UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
  Washington,
D.C. 20549
  
  FORM
10-Q
  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
  For
the quarterly period ended March 29, 2008
  Commission
file number 1-12551
  
  CENVEO,
INC.
 (Exact
name of Registrant as specified in its charter.)
  COLORADO
              84-1250533(State
      or other jurisdiction of
                incorporation
      or organization)
              (I.R.S.
      Employer Identification No.)ONE
      CANTERBURY GREEN
                201
      BROAD STREETSTAMFORD,
      CT
              06901(Address
      of principal executive offices)
              (Zip
      Code)203-595-3000(Registrant’s
      telephone number, including area
code)
  
 
 
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x
  No o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.   Large accelerated filer x   Accelerated
filer o
  Non-accelerated filer o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o  No
x
  As of May
1, 2008 the registrant had 53,836,448 shares of common stock
outstanding.
  
 
  
 
  
  
  PART
I. FINANCIAL INFORMATION
  Item
      1.   Financial
Statements
  CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (in
thousands)
 (Unaudited)
  March
      29, 2008
              
              
              December
      29, 2007AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              13,055
              
              
              $
              15,882Accounts
      receivable, net
              
              
              307,505
              
              
              
              344,634Inventories
              
              
              172,060
              
              
              
              162,908Assets
      held for sale
              
              
              4,278
              
              
              
              —Prepaid
      and other current assets
              
              
              66,320
              
              
              
              73,358Total
      current assets
              
              
              563,218
              
              
              
              596,782Property,
      plant and equipment, net
              
              
              416,281
              
              
              
              428,341Goodwill
              
              
              668,738
              
              
              
              669,802Other
      intangible assets, net
              
              
              268,447
              
              
              
              270,622Other
      assets, net
              
              
              29,673
              
              
              
              37,175Total
      assets
              
              $
              1,946,357
              
              
              $
              2,002,722Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
              
              $
              16,961
              
              
              $
              18,752Accounts
      payable
              
              
              160,192
              
              
              
              165,458Accrued
      compensation and related liabilities
              
              
              48,732
              
              
              
              47,153Other
      current liabilities
              
              
              88,667
              
              
              
              79,554Total
      current liabilities
              
              
              314,552
              
              
              
              310,917Long-term
      debt
              
              
              1,378,790
              
              
              
              1,425,885Deferred
      income taxes
              
              
              47,540
              
              
              
              55,181Other
      liabilities
              
              
              117,177
              
              
              
              111,413Commitments
      and contingencies
                Shareholders’
      equity:Preferred
      stock
              
              
              —
              
              
              
              —Common
      stock
              
              
              537
              
              
              
              537Paid-in
      capital
              
              
              257,221
              
              
              
              254,241Retained
      deficit
              
              
              (152,338
              )
              
              
              (148,939
              )Accumulated
      other comprehensive loss
              
              
              (17,122
              )
              
              
              (6,513
              )Total
      shareholders’ equity
              
              
              88,298
              
              
              
              99,326Total
      liabilities and shareholders’ equity
              
              $
              1,946,357
              
              
              $
              2,002,722
  See notes
to condensed consolidated financial statements.
  1
   CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in
thousands, except per share data)
 (Unaudited)
  Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007As
      RestatedNet
      sales
              
              $
              534,328
              
              
              $
              414,714Cost
      of sales
              
              
              436,298
              
              
              
              332,536Selling,
      general and administrative
              
              
              63,126
              
              
              
              49,484Amortization
      of intangible assets
              
              
              2,175
              
              
              
              1,830Restructuring,
      impairment and other charges
              
              
              9,749
              
              
              
              2,625Operating
      income
              
              
              22,980
              
              
              
              28,239Interest
      expense, net
              
              
              26,978
              
              
              
              16,282Loss
      on early extinguishment of debt
              
              
              —
              
              
              
              8,700Other
      expense, net
              
              
              461
              
              
              
              222(Loss)
      income from continuing operations before income taxes
              
              
              (4,459
              )
              
              
              3,035Income
      tax (benefit) expense
              
              
              (1,716
              )
              
              
              1,255(Loss)
      income from continuing operations
              
              
              (2,743
              )
              
              
              1,780(Loss)
      income from discontinued operations, net of taxes
              
              
              (656
              )
              
              
              16,293Net
      (loss) income
              
              $
              (3,399
              )
              
              $
              18,073(Loss)
      income per share - basic:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.31Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.34(Loss)
      income per share - diluted:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.30Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.33Weighted
      average shares:Basic
              
              
              53,715
              
              
              
              53,525Diluted
              
              
              53,715
              
              
              
              54,572
  See notes
to condensed consolidated financial statements.
  2
  CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands)
 (Unaudited)
 Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007As
      RestatedCash
      flows from operating activities:Net
      (loss) income
              
              $
              (3,399
              )
              
              $
              18,073Adjustments
      to reconcile net income to net cash provided by operating
      activities:Gain
      on sale of discontinued operations, net of taxes
              
              
              —
              
              
              
              (16,287
              )Loss
      (income) from discontinued operations, net of taxes
              
              
              656
              
              
              
              (6
              )Depreciation
      and amortization, excluding non-cash interest expense
              
              
              18,013
              
              
              
              11,766Non-cash
      interest expense, net
              
              
              390
              
              
              
              379Loss
      on early extinguishment of debt
              
              
              —
              
              
              
              8,700Stock-based
      compensation provision
              
              
              2,692
              
              
              
              2,265Non-cash
      restructuring, impairment and other charges
              
              
              3,456
              
              
              
              (473
              )Deferred
      income taxes
              
              
              (1,775
              )
              
              
              1,621Other
      non-cash charges, net
              
              
              2,846
              
              
              
              1,431Changes
      in operating assets and liabilities, excluding the effects of acquired
      businesses:Accounts
      receivable
              
              
              35,195
              
              
              
              9,635Inventories
              
              
              (10,106
              )
              
              
              (4,387
              )Accounts
      payable and accrued compensation and related liabilities
              
              
              (3,442
              )
              
              
              (1,506
              )Other
      working capital changes
              
              
              12,955
              
              
              
              (4,833
              )Other,
      net
              
              
              (3,050
              )
              
              
              3,312Net
      cash provided by continuing operating activities
              
              
              54,431
              
              
              
              29,690Net
      cash provided by discontinued operating activities
              
              
              —
              
              
              
              2,198Net
      cash provided by operating activities
              
              
              54,431
              
              
              
              31,888Cash
      flows from investing activities:Cost
      of business acquisitions, net of cash acquired
              
              
              —
              
              
              
              (329,300
              )Capital
      expenditures
              
              
              (9,097
              )
              
              
              (7,115
              )Proceeds
      from sale of property, plant and equipment
              
              
              348
              
              
              
              2,347Net
      cash used in investing activities of continuing operations
              
              
              (8,749
              )
              
              
              (334,068
              )Proceeds
      from the sale of discontinued operations
              
              
              —
              
              
              
              73,628Net
      cash used in investing activities
              
              
              (8,749
              )
              
              
              (260,440
              )Cash
      flows from financing activities:Proceeds
      from issuance of Term Loans
              
              
              —
              
              
              
              620,000(Repayments)
      borrowings under Revolving Credit Facility, net
              
              
              (45,200
              )
              
              
              29,400Proceeds
      from exercise of stock options
              
              
              288
              
              
              
              185Repayment
      of Term Loan B
              
              
              —
              
              
              
              (324,188
              )Repayment
      of Cadmus revolving senior bank credit facility
              
              
              —
              
              
              
              (70,100
              )Repayment
      of 83⁄8% Senior Subordinated Notes
              
              
              —
              
              
              
              (20,875
              )Repayment
      of Term Loans
              
              
              (1,800
              )
              
              
              —Repayments
      of other long-term debt
              
              
              (1,806
              )
              
              
              (166
              )Payment
      of refinancing fees, redemption premiums and expenses
              
              
              —
              
              
              
              (7,489
              )Payment
      of debt issuance costs
              
              
              —
              
              
              
              (886
              )Net
      cash (used in) provided by financing activities
              
              
              (48,518
              )
              
              
              225,881Effect
      of exchange rate changes on cash and cash equivalents of continuing
      operations
              
              
              9
              
              
              
              —Net
      decrease in cash and cash equivalents
              
              
              (2,827
              )
              
              
              (2,671
              )Cash
      and cash equivalents at beginning of year
              
              
              15,882
              
              
              
              10,558Cash
      and cash equivalents at end of quarter
              
              $
              13,055
              
              
              $
              7,887
  See notes
to condensed consolidated financial statements.
  3
   CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  1.
Basis of Presentation
  The
accompanying unaudited condensed consolidated financial statements (the
“Financial Statements”) of Cenveo, Inc. and subsidiaries (collectively, “Cenveo”
or the “Company”) have been prepared in accordance with Rule 10-01 of Regulation
S-X promulgated by the Securities and Exchange Commission (the “SEC”) and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America (“GAAP”). In the opinion of the Company, however, the Financial
Statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company’s financial position,
results of operations and cash flows as of and for the three month period ended
March 29, 2008. The results of operations for the three month period ended March
29, 2008 are generally not indicative of the results to be expected for the full
year, primarily due to seasonality and the Company’s debt-financed acquisition
of Rex Corporation (“Rex”) on March 31, 2008 (Note 16). These Financial
Statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 29, 2007 (the “Form 10-K”).
  It is the
Company’s practice to close its quarters on the Saturday closest to the last day
of the calendar quarter so that each quarter has the same number of days and 13
full weeks. The reporting periods consist of the 13 weeks ended on March 29,
2008 and March 31, 2007. Prior to fiscal 2008, the Company reported its
results as ending on the calendar quarter end.
  New
Accounting Pronouncements
  SFAS
157
 
 In
September 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard No. 157, Fair Value Measurements
(“SFAS 157”), which defines fair value, establishes a framework for measuring
fair value under GAAP, and expands disclosures about fair value measurements.
SFAS 157 applies under other accounting pronouncements that require or permit
fair value measurements and was effective for the Company on December 30, 2007.
However, the FASB deferred the effective date of SFAS 157, until the beginning
of the Company’s 2009 fiscal year, as it relates to fair value measurement
requirements for nonfinancial assets and liabilities that are not remeasured at
fair value on a recurring basis. These include goodwill, other nonamortizable
intangible assets and unallocated purchase price for recent acquisitions. The
Company’s adoption of SFAS 157 on December 30, 2007 did not have a material
impact on its condensed consolidated financial statements.
 
 The fair
value framework requires the categorization of assets and liabilities into three
levels based upon the assumptions (inputs) used to price the assets or
liabilities. Level 1 provides the most reliable measure of fair value, whereas
Level 3 generally requires significant management judgment. As of March 29,
2008, the Company’s only fair valued financial item under the scope of SFAS
157 is its liability for interest rate swaps (Note 12), which are based on
LIBOR index inputs and are categorized as Level 2. The Company's interest rate
swaps are valued using discounted cash flows, as no quoted market prices exist
for the specific instruments. The primary inputs to the valuation are maturity
and interest rate yield curves, specifically three-month LIBOR, using
commercially available market sources.
  SFAS
159
  In
February 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No.
115 (“SFAS 159”), which permits entities to choose to measure many
financial instruments and certain other items at fair value. SFAS 159 is
effective for the Company on December 30, 2007. The Company did not elect the
fair value option for existing eligible items; therefore, SFAS 159 had no impact
on the Company’s condensed consolidated financial statements at December 30,
2007.
  SFAS
141R
  In
December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS
141R”). SFAS 141R establishes revised principles and requirements for how the
Company will recognize and measure assets and liabilities acquired in a business
combination. SFAS 141R is effective for business combinations completed on or
after the beginning of the Company’s 2009 fiscal year. The Company will adopt
SFAS 141R at the beginning of its 2009 fiscal year, as required, and is
currently evaluating the impact of such adoption on its financial
statements.
  4
   CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  1.
Basis of Presentation (Continued)
  SFAS
160
  In
December 2007, the FASB issued SFAS 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
interests in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160
is effective at the beginning of the Company’s 2009 fiscal year. The Company is
currently evaluating the impact of adopting SFAS 160.
 
 2.  Restatement
  During
the fourth quarter of 2007, senior management became aware of unsupported
accounting entries that were recorded by a plant controller who had
responsibility for two of the Company’s envelope plants. As a result, the
Company’s audit committee initiated an internal review conducted by outside
counsel under the direction of the audit committee that was completed prior to
the filing of the Form 10-K in March 2008 (Note 10). The review concluded that
the accounting irregularities were isolated to those two envelope plants and
were committed solely by that former plant controller.  The accounting
irregularities included the recording of unsupported journal entries to enhance
the plants’ financial results through a reduction of cost of goods sold and
increases to accounts receivable and inventories and decreases to accounts
payable and other current liabilities.  As a result, the Company
recorded adjustments to restate its historical condensed consolidated financial
statements for the three month period ended March 31, 2007 which decreased
operating income by approximately $1.0 million. As part of this restatement, the
Company made an adjustment for an immaterial error in its statement of cash
flows.
  The following tables summarize the
effects of the restatement (Note 1) on the line items included in the balance
sheet, statement of operations and cash flows as of and for the three months
ended March 31, 2007.
  
