FORWARD-LOOKING INFORMATION

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. All statements regarding our expected future financial condition, revenues or revenue growth, Adjusted Operating Income improvement, projected costs or cost savings, cash flows and future cash obligations, dividends, capital expenditures, business strategy, competitive positions, growth opportunities for existing products or products under development, and objectives of management are forward-looking statements that involve certain risks and uncertainties. In addition, forward-looking statements include statements in which we use words such as "anticipates," "projects," "expects," "plans," "intends," "believes," "estimates," "targets," and other similar expressions that indicate trends and future events. These forward-looking statements are based on current expectations and estimates; we cannot assure you that such expectations will prove to be correct. The Company undertakes no obligation to update forward-looking statements as a result of new information, since these statements may no longer be accurate or timely.

Because such statements deal with future events, actual results for fiscal year 2008 and beyond could differ materially from our current expectations depending on a variety of factors including, but not limited to, the risk factors discussed in Item 1A to Part I of the Company's Annual Report on Form 10-K for the year ended December 30, 2007 (Annual Report). You should read this Management Discussion and Analysis in conjunction with those risk factors and the financial statements and related notes included in this Quarterly Report on Form 10-Q (Quarterly Report) and included in our Annual Report.

CRITICAL ACCOUNTING POLICIES

In preparing the accompanying unaudited financial statements and accounting for the underlying transactions and balances, we applied the accounting policies disclosed in the Notes to the Consolidated Financial Statements contained in our Annual Report. Preparation of these unaudited financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Although we believe our estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates.

We believe that some of the more critical estimates and related assumptions are in the areas of pension and postretirement healthcare benefits, fair value measurements, deferred taxes, inventories, contingent liabilities, and share-based compensation. For a detailed discussion of these critical accounting estimates, see the Management Discussion and Analysis included in our Annual Report. Management believes there were no significant changes in these critical accounting policies and estimates in the first nine months of 2008, except as discussed below.

We have discussed the development and selection of the critical accounting policies and the related disclosures included in this Quarterly Report with the Audit Committee of our Board of Directors.

Fair Value Measurements

Effective December 31, 2007, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements," which provides a common definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants. SFAS 157 does not require any new fair value measurements, but is applicable under most current accounting pronouncements that require or permit fair value measurements.

The new standard provides guidance on the methods used to measure fair value, including the market, income, and cost approach. These approaches require us to use certain assumptions in our models that market participants would use in pricing assets and liabilities. The models may use readily observable, market corroborated, or generally unobservable inputs.

The new standard also requires expanded disclosures related to fair value measurements. Assets and liabilities that are measured at fair value on a recurring basis (at least annually) subsequent to initial recognition will be classified and disclosed in one of the following three categories:

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Level 1 - Quoted market prices in active markets for identical assets or liabilities

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Level 2 - Observable market based inputs or unobservable inputs that are corroborated by market data

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Level 3 - Unobservable inputs that are not corroborated by market data.

We do not have any financial instruments carried at fair value that required a cumulative effect adjustment to beginning retained earnings and there was no material effect on our consolidated results of operations, financial position, or cash flows as a result of the adoption of SFAS 157. We currently do not have any financial assets or liabilities measured at fair value that would require the expanded disclosures under SFAS 157.

We are not required to apply the new standard to nonfinancial assets and liabilities not currently recognized or disclosed at fair value on a recurring basis until 2009. The major categories of nonfinancial assets and liabilities that apply to us include goodwill, trademark intangible asset, and property and equipment reported at fair value as a result of impairment testing.

Share-Based Compensation

During the first quarter of 2008, the Company awarded 312,600 shares of nonvested performance-based stock which vest subject to attainment of a pre-determined performance goal by the Company by fiscal year-end 2009. The performance goal is a cumulative goal which allows partial vesting if a minimum level of performance is attained over the two-year period. If the minimum level of performance is not attained by the end of 2009, these stock awards will be forfeited and canceled, and all expense recognized to that date will be reversed. The amount of shares that ultimately vest could range from 50% to 150% of the initial shares granted. Additional shares would be granted and automatically vested upon performance above the target level.

