• Disciplined Acquisition Program - We selectively pursue opportunities to acquire additional printing businesses at reasonable prices. Some of these acquisitions may include smaller and/or distressed printing businesses for consolidation into one of our existing businesses.

• Cost Savings - Because of our size and extensive geographic footprint, we leverage our economies of scale to purchase supplies and equipment at preferential prices, and centralize various administrative services to generate cost savings.

• Best Practices/Benchmarking - We provide a forum for our printing businesses to share their knowledge of technical processes and their best practices with one another, as well as benchmark financial and operational data to help our printing businesses identify and respond to changes in operating trends.

• Leadership Development - Through our unique Leadership Development Program, we develop talent for future sales and management positions at our printing businesses.

Our printing businesses maintain their own sales, customer service, estimating and planning, prepress, production and accounting departments. Our corporate headquarters staff provides support to our printing businesses in such areas as human resources, purchasing, internal financial controls design and management information systems. We also maintain centralized treasury, risk management, tax, internal audit and consolidated financial reporting activities. Our sales are derived from commercial printing services. These services consist of (i) traditional print services, including electronic prepress, printing, finishing, storage and delivery of high-quality materials which are custom manufactured to our customers' design specifications; (ii) fulfillment and mailing services for such printed materials; and (iii) digital technology solutions and e-commerce capabilities that enable our customers to more efficiently procure and manage printed materials and/or design, procure, distribute, track and analyze results of printing-based marketing programs and activities. Examples of the types of documents we print for our customers include high-quality, multi-color marketing materials, product and capability brochures, point-of-purchase displays, direct mail pieces, shareholder communications, trading cards, catalogs and training manuals.

Most of our sales are generated by individual orders through commissioned sales personnel. We recognize revenue from these orders when we deliver the ordered goods and services. To a large extent, continued engagement of our Company by our customers for successive business opportunities depends upon the customers' satisfaction with the quality of products and services we provide. As such, it is difficult for us to predict with any high degree of certainty the number, size, and profitability of printing services that we expect to provide for more than a couple of weeks in advance. Our revenues, however, tend to be strongest in the quarter ended December 31 followed by revenue in the quarter ended March 31. Conversely, revenues tend to be seasonally weaker in the quarters ended June 30 and September 30. Due to the current economic recession, which began in late fiscal 2008 and may potentially continue though fiscal 2010, these seasonal trends may not have a significant impact on our sales since revenues are generally depressed. Additionally, a further deterioration in the economy would likely adversely impact our revenues and results from operations. Our cost of sales mainly consists of raw materials consumed in the printing process, as well as labor and outside services, such as delivery costs. Paper cost is the most significant component of our materials cost; however, fluctuation in paper pricing generally does not materially impact our operating margins because we typically quote, and subsequently purchase, paper for each specific printing project we are awarded. As a result, any changes in paper pricing are effectively passed through to customers by our printing businesses. Additionally, our cost of sales includes salary and benefits paid to operating personnel, maintenance, repair, rental and insurance costs associated with operating our facilities and equipment and depreciation charges. Our selling expenses generally include the compensation paid to our sales professionals, along with promotional, travel and entertainment costs. Our general and administrative expenses generally include the salary and benefits paid to support personnel at our printing businesses and our corporate staff including stock-based compensation, as well as office rent, utilities and communications expenses, various professional services and amortization of identifiable intangible assets.
Results of Operations
The following table sets forth our Company's historical consolidated income statements and certain percentage relationships for the periods indicated:

                                                                             As a Percentage of Sales
                                        Year Ended March 31                     Year Ended March 31
                                 2009          2008          2007          2009         2008        2007
                                           (In millions)
Sales                          $ 1,145.2     $ 1,095.4     $ 1,006.2        100.0 %      100.0 %     100.0 %
Cost of sales                      875.1         812.4         737.0         76.4         74.2        73.2

Gross profit                       270.1         283.0         269.2         23.6         25.8        26.8
Selling expenses                   105.7         107.0         101.7          9.2          9.8        10.1
General and administrative
expenses                            95.3          78.8          69.2          8.3          7.2         6.9
Goodwill impairment charge          83.3             -          11.5          7.3            -         1.2
Litigation charge                   17.0             -             -          1.5            -           -
Other income, net                   (0.8 )        (3.1 )           -         (0.0 )       (0.3 )         -

