (34.5 | ) |                  |   | (12.7 | )                |  |   | (4.1             | ) |  |                  | (0.8  | ) |  |   | 0.0   |  
|Less related party receivables        |  |                  | 0.0   |   |                  |   | 0.0   |                  |  |   | 0.0              |   |  |                  | (67.8 | ) |  |   | (33.0 | )
|Add related party payables2           |  |                  | 0.0   |   |                  |   | 0.0   |                  |  |   | 0.0              |   |  |                  | 34.7  |   |  |   | 23.1  |  
|Add short-term borrowings2            |  |                  | 0.0   |   |                  |   | 0.0   |                  |  |   | 0.0              |   |  |                  | 91.9  |   |  |   | 83.8  |  
|Add current portion of long-term debt |  |                  | 2.2   |   |                  |   | 3.6   |                  |  |   | 1.9              |   |  |                  | 0.4   |   |  |   | 0.0   |  
|                                      |  |                  |       |   |                  |   |       |                  |  |   |                  |   |  |                  |       |   |  |   |       |  
|Adjusted working capital              |  | $                | 39.6  |   |                  | $ | 41.6  |                  |  | $ | 35.6             |   |  | $                | 31.6  |   |  | $ | 34.2  |  
|                                      |  |                  |       |   |                  |   |       |                  |  |   |                  |   |  |                  |       |   |  |   |       |  



|2 | Years ended December 31, 2003 and 2004 include short- and long-term borrowings with related parties, as well as
related party payables.
|- | ---------------------------------------------------------------------------------------------------------------------------------------



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The statements in the discussion and analysis regarding our expectations regarding the performance of our business, our liquidity and capital resources and other non-historical statements are forward-looking
statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any of these forward-looking statements. You should read the following
discussion together with the financial statements and the related notes included elsewhere in this Form 10K.

OVERVIEW

We are a global leader in the digital imaging industry, offering design-to-print graphic services to the international consumer products packaging market
in North America, Europe and Asia. Our global service platform and financial capability provide a distinct competitive advantage over the majority of companies in our industry. We offer a full spectrum of innovative digital solutions that streamline
the capture, management, execution, and distribution of graphics information. Our brand development, creative design, prepress, image carriers and print support services are utilized in each of the three main printing processes: flexography, gravure
and lithography. Our customers, many of which we have served for over 20 years, include large branded consumer products companies, mass merchant retailers and the printers and converters that service them. Our services ensure that our customers are
able to obtain or produce consistent, high quality packaging materials often on short turnaround times.

In our industry, we believe a
global presence provides the best platform to serve all of our customers needs. Therefore, our strategy for fiscal 2007 included strengthening our global presence through further expansion into Europe and entry into Asia. We executed this
strategy with our acquisition of McGurk Studios Limited and Thames McGurk Limited (collectively McGurk) in April 2007. McGurk is a UK-based provider of end-to-end digital design, artwork and reprographics for packaging solutions with
locations in Hull and London, England and Hong Kong. McGurk contributed sales of $15.9 in fiscal 2007.

In addition to our global
expansion, we continue to grow our business in North America through acquisitions. In February 2007, we acquired the assets of C.M. Jackson Associates, Inc. (CMJ). CMJ is a supplier of design and creative, production art and pre-press,
packaging management, project tracking and digital asset management services with an emphasis on store brands located in the United States. The acquisition of the operations of CMJ contributed sales of $7.1 million in fiscal 2007. In
January 2008, we acquired 1043497 Ontario Limited, Cooper & Williamson, Inc., Tri-Ad Graphic Communications Ltd. and Flex-Art Design Inc. (collectively Tri-Ad). Tri-Ad is a Canadian provider of packaging and retail graphics
services with locations in Toronto, Ontario and outside of Montreal, Quebec.

While we continue to successfully grow our business through
acquisitions, organic growth in our base business was flat during 2007 primarily due to price erosion in the industry; however, we were able to partially offset the negative impact of this price erosion through volume growth. Based on current
economic conditions, we expect pricing pressures to continue into 2008. To control costs in response to these pressures, we started the process of consolidating certain operations in North America during 2007 resulting in approximately $2.6 million
of severance charges included in selling, general and administrative expenses. Additionally, we expanded our sales force during 2007, which we believe positions us well to generate organic growth during 2008.



22



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During 2007, our operations generated cash flow of $23.8 million, an 18% increase over the prior year.
The majority of this cash was used to service debt through interest payments and to fund acquisitions. Our ability to generate cash from operations positions us to achieve our financial goals in 2008, fund acquisitions and compete in difficult
economic conditions.

RESULTS OF OPERATIONS

The following table sets forth our results of operations based on the amounts and the percentage relationship of the items listed to net sales for the periods indicated (dollars in thousands).



|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|--------------------------------------------------------------- | --------------------------- | --------- | ------- | --------------------------- | --------- | ----- | ------------------------------ | --------- | - | ------- | - | ----------------------------- | ----------- | - |  | - | ---- | - |  | ---- | - |  |  |  | - | ------- |  | ----- | -
|                                                                |                             | Successor |         |                             | Successor |       |                                | Successor |   |         |   |                               | Predecessor |  
|                                                                | Year EndedDecember 31, 2007 |           |         | Year EndedDecember 31, 2006 |           |       | One-Day EndedDecember 31, 2005 |           |   |         |   | Period EndedDecember 30, 2005 |            
|Net sales                                                       |                             | $         | 308,809 |                             |           | 100.0 | %                              |           | $ | 276,276 |   |                               | 100.0       | % |  | $ |     |   |  | 0.0  | % |  |  |  | $ | 260,328 |  | 100.0 | %
|Cost of goods sold                                              |                             |           | 205,132 |                             |           | 66.4  | %                              |           |   | 180,512 |   |                               | 65.3        | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 170,926 |  | 65.7  | %
|Selling, general, and administrative expenses                   |                             |           | 46,555  |                             |           | 15.1  | %                              |           |   | 37,913  |   |                               | 13.7        | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 32,632  |  | 12.5  | %
|Depreciation and amortization                                   |                             |           | 23,689  |                             |           | 7.7   | %                              |           |   | 20,061  |   |                               | 7.3         | % |  |   | 42   |   |  | 0.0  | % |  |  |  |   | 16,415  |  | 6.3   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|Income from (loss on) operations                                |                             |           | 33,433  |                             |           | 10.8  | %                              |           |   | 37,790  |   |                               | 13.7        | % |  |   | (42  | ) |  | 0.0  | % |  |  |  |   | 40,355  |  | 15.5  | %
|Related party interest expense                                  |                             |           |        |                             |           | 0.0   | %                              |           |   |        |   |                               | 0.0         | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 6,431   |  | 2.5   | %
|Interest expense                                                |                             |           | 36,929  |                             |           | 12.0  | %                              |           |   | 35,012  |   |                               | 12.7        | % |  |   | 97   |   |  | 0.0  | % |  |  |  |   | 10      |  | 0.0   | %
|Other expense, net                                              |                             |           | 497     |                             |           | 0.2   | %                              |           |   | 225     |   |                               | 0.1         | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 1,457   |  | 0.6   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|Income from (loss on) continuing operations before income taxes |                             |           | (3,993  | )                           |           | -1.3  | %                              |           |   | 2,553   |   |                               | 0.9         | % |  |   | (139 | ) |  | -0.1 | % |  |  |  |   | 32,457  |  | 12.5  | %
|Provision (benefit) for income taxes                            |                             |           | (1,182  | )                           |           | -0.4  | %                              |           |   | 1,345   |   |                               | 0.5         | % |  |   | (54  | ) |  | 0.0  | % |  |  |  |   | 12,690  |  | 4.9   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|Income from (loss on) continuing operations                     |                             |           | (2,811  | )                           |           | -0.9  | %                              |           |   | 1,208   |   |                               | 0.4         | % |  |   | (85  | ) |  | 0.0  | % |  |  |  |   | 19,767  |  | 7.6   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|Income from (loss on) discontinued operations                   |                             |           | 842     |                             |           | 0.3   | %                              |           |   | (480    | ) |                               | -0.2        | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 94      |  | 0.0   | %
|Provision (benefit) for income taxes on discontinued operations |                             |           | 170     |                             |           | 0.1   | %                              |           |   | (197    | ) |                               | -0.1        | % |  |   |     |   |  | 0.0  | % |  |  |  |   | 67      |  | 0.0   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  
|Net income (loss)                                               |                             | $         | (2,139  | )                           |           | -0.7  | %                              |           | $ | 925     |   |                               | 0.3         | % |  | $ | (85  | ) |  | 0.0  | % |  |  |  | $ | 19,794  |  | 7.6   | %
|                                                                |                             |           |         |                             |           |       |                                |           |   |         |   |                               |             |   |  |   |      |   |  |      |   |  |  |  |   |         |  |       |  

The following table summarizes the concentrations of sales by major geographic region (dollars in thousands).



|                           |                             |           |         |                             |           |   |         |   |                               |             |  |   |         |  
|-------------------------- | --------------------------- | --------- | ------- | --------------------------- | --------- | - | ------- | - | ----------------------------- | ----------- |  | - | ------- | -
|                           |                             | Successor |         |                             | Successor |   |         |   |                               | Predecessor | 
|                           | Year EndedDecember 31, 2007 |           |         | Year EndedDecember 31, 2006 |           |   |         |   | Period EndedDecember 30, 2005 |            
|United States              |                             | $         | 221,426 |                             |           | $ | 216,835 |   |                               |             |  | $ | 220,559 |  
|Canada                     |                             |           | 42,582  |                             |           |   | 40,853  |   |                               |             |  |   | 40,486  |  
|United Kingdom             |                             |           | 44,576  |                             |           |   | 23,867  |   |                               |             |  |   | 3,188   |  
|Other geographic locations |                             |           | 6,423   |                             |           |   | 1,881   |   |                               |             |  |   | 2,114   |  
|Eliminations               |                             |           | (6,198  | )                           |           |   | (7,160  | ) |                               |             |  |   | (6,019  | )
|                           |                             |           |         |                             |           |   |         |   |                               |             |  |   |         |  
|Total                      |                             | $         | 308,809 |                             |           | $ | 276,276 |   |                               |             |  | $ | 260,328 |  
|                           |                             |           |         |                             |           |   |         |   |                               |             |  |   |         |  

Year ended December 31, 2007 compared to the year ended December 31, 2006

Sales. Sales increased 11.8%, or $32.5 million, to $308.8 million for fiscal 2007 from $276.3 million for fiscal 2006. The acquisition of McGurk in the United
Kingdom on April 2, 2007 added sales of $15.9 million for fiscal 2007. The acquisition of the operations of C.M Jackson Associates, Inc. (CMJ) in the United States on February 28, 2007 added sales of $7.1 million for fiscal
2007. The operations of businesses acquired during 2006 generated sales of $6.3 million for fiscal 2007 compared to sales of $1.5 million for fiscal 2006.

In addition, sales for fiscal 2007 included $4.3 million for amounts invoiced to customers for shipping and handling costs. In fiscal 2006, amounts invoiced to customers for shipping and handling costs were netted against the actual cost
incurred and reflected as a reduction in cost of sales.

After excluding the impact of sales generated from acquisitions and the presentation of amounts
invoiced to customers for shipping and handling costs, sales in the United States decreased by $5.5 million in fiscal 2007 compared to 2006. This decrease was due to



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price erosion in the industry partially offset by volume growth. Sales in Canada increased by $1.8 in fiscal 2007 compared to fiscal 2006 primarily as a
result of the weakening of the United States dollar compared to the Canadian dollar, which positively impacted sales in Canada by $2.0 million. This increase was slightly offset by price erosion in the industry. After excluding the impact of sales
generated from acquisitions, sales in the United Kingdom increased by $4.7 million in fiscal 2007 compared to fiscal 2006. The weakening of the United States dollar compared to the British pound positively impacted sales in the United Kingdom by
$1.9 million and the remaining increase was primarily due to organic growth.

Cost of Goods Sold. Cost of goods sold for fiscal 2007 increased
13.6%, or $24.6 million, to $205.1 million from $180.5 million for fiscal 2006. The acquisitions previously discussed added estimated incremental costs of goods sold in fiscal 2007 compared to fiscal 2006 of $10.4 for McGurk, $5.6 million for the
operations of CMJ, and $4.1 million for businesses acquired during 2006. In addition, cost of goods sold for fiscal 2007 increased by $4.3 million for shipping and handling costs billed to customers that were recorded as a component of net sales in
fiscal 2007 but were reflected as a reduction of costs of goods sold in fiscal 2006. The remaining increase in cost of goods sold was due to the weakening of the United States dollar compared to the Canadian dollar and the British pound. The
increase in cost of goods sold as a percentage of sales to 66.4% for fiscal 2007 from 65.3% in fiscal 2006 is primarily due to the accounting for shipping and handling costs billed to customers and price erosion, as previously discussed.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for fiscal 2007 increased 22.8%, or $8.7 million, to $46.6 million
from $37.9 million for fiscal 2006. The acquisitions previously discussed added estimated incremental expenses in fiscal 2007 compared to fiscal 2006 of $2.0 million for McGurk, $3.8 million for the operations of CMJ, and $0.3 million for businesses
acquired during 2006. The CMJ expenses of $3.8 million include $3.1 million of expense payable under the purchase agreement. We expect this component of CMJ expenses to decrease to $1.7 million for fiscal 2008 and $0.2 million for fiscal 2009. The
remaining increase in expenses is due to expenses associated with potential and other business combinations and severance costs related to consolidating certain operations in North America. Professional fees associated with potential and other
business combinations were $1.2 million in fiscal 2007 compared to $0.3 million in fiscal 2006. Severance costs incurred in connection with consolidating certain operations were $2.6 million in fiscal 2007 compared to $0.4 million in fiscal 2006. We
expect the expenses associated with potential and other business combinations and severance costs to decrease in 2008.

Depreciation and Amortization
Expenses. Depreciation and amortization expenses for fiscal 2007 increased 18.1%, or 3.6 million, to $23.7 million from $20.1 million for fiscal 2006. The acquisitions previously discussed added expenses in fiscal 2007 compared to fiscal
2006 of $1.4 for McGurk, $0.5 million for the operations of CMJ, and $0.5 million for businesses acquired during 2006. The remaining increase of $1.2 million was primarily due to depreciation and amortization on assets acquired or placed in service
during 2006 and 2007.

Interest Expense. Interest expense for fiscal 2007 increased 5.5%, or $1.9 million, to $36.9 million from $35.0 million for
fiscal 2006. This increase was primarily due to interest expense on borrowings made on the senior secured acquisition facility during 2007. Interest expense from borrowings on the senior secured acquisition facility was $1.5 million in fiscal 2007
compared to zero in fiscal 2006. The remaining increase of $0.4 million was primarily due to higher average interest rates on the senior secured term loan during fiscal 2007 compared to fiscal 2006.

Other Expense, net. Other expenses, net for fiscal 2007 increased by $0.3 million to $0.5 million from $0.2 million for fiscal 2006. Other expense, net, primarily
consists of realized (gains) losses on foreign exchange, net of interest income. The fluctuation from fiscal 2007 to fiscal 2006 was not significant.

Provision for taxes on income. The effective tax rate for fiscal 2007 was 29.6%, compared to 52.7% for fiscal 2006. The decrease in the effective tax rate is primarily due to expenses not fully deductible for income tax purposes
having a smaller impact on the effective tax rate for fiscal 2007 than for fiscal 2006. This smaller impact in fiscal 2007 than fiscal 2006 is due to the loss before income taxes for fiscal 2007 being a larger amount than the income before income
taxes for fiscal 2006.

Income from (loss on) discontinued operations. Income from (loss on) discontinued operations was a gain of $0.8 million in
fiscal 2007 compared to a loss of $0.5 million in fiscal 2006. This fluctuation was primarily due to the gain on divestiture of the controlling interest in Mozaic Group, Ltd. of $0.9 million during fiscal 2007.

There is no discussion of the one-day ended December 31, 2005 due to the insignificance of the results of operation for this period.

Year ended December 31, 2006 compared to the period ended December 30, 2005

Sales. Sales for fiscal 2006 increased 6.1% to $276.3 million from $260.3 million for the period ended December 30, 2005. This increase is largely due to the acquisition of MCG Graphics in November 2005.
This acquisition added sales of $20.8 million in fiscal



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2006 compared to sales of $3.2 million in the period ended December 30, 2005. The acquisition of The Box Room in June 2006 (included in United Kingdom
operations) added incremental sales of $1.1 million in fiscal 2006 and the acquisition of a business supplying photographic and digital images for the packaging printing industry in the Netherlands added incremental sales of $0.4 million in fiscal
2006.

Cost of Goods Sold. Cost of goods sold for fiscal 2006 increased 5.6% to $180.5 million from $170.9 million for the period ended
December 30, 2005. The acquisitions previously discussed added estimated incremental costs of goods sold in fiscal 2006 compared to the period ended December 30, 2005 of $15.3 million for MCG Graphics, $1.6 million for The Box Room, and
$0.5 million for operations in the Netherlands. The increase in cost of goods sold due to acquisitions was partially offset by a reduction in cost of goods sold of $2.4 million in fiscal 2006 compared to the period ended December 30, 2005 due
to the elimination of a defined benefit pension plan associated with the operations of the Predecessor and a reduction in cost of goods sold of approximately $1.4 million in fiscal 2006 compared to the period ended December 30, 2005 as a result
of plant restructuring activities during 2005.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for
fiscal 2006 increased 16.2% to $37.9 million from $32.6 million for the period ended December 30, 2005. The acquisition of MCG Graphics previously discussed added estimated incremental expenses in fiscal 2006 compared to the period ended
December 30, 2005 of $1.4 million. In addition, we incurred an incremental $2.2 million in one-time expenses in fiscal 2006 for establishing ourselves as a stand-alone company and an additional $0.5 million in fiscal 2006 for management fees.
The $2.2 million in one-time expenses in fiscal 2006 included professional fees incurred in connection with SGS International, Inc.s Registration Statement filed on Form S-4, professional fees incurred in connection with the acquisition of
Southern Graphic Systems and its affiliated businesses from Alcoa Inc., and one-time expenses related to personnel changes. The remaining increase in expenses is primarily due to additional personnel costs and administrative services related to our
operation as a stand-alone company.

Depreciation and Amortization Expenses. Depreciation and amortization expenses for fiscal 2006 increased 22.2%
to $20.1 million from $16.4 million for the period ended December 30, 2005. The acquisition of MCG Graphics previously discussed added incremental expenses in fiscal 2006 of $1.3 million. The remaining increase was primarily due to depreciation
and amortization on assets placed in service during 2006. This increase was partially offset by a reduction in amortization due to the adjustments to the remaining useful lives of intangible assets through the purchase accounting process.

Interest Expense. Interest expense, including related party interest expense, for fiscal 2006 increased $28.6 million to $35.0 million from $6.4
million for the period ended December 30, 2005. This increase was primarily due to the impact of the financing required for SGS International, Inc.s purchase of Southern Graphic Systems from Alcoa Inc.

Other Expense, net. Other expenses, net for fiscal 2006 decreased by $1.2 million to $0.2 million from $1.4 million for the period ended December 30, 2005.
The decrease was primarily due to $1.6 million in restructuring charges associated with the shutdown of a gravure engraving facility in May 2005 and interest income of $0.8 million in fiscal 2006. The impact of the restructuring charges in 2005 and
interest income in 2006 was partially offset by a realized foreign exchange loss of $1.3 million in 2006 and a foreign exchange gain of $0.3 million in 2005.

Provision for taxes on income. The effective tax rate for fiscal 2006 was 52.7% compared to 39.1% for the period ended December 30, 2005. The increase in the effective tax rate is primarily due to expenses not fully deductible
for income tax purposes having a much larger impact on the effective tax rate for fiscal 2006 than for the period ended December 30, 2005 due to the significant decrease in income before income taxes for fiscal 2006 compared to the period ended
December 30, 2005.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses,
results of operations, liquidity, capital expenditures or capital resources.



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CONTRACTUAL OBLIGATIONS

The following table reflects the contractual obligations and commercial commitments as of December 31, 2007.



|                              |  |                                                 |        |      |   |        |  |      |        |      |   |               |  |       |        |  |   |         |  |   |        
|----------------------------- |  | ----------------------------------------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                              |  | Years ending December 31,(dollars in
thousands)
|                              |  | 2008                                            |        | 2009 |   | 2010   |  | 2011 |        | 2012 |   | 2013 andafter |  | Total
|Contractual obligations:      |  |                                                 |        |      |   |        |  |      |        |      |   |               |  |       |        |  |   |         |  |   |        
|Principal payments on debt    |  | $                                               | 1,638  |      | $ | 1,635  |  | $    | 1,630  |      | $ | 156,449       |  | $     | 0      |  | $ | 200,000 |  | $ | 361,352
|Interest payments on debt1    |  |                                                 | 35,969 |      |   | 35,847 |  |      | 35,726 |      |   | 35,605        |  |       | 24,000 |  |   | 23,000  |  |   | 190,147
|Capital lease obligations     |  |                                                 | 590    |      |   | 557    |  |      | 503    |      |   | 37            |  |       | 37     |  |   | 9       |  |   | 1,733  
|Operating lease obligations   |  |                                                 | 6,648  |      |   | 4,846  |  |      | 3,237  |      |   | 2,424         |  |       | 3,681  |  |   |        |  |   | 20,836 
|Other long-term liabilities   |  |                                                 | 2,755  |      |   | 2,755  |  |      | 51     |      |   | 51            |  |       |       |  |   |        |  |   | 5,612  
|Management advisory fee       |  |                                                 | 500    |      |   | 500    |  |      | 500    |      |   | 500           |  |       | 500    |  |   | 1,500   |  |   | 4,000  
|                              |  |                                                 |        |      |   |        |  |      |        |      |   |               |  |       |        |  |   |         |  |   |        
|Total contractual obligations |  | $                                               | 48,100 |      | $ | 46,140 |  | $    | 41,647 |      | $ | 195,066       |  | $     | 28,218 |  | $ | 224,509 |  | $ | 583,680
|                              |  |                                                 |        |      |   |        |  |      |        |      |   |               |  |       |        |  |   |         |  |   |        



|1 | The interest payments on debt include interest on $161.4 million of variable rate debt in the senior credit facility.
Interest payments on the senior secured term loan are based on LIBOR + 2.5%. The interest payment amounts in the table above on the senior secured term loan were calculated using the interest rate in effect on December 31, 2007.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2007, we had $34.5 million in cash and $39.6 million in adjusted working capital compared with $12.7 million in cash and $41.6 million in adjusted working capital at December 31, 2006. The
$21.8 million increase in cash is primarily due to cash provided by operations and $17.0 million borrowed in December 2007 for the Tri-Ad acquisition. On January 3, 2008, we acquired the outstanding shares of Tri-Ad for a cash purchase price of
22.0 million Canadian dollars (approximately $22.2 million based on the U.S. dollar/Canadian dollar exchange rate on January 2, 2008). The $2.0 million decrease in adjusted working capital is primarily due to the increase in accounts
payable.

We expect that cash generated from operating activities and availability under our revolving credit facility, which is included
in our senior secured credit facility, will be our principal sources of liquidity. At December 31, 2007, there were no borrowings outstanding under the revolving credit facility, which had $35 million of borrowing availability. Based on our
current level of operations, we believe our cash flow from operations and availability under the revolving credit facility will be adequate to meet our liquidity needs for at least the next twelve months. We cannot assure you, however, that our
business will generate sufficient cash flows from operations, or that future borrowings will be available to us under our revolving credit facility in an amount sufficient to enable us to repay our indebtedness, or to fund our other liquidity needs.

We are highly leveraged and our aggregate indebtedness at December 31, 2007 was $363.1 million. In 2011, our debt service
requirements will substantially increase as a result of the maturity of the senior secured term loans and borrowings on the senior secured acquisition facility on December 30, 2011. We anticipate that we will refinance these borrowings prior to
the maturity of these debt obligations. Our ability to operate our business, service our debt requirements and reduce our total debt will depend upon our future operating performance.

Our senior secured credit facility contains customary financial and other covenants, including a maximum leverage ratio and a minimum interest coverage
ratio, as defined in the senior secured credit facility agreement. Our senior secured credit facility also places certain restrictions on our ability to make capital expenditures. As of December 31, 2007 we were in compliance with all
covenants. Below are the required financial covenant levels and the actual levels as of December 31, 2007:



|                                    |  |                 |              |        |   |             
|----------------------------------- |  | --------------- | ------------ | ------ | - | ------------
|                                    |  | Required        |              | Actual
|Maximum leverage ratio              |  |                 | 5.75         |        |   | 5.35        
|Minimum interest coverage ratio     |  |                 | 1.60         |        |   | 1.94        
|Maximum annual capital expenditures |  | not to exceed $ | 15.0 million |        | $ | 11.1 million

We believe that our financing arrangements provide us with sufficient financial flexibility to
fund our operations, debt service requirements and contingent earnout obligations. Our ability to access additional capital in the long-term depends on availability of capital markets and pricing on commercially reasonable terms as well as our
credit profile at the time we are seeking funds. From time-to-time, we review our long-term financing and capital structure. As a result of our review, we may periodically explore alternatives to our current financing, including the issuance of
additional long-term debt, refinancing our credit facility and other restructurings or financings. In addition, we may from time to time seek to retire our outstanding notes in open market purchases, privately negotiated transactions or otherwise.
These repurchases, if any, will depend on prevailing market conditions based on our liquidity requirements, contractual restrictions and other factors. The amount of repurchases of our notes may be material and may involve significant amounts of
cash and/or financing availability.



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Capital expenditures

Capital expenditures were $11.1 million for fiscal 2007. Capital expenditures for fiscal 2008 are expected to be approximately $14.0 million.

Cash flow

Year ended December 31, 2007 compared to the year ended December 31, 2006

Cash flows from operating activities.Net cash provided by operating activities was $23.8 million for fiscal 2007 as compared to $20.2 million for
fiscal 2006. The primary reason for the increase was that adjusted working capital decreased $2.0 million from December 31, 2006 to December 31, 2007 compared to an increase of $6.0 million from December 31, 2005 to December 31,
2006.

Cash flows from investing activities. Net cash used in investing activities was $39.7 million for fiscal 2007 as compared to
$11.0 million for fiscal 2006. The increase in cash used in investing activities is primarily due to an increase in cash used in business acquisitions. The net cash used in business acquisitions increased $24.9 million to $29.3 million for fiscal
2007 compared to $4.4 million for fiscal 2006. This increase was the result of our acquisition of the assets of CMJ in February 2007 and our acquisition of McGurk in April 2007. The increase in cash used in investing activities was also
partially due to an increase in capital expenditures of $2.4 million to $11.1 million for fiscal 2007 compared to $8.7 million for fiscal 2006. Capital expenditures are generally made to replace existing assets, support new business or customer
initiatives, increase productivity, facilitate cost reductions, or meet regulatory requirements. Our operations typically do not have large capital requirements.

Cash flows from financing activities.Net cash provided by financing activities was $36.4 million for fiscal 2007 as compared to $0.5 million of cash used in financing activities for fiscal 2006. The primary
reason for this fluctuation was $40.0 million in borrowings on the acquisition facility in fiscal 2007 to finance the acquisitions of the assets of CMJ in February 2007, McGurk in April 2007 and Tri-Ad in January 2008. The cash flows from the
borrowings on the acquisition facility were partially offset by an increase in payments made on long-term debt obligations during fiscal 2007 compared to fiscal 2006.

Year ended December 31, 2006 compared to the period ended December 30, 2005

Cash flows
from operating activities.Net cash provided by operating activities was $20.2 million for fiscal 2006 as compared to $14.5 million for the period ended December 30, 2005. The primary reasons for the increase were changes in adjusted
working capital offset by a decrease in net income. Net income decreased $18.9 million for fiscal 2006 compared with the period ended December 30, 2005.

Cash flows from investing activities. Net cash used in investing activities was $11.0 million for fiscal 2006 as compared to $28.8 million for the period ended December 30, 2005. The decrease in cash used
in investing activities is primarily due to a decrease in capital expenditures and a decrease in business acquisitions, net of cash acquired. Capital expenditures decreased $5.3 million to $8.7 million in fiscal 2006 compared to $13.9 million in the
period ended December 30, 2005. Capital expenditures are generally made to replace existing assets, support new business or customer initiatives, increase productivity, facilitate cost reductions, or meet regulatory requirements. Our operations
typically do not have large capital requirements. Cash used in business acquisitions, net of cash acquired, decreased $11.0 million to $4.4 million in fiscal 2006 compared to $15.4 million in the period ended December 30, 2005.

Cash flows from financing activities.Net cash used in financing activities was $0.5 million for fiscal 2006 as compared to $17.3 million of cash
provided by financing activities for the period ended December 30, 2005. The primary reason for this fluctuation was a decrease in short-term borrowings of $15.9 million to $1.6 million in fiscal 2006 compared to $17.5 million in the period
ended December 30, 2006. The remainder of this fluctuation is primarily due to the $1.2 million in principal payments made on the senior secured term loan in fiscal 2006 compared to no payments made in the period ended December 30, 2005.

One-day ended December 31, 2005

Cash flows from operating activities. Net cash provided by operating activities was $0.9 million for the one-day ended December 31, 2005. This cash provided by operating activities was due to a decrease in accounts receivable
for the one-day ended December 31, 2005.



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Cash flows from investing activities. Net cash used in investing activities was $412.5 million for
the one-day ended December 31, 2005. This cash was used in the acquisition of Southern Graphic Systems and its affiliated businesses from Alcoa Inc.

Cash flows from financing activities. Net cash provided by financing activities was $414.5 million for the one-day ended December 31, 2005. This cash provided by financing activities was primarily due to
the proceeds from the common stock issuance, borrowings on the senior secured credit facility, and proceeds from the issuances of senior subordinated notes used in connection with the acquisition of Southern Graphic Systems and its affiliated
businesses from Alcoa Inc.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, accounts receivable and the allowance
for doubtful accounts, work-in-process inventory, impairment of goodwill, other intangible assets and long-lived assets, accrued health and welfare benefits, and the income tax provision. We base our estimates and assumptions on our historical
experience and other relevant factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Reported results would differ under different assumptions or conditions. Actual results may differ from our estimates, and such differences could be material to the consolidated financial statements.

We believe the following critical accounting policies affect our more significant estimates and assumptions used in the preparation of our consolidated
financial statements:

Revenue RecognitionWe recognize revenue when title, ownership, and risk of loss pass to the customer in
accordance with the provisions of Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. Revenues are recorded net of allowances for customer rebates, customer claims and cash discounts. The Company records revenue in the period
when shipped because all of the requirements of SAB No. 104 have been met and the price can be reasonably estimated based on the services performed, historical experience and customer information.

We recognize customer rebates as sales deductions, and they are accrued as earned by the customer based on a systematic allocation of the total estimated
rebates to be paid to the underlying sales that result in progress toward earning the rebate. In addition, we provide for estimated customer claims, which also are recorded as sales deductions and are accrued based on estimated claims. The amount of
future claims can be reasonably estimated based on historical experience, specific notification of pending claims, and estimated lag times for processing credit memos. Also, we record cash discounts as sales deductions. Cash discounts are recorded
based on actual discounts given to customers.

Accounts Receivable and Allowance for Doubtful AccountsTrade accounts
receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in the existing accounts receivable. We determine the allowance based on
specifically identified probable credit losses and also consider historical write-off experience. In addition, we also maintain allowances for customer claims due to returned products, billing errors, disputed amounts, etc., which result in credit
memos charged to net sales. Managements estimated allowances are based on historical experience, specific notification of pending claims, and estimated lag times for processing credit memos. In our opinion, these allowances are adequately
established and sufficient to cover future collection problems. However, should business conditions deteriorate and more customers have financial problems, these allowances may be increased, which would negatively impact our results of operations.

Work-in-process InventoryWork-in-process inventories are recorded based on the estimated costs incurred for orders that have not
satisfied the revenue recognition considerations in SAB No. 104. This estimate is based on an itemized listing of unbilled orders, considerations of SAB No. 104 and completion percentage for these unbilled orders, an estimated amount to be
billed based on historical experience and customer information, and gross profit margin. Although we believe the current estimated amount for work-in-process inventory is reasonable, variations between the estimated amount to be billed and the
actual billings to the customer, variations between the estimate completion percentage and actual completion percentage, and variations in gross profit margin could materially affect the recorded work-in-process inventory and cost of goods sold,
impacting financial condition and results of operations

Impairment of Goodwill, Other Intangible Assets and Long-Lived
AssetsWe have goodwill and other intangible assets, most notably customer relationships. Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. Intangible assets with finite useful lives are
amortized generally on a straight-line basis over the periods benefited, with a weighted average useful life of approximately 20 years.