The amount of compensation expense recognized is dependent on the total amount of performance-based shares we expect to vest. This requires us to evaluate the probability of achieving the performance goal and assess the level of goal achievement each quarter. The amount of compensation expense recorded is subject to adjustment based on changes in our expectations and the actual level of achievement of the performance goal.

2008 HIGHLIGHTS

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On a year-to-date basis, net income from continuing operations was $6.0 million or $.21 per share in 2008, up substantially from a loss of $3.6 million, or $.12 per share in 2007.

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Year-to-date cash flow from operating activities increased by $32 million in 2008 compared with 2007.

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Net debt as of September 2008 declined by $10.8 million from year-end 2007.

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Paper prices have continued to increase during 2008. We have increased our selling prices and are currently negotiating with customers to recover these paper cost increases. Despite a competitive marketplace, we have generally been able to pass through these paper cost increases, although it often takes several quarters due to the custom nature of our products and our contractual relationships with many of our customers. We expect this trend to continue.

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Effective June 30, 2008, the Company modified its qualified and nonqualified defined benefit pension plans for employees still accruing benefits under the plans. Accordingly, these participants ceased accruing pension benefits and their final pension benefit amount will be based on pay and service through June 29, 2008. As a result, we recorded a curtailment gain of $0.7 million in the second quarter of 2008. Additionally, we reduced our pension liabilities by $23.2 million to reflect the reduction in plan obligations as a result of the plan modification. However, as part of the remeasurement, asset valuations and actuarial assumptions were also updated which resulted in an increase in our pension liabilities of $27.2 million, primarily reflecting the decline in the fair value of assets in the first half of 2008.

The company match in the 401(k) saving plan was increased for the affected employees from 10% to 75% on the first six percent of eligible compensation deferred, effective June 30, 2008.

Excluding pension loss amortization, we expect to realize annualized savings of approximately $4.4 million as a result of these changes.

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During the third quarter, we initiated the following restructuring actions:

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We implemented plans to integrate several of our POD Services print centers and Document Management distribution warehouses in order to improve efficiency and reduce cost. This move will allow us to reduce operating expenses by leveraging more cross-functional roles in production and distribution. We expect these changes to result in annualized cost savings of approximately $3.0 million.

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We began implementing a plan to redesign our sales support infrastructure to more of a centralized model. Over the next twelve months, we will transition customer transactional and administrative functions from our field sales offices to one of three client support centers, one of which is new. We expect this action to generate approximately $5.6 million annually in compensation and related cost savings.

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In the fourth quarter, we announced a 5 percent reduction in force to be completed before the end of the year that will result in an additional $11.0 million in annualized savings. We also announced policy changes and the elimination of some programs resulting in additional annualized savings of $9.0 million.

RESULTS OF OPERATIONS

The discussion that follows provides information which we believe is relevant to an understanding of our consolidated results of operations and financial condition, supplemented by a discussion of segment results where appropriate.
The discussion is focused on continuing operations.

We evaluate the Company's financial results and those of our segments on the basis of income from continuing operations excluding restructuring charges, asset impairments, pension loss amortization, and pension settlements, referred to as "Adjusted Operating Income." We believe that this non-GAAP financial measure enhances the understanding of our results of operations due to the non-operational nature of the excluded items and the significant and varying effect they have on our reported results from period to period. This presentation is consistent with the manner in which our Board of Directors establishes incentives and internally evaluates financial performance. This non-GAAP information is not meant to be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

Consolidated Summary

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Year-to-date revenue was $595 million, down 8% from the prior year. Software and other digital technologies have continued to erode the demand for certain traditional business documents, which in turn has put pressure on pricing in an already over supplied marketplace. Aside from these factors, which will continue to impact certain traditional segments of our business, the weak economy has had an adverse effect on our revenue. Our analysis indicates that the majority of our year-to-date decline is attributed to the recent downturn in the economy.