Operating income (loss)            (30.4 )       100.3          86.8         (2.7 )        9.1         8.6
Interest expense, net               15.0          12.0           6.7          1.3          1.1         0.7

Income (loss) before taxes         (45.4 )        88.3          80.1         (4.0 )        8.0         7.9
Income taxes                        (5.8 )        29.0          29.4         (0.5 )        2.6         2.9

Net income (loss)              $   (39.6 )   $    59.3     $    50.7         (3.5 )%       5.4 %       5.0 %

Our sales and expenses during the periods shown were impacted by the acquisition of three printing businesses in fiscal 2008 and two printing businesses in fiscal 2007. In accordance with the purchase method of accounting, our consolidated income statements reflect sales and expenses of acquired businesses only for post-acquisition periods. Accordingly, acquisitions affect our financial results in any one year compared to the prior year by the full-year impact of prior year acquisitions (as compared to the partial impact in the prior year) and the partial-year impact of current year acquisitions. This revenue impact is referred to below as the "impact of acquisitions." We refer to revenue growth or decline, excluding the effect of revenues contributed by acquisitions and election-related business, in the most recent or prior fiscal year as "internal" or "same-store" sales growth or decline.

Analysis of Consolidated Income Statements for Fiscal 2009 as Compared to Fiscal 2008
Sales for fiscal 2009 increased $49.7 million, or 5%, to $1.15 billion from $1.10 billion in fiscal 2008. In fiscal 2009, the impact of acquisitions provided increased revenues of $128.7 million while an increase in election-related business contributed $24.2 million. These increases were partially offset by a $103.2 million decline in same-store sales compared to 2008. The decline in same-store sales was primarily due to a reduction in demand for printing services as a result of continuing weakness in the overall U.S. economy, and a more competitive pricing environment.
Gross profit for fiscal 2009 declined by $12.9 million, or 5%, to $270.1 million from $283.0 million in fiscal 2008. Gross profits as a percentage of sales declined to 23.6% from 25.8% in fiscal 2008 due to relatively lower gross margins of businesses acquired in fiscal 2008 and the adverse effect of lower same-store sales, offset, in part, by the effect of an increase in election-related business and the beneficial impact of the Company's growing digital print business.
Selling expense for fiscal 2009 declined $1.3 million, or 1%, to $105.7 million from $107.0 million in fiscal 2008. The decrease was attributable to lower sales commissions and other miscellaneous selling expenses, offset by higher selling expenses of businesses acquired in fiscal year 2008. As a percentage of sales, selling expenses in fiscal 2009 declined to 9.2% from 9.8% in fiscal 2008. The decline was primarily due to lower selling expense as a percentage of sales for businesses acquired in fiscal year 2008.
General and administrative expenses for fiscal 2009 increased $16.5 million, or 21%, to $95.3 million from $78.8 million in fiscal 2008. This increase was primarily caused by the impact of acquisitions (including direct expenses and incremental intangible asset amortization), an increase in share-based compensation and an increase in bad debt expense. Overall, as a percentage of sales, general and administrative expenses in fiscal 2009 increased to 8.3% from 7.2% in fiscal 2008 due to the factors described above and lower same-store sales.
The Company assesses the impairment of goodwill as required by SFAS No. 142. Under SFAS No. 142, the Company determines fair value for each reporting unit using trailing twelve months earnings before interest, income taxes and depreciation and amortization ("EBITDA") multiplied by management's estimate of the total Company's enterprise value-to-EBITDA multiple, adjusted for a control premium. Management estimated a total Company enterprise value-to-EBITDA multiple based upon the multiple derived from using the market capitalization of the Company's common stock around March 31, 2009, after considering an appropriate control premium (25% based upon historical transactions in the printing industry). Each of the Company's printing businesses is separately evaluated for goodwill impairment because they comprise individual reporting units. The Company evaluates goodwill for impairment at the end of each fiscal year, or at any time that management becomes aware of an indication of impairment.
To the extent the net book value of the Company as a whole is greater than the Company's market capitalization, all or a significant portion of its goodwill may be considered impaired. As a result of the recent decline in the market capitalization of the Company during fiscal year 2009, and a weakening operating performance outlook driven primarily by the U.S. recession, the Company concluded that a triggering event occurred for the quarter ended December 31, 2008 and recognized a non-cash, pre-tax impairment of its goodwill during that quarter of $62.5 million. In connection with the year ended March 31, 2009, the Company performed an additional, required annual impairment test of goodwill and recognized a non-cash, pre-tax impairment of goodwill of $20.8 million in the quarter ended March 31, 2009. For the fiscal year, the total non-cash , pre-tax impairment of goodwill and accompanying charge to earnings was $83.3 million. The litigation charge for fiscal 2009 relates to jury rendered verdicts for compensatory and punitive damages against the Company due to a lawsuit involving an isolated dispute between the Company and the former employer of an existing sales employee. As a result of these verdicts, a pre-tax litigation charge of $17.0 million has been recognized in the consolidated financial statements. The judge may also award the plaintiff their attorney fees and costs. We intend to continue our defense of this matter and appeal the judgment, as well as pursue potential insurance reimbursement, which has previously been denied. See "Item 3. Legal Proceedings."
Other income for fiscal 2009 decreased $2.3 million to $0.8 million from $3.1 million in fiscal 2008. Other income primarily consists of foreign currency transaction gains resulting from certain transactions of our Canadian and Czech Republic subsidiaries that are denominated in U.S. dollars. Net interest expense for fiscal 2009 increased $3.0 million, or 25%, to $15.0 million from $12.0 million in fiscal 2008, primarily due to a higher level of average debt outstanding due to borrowings used to fund 2008 acquisitions, capital expenditures and share repurchases under our now expired common stock repurchase program during the second and third quarters of fiscal 2008. The increase was partially offset by a decline in our weighted average interest rate on LIBOR-based debt.