 Condensed
      consolidated balance sheet line items (in thousands)March
      31, 2007As
      Reported
              
              
              As
      RestatedAccounts
      receivable, net
              
              $
              286,603
              
              
              $
              284,884Inventories
              
              
              135,485
              
              
              
              134,132Total
      current assets
              
              
              470,228
              
              
              
              467,156Total
      assets
              
              
              1,589,719
              
              
              
              1,586,647Accounts
      payable
              
              
              145,321
              
              
              
              145,473Other
      current liabilities
              
              
              82,729
              
              
              
              82,496Total
      current liabilities
              
              
              303,027
              
              
              
              302,946Other
      liabilities
              
              
              75,735
              
              
              
              76,645Retained
      deficit
              
              
              (167,746
              )
              
              
              (171,647
              )Total
      shareholders' equity
              
              
              77,589
              
              
              
              73,688Total
      liabilities and shareholders' equity
              
              
              1,589,719
              
              
              
              1,586,647
  5
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  2.  Restatement
(Continued)
 
 Condensed
      consolidated statement of operations line items (in thousands, except per
      share data)Three
      Months EndedMarch
      31, 2007As
      Reported
              
              As
      RestatedCost
      of sales
              
              $
              331,490
              
              
              $
              332,536Operating
      income
              
              
              29,285
              
              
              
              28,239Income
      from continuing operations before taxes
              
              
              4,081
              
              
              
              3,035Income
      tax expense
              
              
              1,684
              
              
              
              1,255Income
      from continuing operations
              
              
              2,397
              
              
              
              1,780Net
      income
              
              
              18,690
              
              
              
              18,073Income
      per share – basic:Continuing
      operations
              
              
              0.04
              
              
              
              0.03Net
      income
              
              
              0.35
              
              
              
              0.34Income
      per share – diluted:Continuing
      operations
              
              
              0.04
              
              
              
              0.03Net
      income
              
              
              0.34
              
              
              
              0.33
 
 Condensed
      consolidated statement of cash flows line items
                (in
      thousands)Three
      Months EndedMarch
      31, 2007As
      Reported
              
              
              As
      RestatedNet
      income
              
              $
              18,690
              
              
              $
              18,073Accounts
      receivable
              
              
              9,102
              
              
              
              9,635Inventories
              
              
              (4,868
              )
              
              
              (4,387
              )Accounts
      payable and accrued compensation and related liabilities
              
              
              (1,545
              )
              
              
              (1,506
              )Other
      working capital changes
              
              
              4,201
              
              
              
              (4,833
              )Net
      cash provided by continuing operating activities
              
              
              38,288
              
              
              
              29,690Net
      cash provided by discontinued operating activities
              
              
              —
              
              
              
              2,198Net
      cash provided by  operating activities
              
              
              38,288
              
              
              
              31,888Proceeds
      from the sale of discontinued operations
              
              
              67,228
              
              
              
              73,628Net
      cash provided by investing activities of discontinued
      operations
              
              
              67,228
              
              
              
              73,628Net
      cash used in investing activities
              
              
              (266,840
              )
              
              
              (260,440
              )
  
  3.
Stock-Based Compensation
  The
Company did not issue any form of stock-based compensation in the first quarter
of 2008. In addition, none of the Company’s stock-based compensation awards
vested in the first quarter of 2008. The only change to the Company’s
stock-based compensation awards from the amounts presented as of December 29,
2007 was the exercise of 36,000 stock options for shares of the Company’s common
stock and the cancellation or forfeiture of 366,875 stock options and 113,750
restricted stock units. See Note 13 in the Form 10-K.
  Total
stock-based compensation expense recognized in selling, general and
administrative expenses in the Company’s condensed consolidated statements of
operations was $2.7 million and $2.3 million for the three months ended March
29, 2008 and March 31, 2007, respectively.
  6
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   4.
Acquisitions
  Commercial
Envelope
 
 On August
30, 2007, the Company acquired all of the stock of Commercial
Envelope.  Commercial Envelope is one of the largest envelope
manufacturers in the United States, with approximately $160.0 million in annual
revenues prior to its acquisition by the Company.  The total cash
consideration in connection with the Commercial Envelope acquisition, excluding
assumed debt of approximately $20.3 million, was approximately $218.0 million,
including approximately $3.8 million of related expenses. Commercial Envelope’s
results of operations and cash flows have been included in the Company’s
consolidated statements of operations and cash flows from the August 30, 2007
acquisition date.
 
 Pro
Forma Operating Data
 
 The
following supplemental pro forma consolidated summary operating data of the
Company for the three month period ended March 31, 2007 has been prepared by
adjusting the historical data as set forth in the accompanying condensed
consolidated statements of operations to give effect to the Commercial Envelope
acquisition as if it had been consummated as of December 31, 2006 (in thousands,
except per share amounts):
 
 Three
      Months EndedMarch
      31, 2007As
                Restated
              
              
              Pro
                FormaNet
      sales
              
              $
              414,714
              
              
              $
              456,471Operating
      income
              
              
              28,239
              
              
              
              34,688Income
      from continuing operations
              
              
              1,780
              
              
              
              2,776Net
      income
              
              
              18,073
              
              
              
              19,069Income
      per share – basic:Continuing
      operations
              
              $
              0.03
              
              
              $
              0.05Discontinued
      operations
              
              
              0.31
              
              
              
              0.31Net
      income
              
              $
              0.34
              
              
              $
              0.36Income
      per share – diluted:Continuing
      operations
              
              $
              0.03
              
              
              $
              0.05Discontinued
      operations
              
              
              0.30
              
              
              
              0.30Net
      income
              
              $
              0.33
              
              
              $
              0.35
  The pro forma information is presented
for comparative purposes only and does not purport to be indicative of the
Company’s actual consolidated results of operations had the Commercial Envelope
acquisition actually been consummated as of December 31, 2006, or of the
Company’s expected future results of operations.
  ColorGraphics
  On July
9, 2007, the Company acquired all of the stock of
ColorGraphics.  ColorGraphics is one of the largest commercial
printers in the western United States, with annual revenues of approximately
$170.0 million prior to its acquisition by the Company.  ColorGraphics
prints annual reports, booklets, brochures, advertising inserts, direct mail and
other corporate communication materials.  The total cash consideration
in connection with the ColorGraphics acquisition, excluding assumed debt of
approximately $28.6 million, was approximately $71.7 million, including
approximately $0.9 million of related expenses. ColorGraphics’ results of
operations and cash flows have been included in the Company’s condensed
consolidated statements of operations and cash flows from July 1, 2007. Pro
forma results for the three month period ended March 31, 2007, assuming the
acquisition of ColorGraphics had been made on December 31, 2006, has not been
presented since the effect would not be material.
  7
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   4.
Acquisitions (Continued)
  Cadmus
  On March
7, 2007, the Company acquired all of the stock of Cadmus for $24.75 per share,
by merging an indirect wholly owned subsidiary of Cenveo with and into Cadmus.
As a result, Cadmus became an indirect wholly owned subsidiary of Cenveo.
Following the merger, Cadmus was merged into Cenveo Corporation, a direct wholly
owned subsidiary of the Company. Cadmus is one of the world’s largest providers
of content management and print offerings to scientific, technical and medical
journal publishers, one of the largest periodicals printers in North America,
and a leading provider of specialty packaging and promotional printing products,
with annual sales of approximately $450.0 million prior to its acquisition by
the Company. The total cash consideration in connection with the Cadmus
acquisition, excluding assumed debt of approximately $210.1 million, was
approximately $248.7 million, consisting of: (1) $228.9 million in cash for all
of the common stock of Cadmus, (2) payments of $17.7 million for vested stock
options and restricted shares of Cadmus and for change in control provisions in
Cadmus’ incentive plans and (3) $2.1 million of related expenses.
  The
following table summarizes the final allocation of the purchase price of Cadmus
to the assets acquired and liabilities assumed in the acquisition (in
thousands):
  Purchase
Price Allocation
  
 As
      of
                March
      7, 2007Current
      assets
              
              $
              96,942Property,
      plant and equipment
              
              
              136,268Goodwill
              
              
              229,450Other
      intangible assets
              
              
              111,600Other
      assets
              
              
              6,856Total
      assets acquired
              
              
              581,116Current
      liabilities, excluding current portion of long-term debt
              
              
              56,868Long-term
      debt, including current maturities
              
              
              210,063Deferred
      income taxes
              
              
              7,277Other
      liabilities
              
              
              58,201Total
      liabilities assumed
              
              
              332,409Net
      assets acquired
              
              
              248,707Less
      cash acquired
              
              
              —Cost
      of Cadmus acquisition, less cash acquired
              
              $
              248,707
 
  The
Cadmus acquisition resulted in $229.5 million of goodwill (Note 8), none of
which is deductible for income tax purposes, and which was assigned entirely to
the Company’s commercial printing segment.
  Cadmus’
results of operations and cash flows have been included in the Company’s
condensed consolidated statements of operations and cash flows from the March 7,
2007 acquisition date.
  8
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   4.
Acquisitions (Continued)
  Pro
Forma Operating Data
  The
following supplemental pro forma consolidated summary operating data of the
Company for the three month period ended March 31, 2007 has been prepared by
adjusting the historical data as set forth in the accompanying condensed
consolidated statements of operations to give effect to the Cadmus acquisition
as if it had been consummated as of December 31, 2006 (in thousands, except per
share amounts):
  
 Three
      Months EndedMarch
      31, 2007As
                Restated
              
              
              Pro
                FormaNet
      sales
              
              $
              414,714
              
              
              $
              496,531Operating
      income
              
              
              28,239
              
              
              
              31,564Income
      (loss) from continuing operations
              
              
              1,780
              
              
              
              (3,176
              )Net
      income
              
              
              18,073
              
              
              
              13,117Income
      (loss) per share – basic:Continuing
      operations
              
              $
              0.03
              
              
              $
              (0.06
              )Discontinued
      operations
              
              
              0.31
              
              
              
              0.31Net
      income
              
              $
              0.34
              
              
              $
              0.25Income
      (loss) per share – diluted:Continuing
      operations
              
              $
              0.03
              
              
              $
              (0.06
              )Discontinued
      operations
              
              
              0.30
              
              
              
              0.31Net
      income
              
              $
              0.
      33
              
              
              $
              0.25
  The pro
forma information is presented for comparative purposes only and does not
purport to be indicative of the Company’s actual consolidated results of
operations had the Cadmus acquisition actually been consummated as of December
31, 2006, or of the Company’s expected future results of
operations.
  Printegra
 
 On
February 12, 2007, the Company acquired all of the stock of Printegra, with
annual sales of approximately $90.0 million prior to its acquisition by the
Company. Printegra produces printed business communication documents regularly
consumed by small and large businesses, including laser cut sheets, envelopes,
business forms, security documents and labels. The final aggregate purchase
price for Printegra was approximately $78.1 million, which included $0.5 million
of related expenses. Printegra’s results of operations and cash flows have been
included in the Company’s condensed consolidated statements of operations and
cash flows from the February 12, 2007 acquisition date.  Pro forma
results for the three month period ended March 31, 2007, assuming the
acquisition of Printegra had been made on December 31, 2006, have not been
presented since the effect would not be material.
  Deferred
Taxes
  In
connection with the acquisition of Commercial Envelope, the Company recorded a
net deferred tax liability of $20.7 million relating to indefinite lived
intangible assets, after considering the release of $21.5 million of existing
valuation allowances against goodwill recorded.  In connection with
the acquisition of ColorGraphics, the Company recorded a net deferred tax
liability of $6.8 million.  In connection with the acquisition of
Cadmus, the Company recorded a net deferred tax liability of $1.5 million. In
connection with the acquisition of Printegra, the Company recorded a net
deferred tax liability of $7.4 million and released existing valuation
allowances of a like amount against goodwill recorded, in accordance with SFAS
109.
  9
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   4.
Acquisitions (Continued)
  Liabilities
Related to Exit Activities
  The
Company recorded liabilities in the purchase price allocation in connection with
its plans to exit certain activities of the above acquisitions. A summary of the
activity recorded for these liabilities is as follows (in
thousands):
  Lease
                Termination
                Costs
              
              
              Employee
                Separation
                Costs
              
              
              Other
                Exit
      Costs
              
              
              TotalLiabilities
      recorded at December 29, 2007
              
              $
              3,453
              
              
              $
              495
              
              
              $
              351
              
              
              $
              4,299Accruals,
      net
              
              
              —
              
              
              
              —
              
              
              
              149
              
              
              
              149Payments
              
              
              (380
              )
              
              
              (119
              )
              
              
              (338
              )
              
              
              (837
              )Balance
      at March 29, 2008
              
              $
              3,073
              
              
              $
              376
              
              
              $
              162
              
              
              $
              3,611
 
 
  5.
Discontinued Operations
  On March
13, 2007, the Company sold its remaining 28.6% economic and voting interest in
the Supremex Index Fund (the “Fund”) for $67.2 million and recorded a pre-tax
gain of approximately $25.6 million. Income from discontinued operations for the
three months ended March 31, 2007 includes equity income of $2.2 million related
to the Company’s retained interest in the Fund from January 1, 2007 through the
March 13, 2007 date of sale.
  The
following table summarizes certain statement of operations data for discontinued
operations (in thousands):
  Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007Other
      (expense) income
              
              $
              (400
              )
              
              $
              2,198Income
      tax expense
              
              
              256
              
              
              
              1,294Gain
      on sale of discontinued operations, net of taxes of $10,196 in
      2007
              
              
              —
              
              
              
              15,389(Loss)
      income from discontinued operations, net of taxes
              
              
              (656
              )
              
              
              16,293
 
 
  6.
Inventories
  Inventories
by major category are as follows (in thousands):
  March
      29,
                2008
              
              
              December
      29,
                2007Raw
      materials
              
              $
              68,810
              
              
              $
              71,075Work
      in process
              
              
              38,183
              
              
              
              34,875Finished
      goods
              
              
              65,067
              
              
              