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According to SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is subject to an
assessment for impairment on a reporting unit basis by applying a fair-value-based test annually and more frequently if circumstances indicate a possible impairment. We perform the annual test for impairment during the fourth quarter. All other
long-lived and intangible assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. If a reporting units carrying value exceeds its fair value, and the reporting
units carrying value of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The evaluation of goodwill for impairment requires us to use significant estimates and assumptions including, but not limited to, projecting future revenue, operating results, and cash flow of the reporting unit. We
have one reporting unit. Although we believe the estimates and assumptions used in the evaluation of goodwill are reasonable, differences between actual and projected revenue, operating results, and cash flows could cause a future impairment of this
goodwill. If this were to occur, we would be required to write down the goodwill, which could have a material negative impact on our results of operations and financial condition.

Accrued Health and Welfare BenefitsWe are self-insured for health and welfare benefits. The accrual for health and welfare benefits is the
Companys best estimate of health and welfare costs incurred, but not paid as of the balance sheet date. We estimate our liability for claims incurred by applying a lag factor to our historical claims experience. The validity of the lag factor
is evaluated periodically and revised if necessary. Although we believe the current estimated liabilities for health and welfare claims are reasonable, changes in the lag in reporting claims, changes in claims experience, unusually large claims, and
other factors could materially affect the recorded liabilities and expense, impacting financial condition and results of operations.

Income Tax ProvisionSignificant judgment is required in developing our income tax provision which is further complicated by the multiple taxing jurisdictions in which we operate. Results of Internal Revenue Service or other
jurisdictional audits, statute closings on prior tax returns, and future tax law changes could have a material impact on our future tax liabilities and provisions, impacting financial condition and results of operations. In addition, realization of
certain deferred tax assets is dependent upon our ability to generate future taxable income. The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. While the
Company has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax
assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. In addition, the Company applies a more-likely-than-not recognition threshold for all tax uncertainties in
accordance with FIN 48. Such uncertainties include any claims by the Internal Revenue Service for income taxes, interest, and penalties attributable to audits of open tax years.

Recently Issued and Adopted Accounting Standards

See Footnote A to the Financial Statements following Item 15
of this Annual Report on Form 10-K.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

We are exposed to foreign currency exchange rate risk due to our operations in Canada, Mexico, the United Kingdom, the Netherlands, and Hong Kong. Our results of operations can be impacted through foreign currency exchange rate risk
(a) to the balance sheet components (assets and liabilities) and (b) through our foreign denominated revenue and expenses in Canada, Mexico, the United Kingdom, the Netherlands, and Hong Kong. A 10% strengthening in the Canadian dollar
against the U.S. dollar would have increased fiscal 2007 net income by $0.1 million. A 10% strengthening in the British pound against the U.S. dollar would have decreased fiscal 2007 net income by $0.1 million. A 10% strengthening in any of the
other currencies utilized by our subsidiaries, the Mexican peso, the Euro, and the Hong Kong dollar against the U.S. dollar would not have a material effect on the Companys results of operations.

We do not use derivative financial instruments.

We have $161.4 million of variable rate debt outstanding at December 31, 2007. A 1% increase in the average interest rate would increase future interest expense by $0.9 million annually. To the extent we incur additional debt under our
senior secured revolving credit facility, our exposure to variable rate interest rates will increase.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

See
Financial Statements following Item 15 of this Annual Report on Form 10-K.



|Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

Not applicable.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

Disclosure Controls and Procedures

The Companys management, with participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period
covered by this report. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the rules and forms of the U.S.
Securities and Exchange Commission (SEC), and accumulated and communicated to the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.

Management Report on Internal Control Over Financial Reporting

We, as management of the Company, are responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the
rules and regulations of the SEC, internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and
effected by the companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:



| |  |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and 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 assessed the design and effectiveness of the Companys
internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
 Integrated Framework (1992).

The Company completed its acquisition of the assets of C.M. Jackson Associates, Inc. on
February 28, 2007 and of the outstanding shares of McGurk Studios Limited and Thames McGurk Limited on April 2, 2007. As permitted by the SEC, managements assessment as of December 31, 2007 did not include the internal control
of C.M. Jackson Associates, Inc.s operations, McGurk Studios Limited and Thames McGurk Limited, which are included in the Companys consolidated financial statements as of December 31, 2007. C.M. Jackson Associates, Inc.s
operations constituted $14,122 and $7,716 of total and net assets, respectively, as of December 31, 2007 and $7,123 and ($2,774) of revenues and net income (loss), respectively, for the year then ended. McGurk Studios Limited constituted
$16,980 and $12,842 of total and net assets, respectively, as of December 31, 2007 and $8,755 and $336 of revenues and net income, respectively, for the year then ended. Thames McGurk Limited constituted $8,090 and $6,421 of total and net
assets, respectively, as of December 31, 2007 and $6,928 and $482 of revenues and net income, respectively, for the year then ended.

Based on managements assessment, which excluded an assessment of internal control of the acquired operations of C.M. Jackson Associates, Inc., McGurk Studios Limited and Thames McGurk Limited., management has concluded that the
Companys internal control was effective as of December 31, 2007 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance
with GAAP.



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Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only managements report in this
annual report.

Changes in internal control over financial reporting

There have been no changes to the Companys internal control over financial reporting during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.

PART III



|Item 10. | Directors, Executive Officers, and Corporate Governance
|-------- | -------------------------------------------------------

The following sets forth certain information with respect to the persons who are members of the Registrants Board of Directors, our executive officers and key management employees of the Company and its subsidiaries.



|                            |  |      |  |                                                                                           
|--------------------------- |  | ---- |  | ------------------------------------------------------------------------------------------
|Name                        |  | Age* |  | Position                                                                                  
|Henry R. Baughman           |  | 60   |  | President, Chief Executive Officer and Director                                           
|Luca C. Naccarato           |  | 47   |  | Executive Vice President; Chief Executive Officer of Southern Graphic Systems- Canada, Co.
|James M. Dahmus             |  | 51   |  | Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary         
|Michael L. Shannon          |  | 41   |  | Senior Vice President                                                                     
|Marriott W. Winchester, Jr. |  | 47   |  | Senior Vice President                                                                     
|Benjamin F. Harmon, IV      |  | 55   |  | Vice President, General Counsel and Secretary                                             
|Vic Baranowski              |  | 49   |  | Vice President, Northeast Region                                                          
|Terence E. Dunn             |  | 51   |  | Vice President, Global Business Unit Manager                                              
|Christopher Horton          |  | 46   |  | Vice President, Southern Region                                                           
|C. Michael Jackson, Sr.     |  | 66   |  | Chief Operating Officer, C.M. Jackson Associates, Inc. Division                           
|William D. Klocke           |  | 61   |  | Regional Vice President                                                                   
|Larry S. Nussbaum           |  | 56   |  | Chief Executive Officer, C.M. Jackson Associates, Inc. Division                           
|Todd C. Santo               |  | 45   |  | Vice President of Creative Services                                                       
|David J. Scheve             |  | 32   |  | Vice President and Controller                                                             
|Brian C. Sinta              |  | 40   |  | Vice President Sales, Consumer Packaged Goods                                             
|Mark E. Spurgeon            |  | 46   |  | President of Southern Graphic Systems- Canada, Co.                                        
|Dennis Wilcox               |  | 53   |  | Regional Vice President                                                                   
|Joseph M. Silvestri         |  | 45   |  | Director                                                                                  
|John P. Civantos            |  | 39   |  | Director                                                                                  
|Thomas L. Hammond           |  | 72   |  | Director                                                                                  
|Richard Leong               |  | 35   |  | Director                                                                                  



|* | As of March 31, 2008.
|- | ---------------------

Henry R. Baughman has
been employed by us since 1973. He became President and a director of Southern Graphic Systems, Inc. in 1999. Prior to becoming President he held various senior executive level positions with us. Mr. Baughman is a graduate of Rochester
Institute of Technology. Mr. Baughman became President and Chief Executive Officer of SGS International, Inc. and one of our directors upon completion of the Acquisition in December 2005. As our President, Mr. Baughman leads our strategic
planning, acquisition process, resource units and customer value determination system.

Luca C. Naccarato has been employed by us
since 1993. He became Executive Vice President of Southern Graphic Systems, Inc. in 2000 and of SGS International, Inc. upon completion of the Acquisition in December 2005. He is also the Chief Executive Officer of Southern Graphic Systems-Canada,
Co./Systemes Graphiques Southern-Canada, Co. As our Executive Vice President, Mr. Naccarato is responsible for integrating our new acquisitions, managing our operations, and developing annual growth and business objectives. Prior to joining us,
Mr. Naccarato worked for a mid-sized packaging graphics and gravure supplier near Toronto, Canada.



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James M. Dahmushas been employed with us
since April 2006. He joined the Company as Chief Financial Officer and was promoted to Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary on May 31, 2007. He served as the senior vice president and chief
financial officer of Sunny Delight Beverages Co., an international consumer products company from 2004 until April 2006. From 2003 until 2004, he was the CFO for ADVO®, the largest direct
marketing company in the world with $1.2 billion in revenue. Prior to that, he served in a variety of business leadership roles at Convergys and Cincinnati Bell beginning in 1995, including President of Asia/Pacific, CFO of the Software Division,
and Corporate Controller. Prior to that, he served for 15 years at Procter & Gamble, with 13 of those years in finance and two as a brand manager of Pringles®. He received his MBA
from Northwestern University, and his BA from Penn State University.

Michael L. Shannon has been employed with us since 2000. He
has been a Senior Vice President of Southern Graphic Systems, Inc. since 2002 and of SGS International, Inc. since completion of the Acquisition in December 2005. He is also our Senior Vice President of Global Operations and a director of MCG,
McGurk and SGS Packaging Europe Holdings Limited. He is currently responsible for leading and executing our global strategy. Mr. Shannon has 20 years of experience in the graphic arts industry with responsibilities in Operations,
Sales & Marketing, Information Technology, and Mergers/Acquisitions. Prior to joining SGS, he spent 12 years at Schawk.

Marriott W. Winchester, Jr.has been employed with us since November 2006 as Assistant to the President. He initially served as Senior Vice President of Sales and Marketing with responsibility for the Companys sales and
marketing activities in the US, Asia and Latin America markets. His title was changed to Senior Vice President on March 18, 2008 with the addition of senior responsibilities for our Florence, KY, Philadelphia, PA, Ramsey NJ and Mexico City
production facilities. Mr. Winchester has 27 years of experience in the graphic arts industry with 17 years of senior leadership experience. Mr. Winchester was previously employed with Vertis, Inc., a provider of targeted advertising,
media and marketing services, from March 2005 to October 2006. At Vertis, he served as Vice President Premedia Operations and most recently as Senior Vice President & General Manager for the Premedia business unit. Mr. Winchester
previously was employed by Net Results, Inc., a computer integration and consulting company, from 2001 to 2005 as Vice President, Director of Operations. Mr. Winchester holds a BS in business management from the University of Maryland.

Benjamin F. Harmon, IV was employed by the Company as Vice President, General Counsel and Secretary in January 2006.
Mr. Harmon joined Reynolds Metals Company (Southern Graphic Systems, Inc.s former parent company) as an attorney in 1989 and handled various legal matters for Reynolds and its subsidiaries. After Alcoa Inc. acquired Reynolds in 2000,
Mr. Harmon became Manager, Business Development for Alcoas Packaging and Consumer Group, where he worked with Southern Graphic Systems, Inc. and other Alcoa businesses in a non-legal capacity planning and negotiating acquisitions and
divestitures through December 2005. Mr. Harmon is a member of the Virginia State Bar.

Vic Baranowski has been employed by us
since 1989. He has been our Northeast Vice President since 2003. Mr. Baranowskis responsibilities include sales, marketing, business operations and startups, and he is responsible for locations serving the gravure market in the northeast
and midwest regions. Mr. Baranowski holds an MBA and an undergraduate degree from Rensselaer Polytechnic Institute.

Terence E.
Dunn has been employed by us since 1983. He has been the Global Business Unit Manager for the Procter & Gamble account since 1997. Over the years, Mr. Dunn has held positions as our Production Control Manager, Sales Representative,
Sales Manager, Print Production Manager and General Manager. In 1997, Mr. Dunn was responsible for the start up of SGS Mexico and managed the facility for five years. He graduated from Quincy University with a BS in elementary education.

Christopher Horton has been employed by us since 2001 as Vice President of the Southern Region. He founded Advance Printing
Products in 1988, which grew profitably to an $8 million business with three locations before being acquired by us in March 2001. Mr. Horton currently manages five of our operations. Additionally, he has assumed national market sector
responsibility for the corrugated box market. He has 18 years of experience in the graphic arts industry. He earned a BS in accounting from Clemson University.

C. Michael Jackson, Sr.has been employed with us since March 2007 following our acquisition of the business of C.M. Jackson Associates, Inc. (CMJ), a packaging graphics company Mr. Jackson
helped found 25 years earlier. Mr. Jackson now serves as Chief Operating Officer of our C.M. Jackson Associates, Inc. Division. Mr. Jackson served in various executive roles with CMJ, most recently as President and CEO. Mr. Jackson
earned a degree in Graphics Art from New York Community College and a Bachelors Degree in Graphics Art from Pratt Institute.



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William D. Klocke has been employed by us since 2002 as a Regional Vice President. His
responsibilities span business operations, sales, marketing and mergers/acquisitions. Mr. Klocke has responsibilities for three locations. He has over 30 years of experience in the graphics industry. Prior to joining us, he held various
positions at COLORHOUSE, including serving as its President and Vice President of Operations. He holds a graphic arts degree from North Dakota College of Science.

Larry S. Nussbaumhas been employed with us since March 2007 following our acquisition of the CMJ business. Mr. Nussbaum now serves as Chief Executive Officer of our C.M. Jackson Associates, Inc. Division.
Mr. Nussbaum was co-owner of CMJ with C. Michael Jackson, Sr. and employed for over 15 years with CMJ as Principal Partner and Chief Financial Officer. Mr. Nussbaum holds a Bachelors degree from City College of New York and an MBA degree
from Baruch College.

Todd Santo has been employed by us since 1994. He joined the Company in a senior sales management role in 1994
and was promoted to General Manager of the St. Louis operation in 1996. In 2005 he was promoted to Vice President of Creative Services. Prior to joining the Company, he served in a senior management role with Anheuser-Busch.

David J. Schevehas been employed with the company since August 2007 as Vice President and Controller. His responsibilities include the corporate
accounting processes, internal audit, and financial reporting activities. Mr. Scheve has brought significant finance and audit experience to his role, most recently serving as Composites Mergers and Acquisition Leader at Owens Corning
Corporation, a manufacturer of building materials products, from February 2006 to July 2007. Mr. Scheve served as Leader of External Financial Reporting for Owens Corning Corporation from April 2004 to February 2006, and before that was
Assistant Controller, Consolidated Accounting Center, for the Kroger Co., a grocery retailer, from 2001 to April 2004. Mr. Scheve is a summa cum laude graduate of the University of Kentucky and has also earned an MBA degree from the University
of Chicago.

Brian C. Sintahas been employed with the company since November 2006 as Vice President Sales, Consumer Packaged Goods.
He was previously employed at Vertis, Inc. from 1995 through 2006 in a number of positions, including account executive and Director Consumer Packaged Goods and most recently as Vice President Sales, Consumer Packaged Goods. Mr. Sinta earned a
BS degree from Western Michigan University and an MBA degree from the Kellogg School of Management.

Mark E. Spurgeon has been
employed with us since January 2008 following our acquisition of Tri-Ad Graphic Communications, Ltd. Mr. Spurgeon is President of Southern Graphic Systems-Canada, Co. /Systemes Graphiques Southern-Canada, Co. Mr. Spurgeon joined Tri-Ad
Graphic Communications, Ltd., a Canadian provider of packaging and retail graphics services, as Vice President, Sales and Marketing in March 2002 and became that companys President in December 2005.

Dennis Wilcoxhas been employed by us since 1978. He became a Regional Vice President, with responsibility for four locations in the southeast, in
2001. Mr. Wilcox has held numerous positions in the gravure engraving industry since he started in the industry in 1971.

Joseph M.
Silvestri has been since July 2006 a Managing Partner at Court Square Capital Partners, LP, a private equity firm, and became one of our directors in connection with our formation in November 2005. Mr. Silvestri previously was a Managing
Partner of Citigroup Venture Capital (CVC), also a private equity firm, having joined CVC in 1990. Mr. Silvestri received his B.S. from Pennsylvania State University and his MBA from Columbia Business School. He is a director of
MacDermid, Incorporated, Auto Europe Group and Newmarket, Inc.

John P. Civantos has been since July 2006 a Partner at Court Square
Capital Partners, LP, a private equity firm, and became one of our directors in connection with our formation in November 2005. Mr. Civantos previously was a Partner of CVC, having joined CVC in 2004 after serving for several years with the
leveraged buyout firm Hicks, Muse, Tate & Furst. Prior to Hicks, Muse, he was with Morgan Stanley & Co.

Thomas L.
Hammond became one of our directors in December 2005. He was our president from 1978 to 2002, and our Chief Executive Officer from 2000 until 2002, when he retired. He has a BS in mechanical engineering from Purdue and a J.D. from the University
of Louisville.

Richard Leong became one of our directors in February 2006. Mr. Leong has served as the Managing Director of
Flexo Manufacturing Corporation, a Philippines-based maker of flexible packaging, since 2004 and served as that companys Executive Vice President from 1996 to 2003. He is also the Chairman of Tigerpack Ltd. (Shanghai), a flexible
packaging maker located in China, and serves as the Chief Investment Advisor to Lyon Capital Partners, a private investment fund. Mr. Leong received his BS in Economics, with a concentration in Decision Sciences, from the Wharton School of
the University of Pennsylvania.



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AUDIT COMMITTEE FINANCIAL EXPERT

Messrs. Silvestri, Civantos and Leong comprise our audit committee (the Audit Committee). The Audit Committee has determined that it does not have an audit committee financial expert as that
term is defined in the Securities and Exchange Commission rules and regulations. However, the Audit Committee believes that its members have demonstrated the capability of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting.

RECOMMENDATION OF NOMINEES TO THE BOARD OF DIRECTORS

The Registrant does not have in place procedures by which its security holders may recommend nominees to its Board of Directors.

CODE OF ETHICS

SGS International, Inc. has
implemented a Code of Ethics which applies to our principal executive officer, principal financial officer, principal accounting officer and controller or persons performing similar functions (covered employees). The Code of Ethics may
be found on our website at http://www.sgsintl.com. We intend to disclose any amendments to, or waivers of the Code of Ethics on behalf of our covered employees by posting such information on our website.



|Item 11. | Executive Compensation
|-------- | ----------------------

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

General
Philosophy

The Compensation Committee has responsibility for establishing and monitoring our compensation philosophy. Executive
officers shown in the Summary Compensation Table (each, an Executive) are compensated through a combination of base salary, bonus plan awards, equity-based awards and various other benefits that are designed to be competitive with the
overall compensation paid to executives in comparable companies and to align the Executives interests with the long term interests of the Companys shareholders. Base salaries and annual bonus awards are designed to reward performance.
Our Compensation Committee annually reviews the base salaries and the performance targets for Executive bonus compensation. Executive bonus compensation is designed to be earned based on the achievement of Company-wide performance objectives and
goals, personal performance and the Executives demonstrated adherence to Company values.

Targeted Overall Compensation

Messrs. Baughman, Naccarato, and Dahmus have employment agreements with the Company that set forth their compensation and terms and conditions of
employment. Their compensation levels were initially set by the Company at prevailing levels for comparable positions in similarly sized companies in our industry. The Compensation Committee reviews their compensation annually. Because Messrs.
Shannon and Winchester are not parties to an employment agreement, their base salary and bonus opportunity may be modified by the Compensation Committee, as it deems appropriate, from time to time.

Compensation Setting Process

The Compensation
Committee reviews and approves compensation and awards for the Companys officers at the level of Senior Vice President and above and provides oversight of managements decisions concerning the compensation of other Company officers. Base
salary is designed to be competitive by position in the marketplace, and is set at levels sufficient to attract and retain top management talent. Those salaries are reviewed periodically and compensation decisions are based on paying our executives
a competitive compensation package as well as rewarding them annually based on their performance. The Compensation Committee determines whether executives are being offered competitive compensation packages by analyzing the compensation packages
received by executive officers in similar sized companies in similar industries. Comparison components include base salary, group benefits and annual bonus awards.

Base Salary

Base salary compensates each Executive for the primary responsibilities of his position. Base salaries payable
to each executive with an employment agreement may be increased but may not be decreased.



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Base salaries as of December 31, 2007, for Messrs. Baughman, Dahmus, Naccarato, Winchester and
Shannon were $336,000; $231,000; $288,750; $225,000; and $222,907 respectively.

Annual Bonus Compensation

The Company established the Management Incentive Bonus Plan to drive behaviors and motivate our employees to maximize profit and improve the
Companys productivity and cash flow. The bonus plans goal is to provide for commensurate reward for the eligible employees, including Executives, contributing to those profits and efficiencies.

The Compensation Committee reviews the bonus targets and related goals and objectives annually. For the 2007 plan year we established EBITDA (earnings
before interest, taxes, depreciation and amortization) adjusted for one-time restructuring costs (Adjusted EBITDA) and Free Cash Flow as financial performance metrics for all Executives. In addition, Global Organic Growth was established
as an additional performance metric for Mr. Winchester. EBITDA performance measures our operational cash flow generated. The Compensation Committee believes that EBITDA is an appropriate performance measure for the Company because it allows us
to compare our performance against companies within and across industries. This measure is also of interest to our Companys shareholders and securityholders, since EBITDA is essentially the income that a company has free for interest payments
and principal repayment. The Compensation Committee believes that Free Cash Flow is a meaningful performance measure because it closely measures our progress toward achieving our Company objective of reducing debt -related service costs and
improving Company net worth. Global Organic Growth measures the Companys success in its business growing organically on a global basis. We believe that Global Organic Growth is an appropriate metric for Mr. Winchester because of his
overall responsibilities for Sales and Marketing.

The 2007 Adjusted EBITDA target was established at $69.275 million, the Free Cash Flow
target was established at $17.4 million, and the Global Organic Growth Target was established at $4 million. The performance metrics were weighted as described below. Each Executive has an individual bonus target expressed as a percentage of base
salary. For the 2007 plan year, with respect to Messrs. Baughman, Naccarato, Dahmus and Shannon, Adjusted EBITDA was weighted at 80% and Free Cash Flow generated was weighted at 20% of their total management incentive bonus. With respect to
Mr. Winchester, Adjusted EBITDA was weighted at 50%, Free Cash Flow generated was weighted at 30% and Global Organic Growth was weighted at 20% of his 2007 total management incentive bonus. The Companys performance during 2007 resulted in
a 77.5% payout based on Adjusted EBITDA, a 120% payout on Free Cash Flow, and 0% payout on Global Organic Growth. Although the Company exceeded its Free Cash Flow target, because it fell just short of the Adjusted EBITDA target and did not achieve
its Global Organic Growth target, none of the Executives received their target bonus for 2007. Adjusted EBITDA and Free Cash Flow are non-GAAP measures. A reconciliation of Adjusted EBITDA to our financial statements can be found in the footnotes
following our Summary Compensation Table below. The Free Cash Flow calculation begins with the Adjusted EBITDA amount and adjusts for certain interest and taxes, capital spending, changes in working capital, and other items allowed by the
Compensation Committee. Due to the detailed nature of this calculation, a reconciliation of this non-GAAP measure to the financial statements provided within is not practicable.

Messrs. Baughman, Dahmus and Naccarato had target bonus amounts set at 50% of their respective base salary, while their threshold and maximum bonus
opportunities were set at 1% and 100% of their base salaries, respectively. Mr. Winchesters target bonus amount was set at 40% of his base salary, while his threshold and maximum bonus opportunities were set at 50% and 120% of his target
bonus opportunity, respectively. Mr. Shannons target bonus amount was set at 35% of his base salary, while his threshold and maximum bonus opportunities were set at 50% and 120% of his target bonus opportunity, respectively. The bonuses
for Messrs. Baughman, Naccarato and Dahmus are calculated according to a special performance grid which reflects their status as the Companys three highest ranking officers. This resulted in each such Executive receiving 99.6% of his target
bonus. The bonuses for Messrs. Winchester and Shannon are calculated using the same bonus calculation table that is used for the Companys other officers which resulted in them receiving 74.75% and 86.5% of their target bonus, respectively. The
resulting bonus payment amounts are shown in the Summary Compensation Table, below, in the column entitled Non-Equity Incentive Plan Compensation.

Equity Ownership

Our compensation philosophy includes adding an equity based element to our compensation package for senior
management. Equity ownership is intended to motivate Executives to make stronger business decisions, improve financial performance and enhance the long term interests of the Companys stockholders. Each Executive was given the opportunity to,
and did, purchase common and preferred stock of Southern Graphics Inc. in 2006. See the discussion under Equity Investment in Item 13. Also in 2006, Mr. Dahmus was granted options to purchase shares of Southern Graphics Inc. No
equity-based awards were granted in 2007. However, the Company may, in its discretion, grant options under the Stock Incentive Plan to senior management, including Executives, in the future.



35



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Severance Benefits

The Company may terminate an Executives employment without cause at any time. For those who have employment agreements, severance benefits are outlined in the employment agreements. Severance benefits for
Executives not having an employment agreement would be determined by reference to the Companys severance guidelines. The purpose of the severance benefits is to assist the Executive with his transition into new employment, recognizing that it
may take time for that person to find comparable employment elsewhere. Each Executives potential severance is described below under the heading Potential Payments upon Termination or Change in Control.

Other Benefits

Reflecting the Companys culture
of respect and value for all employees, the Company offers salaried employees, including Executives, a group benefits package that is competitive in our industry. Executives may participate in a group retirement savings plan, various group health
and welfare benefit plans and a deferred compensation plan.

The Retirement Savings Plan is available to all employees including
Executives. The plan is funded with both employer and employee contributions. Plan participants may voluntarily contribute from 1% to 16% of their annual pay to the plan on a pre-tax basis, not to exceed an annual dollar IRS limitation, which was
$15,500 in 2007. The plan provides for Company matching contributions of up to 6% of the plan participants pre-tax eligible contributions.

Executives are also eligible to participate in the Deferred Compensation Plan. This plan allows plan participants to continue to contribute a percentage of their annual pay on a pre-tax basis after they have reached the annual dollar IRS
limitation in the Retirement Savings Plan. The plan is funded with both employer and employee contributions. Plan participants may voluntarily contribute from 1% to 16% of their annual pay to the plan on a pre-tax basis. The plan provides for
Company matching contributions of up to 6% of the plan participants pre-tax eligible contributions.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this annual report. Based on
the review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this annual report.



COMPENSATION COMMITTEEJoseph M. SilvestriJohn P. CivantosThomas L. Hammond




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##### Table of Contents

Compensation Summary

The following table summarizes the principal components of compensation for our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers for our fiscal year ended
2007. We refer to these persons as our named executive officers.

SUMMARY COMPENSATION TABLE



|                                                                     |      |      |   |           |         |          |        |                |      |                 |   |                                             |      |                                                                        |         |                           |      |           |   |        |        |   |         |        
|-------------------------------------------------------------------- | ---- | ---- | - | --------- | ------- | -------- | ------ | -------------- | ---- | --------------- | - | ------------------------------------------- | ---- | ---------------------------------------------------------------------- | ------- | ------------------------- | ---- | --------- | - | ------ | ------ | - | ------- | -------
|Name and Principal Position                                          |      | Year |   | Salary($) |         | Bonus($) |        | StockAwards($) |      | OptionAwards($) |   | Non-EquityIncentive PlanCompensation($) (4) |      | Change inPension Valueand NonqualifiedDeferredCompensationEarnings ($) |         | All otherCompensation ($) |      | Total ($)
|(a)                                                                  |      | (b)  |   | (c)       |         | (d)      |        | (e)            |      | (f)             |   | (g)                                         |      | (h)                                                                    |         | (i)                       |      | (j)      
|Henry R. Baughman President and Chief Executive Officer              |      | 2007 |   | $         | 332,000 |          |        | None           |      | None            |   |                                             | None |                                                                        | $       | 167,348                   |      | None      |   | $      | 42,370 |   | $       | 541,718
|                                                                     | 2006 |      | $ | 316,727   |         |          | None   |                | None |                 |   | None                                        |      | $                                                                      | 163,960 |                           | None |           | $ | 28,030 |        | $ | 508,717
|                                                                     |      |      |   |           |         |          |        |                |     
|James M. Dahmus Senior Vice President andChief Financial Officer (1) |      | 2007 |   | $         | 228,250 |          |        | None           |      | None            |   |                                             | None |                                                                        | $       | 115,052                   |      | None      |   | $      | 30,404 |   | $       | 373,706
|                                                                     | 2006 |      | $ | 160,417   |         |          | None   |                | None |                 | $ | 111                                         |      | $                                                                      | 112,723 |                           | None |           | $ | 15,350 |        | $ | 288,601
|                                                                     |      |      |   |           |         |          |        |                |     
|Luca C. Naccarato Executive Vice President                           |      | 2007 |   | $         | 285,312 |          |        | None           |      | None            |   |                                             | None |                                                                        | $       | 143,814                   |      | None      |   | $      | 32,718 |   | $       | 461,844
|                                                                     | 2006 |      | $ | 272,944   |         |          | None   |                | None |                 |   | None                                        |      | $                                                                      | 140,903 |                           | None |           | $ | 19,950 |        | $ | 433,797
|                                                                     |      |      |   |           |         |          |        |                |     
|Michael L. Shannon Senior Vice President Global Operations(3)        |      | 2007 |   | $         | 221,283 |          |        | None           |      | None            |   |                                             | None |                                                                        | $       | 67,095                    |      | None      |   | $      | 25,277 |   | $       | 313,655
|                                                                     | 2006 |      | $ | 216,414   |         |          | None   |                | None |                 |   | None                                        |      | $                                                                      | 67,201  |                           | None |           | $ | 15,492 |        | $ | 299,107
|                                                                     |      |      |   |           |         |          |        |                |     
|Marriot W. Winchester, Jr. Senior Vice President (2,3)               |      | 2007 |   | $         | 225,000 |          |        | None           |      | None            |   |                                             | None |                                                                        | $       | 67,275                    |      | None      |   | $      | 15,375 |   | $       | 307,650
|                                                                     | 2006 |      | $ | 43,466    |         | $        | 45,674 |                | None |                 |   | None                                        |      |                                                                        | None    |                           | None |           | $ | 2,000  |        | $ | 91,140 



|(1) | James Dahmus commenced employment on April 10, 2006.
|--- | ----------------------------------------------------

|(2) | Marriott Winchester commenced employment October 23, 2006.
|--- | ----------------------------------------------------------

|(3) | Michael Shannon and Marriot W. Winchester, Jr. are not employed under an employment agreement.
|--- | ----------------------------------------------------------------------------------------------

|(4) | 2007 and 2006 Non-Equity Incentive Plan Compensation based on the actual 2007 and 2006 Adjusted EBITDA performance of $66.6 million and $61.8 million, respectively, 2007 and 2006
Free Cash Flow at 120% of target for both years, and 2007 Global Organic Growth at 0% of target. EBITDA, a measure used by management to measure operating performance, is defined as net income before interest, taxes, depreciation and amortization.
We also exclude the impact of other expense, net, and discontinued operations, net, from the calculation of EBITDA to be consistent with the determination of EBITDA under our senior secured credit facility. Other expense, net, primarily consists of
the gain (loss) on foreign exchange and interest income. Adjusted EBITDA is comprised of EBITDA plus allowed adjustments, which are expenses added back to EBITDA with the approval of the Compensation Committee of our Board of Directors, as
administrator of the Management Incentive Bonus Plan. The following table reconciles net income to Adjusted EBITDA for the years ended December 31, 2007 and 2006:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                     |  |                                          |      |   |                                          |   |     
|------------------------------------ |  | ---------------------------------------- | ---- | - | ---------------------------------------- | - | ----
|                                     |  | Year EndedDecember 31, 2007(in
millions) |      |   | Year EndedDecember 31, 2006(in
millions)
|Net income (loss)                    |  | $                                        | (2.1 | ) |                                          | $ | 0.9 
|Depreciation and amortization        |  |                                          | 23.7 |   |                                          |   | 20.1
|Interest expense                     |  |                                          | 36.9 |   |                                          |   | 35.0
|Other expense, net                   |  |                                          | 0.5  |   |                                          |   | 0.2 
|Provision (benefit) for income taxes |  |                                          | (1.2 | ) |                                          |   | 1.3 
|Discontinued operations, net         |  |                                          | (0.7 | ) |                                          |   | 0.4 
|                                     |  |                                          |      |   |                                          |   |     
|                                     |  |                                         
|EBITDA                               |  |                                          | 57.1 |   |                                          |   | 57.9
|                                     |  |                                         
|Allowed adjustments                  |  |                                          | 9.5  |   |                                          |   | 3.9 
|                                     |  |                                          |      |   |                                          |   |     
|Adjusted EBITDA                      |  | $                                        | 66.6 |   |                                          | $ | 61.8
|                                     |  |                                          |      |   |                                          |   |     



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ALL OTHER COMPENSATION



|                                                                  |      |      |   |                                                      |        |                                              |       |              |   |          |        |   |        |       
|----------------------------------------------------------------- | ---- | ---- | - | ---------------------------------------------------- | ------ | -------------------------------------------- | ----- | ------------ | - | -------- | ------ | - | ------ | ------
|Name and Principal Position                                       |      | Year |   | CompanyContributionsto RetirementSavings Plan($) (1) |        | ContributionstoNon-QualifiedDef. Comp($) (2) |       | Other($) (3) |   | Total($)
|(a)                                                               |      | (b)  |   | (c)                                                  |        | (e)                                          |       | (g)          |   | (j)     
|Henry R. Baughman President and Chief Executive Officer           |      | 2007 |   | $                                                    | 5,813  |                                              | $     | 14,495       |   | $        | 22,062 |   | $      | 42,370
|                                                                  | 2006 |      | $ | 1,679                                                |        | $                                            | 8,302 |              | $ | 18,049   |        | $ | 28,030
|                                                                  |      |      |   |                                                      |       
|James M. Dahmus Senior Vice President and Chief Financial Officer |      | 2007 |   | $                                                    | 13,962 |                                              |       | None         |   | $        | 16,442 |   | $      | 30,404
|                                                                  | 2006 |      | $ | 6,600                                                |        |                                              | None  |              | $ | 8,750    |        | $ | 15,350
|                                                                  |      |      |   |                                                      |       
|Luca C. Naccarato                                                 |      | 2007 |   | $                                                    | 5,437  |                                              | $     | 11,681       |   | $        | 15,600 |   | $      | 32,718
|Executive Vice President                                          |      | 2006 |   | $                                                    | 5,552  |                                              | $     | 2,698        |   | $        | 11,700 |   | $      | 19,950
|                                                                  |      |      |   |                                                      |       
|Michael L. Shannon                                                |      | 2007 |   | $                                                    | 13,277 |                                              |       | None         |   | $        | 12,000 |   | $      | 25,277
|Senior Vice President Global Operations                           |      | 2006 |   | $                                                    | 6,492  |                                              |       | None         |   | $        | 9,000  |   | $      | 15,492
|                                                                  |      |      |   |                                                      |       
|Marriott W. Winchester, Jr. Senior Vice President                 |      | 2007 |   | $                                                    | 3,375  |                                              |       | None         |   | $        | 12,000 |   | $      | 15,375
|                                                                  | 2006 |      |   | None                                                 |        |                                              | None  |              | $ | 2,000    |        | $ | 2,000 



|(1) | The Retirement Savings Plan provides for matching contributions not greater than 100% of the participants elective deferrals that do not exceed the first 6% of the plan
participants compensation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Deferred Compensation Plan provides for matching contributions not greater than 100% of the participants elective deferrals that do not exceed the first 6% of the plan
participants compensation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Other compensation includes auto allowance and unused paid vacation.
|--- | --------------------------------------------------------------------

Employment Agreements

We entered into employment agreements with Messrs. Baughman and Naccarato in connection with the
closing of the Acquisition. The term of these employment agreements is initially three years for Mr. Baughman and four years for Mr. Naccarato and will automatically renew for successive one-year periods, unless either party gives written
notice to the other not less than ninety days prior to the end of the original term (or any subsequent term, as the case may be). Each of these agreements was amended on January 25, 2006, to increase Mr. Baughmans base salary from
$241,440 to $320,000 and Mr. Naccaratos base salary from $225,649 to $275,000. The remaining terms of such agreements were not changed by such amendments. Effective April 1, 2007, Mr. Baughmans salary was increased to
$336,000 and Mr. Naccaratos salary was increased to $288,750.