Income tax benefit for fiscal 2009 was $5.8 million, reflecting an overall effective tax rate of 12.8% as compared to an effective tax rate of 32.8% in fiscal 2008. In fiscal 2009, the effective tax rate declined primarily as a result of the goodwill impairment charges and lower pretax book income. Without the goodwill impairment charges, the effective rate for fiscal 2009 would be 37.6%, compared to an effective rate of 32.8% in fiscal 2008. This increase in effective rate was primarily due to a lower tax benefit resulting from a reduction of reserves related to certain tax positions in 2009 compared to 2008. Analysis of Consolidated Income Statements for Fiscal 2008 as Compared to Fiscal 2007
Sales for fiscal 2008 increased $89.2 million, or 9%, to $1.10 billion from $1.01 billion in fiscal 2007. The $89.2 million revenue increase is attributable to an increase of $109.4 million from the incremental impact of acquisitions, partially offset by an internal same-store revenue decline of $8.5 million and an $11.7 million decline in election-related printing. Excluding the decline in election-related printing, internal sales were down .8% compared to 2007. We believe this decline was generally due to the weakness of the U.S. economy during the year.
Fiscal 2008 gross profit increased by $13.8 million, or 5%, to $283 million from $269.2 million in fiscal 2007. This increase was primarily attributable to the increased sales levels discussed above, which were significantly affected by the incremental impact of acquisitions. Gross profits as a percentage of sales, declined to 25.8% from 26.8% in fiscal 2007 due to relatively lower gross margins for recently acquired businesses, as well as higher direct start-up expenses associated with our growing digital printing business.
Selling expense for fiscal 2008 increased $5.3 million, or 5%, to $107 million from $101.7 million in fiscal 2007. The increase is attributable to higher commission expense due to the increased sales levels noted above. As a percentage of sales, selling expenses in fiscal 2008 declined to 9.8% from 10.1% in fiscal 2007. The decline was primarily due to lower selling expense as a percentage of sales for recently acquired businesses.
General and administrative expenses for fiscal 2008 increased $9.6 million, or 14%, to $78.8 million from $69.2 million in fiscal 2007. This increase was caused by the incremental impact of acquisitions (including intangible asset amortization) and an increase in professional fees related to legal costs and information technology consulting fees. Overall, as a percentage of sales, general and administrative expenses in fiscal 2008 increased to 7.2% from 6.9% in fiscal 2007.
Other income for fiscal 2008 of $3.1 million related to a foreign currency transaction gain primarily resulting from certain transactions at our Canadian subsidiary denominated in U.S. dollars.
Based on our annual evaluation of goodwill at March 31, 2008, no goodwill impairment was recorded. Goodwill impairment for fiscal 2007 was $11.5 million. Net interest expense for fiscal 2008 increased $5.3 million, or 80%, to $12 million from $6.7 million in fiscal 2007, mostly due to a higher level of average debt outstanding due to borrowings used to fund 2008 acquisitions and share repurchases under our common stock repurchase program. The increase was partially offset by a decrease in our weighted average interest rate. Income taxes for fiscal 2008 were $29.0 million, reflecting an overall effective tax rate of 32.8% as compared to an effective tax rate of 36.6% in fiscal 2007. In fiscal 2008, the effective tax rate declined primarily as a result of a reduction in reserves related to certain tax positions, partially offset by an increase in state income taxes.

