OVERVIEW

The Company is a commercial printer, business forms manufacturer and office products and office furniture supplier in regional markets of the United States of America, east of the Mississippi River. The Company also publishes The Herald-Dispatch daily newspaper in Huntington, West Virginia with a total daily and Sunday circulation of approximately 26,000 and 31,000, respectively. The Company has grown through strategic acquisitions and internal growth. Through such growth, the Company has realized regional economies of scale, operational efficiencies, and exposure of its core products to new markets. The Company has acquired fifteen printing companies, eight office products and office furniture companies, one company with a combined emphasis on both printing and office products and office furniture, a paper distribution division (which was subsequently sold in 2001) and a daily newspaper since its initial public offering on January 28, 1993.

The Company's net revenues consist primarily of sales of commercial printing, business forms, tags, other printed products, document output solutions including rendering, inserting and mailing, office supplies, office furniture, data products and office design services as well as newspaper revenues primarily from advertising and circulation. The Company recognizes revenues when products are shipped or ownership is transferred and when services are rendered to the customer. Newspaper advertising revenues are recognized, net of agency commissions, in the period when advertising is printed or placed on web sites. Circulation revenues are recognized when purchased newspapers are distributed. The Company's revenues are subject to seasonal fluctuations caused by variations in demand for its products.

The Company's cost of sales primarily consists of raw materials, including paper, ink, pre-press supplies and purchased office supplies, furniture and data products, and manufacturing costs including direct labor, indirect labor and overhead. Significant factors affecting the Company's cost of sales include the costs of paper in printing, office supplies and the newspaper operations, costs of labor and other raw materials.

The Company's operating costs consist of selling, general and administrative expenses. These costs include salaries, commissions and wages for sales, customer service, accounting, administrative and executive personnel, rent, utilities, legal, audit, information systems equipment costs, software maintenance and depreciation.

CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The Company's significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 15 of this Form 10-K. The discussion and analysis of the financial statements and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The following critical accounting policies affect the Company's more significant judgments and estimates used in the preparation of the consolidated financial statements. There can be no assurance that actual results will not differ from those estimates.

The Company believes that the accounting estimate related to an asset impairment is a "critical accounting estimate" because it is highly susceptible to change from period to period because it requires management to make assumptions about future cash flows over future years and that the impact of recognizing an impairment could have a significant effect on operations. Management's assumptions about future cash flows requires significant judgment because actual operating levels have fluctuated in the past and are expected to continue to do so in the future. Management has discussed the development and selection of this critical accounting estimate with the audit committee of our board of directors and the audit committee has reviewed the Company's disclosure relating to it in the MD&A.

Beginning in fiscal year 2002, goodwill and other intangibles are required to be evaluated annually for impairment, according to SFAS No. 142, "Goodwill and Other Intangible Assets." (SFAS 142). The standard requires a two-step process be performed to analyze whether or not goodwill has been impaired. Step one is to test for potential impairment and requires that the fair value of the reporting unit be compared to its book value including goodwill and other intangibles. If the fair value is higher than the book value, no impairment is recognized. If the fair value is lower than the book value, a second step must be performed. The second step is to measure the amount of impairment loss, if any, and requires that a hypothetical purchase price allocation be done to determine the implied fair value of goodwill and other intangibles. This fair value is then compared to the carrying value of goodwill and other intangibles. If the implied fair value is lower than the carrying value, an impairment must be recorded.

As discussed in the notes to the financial statements, goodwill and other intangibles are recorded at the adjusted book value and were analyzed for impairment with the implementation of SFAS 142. The fair value of the Company's goodwill and other intangibles was estimated using discounted cash flow methodologies. Based on the analysis, the Company determined that the fair value relating to goodwill and other intangibles resulted in an implied fair value greater than the book value recorded for the corresponding goodwill and other intangibles, and therefore, no impairment was recognized in any period subsequent to the adoption of this statement.