We entered into an employment agreement with Mr. Dahmus on
April 10, 2006. The term of the employment agreement is initially three years and will automatically renew for successive one-year periods, unless either party gives written notice to the other not less than ninety days prior to the end of the
original term (or any subsequent term, as the case may be). Mr. Dahmus base salary was $220,000 from April 10, 2006 to April 1, 2007, at which time his salary increased to $231,000.

The Company has not entered into any employment agreements with Messrs. Shannon and Winchester.

Each executive is entitled to receive the base salary set forth in such executives employment agreement, which will be reviewed annually throughout
the term. In addition to base salary, the executives are entitled to participate in our employee benefit plans for senior management. The executives are also eligible to participate in our senior management bonus plans with annual incentive targets
of up to 50% of base salary.

Each executives employment will terminate automatically upon his death. We may terminate the
executives employment for any disability that has continued for a period of ninety days. We may also terminate the executives employment at any time for cause (as described below) upon written notice. We may also terminate
the executives employment at any time without cause, upon written notice. The executive may terminate his employment upon not less than thirty days written notice prior to the effective date of such termination. If the executive terminates his
employment for good reason (as defined below) it will be deemed to be a termination of the executives employment without cause by us.



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Cause generally means any of the following: (i) gross or willful misconduct;
(ii) willful and repeated failure to comply with the directives of our board of directors or any of our supervisory personnel; (iii) any criminal act or act of dishonesty or willful misconduct or any act of fraud, dishonesty or
misappropriation involving us or any of our subsidiaries; (iv) any conviction or plea of guilty or nolo contendere to a felony or a crime involving dishonesty; (v) breach of the terms of any confidentiality, non-competition,
non-solicitation or employment agreement the executive has with us or any of our subsidiaries; (vi) acts of malfeasance or negligence in a matter of material importance to us or any of our subsidiaries; (vii) the material failure to
perform the duties and responsibilities of the executives position after written notice and a reasonable opportunity to cure (not to exceed 30 days), (viii) grossly negligent conduct; or (ix) activities materially damaging to us or
any of our subsidiaries.

Good reason generally means, after written notice by the executive to our board of directors and a
reasonable opportunity for us to cure (not to exceed 30 days), any of the following: (i) the executives base salary is not paid or is reduced by more than ten percent in the aggregate other than as part of a salary reduction program
pursuant to which the base salaries of all executive officers are reduced by the same percentage at the same time and for the same period of time; (ii) the executives target incentive payments are reduced; or (iii) the
executives job duties and responsibilities are diminished. The expiration of the term of the employment agreement (including notice of non-renewal) shall not be considered good reason.

If an executives employment is terminated for any reason, the executive shall be entitled to receive the employee benefits to which he is entitled
pursuant to the terms of the relevant employee benefit plans in which the executive participates. If an executives employment is terminated because of disability, the executive shall receive his normal compensation for the period of disability
prior to termination of employment, and then will be entitled to receive a pro rata portion of his bonus payments from the senior management bonus plan. If an executive is terminated, other than for cause or by death or disability, or if an
executive terminates employment for good reason, he shall be entitled to (i) receive 50% of his base salary for a twenty-four month period thereafter for Messrs. Baughman and Naccarato and for the 12 month period thereafter for Mr. Dahmus;
(ii) receive a pro rata share of the estimated bonus for the year in which the termination occurs; and (iii) continued participation in the employee welfare benefit plans for the executive and his dependents (other than disability and life
insurance) for twenty-four months for Messrs. Baughman and Naccarato and twelve months for Mr. Dahmus.

If an executive is terminated
for cause, dies or becomes disabled or voluntarily terminates employment other than for good reason, he shall be entitled to payment only of earned and unpaid base salary to the date of termination and, in the case of death, payment of earned and
unpaid incentive payments.

The employment agreements also provide that, during the executives employment and for a period of
twenty-four months after the end of the executives employment with us for Messrs. Baughman and Naccarato and twelve months after the end of the executives employment for Mr. Dahmus, referred to below as the non-competition period,
the executive will not (i) compete, directly or indirectly, with us (ii) solicit or hire current and former employees, or (iii) solicit current and former customers. In consideration of the executives non-competition and
non-solicitation agreement with respect to periods after termination of employment, we will pay the executive an amount equal to 50% of his base salary during the non-competition period. If the executive breaches any of the non-competition or
non-solicitation restrictions, the executive will waive and forfeit any and all rights to any further payments under his employment agreement and will repay any severance pay received under such agreement to us.



40



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##### Table of Contents

Equity Awards

Below is a summary of the future payouts under non-equity incentive plan awards and all other option awards:

GRANTS OF
PLAN-BASED AWARDS



|                                                                  |  |           |  |                                                                   |        |                                                           |   |                                                        |  |                                                                |         |                                           |      |                                          |      |     |      |     |      |     |      |     |      |  |     
|----------------------------------------------------------------- |  | --------- |  | ----------------------------------------------------------------- | ------ | --------------------------------------------------------- | - | ------------------------------------------------------ |  | -------------------------------------------------------------- | ------- | ----------------------------------------- | ---- | ---------------------------------------- | ---- | --- | ---- | --- | ---- | --- | ---- | --- | ---- |  | ----
|Name and Principal Position                                       |  | GrantDate |  | Estimated Future PayoutsUnder Non-Equity IncentivePlan Awards 1,2 |        | Estimated Future PayoutsUnder Equity
IncentivePlan Awards |   | All otherStockAwards:NumberofSharesof Stockor Units(#) |  | All otherOptionAwards:NumberofSecuritiesUnder- lyingOptions(#) |         | Exerciseor BasePrice ofOptionAwards($/Sh) |      | GrantDateFairValueofStockandOptionAwards
|                                                                  |  |           |  | Threshold ($)                                                     |        | Target ($)                                                |   | Maximum ($)                                            |  | Threshold (#)                                                  |         | Target(#)                                 |      | Maximum (#)                              |      |     |      |     |      |     |      |    
|(a)                                                               |  | (b)       |  | (c)                                                               |        | (d)                                                       |   | (e)                                                    |  | (f)                                                            |         | (g)                                       |      | (h)                                      |      | (i) |      | (j) |      | (k) |      | (l)
|Henry R. Baughman President and Chief Executive Officer           |  | N/A       |  | $                                                                 | 3,360  |                                                           | $ | 168,000                                                |  | $                                                              | 336,000 |                                           | None |                                          | None |     | None |     | None |     | None |     | None |  | None
|                                                                  |  |           |  |                                                                   |        |                                                           |   |                                                        |  |                                                                |        
|James M. Dahmus Senior Vice President and Chief Financial Officer |  | N/A       |  | $                                                                 | 2,310  |                                                           | $ | 115,500                                                |  | $                                                              | 231,000 |                                           | None |                                          | None |     | None |     | None |     | None |     | None |  | None
|                                                                  |  |           |  |                                                                   |        |                                                           |   |                                                        |  |                                                                |        
|Luca C. Naccarato Executive Vice President                        |  | N/A       |  | $                                                                 | 2,888  |                                                           | $ | 144,375                                                |  | $                                                              | 288,750 |                                           | None |                                          | None |     | None |     | None |     | None |     | None |  | None
|                                                                  |  |           |  |                                                                   |        |                                                           |   |                                                        |  |                                                                |        
|Michael L. Shannon Senior Vice President Global Operations        |  | N/A       |  | $                                                                 | 39,009 |                                                           | $ | 78,017                                                 |  | $                                                              | 93,620  |                                           | None |                                          | None |     | None |     | None |     | None |     | None |  | None
|                                                                  |  |           |  |                                                                   |        |                                                           |   |                                                        |  |                                                                |        
|Marriott W. Winchester, Jr. Senior Vice President                 |  | N/A       |  | $                                                                 | 45,000 |                                                           | $ | 90,000                                                 |  | $                                                              | 108,000 |                                           | None |                                          | None |     | None |     | None |     | None |     | None |  | None



|(1) | The Estimated Future Payouts Under Non-Equity Incentive Plan Awards are determined using the Management Incentive Plan previously discussed.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Please see the description in the Compensation Discussion and Analysis above, under the heading Annual Bonus Compensation, for an explanation of each Executives
threshold, target and maximum bonus opportunity.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(3) | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|--- | --------------------------------------------



|                                                                      |  |                                                                |  |                                                                  |  |                                                                                      |  |                         |  |                      |  |                                                    |  |                                                       |  |                                                                                           |  |                                                                                                          
|--------------------------------------------------------------------- |  | -------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | ----------------------- |  | -------------------- |  | -------------------------------------------------- |  | ----------------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------
|Name and Principal Position                                           |  | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable |  | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable |  | EquityIncentivePlanAwardsNumber ofSecuritiesUnderlyingUnexercisedUnearnedOptions
(#) |  | OptionsExercisePrice($) |  | OptionExpirationDate |  | NumberofSharesor Unitsof StockThatHaveNotVested(#) |  | MarketValueofSharesorUnitsofStockThatHaveNotVested($) |  | EquityIncentivePlanAwards:NumberofUnearnedShares,Units orOtherRightsThatHave
NotVested(#) |  | EquityIncentivePlanAwards:Marketor PayoutValue ofUnearnedShares,units
orOtherRightsThatHave NotVested ($)
|(a)                                                                   |  | (b)                                                            |  | (c)                                                              |  | (d)                                                                                  |  | (e)                     |  | (f)                  |  | (g)                                                |  | (h)                                                   |  | (i)                                                                                       |  | (j)                                                                                                      
|Henry R. Baughman President and Chief Executive Officer               |  | None                                                           |  | None                                                             |  | None                                                                                 |  | None                    |  | None                 |  | None                                               |  | None                                                  |  | None                                                                                      |  | None                                                                                                     
|                                                                      |  |                                                                |  |                                                                  |  |                                                                                      |  |                         | 
|James M. Dahmus (1) Senior Vice President and Chief Financial Officer |  | 600                                                            |  | 900                                                              |  | None                                                                                 |  | 151                     |  | 7-25-2016            |  | None                                               |  | None                                                  |  | None                                                                                      |  | None                                                                                                     
|                                                                      |  |                                                                |  |                                                                  |  |                                                                                      |  |                         | 
|Luca C. Naccarato Executive Vice President                            |  | None                                                           |  | None                                                             |  | None                                                                                 |  | None                    |  | None                 |  | None                                               |  | None                                                  |  | None                                                                                      |  | None                                                                                                     
|                                                                      |  |                                                                |  |                                                                  |  |                                                                                      |  |                         | 
|Michael L. Shannon Senior Vice President Global Operations            |  | None                                                           |  | None                                                             |  | None                                                                                 |  | None                    |  | None                 |  | None                                               |  | None                                                  |  | None                                                                                      |  | None                                                                                                     
|                                                                      |  |                                                                |  |                                                                  |  |                                                                                      |  |                         | 
|Marriott W. Winchester, Jr. Senior Vice President                     |  | None                                                           |  | None                                                             |  | None                                                                                 |  | None                    |  | None                 |  | None                                               |  | None                                                  |  | None                                                                                      |  | None                                                                                                     



|(1) | On July 25, 2006, the Board of Directors of Southern Graphics Inc. adopted the Stock Incentive Plan. Also on July 25, 2006, the Board approved the grant under the Stock
Incentive Plan to James M. Dahmus of options to acquire an aggregate of 1,500 shares of Southern Graphics Inc. Class A common stock, par value $.01 per share. The options granted on July 25, 2006, are non-qualified stock options that will
terminate on July 25, 2016, and have an exercise price that declines (but not below fair market value of the underlying shares on the grant date) through the fifth anniversary of the grant date. The options will become exercisable at the rate
of 20% per year, beginning on December 31, 2006 and ending on December 31, 2010. All outstanding options will vest immediately upon a change in control.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Nonqualified Deferred Compensation

Below is the summary of nonqualified deferred compensation. Executives are eligible to participate in the Deferred Compensation Plan. The plan is unfunded and benefits under the plan are paid from the general assets
of the Company. Executives whose salary deferrals to the Companys qualified plans are limited by Internal Revenue Code limitations may elect to reduce their salary and credit to the plan the excess, if any, of (i) the amount of salary
deferrals that would have been credited pursuant to the Retirement Savings Plan on their behalf for the plan year had the statutory limitations not been applicable over (ii) the amount of salary deferrals actually credited for the year by the
participant to the Retirement Savings Plan. Salary reduction credits under the plan are in the same percentage as most recently elected under the Retirement Savings Plan. For each payroll period for which the Company credits salary to the plan on
behalf of the participant, matching credits are also credited to the plan on behalf of the participant. The matching credits for each payroll period are equal to an amount not greater than 100 percent of that portion of the salary reduction credits
that do not exceed 6% of the participants salary for the payroll period. Effective June 1, 2008, eligible plan participants, including Executives, may defer all or a portion of their awards under the Management Incentive Bonus Plan into the
Deferred Compensation Plan, in 10% increments. There are no employer matching contributions on management incentive compensation awards deferred into the plan. The balance of a plan participants benefit under the plan will be distributed upon
the plan participants termination of employment or death (to the plan participants beneficiary) in a lump sum, unless the participant elects to have the benefit paid in annual installments over a period of not more than ten years.

NONQUALIFIED DEFERRED COMPENSATION



|                                                                  |  |                                     |        |                                          |   |                               |  |   |                                       |   |                               |      |  |   |       
|----------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------------------------------------- | - | ----------------------------- |  | - | ------------------------------------- | - | ----------------------------- | ---- |  | - | ------
|Name and Principal Position                                       |  | ExecutiveContributionsin Last FY($) |        | RegistrantContributionsin Last FY ($)(1) |   | AggregateEarningsin LastFY($) |  |   | AggregateWithdrawals/Distributions($) |   | AggregateBalanceat LastFYE($)
|(a)                                                               |  | (b)                                 |        | (c)                                      |   | (d)                           |  |   | (e)                                   |   | (f)                          
|Henry R. Baughman President and Chief Executive Officer           |  | $                                   | 38,654 |                                          | $ | 14,495                        |  | $ | (1,797                                | ) |                               | None |  | $ | 82,086
|                                                                  |  |                                     |        |                                          |  
|James M. Dahmus Senior Vice President and Chief Financial Officer |  |                                     | None   |                                          |   | None                          |  |   | None                                  |   |                               | None |  |   | None  
|                                                                  |  |                                     |        |                                          |  
|Luca C. Naccarato Executive Vice President                        |  | $                                   | 30,150 |                                          | $ | 11,681                        |  | $ | (1,346                                | ) |                               | None |  | $ | 47,704
|                                                                  |  |                                     |        |                                          |  
|Michael L. Shannon Senior Vice President Global Operations        |  |                                     | None   |                                          |   | None                          |  |   | None                                  |   |                               | None |  |   | None  
|                                                                  |  |                                     |        |                                          |  
|Marriott W. Winchester, Jr. Senior Vice President                 |  |                                     | None   |                                          |   | None                          |  |   | None                                  |   |                               | None |  |   | None  



|(1) | Registrant Contributions (column c) are reported as Contributions to Non-Qualified Deferred Compensation in the All Other Compensation Table.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



43



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##### Table of Contents

Potential Payments upon Termination or Change in Control

Below is the summary of the estimated termination benefits that would be paid to each current executive as of December 31, 2007 in the various
circumstances listed.

TERMINATION BENEFITS



|                                                                                                                  |  |                       |  |                          |                       |                    |      |                   |  | 
|----------------------------------------------------------------------------------------------------------------- |  | --------------------- |  | ------------------------ | --------------------- | ------------------ | ---- | ----------------- |  | 
|Name and Principal Position                                                                                       |  | Termination WithCause |  | Termination WithoutCause |                       | Death orDisability |      | Change InControl 
|(a)                                                                                                               |  | (b)                   |  | (c)                      |                       | (d)                |      | (e)              
|Henry R. Baughman President and Chief Executive Officer Cash Payments Health and welfare benefits Total           |  |                       |  | $$$                      | 672,00029,304701,304  |                    | $  $ | 168,000  168,000 |  | 
|                                                                                                                  |  |                       |  |                         
|James M. Dahmus Senior Vice President and Chief Financial Officer Cash Payments Health and welfare benefits Total |  |                       |  | $$$                      | 231,00014,652245,652  |                    | $  $ | 115,500  115,500 |  | 
|                                                                                                                  |  |                       |  |                         
|Luca C. Naccarato Executive Vice President Cash Payments Health and welfare benefits Total                        |  |                       |  | $$$                      | 577,50029,304606,804  |                    | $  $ | 144,375  144,375 |  | 
|                                                                                                                  |  |                       |  |                         
|Michael L. Shannon Senior Vice President Global Operations Cash Payments Health and welfare benefits Total        |  |                       |  | $$$                      | 111,4547,325118,779   |                    |      |                |  | 
|                                                                                                                  |  |                       |  |                         
|Marriott W Winchester, Jr Senior Vice President Cash Payments Health and welfare benefits Total                   |  |                       |  | $ $ $                    | 120,939 7,325 128,264 |                    |      |                |  | 



|(1) | Henry Baughman would be paid a severance in the amount equal to one hundred percent (100%) of his base salary for a period of twenty four (24) months if terminated without
cause. Additionally, Mr. Baughman would be entitled to continued participation in the welfare benefit plans for a period of twenty four (24) months. Finally, Mr. Baughman would be paid an incentive bonus amount equal to the full
target incentive bonus payment for the year terminated prorated by the number of months worked in the year terminated. In case of termination for disability, Mr. Baughman would be entitled only to his target management incentive bonus.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | James Dahmus would be paid a severance in the amount equal to one hundred percent (100%) of his base salary for a period of twelve (12) months if terminated without cause.
Additionally, Mr. Dahmus would be entitled to continued participation in the welfare benefit plans for a period of twelve (12) months. Finally, Mr. Dahmus would be paid an incentive bonus amount equal to the full target incentive
bonus payment for the year terminated prorated by the number of months worked in the year terminated. In case of termination for disability, Mr. Dahmus would be entitled only to his target management incentive bonus.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Luca Naccarato would be paid a severance in the amount equal to one hundred percent (100%) of his base salary for a period of twenty four (24) months if terminated without
cause. Additionally, Mr. Naccarato would be entitled to continued participation in the welfare benefit plans for a period of twenty four (24) months. Finally, Mr. Naccarato would be paid an incentive bonus amount equal to the full
target incentive bonus payment for the year terminated prorated by the number of months worked in the year terminated. In case of termination for disability, Mr. Naccarato would be entitled only to his target management incentive bonus.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Michael Shannon and Marriott W Winchester Jr. would be paid a severance, pursuant to Company severance guidelines, in the amount equal to one hundred percent (100%) of their
base salary for a period of six (6) months if terminated without cause. Additionally, Mr. Shannon and Mr. Winchester would be entitled to continued participation in the welfare benefit plans for a period of six (6) months.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



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##### Table of Contents

Compensation of Directors

Below is the summary of Director compensation. Directors (other than management directors) are paid $15,000 per year for serving on the Registrants board and are reimbursed for out-of-pocket expenses incurred in
connection with attending the Registrants board of director meetings.

DIRECTOR COMPENSATION



|                            |  |                              |        |                |      |                |      |                                          |      |                                                                           |      |                          |      |           |   |       
|--------------------------- |  | ---------------------------- | ------ | -------------- | ---- | -------------- | ---- | ---------------------------------------- | ---- | ------------------------------------------------------------------------- | ---- | ------------------------ | ---- | --------- | - | ------
|Name and Principal Position |  | FeesEarned orPaid inCash ($) |        | StockAwards($) |      | OptionAward($) |      | Non-EquityIncentive PlanCompensation ($) |      | Change in Pension Valueand Nonqualified DeferredCompensation Earnings ($) |      | All OtherCompensation($) |      | Totals($)
|(a)                         |  | (b)                          |        | (c)            |      | (d)            |      | (e)                                      |      | (f)                                                                       |      | (g)                      |      | (h)      
|Joseph M. Silvestri         |  |                              | None   |                | None |                | None |                                          | None |                                                                           | None |                          | None |           |   | None  
|John P. Civantos            |  |                              | None   |                | None |                | None |                                          | None |                                                                           | None |                          | None |           |   | None  
|Thomas L. Hammond           |  | $                            | 15,000 |                | None |                | None |                                          | None |                                                                           | None |                          | None |           | $ | 15,000
|Richard Leong               |  | $                            | 15,000 |                | None |                | None |                                          | None |                                                                           | None |                          | None |           | $ | 15,000



|(1) | Joseph Silvestri and John Civantos waived their Directors fees for 2007. Mr. Silvestri is a Managing Partner, and Mr. Civantos a Partner, of Court Square Advisor LLC,
which receives an annual fee from the Company pursuant to an Advisory Agreement.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compensation Committee Interlocks and Insider
Participation

Messrs. Silvestri, Civantos and Hammond comprise our Compensation Committee. Mr. Silvestri is a Managing Partner,
and Mr. Civantos a Partner, of Court Square Advisor LLC, which receives an annual fee of $0.5 million per year plus reasonable out-of-pocket expenses from the Company, pursuant to an Advisory Agreement. See the discussion under Advisory
Agreement in Item 13.

Messrs. Silvestri and Civantos were officers of the Registrant before the Acquisition and resigned their
positions on December 30, 2005 effective with the Acquisition. Mr. Hammond was the former Chief Executive Officer of Southern Graphic Systems, Inc. from 2000 until 2002, when he retired.

None of our executive officers has a relationship that would constitute an interlocking relationship with executive officers or directors of another
entity or insider participation in compensation decisions.



45



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##### Table of Contents

|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

All of the Registrants outstanding capital stock is held by Southern Graphics Inc. (SGS Holdco). The following table sets forth certain
information regarding the beneficial ownership of SGS Holdco by (i) each person or entity known to us to own more than 5% of any class of the outstanding securities of SGS Holdco, (ii) each member of the Registrants board of
directors and each of our named executive officers and (iii) all members of the Registrants board of directors and executive officers as a group. The outstanding securities of SGS Holdco consist of approximately 996,674 shares of common
stock and 969,719 shares of preferred stock. To our knowledge, each of such stockholders has sole voting and investment power as to the stock shown unless otherwise noted. Beneficial ownership of the securities listed in the table has been
determined in accordance with the applicable rules and regulations promulgated under the Exchange Act.



|                                                                                    |  |                                                        |  |         |                 |  |         |  |         |  
|----------------------------------------------------------------------------------- |  | ------------------------------------------------------ |  | ------- | --------------- |  | ------- |  | ------- | -
|                                                                                    |  | Number and Percent of Shares ofSouthern Graphics
Inc.1 | 
|                                                                                    |  | Common Stock                                           |  |         | Preferred Stock | 
|                                                                                    |  | Number                                                 |  | Percent |                 |  | Number  |  | Percent |  
|Greater than 5% Stockholders:                                                       |  |                                                        |  |         |                 |  |         |  |         |  
|Citigroup Venture Capital Equity Partners, L.P.2 399 Park Avenue New York, NY 10043 |  | 731,462                                                |  | 73.39   | %               |  | 788,354 |  | 81.30   | %
|Lyon Southern                                                                       |  | 127,358                                                |  | 12.78   | %               |  | 137,264 |  | 14.16   | %
|Named Executive Officers and Directors:                                             |  |                                                        |  |         |                 |  |         |  |         |  
|Henry R. Baughman                                                                   |  | 22,712                                                 |  | 2.28    | %               |  | 229     |  | .02     | %
|James M. Dahmus3                                                                    |  | 14,161                                                 |  | 1.42    | %               |  | 1,144   |  | .12     | %
|Luca C. Naccarato                                                                   |  | 22,712                                                 |  | 2.28    | %               |  | 229     |  | .02     | %
|Michael L. Shannon                                                                  |  | 5,425                                                  |  | .54     | %               |  | 458     |  | .05     | %
|Marriott W. Winchester, Jr.                                                         |  | 5,425                                                  |  | .54     | %               |  | 458     |  | .05     | %
|Joseph M. Silvestri2,4,5                                                            |  | 733,160                                                |  | 73.56   | %               |  | 790,184 |  | 81.49   | %
|John P. Civantos2, 4                                                                |  | 731,760                                                |  | 73.42   | %               |  | 788,674 |  | 81.33   | %
|Thomas L. Hammond                                                                   |  | 1,698                                                  |  | .17     | %               |  | 1,830   |  | .19     | %
|Richard Leong                                                                       |  |                                                       |  |        |                 |  |        |  |        |  
|                                                                                    |  |                                                        |  |        
|All executive officers and directors as a group (10 persons)2,4, 5, 6               |  | 808,303                                                |  | 81.10   | %               |  | 795,081 |  | 81.99   | %



|1 | Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person has beneficial ownership of any securities as to which such person, directly or indirectly,
through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power and as to which such person has the right to acquire such voting and/or investment power within 60 days. Percentage of
beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of shares as to which such
person has the right to acquire voting and/or investment power within 60 days.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | Includes shares of Common Stock (717,467.988) and Preferred Stock (773,271.028) held by Citigroup Venture Capital Equity Partners, L.P., shares of Common Stock
(7,400.479) and Preferred Stock (7,976.069) held by CVC/SSB Employee Fund, L.P. and shares of Common Stock (6,593.814) and Preferred Stock (7,106.676) held by CVC Executive Fund LLC.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | Includes options to acquire 600 shares of Common Stock under the Southern Graphics Inc. Stock Incentive Plan.
|- | -------------------------------------------------------------------------------------------------------------

|4 | Court Square Advisor LLC, an independent company formed by the former managers of CVC, manages and has voting power with
respect to the shares owned by Citigroup Venture Capital Equity Partners, L.P., CVC/SSB Employee Fund, L.P., and CVC Executive Fund LLC. Messrs. Silvestri and Civantos are the Managing Partner and Partner, respectively, of Court Square Advisor LLC,
which manages CVCs investment in Southern Graphics Inc., and disclaim beneficial ownership of the shares held by CVC, CVC/SSB Employee Fund, L.P. and CVC Executive Fund LLC. The address of Mr. Silvestri and Mr. Civantos is c/o Court
Square Capital Partners, L.P., Park Avenue Plaza, 55 East 52ndStreet, 34th Floor, New York, NY 10055.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5 | Includes shares of Common Stock held by the Silvestri 2002 Trust. Mr. Silvestri disclaims beneficial ownership of the shares held by the Silvestri 2002 Trust.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|6 | Includes shares purchased by Messrs. Baughman, Dahmus, Naccarato, Shannon and Winchester, as well as certain other members of management after December 30, 2005. See
Certain relationships and related party transactions.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------

EQUITY
INVESTMENT

In connection with the Acquisition, CVC and SGS Holdco entered into a Stockholders Agreement providing for CVCs
investment in SGS Holdco and containing agreements among its stockholders with respect to certain rights and restrictions and with respect to its corporate governance. SGS Holdco contributed the proceeds from the sale of its equity interest to the
Registrant. The following is a summary description of the principal terms of the equity investment provisions of the Stockholders Agreement.

Pursuant to the Stockholders Agreement and a related subscription agreement, CVC and certain employees of CVC purchased 1,000,000 shares of common stock of SGS Holdco for $10.0 million and 970,000 shares of perpetual preferred stock
of SGS Holdco for $97.0 million. Since the closing of the Acquisition and through the end of December 2006, Messrs. Baughman, Dahmus, Naccarato, Shannon, Winchester, and Harmon along with other management investors purchased approximately 105,094.32
shares of common stock and 5,493.572 shares of perpetual preferred stock of SGS Holdco, in the aggregate, at the same purchase price per share as CVC. The proceeds from the sale of shares to management investors were used to repurchase an equivalent
number of shares of SGS Holdco from CVC. In transactions in 2007 and January of 2008, SGS Holdco repurchased an aggregate of 10,849.06 shares of its common stock and 915.095 shares of its perpetual preferred stock from three management investors in
connection with their termination of employment with the Company at an aggregate price of $232,220, and sold 7,522.934 of such common shares and 634.544 of such perpetual preferred shares to three new management investors for an aggregate price of
$200,550. The common stock of SGS Holdco purchased by the management investors will vest in five equal annual installments or, in the case of Mr. Baughman, if he retires after three years, he will be fully vested upon retirement. All vesting of
such common stock is subject to the employees continuous employment with us and the terms and conditions of the Stockholders Agreement, including SGS Holdcos repurchase rights upon termination of employment. In addition,
Mr. Hammond made an investment of $200,000 in SGS Holdco. Mr. Hammond purchased approximately 1,700 shares of common stock and 1,830 shares of perpetual preferred stock of SGS Holdco at the same price per share and in the same ratio as
CVC. The purchase price for such shares consisted of $150,000 in cash and the waiver of a $50,000 consulting fee owed to Mr. Hammond from the Registrant. The proceeds were used to repurchase from CVC the same number of shares of common stock
and perpetual preferred stock of SGS Holdco. In other transactions, Lyon Southern, Inc. (Lyon), an affiliate of Richard Leong, purchased approximately 127,000 shares of common stock and 137,000 shares of perpetual preferred stock of SGS
Holdco, and other third party investors purchased approximately 8,500 shares of common stock and 9,150 shares of perpetual preferred stock of SGS Holdco, in each case at the same price per share and in the same ratio as CVC, with the proceeds being
used to repurchase from CVC the same number of shares of common stock and perpetual preferred stock of SGS Holdco. SGS Holdco has the right to redeem the shares of perpetual preferred stock at any time at a price equal to $100 per share plus
dividends accrued to the date of redemption. The following chart sets forth a summary of such stock sales:



|                     |  |                |  |                   |  |                |           
|-------------------- |  | -------------- |  | ----------------- |  | -------------- | ----------
|Name                 |  | Class A Common |  | Series APreferred |  | Purchase Price
|Management Investors |  | 101,768.19     |  | 5,213.021         |  | $              | 1,568,630 
|Thomas Hammond       |  | 1,698.113      |  | 1,830.189         |  | $              | 200,000   
|Lyon Southern        |  | 127,358.491    |  | 137,264.151       |  | $              | 15,000,000
|Others               |  | 8,490.970      |  | 9,150.940         |  | $              | 1,000,000 

OTHER PROVISIONS OF THE STOCKHOLDERS AGREEMENT

Pursuant to the Stockholders Agreement, the stockholders of SGS Holdco will agree to take all actions so that its Board of Directors is composed of
up to six directors, which so long as SGS Holdco has not consummated a public offering will include SGS Holdcos CEO and up to five individuals designated by CVC. SGS Holdcos board of directors currently consists of Messrs. Silvestri,
Civantos, Baughman, Hammond and Leong.