Liquidity and Capital Resources

Sources and Uses of Cash
Our historical sources of cash have primarily been cash provided by operations
or borrowings under our various bank credit facilities. Our historical uses of
cash have been for acquisitions of printing businesses, capital expenditures,
payment of principal and interest on outstanding debt obligations and
repurchases of our common stock. Supplemental information pertaining to our
historical sources and uses of cash is presented as follows and should be read
in conjunction with our consolidated statements of cash flows and the notes
thereto included in Item 8. Financial Statements and Supplementary Data:

                                                            Year Ended March 31
                                                    2009           2008           2007
                                                               (In millions)

Net cash provided by operating activities         $   141.1      $   110.2      $    72.8
Acquisitions of businesses                             (6.7 )        (97.3 )        (67.6 )
Capital expenditures, net of proceeds from
asset dispositions (1)                                (68.2 )        (39.4 )        (39.1 )
Net proceeds (payments) under bank credit
facilities                                            (53.1 )        177.4           51.1
Net payments on term equipment notes and other
debt                                                  (21.6 )         (1.1 )         (3.1 )
Payments to repurchase and retire common stock            -         (150.0 )        (24.7 )
Proceeds from exercise of stock options                 3.0            2.9           17.6

(1) Excludes capital expenditures of $7.3 million in fiscal 2009, $41.0 million in fiscal 2008, and $5.1 million in fiscal 2007, which were directly financed and/or accrued as a current liability.

Additionally, our cash position, working capital and debt obligations as of March 31, 2009, 2008 and 2007 are shown below and should be read in conjunction with our consolidated balance sheets and the notes thereto included in Item 8. Financial Statements and Supplementary Data:

                                                                     March 31
                                                           2009        2008        2007
                                                                   (In millions)

Cash and cash equivalents                                 $   9.8     $  15.1     $  12.0
Working capital, inclusive of cash and cash equivalents     109.4       138.3       100.2
Total debt                                                  314.2       385.7       154.6

