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, 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 2009 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 28, 2008 (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. This Management's Discussion and Analysis includes the following sections:

†

Critical Accounting Policies and Estimates-An update on the discussion provided in our Annual Report of the accounting policies that require our most critical judgments and estimates.

†

Quarter Highlights-An overall discussion of changes in our business and key financial results for the quarter.

†

Results of Operations-An analysis of our consolidated results of operations and segment results for the first quarter of 2009 and 2008.

†

Liquidity and Capital Resources-An analysis of cash flows and discussion of our financial condition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 benefits, fair value measurements, deferred taxes, inventories, contingent liabilities, revenue recognition, and share-based compensation. For a detailed discussion of these critical accounting estimates, see the Management Discussion and Analysis included in our Annual Report. There were no significant changes in these critical accounting policies and estimates in the first quarter of 2009.

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.

Recently Issued Accounting Pronouncements

Recently issued accounting standards and their estimated effect on our consolidated financial statements are described in Note 2, "Recently Adopted Accounting Pronouncements," to the Consolidated Financial Statements.

QUARTER HIGHLIGHTS

Throughout the fourth quarter of 2008 and the first quarter of 2009, we have been transforming our organizational structure to align around our new vertical market strategy. We have aligned management roles and resources to create an intense focus on customer needs within our three primary markets: Commercial, Healthcare, and Industrial. We have also been aligning our manufacturing, supply chain, client satisfaction, information technology, human resource, and finance functions into a shared-services model in order to provide better support and service to our customers and create cost efficiencies. All of these actions have been completed with the exception of the consolidation of our client satisfaction operations, which is expected to be completed by the end of June 2009.

During the first quarter 2009, our business continued to be negatively impacted by the downturn in the economy which resulted in lower sales volume with our existing base of customers and increased pressure on pricing. As expected, the continued adoption of digital and non-print related technologies has also negatively impacted sales volume. However, due to the value proposition of the many cost-saving solutions we provide and a more focused marketing approach, we have been able to expand our customer base during this time in each of our segments. Our strong financial condition and national presence have contributed to this success.

The following summarizes some of the key financial results for the quarter:

†

In the first quarter of 2009, a large number of employees elected to retire and receive lump sum payments from their pension plans. As a result, we recorded non-cash pension settlement charges in the amount of $19.7 million. These charges are discussed in more detail under "Pension Settlements" within the Results of Operations discussion.

†

Net loss was $11.0 million, or ($0.38) per share compared to net income of $2.5 million, or $0.09 per share in 2008. On a per share basis, the pension settlements represented a loss of $0.41 per share.

†

Cash flow on a net debt basis was a negative $7.4 million compared to a positive $9.7 million in the first quarter of 2008.

†

Net debt in the first quarter increased by $7.5 million from year-end 2008.

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.
 Unless otherwise noted, references to 2009 and 2008 refer to the 13-week
periods ended March 29, 2009 and March 30, 2008.

Consolidated Summary

                                                         2009       %    2008
                                                                 Change
Revenue                                               $ 174.6     -16% $ 207.2
Cost of sales                                           120.4     -15%   142.4
Gross margin                                             54.2     -16%    64.8
 Gross margin % of sales                                 31.0%           31.3%

SG&A expense                                             51.8     -13%    59.5
Pension settlements                                      19.7                -
Restructuring & asset impairment                          0.6              0.2
Other expense, net                                        0.3              0.7
(Loss) income from continuing operations before taxes   (18.2)             4.4
Income tax (benefit) expense                             (7.2)             1.9
   % rate                                                39.5%           42.9%

(Loss) income from continuing operations              $ (11.0)         $   2.5

Revenue

Revenue for the first quarter 2009 was down $32.6 million or 16% compared to the first quarter 2008, primarily the result of unit declines of 17% which were offset by a slight increase in pricing of 1%. We estimate that approximately 50% of the overall revenue decline is a result of the downturn in the economy that began in 2008 and has continued into 2009. Declining consumer demand has negatively impacted our existing base of customers which has led to a decrease in order levels for many of our products. Additionally, we estimate that close to 15% of our overall revenue decline resulted from the continued advancement of digital technologies.