The Stockholders Agreement contains provisions that, with some exceptions, restrict the
ability of the stockholders to transfer any common stock or preferred stock of SGS Holdco except pursuant to the terms of the Stockholders Agreement. If holders of more than 50% of the common stock of SGS Holdco approve the sale of either the
Company or SGS Holdco, which is known under the Stockholders Agreement as an approved sale, each stockholder has agreed to consent to the sale and, if the sale includes the sale of stock of SGS Holdco, each stockholder has agreed to sell all
of its common stock and preferred stock of SGS Holdco on the terms and conditions approved by holders of a majority of the common stock of SGS Holdco then outstanding. In the event SGS Holdco proposes to issue and sell, other than in a public
offering under a registration statement, any shares of its common stock or any securities containing options or rights to acquire any shares of its common stock or any securities convertible into its common stock



47



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##### Table of Contents

to CVC or any of its respective affiliates, SGS Holdco must first offer to each of the other stockholders a pro rata portion of such shares. These preemptive
rights will not be applicable to certain issuances of shares of SGS Holdco, including issuances of common stock of SGS Holdco upon conversion of shares of one class of common stock into shares of another class. Subject to some limitations (including
the ability of CVC to sell to affiliates and to sell a portion of its holdings to other investors) CVC may not sell any of its shares of common stock without offering the other stockholders of SGS Holdco a pro rata opportunity to participate in the
sale.

The related subscription agreement for management investors also provides for additional restrictions on transfer of shares of SGS
Holdco by our executive officers and other employees, including the right of SGS Holdco to repurchase shares upon termination of the stockholders employment prior to December 30, 2010. If the management investor resigns or is terminated
without cause, the repurchase price for vested shares of common stock of SGS Holdco will be their fair market value and the repurchase price for unvested shares will be their cost. If the management investor is terminated for cause, the repurchase
price for all shares of common stock of SGS Holdco will be based on the lower of cost or fair market value. The Stockholders Agreement also provides for a right of first refusal in favor of SGS Holdco in the event a management investor elects
to transfer shares of stock of SGS Holdco.

The Stockholders Agreement also provides that in consideration for the opportunity to
purchase common stock of SGS Holdco, each management investor released all claims against us and SGS Holdco (other than claims for compensation and benefits in the ordinary course of business) and agreed for a period of one year after his
termination of employment to not (i) compete directly or indirectly with us, (ii) solicit or hire current and former employees, and (iii) solicit current and former customers.

REGISTRATION RIGHTS AGREEMENT

As part of the
Stockholders Agreement, CVC and the other stockholders of SGS Holdco are parties to a registration rights agreement. Under the registration rights agreement, upon the written request of CVC, SGS Holdco will prepare and file a registration
statement with the Securities and Exchange Commission concerning the distribution of all or part of the shares of SGS Holdco held by CVC or its affiliates and use its best efforts to cause the registration statement to become effective. If at any
time SGS Holdco files a registration statement for its common stock pursuant to a request by CVC, or otherwise (other than a registration statement on Form S-8, Form S-4 or any similar form, a registration statement filed in connection with a share
exchange or an offering solely to our employees or its existing stockholders, or a registration statement registering a unit offering, which we refer to as a qualified offering), SGS Holdco will use its best efforts to allow the other parties to the
registration rights agreement to have their shares of common stock of SGS Holdco (or a portion of their shares under some circumstances) included in the offering of common stock of SGS Holdco. Registration expenses of the selling stockholders (other
than underwriting fees, brokerage fees and transfer taxes applicable to the shares sold by such stockholders or in some cases the fees and expenses of any accountants or other representatives retained by a selling stockholder) will be paid by SGS
Holdco.

ADVISORY AGREEMENT

In
connection with the Acquisition, we entered into an advisory agreement with CVC Management LLC. This agreement was assigned to Court Square Advisor LLC (CS Advisor) on July 31, 2006. CS Advisor may provide financial, advisory and
consulting services to us under the advisory agreement. In exchange for these services, CS Advisor will be entitled to an annual advisory fee of $0.5 million per year plus reasonable out-of-pocket expenses. We have also agreed to pay CS Advisor a
transaction fee in connection with the consummation of any acquisition, divestiture or financing with a value in excess of $25,000,000, including any refinancing, by us or any of our subsidiaries, in an amount equal to 1% of the value of the
transaction, plus reasonable out-of-pocket expenses. This advisory agreement has an initial term of ten years from December 30, 2005, subject to automatic one year extensions thereafter unless terminated by either party upon written notice 90
days prior to the expiration of the initial term or any extension thereof. The advisory agreement automatically terminates on a change of control upon payment of the relevant transaction fee, and also terminates, upon payment of a fee based on the
discounted value of the remaining annual advisory fees, on an initial public offering of SGS Holdcos common stock. There are no minimum levels of service required to be provided pursuant to the advisory agreement. The advisory agreement
includes customary indemnification provisions in favor of CS Advisor. Mr. Silvestri is a Managing Partner, and Mr. Civantos is a Partner, of CS Advisor.

RELATED PERSONS POLICIES AND PROCEDURES

Our Board of Directors is responsible for reviewing and recommending action
regarding potential material transactions with any related party. Related parties include any of our directors or executive officers, certain of our stockholders and their immediate family members. We expect our directors, officers and employees to
act and make decisions that are in our best interests and encourage them to avoid situations which present a conflict between our interests and their own personal interests.



48



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##### Table of Contents

To identify related party transactions not otherwise brought to the Boards attention, each year we
require our directors, executive officers and certain stockholders to complete Director and Officer Questionnaires identifying any transactions with us in which the stockholder, officer or director or their family members have an interest. We review
related party transactions due to the potential for a conflict of interest. A conflict of interest occurs when an individuals private interest interferes, or appears to interfere, in any way with our interests.

If a potential conflict is identified the Board of Directors will review and discuss the transaction. At a minimum, we are required to comply with
Section 144 of the Delaware General Corporation Law and therefore we may request that any implicated director recuse himself from the discussions and vote regarding the transaction.

On February 20, 2007, we entered into an Undertaking Agreement (the Undertaking Agreement) with Marriott W. Winchester, Jr., a Senior
Vice President of the Company. Pursuant to the Undertaking Agreement we agreed to advance to Mr. Winchester such legal fees and expenses as were actually and reasonably incurred by him in connection with his defense of a claim brought by Vertis,
Inc. in which Vertis, Inc. alleged that Mr. Winchester breached a Business Responsibility Agreement between Mr. Winchester and Vertis, Inc. during his employment with us. Mr. Winchester agreed to repay the amount of any advance made
by us if our Board of Directors determined that Mr. Winchester is not entitled to indemnification or if it was determined under our bylaws or the laws of the State of Delaware that Mr. Winchester is not entitled to indemnification. We
amended the Undertaking Agreement on January 2, 2008 to increase to $150,000 the aggregate amount of legal fees and expenses that we could advance to Mr. Winchester. Our Board of Directors approved the Undertaking Agreement and the
subsequent amendment to it. A total of $150,000 was advanced to Mr. Winchester under the Undertaking Agreement, as amended. Vertis, Inc.s claim against Mr. Winchester has been settled.

On March 18, 2008, our Board of Directors authorized the Company to purchase prepress graphics services from (and enter into related transactions
with) Flexo Manufacturing Corporation in an aggregate amount not to exceed $250,000 in 2008. Richard Leong is Managing Director of Flexo Manufacturing Corporation. Mr. Leong is one of our directors and Chief Investment Advisor to Lyon Capital
Partners, an affiliate of our shareholder Lyon Southern, Inc.

DIRECTOR INDEPENDENCE



|                       |  |             
|---------------------- |  | ------------
|Director               |  | Independent1
|Henry R. Baughman      |  | No          
|John P. Civantos2,3    |  | Yes         
|Thomas L. Hammond3     |  | Yes         
|Richard Leong2         |  | Yes         
|Joseph M. Silvestri2,3 |  | Yes         



|1 | As defined by NASDAQ Rule 4200(a)(15)
|- | -------------------------------------

|2 | Member of Audit Committee
|- | -------------------------

|3 | Member of Compensation Committee
|- | --------------------------------



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

On
July 16, 2007, the Company dismissed PricewaterhouseCoopers LLP as its independent registered public accounting firm.

Effective as of
July 27, 2007, the Audit Committee of the Board of Directors of the Company engaged BDO Seidman, LLP to serve as the independent registered public accounting firm to audit its consolidated financial statements for the fiscal year ending
December 31, 2007.

Aggregate fees billed to the Company for the fiscal year ending December 31, 2007 by the Companys
principal accounting firm, BDO Seidman, LLP were as follows:



|                   |  |      |        
|------------------ |  | ---- | -------
|                   |  | 2007
|Audit fees         |  | $    | 544,915
|Audit-related fees |  |      | 23,337 
|Tax fees           |  |      |       
|                   |  |      |        
|Total              |  | $    | 568,252
|                   |  |      |        



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##### Table of Contents

Audit fees consist of fees billed or agreed to be billed for services relating to the audit of our
Companys annual financial statements and reviews of the interim financial statements. The audit-related fees relate to professional services in connection with potential and other business combinations. During 2006, the Companys Audit
Committee implemented audit and non-audit pre-approval policies and procedures. The Audit Committee now pre-approves both the type of services to be provided by the Companys principal accounting firm and the estimated fees related to these
services. The services provided by BDO Seidman, LLP were pre-approved by the Audit Committee.



50



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##### Table of Contents

PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------

Financial Statements

Our consolidated / combined financial statements are filed on the pages listed below, as part of Part II, Item 8 of this report:



|                                                                                                                                                                                                                                               |  |     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                               |  | Page
|Reports of Independent Registered Public Accounting Firms                                                                                                                                                                                      |  | 56  
|                                                                                                                                                                                                                                               | 
|Consolidated Balance Sheets  December 31, 2007 and December 31, 2006                                                                                                                                                                          |  | 58  
|                                                                                                                                                                                                                                               | 
|Consolidated / Combined Statements of Operations  Year Ended December 31. 2007, Year Ended December 31, 2006, One-Day Ended December 31, 2005, and Period Ended December 30, 2005                                                             |  | 59  
|                                                                                                                                                                                                                                               | 
|Consolidated / Combined Statements of Comprehensive Income and Stockholders Equity and Enterprise Capital  Year Ended December 31, 2007, Year Ended December 31, 2006, One-Day Ended December
 31, 2005, and Period Ended December 30, 2005, |  | 60  
|                                                                                                                                                                                                                                               | 
|Consolidated / Combined Statements of Cash Flows  Year Ended December 31, 2007, Year Ended December 31, 2006, One-Day Ended December 31, 2005, and Period Ended December 30, 2005                                                             |  | 61  
|                                                                                                                                                                                                                                               | 
|Notes to Consolidated / Combined Financial Statements                                                                                                                                                                                          |  |     
|                                                                                                                                                                                                                                               | 
|Financial Statement Schedule:                                                                                                                                                                                                                  |  |     
|                                                                                                                                                                                                                                               | 
|II  Valuation and Qualifying Accounts                                                                                                                                                                                                         |  | 88  

Schedules other than those mentioned above have been omitted because they are inapplicable, or not
required, or the information is included in the financial statements or footnotes.

The following Exhibits are filed as part of this report:



|              |  |                                                                                                                                                                                                                                                                                                                                
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                    
|3.            |  | CERTIFICATE OF INCORPORATION AND BY-LAWS                                                                                                                                                                                                                                                                                       
|              | 
|3.1           |  | Certificate of Incorporation of the Registrant filed with the Secretary of State of the State of Delaware on November 8, 2005, incorporated by reference to exhibit 3.1 to the Registrants
registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                       
|              | 
|3.2           |  | By-Laws of the Registrant adopted on November 8, 2005, incorporated by reference to exhibit 3.2 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File
No. 333-133825                                                                                                                               
|              | 
|4.            |  | INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES                                                                                                                                                                                                                                                      
|              | 
|4.1           |  | Certificate of Incorporation. See Exhibit 3.1                                                                                                                                                                                                                                                                                  
|              | 
|4.2           |  | By-laws. See Exhibit 3.2                                                                                                                                                                                                                                                                                                       
|              | 
|4.3           |  | Indenture dated as of December 30, 2005, by and between the Registrant and Wells Fargo Bank National Association, as trustee, relating to the 12% Senior Subordinated Notes due 2013, incorporated
by reference to exhibit 4.3 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825
|              | 
|4.4           |  | Form of Global 12% Notes due 2013 (included in Exhibit 4.3)                                                                                                                                                                                                                                                                    
|              | 
|4.5           |  | Form of Regulation S Temporary Global 12% Notes due 2013 (included in Exhibit 4.3)                                                                                                                                                                                                                                             
|              | 
|4.6           |  | Supplemental Indenture, dated April 25, 2006, by and among the Registrant, Southern Graphic Systems, Inc., Project Dove Holdco, Inc. and Wells Fargo Bank, N.A., as trustee, incorporated by
reference to exhibit 4.6 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825         



51



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.7  |  | Registration Rights Agreement, dated as of December 30, 2005, by and between the Registrant, certain of its subsidiaries as Guarantors, and UBS Securities LLC and Lehman Brothers Inc. as
Initial Purchasers, incorporated by reference to exhibit 4.7 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|4.8  |  | Credit Agreement, dated as of December 30, 2005, among the Registrant and Southern Graphic Systems  Canada, Co., as borrowers, certain of the Registrants subsidiaries, as guarantors,
UBS Securities LLC and Lehman Brothers Inc., as joint arrangers and joint bookmanagers, UBS AG, Stamford Branch, as issuing bank, US administrative agent, US collateral agent and Canadian collateral agent, Lehman Brothers Inc., as syndication agent,
CIT Lending Services Corporation, as documentation agent, National City Bank, as Canadian administrative agent, UBS Loan Finance LLC, as swingline lender, and the lenders referred to therein, incorporated by reference to exhibit 10.7 to the
Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825
|     | 
|4.9  |  | First Amendment to Credit Agreement by and among the Registrant and Southern Graphic Systems  Canada, Co., as borrowers, certain affiliates of the borrowers, as guarantors, and the lenders
party to the Credit Agreement as described therein, incorporated by reference to exhibit 10.8 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                 
|     | 
|4.10 |  | Security Agreement, dated as of December 30, 2005, by the Registrant, as borrower, certain of the Registrants subsidiaries, as guarantors, and UBS AG, Stamford Branch, as US collateral
agent, incorporated by reference to exhibit 10.9 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | 
|4.11 |  | Canadian Security Agreement, dated as of December 30, 2005, by certain of the Registrants subsidiaries, as pledgors, and UBS AG, Stamford Branch, as Canadian collateral agent, incorporated
by reference to exhibit 10.10 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     | 
|4.12 |  | Debenture dated as of December 30, 2005, from SGS-UK Holdings Limited and others, as chargors, in favour of UBS AG, Stamford Branch, as Canadian collateral agent, incorporated by reference to
exhibit 10.11 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 
|4.13 |  | Limited Waiver and Consent to Credit Agreement dated as of April 11, 2007 among SGS International, Inc. and Southern Graphic Systems  Canada, Co., as borrowers, certain of the
Registrants subsidiaries, as guarantors, the lenders signatory thereto, UBS AG, Stamford Branch, as US administrative agent, US collateral agent and Canadian collateral agent, and National City Bank, as Canadian administrative agent
(incorporated by reference to Exhibit 4.13 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed May 15, 2007, File No. 333-133825)                                                                                                                                                                                       
|     | 
|9.   |  | VOTING TRUST AGREEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     | 
|9.1  |  | Stockholder Agreement, dated as of December 30, 2005, among Southern Graphics Inc. (the Registrants parent) and the parties referred to therein, incorporated by reference to exhibit 9.1 to
the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | 
|10.  |  | MATERIAL CONTRACTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     | 
|10.1 |  | Acquisition Agreement dated as of November 11, 2005, by and among the Registrant, RMC Delaware, Inc., Southern Graphic Systems-Canada, Ltd., and Alcoa UK Holdings Limited, incorporated by
reference to exhibit 10.1 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | 
|10.2 |  | First Amendment to the Acquisition Agreement dated as of December 30, 2005, by and among the Registrant, Project Dove Holdco, Inc., Southern Graphics Systems-Canada, Co. SGS-UK Holdings Limited,
RMC Delaware, Inc., Southern Graphic Systems-Canada, Ltd., and Alcoa UK Holdings Limited, incorporated by reference to exhibit 10.2 to the Registrants registration statement on Form S-4 filed on May 5, 2006, File No.
333-133825                                                                                                                                                                                                                                                                                                                                                      
|     | 
|10.3 |  | Indenture. See Exhibit 4.3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | 
|10.4 |  | Supplemental Indenture. See Exhibit 4.6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|10.5 |  | Registration Rights Agreement. See Exhibit 4.7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | 
|10.6 |  | Credit Agreement. See Exhibit 4.8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



52



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##### Table of Contents

|       |  |                                                                                                                                                                                                                                                                                   
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7   |  | First Amendment to Credit Agreement. See Exhibit 4.9.                                                                                                                                                                                                                             
|       | 
|10.8   |  | Security Agreement. See Exhibit 4.10.                                                                                                                                                                                                                                             
|       | 
|10.9   |  | Canadian Security Agreement. See Exhibit 4.11.                                                                                                                                                                                                                                    
|       | 
|10.10  |  | Debenture. See Exhibit 4.12.                                                                                                                                                                                                                                                      
|       | 
|10.11* |  | Employment Agreement, dated December 30, 2005, between the Registrant and Henry R. Baughman, incorporated by reference to exhibit 10.12 to the Registrants registration statement on Form
S-4 filed on May 5, 2006, File No. 333-133825                                          
|       | 
|10.12* |  | Amendment, dated as of January 15, 2006, to Employment Agreement dated December 30, 2005 between the Registrant and Henry R. Baughman, incorporated by reference to exhibit 10.13 to the
Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825
|       | 
|10.13* |  | Supplemental Pension Agreement, dated as of April 6, 1999 between Southern Graphic Systems, Inc. and Henry R. Baughman, incorporated by reference to exhibit 10.14 to the Registrants
registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825               
|       | 
|10.14* |  | Amendment, dated as of August 9, 2006, to Employment Agreement dated December 30, 2005 between the Registrant and Henry R. Baughman, incorporated by reference to exhibit 10.5 to the
Registrants Form 10-Q Report for the quarter ended June 30, 2006, File No. 333-133825      
|       | 
|10.15* |  | Agreement, dated as of August 9, 2006, regarding vesting of management investment, between Southern Graphics Inc. and Henry R. Baughman, incorporated by reference to exhibit 10.7 to the
Registrants Form 10-Q Report for the quarter ended June 30, 2006, File No. 333-133825  
|       | 
|10.16* |  | Employment Agreement, dated December 30, 2005, between the Registrant and Luca C. Naccarato, incorporated by reference to exhibit 10.15 to the Registrants registration statement on Form
S-4 filed on May 5, 2006, File No. 333-133825                                          
|       | 
|10.17* |  | Amendment, dated as of January 15, 2006, to Employment Agreement dated December 30, 2005 between the Registrant and Luca C. Naccarato, incorporated by reference to exhibit 10.16 to the
Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825
|       | 
|10.18* |  | Agreement, dated as of June 23, 2003, regarding reimbursement of educational expenses between the Registrant and Luca C. Naccarato, incorporated by reference to exhibit 10.17 to the
Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825   
|       | 
|10.19* |  | Amendment, dated as of August 9, 2006, to Employment Agreement dated December 30, 2005 between the Registrant and Luca C. Naccarato, incorporated by reference to exhibit 10.6 to the
Registrants Form 10-Q Report for the quarter ended June 30, 2006, File No. 333-133825      
|       | 
|10.20* |  | Employment Agreement, dated January 27, 2006, between the Registrant and Benjamin F. Harmon, IV, incorporated by reference to exhibit 10.22 to the Registrants registration statement on
Form S-4 filed on May 5, 2006, File No. 333-133825                                      
|       | 
|10.21  |  | Stock Purchase Agreement, dated November 4, 2005, by and among Omnipack PLC, SGS-UK Limited, and Daniel M. Bejarano, incorporated by reference to exhibit 10.28 to the Registrants
registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825                  
|       | 
|10.22  |  | Advisory Agreement between the Registrant and Court Square Advisors LLC (as assignee of CVC Management LLC) dated December 30, 2005, incorporated by reference to exhibit 10.29 to the
Registrants registration statement on Form S-4 filed on May 5, 2006, File No. 333-133825  
|       | 
|10.23  |  | Deed of Lease dated as of April 2005 between 5301 Lewis Road, L.L.C. and Southern Graphic Systems, Inc., incorporated by reference to exhibit 10.30 to the Registrants registration
statement on Form S-4 filed on May 5, 2006, File No. 333-133825                              
|       | 
|10.24* |  | Stockholder Agreement. See Exhibit 9.1.                                                                                                                                                                                                                                           
|       | 
|10.25* |  | Employment Agreement, dated as of April 10, 2006, between the Registrant and James M. Dahmus, incorporated by reference to exhibit 10.32 to the Registrants registration statement on Form
S-4 filed on May 5, 2006, File No. 333-133825                                         



53



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.26* |  | Southern Graphic Systems, Inc. Deferred Compensation Plan Effective April 1, 2006, incorporated by reference to exhibit 10.1 to the Registrants Form 10-Q Report for the quarter
ended June 30, 2006, File No. 333-133825                                                                                                                                                                                                                                                                
|       | 
|10.27* |  | Southern Graphics Inc. Stock Incentive Plan, incorporated by reference to exhibit 10.2 to the Registrants Form 10-Q Report for the quarter ended June 30, 2006, File No.
333-133825                                                                                                                                                                                                                                                                                                      
|       | 
|10.28* |  | Form of Stock Option Agreement for Southern Graphics Inc. Stock Incentive Plan (included in Exhibit 10.27)                                                                                                                                                                                                                                                                                                                                                                                
|       | 
|10.29* |  | Form of Subscription Agreement for Southern Graphics Inc. Stock Incentive Plan (included in Exhibit 10.27)                                                                                                                                                                                                                                                                                                                                                                                
|       | 
|10.30* |  | SGS International, Inc. Management Incentive Plan - 2006, incorporated by reference to exhibit 10.1 to the Registrants Form 10-Q Report for the quarter ended June 30, 2006, File No.
333-133825                                                                                                                                                                                                                                                                                         
|       | 
|10.31* |  | Undertaking Agreement, dated February 20, 2007, by and between the Registrant and Marriott W. Winchester, Jr., incorporated by reference to exhibit 99.1 to the Registrants Form 8-K dated
February 20, 2007, filed February 26, 2007, File No. 333-133825                                                                                                                                                                                                                               
|       | 
|10.32* |  | Amendment No. 1 dated as of January 2, 2008 to the Undertaking Agreement dated February 20, 2007 between the Registrant and Marriott W. Winchester, Jr., incorporated by reference to exhibit 10.1
to the Registrants Form 8-K dated December 27, 2007, filed January 3, 2008, File No. 333-133825                                                                                                                                                                                       
|       | 
|10.33  |  | Asset Purchase Agreement dated as of February 28, 2007, between C. M. Jackson Associates, Inc. and Southern Graphic Systems, Inc., incorporated by reference to Exhibit 10.32 of the
Registrants Annual Report on Form 10-K for the year ended December 31, 2006, filed April 13, 2007, File No. 333-133825                                                                                                                                                                              
|       | 
|10.34  |  | Share Sale and Purchase Agreement dated April 2, 2007 among (1) McGurk Group Limited, Mr. P.J. Fraine, Ms J.K. Martindale, Ms A.J. Crisp and (2) SGS Packaging Europe Holdings Limited and (3) Mr.
P.E. McGurk, Mr. L. McGurk, Ms. A.L. Austin, Mr. J.R. McCarthy and (4) Mr. P.E. McGurk and (5) the Registrant incorporated by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2007,
filed May 15, 2007, File No. 333-133825
|       | 
|10.35  |  | Share Sale and Purchase Agreement dated April 2, 2007 among (1) Mr. P.E. McGurk, Mr. L. McGurk, Ms. A.L. Austin, Mr. J.R. McCarthy and (2) SGS Packaging Europe Holdings Limited and (3) McGurk
Group Limited, Mr. P.J. Fraine, Ms J.K. Martindale, Ms A.J. Crisp and (4) Mr. P.E. McGurk and (5) the Registrant incorporated by reference to Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2007,
filed May 15, 2007, File No. 333-133825
|       | 
|10.36  |  | Share Purchase Agreement, dated as of January 2, 2008, between Southern Graphic Systems-Canada, Co., Janko Herak, Adrianne Herak, Adrianne Herak Trust and C.J.K. Photo Engravers Limited,
incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K dated December 27, 2007, filed January 3, 2008, File No. 333-133825                                                                                                                                                     
|       | 
|10.37* |  | First Amendment of the Southern Graphic Systems, Inc. Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                          
|       | 
|21     |  | SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | 
|21.1   |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | 
|24.    |  | POWERS OF ATTORNEY                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|24.1   |  | Powers of Attorney                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|31.    |  | CERTIFICATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | 
|31.1   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|31.2   |  | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                    
|       | 
|32     |  | CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 
|32.1   |  | Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                         



|* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
|- | ----------------------------------------------------------------------------------------------------------------------------------



54



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##### Table of Contents

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.



|                     |  |                         |  |                                                
|-------------------- |  | ----------------------- |  | -----------------------------------------------
|Date: March 19, 2008 |  | SGS INTERNATIONAL, INC.
|                     |  |                        
|                     |  | By:                     |  | /s/ HENRY R. BAUGHMAN                          
|                     |  | Name:                   |  | Henry R. Baughman                              
|                     |  | Title:                  |  | President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                      |  |                                                   |  |                |  |               
|--------------------- |  | ------------------------------------------------- |  | -------------- |  | --------------
|Signature             |  | Title                                             |  | Date          
|                      |  |                                                  
|/s/ HENRY R. BAUGHMAN |  | President, Chief Executive Officer and Director   |  | March 19, 2008
|Henry R. Baughman     |  | (Principal Executive Officer)                     |  |               
|                      |  |                                                  
|/s/ James M. Dahmus   |  | Senior Vice President and Chief Financial Officer |  | March 19, 2008
|James M. Dahmus       |  | (Principal Financial and Accounting Officer)      |  |               
|                      |  |                                                  
|*                     |  | Director                                          |  | March 19, 2008
|Joseph M. Silvestri   |  |                                                   |  |               
|                      |  |                                                  
|*                     |  | Director                                          |  | March 19, 2008
|John P. Civantos      |  |                                                   |  |               
|                      |  |                                                  
|*                     |  | Director                                          |  | March 19, 2008
|Thomas L. Hammond     |  |                                                   |  |               
|                      |  |                                                  
|*                     |  | Director                                          |  | March 19, 2008
|Richard Leong         |  |                                                   |  |               
|                      |  |                                                   | 
|*By:                  |  | /s/ BENJAMIN F. HARMON, IV                        |  |                |  | March 19, 2008
|                      |  | Benjamin F. Harmon, IV                            |  |                |  |               
|                      |  | Attorney-in-Fact                                  |  |                |  |               



55



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of Directors of

SGS International, Inc.:

In our opinion, the accompanying
consolidated balance sheet and the related consolidated statements of operations, comprehensive income and stockholders equity and cash flows present fairly, in all material respects, the financial position of SGS International, Inc. and its
subsidiaries (the Company) at December 31, 2006 and the results of their operations and their cash flows for the year ended December 31, 2006 and the one-day ended December 31, 2005, in conformity with accounting
principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index under Item 15 presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



|                                                       
|-------------------------------------------------------
|/s/ PricewaterhouseCoopers LLP                         
|                                                       
|April 11, 2007                                         
|Except for Note T, for which the date is March 19, 2008
|Louisville, Kentucky                                   

Report of Independent Registered Public Accounting Firm

To the Shareholder of

Southern Graphic Systems:

In our opinion, the accompanying combined statement of operations, comprehensive income and enterprise capital and cash flows present fairly, in all
material respects, the results of operations and cash flows of Southern Graphic Systems for the period ended December 30, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our
opinion, the financial statement schedule listed in the index under Item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements. These financial
statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our
audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



|                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------
|/s/ PricewaterhouseCoopers LLP                                                                                                                    
|                                                                                                                                                  
|March 28, 2006                                                                                                                                    
|Except for Note S, for which the date is May 1, 2006, and the Discontinued Operations as discussed in Note T, for which the date is March 19, 2008
|Pittsburgh, Pennsylvania                                                                                                                          



56



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholder

SGS International, Inc.

Louisville, Kentucky

We have audited the accompanying consolidated balance
sheet of SGS International, Inc. as of December 31, 2007 and the related consolidated statements of operations, comprehensive income and stockholders equity, and cash flows for the year then ended. In connection with our audit of the
financial statements, we have also audited the 2007 financial statement schedule listed in the index under Item 15. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and
schedule. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SGS International, Inc. at December 31, 2007, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

Also, in our opinion, the 2007 financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



|                    
|--------------------
|/s/ BDO Seidman, LLP
|                    
|Nashville, Tennessee
|                    
|March 18, 2008      



57



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##### Table of Contents

SGS International, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2007 and December 31, 2006

(in
thousands of dollars, except share data)





|                                                                                                                        |  |                   |         |   |                   |   |        
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | -------
|                                                                                                                        |  | December 31, 2007 |         |   | December 31, 2006
|ASSETS                                                                                                                  |  |                   |         |   |                   |   |        
|Current assets:                                                                                                         |  |                   |         |   |                   |   |        
|Cash and cash equivalents                                                                                               |  | $                 | 34,467  |   |                   | $ | 12,658 
|Receivables from customers, less allowances of $830 and $1,422 at December 31, 2007 and December 31, 2006,
respectively |  |                   | 61,142  |   |                   |   | 57,417 
|Inventories                                                                                                             |  |                   | 7,718   |   |                   |   | 5,733  
|Deferred income taxes                                                                                                   |  |                   | 575     |   |                   |   | 1,676  
|Prepaid expenses and other current assets                                                                               |  |                   | 11,039  |   |                   |   | 8,053  
|                                                                                                                        |  |                   |         |   |                   |   |        
|Total current assets                                                                                                    |  |                   | 114,941 |   |                   |   | 85,537 
|Properties, plants and equipment, net                                                                                   |  |                   | 53,368  |   |                   |   | 52,413 
|Goodwill                                                                                                                |  |                   | 175,933 |   |                   |   | 157,778
|Other intangible assets, net                                                                                            |  |                   | 176,233 |   |                   |   | 163,113
|Deferred financing costs, net                                                                                           |  |                   | 8,848   |   |                   |   | 10,177 
|Other assets                                                                                                            |  |                   | 883     |   |                   |   | 509    
|                                                                                                                        |  |                   |         |   |                   |   |        
|TOTAL ASSETS                                                                                                            |  | $                 | 530,206 |   |                   | $ | 469,527
|                                                                                                                        |  |                   |         |   |                   |   |        
|                                                                                                                        |  |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    |  |                   |         |   |                   |   |        
|Current liabilities:                                                                                                    |  |                   |         |   |                   |   |        
|Accounts payable, trade                                                                                                 |  | $                 | 22,346  |   |                   | $ | 15,719 
|Accrued compensation                                                                                                    |  |                   | 7,928   |   |                   |   | 6,122  
|Accrued taxes, including taxes on income                                                                                |  |                   | 2,397   |   |                   |   | 1,248  
|Accrued interest                                                                                                        |  |                   | 1,048   |   |                   |   | 1,091  
|Other current liabilities                                                                                               |  |                   | 7,101   |   |                   |   | 7,046  
|Current portion of short-term and long-term obligations                                                                 |  |                   | 2,226   |   |                   |   | 3,605  
|                                                                                                                        |  |                   |         |   |                   |   |        
|Total current liabilities                                                                                               |  |                   | 43,046  |   |                   |   | 34,831 
|Long-term obligations, net of current portion                                                                           |  |                   | 360,859 |   |                   |   | 318,384
|Non-current liabilities                                                                                                 |  |                   | 1,398   |   |                   |   | 517    
|Deferred income taxes                                                                                                   |  |                   | 5,693   |   |                   |   | 5,524  
|                                                                                                                        |  |                   |         |   |                   |   |        
|Total liabilities                                                                                                       |  |                   | 410,996 |   |                   |   | 359,256
|                                                                                                                        |  |                   |         |   |                   |   |        
|Commitments and contingencies                                                                                           |  |                   |         |   |                   |   |        
|                                                                                                                        |  |                  
|Stockholders equity:                                                                                                   |  |                   |         |   |                   |   |        
|Common stock, $.01 par value, 1,000 shares authorized and outstanding                                                   |  |                   |        |   |                   |   |       
|Additional capital                                                                                                      |  |                   | 107,000 |   |                   |   | 107,000
|Accumulated other comprehensive incomeunrealized translation adjustments, net of tax                                   |  |                   | 13,509  |   |                   |   | 2,431  
|Retained earnings (accumulated deficit)                                                                                 |  |                   | (1,299  | ) |                   |   | 840    
|                                                                                                                        |  |                   |         |   |                   |   |        
|Total stockholders equity                                                                                              |  |                   | 119,210 |   |                   |   | 110,271
|                                                                                                                        |  |                   |         |   |                   |   |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                              |  | $                 | 530,206 |   |                   | $ | 469,527
|                                                                                                                        |  |                   |         |   |                   |   |        

The accompanying notes are an integral part of the consolidated / combined financial statements.