The Company believes that the accounting estimate related to the goodwill and other intangibles impairment is a "critical accounting estimate" because the underlying assumptions used for the discounted cash flow can change from period to period and could potentially cause a material impact to the income statement. Management's assumptions about discount rates, inflation rates and other internal and external economic conditions, such as earnings growth rate, require significant judgment based on fluctuating rates and expected revenues. Additionally, SFAS 142 requires that the goodwill and other intangibles be analyzed for impairment on an annual basis using the assumptions that apply at the time the analysis is updated. Management has discussed the development of these estimates with the audit committee of the board of directors. Additionally, the board of directors has reviewed this disclosure and its relation to MD&A.

The Company believes that the accounting estimate related to the allowance for doubtful accounts is a "critical accounting estimate" because the underlying assumptions used for the allowance can change from period to period and could potentially cause a material impact to the income statement and working capital. Management has discussed the development and selection of this estimate with the audit committee of the board of directors, and the board has, in turn, reviewed the disclosure and its relation to MD&A.

During 2008, 2007 and 2006, $854,000, $492,000, and $979,000 of bad debt expense was incurred and the allowance for doubtful accounts was $1,851,000, $1,511,000 and $1,558,000 of October 31, 2008, 2007 and 2006. The actual write-offs for the periods were $514,000, $657,000, and $832,000 during 2008, 2007 and 2006. General economic conditions and specific geographic and customer concerns are major factors that may affect the adequacy of the allowance and may result in a change in the annual bad debt expense.

The following discussion and analysis presents the significant changes in the financial position and results of operations of the Company and should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included elsewhere herein.

The following table sets forth for the periods indicated information derived from the Company's Consolidated Statements of Operations, including certain information presented as a percentage of total revenues.

                                                     Year Ended October 31,
                                                        ($ In thousands)
                                    2008                      2007                      2006
Revenues:
Printing                    $ 102,206        62.8 %   $ 101,653        69.8 %   $ 106,414        73.3 %
Office products and
office furniture               41,540        25.5        41,449        28.5        38,774        26.7
   Newspaper                   18,939        11.7         2,540        1.7             -         0.0
Total revenues                162,685       100.0       145,642       100.0       145,188       100.0
Cost of sales & newspaper
operating costs:
Printing                       72,521        44.6        72,769        50.0        75,016        51.7
Office products and
office furniture               28,457        17.5        28,835        19.8        26,778        18.4
   Newspaper cost of
sales & operating costs         9,492         5.8         1,188         0.8            -         0.0
Total cost of sales and
newspaper operating costs     110,470        67.9       102,792        70.6       101,794        70.1
Gross profit                   52,215        32.1        42,850        29.4        43,394        29.9
Selling, general and
administrative
expenses                       39,529        24.3        32,336        22.2        34,018        23.5
Hurricane and relocation
costs, net of recoveries          (33 )      -0.0             -         0.0          (377 )      -0.3
Income from operations         12,719         7.8        10,514         7.2         9,753         6.7
Other income (expense):
Interest income                    66         0.0            45         0.0            28         0.0
Interest expense               (5,734 )      -3.5        (1,455 )      -1.0          (610 )      -0.4
Other income                       70         0.1           179         0.2            32         0.0
Income before income
taxes                           7,121         4.4         9,283         6.4         9,203         6.3
Income tax expense             (1,099 )      -0.7        (3,203 )      -2.2        (3,729 )      -2.5
Net income                  $   6,022         3.7 %   $   6,080         4.2 %   $   5,474         3.8 %