Pricing on the supply side has stabilized in the first quarter; however, price pressures from our customers continued to intensify as they focused on cost reductions.

Although unit sales declined, our overall customer base increased during the quarter. The intense focus on cost by customers within our markets has contributed to this increase as our document management products and services offer cost effective solutions.

Cost of Sales/Gross Margin

Cost of sales decreased $22.0 million or 15% in the first quarter of 2009. Unit declines reduced costs by approximately 14%. Material prices increased approximately 3%; however, this was more than offset by our workforce reduction and the successful execution of cost reduction initiatives implemented in 2007 and 2008 which reduced overall costs by 4%. The major categories of cost reductions included compensation, freight, and warehousing costs.

As a result, despite a decline in units, the gross margin percentage was consistent with the first quarter 2008. One of our key areas of focus is the relentless pursuit of cost reduction.

Selling, General and Administrative Expenses

As shown in the table below, SG&A expense decreased by $7.7 million in the first quarter 2009 as compared to 2008. Selling and sales support decreased $4.0 million and general and administrative expenses decreased $2.9 million, primarily reflecting lower salaries and commissions as a result of our workforce reduction and other cost reduction initiatives taken late in 2008 and early 2009. Additionally, pension amortization decreased $0.5 million resulting from our 2008 plan modifications that lowered the amount of our unamortized actuarial losses to be recognized in 2009 and future years.

                                                    2009   2008

Selling and sales support                         $ 26.9 $ 30.9
Research and development                             1.2    1.2
General and administrative expenses                 15.8   18.7
Depreciation                                         2.2    2.5
Amortization of pension net actuarial losses         4.7    5.2
Other pension and  postretirement expenses           1.0    1.0
Total selling, general and administrative expense $ 51.8 $ 59.5

Pension settlements

As a result of associates retiring and electing a lump-sum payment of their pension benefit, we recorded non-cash settlement charges of $19.7 million in the first quarter of 2009 related to our qualified, non-qualified and supplemental executive retirement plans. A pension settlement charge is recorded when the total lump sum payments for a year exceed total service and interest costs recognized for that year. The settlement charge recognizes a pro-rata portion of the unrecognized actuarial losses at the date of the settlement.

As part of recording the settlement, we remeasured our pension obligations and plan assets under these plans as of March 1, 2009, the settlement date. The remeasurement resulted in an actuarial gain of $52.8 due to a change in the discount rate used to measure the benefit obligations from 5.75% at December 28, 2008 to 7.0% at March 1, 2009. The change in discount rate is primarily the result of increases in long-term interest rates during the period.
Additionally, we updated the fair value of our plan assets and recognized a net actuarial loss of $28.1 due to the actual rate of investment return on our qualified plan being less than the expected rate of return. As a result, we realized a net actuarial gain of $24.7 million which will be amortized into income in future years. This gain reduced our pension liabilities by $24.7, decreased our deferred tax assets by $9.8 million, and reduced accumulated comprehensive losses by $14.9 million.

Restructuring and Other Exit Costs

The Company has undertaken cost reduction initiatives and restructuring actions in 2008 as part of ongoing efforts to improve efficiencies, reduce cost, and maintain a strong financial condition. Restructuring and other exit costs of $0.6 million for the first quarter of 2009 primarily relate to costs associated with the planned closing of facilities that are required to be expensed as incurred. All costs related to these actions are included in restructuring and other exit costs in the accompanying Consolidated Statements of Income.

Our restructuring and cost reduction activities include production facility consolidations, sales reorganization, and general reductions in headcount.
Under our new operating model, the majority of our manufacturing, printing, warehousing, and distribution activities are managed under a shared-services model and are therefore not specific to a particular segment. Additionally, we still maintain certain other corporate functions that also are not attributable to a specific segment. As a result, none of our restructuring or cost reduction activities are reported under any segment, and are all attributable to corporate and other shared services.