58



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##### Table of Contents

SGS International, Inc. and Subsidiaries

Consolidated / Combined Statements of Operations

Year Ended December 31, 2007, Year Ended December 31, 2006,

One-Day Ended December 31, 2005, and Period Ended December 30, 2005

(in thousands of dollars)





|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|---------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | ----------------------------- |  | - | ---- | - | ---------------------------- |  |  | - | -------
|                                                                                               |  | Successor                  |         |   | Successor                  |   |         | Successor                     |  |   |      |   | Predecessor                 
|                                                                                               |  | Year EndedDecember 31,2007 |         |   | Year EndedDecember 31,2006 |   |         | One-Day EndedDecember 31,2005 |  |   |      |   | Period EndedDecember 30,2005
|NET SALES:                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|Net sales                                                                                      |  | $                          | 308,809 |   |                            | $ | 276,276 |                               |  | $ |     |   |                              |  |  | $ | 254,930
|Net sales to related parties                                                                   |  |                            |        |   |                            |   |        |                               |  |   |     |   |                              |  |  |   | 5,398  
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|                                                                                               |  |                            | 308,809 |   |                            |   | 276,276 |                               |  |   |     |   |                              |  |  |   | 260,328
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|COSTS OF OPERATIONS:                                                                           |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|Cost of goods sold (exclusive of depreciation)                                                 |  |                            | 205,132 |   |                            |   | 180,512 |                               |  |   |     |   |                              |  |  |   | 170,926
|Selling, general, and administrative expenses                                                  |  |                            | 46,555  |   |                            |   | 37,913  |                               |  |   |     |   |                              |  |  |   | 32,632 
|Depreciation and amortization                                                                  |  |                            | 23,689  |   |                            |   | 20,061  |                               |  |   | 42   |   |                              |  |  |   | 16,415 
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|INCOME FROM (LOSS ON) OPERATIONS                                                               |  |                            | 33,433  |   |                            |   | 37,790  |                               |  |   | (42  | ) |                              |  |  |   | 40,355 
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|NON-OPERATING EXPENSES:                                                                        |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|Related party interest expense                                                                 |  |                            |        |   |                            |   |        |                               |  |   |     |   |                              |  |  |   | 6,431  
|Interest expense                                                                               |  |                            | 36,929  |   |                            |   | 35,012  |                               |  |   | 97   |   |                              |  |  |   | 10     
|Other expense, net                                                                             |  |                            | 497     |   |                            |   | 225     |                               |  |   |     |   |                              |  |  |   | 1,457  
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|INCOME FROM (LOSS ON) CONTINUING OPERATIONS BEFORE INCOME TAXES                                |  |                            | (3,993  | ) |                            |   | 2,553   |                               |  |   | (139 | ) |                              |  |  |   | 32,457 
|PROVISION (BENEFIT) FOR INCOME TAXES                                                           |  |                            | (1,182  | ) |                            |   | 1,345   |                               |  |   | (54  | ) |                              |  |  |   | 12,690 
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|INCOME FROM (LOSS ON) CONTINUING OPERATIONS                                                    |  |                            | (2,811  | ) |                            |   | 1,208   |                               |  |   | (85  | ) |                              |  |  |   | 19,767 
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|INCOME FROM (LOSS ON) DISCONTINUED OPERATIONS (including gain on disposal of $935 during 2007) |  |                            | 842     |   |                            |   | (480    | )                             |  |   |     |   |                              |  |  |   | 94     
|PROVISION (BENEFIT) FOR INCOME TAXES ON DISCONTINUED OPERATIONS                                |  |                            | 170     |   |                            |   | (197    | )                             |  |   |     |   |                              |  |  |   | 67     
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        
|NET INCOME (LOSS)                                                                              |  | $                          | (2,139  | ) |                            | $ | 925     |                               |  | $ | (85  | ) |                              |  |  | $ | 19,794 
|                                                                                               |  |                            |         |   |                            |   |         |                               |  |   |      |   |                              |  |  |   |        

The accompanying notes are an integral part of the consolidated / combined financial statements.



59



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##### Table of Contents

SGS International, Inc. and Subsidiaries

Consolidated / Combined Statements of Comprehensive Income and Stockholders
Equity / Enterprise Capital

Year Ended December 31, 2007, Year Ended December 31, 2006,

One-Day Ended December 31, 2005, and Period Ended December 30, 2005

(in thousands of dollars)





|                                   |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|---------------------------------- |  | ------------------- | ------ | ----------- | - | ----------------- |  | ------------------------------------ | - | ----------------- | - | ----------------------------------- |  | ------------------------------------------- | ------- |  | - | ----- |  | - | -------
|                                   |  | ComprehensiveIncome |        | CommonStock |   | AdditionalCapital |  | RetainedEarnings(AccumulatedDeficit) |   | EnterpriseCapital |   | AccumulatedOtherComprehensiveIncome |  | TotalStockholdersEquity /EnterpriseCapital
|Predecessor                       
|                                   |  |                     |        |             |   |                   | 
|Balance at December 31, 2004       |  |                     |        |             | $ |                  |  | $                                    |  |                   | $ |                                    |  | $                                           | 133,376 |  | $ | 6,463 |  | $ | 139,839
|                                   |  |                     |        |             |   |                   | 
|Comprehensive income:              |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|Net income                         |  | $                   | 19,794 |             |   |                  |  |                                      |  |                   |   |                                    |  |                                             | 19,794  |  |   |      |  |   | 19,794 
|Unrealized translation adjustments |  |                     | 1,807  |             |   |                  |  |                                      |  |                   |   |                                    |  |                                             |        |  |   | 1,807 |  |   | 1,807  
|                                   |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|Comprehensive income               |  | $                   | 21,601 |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|                                   |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|Stock compensation                 |  |                     |       |             |   |                  |  |                                      |  |                   |   |                                    |  |                                             | 246     |  |   |      |  |   | 246    
|Capital contributions              |  |                     |       |             |   |                  |  |                                      |  |                   |   |                                    |  |                                             | 60,885  |  |   |      |  |   | 60,885 
|                                   |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        
|Balance at December 30, 2005       |  |                     |        |             | $ |                  |  | $                                    |  |                   | $ |                                    |  | $                                           | 214,301 |  | $ | 8,270 |  | $ | 222,571
|                                   |  |                     |        |             |   |                   |  |                                      |   |                   |   |                                     |  |                                             |         |  |   |       |  |   |        







|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|---------------------------------------------------------------------------- |  | - | ------ | - |  | - | - |  | - | ------- |  | - | ------ | - |  | - | - |  | - | ------ |  | - | ------- | -
|Successor                                                                    |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|                                                                             |  |   |        |   |  |   |  
|Southern Graphics, Inc. Holding Companyinvestment in SGS International, Inc. |  |   |        |   |  | $ |  |  | $ | 107,000 |  | $ |       |   |  | $ |  |  | $ |       |  | $ | 107,000 |  
|Net loss                                                                     |  |   |        |   |  |   |  |  |   |        |  |   | (85    | ) |  |   |  |  |   |       |  |   | (85     | )
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Balance at December 31, 2005                                                 |  |   |        |   |  |   |  |  |   | 107,000 |  |   | (85    | ) |  |   |  |  |   |       |  |   | 106,915 |  
|                                                                             |  |   |        |   |  |   |  
|Comprehensive income:                                                        |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Net income                                                                   |  | $ | 925    |   |  |   |  |  |   |        |  |   | 925    |   |  |   |  |  |   |       |  |   | 925     |  
|Unrealized translation adjustments                                           |  |   | 2,431  |   |  |   |  |  |   |        |  |   |       |   |  |   |  |  |   | 2,431  |  |   | 2,431   |  
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Comprehensive income                                                         |  | $ | 3,356  |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Balance at December 31, 2006                                                 |  |   |        |   |  |   |  |  |   | 107,000 |  |   | 840    |   |  |   |  |  |   | 2,431  |  |   | 110,271 |  
|                                                                             |  |   |        |   |  |   |  
|Comprehensive income:                                                        |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Net loss                                                                     |  | $ | (2,139 | ) |  |   |  |  |   |        |  |   | (2,139 | ) |  |   |  |  |   |       |  |   | (2,139  | )
|Unrealized translation adjustments                                           |  |   | 11,078 |   |  |   |  |  |   |        |  |   |       |   |  |   |  |  |   | 11,078 |  |   | 11,078  |  
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Comprehensive income                                                         |  | $ | 8,939  |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  
|Balance at December 31, 2007                                                 |  |   |        |   |  | $ |  |  | $ | 107,000 |  | $ | (1,299 | ) |  | $ |  |  | $ | 13,509 |  | $ | 119,210 |  
|                                                                             |  |   |        |   |  |   |   |  |   |         |  |   |        |   |  |   |   |  |   |        |  |   |         |  

The accompanying notes are an integral part of the consolidated / combined financial statements.



60



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##### Table of Contents

SGS International, Inc. and Subsidiaries

Consolidated / Combined Statements of Cash Flows

Year Ended December 31, 2007, Year Ended December 31, 2006,

One-Day Ended December 31, 2005, and Period Ended December 30, 2005

(in thousands of dollars)



|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | ----------------------------- |  | - | -------- | - | ---------------------------- |  |  | - | ------- | -
|                                                                                                     |  | Successor                  |         |   | Successor                  |   |         | Successor                     |  |   |          |   | Predecessor                  | 
|                                                                                                     |  | Year EndedDecember 31,2007 |         |   | Year EndedDecember 31,2006 |   |         | One-Day EndedDecember 31,2005 |  |   |          |   | Period EndedDecember 30,2005 | 
|Cash from Operations                                                                                 |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Net income (loss)                                                                                    |  | $                          | (2,139  | ) |                            | $ | 925     |                               |  | $ | (85      | ) |                              |  |  | $ | 19,794  |  
|Adjustments to reconcile net income (loss) to cash from operations:                                  |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Depreciation and amortization                                                                        |  |                            | 23,761  |   |                            |   | 20,507  |                               |  |   | 42       |   |                              |  |  |   | 16,890  |  
|Amortization of deferred financing fees                                                              |  |                            | 1,393   |   |                            |   | 1,226   |                               |  |   | 5        |   |                              |  |  |   |        |  
|Foreign currency loss on senior secured term loan                                                    |  |                            | 215     |   |                            |   | 1,384   |                               |  |   |         |   |                              |  |  |   |        |  
|Change in deferred income taxes                                                                      |  |                            | (1,174  | ) |                            |   | 754     |                               |  |   |         |   |                              |  |  |   | (1,555  | )
|Loss (gain) on disposal of assets                                                                    |  |                            | 816     |   |                            |   |        |                               |  |   |         |   |                              |  |  |   | (319    | )
|Gain on divestiture of business                                                                      |  |                            | (935    | ) |                            |   |        |                               |  |   |         |   |                              |  |  |   |        |  
|Increase (decrease) in cash due to changes in operating assets and liabilities, net of acquisitions: |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Receivables                                                                                          |  |                            | (804    | ) |                            |   | (277    | )                             |  |   | 851      |   |                              |  |  |   | (6,064  | )
|Related party receivables                                                                            |  |                            |        |   |                            |   |        |                               |  |   |         |   |                              |  |  |   | (24,050 | )
|Inventories                                                                                          |  |                            | (1,254  | ) |                            |   | (1,146  | )                             |  |   |          |   |                              |  |  |   |        |  
|Prepaid expenses and other current assets                                                            |  |                            | (2,632  | ) |                            |   | (122    | )                             |  |   |         |   |                              |  |  |   | 487     |  
|Accounts payable and accrued expenses                                                                |  |                            | 5,833   |   |                            |   | (2,382  | )                             |  |   | 92       |   |                              |  |  |   | (3,415  | )
|Related party payables                                                                               |  |                            |        |   |                            |   |        |                               |  |   |         |   |                              |  |  |   | 10,385  |  
|Taxes, including taxes on income                                                                     |  |                            | 89      |   |                            |   | (486    | )                             |  |   | (54      | ) |                              |  |  |   | 516     |  
|Noncurrent assets and liabilities                                                                    |  |                            | 641     |   |                            |   | (181    | )                             |  |   |         |   |                              |  |  |   | 1,877   |  
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Cash provided by operations                                                                          |  |                            | 23,810  |   |                            |   | 20,202  |                               |  |   | 851      |   |                              |  |  |   | 14,546  |  
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Investing Activities                                                                                 |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Capital expenditures                                                                                 |  |                            | (11,108 | ) |                            |   | (8,650  | )                             |  |   |         |   |                              |  |  |   | (13,941 | )
|Proceeds from sale of assets                                                                         |  |                            |        |   |                            |   | 2,060   |                               |  |   |         |   |                              |  |  |   | 570     |  
|Proceeds from divestiture of business, net of cash divested                                          |  |                            | 628     |   |                            |   |        |                               |  |   |         |   |                              |  |  |   |        |  
|Business acquisitions, net of cash acquired                                                          |  |                            | (29,262 | ) |                            |   | (4,424  | )                             |  |   | (412,505 | ) |                              |  |  |   | (15,446 | )
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Cash used in investing activities                                                                    |  |                            | (39,742 | ) |                            |   | (11,014 | )                             |  |   | (412,505 | ) |                              |  |  |   | (28,817 | )
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Financing Activities                                                                                 |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Common Stock Issuance                                                                                |  |                            |        |   |                            |   |        |                               |  |   | 107,000  |   |                              |  |  |   |        |  
|Borrowings on senior secured credit facility                                                         |  |                            |        |   |                            |   |        |                               |  |   | 118,700  |   |                              |  |  |   |        |  
|Proceeds from senior subordinated notes                                                              |  |                            |        |   |                            |   |        |                               |  |   | 200,000  |   |                              |  |  |   |        |  
|Borrowings on acquisition facility                                                                   |  |                            | 40,000  |   |                            |   |        |                               |  |   |         |   |                              |  |  |   |        |  
|Deferred financing fees                                                                              |  |                            | (65     | ) |                            |   | (218    | )                             |  |   | (11,190  | ) |                              |  |  |   |        |  
|Net changes in short-term borrowings                                                                 |  |                            |        |   |                            |   | 1,600   |                               |  |   |         |   |                              |  |  |   | 17,485  |  
|Contributions of minority interest holder                                                            |  |                            |        |   |                            |   |        |                               |  |   |         |   |                              |  |  |   | 221     |  
|Payments on senior secured notes                                                                     |  |                            | (1,454  | ) |                            |   | (1,202  | )                             |  |   |         |   |                              |  |  |   |        |  
|Payments on other long-term debt                                                                     |  |                            | (2,060  | ) |                            |   | (672    | )                             |  |   |         |   |                              |  |  |   | (342    | )
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Cash (used in) provided by financing activities                                                      |  |                            | 36,421  |   |                            |   | (492    | )                             |  |   | 414,510  |   |                              |  |  |   | 17,364  |  
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Effect of exchange rate changes on cash                                                              |  |                            | 1,320   |   |                            |   | (119    | )                             |  |   |         |   |                              |  |  |   | (49     | )
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Net change in cash and cash equivalents                                                              |  |                            | 21,809  |   |                            |   | 8,577   |                               |  |   | 2,856    |   |                              |  |  |   | 3,044   |  
|Cash and cash equivalents at beginning of period                                                     |  |                            | 12,658  |   |                            |   | 4,081   |                               |  |   | 1,225    |   |                              |  |  |   | 828     |  
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  
|Cash and cash equivalents at end of period                                                           |  | $                          | 34,467  |   |                            | $ | 12,658  |                               |  | $ | 4,081    |   |                              |  |  | $ | 3,872   |  
|                                                                                                     |  |                            |         |   |                            |   |         |                               |  |   |          |   |                              |  |  |   |         |  

The accompanying notes are an integral part of the consolidated / combined financial statements.



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(Dollars in thousands, except per share amounts and where otherwise noted)



|A. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

General Nature of Business

SGS International, Inc. (the Company or the Successor), headquartered in
Louisville, Kentucky, operates in one operating business segment, pre-press graphic services. The Company provides a variety of services that include the preparatory steps that precede the actual printing of an image onto packaging material. The
Company supplies photographic images, digital images, flexographic printing plates and rotogravure cylinders for the packaging printing industry. The Successor has 39 locations in the United States, Canada, Mexico, the United Kingdom, the
Netherlands, and Hong Kong.

Acquisition of Southern Graphic Systems

On December 30, 2005, the Successor, a wholly-owned subsidiary of Southern Graphics Inc., which is a majority owned subsidiary of Citigroup Venture
Capital Equity Partners, LP (CVC), purchased Southern Graphic Systems (the Predecessor) from Alcoa Inc. (Alcoa), for approximately $416.9 million (the Acquisition), including acquisition costs of $7.9 million, which was paid
via a combination of cash and the proceeds from the issuance of senior subordinated notes and borrowings under a senior credit facility, as summarized herein. CVC and certain other investors contributed a cash equity investment of $107.0 million.
(In subsequent transactions, Lyon Southern, Inc. (of which the Successors director, Richard Leong, is Chief Investment Advisor), certain members of management and others made an aggregate equity investment of $17.8 million, the proceeds of
which were used to repurchase from CVC the same number of shares of common stock and preferred stock of Southern Graphics Inc. originally acquired by CVC.) The Successor also issued $200.0 million aggregate principal amount of its 12% senior
subordinated notes due in 2013, resulting in net proceeds of $194.5 million. In addition, the Successor also obtained a new senior credit facility of $193.7 million, of which $118.7 million was drawn at closing to fund a portion of the Acquisition
purchase price. These total proceeds were reduced by certain debt issuance and other transaction costs.

In conjunction with the
Acquisition, the purchase price was allocated to reflect the fair value of the assets acquired and liabilities assumed as of December 30, 2005 in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, (SFAS No. 141). The following table summarizes the allocation of the purchase price to the Successors assets acquired and liabilities assumed:



|                        |  |               |       |    
|----------------------- |  | ------------- | ----- | ---
|Purchase price          |  | (in millions) |      
|Acquisition price       |  | $             | 409.0 | (1)
|Transaction costs       |  |               | 7.9   | (2)
|                        |  |               |       |    
|Total acquisition price |  | $             | 416.9 |    
|                        |  |               |       |    



|(1) | The acquisition price in the table above consists of the initial
purchase price of $409.4 million, plus revisions to the estimated working capital adjustment component ($5.0 million at December 31, 2005 included in other current liabilities) of the purchase price of $1.3 million, less debt assumed of $1.7
million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The transaction costs in the table above consist of the initial
estimate of transaction costs of $7.7 million, plus revisions to the estimated transaction costs of $0.2 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |               |       |  
|-------------------------------- |  | ------------- | ----- | -
|Allocation of acquisition price  |  | (in millions) |      
|Current assets                   |  | $             | 70.8  |  
|Properties, plants and equipment |  |               | 56.5  |  
|Goodwill                         |  |               | 157.7 |  
|Customer relationships           |  |               | 142.7 |  
|Other intangible assets          |  |               | 23.1  |  
|Other assets                     |  |               | 0.5   |  
|Liabilities assumed              |  |               | (34.4 | )
|                                 |  |               |       |  
|Total acquisition price          |  | $             | 416.9 |  
|                                 |  |               |       |  



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Supplemental Unaudited Pro Forma Information

The following unaudited pro forma information for the period ended December 30, 2005 assumes that the Acquisition of the Company had occurred as of
January 1, 2005. The Pro Forma adjustments relate to depreciation, amortization, interest, management fees and include the results of operations for MCG Graphics Limited (see Footnote F) for the full period. The tax effects of the pro forma
adjustments have been reflected at the Companys blended federal and state income tax rate of 39.2%.

The pro forma results are not
necessarily indicative of the results that would have occurred had the Acquisition occurred as of such date and are not intended to provide a forecast of future expected results.



|           |  |                               |  |                                       
|---------- |  | ----------------------------- |  | --------------------------------------
|           |  | Period EndedDecember 30, 2005 |  | Pro FormaPeriod EndedDecember 30, 2005
|Revenue    |  | 260,328                       |  | 275,195                               
|Net income |  | 19,794                        |  | 4,686                                 

Successor Principles of Consolidation

The accompanying consolidated financial statements as of and for the years ended December 31, 2007 and December 31, 2006, and for the one-day
December 31, 2005 include the accounts of SGS International, Inc., its wholly owned subsidiaries and companies more than fifty percent owned. These subsidiaries include Southern Graphic Systems, Inc. (SGS), Project Dove Holdco,
Inc., Project Dove Manitoba, L.P., Southern Graphic Systems-Canada, Co., Southern Graphic Systems Mexico, S. De R.L. De C.V (SGS Mexico), SGS Packaging Europe Holdings Limited, SGS Packaging Europe Limited, MCG Graphics Limited, and SGS
Packaging Netherlands B.V. These subsidiaries also include The Box Room Limited since June 30, 2006, Mozaic Group, Ltd (Mozaic) through February 28, 2007, McGurk Studios Limited and Thames McGurk Limited since April 2,
2007, and SGS Asia Pacific Limited since July 11, 2007. Accordingly, the accompanying financial statements for the periods subsequent to the Acquisition are labeled Successor and the periods prior to the Acquisition are labeled Predecessor.

On February 28, 2007, the Company sold its controlling interest in Mozaic to a third party. The Company has retained a 10% interest in
Mozaic. The accompanying consolidated balance sheet as of December 31, 2007 does not include the accounts of Mozaic, but includes our investment in Mozaic recorded at cost, adjusted for impairment. The carrying value of our investment in Mozaic
is zero at December 31, 2007. The historical results of Mozaic are presented as discontinued operations in the accompanying consolidated statement of operations.

The Company currently has an annual user license agreement with Mozaic, which grants the Company rights to access and use certain software. The use of these services is approximately $50 per month.

The following table represents the major classes of assets and liabilities as of the date of the disposal of Mozaic.



|                        |  |   |      
|----------------------- |  | - | -----
|Current assets          |  | $ | 3,120
|Non-current assets      |  | $ | 812  
|                        | 
|Current liabilities     |  | $ | 4,209
|Non-current liabilities |  | $ | 288  

Below are the amounts of revenue and pre-tax profit (loss) reported from the discontinued
operations of Mozaic. The pre-tax profit of $842 for the year ended December 31, 2007 includes a gain on the sale of Mozaic of $935. Net of this gain on sale, the pre-tax loss is ($93).



|                      |  |                            |       |                            |   |        |                               |  |                              |   |  |   |       
|--------------------- |  | -------------------------- | ----- | -------------------------- | - | ------ | ----------------------------- |  | ---------------------------- | - |  | - | ------
|                      |  | Successor                  |       | Successor                  |   |        | Successor                     |  | Predecessor                 
|                      |  | Year EndedDecember 31,2007 |       | Year EndedDecember 31,2006 |   |        | One-Day EndedDecember 31,2005 |  | Period EndedDecember 30,2005
|                      |  |                            |      
|                      |  |                            |      
|Revenues              |  | $                          | 2,406 |                            | $ | 13,798 |                               |  | $                            |  |  | $ | 12,439
|Pre-tax profit (loss) |  | $                          | 842   |                            | $ | (480   | )                             |  | $                            |  |  | $ | 94    

Predecessor Principles of Combination

The accompanying combined financial statements for the period ended December 30, 2005 are stated at historical cost basis and include the combined
accounts of SGS, Southern Graphic Systems-Canada, Ltd., SGS Mexico and companies more than fifty percent owned by them (Mozaic). The combined financial statements for this period have been derived from the books and records of Alcoa. The combined
statement of income includes all items of revenue and income generated by the

Predecessor, and all items of expense incurred by the
Predecessor. These include expenses charged to the Predecessor by Alcoa in the normal course of business. The combined financial statements reflect amounts that have been pushed down from Alcoa in order to depict the combined results of operations
and cash flows of the Predecessor on a stand-alone basis. As a result of recording these amounts, the combined financial statements of the Predecessor may not be indicative of the results that would be presented if the Predecessor had operated as an
independent stand-alone entity. Management believes the method of allocation is reasonable.

Use of Estimates

The consolidated / combined financial statements are prepared in conformity with accounting principles generally accepted in the United States of America
and require management to make certain estimates and assumptions. These may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They may also affect
the reported amounts of revenues and expenses during the reporting period. Areas that require significant judgments, estimates and assumptions include revenue recognition, accounts receivable and the allowance for doubtful accounts, work-in-process
inventory, impairment of goodwill, other intangible assets and long-lived assets, accrued health and welfare benefits, and tax matters. Management uses historical experience and all available information to make these judgments and actual results
could differ from those estimates upon subsequent resolution of some matters.



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Cash and Cash Equivalents

Cash and cash equivalents include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original
maturities of three months or less.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Companys best
estimate of the amount of probable credit losses in our existing accounts receivable. The Company determines the allowance based on specifically identified probable credit losses and historical write-off experience. Account balances are charged off
against the allowance when it is probable the receivable will not be recovered. In addition, the Company maintains allowances for customer claims due to returned products, billing errors, disputed amounts, and other items, which result in credit
memos charged to net sales. The Company determines the allowance for claims based on historical experience, specific notification of pending claims, and estimated lag times for processing credit memos. The Company does not have any off-balance-sheet
credit exposure related to its customers.

Properties, Plants and Equipment

Properties, plants and equipment are recorded at cost. Depreciation is recorded principally on the straight-line method at rates based on the estimated
useful lives of the assets, averaging 20 years for structures, between 3 and 10 years for machinery and equipment, and 3 years for software. The provision for depreciation also includes depreciation on assets under capital lease arrangements.
Properties, plants and equipment are evaluated for impairment when indicators of impairment exist. Gains or losses from the sale of assets are included in other income. Repairs and maintenance are charged to expense as incurred.

Capitalized software costs are included in properties, plants and equipment. We record software development costs in accordance with the American
Institute of Certified Public Accountants Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.

Goodwill and Other Intangible Assets

The Company has goodwill and other intangible assets, most
notably customer relationships. Goodwill represents the excess of costs over the fair values of net assets of businesses acquired. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the periods
benefited, with a weighted average useful life of 20 years. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, (SFAS No. 142) goodwill is not amortized, but instead is
tested for impairment at least annually in accordance with the provisions of SFAS No. 142. The Company performs the annual test for impairment during the fourth quarter. The impairment test compares the carrying amount of the reporting
unit to the fair value of the reporting unit. The Company has one reporting unit. The impairment tests in 2007, 2006, and 2005 supported the carrying value of goodwill, and as such, no write-downs in the carrying value of goodwill were recorded.

Impairments of Other Intangible Assets and Long-Lived Assets

Other intangible assets and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS No. 144).Recoverability of assets in accordance with SFAS No. 144 compares the
projected undiscounted future cash flows from use and disposition of assets to the carrying amounts of those assets. When the sum of projected undiscounted cash flows is less than the carrying amount, impairment losses are recognized. In determining
such impairment losses, discounted cash flows are utilized to determine the fair value of the assets being evaluated. The Company has not recorded impairment losses on other intangible assets or long-lived assets in the consolidated / combined
financial statements for 2007, 2006, or 2005.

Deferred Financing Costs

Deferred financing costs reflect costs incurred in connection with obtaining the financing for the Acquisition and the registration of the senior
subordinated notes. Deferred financing costs are amortized (included in interest expense) using the effective interest method, over the life of the related debt.

Accrued Health and Welfare Benefits

The Company is partially self-insured for health and welfare
benefits since April 1, 2006. The accrual for health and welfare benefits is the Companys best estimate of health and welfare costs incurred but not paid as of the balance sheet date. The Company estimates the liability for claims
incurred by applying a lag factor to historical claims experience. As of December 31, 2007 and 2006, the Company had accrued $677 and $744, respectively, within other current liabilities for accrued health and welfare benefits.



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Revenue Recognition

The Company recognizes revenue when title, ownership, and risk of loss pass to the customer in accordance with the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition. Revenues are
recorded net of allowances for customer rebates and cash discounts. The Company records revenue in the period when shipped because all of the requirements of SAB No. 104 have been met and the price can be reasonably estimated based on the
services performed, historical experience and customer information.

The majority of the Companys revenue is from the sale of prepress
services and image carriers for the printing industry. The products for prepress services consist of electronic image files for which the Company recognizes revenue when the electronic file is delivered to the customer. The product for image
carriers consists of the engravings on gravure cylinders and flexographic printing plates for which the Company recognizes revenue when the product is shipped and risk of loss has passed to the customer.

Inventories and Cost of Goods Sold

Raw materials inventory is valued at the lower of cost or market with cost determined using the first-in, first-out (FIFO) method. Work-in-process inventory is valued at the lower of cost or net realizable value. There is no
finished goods inventory since all products are shipped upon completion. Raw materials inventory and work-in-process inventory are as follows:



|                |  |                  |       |                  |   |      
|--------------- |  | ---------------- | ----- | ---------------- | - | -----
|                |  | Successor        |       | Successor       
|                |  | December 31,2007 |       | December 31,2006
|Raw materials   |  | $                | 2,709 |                  | $ | 1,311
|Work-in-process |  |                  | 5,009 |                  |   | 4,422
|                |  |                  |       |                  |   |      
|                |  | $                | 7,718 |                  | $ | 5,733
|                |  |                  |       |                  |   |      

Rebates

The Company receives rebates from certain vendors. The Company records these rebates as a reduction of cost of goods sold in accordance with Emerging Issues Task Force (EITF) 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor. Receivables for vendor rebates of $7,597 and $5,923 as of December 31, 2007 and 2006, respectively, are included as a component of prepaid expenses and other current
assets.

The Company also grants rebates to certain customers. The Company records these rebates as a reduction of sales in accordance with
EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products). Liabilities for customer rebates of $2,997 and $1,941 as of December 31, 2007 and 2006, respectively, are
included as a component of other current liabilities.

Shipping and Handling Costs

Effective January 1, 2007, the Company included amounts invoiced to customers for shipping and handling costs as a component of net sales. Net sales
included $4,321 for amounts invoiced to customers for shipping and handling costs for the year ended December 31, 2007. Prior to January 1, 2007, amounts invoiced to customers for shipping and handling costs were netted against the actual
cost incurred and reflected as a reduction in cost of sales. Amounts prior to January 1, 2007 were not material.

Income Taxes

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes in accordance with SFAS
No. 109, Accounting for Income Taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes
represents income taxes paid or payable for the current year, plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the Companys assets and liabilities and are adjusted
for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce the deferred tax assets when it is more likely than not that a tax benefit will not be realized. Amounts payable for non-U.S. income taxes
are reflected in accrued income taxes payable.