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Year-to-date gross margin as a percentage of revenue improved to 34.1% compared to 33.0% in 2007, despite the decline in revenue. This result reflects continued cost savings from our restructuring and cost reduction activities undertaken in 2007 and 2008. In addition, during the quarter, we concluded that it was not probable that we would meet our 2008 performance goal for annual cash incentives. As a result, we reversed approximately $2.0 million in compensation expense recorded in the first half of the year; $1.2 million in cost of sales and $0.8 million in selling, general and administrative expenses.

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Year-to-date Adjusted Operating Income for 2008 was $30.7 million, up 16% from the prior year, despite the decrease in consolidated revenues of $51.9 million.
A significant reduction in costs from the restructuring actions and other cost reduction plans implemented in mid 2007 was largely responsible for the earnings growth.

The following table presents Revenue, Gross Margin, and Operating Income for each of our reportable segments. The table also reconciles our presentation of Adjusted Operating Income to Income (Loss) from Continuing Operations on a GAAP basis.

                                         13 Weeks Ended                                  39 Weeks Ended
                              September 28,          September 30,            September 28,          September 30,
                                  2008                   2007        % Chg        2008                   2007        % Chg
Revenue
Document Management               $  101.8               $  116.6    -12.8%       $  324.2                $  356.0    -8.9%
Label Solutions                       25.4                   25.7     -0.8%           77.8                    86.0    -9.5%
POD Services                          55.9                   59.8     -6.6%          173.4                   184.0    -5.7%
Document Systems                       4.9                    4.8      3.7%           16.0                    16.5    -3.2%
PathForward                            1.0                    1.4    -27.7%            3.6                     4.4   -17.5%
  Consolidated Revenue            $  189.0               $  208.3     -9.3%       $  595.0                $  646.9    -8.0%
                                             % Rev                    % Rev                  % Rev                    % Rev
Gross Margin
Document Management               $   32.3   31.8%       $   35.7     30.5%       $  101.8   31.4%       $  105.3     29.6%
Label Solutions                        8.5   33.4%            8.9     34.7%           25.9   33.2%           28.1     32.7%
POD Services                          22.7   40.7%           23.7     39.6%           67.3   38.8%           72.6     39.5%
Document Systems                       2.4   45.6%            2.3     48.8%            7.4   46.1%            7.8     47.3%
PathForward                            -      0.0%            0.1     10.0%            -      0.0%            0.3      7.2%
  Total Segments                      65.9   35.1%           70.7     33.9%          202.4   34.1%          214.1     33.0%
LIFO Adjustment                        0.4                   (0.2)                     0.6                   (0.4)
  Consolidated Gross Margin       $   66.3   35.1%       $   70.5     33.8%       $  203.0   34.1%       $  213.7     33.0%

Depreciation & Amortization            6.6    3.5%            6.5      3.1%           20.0    3.4%           19.8      3.1%
SG&A Expense (1)                      47.5   25.1%           50.4     24.2%          152.3   25.6%          167.5     25.9%

Operating Income (Loss)
Document Management               $    5.4    5.2%       $    5.3      4.6%       $   14.1    4.3%       $    5.7      1.6%
Label Solutions                        0.8    3.0%            1.1      4.4%            1.4    1.8%            2.6      3.0%
POD Services                           5.9   10.6%            6.1     10.2%           13.4    7.7%           16.0      8.7%
Document Systems                       0.4    9.1%            0.6     12.3%            1.8   11.3%            2.6     15.8%
PathForward                           (0.8) -70.8%           (0.5)   -36.8%           (2.1) -59.5%           (1.1)   -24.7%
  Total Segments                  $   11.7    6.2%       $   12.6      6.0%       $   28.6    4.8%       $   25.8      4.0%
LIFO and Other Unallocated             0.5                    1.0                      2.1                    0.6
  Adjusted Operating Income           12.2    6.5%           13.6      6.5%           30.7    5.2%           26.4      4.1%