2008

During 2008, we initiated a plan to close several print centers and integrate certain other print centers into our distribution warehouses to improve efficiency and reduce cost. The last of these actions was completed during the first quarter of 2009. We expected to incur costs of approximately $2.4 million and to realize approximately $3.0 million in savings from these actions. Based upon the reduction in costs realized during the first quarter of 2009, we expect to realize substantially all of our projected savings.

Also during 2008, we began implementing a plan to redesign our client support infrastructure to more of a centralized model. We have been transitioning customer transactional and administrative functions from our field sales offices to one of three client support centers. The overall benefit of the change is an optimized client support model along with significant annualized cost savings.
We expect to complete these actions by the end of June 2009. 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. However, we expect to re-invest a portion of the savings into our client satisfaction operations. We expect to have involuntary termination costs of $1.5 million and contract termination costs of $0.2 million.

Pretax components of 2008 restructuring and other exit costs consist of the following:

                                  Total        Total     Cumulative-
                                 Expected     Q1 2009      To-Date
                                  Costs       Expense      Expense

Involuntary termination costs      $   4.3     $     -          $ 4.2
Contract termination costs             1.7         0.3            1.2
Other associated exit costs            0.5         0.3            0.7

Total                              $   6.5     $   0.6          $ 6.1

A summary of the 2008 restructuring accrual activity is as follows:

                                 Balance     Charged to     Incurred   Balance
                                  2008        Accrual       in 2009     2009

Involuntary termination costs     $ 3,206          $   8 $   (1,261) $   1,953
Contract termination costs            517            319       (236) $     600
   Total                          $ 3,723          $ 327 $   (1,497) $   2,553

Taxes

The effective tax rate was 3.4% lower in the first quarter of 2009 as compared to 2008 as a result of permanent differences related to the cash surrender value of life insurance policies.

Segment Operating Results

In 2009, we organized our operating businesses into three Business Units based upon their customer base and the primary vertical markets they serve. We believe this will allow us to further enhance our in-depth knowledge of customer needs within our vertical markets and define a more market-specific portfolio of products and solutions. Ultimately, we expect these actions will enable us to accelerate growth and increase market share. Pursuant to SFAS No. 131 -"Disclosures about Segments of an Enterprise and Related Information", we re-evaluated our reportable segments based upon the new management structure, our internal reporting, and how our chief executive officer and other chief decision makers evaluate performance and allocate resources. As a result, our new reportable segments are primarily market focused as opposed to our previous reporting segments that were product-based. We sell most of our products and services across all of our Business Units; therefore, our new reportable segments are not based upon any aggregation of the previously reported segments.

Although we have changed our reportable segments, our description of our products, services and related market trends contained in Item 1 of our Annual Report, as well as our discussion of risk factors in Item 1A, have not changed and should be reviewed in conjunction with this Management's Discussion and Analysis.

Under our new operating model, the majority of our manufacturing, printing, warehousing, and distribution functions are managed under a shared-services model and are therefore not specific to a particular reportable segment. Each Business Unit is supported by our shared-services comprised of manufacturing, supply chain, and client satisfaction, as well as finance, technology, and other corporate functions.

Production costs of our manufacturing and supply chain shared-services functions are accumulated on a customer basis and reported in the applicable Business Unit's cost of sales. Our Business Units incur a portion of selling, general and administrative expense directly. Each Business Unit also receives an allocation of SG&A expense as follows:

†

Each Business Unit has its own sales regions. Selling expense incurred by each sales region is allocated to other Business Unit's based on the percentage of revenue generated for the other Business Unit. Expense associated with our client satisfaction function is allocated to Business Units in proportion to their share of consolidated revenue

†

Finance, technology, and other corporate general and administrative expense is allocated based on the Business Unit's budgeted revenue as a percentage of budgeted consolidated revenue

†

General and administrative expense of our remaining shared-services is allocated based on a percentage of actual revenue.