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For the Predecessor periods, the Company was included in Alcoas U.S. consolidated tax return.
Deferred income taxes and income tax expense are presented on a separate return basis.

In accordance with Financial Accounting
Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), the Company recognizes interest and penalties related to uncertain tax positions in
income tax expense. There were no such amounts recognized for the year ended December 31, 2007.

Tax returns filed for the one-day
ended December 31, 2005 and for the year ended December 31, 2006 are currently still subject to examination by taxing authorities.

Successor Stock-Based Compensation

On January 1, 2006, the Successor adopted SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS 123R), which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values.

On July 25, 2006, the Board of Directors of Southern Graphics Inc. (the parent of SGS International, Inc.) adopted the Southern Graphics Inc. Stock
Incentive Plan. The total shares available for grant under the Southern Graphics Inc. Stock Incentive Plan are not to exceed 31,000 shares. Also on July 25, 2006, Southern Graphics Inc. granted options to certain employees of SGS International,
Inc. and its subsidiaries to acquire an aggregate of 7,300 shares of Southern Graphics Inc. Class A Common Stock. On February 20, 2007 Southern Graphics Inc. granted options to an employee of SGS International, Inc. and its subsidiaries to
acquire an aggregate of 1,500 shares of Southern Graphics Inc.

Stock option features based on the date of original grant are as follows:



|                       |  |                                                                               |  |          |  |                                                                                                
|---------------------- |  | ----------------------------------------------------------------------------- |  | -------- |  | -----------------------------------------------------------------------------------------------
|Date of Original Grant |  | Vesting                                                                       |  | Term     |  | Exercise Price                                                                                 
|July 25, 2006          |  | 20% each year, beginning on December 31, 2006 and ending on December 31, 2010 |  | 10 years |  | $161 at grant date; declines semi-annually until exercise price reaches $113 on July 1, 2010   
|                       |  |                                                                               | 
|February 20, 2007      |  | 20% each year, beginning on March 31, 2008 and ending on February 20, 2012    |  | 10 years |  | $161 at grant date; declines semi-annually until exercise price reaches $113 on August 21, 2011

The options above are the only options granted by Southern Graphics Inc. or SGS International,
Inc., as of December 31, 2007. During the year ended December 31, 2007, a former employee of SGS International, Inc. and its subsidiaries forfeited 1,200 of the options granted on July 25, 2006.

Compensation expense for share-based awards granted is based on the grant date fair value estimated in accordance with the provisions of SFAS 123R and
determined using the straight-line expense attribution method. The fair value of share-based awards is determined using the Black-Scholes option pricing model. The Company recorded less than $0.1 of compensation expense for share-based awards for
the each of the years ended December 31, 2007 and 2006.

The primary assumptions utilized in the Black-Scholes option pricing model are
as follows:



|                         |  |                                |   |  |                            |  
|------------------------ |  | ------------------------------ | - |  | -------------------------- | -
|                         |  | Grant Date ofFebruary 20, 2007 |   |  | Grant Date ofJuly 25, 2006 |  
|Stock price volatility   |  | 28.0                           | % |  | 27.9                       | %
|Dividend yield           |  | 0.0                            | % |  | 0.0                        | %
|Risk-free interest rate  |  | 4.7                            | % |  | 5.0                        | %
|Expected life of options |  | 10 years                       |   |  | 10 years                   |  
|Derived service period   |  | 10 years                       |   |  | 10 years                   |  

The stock price volatility utilized above was determined using historical data for companies in
the Successors industry as there is not an established market for the Successors stock.

The risk-free interest rate utilized above
was based on the rate of United States Treasury Bonds with a remaining term approximately equal to the expected term of the options being valued.

The derived service period of the options was determined using a risk-neutral option pricing simulation model.



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The fair value of options granted during the years ended December 31, 2007 and 2006 was $0.07 per
option for each year.

As of December 31, 2007, there was $0.1 of total unrecognized compensation cost related to nonvested options
outstanding. That cost is expected to be recognized over 5 years with an annual charge of less than $0.1.

Predecessor Stock-Based
Compensation

Certain employees of the Company received stock options under Alcoas stock incentive plans. Stock options under
Alcoas stock incentive plans have been granted at not less than market prices on the dates of grant. The Company accounted for stock-based compensation of the Predecessor in accordance with the provisions of Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations using the intrinsic value method which resulted in no compensation costs for options granted. In addition to stock option awards, Alcoa granted stock
awards and performance share awards that vest over three years from the date of grant. Compensation expense for stock awards was calculated based on the fair value at the grant date, and compensation expense for performance share awards was based on
the fair value on the date the performance criteria are determined. The after-tax expense (at a rate of 35%) for these awards was $174 in 2005.

Stock option features based on the date of original grant are as follows:



|                       |  |                        |  |          |  |                                            
|---------------------- |  | ---------------------- |  | -------- |  | -------------------------------------------
|Date of Original Grant |  | Vesting                |  | Term     |  | Reload Feature                             
|2003                   |  | 3 years (1/3each year) |  | 10 years |  | One reloaded in 2004 for 1/3vesting in
2004
|2004 and Forward       |  | 3 years (1/3each year) |  | 6 years  |  | None                                       

The Companys net income would have been reduced to the pro forma amounts shown below if
compensation cost had been determined based on the fair value of the grant dates in accordance with SFAS No. 123 and SFAS No. 148, Accounting for Stock Based Compensation.



|                                                                                      |  |                              |       
|------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                      |  | Predecessor                 
|                                                                                      |  | Period EndedDecember 30,2005
|Net income, as reported                                                               |  | $                            | 19,794
|Less: additional compensation cost determined under the fair value method, net of tax |  |                              | 598   
|                                                                                      |  |                              |       
|Pro forma net income                                                                  |  | $                            | 19,196
|                                                                                      |  |                              |       

On December 31, 2005, Alcoa accelerated the vesting of stock options granted to employees on
January 13, 2005. The 2005 accelerated options have weighted average exercise prices of $29.54. The decision to accelerate the vesting of the 2005 options was made primarily to avoid recognizing the related compensation cost in future financial
statements upon the adoption of SFAS No. 123R.

In anticipation of the adoptions of SFAS No. 123R Alcoa switched from the
Black-Scholes pricing model to a lattice model to estimate fair value at grant date for options granted in 2005. The fair value of each option is estimated on the date of grant or subsequent reload using the lattice or Black-Scholes pricing model
with the following assumptions:



|                                |  |          
|------------------------------- |  | ---------
|                                |  | 2005     
|Average risk free interest rate |  | 2.65-4.2%
|Expected dividend yield         |  | 1.8%     
|Expected volatility             |  | 27%-35%  
|Expected life (years):          |  |          
|New option grants               |  | 3.8      
|Reload option grants            |  |         

The weighted average fair value per option granted was $6.18 in 2005.

Foreign Currency

The local currency
is the functional currency for locations in Canada, Mexico, the United Kingdom, the Netherlands and Hong Kong. In accordance with SFAS No. 52, Foreign Currency Translation, assets and liabilities of those



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operations denominated in foreign currencies are translated into U.S. dollars using period-end exchange rates, and income and expenses are translated using
average exchange rates for the reporting period. Gains or losses from the translation are recorded as currency translation adjustment in other comprehensive income. Gains or losses resulting from transactions denominated in foreign currencies are
included in other income or expense, within the consolidated / combined statements of income. In 2007, 2006 and 2005, transaction gains (losses) recognized in the statement of operations due to exchange rate changes were ($1,141), ($1,332) and $298,
respectively. We also have certain intercompany loans that are deemed to be permanently reinvested. Transaction gains and losses on these intercompany loans are charged to cumulative translation adjustment in other comprehensive income.

Recently Issued and Adopted Accounting Standards

On January 1, 2007, the Company adopted the provisions of FIN 48. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain
tax positions that it has taken or expects to take on a tax return. At the adoption date and as of December 31, 2007, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations(SFAS 141(R)). SFAS 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess
value over the net identifiable assets acquired. SFAS 141(R) is effective for acquisitions completed in fiscal years beginning after December 15, 2008. The effect the adoption of SFAS 141(R) will have on the Companys financial statements
will depend on the nature and size of acquisitions completed after the Company adopts SFAS 141(R).

In December 2007, the FASB issued
Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51, (SFAS 160). SFAS 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 160 is not expected to have an impact on the Companys
consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115, (SFAS 159). SFAS 159 permits entities to measure many financial instruments and certain other assets and liabilities at fair value
on an instrument-by-instrument basis under a fair value option. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 will not have a significant impact on the Companys consolidated financial
statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or
permit fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Upon adoption, the provisions of SFAS 157 are to be applied prospectively with limited exceptions. The adoption of SFAS 157 will not
have a significant impact on the Companys consolidated financial statements.

Reclassifications

Certain amounts as of and for the year ended December, 31, 2006, for the one-day ended December 31, 2005 and for the period ended December 30,
2005 have been reclassified to conform to their 2007 presentation due to the presentation of the results of operations for Mozaic as a discontinued operation.



|B. | Nature of Operations
|-- | --------------------

The Company operates in a
single reportable segment whose product offerings include package design, prepress, imaging and managing the entire graphics development cycle for customers in a broad spectrum of industries. There were no customers that comprised in excess of 10%
of total revenues in 2007, 2006 or 2005.

The following summarizes the concentrations of sales and long-lived assets by major geographic
region. Sales are attributed to the geographic region based on the point of origin of the sale.



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|               |  |                            |         |   |                            |   |         |                               |  |   |   |                              |  |  |   |         |  
|-------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | ----------------------------- |  | - | - | ---------------------------- |  |  | - | ------- | -
|               |  | Successor                  |         |   | Successor                  |   |         | Successor                     |  |   |   | Predecessor                  | 
|               |  | Year EndedDecember 31,2007 |         |   | Year EndedDecember 31,2006 |   |         | One-Day EndedDecember 31,2005 |  |   |   | Period EndedDecember 30,2005 | 
|Net sales      |  |                            |         |   |                            |   |         |                               |  |   |   |                              |  |  |   |         |  
|United States  |  | $                          | 221,426 |   |                            | $ | 216,835 |                               |  | $ |  |                              |  |  | $ | 220,559 |  
|Canada         |  |                            | 42,582  |   |                            |   | 40,853  |                               |  |   |  |                              |  |  |   | 40,486  |  
|United Kingdom |  |                            | 44,576  |   |                            |   | 23,867  |                               |  |   |  |                              |  |  |   | 3,188   |  
|Other          |  |                            | 6,423   |   |                            |   | 1,881   |                               |  |   |  |                              |  |  |   | 2,114   |  
|Eliminations   |  |                            | (6,198  | ) |                            |   | (7,160  | )                             |  |   |  |                              |  |  |   | (6,019  | )
|               |  |                            |         |   |                            |   |         |                               |  |   |   |                              |  |  |   |         |  
|Total sales    |  | $                          | 308,809 |   |                            | $ | 276,276 |                               |  | $ |  |                              |  |  | $ | 260,328 |  
|               |  |                            |         |   |                            |   |         |                               |  |   |   |                              |  |  |   |         |  



|                        |  |                  |         |                  |   |        
|----------------------- |  | ---------------- | ------- | ---------------- | - | -------
|                        |  | Successor        |         | Successor       
|                        |  | December 31,2007 |         | December 31,2006
|Long-lived assets       |  |                  |         |                  |   |        
|United States           |  | $                | 301,319 |                  | $ | 299,097
|Canada                  |  |                  | 71,895  |                  |   | 62,365 
|United Kingdom          |  |                  | 38,014  |                  |   | 19,410 
|Other                   |  |                  | 4,037   |                  |   | 3,118  
|                        |  |                  |         |                  |   |        
|Total long-lived assets |  | $                | 415,265 |                  | $ | 383,990
|                        |  |                  |         |                  |   |        



|C. | Prepaid Expenses and Other Current Assets
|-- | -----------------------------------------



|                               |  |                  |        |                  |   |      
|------------------------------ |  | ---------------- | ------ | ---------------- | - | -----
|                               |  | Successor        |        | Successor       
|                               |  | December 31,2007 |        | December 31,2006
|Receivables for vendor rebates |  | $                | 7,597  |                  | $ | 5,923
|Prepaid expenses               |  |                  | 2,060  |                  |   | 1,722
|Other                          |  |                  | 1,382  |                  |   | 408  
|                               |  |                  |        |                  |   |      
|                               |  | $                | 11,039 |                  | $ | 8,053
|                               |  |                  |        |                  |   |      



|D. | Properties, Plants and Equipment, net
|-- | -------------------------------------



|                              |  |                  |         |   |                  |   |         |  
|----------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                              |  | Successor        |         |   | Successor        |  
|                              |  | December 31,2007 |         |   | December 31,2006 |  
|Land                          |  | $                | 941     |   |                  | $ | 941     |  
|Structures                    |  |                  | 8,778   |   |                  |   | 7,275   |  
|Machinery and equipment       |  |                  | 52,273  |   |                  |   | 43,912  |  
|Software                      |  |                  | 15,123  |   |                  |   | 10,526  |  
|                              |  |                  |         |   |                  |   |         |  
|                              |  |                  | 77,115  |   |                  |   | 62,654  |  
|Accumulated depreciation      |  |                  | (25,833 | ) |                  |   | (12,126 | )
|                              |  |                  |         |   |                  |   |         |  
|                              |  |                  | 51,282  |   |                  |   | 50,528  |  
|Construction work-in-progress |  |                  | 2,086   |   |                  |   | 1,885   |  
|                              |  |                  |         |   |                  |   |         |  
|                              |  | $                | 53,368  |   |                  | $ | 52,413  |  
|                              |  |                  |         |   |                  |   |         |  

Depreciation expense on properties, plants, and equipment was $14,298, $11,570, $20, and $7,393,
for the years ended December 31, 2007 and 2006, the one-day ended December 31, 2005 and the period ended December 30, 2005, respectively.



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|E. | Goodwill and Other Intangible Assets
|-- | ------------------------------------



|                                                  |  |                  |         |   |                  |   |         |  
|------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                  |  | Successor        |         |   | Successor        |  
|                                                  |  | December 31,2007 |         |   | December 31,2006 |  
|Goodwill, cost                                    |  | $                | 175,933 |   |                  | $ | 157,778 |  
|                                                  |  |                 
|Customer relationships, cost                      |  |                  | 168,070 |   |                  |   | 148,572 |  
|Customer relationships, accumulated amortization  |  |                  | (15,733 | ) |                  |   | (7,415  | )
|                                                  |  |                 
|Other intangible assets, cost                     |  |                  | 26,327  |   |                  |   | 23,115  |  
|Other intangible assets, accumulated amortization |  |                  | (2,431  | ) |                  |   | (1,159  | )
|                                                  |  |                  |         |   |                  |   |         |  
|                                                  |  | $                | 352,166 |   |                  | $ | 320,891 |  
|                                                  |  |                  |         |   |                  |   |         |  

The change in goodwill during 2007 is due to the following:



|                                             |  |   |        
|-------------------------------------------- |  | - | -------
|Goodwill at December 31, 2006                |  | $ | 157,778
|Acquisitions during 2007                     |  |   | 11,844 
|Changes due to foreign currency fluctuations |  |   | 6,311  
|                                             |  |   |        
|Goodwill at December 31, 2007                |  | $ | 175,933
|                                             |  |   |        

The change in customer relationships, cost during 2007 is due to the following:



|                                             |  |   |        
|-------------------------------------------- |  | - | -------
|Customer relationships at December 31, 2006  |  | $ | 148,572
|Acquisitions during 2007                     |  |   | 15,500 
|Changes due to foreign currency fluctuations |  |   | 3,998  
|                                             |  |   |        
|Customer relationships at December 31, 2007  |  | $ | 168,070
|                                             |  |   |        

The change in other intangible assets, cost during 2007 is due to the following:



|                                             |  |   |       
|-------------------------------------------- |  | - | ------
|Other intangible assets at December 31, 2006 |  | $ | 23,115
|Acquisitions during 2007                     |  |   | 2,583 
|Changes due to foreign currency fluctuations |  |   | 629   
|                                             |  |   |       
|Other intangible assets at December 31, 2007 |  | $ | 26,327
|                                             |  |   |       

Amortization expense on customer relationships and other intangible assets was $9,391, $8,491, $22,
and $9,022 for the year ended December 31, 2007 and 2006, the one-day ended December 31, 2005 and the period ended December 30, 2005, respectively.

Amortization of customer relationships and other intangible assets is estimated to be approximately $8,600 and $1,300 respectively, each year from 2008 through 2012.



|F. | Acquisitions
|-- | ------------

The Company has consummated
acquisitions for a variety of reasons, including obtaining additional scale, acquiring a specific design or technical skill, achieving geographic diversification, strengthening existing customer relationships, forming new customer relationships
and/or acquiring an underutilized asset that could more efficiently perform existing services within our organization.

Acquisitions
during the year ended December 31, 2007

On February 28, 2007, the Companys subsidiary, Southern Graphic Systems, Inc.,
entered into an Asset Purchase Agreement (the Purchase Agreement) with C.M. Jackson Associates, Inc. (CMJ), a supplier of design and creative, production art



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and pre-press, packaging management, project tracking and digital asset management services with an emphasis on store brands. Under the Purchase
Agreement, the Company acquired substantially all of CMJs assets for an aggregate cash consideration of $16,650 (the CMJ Consideration). In conjunction with this acquisition, the Company borrowed $8,000 on its acquisition facility.
The acquired assets include CMJs leasehold interest in its single facility located in Ramsey, New Jersey. The Company operates the acquired business under the C.M. Jackson Associates, Inc. name. The Purchase Agreement contains
customary representations, warranties, covenants and indemnification provisions. $5,000 of the CMJ Consideration is payable in two equal installments on February 28, 2008 and 2009, respectively. The deferred consideration installments are
subject to forfeiture if certain key CMJ employees now employed by the Company terminate their employment before the expiration of their respective employment agreements. A portion of the second deferred installment is payable only if the acquired
business achieves a specified threshold of earnings before interest, depreciation and amortization. This $5,000 of deferred consideration will continue to be recorded as compensation expense through February 2009. The purchase price allocation for
the acquisition from CMJ is provided below.



|                                 |  |   |        |  
|-------------------------------- |  | - | ------ | -
|Purchase price                   |  | $ | 11,650 |  
|Transaction costs                |  |   | 300    |  
|                                 |  |   |        |  
|Total cash acquisition price     |  | $ | 11,950 |  
|                                 |  |   |        |  
|Allocation of acquisition price: |  |   |        |  
|Current assets                   |  | $ | 265    |  
|Properties, plants and equipment |  |   | 217    |  
|Goodwill                         |  |   | 2,570  |  
|Customer relationships           |  |   | 7,600  |  
|Other intangible assets          |  |   | 1,600  |  
|Liabilities assumed              |  |   | (302   | )
|                                 |  |   |        |  
|Total cash acquisition price     |  | $ | 11,950 |  
|                                 |  |   |        |  

Results of operations of the business acquired from CMJ are included in the condensed consolidated
statements of operations from the date of the acquisition. Pro forma results of the Company, assuming the acquisition from CMJ had been made at the beginning of each period presented, would not have been materially different from the results
reported.

On April 2, 2007, the Company and SGS Packaging Europe Holdings Limited (Holdings), a wholly owned subsidiary of
the Company, entered into Share Sale and Purchase Agreements (the Agreements) under which Holdings acquired the outstanding shares of McGurk Studios Limited (Studios) and Thames McGurk Limited (Thames and,
together with Studios, McGurk) for an initial aggregate consideration (the Initial McGurk Consideration) of 9,388 pounds sterling (approximately $18,566 based on the U.S. dollar/pound sterling exchange rate on April 2,
2007), subject to adjustment as described in the Agreements. The Initial McGurk Consideration consisted of a cash payment in the amount of 8,543 pounds sterling (approximately $16,896 based on the April 2, 2007 U.S. dollar/pound sterling
exchange rate) and assumption of McGurks short-term and long-term indebtedness in the amount of 845 pounds sterling (approximately $1,670 based on the April 2, 2007 U.S. dollar/pound sterling exchange rate). On September 4, 2007, 375
pounds sterling (approximately $742 based on the April 2, 2007 U.S. dollar/pound sterling exchange rate) was paid as additional consideration to McGurk based on the financial results of McGurk. McGurk is a UK-based provider of end-to-end
digital design, artwork and reprographics for packaging solutions with locations in Hull and London, England, and Hong Kong.

On
March 30, 2007, in connection with the financing of the acquisition of McGurk described above, the Company borrowed the sum of $15.0 million under its acquisition facility (the McGurk Borrowing).

The purchase price allocation for this acquisition is provided below. The purchase price allocation for this acquisition is subject to completion of final
fair value allocations.



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|                                 |  |   |        |    
|-------------------------------- |  | - | ------ | ---
|Purchase price                   |  | $ | 17,638 | (1)
|Transaction costs                |  |   | 604    |    
|                                 |  |   |        |    
|Total cash acquisition price     |  | $ | 18,242 |    
|                                 |  |   |        |    
|Allocation of acquisition price: |  |   |        |    
|Current assets                   |  | $ | 5,835  |    
|Properties, plant and equipment  |  |   | 2,845  |    
|Goodwill                         |  |   | 9,125  |    
|Customer relationships           |  |   | 7,792  |    
|Other intangible assets          |  |   | 969    |    
|Liabilities assumed              |  |   | (8,324 | )  
|                                 |  |   |        |    
|Total cash acquisition price     |  | $ | 18,242 |    
|                                 |  |   |        |    



|(1) | The cash acquisition price in the table above consists of the aggregate consideration of $19,308 (9,763 pounds sterling) less debt assumed of $1,670 (845 pounds sterling).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents the unaudited pro forma results of operations for the Company for the years ended
December 31, 2007 and 2006. The unaudited pro forma financial information summarizes the results of operations for the periods indicated as if the McGurk acquisition had occurred as of the beginning of each period. The pro forma information
contains the actual combined operating results of the Company and McGurk, with the results prior to the acquisition adjusted to include the pro forma impact of (1) amortization expense associated with the customer relationships and other
intangible assets (calculated using a useful life of 20 years) recorded in connection with the preliminary purchase price allocation, (2) interest expense associated with the McGurk Borrowing of $15,000 at a variable rate of LIBOR plus 2.5%,
and (3) income tax expense at a blended rate of 38.5% in 2007 and 37.9% in 2006.

Pro forma



|                  |  |                             |         |   |                             |   |        
|----------------- |  | --------------------------- | ------- | - | --------------------------- | - | -------
|                  |  | Year EndedDecember 31, 2007 |         |   | Year EndedDecember 31, 2006
|Revenues          |  | $                           | 313,548 |   |                             | $ | 295,936
|Net income (loss) |  |                             | (2,134  | ) |                             |   | 1,470  

Acquisitions during the year ended December 31, 2006

During 2006, the Company completed three acquisitions at an aggregate purchase price of $5,403. Each of the acquisitions was funded through cash generated
from operations. On June 30, 2006, SGS Packaging Europe Holdings Limited purchased The Box Room Limited, a supplier of photographic and digital images for the packaging printing industry in the United Kingdom. On August 31, 2006, SGS
Packaging Europe Holdings Limited purchased a business supplying photographic and digital images for the packaging printing industry in the Netherlands through an asset purchase. On December 29, 2006, Southern Graphic Systems-Canada, Co.
purchased Synnoflex Inc., a supplier of photographic and digital images for the packaging printing industry in Canada. The purchase price allocations for these three acquisitions included an aggregate $1,956 for working capital, $788 for properties,
plant, and equipment, $4,186 for customer relationships, $26 for other assets, ($605) for non current liabilities, and ($948) for non current deferred tax liabilities.

Results of operations of the acquired businesses are included in the consolidated statement of operations from the respective dates of the acquisitions. Pro forma results of the Company, assuming all acquisitions had
been made at the beginning of each period presented, would not have been materially different from the results reported.

Acquisitions
during the period ended December 30, 2005

During 2005, the Company completed two acquisitions at a cost of $15,446. The most
significant of these transactions was the acquisition of MCG Graphics Limited (MCG) in November 2005. The MCG transaction was valued at $14,434. The purchase price allocation included $2,550 of property, plant and equipment, $9,866 of
customer relationships, $4,155 of goodwill, ($506) of long-term capital lease obligations, ($2,496) of deferred income tax liabilities and $865 of working capital.



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Results of operations of the acquired businesses are included in the consolidated / combined statements
of income from the respective dates of the acquisitions. Pro forma results of the Company, assuming all acquisitions had been made at the beginning of each period presented, would not have been materially different from the results reported.



|G. | Short-Term and Long-Term Obligations
|-- | ------------------------------------



|                                                              |  |                  |         |   |                  |   |         |  
|------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                              |  | December 31,2007 |         |   | December 31,2006 |  
|Senior secured term loan                                      |  | $                | 121,586 |   |                  | $ | 118,986 |  
|Borrowings on senior acquisition loan facility                |  |                  | 39,766  |   |                  |   |        |  
|Senior subordinated notes                                     |  |                  | 200,000 |   |                  |   | 200,000 |  
|Capital lease obligations                                     |  |                  | 1,733   |   |                  |   | 836     |  
|Borrowings on line of credit                                  |  |                  |        |   |                  |   | 1,600   |  
|Other                                                         |  |                  |        |   |                  |   | 567     |  
|                                                              |  |                  |         |   |                  |   |         |  
|                                                              |  |                  | 363,085 |   |                  |   | 321,989 |  
|Less short-term and long-term obligations due within one year |  |                  | (2,226  | ) |                  |   | (3,605  | )
|                                                              |  |                  |         |   |                  |   |         |  
|                                                              |  | $                | 360,859 |   |                  | $ | 318,384 |  
|                                                              |  |                  |         |   |                  |   |         |  

In connection with the Acquisition, the Company entered into a new $193,700 senior credit
facility, of which $118,700 was drawn at the closing of the Acquisition. The $193,700 senior credit facility consists of a $118,700 term loan facility, a $35,000 revolving credit facility, and a $40,000 loan facility for acquisitions.

The $121,586 outstanding on the term loan facility at December 31, 2007 is payable in quarterly installments of approximately $300 through September
2011, with the remaining amount due at maturity on December 30, 2011. At December 31, 2007, the balance outstanding on the term loan facility consisted of $86,926 of borrowings denominated in the United States dollar, $23,286 of borrowings
denominated in the Canadian dollar, and $11,374 of borrowings denominated in pound sterling. Borrowings on the term loan facility bear interest at a variable rate of LIBOR plus 2.5%. At December 31, 2007, the weighted average interest rate on
the term loan facility was 7.4%

The senior credit facility requires mandatory prepayment, subject to certain exceptions and limitations,
with: 100% of the net cash proceeds from asset sales by the Registrant or any of its subsidiaries (together, the Company); 100% of the net cash proceeds of issuances of debt or preferred stock by the Company; and 50% of the
Companys excess cash flow, as defined in the senior secured credit facility.

At December 31, 2007 and 2006, no amounts were
drawn on the revolving credit facility. Unused portions of the revolving credit facility are charged a fee of 0.5%. Fees incurred on the unused portion of the revolving credit facility were $175 for each of the years ended December 31, 2007 and
2006. The revolving credit facility is available through December 30, 2010. Borrowings on the revolving credit facility bear interest at a variable rate of LIBOR plus 2.5%.

At December 31, 2007, $39,766 was outstanding on the acquisition loan facility. At December 31, 2006, no amounts were outstanding on the
acquisition facility. Unused portions of the acquisition loan facility are charged a fee of 1.5%. Fees incurred on the unused portion of the acquisition loan facility were $320 and $600 for the years ended December 31, 2007 and 2006. As of
December 31, 2007, the Company has no additional borrowings available through the acquisition loan facility. Borrowings on the acquisition loan facility bear interest at a variable rate of LIBOR plus 2.5%. At December 31, 2007, the
weighted average interest rate on the acquisition loan facility was 7.4%.

The senior secured credit facility contains customary financial
and other covenants, including a maximum leverage ratio and a minimum interest coverage ratio, as defined in the senior credit facility agreement. The senior credit facility also places certain restrictions on our ability to make capital
expenditures. As of December 31, 2007, the Company was in compliance with these covenants.

Also in connection with the Acquisition,
the Company issued $200.0 million of 12% senior subordinated notes. The senior subordinated notes mature on December 15, 2013 and bear interest at the rate of 12% per year, which is payable semi-annually in arrears on June 15 and
December 15 of each year. The senior subordinated notes are general unsecured obligations and are guaranteed on a senior subordinated basis by certain of the Companys subsidiaries and rank secondary to the Companys senior credit
facility. The senior subordinated notes contain restrictive covenants as stated in the indenture agreement, including limitations on the Companys ability to incur additional debt.



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Through December 15, 2008, the Company may redeem up to 35% of the aggregate principal amount of the
senior subordinated notes at a redemption price of 112% of the principal amount, plus accrued and unpaid interest to the redemption date. After December 15, 2008, the Company may redeem all or part of the aggregate principal amount of the
senior subordinated notes at a redemption price from 106% in 2009 to 100% in 2011 of the principal amount, plus accrued and unpaid interest to the redemption date.

The capital lease obligations relate to vehicles and computer graphic design and related equipment. Lease payments are due in equal monthly installments and the leases mature at various dates through December 2012.

The amount of long-term debt, including capital lease obligations, maturing in each of the next five years and thereafter is $2,226 in
2008, $2,194 in 2009, $2,134 in 2010, $156,485 in 2011, $37 in 2012, and $200,009 thereafter.



|H. | Interest Expense
|-- | ----------------

Interest expense consists of the
following:



|                                               |  |                            |        |                            |   |                               |  |   |    |                              |  |  |   |   
|---------------------------------------------- |  | -------------------------- | ------ | -------------------------- | - | ----------------------------- |  | - | -- | ---------------------------- |  |  | - | --
|                                               |  | Successor                  |        | Successor                  |   | Successor                     |  |   |    | Predecessor                 
|                                               |  | Year EndedDecember 31,2007 |        | Year EndedDecember 31,2006 |   | One-Day EndedDecember 31,2005 |  |   |    | Period EndedDecember 30,2005
|Interest on senior term loan                   |  | $                          | 9,436  |                            | $ | 8,948                         |  | $ | 25 |                              |  |  | $ |  
|Interest on borrowings on acquisition facility |  |                            | 1,493  |                            |   |                              |  |   |   |                              |  |  |   |  
|Interest on senior subordinated notes          |  |                            | 24,000 |                            |   | 24,000                        |  |   | 67 |                              |  |  |   |  
|Amortization of deferred financing costs       |  |                            | 1,394  |                            |   | 1,226                         |  |   | 5  |                              |  |  |   |  
|Commitment fees on senior credit facility      |  |                            | 577    |                            |   | 775                           |  |   |   |                              |  |  |   |  
|Other                                          |  |                            | 29     |                            |   | 63                            |  |   |   |                              |  |  |   | 10
|                                               |  |                            |        |                            |   |                               |  |   |    |                              |  |  |   |   
|Total                                          |  | $                          | 36,929 |                            | $ | 35,012                        |  | $ | 97 |                              |  |  | $ | 10
|                                               |  |                            |        |                            |   |                               |  |   |    |                              |  |  |   |   



|I. | Other Expense, net
|-- | ------------------

Other expense, net consists of
the following:



|                                      |  |                            |       |   |                            |   |       |                               |  |   |   |                              |  |  |   |       |  
|------------------------------------- |  | -------------------------- | ----- | - | -------------------------- | - | ----- | ----------------------------- |  | - | - | ---------------------------- |  |  | - | ----- | -
|                                      |  | Successor                  |       |   | Successor                  |   |       | Successor                     |  |   |   | Predecessor                  | 
|                                      |  | Year EndedDecember 31,2007 |       |   | Year EndedDecember 31,2006 |   |       | One-Day EndedDecember 31,2005 |  |   |   | Period EndedDecember 30,2005 | 
|Realized foreign exchange (gain) loss |  | $                          | 1,141 |   |                            | $ | 1,332 |                               |  | $ |  |                              |  |  | $ | (298  | )
|Restructuring and closure costs       |  |                            |      |   |                            |   |      |                               |  |   |  |                              |  |  |   | 1,563 |  
|Interest income                       |  |                            | (748  | ) |                            |   | (795  | )                             |  |   |  |                              |  |  |   |      |  
|Other                                 |  |                            | 104   |   |                            |   | (312  | )                             |  |   |  |                              |  |  |   | 192   |  
|                                      |  |                            |       |   |                            |   |       |                               |  |   |   |                              |  |  |   |       |  
|Total                                 |  | $                          | 497   |   |                            | $ | 225   |                               |  | $ |  |                              |  |  | $ | 1,457 |  
|                                      |  |                            |       |   |                            |   |       |                               |  |   |   |                              |  |  |   |       |  



|J. | Related Party Transactions
|-- | --------------------------

Successor

The company incurred and paid management advisory fees of $500 annually during both 2007 and 2006 to a related party in accordance with the
Advisory Agreement between the Company and CVC Management LLC, which was assigned to Court Square Advisor LLC on July 31, 2006. The Company will pay $500 annually in advisory fees through 2015 in accordance with this Advisory Agreement.