              56,958$
              172,060
              
              
              $
              162,908
 
 
   10
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   7. Property, Plant and
Equipment
  Property,
      plant and equipment are as follows (in
  thousands):
  March
      29,
                2008
              
              
              December
      29,
                2007Land
      and land improvements
              
              $
              22,271
              
              
              $
              23,734Buildings
      and building improvements
              
              
              108,320
              
              
              
              109,673Machinery
      and equipment
              
              
              592,139
              
              
              
              577,763Furniture
      and fixtures
              
              
              12,443
              
              
              
              12,430Construction
      in progress
              
              
              9,307
              
              
              
              18,664744,480
              
              
              
              742,264Accumulated
      depreciation
              
              
              (328,199
              )
              
              
              (313,923
              )$
              416,281
              
              
              $
              428,341
  8.
Goodwill and Other Intangible Assets
  The
changes in the carrying amount of goodwill by reportable segment (Note 14) are
as follows (in thousands):
  Envelopes,
      Forms
                and
      Labels
              
              
              Commercial
                Printing
              
              
              TotalBalance
      as of December 29, 2007
              
              $
              305,025
              
              
              $
              364,777
              
              
              $
              669,802Acquisitions
              
              
              501
              
              
              
              (1,308
              )
              
              
              (807
              )Foreign
      currency translation
              
              
              —
              
              
              
              (257
              )
              
              
              (257
              )Balance
      as of March 29, 2008
              
              $
              305,526
              
              
              $
              363,212
              
              
              $
              668,738
  Other
intangible assets are as follows (in thousands):
  
 March
      29, 2008
              
              
              December
      29, 2007Gross
                Carrying
                Amount
              
              
              Accumulated
                Amortization
              
              
              Net
                Carrying
                Amount
              
              
              Gross
                Carrying
                Amount
              
              
              Accumulated
                Amortization
              
              
              Net
                Carrying
                AmountIntangible
      assets with determinable lives:Customer
      relationships
              
              $
              153,806
              
              
              $
              (24,141
              )
              
              $
              129,665
              
              
              $
              153,806
              
              
              $
              (22,303
              )
              
              $
              131,503Trademarks
      and tradenames
              
              
              20,521
              
              
              
              (3,442
              )
              
              
              17,079
              
              
              
              20,521
              
              
              
              (3,251
              )
              
              
              17,270Patents
              
              
              3,028
              
              
              
              (1,554
              )
              
              
              1,474
              
              
              
              3,028
              
              
              
              (1,487
              )
              
              
              1,541Non-compete
      agreements
              
              
              2,316
              
              
              
              (1,406
              )
              
              
              910
              
              
              
              2,316
              
              
              
              (1,336
              )
              
              
              980Other
              
              
              768
              
              
              
              (369
              )
              
              
              399
              
              
              
              768
              
              
              
              (360
              )
              
              
              408180,439
              
              
              
              (30,912
              )
              
              
              149,527
              
              
              
              180,439
              
              
              
              (28,737
              )
              
              
              151,702Intangible
      assets with indefinite lives:Trademarks
              
              
              118,200
              
              
              
              —
              
              
              
              118,200
              
              
              
              118,200
              
              
              
              —
              
              
              
              118,200Pollution
      credits
              
              
              720
              
              
              
              —
              
              
              
              720
              
              
              
              720
              
              
              
              —
              
              
              
              720Total
              
              $
              299,359
              
              
              $
              (30,912
              )
              
              $
              268,447
              
              
              $
              299,359
              
              
              $
              (28,737
              )
              
              $
              270,622
  As of
March 29, 2008, the weighted average remaining amortization period for customer
relationships was 18 years, trademarks and tradenames was 26 years, patents was
six years, non-compete agreements was four years and other was 27
years.
  Total
pre-tax amortization expense for the five years ending March 30, 2013 is
estimated to be as follows:  $8.8 million, $8.8 million, $8.7 million,
$8.6 million and $8.5 million, respectively.
  11
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   9.
Long-Term Debt
  Long-term
debt is as follows (in thousands):
  March
      29,
                2008
              
              
              December
      29,
                2007Term
      Loan, due 2013
              
              $
              713,300
              
              
              $
              715,10077⁄8%
      Senior Subordinated Notes, due 2013
              
              
              320,000
              
              
              
              320,00083⁄8%
      Senior Subordinated Notes, due 2014 ($104.1 million outstanding principal
      amount)
              
              
              106,140
              
              
              
              106,220Senior
      Unsecured Loan, due 2015
              
              
              175,000
              
              
              
              175,000Revolving
      Credit Facility, due 2012
              
              
              46,000
              
              
              
              91,200Other
              
              
              35,311
              
              
              
              37,1171,395,751
              
              
              
              1,444,637Less
      current maturities
              
              
              (16,961
              )
              
              
              (18,752
              )Long-term
      debt
              
              $
              1,378,790
              
              
              $
              1,425,885
  As of
March 29, 2008, the Company was in compliance with all covenants under its debt
agreements.
  Interest
Rate Swaps
  The
Company enters into interest rate swap agreements to hedge interest rate
exposure of notional amounts of its floating rate debt.  As of March
29, 2008 and December 29, 2007, the Company had $595.0 million of such interest
rate swaps.  The Company’s hedges of interest rate risk were
designated and documented at inception as cash flow hedges and are evaluated for
effectiveness at least quarterly. Effectiveness of the hedges is calculated by
comparing the fair value of the derivatives to hypothetical derivatives that
would be a perfect hedge of floating rate debt. The accounting for gains and
losses associated with changes in the fair value of cash flow hedges and the
effect on the Company’s condensed consolidated financial statements will depend
on whether the hedge is highly effective in achieving offsetting changes in fair
value of cash flows of the liability hedged. As of March 29, 2008, the Company
does not anticipate reclassifying any ineffectiveness into its results of
operations for the next twelve months.
  10.
Restructuring, Impairment and Other Charges
  The
Company has two cost savings plans, the 2007 Cost Savings and Integration Plan
and the 2005 Cost Savings and Restructuring Plan.
  2007
Cost Savings and Integration Plan
  In 2007,
the Company formulated its preliminary cost savings and integration plan related
to its acquisition of Commercial Envelope, ColorGraphics, Cadmus and Printegra.
In connection with the implementation of this plan, during 2007, the Company
closed its envelope plant in O’Fallon, Missouri, its forms plant in Girard,
Kansas and commercial printing plants in San Francisco, California, Seattle,
Washington, and Philadelphia, Pennsylvania and integrated these operations into
acquired and other operations.  In the first quarter of 2008, the
Company continued the implementation of cost savings initiatives throughout its
operations and anticipates further headcount reductions and plant
closures.  The following tables and discussion present the details of
the expenses recognized in the three months ended March 29, 2008 as a result of
this plan.
  
  
  12
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  10.
Restructuring, Impairment and Other Charges (Continued)
  2008
Activity
  Restructuring
and impairment charges for the three months ended March 29, 2008 were as follows
(in thousands):
  Envelopes,
                Forms
      and
                Labels
              
              
              Commercial
                Printing
              
              
              TotalEmployee
      separation costs
              
              $
              813
              
              
              $
              730
              
              
              $
              1,543Asset
      impairments
              
              
              152
              
              
              
              —
              
              
              
              152Equipment
      moving expenses
              
              
              48
              
              
              
              67
              
              
              
              115Lease
      termination expenses
              
              
              294
              
              
              
              —
              
              
              
              294Building
      clean-up and other expenses
              
              
              155
              
              
              
              228
              
              
              
              383Total
      restructuring and impairment charges
              
              $
              1,462
              
              
              $
              1,025
              
              
              $
              2,487
  Envelopes, Forms and Labels.
As a result of the above closures and cost savings initiatives at other
locations, the segment incurred employee separation costs of $0.8 million
related to workforce reductions, asset impairment charges of $0.2 million
related to equipment taken out of service, lease termination expenses of $0.3
million and building clean-up and other related expenses of $0.2
million.
  Commercial Printing. As a
result of the above closures and cost savings initiatives at other locations,
the segment incurred employee separation costs of $0.7 million related to
workforce reductions, equipment moving expenses of $0.1 million for the
redeployment of equipment and building clean-up and other related expenses of
$0.2 million.
  A summary
of the activity charged to the restructuring liabilities as a result of the 2007
Cost Savings and Integration Plan is as follows (in thousands):
  
 Lease
                Termination
                Costs
              
              
              Employee
                Separation
                Costs
              
              
              Pension
                Withdrawal
                Liabilities
              
              
              TotalBalance
      at December 29, 2007
              
              $
              3,582
              
              
              $
              541
              
              
              $
              2,092
              
              
              $
              6,215Accruals,
      net
              
              
              294
              
              
              
              1,543
              
              
              
              —
              
              
              
              1,837Payments
              
              
              (923
              )
              
              
              (918
              )
              
              
              —
              
              
              
              (1,841
              )Balance
      at March 29, 2008
              
              $
              2,953
              
              
              $
              1,166
              
              
              $
              2,092
              
              
              $
              6,211
  
  2005
Cost Savings and Restructuring Plan
  In the
fourth quarter of 2007, the senior management team of Cenveo completed the
implementation of its 2005 Cost Savings and Restructuring Plan that it initiated
in September 2005, including the consolidation of the Company’s purchasing
activities and manufacturing platform, corporate and field human resources
reductions, streamlining information technology infrastructure and eliminating
all discretionary spending.  The following tables and discussion
present the details of the expenses recognized in the three months ended March
29, 2008 and March 31, 2007, as a result of this plan.
  
  
  
  
  
  13
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  10.
Restructuring, Impairment and Other Charges (Continued)
  2008
Activity
  Restructuring
and impairment charges for the three months ended March 29, 2008 were as follows
(in thousands):
  Envelopes,
                Forms
      and
                Labels
              
              
              Commercial
                Printing
              
              
              Corporate
              
              
              TotalEmployee
      separation costs
              
              $
              13
              
              
              $
              122
              
              
              $
              68
              
              
              $
              203Asset
      impairments, net of gain on sale
              
              
              —
              
              
              
              (476
              )
              
              
              —
              
              
              
              (476
              )Equipment
      moving expenses
              
              
              —
              
              
              
              322
              
              
              
              —
              
              
              
              322Lease
      termination expenses
              
              
              32
              
              
              
              —
              
              
              
              34
              
              
              
              66Building
      clean-up and other expenses
              
              
              148
              
              
              
              361
              
              
              
              —
              
              
              
              509Total
      restructuring and impairment charges
              
              $
              193
              
              
              $
              329
              
              
              $
              102
              
              
              $
              624
 
  Envelopes, Forms and
Labels.  The envelopes, forms and labels segment incurred
employee separation, lease termination and building clean-up and other expenses
of $0.2 million related to closed locations.
  Commercial
Printing.  The commercial printing segment incurred employee
separation costs of $0.1 million related to workforce reductions, gains on sale
of impaired assets of $0.5 million related to equipment sold, equipment moving
expenses of $0.3 million and building clean-up and other expenses of $0.4
million related to locations that were closed in 2007.
  2007
Activity
  Restructuring
and impairment charges for the three months ended March 31, 2007 were as follows
(in thousands):
  Envelopes,
                Forms
      and
                Labels
              
              
              Commercial
                Printing
              
              
              Corporate
              
              
              TotalEmployee
      separation costs
              
              $
              702
              
              
              $
              663
              
              
              $
              18
              
              
              $
              1,383Asset
      impairments, net of gain on sale
              
              
              (608
              )
              
              
              135
              
              
              
              —
              
              
              
              (473
              )Equipment
      moving expenses
              
              
              536
              
              
              
              112
              
              
              
              —
              
              
              
              648Lease
      termination expenses
              
              
              19
              
              
              
              66
              
              
              
              30
              
              
              
              115Building
      clean-up and other expenses
              
              
              113
              
              
              
              817
              
              
              
              22
              
              
              
              952Total
      restructuring and impairment charges
              
              $
              762
              
              
              $
              1,793
              
              
              $
              70
              
              
              $
              2,625
  Envelopes, Forms and Labels.
As a result of locations closed in 2006 and cost savings at other locations, the
envelopes, forms and labels segment incurred employee separation costs of $0.7
million related to workforce reductions, asset impairments, net of $(0.6)
million which primarily relates to the gain on sale of a facility, equipment
moving expenses of $0.5 million for the redeployment of equipment and building
clean-up and other expenses of $0.1 million.
  Commercial Printing. As a
result of locations closed in 2006 and 2005 and cost savings at other locations,
the commercial printing segment incurred employee separation costs of $0.7
million related to workforce reductions, asset impairment charges of $0.1
million for equipment taken out of service, equipment moving expenses of $0.1
million for the redeployment of equipment and $0.8 million of building clean-up
and other expenses.
 