Restructuring                         (2.7)                  (3.6)                    (2.7)                  (7.7)
Asset Impairments                      -                     (0.1)                    (0.2)                   0.6
Pension Loss Amortization             (4.8)                  (5.5)                   (15.2)                 (19.6)
Pension Settlement                     -                      -                        -                     (3.2)
Operating Income                       4.7                    4.4                     12.6                   (3.5)
Interest and Other Expense            (0.5)                  (1.0)                    (1.6)                  (2.6)
Income (Loss) Before Taxes             4.2                    3.4                     11.0                   (6.1)
Income Tax (Expense) Benefit          (2.0)                  (1.4)                    (5.0)                   2.5
  % Rate                              49.0%                  41.9%                    45.2%                  41.9%
Income (Loss) from Continuing
Operations                        $    2.2               $    2.0                 $    6.0               $   (3.6)

(1) SG&A expense above excludes pension loss amortization and pension settlements.

Document Management

Document Management year-to-date revenue was $324.2 million, down $31.8 million or 8.9% compared with the same period of 2007. Unit sales were down approximately 14.2% while overall pricing was about 5.3% higher, the latter primarily reflecting the recovery of higher paper costs. The rate of decline in unit sales was higher than expected and partially reflects increased pressure on customers to cut costs in response to the continued overall downturn in the economy during this period. Customer cost-cutting initiatives have led to decreased demand as well as significant price competition within the market in this segment.

As a percentage of revenue, gross margin improved to 31.4% compared with 29.6%.
This improvement reflects the prior year cost reduction carried forward to this year, plus ongoing cost reduction efforts.

Label Solutions

Label Solutions year-to-date revenue decreased $8.2 million or 9.5% in 2008 compared with the same period in 2007. The decrease primarily reflects the impact of the loss of a single account. Excluding this account, revenue was down $0.8 million.

Gross margin decreased $2.2 million in 2008 compared with the same period in 2007. As a percentage of revenue, gross margin improved to 33.2% compared with 32.7%, primarily reflecting an improved mix of business.

POD Services

POD Services year-to-date revenue was down $10.6 million, or 5.7% compared with the same period of 2007, primarily the result of a decline in traditional short-run offset printed products. The decrease was greater than in previous periods as a result of the weak economy, which has reduced units and prices.

The gross margin decreased by $5.3 million in 2008 compared to the same period in 2007. As a percentage of revenue, the gross margin was 38.8% versus 39.5% in 2007. These declines were primarily a result of the decreased unit sales.

Document Systems

Document Systems reported year-to-date revenue of $16.0 million, down $0.5 million compared with 2007. Lower software sales and the accompanying professional services contributed to the slight decrease in revenue and gross margin.

PathForward

The 2008 year-to-date revenue and gross margin for our PathForward segment were down compared with the same period in 2007. The revenue decline was primarily the result of decreased unit sales. Lower revenue combined with increased fixed costs associated with the development and purchase of newer software products resulted in the decline in gross margin.

Current economic conditions in the financial services industry

One of the primary industries we serve is the financial services industry. At this time, we do not expect the recent acquisitions and disruptions that occurred to date in the financials services market to have a material adverse effect on our business. During the third quarter, we reserved $0.5 million for a potential bad debt from a single financial services customer.

Selling, General, and Administrative (SG&A) Expenses


                                                                     13 Weeks Ended                    39 Weeks Ended
                                                             September 28,    September 30,    September 28,    September 30,
                                                                  2008             2007             2008             2007
Total selling, general and administrative expense              $      52.3     $       55.9      $     167.5     $      190.3
Amortization of pension net acturial losses                           (4.8)            (5.5)           (15.2)           (19.6)
Pension settlement                                                     -                -                -               (3.2)
  Selling, general and administrative expense,   excluding
the above                                                      $      47.5     $       50.4      $     152.3     $      167.5

As shown in the table above, excluding pension amortization and settlements, year-to-date SG&A expense decreased by $15.2 million in 2008 as compared with 2007. The decrease is primarily a result of the restructuring actions completed in 2007, decreased pension expense as a result of the recent plan modifications, and lower incentive compensation and travel-related expenses.