Revenues

Consolidated net revenues were $162.7 million for the year ended October 31, 2008 compared to $145.6 million in the prior fiscal year. This change represents an increase in revenues of approximately $17.0 million, or 11.7%. Printing revenues increased by $0.6 million or 0.5% from $101.7 million in 2007 to $102.2 million in 2008. The increase in printing sales was primarily due to incremental printing sales associated with the acquisition of The Herald-Dispatch. Office products and office furniture revenue increased from $41.4 million in 2007 to $41.5 million in 2008. The increase in revenues for the office products and office furniture segment was primarily attributable to continued strong office furniture sales, partially offset by a reduction in office supply and data sales. In 2008, newspaper revenues were composed of approximately $14.7 million in advertising revenue and $4.2 million in circulation revenue. During the approximately 6 week period of 2007 in which the Company owned The Herald-Dispatch, the newspaper revenues were composed of approximately $2.0 million in advertising revenue and $0.6 million in circulation revenues.

Cost of Sales

Total cost of sales for the year ended October 31, 2008 totaled $110.5 million compared to $102.8 million in the previous year. This change represented an increase of $7.7 million or 7.5% in cost of sales. Printing cost of sales decreased $248,000, to $72.5 million in 2008 compared to $72.8 million in 2007. Printing cost of sales were lower due to improved printing gross margins. Printing cost of sales as a percentage of printing sales decreased to 71.0% as a percent of printing sales in 2008 from 71.6% in 2007. This decrease was primarily the result of improved material and absorption overhead partially offset by higher labor costs as a percent of printing sales. Office products and office furniture cost of sales decreased $377,000 to $28.5 million in 2008 from $28.8 million in 2007. The decrease in office products and office furniture cost of sales is attributable to improved gross margins in the office supply and office furniture categories. The decrease in office products and office furniture cost of sales as a percent of office products and office furniture sales is primarily reflective of lower furniture and office products costs as a percent of furniture and office products sales. The increase in newspaper cost of sales and operating costs is reflective of a full year operation for The Herald-Dispatch in 2008 compared to six weeks in 2007.

Selling, general and administrative (S,G&A) expenses increased $7.2 million to $39.5 million in 2008 from $32.3 million in 2007. S,G&A as a percentage of net sales represented 24.3% of net sales in 2008 compared with 22.2% of net sales in 2007. This increase in selling, general and administrative costs is primarily due to higher selling, general and administrative expenses from a full year of operations for the The Herald-Dispatch in 2008 compared to six weeks in 2007.

Other Income (Expense)

Other expense increased approximately $4,367,000 from $1,231,000 in 2007 to $5,598,000 in 2008. This was primarily due to an increase in interest expense of $4.3 million from $1,455,000 in 2007 to $5,734,000 in 2008. The increase in interest expense was attributed to the acquisition of The Herald-Dispatch which was completed on September 14, 2007.

Income Taxes

Income taxes as a percentage of income before taxes were 15.4% in 2008 compared with 34.5% in 2007. The decrease in income taxes as a percentage of income before taxes is primarily related to amortization expense deductions recorded as a permanent difference due to the acquisition of The Herald-Dispatch.

The effective income tax rate in 2008 and 2007 approximates the combined federal and state, net of federal benefit, statutory income tax rate.

Net Income

For reasons set forth above, net income for 2008 decreased approximately $60,000 to $6.0 million, or $0.60 per share on a basic and a diluted basis, from net income of $6.1 million for 2007, or $0.61 per share on a basic basis and $0.60 on a diluted basis.

Revenues

Consolidated net revenues were $145.6 million for the year ended October 31, 2007 compared to $145.2 million in the prior fiscal year. This change represents an increase in revenues of approximately $0.5 million, or 0.3%. Printing revenues decreased by $4.8 million or 4.5% from $106.4 million in 2006 to $101.7 million in 2007. The decrease in printing sales was primarily due to sales declines in several of our commercial plants that primarily operate in the sheetfed arena. Office products and office furniture revenue increased $2.7 million or 6.9% from $38.8 million in 2006 to $41.4 million in 2007. The increase in revenues for the office products and office furniture segment was primarily attributable to robust office furniture sales in 2007 compared to 2006, as well as slight increases in office products sales. During the period in which the Company owned The Herald-Dispatch, approximately six weeks, the newspapers revenues were composed of approximately $2.0 million in advertising revenue and $0.6 million in circulation revenues.