Net cash provided by operating activities increased by $30.9 million for fiscal 2009 compared to fiscal 2008. This increase was due primarily to changes in working capital items. Accounts receivable and inventory declined compared to an increase during the prior fiscal year and accounts payable and accrued liabilities declined more than they did in the prior year, primarily due to the due to the general slow down in our business.
During fiscal 2009, we invested $76.9 million in new technology, equipment and real estate, of which $37.2 million was for digital presses and related technology.
We believe that our cash flow provided by operations, combined with new borrowings, will be adequate to cover our fiscal 2010 working capital growth, debt service requirements and planned capital expenditures.
We intend to continue pursuing acquisition opportunities at prices we believe are reasonable based upon prevailing market conditions. However, we cannot accurately predict the timing, size and success of our acquisition efforts or our associated potential capital commitments. There can be no assurance that we will be able to acquire additional printing businesses on terms acceptable to us. We expect to fund future acquisitions through cash flow provided by operations and/or additional borrowings under our primary bank credit facility. We have, however, in the past issued our common stock as purchase price consideration in some of our acquisitions and may do so again in the future. Although we may issue common stock for such purposes in the future, we do not expect to do so at this time because of our current financial liquidity and ability to utilize available cash or make additional borrowings. Debt Obligations
Our primary bank credit facility (as amended, the "Credit Agreement") currently provides for $335.0 million in revolving credit and has a maturity date of October 6, 2011. At March 31, 2009, outstanding borrowings under the Credit Agreement were $187.1 million and accrued interest at a weighted average interest rate of 1.8%.
Under the terms of the Credit Agreement the proceeds from borrowings may be used to repay certain indebtedness, finance certain acquisitions, provide for working capital and general corporate purposes and, subject to certain restrictions, repurchase our common stock. Borrowings outstanding under the Credit Agreement are secured by substantially all of our assets other than real estate and certain equipment subject to term equipment notes and other financings. Borrowings under the Credit Agreement accrue interest, at our option, at either
(1) the London Interbank Offered Rate ("LIBOR") plus a margin of .625% to 1.50%, or (2) an alternate base rate (based upon the greater of the agent bank's prime lending rate or the Federal Funds effective rate plus .50%). We are also required to pay an annual commitment fee ranging from .15% to .275% on available but unused amounts under the Credit Agreement. The interest rate margin and the commitment fee are based upon certain financial performance measures set forth in the Credit Agreement and are redetermined quarterly. At March 31, 2009 the applicable LIBOR interest rate margin was 1.25% and the applicable commitment fee was .25%.

We are subject to certain covenants and restrictions and we must meet certain financial tests as defined in the Credit Agreement. We were in compliance with these covenants and financial tests at March 31, 2009. In light of current economic conditions, there is, however, more than a remote possibility that we will exceed the required Debt-to-EBITDA ratio, as defined in the Credit Agreement, at some point prior to its maturity on October 6, 2011. In the event that we are unable to remain in compliance with the Credit Agreement's covenants and financial tests in the future, our lenders would have the right to declare us in default with respect to such obligations, and consequently, certain of our other debt obligations, including substantially all of our term equipment notes, would be deemed to also be in default. All debt obligations in default would be required to be reclassified as a current liability. In the event that we were unable to obtain a waiver from our lenders or renegotiate or refinance these obligations, a material adverse effect on our ability to conduct our operations in the ordinary course would likely result.
We also maintain an unsecured credit facility with a commercial bank (the "A&B Credit Facility") currently consisting of a U.S. $5 million maximum borrowing limit component and a separate Canadian dollar ("C$") C$27.0 million maximum borrowing limit component. At March 31, 2009, outstanding borrowings under the A&B Credit Facility were $2.0 million, which accrued interest at a weighted average rate of 1.8%, and C$20.0 million ($16.0 million U.S. equivalent), which accrued interest at a weighted average rate of 2%. An annual reduction of C$4.0 million on the Canadian dollar denominated commitment occurs on December 31 during each year of the A&B Credit Facility until the final maturity date of October 6, 2011. There are no significant covenants or restrictions set forth in the A&B Credit Facility; however, a default by us under the Credit Agreement constitutes a default under the A&B Credit Facility.
In addition, we maintain two auxiliary revolving credit facilities (each an "Auxiliary Bank Facility" and collectively the "Auxiliary Bank Facilities") with commercial banks. Each Auxiliary Bank Facility is unsecured and has a maximum borrowing capacity of $5.0 million. One facility expires in October 2009 while the other facility expires in December 2009. At March 31, 2009, outstanding borrowings under the Auxiliary Bank Facilities totaled $9.6 million and accrued interest at a weighted average rate of 2.6%. Because we currently have the ability and intent to refinance the borrowings outstanding under the Auxiliary Bank Facilities expiring in October and December 2009, such borrowings are classified as long-term debt in our consolidated balance sheet at March 31, 2009. The Auxiliary Bank Facilities cross-default to the events of default set forth in the Credit Agreement.
At March 31, 2009, outstanding borrowings under our term equipment notes totaled $91 million and accrued interest at rates between 3.9% and 8.1%. The term . . .