 
 
 
 
  14
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 10.
Restructuring, Impairment and Other Charges (Continued)
 
 A summary
of the activity charged to the restructuring liabilities as a result of the 2005
Cost Savings and Restructuring Plan is as follows (in thousands):
  Lease
                Termination
                Costs
              
              
              Employee
                Separation
                Costs
              
              
              Pension
                Withdrawal
                Liabilities
              
              
              TotalBalance
      at December 29, 2007
              
              $
              4,793
              
              
              $
              1,163
              
              
              $
              297
              
              
              $
              6,253Accruals,
      net
              
              
              66
              
              
              
              203
              
              
              
              —
              
              
              
              269Payments
              
              
              (159
              )
              
              
              (1,008
              )
              
              
              —
              
              
              
              (1,167
              )Balance
      at March 29, 2008
              
              $
              4,700
              
              
              $
              358
              
              
              $
              297
              
              
              $
              5,355
  Other
Charges
  In
connection with the internal review conducted by outside counsel under the
direction of the Company’s audit committee, the Company incurred a non-recurring
charge of approximately $6.7 million related to professional fees.
  11.
Pension Plans
  The
components of the net periodic pension expense for the Company’s pension plans
and other postretirement benefit plans are as follows (in
thousands):
  
 Pension
      Plans
              
              
              Postretirement
      PlansThree
      Months Ended
              
              
              Three
      Months EndedMarch
      29,
                2008
              
              
              March
      31,
                2007
              
              
              March
      29,
                2008
              
              
              March
      31,
                2007Service
      cost
              
              $
              119
              
              
              $
              69
              
              
              $
              —
              
              
              $
              —Interest
      cost
              
              
              2,277
              
              
              
              873
              
              
              
              304
              
              
              
              238Expected
      return on plan assets
              
              
              (2,685
              )
              
              
              (925
              )
              
              
              —
              
              
              
              —Net
      amortization and deferral
              
              
              2
              
              
              
              124
              
              
              
              —
              
              
              
              —Recognized
      net actuarial loss
              
              
              56
              
              
              
              51
              
              
              
              —
              
              
              
              —Net
      periodic pension expense
              
              $
              (231
              )
              
              $
              192
              
              
              $
              304
              
              
              $
              238
  For the
three months ended March 29, 2008, the Company made contributions of $1.8
million to its pension plans and postretirement plans. The Company expects to
contribute approximately $9.2 million to its pension plans and postretirement
plans for the remainder of 2008.
  12.
Comprehensive (Loss) Income
  A summary
of comprehensive (loss) income is as follows (in thousands):
 
 Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007Net
      (loss) income
              
              $
              (3,399
              )
              
              $
              18,073Other
      comprehensive (loss) income:Unrealized
      (loss) gain on cash flow hedges
              
              
              (9,359
              )
              
              
              94Currency
      translation adjustment
              
              
              (1,250
              )
              
              
              (5,387
              )Comprehensive
      (loss) income
              
              $
              (14,008
              )
              
              $
              12,780
  As of
March 29, 2008, the Company had a $31.1 million liability relating to the
unrealized loss on cash flow hedges which is included in other liabilities in
its condensed consolidated balance sheet (Note 9). In connection with the sale
of its remaining investment in the Fund on March 13, 2007 (Note 5), the Company
reclassified $5.5 million of currency translation adjustment into discontinued
operations from other comprehensive income.
  15
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  13.
(Loss) Income per Share
  Basic
(loss) income per share is computed based upon the weighted average number of
common shares outstanding for the period. Diluted (loss) income per share
reflects the potential dilution that could occur if stock options, restricted
stock and restricted stock units (“RSUs”) to issue common stock were exercised
under the treasury stock method. The only Company securities as of March 29,
2008 that could dilute basic (loss) income per share for periods subsequent to
March 29, 2008 are (1) outstanding stock options, which are exercisable into
3,447,105 shares of the Company’s common stock and (2) 1,118,400 shares of
restricted stock and RSUs.
  The
following table sets forth the computation of basic and diluted (loss) income
per share (in thousands, except per share data):
  Three
      Months EndedMarch
      29,
                2008
              
              
              March
      31,
                2007Numerator
      for basic and diluted (loss) income per share:(Loss)
      income from continuing operations
              
              $
              (2,743
              )
              
              $
              1,780(Loss)
      income from discontinued operations, net of taxes
              
              
              (656
              )
              
              
              16,293Net
      (loss) income
              
              $
              (3,399
              )
              
              $
              18,073Denominator
      weighted average common shares outstanding:Basic
      shares
              
              
              53,715
              
              
              
              53,525Dilutive
      effect of stock options and RSUs
              
              
              —
              
              
              
              1,047Diluted
      shares
              
              
              53,715
              
              
              
              54,572(Loss)
      income per share - basic:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.31Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.34(Loss)
      income per share - diluted:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.30Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.33
  14.
Segment Information
  The
Company operates in two segments: the envelope, forms and labels segment and the
commercial printing segment. The envelopes, forms and labels segment specializes
in the design, manufacturing, printing and fulfillment of: (1) custom and direct
mail envelopes developed for the advertising, billing and remittance needs of a
variety of customers, including financial services companies; (2) custom labels
and specialty forms sold through an extensive network of resale distributors for
industries including food and beverage, manufacturing and pharmacy chains; and
(3) stock envelopes, labels and business forms generally sold to independent
distributors, office-products suppliers and office-products retail
chains.  The commercial printing segment provides print, design,
content management, fulfillment and distribution offerings, including: (1)
high-end printed materials, which includes a wide range of premium products for
major national and regional customers; (2) general commercial printing products
for regional and local customers; (3) scientific, technical and medical journals
and special interest and trade magazines for non-profit organizations,
educational institutions and specialty publishers; and (4) specialty packaging
and high quality promotional materials for multinational consumer products
companies.
  Operating
income of each segment includes substantially all costs and expenses directly
relating to the segment’s operations. Corporate expenses include general and
administrative expenses (Note 3).
  
  16
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  14.
Segment Information (Continued)
  The
following tables present certain segment information (in
thousands):
  Three
      Months EndedMarch
      29,
                2008
              
              
              March
      31,
                2007Net
      sales:Envelopes,
      forms and labels
              
              $
              238,137
              
              
              $
              211,470Commercial
      printing
              
              
              296,191
              
              
              
              203,244Total
              
              $
              534,328
              
              
              $
              414,714Operating
      income (loss):Envelopes,
      forms and labels
              
              $
              25,626
              
              
              $
              27,389Commercial
      printing
              
              
              11,278
              
              
              
              9,630Corporate
              
              
              (13,924
              )
              
              
              (8,780
              )Total
              
              $
              22,980
              
              
              $
              28,239Restructuring,
      impairment and other charges:Envelopes,
      forms and labels
              
              $
              1,655
              
              
              $
              762Commercial
      printing
              
              
              1,354
              
              
              
              1,793Corporate
              
              
              6,740
              
              
              
              70Total
              
              $
              9,749
              
              
              $
              2,625150Net
      sales by product line:Envelopes
              
              $
              165,668
              
              
              $
              144,358Commercial
      printing
              
              
              201,405
              
              
              
              176,040Journals
      and periodicals
              
              
              93,845
              
              
              
              26,431Labels
      and business forms
              
              
              73,410
              
              
              
              67,885Total
              
              $
              534,328
              
              
              $
              414,714Intercompany
      sales:Envelopes,
      forms and labels to commercial printing
              
              $
              1,234
              
              
              $
              2,966Commercial
      printing to envelopes, forms and labels
              
              
              1,514
              
              
              
              2,632Total
              
              $
              2,748
              
              
              $
              5,598
  March
      29,
                2008
              
              December
      29,
                2007Identifiable
      assets:Envelopes,
      forms and labels
              
              $
              814,129
              
              
              $
              833,337Commercial
      printing
              
              
              1,073,125
              
              
              
              1,105,832Corporate
              
              
              59,103
              
              
              
              63,553Total
              
              $
              1,946,357
              
              
              $
              2,002,722
  
  17
   CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information
 
 Cenveo is
a holding company (“Parent Company”) and is the ultimate parent of all Cenveo
subsidiaries. In January 2004, the Company’s wholly owned subsidiary, Cenveo
Corporation (the "Subsidiary Issuer"), issued 77⁄8% Notes and, in connection with
the acquisition of Cadmus, assumed Cadmus’ 83⁄8% Notes (collectively the
“Subsidiary Issuer Notes”), which are fully and unconditionally guaranteed, on a
joint and several basis, by the Parent Company and substantially all of its
wholly-owned subsidiaries (the “Guarantor Subsidiaries”). The limited numbers of
remaining subsidiaries (the “Non-Guarantor Subsidiaries”) are primarily
non-U.S., indirect wholly-owned subsidiaries of the Parent Company.
 
 Presented
below is condensed consolidating information for the Parent Company, the
Subsidiary Issuer, the Guarantor Subsidiaries and Non-Guarantor Subsidiaries for
the three months ended March 29, 2008 and March 31, 2007.  The
condensed consolidating financial information has been presented to show the
nature of assets held, results of operations and cash flows of the Parent
Company, the Subsidiary Issuer, the Guarantor Subsidiaries and Non-Guarantor
Subsidiaries, assuming the guarantee structure of the Subsidiary Issuer Notes
was in effect at the beginning of the periods presented.
  The
supplemental condensed consolidating financial information reflects the
investments of the Parent Company in the Subsidiary Issuer, the Guarantor
Subsidiaries and Non-Guarantor Subsidiaries using the equity method of
accounting. The Company’s primary transactions with its subsidiaries other than
the investment account and related equity in net loss of unconsolidated
subsidiaries are the intercompany payables and receivables between its
subsidiaries.
   
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  18
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING BALANCE SHEET
 March
29, 2008
 (in
thousands)
  Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedAssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              —
              
              
              $
              8,693
              
              
              $
              2,094
              
              
              $
              2,268
              
              
              $
              —
              
              
              $
              13,055Accounts
      receivable, net
              
              
              —
              
              
              
              154,081
              
              
              
              148,581
              
              
              
              4,843
              
              
              
              —
              
              
              
              307,505Inventories
              
              
              —
              
              
              
              95,224
              
              
              
              75,941
              
              
              
              895
              
              
              
              —
              
              
              
              172,060Assets
      held for sale
              
              
              —
              
              
              
              4,278
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              4,278Notes
      receivable from subsidiaries
              
              
              —
              
              
              
              39,425
              
              
              
              —
              
              
              
              —
              
              
              
              (39,425
              )
              
              
              —Prepaid
      and other current assets
              
              
              —
              
              
              
              49,304
              
              
              
              16,498
              
              
              
              518
              
              
              
              —
              
              
              
              66,320Total
      current assets
              
              
              —
              
              
              
              351,005
              
              
              
              243,114
              
              
              
              8,524
              
              
              
              (39,425
              )
              
              
              563,218Investment
      in subsidiaries
              
              
              88,298
              
              
              
              1,485,083
              
              
              
              3,065
              
              
              
              —
              
              
              
              (1,576,446
              )
              
              
              —Property,
      plant and equipment, net
              
              
              —
              
              
              
              163,661
              
              
              
              251,895
              
              
              
              725
              
              
              
              —
              
              
              
              416,281Goodwill
              
              
              —
              
              
              
              175,234
              
              
              
              493,504
              
              
              
              —
              
              
              
              —
              
              
              
              668,738Other
      intangible assets, net
              
              
              —
              
              
              
              9,415
              
              
              
              259,032
              
              
              
              —
              
              
              
              —
              
              
              
              268,447Other
      assets, net
              
              
              —
              
              
              
              23,102
              
              
              
              6,180
              
              
              
              391
              
              
              
              —
              
              
              
              29,673Total
      assets
              
              $
              88,298
              
              
              $
              2,207,500
              
              
              $
              1,256,790
              
              
              $
              9,640
              
              
              $
              (1,615,871
              )
              
              $
              1,946,357Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
              
              $
              —
              
              
              $
              7,571
              
              
              $
              9,390
              
              
              $
              —
              
              
              $
              —
              
              
              $
              16,961Accounts
      payable
              
              
              —
              
              
              
              97,379
              
              
              
              60,695
              
              
              
              2,118
              
              
              
              —
              
              
              
              160,192Accrued
      compensation and related liabilities
              
              
              —
              
              
              
              29,800
              
              
              
              18,932
              
              
              
              —
              
              
              
              —
              
              
              
              48,732Other
      current liabilities
              
              
              —
              
              
              
              72,384
              
              
              
              15,101
              
              
              
              1,182
              
              
              
              —
              
              
              
              88,667Intercompany
      payable (receivable)
              
              
              —
              
              
              
              505,841
              
              
              
              (509,359
              )
              
              
              3,518
              
              
              
              —
              
              
              
              —Notes
      payable to subsidiary issuer
              
              
              —
              
              
              
              —
              
              
              
              39,425
              
              
              
              —
              
              
              
              (39,425
              )
              
              
              —Total
      current liabilities
              
              
              —
              
              
              
              712,975
              
              
              
              (365,816
              )
              
              
              6,818
              
              
              
              (39,425
              )
              
              
              314,552Long-term
      debt
              
              
              —
              
              
              
              1,354,641
              
              
              
              24,149
              
              
              
              —
              
              
              
              —
              
              
              
              1,378,790Deferred
      income tax liability (asset)
              
              
              —
              
              
              
              (19,986
              )
              
              
              67,769
              
              
              
              (243
              )
              
              
              —
              
              
              
              47,540Other
      liabilities
              
              
              —
              
              
              
              71,572
              
              
              
              45,605
              
              
              
              —
              
              
              
              —
              
              
              
              117,177Shareholders’
      equity
              
              
              88,298
              
              
              
              88,298
              
              
              
              1,485,083
              
              
              
              3,065
              
              
              
              (1,576,446
              )
              
              
              88,298Total
      liabilities and shareholders’ equity
              
              $
              88,298
              
              
              $
              2,207,500
              
              
              $
              1,256,790
              
              
              $
              9,640
              
              
              $
              (1,615,871
              )
              
              $
              1,946,357
 
  
  
  
  
  19
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
 For
the three months ended March 29, 2008
 (in
thousands)
  
 Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedNet
      sales
              
              $
              —
              
              
              $
              260,292
              
              
              $
              269,624
              
              
              $
              4,412
              
              
              $
              —
              
              
              $
              534,328Cost
      of sales
              
              
              —
              
              
              
              218,786
              
              
              
              214,254
              
              
              
              3,258
              
              
              
              —
              
              
              