In the third quarter, we incurred higher than usual bad debt expense and additional severance costs related to the departure of our Chief Executive Officer.

Restructuring and Other Exit Costs

The Company has undertaken restructuring actions in 2007 and 2008 as part of ongoing efforts to improve efficiencies and reduce cost. Total expense for these actions was $2.7 million and $3.6 million for the third quarter of 2008 and 2007. On a year-to-date basis, total expense was $2.7 million and $7.7 million. All costs related to these actions are included in restructuring charges in the accompanying Consolidated Statements of Income.

2008

During the third quarter, we closed two print centers and plan to integrate three other print centers into our distribution warehouses in the fourth quarter. We expect to have involuntary termination costs of approximately $0.6 million; contract termination costs of $2.0 million; and other associated exit costs of $0.4 million. This should result in annualized cost savings of approximately $3.0 million in compensation and facility rent that will be reflected in cost of sales.

We also began implementing a twelve-month plan to redesign our sales support infrastructure to more of a centralized model. We will transition customer transactional and administrative functions from our field sales offices to one of three client support centers, one of which is new. This action should generate approximately $5.6 million annually in compensation and related cost savings that will be reflected in selling, general, and administrative expenses. We expect to have involuntary termination costs of $1.5 million and contract termination costs of $0.2 million.

                                 Total Costs        Total
                                  Expected         Q3 2008
                                    to be       Restructuring
                                  Incurred         Expense
Involuntary termination costs   $         2.1   $          1.9
Contract termination costs                2.2              0.7
Other associated exit costs               0.4              0.1
Total                           $         4.7   $          2.7

BY SEGMENT:
Document Management             $         0.7   $          0.4
POD Services                              2.3              0.9
Other                                     1.7              1.4
Total                           $         4.7   $          2.7

2007

In 2007, we implemented plans to reduce our annual operating costs by $40 million in order to improve profitability, maintain competitiveness, and fund future initiatives essential to the Company's strategy. These restructuring plans are more fully described in Note 3 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 30, 2007. Restructuring expense during 2007 for these actions totaled $8.0 million for severance and employer related costs and other associated costs directly related to the restructuring, primarily equipment removal and relocation. All actions were completed at the end of 2007.

Second half 2007 costs and expenses were $17.5 million lower than the first half 2007. The restructuring actions have continued to produce benefits in 2008, contributing to the significant reduction in SG&A expense and increasing gross margin percentages despite declining revenue.

Subsequent Event

On October 27, 2008, we committed to a restructuring plan to lower costs in response to recent revenue decreases and management's expectation that soft industry demand for some traditional printed products will continue and that the overall economy will remain weak during 2009.

Substantially all of the actions will take place in the fourth quarter of 2008.
Annualized savings are expected to total approximately $11.0 million; total restructuring costs are estimated at $2.2 million for involuntary termination costs.

Taxes

The effective tax rate increased 7.1% for the quarter and 3.3% on a year-to-date basis compared to 2007. This increase was primarily due to a significant increase in permanent tax differences related to the cash surrender value of life insurance policies.

FOURTH QUARTER OUTLOOK

Our past guidance called for second half revenue to slightly exceed that for the first half of the year. In light of the third quarter results and our expectation that there will be no significant change in economic or market conditions during the fourth quarter, we now expect the second half revenue to trail that for the first half.

Past earnings guidance was for the total year Adjusted Operating Income to come in above the prior year. Notwithstanding on-going expense reduction initiatives, lowered second half revenue outlook increases the likelihood that the Adjusted Operating Income will come in below that for 2007.

LIQUIDITY AND CAPITAL RESOURCES

Our discussion will provide information on cash flow, capital structure, and our significant contractual obligations.

This discussion also presents financial measures that are considered non-GAAP. . . .