Predecessor

During
the period ended December 30, 2005, the Company purchased products from and sold products to various related companies, consisting of other Alcoa subsidiaries, at negotiated prices between the two parties. These transactions are recorded as
related party sales on the combined statements of income.



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On December 30, 2005, the Company recorded a capital contribution of $35,595 for the write-off of
related party receivables of $10,311 and related party payables of $45,906. On November 30, 2005, the Company recorded a capital contribution of $10,856 for the write-off of related party receivables of $84,211, related party payables of $81
and short-term borrowings with related parties of $94,986. In November 2005, the Company recorded a capital contribution of $14,434 for the write-off of short-term borrowings related to the MCG acquisition.

On November 1, 1996 and November 25, 1997, the Company entered into promissory notes with RMC Delaware, Inc., a wholly owned subsidiary of
Alcoa, for $32,629 and $5,000, respectively. The principal was payable on demand, and the promissory notes compounded interest quarterly at the prime rate plus 1.5%. The promissory notes were settled in full in December 2005 through a contribution
from Alcoa.

On April 7, 2000, CGA Acquisition Corp., a wholly owned subsidiary of the Company, entered into a promissory note with RMC
Delaware, Inc. for $11,496. The principal was payable on demand, and the promissory note compounded interest quarterly at the prime rate plus 1.0%. The promissory note was settled in full in December 2005 through a contribution from Alcoa.

On June 30, 2004, Mozaic, then a majority owned subsidiary of the Company, entered into a revolving loan agreement with Alcoa
Securities Corporation for $3,100. In December 2005, Alcoa Securities Corporation assigned the note to the Company. Interest is payable quarterly at the LIBOR rate plus 3.5%. The interest rate on the note was 8.87% at December 31, 2006. This
loan is eliminated in the presentation of the consolidated balance sheets as of December 31, 2006. The loan and note were sold to a third party in connection with the Companys divestiture of its controlling interest in Mozaic on
February 28, 2007.

For the period ended December 30, 2005, the Company had sales of $5,280 to Reynolds Metals Company, a wholly
owned subsidiary of Alcoa. The Company had sales to other wholly owned subsidiaries of Alcoa of $118 for the period ended December 30, 2005.

The expenses allocated to the Company by Alcoa in the normal course of business consist of the following, and are reflected in cost of products sold and selling, general and administrative expenses in the combined statements of operations:



|                                   |  |                              |      
|---------------------------------- |  | ---------------------------- | -----
|                                   |  | Predecessor                 
|                                   |  | Period EndedDecember 30,2005
|Pension expense                    |  | $                            | 2,955
|Other postretirement benefit costs |  |                              | 392  
|Information technology             |  |                              | 1,549
|Insurance                          |  |                              | 302  
|Other services                     |  |                              | 2,508
|                                   |  |                              |      
|                                   |  | $                            | 7,706
|                                   |  |                              |      

The allocation of pension expense and the charges for other postretirement benefit costs included
in these financial statements were determined based on the number of employees participating in the various plans and average costs per employee.

Alcoa charged the Company for various other services, including financial shared services (accounts receivable, accounts payable, shared ledger, payroll, etc.), insurance, credit and collection, audit, energy management, legal,
environmental health and safety, information technology and other administrative costs. These charges are allocated primarily based on headcount. Insurance costs are allocated based upon historical claims cost per person for the Company. Management
believes such methods of allocation are reasonable.



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|K. | Lease Expense
|-- | -------------

Certain buildings and office space
are under operating lease agreements. Total expense for all leases was $7,902, $7,064, and $7,724, in 2007, 2006, and 2005, respectively. Under long-term leases, minimum annual rentals are $6,648 in 2008, $4,846 in 2009, $3,237 in 2010, $2,424 in
2011 and $3,681 for 2012. There are no minimum annual rentals after 2012.



|L. | Defined Contribution Plans
|-- | --------------------------

Effective
January 1, 2006, the Company adopted the Southern Graphic Systems, Inc. Savings Plan (the Plan), a defined contribution plan under Section 401(k) of the Internal Revenue Code, for the benefit of eligible employees and their
beneficiaries. Employees were eligible to make elective deferral contributions to the Plan beginning on the first day of any payroll period on or following April 1, 2006. The Plan is funded with both employer and employee contributions.
Participants may voluntarily contribute up to 16% of their annual pay into the plan, not to exceed an annual dollar limitation, which was $15,500 and $15,000 in 2007 and 2006, respectively. The Plan provides that, for each payroll period beginning
on or after July 1, 2006, the Company may make matching contributions in an amount to be determined by the Board of Directors, which amount for each payroll period shall not be greater than 100% of the participants elective deferrals that
do not exceed the first 6% of the participants compensation for the payroll period. In addition, the Plan provides that, for any Plan year, the Company may make discretionary contributions in an amount to be determined by the Board of
Directors as of the last day of the Plan year on behalf of each participant, subject to certain Internal Revenue Code limitations. Contributions to the plan were $3,376 and $2,305 in 2007 and 2006, respectively.

During the period ended December 30, 2005, the Company participated in certain of Alcoas defined contribution plans. These plans covered
substantially all employees in the U.S. and Canada. Contributions to the plans were $2,837 in the period ended December 30, 2005.



|M. | Income Taxes
|-- | ------------

The components of income (loss)
before taxes on income (loss) from continuing operations were:



|        |  |                            |        |   |                            |   |                               |  |   |      |   |                              |  |  |   |       
|------- |  | -------------------------- | ------ | - | -------------------------- | - | ----------------------------- |  | - | ---- | - | ---------------------------- |  |  | - | ------
|        |  | Successor                  |        |   | Successor                  |   | Successor                     |  |   |      |   | Predecessor                 
|        |  | Year EndedDecember 31,2007 |        |   | Year EndedDecember 31,2006 |   | One-Day EndedDecember 31,2005 |  |   |      |   | Period EndedDecember 30,2005
|U.S.    |  | $                          | (5,255 | ) |                            | $ | 1,060                         |  | $ | (132 | ) |                              |  |  | $ | 23,304
|Foreign |  |                            | 1,262  |   |                            |   | 1,493                         |  |   | (7   | ) |                              |  |  |   | 9,153 
|        |  |                            |        |   |                            |   |                               |  |   |      |   |                              |  |  |   |       
|        |  | $                          | (3,993 | ) |                            | $ | 2,553                         |  | $ | (139 | ) |                              |  |  | $ | 32,457
|        |  |                            |        |   |                            |   |                               |  |   |      |   |                              |  |  |   |       

The provision (benefit) for taxes on income (loss) from continuing operations consisted of:



|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|------------ |  | -------------------------- | ------ | - | -------------------------- | - | ----------------------------- |  | - | --- | - | ---------------------------- |  |  | - | ------ | -
|             |  | Successor                  |        |   | Successor                  |   | Successor                     |  |   |     |   | Predecessor                  | 
|             |  | Year EndedDecember 31,2007 |        |   | Year EndedDecember 31,2006 |   | One-Day EndedDecember 31,2005 |  |   |     |   | Period EndedDecember 30,2005 | 
|Current:     |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|U.S. Federal |  | $                          |       |   |                            | $ |                              |  | $ | (50 | ) |                              |  |  | $ | 9,114  |  
|Foreign      |  |                            | 162    |   |                            |   | 523                           |  |   |    |   |                              |  |  |   | 3,436  |  
|State        |  |                            |       |   |                            |   |                              |  |   | (4  | ) |                              |  |  |   | 1,729  |  
|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|             |  |                            | 162    |   |                            |   | 523                           |  |   | (54 | ) |                              |  |  |   | 14,279 |  
|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|Deferred:    |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|U.S. Federal |  |                            | (463   | ) |                            |   | 484                           |  |   |    |   |                              |  |  |   | (1,133 | )
|Foreign      |  |                            | (857   | ) |                            |   | 261                           |  |   |    |   |                              |  |  |   | (243   | )
|State        |  |                            | (24    | ) |                            |   | 77                            |  |   |    |   |                              |  |  |   | (213   | )
|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|             |  |                            | (1,344 | ) |                            |   | 822                           |  |   |    |   |                              |  |  |   | (1,589 | )
|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  
|             |  | $                          | (1,182 | ) |                            | $ | 1,345                         |  | $ | (54 | ) |                              |  |  | $ | 12,690 |  
|             |  |                            |        |   |                            |   |                               |  |   |     |   |                              |  |  |   |        |  



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The reconciliation between the provision (benefit) for taxes on income (loss) for continuing operations
computed by applying the federal statutory tax rate to income (loss) before taxes on income (loss) from continuing operations and the actual provision is as follows:



|                                 |  |                            |   |  |                            |   |  |                               |   |  |  |  |                              |  
|-------------------------------- |  | -------------------------- | - |  | -------------------------- | - |  | ----------------------------- | - |  |  |  | ---------------------------- | -
|                                 |  | Successor                  |   |  | Successor                  |   |  | Successor                     |   |  |  |  | Predecessor                  |  
|                                 |  | Year EndedDecember 31,2007 |   |  | Year EndedDecember 31,2006 |   |  | One-Day EndedDecember 31,2005 |   |  |  |  | Period EndedDecember 30,2005 |  
|U.S. federal statutory rate      |  | 34.0                       | % |  | 34.0                       | % |  | 35.0                          | % |  |  |  | 35.0                         | %
|State tax net of federal benefit |  | 0.7                        | % |  | 1.0                        | % |  | 3.0                           | % |  |  |  | 3.0                          | %
|Taxes on foreign income          |  | 0.3                        | % |  | -0.9                       | % |  | 0.0                           | % |  |  |  | 0.0                          | %
|Permanent differences            |  | -9.6                       | % |  | 13.2                       | % |  | 0.0                           | % |  |  |  | 0.0                          | %
|Valuation allowance              |  | -6.3                       | % |  | 4.8                        | % |  | 0.0                           | % |  |  |  | -0.4                         | %
|Rate changes(1)                  |  | 10.1                       | % |  | 0.0                        | % |  | 0.0                           | % |  |  |  | 0.0                          | %
|Other                            |  | 0.4                        | % |  | 0.6                        | % |  | 0.0                           | % |  |  |  | 1.5                          | %
|                                 |  |                            |   |  |                            |   |  |                               |   |  |  |  |                              |  
|Effective tax rate               |  | 29.6                       | % |  | 52.7                       | % |  | 38.0                          | % |  |  |  | 39.1                         | %
|                                 |  |                            |   |  |                            |   |  |                               |   |  |  |  |                              |  



|(1) | The impact for the rate changes above is primarily due to the
United Kingdom enacting a tax rate change in July 2007 that will reduce the tax rate in the United Kingdom by 2 percentage points effective April 1, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The components of net deferred tax assets and liabilities at December 31, 2007 and 2006 were as follows:



|                                                  |  |                  |         |   |                  |   |         |  
|------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                  |  | Successor        |         |   | Successor        |  
|                                                  |  | December 31,2007 |         |   | December 31,2006 |  
|Deferred Tax Assets:                              |  |                  |         |   |                  |   |         |  
|Employee benefits                                 |  | $                | 261     |   |                  | $ | 1,318   |  
|Foreign tax credit carryforwards                  |  |                  | 977     |   |                  |   | 412     |  
|Foreign currency loss on senior secured term loan |  |                  | 575     |   |                  |   | 533     |  
|Tax loss carry forwards                           |  |                  | 11,880  |   |                  |   | 6,004   |  
|Other                                             |  |                  | 334     |   |                  |   | 407     |  
|Valuation allowance                               |  |                  | (706    | ) |                  |   | (297    | )
|                                                  |  |                  |         |   |                  |   |         |  
|Total deferred tax assets                         |  | $                | 13,321  |   |                  | $ | 8,377   |  
|                                                  |  |                  |         |   |                  |   |         |  
|Deferred Tax Liabilities:                         |  |                  |         |   |                  |   |         |  
|Depreciation and amortization                     |  | $                | (14,905 | ) |                  | $ | (10,740 | )
|Interest on intercompany notes                    |  |                  | (3,423  | ) |                  |   | (1,485  | )
|Other                                             |  |                  | (111    | ) |                  |   |        |  
|                                                  |  |                  |         |   |                  |   |         |  
|Total deferred tax liabilities                    |  | $                | (18,439 | ) |                  | $ | (12,225 | )
|                                                  |  |                  |         |   |                  |   |         |  

The December 31, 2007 depreciation and amortization deferred tax liability includes $2,412 of
deferred tax liabilities that the Company obtained as part of the acquisition of McGurk. These liabilities are recorded as a component of the opening balance sheet of McGurk in accordance with SFAS No. 142.

The Company has recorded a valuation allowance against a portion of its foreign tax credit carry forwards because it is more likely than not that this
portion of the carry forwards will not be realized.

The Company has net operating loss carry forwards in various tax jurisdictions at
December 31, 2007 as follows:



|               |  |                                              
|-------------- |  | ---------------------------------------------
|United States  |  | $25,895 expiring December 31, 2026           
|Canada         |  | $5,037 expiration beginning December 31, 2016
|United Kingdom |  | $884 with no expiration date                 
|Netherlands    |  | $206 with no expiration date                 
|Mexico         |  | $81 expiring December 31, 2016               



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##### Table of Contents

Although the Company expects to continue to generate additional net operating loss carry forwards for the
next two years, it further believes it will be able to utilize all of these loss carry forwards prior to their expiration. As such, no valuation allowance has been recorded against the net operating loss carryforwards. The Company continuously
evaluates the need to record a valuation allowance and will recognize such valuation allowance if it is deemed necessary due to a change in expectations about the ability to realize the full value of the net operating loss carryforwards.

The Company has not recorded a deferred tax liability for undistributed earnings of certain international subsidiaries because such earnings are
considered permanently invested in foreign countries. As of December 31, 2007 and 2006, undistributed earnings of international subsidiaries considered permanently reinvested were approximately $1,113 and $566, respectively. The unrecognized
deferred tax liability is dependent on many factors, including withholding taxes under current tax treaties and foreign tax credits. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not
practicable. The Company does not consider undistributed earnings from certain other international operations to be permanently reinvested. A portion of the estimated tax liabilities upon repatriation of earnings from these international operations
are expected to be offset with foreign tax credits.



|N. | Financial Instruments
|-- | ---------------------

The fair values of cash and
cash equivalents, accounts receivable, accounts payable, short-term borrowings and borrowings under the senior secured credit facility approximate their carrying amount. The fair value of the senior subordinated notes is based on quoted market
prices. At December 31, 2007, the senior subordinated notes had a carrying value of $200,000 and a fair value of $198,250.



|O. | Cash Flow Information
|-- | ---------------------

Cash payments for interest
are as follows:



|         |  |                            |        |                            |   |                               |  |   |   |                              |  |  |   |    
|-------- |  | -------------------------- | ------ | -------------------------- | - | ----------------------------- |  | - | - | ---------------------------- |  |  | - | ---
|         |  | Successor                  |        | Successor                  |   | Successor                     |  |   |   | Predecessor                 
|         |  | Year EndedDecember 31,2007 |        | Year EndedDecember 31,2006 |   | One-Day EndedDecember 31,2005 |  |   |   | Period EndedDecember 30,2005
|Interest |  | $                          | 35,479 |                            | $ | 32,952                        |  | $ |  |                              |  |  | $ | 103

Cash paid for income taxes was not significant for the years ended December 31, 2007 and 2006.
Taxes were paid by Alcoa in conjunction with Alcoas consolidated tax returns in 2005.



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The effects of certain noncash activities were as follows:



|                                                                                |  |                            |       |                            |   |                               |  |   |   |                              |  |  |   |          |  
|------------------------------------------------------------------------------- |  | -------------------------- | ----- | -------------------------- | - | ----------------------------- |  | - | - | ---------------------------- |  |  | - | -------- | -
|                                                                                |  | Successor                  |       | Successor                  |   | Successor                     |  |   |   | Predecessor                  | 
|                                                                                |  | Year EndedDecember 31,2007 |       | Year EndedDecember 31,2006 |   | One-Day EndedDecember 31,2005 |  |   |   | Period EndedDecember 30,2005 | 
|Assets acquired under capital lease obligations                                 |  | $                          | 1,512 |                            | $ | 212                           |  | $ |  |                              |  |  | $ |         |  
|Elimination of related party receivables through contributions                  |  | $                          |      |                            | $ |                              |  | $ |  |                              |  |  | $ | 94,522   |  
|Elimination of related party payables through contributions                     |  | $                          |      |                            | $ |                              |  | $ |  |                              |  |  | $ | (45,987  | )
|Elimination of short-term borrowings with related parties through contributions |  | $                          |      |                            | $ |                              |  | $ |  |                              |  |  | $ | (109,420 | )
|Noncash contributions                                                           |  | $                          |      |                            | $ |                              |  | $ |  |                              |  |  | $ | (60,855  | )



|P. | Condensed Consolidated Quarterly Financial Information (unaudited)
|-- | ------------------------------------------------------------------

Unaudited summarized financial data by quarter for 2007 and 2006 is presented below. The amounts presented below have been adjusted from amounts previously reported for discontinued operations and for certain
immaterial prior period adjustments discussed below.



|                                           |  |                            |        |                           |   |        |                                |  |   |                               |   |  |   |        |  
|------------------------------------------ |  | -------------------------- | ------ | ------------------------- | - | ------ | ------------------------------ |  | - | ----------------------------- | - |  | - | ------ | -
|                                           |  | Quarter EndedMarch 31,2007 |        | Quarter EndedJune 30,2007 |   |        | Quarter EndedSeptember 30,2007 |  |   | Quarter EndedDecember 31,2007 |  
|Sales(1)                                   |  | $                          | 75,126 |                           | $ | 80,363 |                                |  | $ | 76,482                        |   |  | $ | 76,838 |  
|Income from operations                     |  |                            | 10,829 |                           |   | 8,076  |                                |  |   | 7,816                         |   |  |   | 6,712  |  
|Income (loss) from continuing operations   |  |                            | 1,337  |                           |   | (1,106 | )                              |  |   | (1,343                        | ) |  |   | (1,699 | )
|Income (loss) from discontinued operations |  |                            | 672    |                           |   |       |                                |  |   |                              |   |  |   |       |  
|                                           |  |                            |        |                           |   |        |                                |  |   |                               |   |  |   |        |  
|Net income(2)                              |  | $                          | 2,009  |                           | $ | (1,106 | )                              |  | $ | (1,343                        | ) |  | $ | (1,699 | )
|                                           |  |                            |        |                           |   |        |                                |  |   |                               |   |  |   |        |  



|                                           |  |                            |        |   |                           |   |        |                                |  |   |                               |   |  |   |        |  
|------------------------------------------ |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ------------------------------ |  | - | ----------------------------- | - |  | - | ------ | -
|                                           |  | Quarter EndedMarch 31,2006 |        |   | Quarter EndedJune 30,2006 |   |        | Quarter EndedSeptember 30,2006 |  |   | Quarter EndedDecember 31,2006 |  
|Sales                                      |  | $                          | 68,823 |   |                           | $ | 72,597 |                                |  | $ | 65,709                        |   |  | $ | 69,147 |  
|Income from operations                     |  |                            | 9,400  |   |                           |   | 11,937 |                                |  |   | 8,882                         |   |  |   | 7,571  |  
|Income (loss) from continuing operations   |  |                            | 504    |   |                           |   | 1,585  |                                |  |   | (196                          | ) |  |   | (685   | )
|Income (loss) from discontinued operations |  |                            | (133   | ) |                           |   | (4     | )                              |  |   | (139                          | ) |  |   | (7     | )
|                                           |  |                            |        |   |                           |   |        |                                |  |   |                               |   |  |   |        |  
|Net income(3)                              |  | $                          | 371    |   |                           | $ | 1,581  |                                |  | $ | (335                          | ) |  | $ | (692   | )
|                                           |  |                            |        |   |                           |   |        |                                |  |   |                               |   |  |   |        |  



|(1) | Sales were adjusted by $1,019 and $1,026 from the amounts previously reported for the quarters ended March 31, 2007
and June 30, 2007, respectively. The adjustments to the amounts previously reported for the quarters ended March 31, 2007 and June 30, 2007 were due the Company including amounts invoiced to customers for shipping and handling costs
as a component of net sales, effective January 1, 2007. In the amounts previously reported for the quarters ended March 31, 2007 and June 30, 2007, amounts invoiced to customers for shipping and handling costs were netted against the
actual cost incurred and reflected as a reduction in cost of sales.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net income was increased by $59 and $194 from the amounts
previously reported for the quarters ended June 30, 2007 and September 30, 2007, respectively. The adjustments to net income are net of income taxes of $26 and $119 for the quarters ended June 30, 2007 and September 30, 2007,
respectively. The adjustment to the amounts previously reported for the quarter ended June 30, 2007 was due to certain non-income tax related accounting items related to periods prior to 2007. The adjustment to the amounts previously reported
for the quarter ended September 30, 2007 was due to certain inventory items that were accounted for as a correction of an error in accordance with SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior year
Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108) during the third quarter of 2007. The Company re-evaluated the treatment of the inventory items during the year end close process and determined these
adjustments were a change in accounting estimate and should not impact prior periods.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net income was decreased by $4 and increased by $132 to the
amounts previously reported for the quarters ended June 30, 2006 and December 31, 2006, respectively. The adjustments to net income are net of income taxes of $1 and $55 for the quarters ended June 30, 2006 and December 31, 2006,
respectively. The adjustments to the amounts previously reported for the quarters ended June 30, 2006 and December 31, 2006 related to certain non-income tax related accounting items identified during 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Q. | Contingencies and Commitments
|-- | -----------------------------

Various lawsuits,
claims and proceedings have been or may be instituted or asserted against entities within the Company. While the amounts claimed may be substantial, the ultimate liability cannot be determined because of the considerable uncertainties that exist.
Therefore, it is possible that results of operations or liquidity in a particular period could be materially affected by certain contingencies. However, based on currently available facts and in light of legal and other defenses available to us,
management believes that the disposition of matters that are pending or asserted will not have a materially adverse effect on the Companys financial position, results of operations, and liquidity.



|R. | Subsequent Events
|-- | -----------------

On January 3, 2008,
Southern Graphic Systems-Canada, Co. (SGS Canada), a wholly owned subsidiary of SGS International, Inc., entered into a Share Purchase Agreement (the SPA) under which SGS Canada acquired the outstanding shares of 1043497
Ontario Limited (1043497) and Cooper & Williamson, Inc. (together with 1043497 and its wholly owned subsidiaries Tri-Ad Graphic Communications Ltd. and Flex-Art Design Inc., Tri-Ad), for a cash purchase price of
22,000 Canadian dollars (approximately $22,211 based on the U.S. dollar/Canadian dollar exchange rate on January 2, 2008), subject to adjustment as described in the SPA. Tri-Ad is a Canadian provider of packaging and retail graphics services
with locations in Toronto, Ontario and outside of Montreal, Quebec.

The acquisition of Tri-Ad will be recorded as a business acquisition in
2008 in accordance with SFAS No. 141.



|S. | Supplemental Guarantor Information
|-- | ----------------------------------

The
Successors debt includes the senior credit facility and the 12% senior subordinated notes. The U.S. borrowings under the senior credit facility have been guaranteed by Southern Graphics Inc. (the parent of SGS International, Inc.), Southern
Graphic Systems, Inc. and Project Dove Holdco, Inc. The Canadian borrowings under the senior credit facility have been guaranteed by SGS Packaging Europe Holdings Limited, SGS Packaging Europe Limited, MCG Graphics Limited, Southern Graphic Systems
Mexico, S. De R.L. De C.V., The Box Room Limited, SGS Packaging Netherlands, B.V., Synnoflex Inc., McGurk Studios Limited, Thames McGurk Limited, SGS Asia Pacific Limited, Southern Graphic Systems, Inc., Project Dove Holdco, Inc., Project Dove
Manitoba, L.P., Southern Graphics Inc., SGS International, Inc., 1043497 Ontario Limited, Cooper & Williamson, Inc., Tri-Ad Graphic Communications, Ltd., and Flex-Art Design Inc. The senior subordinated notes are general unsecured
obligations and are guaranteed on a senior subordinated basis by certain of the Successors domestic subsidiaries and rank secondary to the Successors senior credit facility. Guarantor subsidiaries for the senior subordinated notes
include Southern Graphic Systems, Inc. and Project Dove Holdco, Inc. Non- Guarantor subsidiaries for the senior subordinated notes include the remaining direct and indirect domestic and foreign subsidiaries. The subsidiary guarantors are 100% owned
by the Successor, the guarantees are full and unconditional, and the guarantees are joint and several.

Following are condensed
consolidating / combining financial statements of the Successor and Predecessor. The guarantor subsidiaries for the senior subordinated notes are presented in a combined format for the Predecessor. There was not a parent company/subsidiary
relationship under the combined Predecessor reporting. Under the Successor, investments in subsidiaries are either consolidated or accounted for under the equity method of accounting. Intercompany balances and transactions have been eliminated.



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Supplemental Consolidating Balance Sheet

December 31, 2007



|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------- | ------- | - | --------------------------------- | - | ------------------------------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | ------- | -
|                                                                                       |  | Parent /Issuer |         |   | ConsolidatedGuarantorSubsidiaries |   | ConsolidatedNon-GuarantorSubsidiaries |  | Eliminations |         |  | Consolidated |         
|Assets                                                                                 |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Current assets                                                                         |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Cash and cash equivalents                                                              |  | $              | 17,515  |   |                                   | $ | 3,068                                 |  | $            | 13,884  |  | $            |         |   |  | $ | 34,467  |  
|Receivables from customers, less allowances                                            |  |                |        |   |                                   |   | 38,712                                |  |              | 22,430  |  |              |         |   |  |   | 61,142  |  
|Related party receivables                                                              |  |                | 312,755 |   |                                   |   | 53,455                                |  |              | 42,209  |  |              | (408,419 | ) |  |   |        |  
|Inventories                                                                            |  |                |        |   |                                   |   | 5,013                                 |  |              | 2,705   |  |              |         |   |  |   | 7,718   |  
|Deferred income taxes                                                                  |  |                |        |   |                                   |   | 508                                   |  |              | 67      |  |              |         |   |  |   | 575     |  
|Prepaid expenses and other current assets                                              |  |                | 10      |   |                                   |   | 8,119                                 |  |              | 2,910   |  |              |         |   |  |   | 11,039  |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total current assets                                                                   |  |                | 330,280 |   |                                   |   | 108,875                               |  |              | 84,205  |  |              | (408,419 | ) |  |   | 114,941 |  
|Investment in subsidiaries                                                             |  |                | 117,232 |   |                                   |   | 23,001                                |  |              | 36,567  |  |              | (176,800 | ) |  |   |        |  
|Properties, plants and equipment, net                                                  |  |                |        |   |                                   |   | 43,058                                |  |              | 10,310  |  |              |         |   |  |   | 53,368  |  
|Goodwill                                                                               |  |                |        |   |                                   |   | 119,962                               |  |              | 55,971  |  |              |         |   |  |   | 175,933 |  
|Other intangible assets, net                                                           |  |                |        |   |                                   |   | 129,219                               |  |              | 47,014  |  |              |         |   |  |   | 176,233 |  
|Deferred financing costs, net                                                          |  |                | 8,848   |   |                                   |   |                                      |  |              |        |  |              |         |   |  |   | 8,848   |  
|Deferred income taxes                                                                  |  |                | 1,320   |   |                                   |   | 460                                   |  |              |        |  |              | (1,780   | ) |  |   |        |  
|Other assets                                                                           |  |                | 47      |   |                                   |   | 184                                   |  |              | 652     |  |              |         |   |  |   | 883     |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total assets                                                                           |  | $              | 457,727 |   |                                   | $ | 424,759                               |  | $            | 234,719 |  | $            | (586,999 | ) |  | $ | 530,206 |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Liabilities                                                                            |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Current liabilities                                                                    |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Accounts payable, trade                                                                |  | $              | 428     |   |                                   | $ | 15,389                                |  | $            | 6,529   |  | $            |         |   |  | $ | 22,346  |  
|Related party payables                                                                 |  |                |        |   |                                   |   | 330,874                               |  |              | 77,545  |  |              | (408,419 | ) |  |   |        |  
|Accrued compensation                                                                   |  |                |        |   |                                   |   | 6,185                                 |  |              | 1,743   |  |              |         |   |  |   | 7,928   |  
|Accrued taxes, including taxes on income                                               |  |                |        |   |                                   |   | 273                                   |  |              | 2,124   |  |              |         |   |  |   | 2,397   |  
|Accrued interest                                                                       |  |                | 23      |   |                                   |   | 1,018                                 |  |              | 7       |  |              |         |   |  |   | 1,048   |  
|Other current liabilities                                                              |  |                |        |   |                                   |   | 4,438                                 |  |              | 2,663   |  |              |         |   |  |   | 7,101   |  
|Current portion of long-term obligations                                               |  |                | 1,401   |   |                                   |   | 507                                   |  |              | 318     |  |              |         |   |  |   | 2,226   |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total current liabilities                                                              |  |                | 1,852   |   |                                   |   | 358,684                               |  |              | 90,929  |  |              | (408,419 | ) |  |   | 43,046  |  
|Noncurrent liabilities                                                                 |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Long-term obligations, net of current portion                                          |  |                | 336,665 |   |                                   |   | 1,127                                 |  |              | 23,067  |  |              |         |   |  |   | 360,859 |  
|Noncurrent liabilities                                                                 |  |                |        |   |                                   |   | 1,042                                 |  |              | 356     |  |              |         |   |  |   | 1,398   |  
|Deferred income taxes                                                                  |  |                |        |   |                                   |   |                                      |  |              | 7,473   |  |              | (1,780   | ) |  |   | 5,693   |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total noncurrent liabilities                                                           |  |                | 336,665 |   |                                   |   | 2,169                                 |  |              | 30,896  |  |              | (1,780   | ) |  |   | 367,950 |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total liabilities                                                                      |  |                | 338,517 |   |                                   |   | 360,853                               |  |              | 121,825 |  |              | (410,199 | ) |  |   | 410,996 |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Minority interest                                                                      |  |                |        |   |                                   |   |                                      |  |              |        |  |              |         |   |  |   |        |  
|Contingencies and commitments                                                          |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Stockholders equity:                                                                  |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Common stock; $.01 par value; 1,000 shares authorized and outstanding                  |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Additional capital                                                                     |  |                | 107,000 |   |                                   |   | 63,001                                |  |              | 96,068  |  |              | (159,069 | ) |  |   | 107,000 |  
|Accumulated other comprehensive income - cumulative translation adjustment, net of tax |  |                | 13,509  |   |                                   |   | 3                                     |  |              | 13,506  |  |              | (13,509  | ) |  |   | 13,509  |  
|Retained earnings (accumulated deficit)                                                |  |                | (1,299  | ) |                                   |   | 902                                   |  |              | 3,320   |  |              | (4,222   | ) |  |   | (1,299  | )
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total stockholders equity                                                             |  |                | 119,210 |   |                                   |   | 63,906                                |  |              | 112,894 |  |              | (176,800 | ) |  |   | 119,210 |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  
|Total liabilities and stockholders equity                                             |  | $              | 457,727 |   |                                   | $ | 424,759                               |  | $            | 234,719 |  | $            | (586,999 | ) |  | $ | 530,206 |  
|                                                                                       |  |                |         |   |                                   |   |                                       |  |              |         |  |              |          |   |  |   |         |  