              436,298Selling,
      general and administrative
              
              
              —
              
              
              
              36,468
              
              
              
              26,507
              
              
              
              151
              
              
              
              —
              
              
              
              63,126Amortization
      of intangible assets
              
              
              —
              
              
              
              111
              
              
              
              2,064
              
              
              
              —
              
              
              
              —
              
              
              
              2,175Restructuring,
      impairment and other charges
              
              
              —
              
              
              
              9,708
              
              
              
              41
              
              
              
              —
              
              
              
              —
              
              
              
              9,749Operating
      income (loss)
              
              
              —
              
              
              
              (4,781
              )
              
              
              26,758
              
              
              
              1,003
              
              
              
              —
              
              
              
              22,980Interest
      expense, net
              
              
              —
              
              
              
              26,560
              
              
              
              437
              
              
              
              (19
              )
              
              
              —
              
              
              
              26,978Intercompany
      interest expense (income)
              
              
              —
              
              
              
              (944
              )
              
              
              944
              
              
              
              —
              
              
              
              —
              
              
              
              —Loss
      on early extinguishment of debt
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Other
      expense, net
              
              
              —
              
              
              
              186
              
              
              
              275
              
              
              
              —
              
              
              
              —
              
              
              
              461Income
      (loss) from continuing operations before income taxes and equity in income
      of unconsolidated subsidiaries
              
              
              —
              
              
              
              (30,583
              )
              
              
              25,102
              
              
              
              1,022
              
              
              
              —
              
              
              
              (4,459
              )Income
      tax expense (benefit)
              
              
              —
              
              
              
              (3,823
              )
              
              
              2,107
              
              
              
              —
              
              
              
              —
              
              
              
              (1,716
              )Income
      (loss) from continuing operations before equity in income of
      unconsolidated subsidiaries
              
              
              —
              
              
              
              (26,760
              )
              
              
              22,995
              
              
              
              1,022
              
              
              
              —
              
              
              
              (2,743
              )Equity
      in income of unconsolidated
                subsidiaries
              
              
              (3,399
              )
              
              
              24,017
              
              
              
              1,022
              
              
              
              —
              
              
              
              (21,640
              )
              
              
              —(Loss)
      income from continuing operations
              
              
              (3,399
              )
              
              
              (2,743
              )
              
              
              24,017
              
              
              
              1,022
              
              
              
              (21,640
              )
              
              
              (2,743
              )Loss
      from discontinued operations, net of taxes
              
              
              —
              
              
              
              (656
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (656
              )Net
      income (loss)
              
              $
              (3,399
              )
              
              $
              (3,399
              )
              
              $
              24,017
              
              
              $
              1,022
              
              
              $
              (21,640
              )
              
              $
              (3,399
              )
  
  
  
  
  
  
  
  
  
  
  20
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
 For
the three months ended March 29, 2008
 (in
thousands)
  Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-
                GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedCash
      flows from operating activities:Net
      cash provided by  operating activities
              
              $
              2,692
              
              
              $
              13,903
              
              
              $
              37,668
              
              
              $
              168
              
              
              $
              —
              
              
              $
              54,431Cash
      flows from investing activities:Intercompany
      note
              
              
              —
              
              
              
              683
              
              
              
              —
              
              
              
              —
              
              
              
              (683
              )
              
              
              —Capital
      expenditures
              
              
              —
              
              
              
              (1,712
              )
              
              
              (7,385
              )
              
              
              —
              
              
              
              —
              
              
              
              (9,097
              )Proceeds
      from sale of property, plant and equipment
              
              
              —
              
              
              
              195
              
              
              
              153
              
              
              
              —
              
              
              
              —
              
              
              
              348Net
      cash used in investing activities of continuing operations
              
              
              —
              
              
              
              (834
              )
              
              
              (7,232
              )
              
              
              —
              
              
              
              (683
              )
              
              
              (8,749
              )Cash
      flows from financing activities:Repayments
      under Revolving Credit Facility, net
              
              
              —
              
              
              
              (45,200
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (45,200
              )Proceeds
      from exercise of stock options
              
              
              288
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              288Repayments
      of Term Loans
              
              
              —
              
              
              
              (1,800
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (1,800
              )Repayments
      of other long-term debt
              
              
              —
              
              
              
              (97
              )
              
              
              (1,709
              )
              
              
              —
              
              
              
              —
              
              
              
              (1,806
              )Intercompany
      note
              
              
              —
              
              
              
              —
              
              
              
              (683
              )
              
              
              —
              
              
              
              683
              
              
              
              —Intercompany
      advances
              
              
              (2,980
              )
              
              
              29,630
              
              
              
              (26,841
              )
              
              
              191
              
              
              
              —
              
              
              
              —Net
      cash (used in) provided by financing activities
              
              
              (2,692
              )
              
              
              (17,467
              )
              
              
              (29,233
              )
              
              
              191
              
              
              
              683
              
              
              
              (48,518
              )Effect
      of exchange rate changes on cash and cash equivalents of continuing
      operations
              
              
              —
              
              
              
              —
              
              
              
              9
              
              
              
              —
              
              
              
              —
              
              
              
              9Net
      (decrease) increase in cash and cash quivalents
              
              
              —
              
              
              
              (4,398
              )
              
              
              1,212
              
              
              
              359
              
              
              
              —
              
              
              
              (2,827
              )Cash
      and cash equivalents at beginning of year
              
              
              —
              
              
              
              13,091
              
              
              
              882
              
              
              
              1,909
              
              
              
              —
              
              
              
              15,882Cash
      and cash equivalents at end of year
              
              $
              —
              
              
              $
              8,693
              
              
              $
              2,094
              
              
              $
              2,268
              
              
              $
              —
              
              
              $
              13,055
  
  
  
 
  
  
  
  
  
  
  
  21
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING BALANCE SHEET
 December
29, 2007
 (in
thousands)
  Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-
                GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedAssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              —
              
              
              $
              13,091
              
              
              $
              882
              
              
              $
              1,909
              
              
              $
              —
              
              
              $
              15,882Accounts
      receivable, net
              
              
              —
              
              
              
              164,815
              
              
              
              175,746
              
              
              
              4,073
              
              
              
              —
              
              
              
              344,634Inventories
              
              
              —
              
              
              
              89,259
              
              
              
              72,782
              
              
              
              867
              
              
              
              —
              
              
              
              162,908Notes
      receivable from subsidiaries
              
              
              —
              
              
              
              40,108
              
              
              
              —
              
              
              
              —
              
              
              
              (40,108
              )
              
              
              —Prepaid
      and other current assets
              
              
              —
              
              
              
              57,484
              
              
              
              15,160
              
              
              
              714
              
              
              
              —
              
              
              
              73,358Total
      current assets
              
              
              —
              
              
              
              364,757
              
              
              
              264,570
              
              
              
              7,563
              
              
              
              (40,108
              )
              
              
              596,782Investment
      in subsidiaries
              
              
              99,326
              
              
              
              1,461,662
              
              
              
              2,058
              
              
              
              —
              
              
              
              (1,563,046
              )
              
              
              —Property,
      plant and equipment, net
              
              
              —
              
              
              
              173,103
              
              
              
              254,378
              
              
              
              860
              
              
              
              —
              
              
              
              428,341Goodwill
              
              
              —
              
              
              
              175,220
              
              
              
              494,582
              
              
              
              —
              
              
              
              —
              
              
              
              669,802Other
      intangible assets, net
              
              
              —
              
              
              
              9,512
              
              
              
              261,110
              
              
              
              —
              
              
              
              —
              
              
              
              270,622Other
      assets, net
              
              
              —
              
              
              
              22,949
              
              
              
              13,833
              
              
              
              393
              
              
              
              —
              
              
              
              37,175Total
      assets
              
              $
              99,326
              
              
              $
              2,207,203
              
              
              $
              1,290,531
              
              
              $
              8,816
              
              
              $
              (1,603,154
              )
              
              $
              2,002,722Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
              
              $
              —
              
              
              $
              8,769
              
              
              $
              9,983
              
              
              $
              —
              
              
              $
              —
              
              
              $
              18,752Accounts
      payable
              
              
              —
              
              
              
              98,111
              
              
              
              65,130
              
              
              
              2,217
              
              
              
              —
              
              
              
              165,458Accrued
      compensation and related liabilities
              
              
              —
              
              
              
              23,792
              
              
              
              23,361
              
              
              
              —
              
              
              
              —
              
              
              
              47,153Other
      current liabilities
              
              
              —
              
              
              
              57,845
              
              
              
              20,495
              
              
              
              1,214
              
              
              
              —
              
              
              
              79,554Intercompany
      payable (receivable)
              
              
              —
              
              
              
              479,191
              
              
              
              (482,518
              )
              
              
              3,327
              
              
              
              —
              
              
              
              —Notes
      payable to subsidiary issuer
              
              
              —
              
              
              
              —
              
              
              
              40,108
              
              
              
              —
              
              
              
              (40,108
              )
              
              
              —Total
      current liabilities
              
              
              —
              
              
              
              667,708
              
              
              
              (323,441
              )
              
              
              6,758
              
              
              
              (40,108
              )
              
              
              310,917Long-term
      debt
              
              
              —
              
              
              
              1,400,620
              
              
              
              25,265
              
              
              
              —
              
              
              
              —
              
              
              
              1,425,885Deferred
      income tax liability (asset)
              
              
              —
              
              
              
              (17,162
              )
              
              
              72,343
              
              
              
              —
              
              
              
              —
              
              
              
              55,181Other
      liabilities
              
              
              —
              
              
              
              56,711
              
              
              
              54,702
              
              
              
              —
              
              
              
              —
              
              
              
              111,413Shareholders’
      equity
              
              
              99,326
              
              
              
              99,326
              
              
              
              1,461,662
              
              
              
              2,058
              
              
              
              (1,563,046
              )
              
              
              99,326Total
      liabilities and shareholders’ equity
              
              $
              99,326
              
              
              $
              2,207,203
              
              
              $
              1,290,531
              
              
              $
              8,816
              
              
              $
              (1,603,154
              )
              
              $
              2,002,722
 
  
  
  
  
  
  22
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
 For
the three months ended March 31, 2007
 (in
thousands)
  
 Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-
                GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedNet
      sales
              
              $
              —
              
              
              $
              305,607
              
              
              $
              108,216
              
              
              $
              891
              
              
              $
              —
              
              
              $
              414,714Cost
      of sales
              
              
              —
              
              
              
              248,417
              
              
              
              83,334
              
              
              
              785
              
              
              
              —
              
              
              
              332,536Selling,
      general and administrative
              
              
              —
              
              
              
              40,440
              
              
              
              9,000
              
              
              
              44
              
              
              
              —
              
              
              
              49,484Amortization
      of intangible assets
              
              
              —
              
              
              
              1,232
              
              
              
              598
              
              
              
              —
              
              
              
              —
              
              
              
              1,830Restructuring
      and impairment charges
              
              
              —
              
              
              
              2,593
              
              
              
              32
              
              
              
              —
              
              
              
              —
              
              
              
              2,625Operating
      income
              
              
              —
              
              
              
              12,925
              
              
              
              15,252
              
              
              
              62
              
              
              
              —
              
              
              
              28,239Interest
      expense, net
              
              
              —
              
              
              
              15,596
              
              
              
              687
              
              
              
              (1
              )
              
              
              —
              
              
              
              16,282Intercompany
      interest expense (income)
              
              
              —
              
              
              
              (687
              )
              
              
              687
              
              
              
              —
              
              
              
              —
              
              
              
              —Loss
      on early extinguishment of debt
              
              
              —
              
              
              
              8,681
              
              
              
              19
              
              
              
              —
              
              
              
              —
              
              
              
              8,700Other
      expense (income), net
              
              
              —
              
              
              
              318
              
              
              
              (98
              )
              
              
              2
              
              
              
              —
              
              
              
              222Income
      (loss) from continuing operations before income taxes and equity in income
      of unconsolidated subsidiaries
              
              
              —
              
              
              
              (10,983
              )
              
              
              13,957
              
              
              
              61
              
              
              
              —
              
              
              
              3,035Income
      tax expense (benefit)
              
              
              —
              
              
              
              (177
              )
              
              
              1,432
              
              
              
              —
              
              
              
              —
              
              
              
              1,255Income
      (loss) from continuing operations before equity in income of
      unconsolidated subsidiaries
              
              
              —
              
              
              
              (10,806
              )
              
              
              12,525
              
              
              
              61
              
              
              
              —
              
              
              
              1,780Equity
      in income of unconsolidatedsubsidiaries
              
              
              18,073
              
              
              
              12,586
              
              
              
              61
              
              
              
              —
              
              
              
              (30,720
              )
              
              
              —Income
      (loss) from continuing operations
              
              
              18,073
              
              
              
              1,780
              
              
              
              12,586
              
              
              
              61
              
              
              
              (30,720
              )
              
              
              1,780Income
      from discontinued operations, net of taxes
              
              
              —
              
              
              
              16,293
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              16,293Net
      income (loss)
              
              $
              18,073
              
              
              $
              18,073
              
              
              $
              12,586
              
              
              $
              61
              
              
              $
              (30,720
              )
              
              $
              18,073
  
  
  
  
  
  
  
  
  
  23
  CENVEO,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  15.
Condensed Consolidating Financial Information (Continued)
 
 CENVEO,
INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
 For
the three months ended March 31, 2007
 (in
thousands)
  Parent
              
              
              Subsidiary
              
              
              Guarantor
              
              
              Non-
                GuarantorCompany
              
              
              Issuer
              
              
              Subsidiaries
              
              
              Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedCash
      flows from operating activities:Net
      cash provided by (used in) continuing operating activities
              