Variability in the segment's budgeted revenue, actual revenue, or the level of selling or Corporate SG&A expense to allocate can have a significant impact on segment profitability. The following is an overview of our new reportable segments and the trends related to each.

Commercial

The Commercial segment serves the business-to-business market with concentrations in insurance, banking, service providers, transportation, retail, government agencies, and utilities. The main product offerings include:
document management services; training solutions; secure document solutions; document outsourcing such as statements, billing, and customer notices; and other printed products. This segment also provides software products and related professional services.

Market trends affecting this segment include:

†

Customer cost reduction initiatives are leading to pricing pressure on existing products, as well as new opportunities for cost-saving print management services and products.

†

Economic uncertainty within the financial services industry is causing financial service providers to intensely focus on capital preservation, cost management, and operational efficiencies.

†

Financial services businesses are focusing on customer retention as the traditional banking environment is rapidly changing, creating opportunities for innovative marketing solutions.

†

Technological advances and a maturing and improving internet infrastructure are leading to adoption of electronic media which is eroding demand for printed documents.

†

Offset printing is in decline as digital printing becomes more prevalent.
Additionally, black and white printing is migrating to color. These trends are creating opportunities for companies that are capable of providing digital color work at competitive prices but are also contributing to declines in traditional printed products.

†

Increasing postal rates and cost management/reduction initiatives are leading to increased focus on electronic communications/applications (internet, e-mail, and mobile banking) in place of printed documents.

Healthcare

The Healthcare segment's primary customers include hospitals, integrated delivery networks, long-term care providers, and managed care organizations.
Products provided include document management services, clinical forms, document workflow solutions, wristbands, labels, secure prescription programs, and other print and electronic solutions.

Market trends affecting this segment include:

†

Today's economic environment has impacted healthcare provider financial performance, making cost containment a top priority in the market. This creates price and unit pressures on our existing base business, but also increased opportunities for new customers who can utilize our solutions to gain significant cost advantages.

†

Migration from paper-based to electronic medical records in hospitals is contributing to declines in demand for clinical forms and increased opportunity for electronic document workflow solutions. This trend is being influenced and could be accelerated by current efforts of the federal government that are aimed at requiring the use of electronic medical records by 2014.

†

Increasing trends in healthcare spending and an aging "baby boomer" population is expected to increase customer interest in solutions designed to manage this volume safely and cost effectively, and to increase need for document workflow solutions, wristbands, labels, and certain documents.

†

Increasing focus on patient safety is creating opportunities for patient identification and security-based solutions.

Industrial

Primary customers of the Industrial segment are manufacturing companies that produce industrial and commercial machinery, transportation equipment, HVAC, electrical distribution products, and appliance and medical equipment. The Industrial segment provides design, sourcing, and inventory management for decorative and functional printed production parts. Printed production parts include all of the labels and technical literature which go on a manufactured product or are shipped with the product. In addition to these products, a wide array of traditional print products and document management services is also provided.

Current trends in this segment include:

†

Increasing focus on lean manufacturing, cost reductions, and consolidations is creating opportunities for solutions based on new technologies and multi-site suppliers who possess a national presence in the market and can provide a full range of services.

†

Customer concerns over product liability, counterfeiting, and piracy is driving an increasing need for the number and size of labels and creating opportunities for technologically-advanced label products.

†

Rapid product innovation is expected to increase the demand for labels long-term.

†

Deteriorating consumer demand due to current economic conditions is leading to declines in demand for label products in the short-term.

†

Demand for products from our Mexico operations is increasing, as it is easier for our customers in Mexico to do business with companies within the country.

The following table presents Revenue, Gross Margin, and Operating Income (Loss) for each of our reportable segments. Segment information for 2008 has been revised from previously reported information to reflect the current presentation.