81



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##### Table of Contents

Supplemental Consolidating Balance Sheet

December 31, 2006



|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|-------------------------------------------------------------------------------------- |  | -------------- | ------- | --------------------------------- | - | ------------------------------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                                                                       |  | Parent /Issuer |         | ConsolidatedGuarantorSubsidiaries |   | ConsolidatedNon-GuarantorSubsidiaries |  | Eliminations |         |  | Consolidated
|Assets                                                                                 |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Current assets                                                                         |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Cash and cash equivalents                                                              |  | $              | 2,100   |                                   | $ | 2,286                                 |  | $            | 8,272   |  | $            |         |   |  | $ | 12,658 
|Receivables from customers, less allowances                                            |  |                |        |                                   |   | 39,005                                |  |              | 18,412  |  |              |         |   |  |   | 57,417 
|Related party receivables                                                              |  |                | 289,829 |                                   |   | 37,289                                |  |              | 41,748  |  |              | (368,866 | ) |  |   |       
|Inventories                                                                            |  |                |        |                                   |   | 3,588                                 |  |              | 2,145   |  |              |          |   |  |   | 5,733  
|Deferred income taxes                                                                  |  |                |        |                                   |   | 1,547                                 |  |              | 129     |  |              |         |   |  |   | 1,676  
|Prepaid expenses and other current assets                                              |  |                | 80      |                                   |   | 6,020                                 |  |              | 1,953   |  |              |         |   |  |   | 8,053  
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total current assets                                                                   |  |                | 292,009 |                                   |   | 89,735                                |  |              | 72,659  |  |              | (368,866 | ) |  |   | 85,537 
|Investment in subsidiaries                                                             |  |                | 105,669 |                                   |   | 23,001                                |  |              | 14,800  |  |              | (143,470 | ) |  |   |       
|Properties, plants and equipment, net                                                  |  |                |        |                                   |   | 43,322                                |  |              | 9,091   |  |              |         |   |  |   | 52,413 
|Goodwill                                                                               |  |                |        |                                   |   | 117,391                               |  |              | 40,387  |  |              |         |   |  |   | 157,778
|Other intangible assets, net                                                           |  |                |        |                                   |   | 127,049                               |  |              | 36,064  |  |              |         |   |  |   | 163,113
|Deferred financing costs, net                                                          |  |                | 10,177  |                                   |   |                                      |  |              |        |  |              |         |   |  |   | 10,177 
|Deferred income taxes                                                                  |  |                | 1,923   |                                   |   |                                      |  |              |        |  |              | (1,923   | ) |  |   |       
|Other assets                                                                           |  |                |        |                                   |   | 275                                   |  |              | 234     |  |              |         |   |  |   | 509    
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total assets                                                                           |  | $              | 409,778 |                                   | $ | 400,773                               |  | $            | 173,235 |  | $            | (514,259 | ) |  | $ | 469,527
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Liabilities                                                                            |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Current liabilities                                                                    |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Accounts payable, trade                                                                |  | $              | 413     |                                   | $ | 8,852                                 |  | $            | 6,454   |  | $            |         |   |  | $ | 15,719 
|Related party payables                                                                 |  |                |        |                                   |   | 314,588                               |  |              | 54,278  |  |              | (368,866 | ) |  |   |       
|Accrued compensation                                                                   |  |                |        |                                   |   | 4,025                                 |  |              | 2,097   |  |              |         |   |  |   | 6,122  
|Accrued taxes, including taxes on income                                               |  |                |        |                                   |   | 391                                   |  |              | 857     |  |              |         |   |  |   | 1,248  
|Accrued interest                                                                       |  |                | 6       |                                   |   | 1,058                                 |  |              | 27      |  |              |         |   |  |   | 1,091  
|Other current liabilities                                                              |  |                |        |                                   |   | 4,318                                 |  |              | 2,728   |  |              |         |   |  |   | 7,046  
|Current portion of long-term obligations                                               |  |                | 1,000   |                                   |   | 57                                    |  |              | 2,548   |  |              |         |   |  |   | 3,605  
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total current liabilities                                                              |  |                | 1,419   |                                   |   | 333,289                               |  |              | 68,989  |  |              | (368,866 | ) |  |   | 34,831 
|Noncurrent liabilities                                                                 |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Long-term obligations, net of current portion                                          |  |                | 298,088 |                                   |   | 155                                   |  |              | 20,141  |  |              |         |   |  |   | 318,384
|Noncurrent liabilities                                                                 |  |                |        |                                   |   |                                      |  |              | 517     |  |              |         |   |  |   | 517    
|Deferred income taxes                                                                  |  |                |        |                                   |   | 2,952                                 |  |              | 4,495   |  |              | (1,923   | ) |  |   | 5,524  
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total noncurrent liabilities                                                           |  |                | 298,088 |                                   |   | 3,107                                 |  |              | 25,153  |  |              | (1,923   | ) |  |   | 324,425
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total liabilities                                                                      |  |                | 299,507 |                                   |   | 336,396                               |  |              | 94,142  |  |              | (370,789 | ) |  |   | 359,256
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Minority interest                                                                      |  |                |        |                                   |   |                                      |  |              |        |  |              |         |   |  |   |       
|Contingencies and commitments                                                          |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Stockholders equity:                                                                  |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Common stock; $.01 par value; 1,000 shares authorized and outstanding                  |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Additional capital                                                                     |  |                | 107,000 |                                   |   | 63,001                                |  |              | 74,300  |  |              | (137,301 | ) |  |   | 107,000
|Accumulated other comprehensive income - cumulative translation adjustment, net of tax |  |                | 2,431   |                                   |   | 3                                     |  |              | 2,428   |  |              | (2,431   | ) |  |   | 2,431  
|Retained earnings (accumulated deficit)                                                |  |                | 840     |                                   |   | 1,373                                 |  |              | 2,365   |  |              | (3,738   | ) |  |   | 840    
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total stockholders equity                                                             |  |                | 110,271 |                                   |   | 64,377                                |  |              | 79,093  |  |              | (143,470 | ) |  |   | 110,271
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        
|Total liabilities and stockholders equity                                             |  | $              | 409,778 |                                   | $ | 400,773                               |  | $            | 173,235 |  | $            | (514,259 | ) |  | $ | 469,527
|                                                                                       |  |                |         |                                   |   |                                       |  |              |         |  |              |          |   |  |   |        



82



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##### Table of Contents

Supplemental Successor Consolidating Statement of Operations

For the Year Ended December 31, 2007



|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------------------------------ |  | -------------- | ------ | - | --------------------------------- | - | ------- | ------------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                   |  | Parent /Issuer |        |   | ConsolidatedGuarantorSubsidiaries |   |         | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net Sales                                                          |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Sales                                                              |  | $              |       |   |                                   | $ | 217,611 |                                       |  | $ | 91,198       |   |  | $            |       |   |  | $ | 308,809 |  
|Sales to related parties                                           |  |                |       |   |                                   |   | 3,522   |                                       |  |   | 2,676        |   |  |              | (6,198 | ) |  |   |        |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total net sales                                                    |  |                |       |   |                                   |   | 221,133 |                                       |  |   | 93,874       |   |  |              | (6,198 | ) |  |   | 308,809 |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Costs and expenses                                                 |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Cost of goods sold                                                 |  |                |       |   |                                   |   | 139,951 |                                       |  |   | 71,379       |   |  |              | (6,198 | ) |  |   | 205,132 |  
|Selling, general and administrative expenses                       |  |                | 1,934  |   |                                   |   | 35,896  |                                       |  |   | 8,725        |   |  |              |       |   |  |   | 46,555  |  
|Depreciation and amortization                                      |  |                |       |   |                                   |   | 17,602  |                                       |  |   | 6,087        |   |  |              |       |   |  |   | 23,689  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income from (loss on) operations                                   |  |                | (1,934 | ) |                                   |   | 27,684  |                                       |  |   | 7,683        |   |  |              |       |   |  |   | 33,433  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Non-operating expenses                                             |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Related party interest expense                                     |  |                |       |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|Interest expense, net                                              |  |                | 3,463  |   |                                   |   | 30,937  |                                       |  |   | 2,529        |   |  |              |       |   |  |   | 36,929  |  
|Other (income) expense, net                                        |  |                | (3,376 | ) |                                   |   | (954    | )                                     |  |   | 4,827        |   |  |              |       |   |  |   | 497     |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total non-operating expenses                                       |  |                | 87     |   |                                   |   | 29,983  |                                       |  |   | 7,356        |   |  |              |       |   |  |   | 37,426  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in net income of subsidiaries                               |  |                | 484    |   |                                   |   |        |                                       |  |   |             |   |  |              | (484   | ) |  |   |        |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations before income taxes         |  |                | (1,537 | ) |                                   |   | (2,299  | )                                     |  |   | 327          |   |  |              | (484   | ) |  |   | (3,993  | )
|(Benefit) provision for taxes on income                            |  |                | 602    |   |                                   |   | (2,374  | )                                     |  |   | 590          |   |  |              |       |   |  |   | (1,182  | )
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations                             |  |                | (2,139 | ) |                                   |   | 75      |                                       |  |   | (263         | ) |  |              | (484   | ) |  |   | (2,811  | )
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) discontinued operations                              |  |                |       |   |                                   |   |        |                                       |  |   | 842          |   |  |              |       |   |  |   | 842     |  
|(Benefit) provision for taxes on income on discontinued operations |  |                |       |   |                                   |   |        |                                       |  |   | 170          |   |  |              |       |   |  |   | 170     |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                  |  | $              | (2,139 | ) |                                   | $ | 75      |                                       |  | $ | 409          |   |  | $            | (484   | ) |  | $ | (2,139  | )
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  

Supplemental Successor Consolidating Statement of Operations

For the Year Ended December 31, 2006



|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------------------------------ |  | -------------- | ------ | - | --------------------------------- | - | ------- | ------------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                   |  | Parent /Issuer |        |   | ConsolidatedGuarantorSubsidiaries |   |         | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net Sales                                                          |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Sales                                                              |  | $              |       |   |                                   | $ | 212,221 |                                       |  | $ | 64,055       |   |  | $            |       |   |  | $ | 276,276 |  
|Sales to related parties                                           |  |                |       |   |                                   |   | 3,477   |                                       |  |   | 2,547        |   |  |              | (6,024 | ) |  |   |        |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total net sales                                                    |  |                |       |   |                                   |   | 215,698 |                                       |  |   | 66,602       |   |  |              | (6,024 | ) |  |   | 276,276 |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Costs and expenses                                                 |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Cost of goods sold                                                 |  |                |       |   |                                   |   | 135,592 |                                       |  |   | 50,944       |   |  |              | (6,024 | ) |  |   | 180,512 |  
|Selling, general and administrative expenses                       |  |                | 1,872  |   |                                   |   | 31,100  |                                       |  |   | 4,941        |   |  |              |       |   |  |   | 37,913  |  
|Depreciation and amortization                                      |  |                |       |   |                                   |   | 16,037  |                                       |  |   | 4,024        |   |  |              |       |   |  |   | 20,061  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income from (loss on) operations                                   |  |                | (1,872 | ) |                                   |   | 32,969  |                                       |  |   | 6,693        |   |  |              |       |   |  |   | 37,790  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Non-operating expenses                                             |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Related party interest expense                                     |  |                |       |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|Interest expense, net                                              |  |                | 1,937  |   |                                   |   | 30,839  |                                       |  |   | 2,236        |   |  |              |       |   |  |   | 35,012  |  
|Other (income) expense, net                                        |  |                | 806    |   |                                   |   | (576    | )                                     |  |   | (5           | ) |  |              |       |   |  |   | 225     |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total non-operating expenses                                       |  |                | 2,743  |   |                                   |   | 30,263  |                                       |  |   | 2,231        |   |  |              |       |   |  |   | 35,237  |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in net income of subsidiaries                               |  |                | 3,765  |   |                                   |   |        |                                       |  |   |             |   |  |              | (3,765 | ) |  |   |        |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations before income taxes         |  |                | (850   | ) |                                   |   | 2,706   |                                       |  |   | 4,462        |   |  |              | (3,765 | ) |  |   | 2,553   |  
|(Benefit) provision for taxes on income                            |  |                | (1,775 | ) |                                   |   | 1,311   |                                       |  |   | 1,809        |   |  |              |       |   |  |   | 1,345   |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations                             |  |                | 925    |   |                                   |   | 1,395   |                                       |  |   | 2,653        |   |  |              | (3,765 | ) |  |   | 1,208   |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) discontinued operations                              |  |                |       |   |                                   |   |        |                                       |  |   | (480         | ) |  |              |       |   |  |   | (480    | )
|(Benefit) provision for taxes on income on discontinued operations |  |                |       |   |                                   |   |        |                                       |  |   | (197         | ) |  |              |       |   |  |   | (197    | )
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                  |  | $              | 925    |   |                                   | $ | 1,395   |                                       |  | $ | 2,370        |   |  | $            | (3,765 | ) |  | $ | 925     |  
|                                                                   |  |                |        |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  



83



---

##### Table of Contents

Supplemental Successor Consolidating Statement of Operations

For the One-Day Ended December 31, 2005



|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ---- | - | --------------------------------- | - | ------- | ------------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                                              |  | Parent /Issuer |      |   | ConsolidatedGuarantorSubsidiaries |   |         | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net Sales                                                                                     |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Sales                                                                                         |  | $              |     |   |                                   | $ |        |                                       |  | $ |             |   |  | $            |       |   |  | $ |        |  
|Sales to related parties                                                                      |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total net sales                                                                               |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Costs and expenses                                                                            |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Cost of goods sold                                                                            |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|Selling, general and administrative expenses                                                  |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|Depreciation and amortization                                                                 |  |                |     |   |                                   |   | 35      |                                       |  |   | 7            |   |  |              |       |   |  |   | 42      |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income from (loss on) operations                                                              |  |                |     |   |                                   |   | (35     | )                                     |  |   | (7           | ) |  |              |       |   |  |   | (42     | )
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Non-operating expenses                                                                        |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Related party interest expense                                                                |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|Interest expense, net                                                                         |  |                | 97   |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   | 97      |  
|Other (income) expense, net                                                                   |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total non-operating expenses                                                                  |  |                | 97   |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   | 97      |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in net income of subsidiaries                                                          |  |                | (26  | ) |                                   |   |        |                                       |  |   |             |   |  |              | 26     |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations before income taxes                                    |  |                | (123 | ) |                                   |   | (35     | )                                     |  |   | (7           | ) |  |              | 26     |   |  |   | (139    | )
|(Benefit) provision for taxes on income                                                       |  |                | (38  | ) |                                   |   | (15     | )                                     |  |   | (1           | ) |  |              |       |   |  |   | (54     | )
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations                                                        |  |                | (85  | ) |                                   |   | (20     | )                                     |  |   | (6           | ) |  |              | 26     |   |  |   | (85     | )
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) discontinued operations                                                         |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|(Benefit) provision for taxes on income on discontinued operations                            |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                                             |  | $              | (85  | ) |                                   | $ | (20     | )                                     |  | $ | (6           | ) |  | $            | 26     |   |  | $ | (85     | )
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|                                                                                             
|Supplemental Predecessor Combining Statement of Income For the Period Ended December 30, 2005 | 
|                                                                                              |  |                |      |   |                                  
|                                                                                              |  | Parent/ Issuer |      |   | ConsolidatedGuarantorSubsidiaries |   |         | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net Sales                                                                                     |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Sales                                                                                         |  | $              |     |   |                                   | $ | 211,524 |                                       |  | $ | 43,406       |   |  | $            |       |   |  | $ | 254,930 |  
|Sales to related parties                                                                      |  |                |     |   |                                   |   | 9,035   |                                       |  |   | 2,382        |   |  |              | (6,019 | ) |  |   | 5,398   |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total net sales                                                                               |  |                |     |   |                                   |   | 220,559 |                                       |  |   | 45,788       |   |  |              | (6,019 | ) |  |   | 260,328 |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Costs and expenses                                                                            |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Cost of goods sold                                                                            |  |                |     |   |                                   |   | 146,395 |                                       |  |   | 30,550       |   |  |              | (6,019 | ) |  |   | 170,926 |  
|Selling, general and administrative expenses                                                  |  |                |     |   |                                   |   | 29,320  |                                       |  |   | 3,312        |   |  |              |       |   |  |   | 32,632  |  
|Depreciation and amortization                                                                 |  |                |     |   |                                   |   | 13,675  |                                       |  |   | 2,740        |   |  |              |       |   |  |   | 16,415  |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income from (loss on) operations                                                              |  |                |     |   |                                   |   | 31,169  |                                       |  |   | 9,186        |   |  |              |       |   |  |   | 40,355  |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Non-operating expenses                                                                        |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Related party interest expense                                                                |  |                |     |   |                                   |   | 6,767   |                                       |  |   | (336         | ) |  |              |       |   |  |   | 6,431   |  
|Interest expense, net                                                                         |  |                |     |   |                                   |   |        |                                       |  |   | 10           |   |  |              |       |   |  |   | 10      |  
|Other (income) expense, net                                                                   |  |                |     |   |                                   |   | 1,312   |                                       |  |   | 145          |   |  |              |       |   |  |   | 1,457   |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Total non-operating expenses                                                                  |  |                |     |   |                                   |   | 8,079   |                                       |  |   | (181         | ) |  |              |       |   |  |   | 7,898   |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in net income of subsidiaries                                                          |  |                |     |   |                                   |   |        |                                       |  |   |             |   |  |              |       |   |  |   |        |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations before income taxes                                    |  |                |     |   |                                   |   | 23,090  |                                       |  |   | 9,367        |   |  |              |       |   |  |   | 32,457  |  
|(Benefit) provision for taxes on income                                                       |  |                |     |   |                                   |   | 9,171   |                                       |  |   | 3,519        |   |  |              |       |   |  |   | 12,690  |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) on continuing operations                                                        |  |                |     |   |                                   |   | 13,919  |                                       |  |   | 5,848        |   |  |              |       |   |  |   | 19,767  |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) discontinued operations                                                         |  |                |     |   |                                   |   |        |                                       |  |   | 94           |   |  |              |       |   |  |   | 94      |  
|(Benefit) provision for taxes on income on discontinued operations                            |  |                |     |   |                                   |   |        |                                       |  |   | 67           |   |  |              |       |   |  |   | 67      |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                                             |  | $              |     |   |                                   | $ | 13,919  |                                       |  | $ | 5,875        |   |  | $            |       |   |  | $ | 19,794  |  
|                                                                                              |  |                |      |   |                                   |   |         |                                       |  |   |              |   |  |              |        |   |  |   |         |  



84



---

##### Table of Contents

Supplemental Successor Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2007



|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|----------------------------------------------- |  | -------------- | ------- | - | --------------------------------- | - | ------ | ------------------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | ------- | -
|                                                |  | Parent /Issuer |         |   | ConsolidatedGuarantorSubsidiaries |   |        | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash provided by operations                     |  | $              | 5,238   |   |                                   | $ | 8,285  |                                       |  | $ | 10,287       |   |              | $ |  |  | $ | 23,810  |  
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Investing activities:                           |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Capital expenditures                            |  |                |        |   |                                   |   | (8,913 | )                                     |  |   | (2,195       | ) |              |   |  |  |   | (11,108 | )
|Proceeds from sales of assets                   |  |                |        |   |                                   |   | 1,500  |                                       |  |   | (872         | ) |              |   |  |  |   | 628     |  
|Business acquisitions, net of cash acquired     |  |                | (28,520 | ) |                                   |   |       |                                       |  |   | (742         | ) |              |   |  |  |   | (29,262 | )
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash used in investing activities               |  |                | (28,520 | ) |                                   |   | (7,413 | )                                     |  |   | (3,809       | ) |              |   |  |  |   | (39,742 | )
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Financing activities:                           |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Deferred financing fees                         |  |                | (65     | ) |                                   |   |       |                                       |  |   |             |   |              |   |  |  |   | (65     | )
|Borrowings on acquisition facility              |  |                | 40,000  |   |                                   |   |       |                                       |  |   |             |   |              |   |  |  |   | 40,000  |  
|Payments on senior secured notes                |  |                | (1,238  | ) |                                   |   |       |                                       |  |   | (216         | ) |              |   |   |  |   | (1,454  | )
|Payments on other long-term debt                |  |                |        |   |                                   |   | (90    | )                                     |  |   | (1,970       | ) |              |   |  |  |   | (2,060  | )
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash provided by (used in) financing activities |  |                | 38,697  |   |                                   |   | (90    | )                                     |  |   | (2,186       | ) |              |   |  |  |   | 36,421  |  
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Effect of exchange rate changes on cash         |  |                |        |   |                                   |   |       |                                       |  |   | 1,320        |   |              |   |  |  |   | 1,320   |  
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Net change in cash and cash equivalents         |  |                | 15,415  |   |                                   |   | 782    |                                       |  |   | 5,612        |   |              |   |  |  |   | 21,809  |  
|                                                |  |                |         |   |                                  
|Cash and cash equivalents, beginning of period  |  |                | 2,100   |   |                                   |   | 2,286  |                                       |  |   | 8,272        |   |              |   |  |  |   | 12,658  |  
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash and cash equivalents, end of period        |  | $              | 17,515  |   |                                   | $ | 3,068  |                                       |  | $ | 13,884       |   |              | $ |  |  | $ | 34,467  |  
|                                                |  |                |         |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  

Supplemental Successor Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2006



|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|----------------------------------------------- |  | -------------- | ------ | - | --------------------------------- | - | ------ | ------------------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | ------- | -
|                                                |  | Parent /Issuer |        |   | ConsolidatedGuarantorSubsidiaries |   |        | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash provided by operations                     |  | $              | 1,309  |   |                                   | $ | 6,809  |                                       |  | $ | 12,084       |   |              | $ |  |  | $ | 20,202  |  
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Investing activities:                           |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Capital expenditures                            |  |                |       |   |                                   |   | (7,435 | )                                     |  |   | (1,215       | ) |              |   |  |  |   | (8,650  | )
|Proceeds from sales of assets                   |  |                |       |   |                                   |   | 2,060  |                                       |  |   |             |   |              |   |  |  |   | 2,060   |  
|Business acquisitions, net of cash acquired     |  |                |       |   |                                   |   |       |                                       |  |   | (4,424       | ) |              |   |  |  |   | (4,424  | )
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash used in investing activities               |  |                |       |   |                                   |   | (5,375 | )                                     |  |   | (5,639       | ) |              |   |  |  |   | (11,014 | )
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Financing activities:                           |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Deferred financing fees                         |  |                | (218   | ) |                                   |   |       |                                       |  |   |             |   |              |   |  |  |   | (218    | )
|Net borrowings on lines of credit               |  |                |       |   |                                   |   |       |                                       |  |   | 1,600        |   |              |   |  |  |   | 1,600   |  
|Payments on senior secured notes                |  |                | (996   | ) |                                   |   |       |                                       |  |   | (206         | ) |              |   |   |  |   | (1,202  | )
|Payments on other long-term debt                |  |                |       |   |                                   |   |       |                                       |  |   | (672         | ) |              |   |  |  |   | (672    | )
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash provided by (used in) financing activities |  |                | (1,214 | ) |                                   |   |       |                                       |  |   | 722          |   |              |   |  |  |   | (492    | )
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Effect of exchange rate changes on cash         |  |                |       |   |                                   |   |       |                                       |  |   | (119         | ) |              |   |  |  |   | (119    | )
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Net change in cash and cash equivalents         |  |                | 95     |   |                                   |   | 1,434  |                                       |  |   | 7,048        |   |              |   |  |  |   | 8,577   |  
|                                                |  |                |        |   |                                  
|Cash and cash equivalents, beginning of period  |  |                | 2,005  |   |                                   |   | 851    |                                       |  |   | 1,225        |   |              |   |  |  |   | 4,081   |  
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash and cash equivalents, end of period        |  | $              | 2,100  |   |                                   | $ | 2,285  |                                       |  | $ | 8,273        |   |              | $ |  |  | $ | 12,658  |  
|                                                |  |                |        |   |                                   |   |        |                                       |  |   |              |   |              |   |   |  |   |         |  



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##### Table of Contents

Supplemental Successor Condensed Consolidating Statement of Cash Flows

For the One-Day Ended December 31, 2005



|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|----------------------------------------------- |  | -------------- | -------- | - | --------------------------------- | - | ------------------------------------- |  | ------------ | ----- | ------------ | - | - |  | - | -------- | -
|                                                |  | Parent /Issuer |          |   | ConsolidatedGuarantorSubsidiaries |   | ConsolidatedNon-GuarantorSubsidiaries |  | Eliminations |       | Consolidated |  
|Cash provided by operations                     |  | $              |         |   |                                   | $ | 851                                   |  | $            |      |              | $ |  |  | $ | 851      |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Investing activities:                           |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Capital expenditures                            |  |                |         |   |                                   |   |                                      |  |              |      |              |   |  |  |   |         |  
|Proceeds from sales of assets                   |  |                |         |   |                                   |   |                                      |  |              |      |              |   |  |  |   |         |  
|Business acquisitions, net of cash acquired     |  |                | (412,505 | ) |                                   |   |                                      |  |              |      |              |   |  |  |   | (412,505 | )
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Cash used in investing activities               |  |                | (412,505 | ) |                                   |   |                                      |  |              |      |              |   |  |  |   | (412,505 | )
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Financing activities:                           |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Common Stock Issuance                           |  |                | 107,000  |   |                                   |   |                                      |  |              |      |              |   |  |  |   | 107,000  |  
|Borrowings on senior secured credit facility    |  |                | 118,700  |   |                                   |   |                                      |  |              |      |              |   |  |  |   | 118,700  |  
|Proceeds from senior subordinated notes         |  |                | 200,000  |   |                                   |   |                                      |  |              |      |              |   |  |  |   | 200,000  |  
|Deferred financing fees                         |  |                | (11,190  | ) |                                   |   |                                      |  |              |      |              |   |  |  |   | (11,190  | )
|Net borrowings on lines of credit               |  |                |         |   |                                   |   |                                      |  |              |      |              |   |  |  |   |         |  
|Payments on senior secured notes                |  |                |         |   |                                   |   |                                      |  |              |      |              |   |   |  |   |         |  
|Payments on long-term debt, net                 |  |                |         |   |                                   |   |                                      |  |              |      |              |   |  |  |   |         |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Cash provided by (used in) financing activities |  |                | 414,510  |   |                                   |   |                                      |  |              |      |              |   |  |  |   | 414,510  |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Effect of exchange rate changes on cash         |  |                |         |   |                                   |   |                                      |  |              |      |              |   |  |  |   |         |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Net change in cash and cash equivalents         |  |                | 2,005    |   |                                   |   | 851                                   |  |              |      |              |   |  |  |   | 2,856    |  
|                                                |  |                |          |   |                                  
|Cash and cash equivalents, beginning of period  |  |                |         |   |                                   |   |                                      |  |              | 1,225 |              |   |  |  |   | 1,225    |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  
|Cash and cash equivalents, end of period        |  | $              | 2,005    |   |                                   | $ | 851                                   |  | $            | 1,225 |              | $ |  |  | $ | 4,081    |  
|                                                |  |                |          |   |                                   |   |                                       |  |              |       |              |   |   |  |   |          |  



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##### Table of Contents

Supplemental Predecessor Condensed Consolidating Statement of Cash Flows

For the Period Ended December 30, 2005



|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|----------------------------------------------- |  | -------------- | - | --------------------------------- | - | ------- | ------------------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | ------- | -
|                                                |  | Parent /Issuer |   | ConsolidatedGuarantorSubsidiaries |   |         | ConsolidatedNon-GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash provided by operations                     |  | $              |  |                                   | $ | 11,440  |                                       |  | $ | 3,106        |   |              | $ |  |  | $ | 14,546  |  
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Investing activities:                           |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Capital expenditures                            |  |                |  |                                   |   | (13,284 | )                                     |  |   | (657         | ) |              |   |  |  |   | (13,941 | )
|Proceeds from sales of assets                   |  |                |  |                                   |   | 570     |                                       |  |   |             |   |              |   |  |  |   | 570     |  
|Business acquisitions, net of cash acquired     |  |                |  |                                   |   |        |                                       |  |   | (15,446      | ) |              |   |  |  |   | (15,446 | )
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash used in investing activities               |  |                |  |                                   |   | (12,714 | )                                     |  |   | (16,103      | ) |              |   |  |  |   | (28,817 | )
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Financing activities:                           |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Net changes in short-term borrowings            |  |                |  |                                   |   | 3,173   |                                       |  |   | 14,312       |   |              |   |  |  |   | 17,485  |  
|Contributions of minority interest holder       |  |                |  |                                   |   | 221     |                                       |  |   |             |   |              |   |  |  |   | 221     |  
|Payments on long-term debt, net                 |  |                |  |                                   |   | (342    | )                                     |  |   |             |   |              |   |  |  |   | (342    | )
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash provided by (used in) financing activities |  |                |  |                                   |   | 3,052   |                                       |  |   | 14,312       |   |              |   |  |  |   | 17,364  |  
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Effect of exchange rate changes on cash         |  |                |  |                                   |   |        |                                       |  |   | (49          | ) |              |   |  |  |   | (49     | )
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Net change in cash and cash equivalents         |  |                |  |                                   |   | 1,778   |                                       |  |   | 1,266        |   |              |   |  |  |   | 3,044   |  
|                                                |  |                |   |                                   |  
|Cash and cash equivalents, beginning of period  |  |                |  |                                   |   |        |                                       |  |   | 828          |   |              |   |  |  |   | 828     |  
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  
|Cash and cash equivalents, end of period        |  | $              |  |                                   | $ | 1,778   |                                       |  | $ | 2,094        |   |              | $ |  |  | $ | 3,872   |  
|                                                |  |                |   |                                   |   |         |                                       |  |   |              |   |              |   |   |  |   |         |  



|T. | Revisions
|-- | ---------

On February 28, 2007, the Company sold
its controlling interest in Mozaic to a third party. The historical results of Mozaic are presented as discontinued operations for all years presented in accordance with SFAS 144.

During 2007, the Company identified certain 2006 non-income tax related errors, which resulted in a $432 overstatement of costs of goods sold. We assessed
the materiality of these errors on the 2006 quarters and year ended December 31, 2006, in accordance with the SECs Staff Accounting Bulletin No. 99 (SAB 99) and concluded that these errors were not material to those periods.
However, because the correction of these errors in the 2007 financial statements would be material to 2007 results, in accordance with the SECs Staff Accounting Bulletin No. 108 (SAB 108), the 2006 financial statements have been
revised to correct the immaterial errors within the appropriate prior periods The revision to the 2006 financial statements resulted in a reduction in cost of goods sold of $432 and an increase in income tax expense of $129.



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##### Table of Contents

Schedule IIValuation and Qualifying Accounts



|                                 |  |                                 |  |                              |       |                            |   |                           |  |   |                                  |   |                        |   |       |  |   |      
|-------------------------------- |  | ------------------------------- |  | ---------------------------- | ----- | -------------------------- | - | ------------------------- |  | - | -------------------------------- | - | ---------------------- | - | ----- |  | - | -----
|                                 |  |                                 |  | BALANCE ATBEGINNINGOF PERIOD |       | ADDITIONSCHARGED TOEXPENSE |   | WRITE-OFFSTO THEALLOWANCE |  |   | CHANGES DUETO PURCHASEACCOUNTING |   | BALANCE ATEND OFPERIOD
|                                 |  |                                 |  | (IN THOUSANDS)              
|ALLOWANCE FOR DOUBTFUL ACCOUNTS  |  |                                 |  |                              |       |                            |   |                           |  |   |                                  |   |                        |   |       | 
|                                 |  |                                 |  |                              |       |                           
|Successor                        |  | Year ended December 31, 2007    |  | $                            | 1,422 |                            | $ | 1,236                     |  | $ | (1,828                           | ) |                        | $ |      |  | $ | 830  
|                                 |  | Year ended December 31, 2006    |  |                              | 1,362 |                            |   | 1340                      |  |   | (1,484                           | ) |                        |   | 204   |  |   | 1,422
|                                 |  | One-day ended December 31, 2005 |  |                              |      |                            |   |                          |  |   |                                 |   |                        |   | 1,362 |  |   | 1,362
|                                 |  |                                 |  |                              |       |                           
|                                 |  |                                 |  |                              |       |                            |   |                           |  |   |                                  |   |                        |   |       |  |   |      
|                                 |  |                                 |  |                              |       |                           
|Predecessor                      |  | Period ended December 30, 2005  |  | $                            | 1,091 |                            | $ | 1,638                     |  | $ | (1,650                           | ) |                        | $ | 282   |  | $ | 1,361
|                                 |  |                                 |  |                              |      
|DEFERRED TAX VALUATION ALLOWANCE |  |                                 |  |                              |       |                            |   |                           |  |   |                                  |   |                        |   |       | 
|                                 |  |                                 |  |                              |       |                           
|Successor                        |  | Year ended December 31, 2007    |  | $                            | 297   |                            | $ | 409                       |  | $ |                                 |   |                        | $ |      |  | $ | 706  
|                                 |  | Year ended December 31, 2006    |  |                              |      |                            |   | 297                       |  |   |                                 |   |                        |   |      |  |   | 297  
|                                 |  | One-day ended December 31, 2005 |  |                              |      |                            |   |                          |  |   |                                 |   |                        |   |      |  |   |     
|                                 |  |                                 |  |                              |       |                           
|                                 |  |                                 |  |                              |       |                            |   |                           |  |   |                                  |   |                        |   |       |  |   |      
|                                 |  |                                 |  |                              |       |                           
|Predecessor                      |  | Period ended December 30, 2005  |  | $                            | 198   |                            |   |                          |  |   | (140                             | ) |                        |   |      |  | $ | 58   



88