              $
              2,265
              
              
              $
              11,165
              
              
              $
              19,539
              
              
              $
              (3,279
              )
              
              $
              —
              
              
              $
              29,690Net
      cash provided by discontinued operating activities
              
              
              —
              
              
              
              2,198
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,198Net
      cash provided by (used in) operating activities
              
              
              2,265
              
              
              
              13,363
              
              
              
              19,539
              
              
              
              (3,279
              )
              
              
              —
              
              
              
              31,888Cash
      flows from investing activities:Cost
      of business acquisitions, net of cash acquired
              
              
              —
              
              
              
              (329,300
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (329,300
              )Intercompany
      note
              
              
              —
              
              
              
              992
              
              
              
              —
              
              
              
              —
              
              
              
              (992
              )
              
              
              —Capital
      expenditures
              
              
              —
              
              
              
              (6,845
              )
              
              
              (270
              )
              
              
              —
              
              
              
              —
              
              
              
              (7,115
              )Proceeds
      from sale of property, plant and equipment
              
              
              —
              
              
              
              2,347
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,347Net
      cash used in investing activities of continuing operations
              
              
              —
              
              
              
              (332,806
              )
              
              
              (270
              )
              
              
              —
              
              
              
              (992
              )
              
              
              (334,068
              )Proceeds
      from the sale of discontinued operations
              
              
              —
              
              
              
              73,628
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              73,628Net
      cash used in investing activities
              
              
              —
              
              
              
              (259,178
              )
              
              
              (270
              )
              
              
              —
              
              
              
              (992
              )
              
              
              (260,440
              )Cash
      flows from financing activities:Proceeds
      from issuance of Term Loans
              
              
              —
              
              
              
              620,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              620,000Borrowings
      under Revolving Credit Facility, net
              
              
              —
              
              
              
              29,400
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              29,400Proceeds
      from exercise of stock options
              
              
              185
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              185Repayment
      of Term Loan B
              
              
              —
              
              
              
              (324,188
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (324,188
              )Repayment
      of Cadmus revolving senior bank credit facility
              
              
              —
              
              
              
              (70,100
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (70,100
              )Repayment
      of 8 3/8% Senior Subordinated Notes
              
              
              —
              
              
              
              (20,875
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (20,875
              )Repayments
      of other long-term debt
              
              
              —
              
              
              
              (166
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (166
              )Payment
      of refinancing fees, redemption, premiums and expenses
              
              
              —
              
              
              
              (7,489
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (7,489
              )Payment
      of debt issuance costs
              
              
              —
              
              
              
              (886
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (886
              )Intercompany
      note
              
              
              —
              
              
              
              —
              
              
              
              (992
              )
              
              
              —
              
              
              
              992
              
              
              
              —Intercompany
      advances
              
              
              (2,450
              )
              
              
              18,309
              
              
              
              (19,827
              )
              
              
              3,968
              
              
              
              —
              
              
              
              —Net
      cash provided by (used in) financing activities
              
              
              (2,265
              )
              
              
              244,005
              
              
              
              (20,819
              )
              
              
              3,968
              
              
              
              992
              
              
              
              225,881Effect
      of exchange rate changes on cash and cash equivalents of continuing
      operations
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Net
      (decrease) increase in cash and cash equivalents
              
              
              —
              
              
              
              (1,810
              )
              
              
              (1,550
              )
              
              
              689
              
              
              
              —
              
              
              
              (2,671
              )Cash
      and cash equivalents at beginning of year
              
              
              —
              
              
              
              8,655
              
              
              
              1,903
              
              
              
              —
              
              
              
              —
              
              
              
              10,558Cash
      and cash equivalents at end of year
              
              $
              —
              
              
              $
              6,845
              
              
              $
              353
              
              
              $
              689
              
              
              $
              —
              
              
              $
              7,887
  
   16.
Subsequent Event
  On March
31, 2008, the Company acquired all of the stock of Rex Corporation and its
manufacturing facility for approximately $50 million using its Revolving Credit
Facility.  Rex is an independent manufacturer of premium and
high-quality packaging solutions with annual sales of approximately $40 million
prior to its acquisition by the Company. Rex’s results of operations and cash
flows will be included in the Company’s consolidated statements of operations
and cash flows from the March 31, 2008 acquisition date.
  24
   Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
  This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations of Cenveo, Inc. and its subsidiaries, which we refer to as Cenveo,
should be read in conjunction with the accompanying condensed consolidated
financial statements and “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K
for the fiscal year ended December 29, 2007. Item 7 of our 2007 Annual Report on
Form 10-K, which we refer to as our Form 10-K, describes the application of our
critical accounting policies, for which there have been no significant changes
as of March 29, 2008.
  Forward-Looking
Statements
  Certain
statements in this report may constitute “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements generally can be identified by the use of terminology such as “may,”
“expect,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,” “believe” or
“continue” and similar expressions, or as other statements that do not relate
solely to historical facts. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that could cause
actual results to differ materially from what is expressed or forecasted in
these forward-looking statements. In view of such uncertainties, investors
should not place undue reliance on our forward-looking statements. Such
statements speak only as of the date they were made, and we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
  Factors
that could cause actual results to differ materially from management’s
expectations include, without limitation: (1) our substantial indebtedness could
impair our financial condition and prevent us from fulfilling our business
obligations; (2) our ability to service or refinance our debt; (3) the terms of
our indebtedness imposing significant restrictions on our operating and
financial flexibility; (4) additional borrowings are available to us that could
further exacerbate our risk exposure from debt;  (5) our ability to
successfully integrate acquisitions; (6) intense competition in our industry;
(7) the absence of long-term customer agreements in our industry, subjecting our
business to quarterly and cyclical fluctuations; (8) factors affecting the U.S.
postal services impacting demand for our products; (9) the availability of the
Internet and other electronic media affecting demand for our products; (10)
increases in paper costs and decreases in its availability; (11) our labor
relations; (12) compliance with environmental rules and regulations; and (13)
dependence on key management personnel. This list of factors is not exhaustive,
and new factors may emerge or changes to the foregoing factors may occur that
would impact the Company’s business. Additional information regarding these and
other factors can be found elsewhere in this report and in our other filings
with the SEC.
  Business
Overview
  We are
one of the largest diversified printing companies in North America. Our broad
portfolio of products includes envelope, form, and label manufacturing,
commercial printing and packaging and publisher offerings. We operate from a
global network of approximately 78 printing and manufacturing, content
management and distribution facilities, which we refer to as manufacturing
facilities, serving a diverse base of customers.
  We
operate our business in two complementary segments: envelopes, forms and labels
and commercial printing.
  Envelopes,
Forms and Labels
  Our
envelopes, forms and labels segment operates approximately 38 manufacturing
facilities, primarily in North America and primarily specializes in the design,
manufacturing, printing and fulfillment of: (1) custom and direct mail envelopes
developed for the advertising, billing and remittance needs of a variety of
customers, including financial services companies; (2) custom labels and
specialty forms sold through an extensive network of resale distributors for
industries including food and beverage, manufacturing and pharmacy chains; and
(3) stock envelopes, labels and business forms generally sold to independent
distributors, office-products suppliers and office-products retail
chains.  In 2007 we grew our envelopes, forms and labels business with
the acquisition of Commercial Envelope Manufacturing Co. Inc., which we refer to
as Commercial Envelope, and PC Ink Corp., which we refer to as
Printegra.
  On August
30, 2007, we acquired all of the stock of Commercial Envelope, one of the
largest envelope manufacturers in the United States.  Prior to our
acquisition, Commercial Envelope had annual revenues of approximately $160.0
million.  Commercial Envelope’s facilities collectively produced over
41 million envelopes per day in 2007.  The acquisition of Commercial
Envelope increased our market share in the U.S. envelope market and is expected
to create efficiencies as we integrate our operations.
  25
   On
February 12, 2007, we acquired all of the stock of Printegra, a leading producer
of printed business communication documents, labels and envelopes regularly used
by small and large businesses.  Prior to our acquisition, Printegra
had annual revenues of approximately $90.0 million.  With the
acquisition of Printegra, we expanded our offerings of short-run documents,
labels and envelope products.  Additionally, the acquisition
facilitates access for Printegra’s historical customer base to our extensive
product offerings.
  Commercial
Printing
  Our
commercial printing segment operates approximately 40 manufacturing facilities
in the United States, Canada, the Caribbean Basin and Asia and primarily offers
print, design, content management, fulfillment and distribution offerings,
including: (1) high-end color printing of a wide range of premium products for
major national and regional customers; (2) general commercial products for
regional and local customers; (3) scientific, technical and medical, which we
refer to STM, journals and special interest and trade magazines for non-profit
organizations, educational institutions and specialty publishers; and (4)
specialty packaging and high quality promotional materials for multinational
consumer products companies. We completed two commercial printing acquisitions
in 2007: Madison/Graham ColorGraphics, Inc., which we refer to as ColorGraphics,
and Cadmus Communications Corporation, which we refer to as Cadmus.
  On July
9, 2007, we acquired all of the stock of ColorGraphics, one of the largest
commercial printers in the western United States.  Prior to our
acquisition, ColorGraphics had annual revenues of approximately $170.0
million.  ColorGraphics produces printed annual reports, booklets,
brochures, advertising inserts, direct mail and other corporate communication
materials.
  On March
7, 2007, we acquired all of the stock of Cadmus. Cadmus is one of the world’s
largest providers of content management and printing to scientific, technical
and medical journal publishers, one of the largest periodicals printers in North
America and a leading provider of specialty packaging and promotional printing
products.  Prior to our acquisition, Cadmus had annual revenues of
approximately $450.0 million.
  See Notes
4 and 14 of our condensed consolidated financial statements included
herein.
  Consolidated
Operating Results
  Management’s
Discussion and Analysis of Financial Condition and Results of Operations
includes an overview of our condensed consolidated results for the three month
period ended March 29, 2008 followed by a discussion of the results of each of
our reported segments for the same period. See Note 2 of our condensed
consolidated financial statements included herein. Our results for the three
month period ended March 29, 2008 included the operating results of Printegra,
Cadmus, ColorGraphics and Commercial Envelope, which we refer to as the 2007
Acquisitions.  Our results for the first quarter of 2007 included the
operating results of both Cadmus and Printegra subsequent to their respective
acquisition. See Note 4 to the condensed consolidated financial statements
included herein.
  
  
  
  
  
  
  
  
  
  
  
  26
   A summary
of our condensed consolidated statements of operations is presented below. The
summary presents reported net sales and operating income. See Segment Operations
below for a summary of net sales and operating income of our reportable segments
that we use internally to assess our operating performance. Our fiscal quarters
end on the Saturday closest to the last day of the calendar month so that each
quarter has the same number of days and 13 full weeks. The reporting periods
consist of 13 weeks ending on March 29, 2008 and March 31, 2007.
  
 Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007(in
      thousands, except
                per
      share amounts)Net
      sales
              
              $
              534,328
              
              
              $
              414,714Operating
      income (loss):Envelopes,
      forms and labels
              
              $
              25,626
              
              
              $
              27,389Commercial
      printing
              
              
              11,278
              
              
              
              9,630Corporate
              
              
              (13,924
              )
              
              
              (8,780
              )Total
      operating income
              
              
              22,980
              
              
              
              28,239Interest
      expense, net
              
              
              26,978
              
              
              
              16,282Loss
      on early extinguishment of debt
              
              
              —
              
              
              
              8,700Other
      expense, net
              
              
              461
              
              
              
              222(Loss)
      income from continuing operations before income taxes
              
              
              (4,459
              )
              
              
              3,035Income
      tax (benefit) expense
              
              
              (1,716
              )
              
              
              1,255(Loss)
      income from continuing operations
              
              
              (2,743
              )
              
              
              1,780(Loss)
      income from discontinued operations, net of taxes
              
              
              (656
              )
              
              
              16,293Net
      (loss) income
              
              $
              (3,399
              )
              
              $
              18,073(Loss)
      income per share−basic:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.31Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.34(Loss)
      income per share−diluted:Continuing
      operations
              
              $
              (0.05
              )
              
              $
              0.03Discontinued
      operations
              
              
              (0.01
              )
              
              
              0.30Net
      (loss) income
              
              $
              (0.06
              )
              
              $
              0.33
  Net
Sales
  Net sales
increased $119.6 million in the first quarter of 2008, as compared to the first
quarter of 2007. This increase was primarily due to the $150.4 million of sales
generated by the 2007 Acquisitions, for which Cadmus and Printegra were included
for only a portion of the first quarter of 2007 and Commercial Envelope and
ColorGraphics had no corresponding amounts in the first quarter of
2007.  This increase was offset in part by lower sales from our
envelopes, forms and labels segment of $11.3 million and from our commercial
printing segment of $19.5 million. See Segment Operations below for a detailed
discussion of the primary factors affecting the change in our net sales by
reportable segment.
  Operating
Income
  Operating
income decreased $5.3 million in the first quarter of 2008, as compared to the
first quarter of 2007. This decrease was primarily due to increased
restructuring, impairment and other charges of $7.1 million, primarily related
to a non-recurring charge for professional fees incurred for the internal review
initiated by our audit committee and decreases in operating income from our
commercial printing segment of $5.9 million and from our envelopes, forms and
labels segment of $3.5 million. These decreases were partially offset by $9.7
million of increased operating income generated in the first quarter of 2008 by
the 2007 Acquisitions, for which Cadmus and Printegra were included for only a
portion of the first quarter of 2007 and Commercial Envelope and ColorGraphics
had
no corresponding amounts in the first quarter of 2007. See Segment Operations
below for a more detailed discussion of the primary factors for the changes in
operating income by reportable segment.
  27
  Interest Expense. Interest
expense increased $10.7 million to $27.0 million in the first quarter of 2008,
as compared to $16.3 million in the first quarter of 2007, primarily due to the
additional debt we incurred to finance the 2007 Acquisitions, partially offset
by lower interest rates. Interest expense in the first quarter of 2008 reflected
average outstanding debt of approximately $1.4 billion and a weighted average
interest rate of 7.3%, as compared to average outstanding debt of $817.1 million
and a weighted average interest rate of 7.6% in the first quarter of 2007. See
Long-Term Debt below and Note 9 to the condensed consolidated financial
statements included herein.
 