Cost of Sales

Total cost of sales for the year ended October 31, 2007 totaled $102.8 million compared to $101.8 million in the previous year. This change represented an increase of $1.0 million or 1.0% in cost of sales. Printing cost of sales decreased $2.2 million, or 3.0% to $72.8 million in 2007 compared to $75.0 million in 2006. Printing cost of sales was higher due to an overall decrease in printing sales. Printing cost of sales as a percentage of printing sales increased to 71.6% as a percent of printing sales in 2007 from 70.5% in 2006. This increase was primarily the result of higher payroll costs as a percent of sales. Office products and office furniture cost of sales increased $2.1 million to $28.8 million in 2007 from $26.8 million in 2006. The increase in office products and office furniture cost of sales is attributable to an increase in office products and office furniture sales. The increase in office products and office furniture cost of sales as a percent of office products and office furniture sales is primarily reflective of higher furniture costs as a percent of furniture sales.

Operating Expenses and Income

Selling, general and administrative (S,G&A) expenses decreased $1.7 million to $32.3 million in 2007 from $34.0 million in 2006. S,G&A as a percentage of net sales represented 22.2% of net sales in 2007 compared with 23.5% of net sales in 2006. This decrease in selling, general, and administrative costs is due to reductions in payroll, lower selling related expense and a decrease in bad debt expense, as well as reductions in several other S,G&A line items partially offset by additional expenses from the acquisition of The Herald-Dispatch.

Other expense increased approximately $681,000 from $550,000 in 2006 to $1,231,000 in 2007. This was primarily due to an increase in interest expense of $846,000 from $610,000 in 2006 to $1,455,000 in 2007 partially offset by higher other income. The increase in interest expense was attributed to the acquisition of The Herald-Dispatch which was completed on September 14, 2007.

Income Taxes

Income taxes as a percentage of income before taxes were 34.5% in 2007 compared with 40.5% in 2006. The decrease in income taxes as a percentage of income before taxes is primarily related to lower state tax rates based on multi-state apportionment factors, amended state returns, and amortization expense deductions recorded as a permanent difference due to the acquisition of The Herald-Dispatch.

The effective income tax rate in 2007 and 2006 approximates the combined federal and state, net of federal benefit, statutory income tax rate.

Net Income

For reasons set forth above, net income for 2007 increased approximately $0.6 million to $6.1 million, or $0.61 per share on a basic and $0.60 per share on a diluted basis, from net income of $5.5 million for 2006, or $0.56 per share on a basic basis and $0.55 on a diluted basis.

As of October 31, 2008, the Company had $(1.0) million negative book cash balance, a net decrease in cash and cash equivalents of $6.8 million from the prior year. Working capital as of October 31, 2008 was $20.4 million, a 19.5% decrease from $25.3 million at October 31, 2007.

The Company had historically used cash generated from operating activities and debt to finance capital expenditures and the cash portion of the purchase price of acquisitions. Management plans to continue making significant investments in equipment and to seek appropriate acquisition candidates. However, to fund the Company's continued expansion of operations, additional financing may be necessary. The Company has two available lines of credit totaling up to $31.0 million, of which $30.0 million is subject to borrowing base limitations (See Note 3 of the Consolidated Financial Statements). For the foreseeable future including through Fiscal 2009, management believes it can fund operations, meet debt service requirements and make the planned capital expenditures based on the available cash and cash equivalents, cash flow from operations and lines of credit.

Additionally, the Company has minimal amounts of future contracted obligations (See Note 3 and Note 6 of the Consolidated Financial Statements). The Company is not a guarantor of indebtedness of others. The Company's off balance sheet arrangements at October 31, 2008 relate to the Syscan acquisition and are associated with a put option from Williams Land Corporation to sell a building to the Company for $1.5 million. This option may be exercised no later than 60 days prior to the end of the lease and closing of said purchase cannot exceed 45 days from the end of the lease.