 Loss on Early Extinguishment of
Debt.  In the first quarter of 2007, we: (i) executed a tender
offer for repayment on March 19, 2007 of $20.9 million of Cadmus’ 83⁄8% senior
subordinated notes due 2014, which we refer to as the 83⁄8% Notes and (ii)
refinanced our existing $525.0 million senior secured credit facilities, which
we refer to as the Credit Facilities, in connection with the Cadmus acquisition
and incurred losses on early extinguishment of debt of $8.7
million.  See Long-Term Debt below and Note 9 to the condensed
consolidated financial statements included herein.
   Income
Taxes
  Three
      Months EndedMarch
      29, 2008
              
              
              March
      31, 2007(in
      thousands)Income
      tax (benefit) expense from U.S. operations
              
              $
              (1,745
              )
              
              $
              995Income
      tax expense from foreign operations
              
              
              29
              
              
              
              260Income
      tax (benefit) expense
              
              $
              (1,716
              )
              
              $
              1,255Effective
      income tax rate
              
              
              38.5
              %
              
              
              41.35
              %
   In the
first quarter of 2008, we had an income tax benefit of $1.7 million, compared to
income tax expense of $1.3 million in the first quarter of 2007, which primarily
relates to taxes on our domestic operations. Our effective tax rate in the first
quarter of 2008 and 2007 was higher than the statutory rate, primarily due to
non-deductible expenses and state income taxes.
  We assess
the recoverability of our deferred tax assets and, based upon this assessment,
record a valuation allowance against deferred tax assets to the extent
recoverability does not satisfy the "more likely than not" recognition criteria
in Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. We consider our recent operating results and anticipated future taxable
income in assessing the need for a valuation allowance. As of March 29, 2008,
the total valuation allowance on our net U.S. deferred tax assets was
approximately $30.8 million.
  Income (Loss) from Discontinued
Operations, Net of Taxes. Income from discontinued operations for the
three months ended March 31, 2007, included the $15.4 million gain on sale of
our remaining interest in the Fund on March 13, 2007, net of taxes of $10.2
million and equity income related to our retained interest in the Fund from
January 1, 2007 through March 13, 2007. See Note 5 to the condensed consolidated
financial statements included herein.
  Segment
Operations
  Our Chief
Executive Officer monitors the performance of the ongoing operations of our two
reportable segments. We assess performance based on division net sales and
operating income. The summaries of net sales of our two segments are presented
to show each segment without the net sales of divested operations, as
applicable, and to show the operating income of each reportable segment. See
Note 14 to the condensed consolidated financial statements included
herein.
  Restructuring, Impairment and Other
Charges. In the fourth quarter 2007, we completed our cost savings and
restructuring plan initiated in September 2005, including the consolidation of
purchasing activities, the rationalization of our manufacturing platform,
corporate and field human resources reductions, implementation of company-wide
purchasing initiatives and streamlining of information technology
infrastructure. In addition, in 2007 we implemented cost savings and integration
initiatives related to the 2007 Acquisitions and anticipate substantially completing
the integration of those operations during 2008.  See Note 10 to the
condensed consolidated financial statements included herein. As of March 29,
2008, our total restructuring liability was $15.2
million.
  28
  During
the first quarter of 2008, we incurred $9.7 million of restructuring, impairment
and other charges, which included a $6.7 million non-recurring charge for
professional fees related to the internal review initiated by our audit
committee (see Notes 2 and 10 of our condensed consolidated financial statements
included herein), $1.7 million of employee separation costs, asset impairments,
net of $(0.3) million which includes the gain on sale of equipment, equipment
moving expenses of $0.4 million, lease termination expenses of $0.4 million, and
building clean-up and other expenses of $0.9 million. During the first quarter
of 2007, we incurred $2.6 million of restructuring and impairment charges, which
include $1.4 million of employee separation costs, asset impairments, net of
$(0.5) million which included the gain on sale of a facility, equipment moving
expenses of $0.6 million, lease termination costs of $0.1 million and building
clean-up and other expenses of $1.0 million.
  Envelopes,
Forms and Labels
  Three
      Months Ended
                March
      31,2008
              
              2007(in
      thousands)Segment
      net sales
              $
              238,137
              
              
              $
              211,470Segment
      operating income
              $
              25,626
              
              
              $
              27,389Operating
      income margin
              
              
              10.8
              %
              
              
              13.0
              %Restructuring
      and impairment charges
              $
              1,655
              
              
              $
              762
             Segment
Net Sales
 
 Segment
net sales for our envelopes, forms and labels segment increased $26.7 million,
or 12.6%, in the first quarter of 2008, as compared to the first quarter of
2007. This increase was primarily due to (1) the $38.0 million of incremental
sales generated by Commercial Envelope and Printegra in 2008, including the
impact of sales changes for work transitioned primarily from a plant closure as
a result of the Commercial Envelope acquisition, with no corresponding amount
for Commercial Envelope and less than a full quarter of results for Printegra in
the first quarter of 2007 and (2) higher sales of approximately $8.6 million,
primarily from our envelope operations due to product mix and our label
operations due to price increases. These increases were offset in part by lower
sales volume of approximately $19.9 million, primarily from our envelope
operations due to the reorganization and closing of operations and the
retirement of older, less efficient assets to maximize profitability, a decline
in the overall market due in part to the U.S. Postal Service’s rate increases in
the middle of the second quarter of 2007, the closure of a forms plant in
connection with the integration of Printegra's operations, and an overall
decline in traditional documents business, mainly as a result of customers’
improved ability to print high quality documents on their own and lower sales
volume from office product retail customers.
  Segment
Operating Income
  Segment
operating income for our envelopes, forms and labels segment decreased $1.8
million, or 6.4%, in the first quarter of 2008, as compared to the first quarter
of 2007. This decrease was primarily due to a $4.4 million decrease in gross
margins due in part to higher material costs and increased restructuring
and impairment charges of $0.9 million primarily due to our 2007 cost savings
and integration initiatives. These decreases were partially offset by $2.6
million of increased operating income generated by Commercial Envelope and
Printegra in 2008, with no corresponding amount and less than a full quarter
of results, respectively, in the first quarter of 2007, and lower selling,
general and administrative expenses of $0.9 million from cost reduction
programs.
  Commercial
Printing
  Three
      Months Ended
                March
      31,2008
              
              2007(in
      thousands)Segment
      net sales
              $
              296,191
              
              
              $
              203,244Segment
      operating income
              $
              11,278
              
              
              $
              9,630Operating
      income margin
              
              
              3.8
              %
              
              
              4.7
              %Restructuring
      and impairment charges
              $
              1,354
              
              
              $
              1,793
  Segment
Net Sales
  
 29
  primarily
from two plants that we closed as a result of the ColorGraphics acquisition,
with no corresponding amount for ColorGraphics and less than a full quarter of
results for Cadmus in the first quarter of 2007. This increase was offset by
lower sales resulting from plants we closed in 2007 of approximately $13.9
million and lower pricing and sales volume and product mix, partially
offset by higher sales due to paper price increases and foreign currency
fluctuations.
  Segment
Operating Income
  Segment
operating income for our commercial printing segment increased $1.6 million, or
17.1%, in the first quarter of 2008, as compared to the first quarter of 2007.
This increase was primarily due to $7.1 million of operating income generated by
ColorGraphics and Cadmus during 2008, with no corresponding amount for
ColorGraphics and less than a full quarter of results for Cadmus in 2007,
reduced selling, general and administrative expenses of approximately $1.7
million from our cost savings programs, lower amortization expense of $1.1
million and lower restructuring and impairment charges of $0.4 million. These
increases were substantially offset by lower gross margins of approximately $8.7
million due in part to higher material costs and plant closures in
2007.
  Corporate Expenses.Corporate
expenses include the costs of running our corporate headquarters. Corporate
expenses were higher in the first quarter of 2008, as compared to the first
quarter of 2007, primarily due to the $6.7 million non-recurring charge incurred
for professional fees in connection with the internal review conducted by our
audit committee. See Notes 2, 3 and 10 to the condensed consolidated financial
statements included herein.
  Liquidity
and Capital Resources
  Net Cash Provided by Continuing
Operating Activities. Net cash provided by continuing operating
activities was $54.4 million in the first three months of 2008, which was
primarily due to a decrease in our working capital of $34.6 million and net
income adjusted for non-cash items of $22.9 million. The decrease in our working
capital primarily resulted from a decrease in receivables primarily due to the
timing of collections and the timing of sales to our customers and the timing of
interest payments, partially offset by an increase in inventories primarily due
to the timing of work performed for our customers.
  Net cash
used in continuing operating activities was $29.7 million in the first three
months of 2007, which was primarily due to net income adjusted for non-cash
items of $27.5 million.
  Net Cash Provided by Discontinued
Operating Activities. Represents the net cash dividends received from the
Fund through March 31, 2007.
  Net Cash Used in Investing
Activities. Net cash used in investing activities was $8.7 million in the
first three months of 2008, primarily resulting from capital expenditures of
$9.1 million.
  Net cash
used in investing activities was $260.4 million in the first three months of
2007, primarily resulting from the acquisition cost of Cadmus and Printegra of
$329.3 million and capital expenditures of $7.1 million, offset in part by $73.6
million of cash proceeds from the sale of our remaining interest in the
Fund.
  Net Cash (Used in) Provided by
Financing Activities. Net cash used in financing activities was $48.6
million in the first three months of 2008, primarily due the repayment of our
revolving credit facility of $45.2 million, our term loans of $1.8 million and
$1.8 million of other long-term debt.
  Net cash
provided by financing activities was $225.9 million in the first quarter of
2007, primarily due to our debt-financed acquisition of Cadmus (see 2007 Debt
Amendment and Refinancing below) with proceeds from our term loans of $620.0
million and net borrowings under our revolving credit facility of $29.4 million,
offset in part by the repayment of: (i) our term loan B of $324.2 million, (ii)
the Cadmus revolving senior bank credit facility of $70.1 million, (iii) $20.9
million of  83⁄8% Notes and (iv) $7.5 million of payments for
refinancing fees, redemption premiums and expenses on the extinguishment of debt
and $0.9 million of debt issuance cost payments in connection with our debt
refinancing and the issuance of debt.
  Long-Term Debt. Our total
outstanding long-term debt, including current maturities, was approximately $1.4
billion at March 29, 2008, a decrease of $48.9 million from December 29, 2007.
This decrease was primarily due to cash flows provided by operating activities
which was used to pay down debt. As of March 29, 2008, approximately
75% of our outstanding debt was subject to fixed interest rates. See the
remainder of this Long-Term Debt section below and Note 9 to the condensed
consolidated financial statements included herein.
  30
  2007
Debt Amendment and Refinancing
  On March
7, 2007, in connection with the Cadmus acquisition, we amended and refinanced
our $525.0 million senior secured credit facilities, which we refer to as the
Credit Facilities. The Credit Facilities, established in September 2006, were
comprised of the Revolving Credit Facility, and a $325.0 million seven-year term
loan facility, which we refer to as the Term Loan B. The Credit Facilities were
amended by increasing the overall borrowing availability from $525.0 million to
$925.0 million to create the Amended Credit Facilities, allowing us to: (1)
retire the Term Loan B, (2) acquire Cadmus, including retiring and extinguishing
the Cadmus revolving senior bank credit facility which had an outstanding
balance of $70.1 million, using the Revolving Credit Facility and a $600.0
million, Term Loan C, and (3) retire any and/or all of the Cadmus 83⁄8% senior
subordinated notes due 2014, which we refer to as the 83⁄8% Notes, tendered
to us using a $125.0 million delayed-draw term loan facility.
  Interest
Rate Swaps
  We
currently have interest rate swap agreements to hedge interest rate exposure of
$595.0 million of our notional floating rate debt.
  83⁄8%
Notes
  On March
5, 2007, we commenced a cash tender offer and consent solicitation, which we
refer to as the Cadmus Tender Offer, for any and all of the outstanding 83⁄8%
Notes at total consideration equal to 101.5% of outstanding principal plus any
accrued and unpaid interest thereon for 83⁄8% Notes validly tendered and not
withdrawn by March 16, 2007.
  On March
19, 2007, we accepted for purchase and paid approximately $20.9 million for the
83⁄8% Notes tendered in the Cadmus Tender Offer, using $20.0 million of
delayed-draw term loan funding under the Amended Credit Facilities and cash on
hand.
  As of
March 29, 2008, we were in compliance with all covenants under our debt
agreements.
  As of
March 29, 2008, we had outstanding letters of credit of approximately $23.9
million and a de minimis amount of surety bonds related to performance and
payment guarantees. Based on our experience with these arrangements, we do not
believe that any obligations that may arise will be significant.
  Our
current credit ratings are as follows:
  Rating
      Agency
              
              Corporate
                  Rating
              
              Amended
                Credit
      Facilities
              
              77⁄8%
                  Notes
              
              83⁄8%
                  Notes
              
              Last
      UpdateStandard
      & Poor’s
              
              BB-
              
              BB+
              
              B
              
              B
              
              December
      2007Moody’s
              
              B1
              
              Ba2
              
              B3
              
              B3
              
              September
      2007
  On March
31, 2008, we acquired all of the stock of Rex Corporation and its manufacturing
facility, which we refer to as Rex, for approximately $50 million using our
Revolving Credit Facility. Rex is an independent manufacturer of premium and
high-quality packaging solutions with annual sales of approximately $40 million
prior to its acquisition by the Company. Rex’s results of operations and cash
flows will be included in our condensed consolidated results from the March 31,
2008 acquisition date.
  The terms of our existing debt do not
have any rating triggers that impact our funding. We do not believe that our
current ratings will impact our ability to raise additional capital. We expect
that internally generated cash flows and the financing available under our
Amended Credit Facilities will be sufficient to fund our working capital needs
and short-term growth through 2008; however, this cannot be
assured.
  Off-Balance Sheet
Arrangements. It is not our business practice to enter into off-balance
sheet arrangements. Accordingly, as of March 29, 2008, we do not have any
off-balance sheet arrangements.
  Guarantees. In connection with the
disposition of certain operations, we have indemnified the purchasers for
certain contingencies as of the date of disposition. We have accrued the
estimated probable cost of these contingencies.
  Seasonality
  
 31
   with a
higher percentage of volume of products sold to these markets occurring during
the fourth quarter of the year. This seasonality is due to the increase in sales
to the direct mail market related to holiday purchases. As a result of these
seasonal variations, some of our operations operate at or near capacity at
certain times throughout the year.
  New
Accounting Pronouncements
  We are
required to adopt certain new accounting pronouncements. See Note 1 to our
condensed consolidated financial statements included herein.
  Available
Information
  Our
Internet address is: www.cenveo.com. We make available free of charge through
our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as
reasonably practicable after such documents are filed electronically with the
Securities and Exchange Commission. In addition, our earnings conference calls
are archived for replay on our website and presentations to securities analysts
are also included on our website.
  Legal
Proceedings
  From time
to time, we are involved in litigation that we consider to be ordinary and
incidental to our business. While the outcome of pending legal actions cannot be
predicted with certainty, we believe the outcome of these proceedings will not
have a material adverse effect on our consolidated financial position, results
of operations or liquidity.
 
 Item
3. Quantitative and Qualitative Disclosures About Market Risk
  We are
exposed to market risks such as changes in interest and foreign currency
exchange rates, which may adversely affect results of operations and financial
position. Risks from interest rate fluctuations and changes in foreign currency
exchange rates are managed through normal operating and financing activities. We
do not utilize derivatives for speculative purposes.
  Exposure
to market risk from changes in interest rates relates primarily to our variable
rate debt obligations. The interest on this debt is LIBOR plus a margin. At
March 29, 2008, we had variable rate debt outstanding of $351.2 million, after
considering our interest rate swaps. A 1% increase in LIBOR on debt outstanding
subject to variable interest rates would increase our annual interest expense by
approximately $3.5 million.
  We have
foreign operations, primarily in Canada, and thus are exposed to market risk for
changes in foreign currency exchange rates. For the three months ended March 29,
2008, a uniform 10% strengthening of the U.S. dollar relative to the local
currency of our foreign operations would have resulted in a decrease in sales
and operating income of approximately $2.2 million and $0.1 million,
respectively. The effects of foreign currency exchange rates on future results
would also be impacted by changes in sales levels or local currency
prices.
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  32
   Item
4. Controls and Procedures
  Evaluation
of Disclosure Controls and Procedures
  Our
management, with the participation of our Chief Executive Officer and our Chief
Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) as of the end of the period covered by this quarterly
report. Based on that evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of March 29, 2008 in order to provide reasonable
assurance that information required to be disclosed by the Company in its
filings under the Exchange Act was recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
  Changes
in Internal Control over Financial Reporting
  There
were no changes in our internal control over financial reporting during the
quarter ended March 29, 2008 that have materially affected or are reasonably
likely to materially affect, our internal control over financial
reporting.
  Inherent
Limitations on Effectiveness of Controls
  Our
management, including our Chief Executive Officer and our Chief Financial
Officer, does not expect that our disclosure controls or our internal control
over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be
met. Our disclosure controls and procedures are designed to provide reasonable
assurance of achieving their objectives. The design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.
    
 33
   PART
II. OTHER INFORMATION
  Item
1A.   Risk Factors
  In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 29, 2007, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing our Company.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
  Item 6.     
Exhibits
  Exhibit
                Number
              
              
              Description
  2.1
              Agreement
      of Merger dated as of December 26, 2006 among Cenveo, Inc., Mouse
      Acquisition Corp. and Cadmus Communications Corporation—incorporated by
      reference to Exhibit 2.1 to registrant’s current report on Form 8-K filed
      December 27, 2006.2.2
              Stock
      Purchase Agreement dated as of July 17, 2007 among Cenveo Corporation,
      Commercial Envelope Manufacturing Co., Inc. and its
      shareholders—incorporated by reference to Exhibit 2.1 to registrant’s
      current report on Form 8-K filed July 20, 2007.3.1
              Articles
      of Incorporation—incorporated by reference to Exhibit 3(i) of the
      registrant’s quarterly report on Form 10-Q for the quarter ended March 31,
      1997.3.2
              Articles
      of Amendment to the Articles of Incorporation dated May 17,
      2004—incorporated by reference to Exhibit 3.2 to registrant’s quarterly
      report on Form 10-Q for the quarter ended March 31,
  2004.3.3
              Amendment
      to Articles of Incorporation and Certificate of Designations of Series A
      Junior Participating Preferred Stock of the Registrant dated April 20,
      2005—incorporated by reference to Exhibit 3.1 to registrant’s current
      report on Form 8-K filed April 21, 2005.3.4
              Bylaws
      as amended and restated effective February 22, 2007—incorporated by
      reference to Exhibit 3.2 to registrant’s current report on Form 8-K filed
      August 30, 2007.4.1
              Indenture
      dated as of February 4, 2004 between Mail-Well I Corporation and U.S. Bank
      National Association, as Trustee, and Form of Senior Subordinated Note and
      Guarantee relating to Mail-Well I Corporation’s 77⁄8% Senior Subordinated
      Notes due 2013—incorporated by reference to Exhibit 4.5 to registrant’s
      annual report on Form 10-K for the year ended December 29,
      2003.4.2
              Registration
      Rights Agreement dated February 4, 2004, between Mail-Well I Corporation
      and Credit Suisse First Boston, as Initial Purchaser, relating to
      Mail-Well I Corporation’s 77⁄8% Senior Subordinated Notes due
      2013—incorporated by reference to Exhibit 4.6 to registrant’s annual
      report on Form 10-K for the year ended December 29,
  2003.4.3
              Supplemental
      Indenture, dated as of June 21, 2006 among Cenveo Corporation (f/k/a
      Mail-Well I Corporation), the Guarantors named therein and U.S. Bank
      National Association, as Trustee, to the Indenture dated as of February 4,
      2004 relating to the 77⁄8% Senior Subordinated Notes due 2013—incorporated
      by reference to Exhibit 4.2 to registrant’s current report on Form 8-K
      filed June 27, 2006.4.4
              Third
      Supplemental Indenture, dated as of March 7, 2007 among Cenveo Corporation
      (f/k/a Mail-Well I Corporation), the Guarantors named therein and U.S.
      Bank National Association, as Trustee, to the Indenture dated as of
      February 4, 2004 relating to the
77⁄8%
  34
  
 Exhibit
                Number
              
              
              Description
  Senior
      Subordinated Notes due 2013—incorporated by reference to Exhibit 4.7 to
      registrant’s quarterly report on Form 10-Q for the quarter ended March 31,
      2007.4.5
              Fourth
      Supplemental Indenture, dated as of July 9, 2007 among Cenveo Corporation
      (f/k/a Mail-Well I Corporation), the Guarantors named therein and U.S.
      Bank National Association, as Trustee, to the Indenture dated as of
      February 4, 2004 relating to the 77⁄8% Senior Subordinated Notes due
      2013—incorporated by reference to Exhibit 4.8 to registrant’s quarterly
      report on Form 10-Q for the quarter ended June 30,
2007.4.6
              Fifth
      Supplemental Indenture, dated as of August 30, 2007 among Cenveo
      Corporation (f/k/a Mail-Well I Corporation), the Guarantors named therein
      and U.S. Bank National Association, as Trustee, to the Indenture dated as
      of February 4, 2004 relating to the 77⁄8% Senior Subordinated Notes due
      2013—incorporated by reference to Exhibit 4.6 to registrant’s quarterly
      report on Form 10-Q for the quarter ended September 30,
    2007.4.7
              Indenture,
      dated as of June 15, 2004, among Cadmus Communications Corporation, the
      Guarantors named therein and Wachovia Bank, National Association, as
      Trustee, relating to the 83⁄8% Senior Subordinated Notes due
      2014—incorporated by reference to Exhibit 4.9 to Cadmus Communications
      Corporation’s registration statement on Form S-4 filed August 24,
      2004.4.8
              Registration
      Rights Agreement, dated June 15, 2004, among Cadmus Communications
      Corporation, the Guarantors named therein and Wachovia Capital Markets,
      LLC and Banc of America Securities LLC on behalf of the Initial
      Purchasers, relating to the 83⁄8% Senior Subordinated Notes due
      2014—incorporated by reference to Exhibit 4.10 to Cadmus Communications
      Corporation’s registration statement on Form S-4 filed August 24,
      2004.4.9
              First
      Supplemental Indenture, dated as of March 1, 2005, to the Indenture dated
      as of June 15, 2004, among Cadmus Communications Corporation, the
      Guarantors named therein and Wachovia Bank, National Association, as
      Trustee, relating to the 83⁄8% Senior Subordinated Notes due
      2014—incorporated by reference to Exhibit 4.9.1 to Cadmus Communications
      Corporation’s quarterly report on Form 10-Q for the quarter ended March
      31, 2005, filed May 13, 2005.4.10
              Second
      Supplemental Indenture, dated as of May 19, 2006, to the Indenture dated
      as of June 15, 2004, among Cadmus Communications Corporation, the
      Guarantors named therein and U.S. Bank National Association (successor to
      Wachovia Bank, National Association), as Trustee, relating to the 83⁄8%
      Senior Subordinated Notes due 2014—incorporated by reference to Exhibit
      4.9.2 to Cadmus Communications Corporation’s annual report on Form 10-K
      for the year ended June 30, 2006, filed September 13,
  2006.4.11
              Third
      Supplemental Indenture, dated as of March 7, 2007, to the Indenture dated
      as of June 15, 2004, among Cenveo Corporation (as successor to Cadmus
      Communications Corporation), the Guarantors named therein and U.S. Bank
      National Association (successor to Wachovia Bank, National Association),
      as Trustee, relating to the 83⁄8% Senior Subordinated Notes due
      2014—incorporated by reference to Exhibit 4.11 to registrant’s quarterly
      report on Form 10-Q for the quarter ended March 31,
  2007.4.12
              Fourth
      Supplemental Indenture, dated as of July 9, 2007, to the Indenture dated
      as of June 15, 2004, among Cenveo Corporation (as successor to Cadmus
      Communications Corporation), the Guarantors named therein and U.S. Bank
      National Association (successor to Wachovia Bank, National Association),
      as Trustee, relating to the 83⁄8% Senior Subordinated Notes due
      2014—incorporated by reference to Exhibit 4.13 to registrant’s quarterly
      report on Form 10-Q for the quarter ended June 30,
2007.
  35
  
 Exhibit
                Number
              
              
              Description
  4.13
              Fifth
      Supplemental Indenture, dated as of August 30, 2007, to the Indenture
      dated as of June 15, 2004, among Cenveo Corporation (as successor to
      Cadmus Communications Corporation), the Guarantors named therein and U.S.
      Bank National Association (successor to Wachovia Bank, National
      Association), as Trustee, relating to the 83⁄8% Senior Subordinated Notes
      due 2014—incorporated by reference to Exhibit 4.13 to registrant’s
      quarterly report on Form 10-Q for the quarter ended September 30,
      2007.4.14
              Sixth
      Supplemental Indenture, dated as of November 7, 2007, to the Indenture
      dated as of June 15, 2004, among Cenveo Corporation (as successor to
      Cadmus Communications Corporation), the Guarantors named therein and U.S.
      Bank National Association (successor to Wachovia Bank, National
      Association), as Trustee, relating to the 83⁄8% Senior Subordinated Notes
      due 2014—incorporated by reference to Exhibit 4.12 to registrant’s annual
      report on Form 10-K for the year ended December 29,
  2007.10.1*
              Amendment,
      dated February 27, 2008, to Employment Agreement dated as of October 27,
      2005, as amended, between the registrant and Robert G. Burton,
      Sr.31.1*
              Certification
      by Robert G. Burton, Sr., Chief Executive Officer, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002.31.2*
              Certification
      by Mark S. Hiltwein, Chief Financial Officer, pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.32.1*
              Certification
      of the Chief Executive Officer and of the Chief Financial Officer pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as an exhibit
      to this report on Form 10-Q.
 
 
  
  *Filed
herewith.
  
  
  36
   SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on May 7, 2008.
  
 CENVEO,
      INC.By:
              /s/
      Robert
      G. Burton, Sr.Robert
      G. Burton, Sr.Chairman
      and Chief Executive Officer(Principal
      Executive Officer)By:
              /s/
      Mark
      S. HiltweinMark
      S. HiltweinChief
      Financial Officer(Principal
      Financial Officer andPrincipal
      Accounting Officer)