The Company had borrowed under its $30.0 million line of credit approximately $9.1 million at October 31, 2008 which encompassed refinancing of existing indebtedness prior to The Herald-Dispatch acquisition and to partially fund the purchase of The Herald-Dispatch. Pursuant to the borrowing base calculation the Company had $9.1 million in additional availability under its $30.0 million revolving credit line. In January 2009, the Company renewed its $1.0 million unsecured line of credit with a bank.

As of October 31, 2008, the Company had contractual obligations in the form of leases and debt as follows:

                                                      Payments Due by Fiscal Year
Contractual
Obligations           2009            2010            2011             2012             2013           Residual             Total

 Non-cancelable
operating leases   $ 1,319,849     $ 1,095,075     $   940,785     $    782,343     $    695,884     $    121,640     $  4,955,576

 Revolving line
of credit                   -               -               -        9,125,496                -                -        9,125,496

 Term debt           7,118,543       5,055,960       5,062,313        5,068,927       42,019,107                -       64,324,850

                   $ 8,438,392     $ 6,151,035     $ 6,003,098     $ 14,976,766     $ 42,714,991      $   121,640     $ 78,405,922

The Company is required to make certain mandatory payments on its credit facilities related to (1) net proceeds received from a loss subject to applicable thresholds, (2) equity proceeds and (3) effective January 31, 2009, the Company is required to prepay its credit facilities by 75% of excess cash flow for its most recently completed fiscal year. The excess cash flow for purposes of this calculation is defined as the difference (if any) between (a) EBITDA for such period and (b) federal, state and local income taxes paid in cash during such period plus capital expenditures during such period not financed with indebtedness plus interest expense paid in cash during such period plus the aggregate amount of scheduled payments made by the Borrower and its Subsidiaries during such period in respect of all principal on all indebtedness (whether at maturity, as a result of mandatory sinking fund redemption, or otherwise), plus restricted payments paid in cash by the Borrower during such period in compliance with the credit agreement. The Company's prepayment obligation due January 31, 2009 is approximately $2.0 million.

The Company converted an operating lease to an equipment purchase in December 2008. As a result of this conversion no lease commitments pertaining to this equipment are reflected in the contractual obligations schedule above. The Company paid $260,000 of an approximate aggregate commitment of $650,000 for this equipment in December 2008.

Cash Flows from Operating Activities

Cash flows from operating activities for the years ended October 31, 2008, 2007 and 2006 were $10.3 million, $8.7 million, and $10.2 million. The increase in cash flows from operating activities for fiscal 2008 compared to 2007 was primarily associated with higher depreciation and amortization, deferred financing costs, deferred income taxes and bad debt expense. The decrease in cash flows from operating activities for the fiscal year 2007 compared to 2006 was primarily reflective of cash paid for taxes of which a refund has been recorded in 2007 and a liability was recorded in 2006, primarily due to the timing of tax payments and a cash payment under a deferred compensation plan. These items were partially offset by additional cash generated by changes in the remaining assets and liabilities and an increase in net income.

Cash Flows from Investing Activities

Cash used in investing activities was ($3.8) million, ($4.1) million, and ($3.0) million for the years ended October 31, 2008, 2007 and 2006. Cash flows used in investing activities were down approximately $300,000 in 2008 from 2007. The cash used in investing activities in 2008 was primarily related to capital expenditures and a working capital adjustment payment associated with the acquisition of The Herald-Dispatch. Cash flows used in investing activities increased in 2007 compared to 2006 primarily due to the contingent earn-out paid for the acquisition of Syscan, higher capital expenditures, partially offset by cash net of certain acquisition related expenditures for The Herald-Dispatch.

Cash Flows from Financing Activities

Net cash flows used in financing activities for the years ended October 31, . . .