This Management's Discussion and Analysis of Financial Condition and Results of Operations, which we refer to as MD&A, of Cenveo, Inc. and its subsidiaries, which we refer to as Cenveo, should be read in conjunction with the accompanying condensed consolidated financial statements and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which we refer to as our 2011 Form 10-K. Item 7 of our 2011 Form 10-K describes the application of our critical accounting policies, for which there have been no significant changes as of March 31, 2012.

Forward-Looking Statements

Certain statements in this report may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of terminology such as "may," "expect," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "continue" and similar expressions, or as other statements that do not relate solely to historical facts. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause actual results to differ materially from what is expressed or forecasted in these forward-looking statements. In view of such uncertainties, investors should not place undue reliance on our forward-looking statements. Such statements speak only as of the date they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from management's expectations include, without limitation: (i) recent United States and global economic conditions have adversely affected us and could continue to do so; (ii) our substantial level of indebtedness could impair our financial condition and prevent us from fulfilling our business obligations; (iii) our ability to service or refinance our debt; (iv) the terms of our indebtedness imposing significant restrictions on our operating and financial flexibility; (v) additional borrowings are available to us that could further exacerbate our risk exposure from debt; (vi) our ability to successfully integrate acquired businesses into our business; (vii) a decline in our consolidated profitability or profitability within one of our individual reporting units could result in the impairment of our assets, including goodwill, other long-lived assets and deferred tax assets; (viii) intense competition and fragmentation in our industry; (ix) the general absence of long-term customer agreements in our industry, subjecting our business to quarterly and cyclical fluctuations; (x) factors affecting the United States postal services impacting demand for our products; (xi) the availability of the internet and other electronic media adversely affecting our business; (xii) increases in paper costs and decreases in the availability of raw materials; (xiii) our labor relations; (xiv) our compliance with environmental laws; (xv) our dependence on key management personnel; (xvi) our dependence upon information technology systems; and (xvii) our international operations and the risks associated with operating outside of the United States. This list of factors is not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Additional information regarding these and other factors can be found elsewhere in this report and in our other filings with the Securities and Exchange Commission, which we refer to as the SEC.

Business Overview

We are one of the largest diversified printing companies in North America, according to the December 2011 Printing Impressions 400 report. Our broad portfolio of products includes commercial printing, envelope converting, label manufacturing and specialty packaging. We operate a global network of strategically located manufacturing facilities, serving a diverse base of over 100,000 customers. Our business strategy focuses on providing our customers with quality product offerings, improving our cost structure and profitability, and pursuing strategic acquisitions that either expand our current product offerings or allow us to enter into niche businesses that are highly complementary to our current product offering.

We operate our business in two complementary reportable segments: print and envelope and label and packaging.

Print and Envelope. We are one of the leading commercial printers in North America and the largest envelope manufacturer. In August 2011, we added to our print and envelope business with the acquisition of Nesbitt Graphics, Inc., which we refer to as Nesbitt. In February 2011, we added to our print and envelope business with the acquisition of MeadWestvaco Corporation's Envelope Product Group, which we refer to as EPG. Our print and envelope segment represents approximately 75.3% of our net sales for the three months ended March 31, 2012.

Our print and envelope segment serves customers ranging from Fortune 50 companies to middle market and small companies operating in niche markets. This segment primarily caters to the consumer products, financial services, travel and leisure and telecommunications industries. We offer direct mail products used for customer solicitations and custom envelopes used for billing and remittance by end users including banks, brokerage firms and insurance and credit card companies. We produce

a broad line of specialty and stock envelopes that are sold through wholesalers, distributors, contract stationers, national catalogs for the office product markets and office product superstores. We provide a wide array of print offerings to our customers including electronic prepress, digital asset archiving, direct-to-plate technology, high-quality color printing on web and sheet-fed presses, digital printing and content management. The broad selection of print products we produce includes journals and specialized periodicals, annual reports, car brochures, direct mail products, advertising literature, corporate identity materials and brand marketing materials. Our content management business offers complete solutions, including editing, content processing, content management, electronic peer review, production, distribution and reprint marketing.

Label and Packaging. We are a leading label manufacturer and the largest North American prescription label manufacturer for retail pharmacy chains. Our specialty packaging business currently focuses on specialty folded carton packaging and shrink-sleeve packaging. Our label and packaging segment represented approximately 24.7% of our net sales for the three months ended March 31, 2012.

Our label and packaging segment serves customers ranging from multinational, national, middle market and small companies serving niche markets and resale customers. We print a diverse line of custom labels for a broad range of industries including manufacturing, warehousing, packaging, food and beverage, and health and beauty, which we sell through extensive networks within the resale channels. We also provide direct mail and overnight packaging labels, food and beverage labels, and shelf and scale labels for national and regional customer accounts. We also produce pressure-sensitive prescription labels for the retail pharmacy chain market. We produce premium high quality promotional packaging offerings including, folded carton, heat shrink labels and full body shrink sleeves. Our primary customers for our specialty packaging products are pharmaceutical, apparel, tobacco, neutraceutical and other large multinational consumer product companies.

Consolidated Operating Results

This MD&A includes an overview of our condensed consolidated results of operations for the three months ended March 31, 2012 and April 2, 2011 followed by a discussion of the results of operations of each of our reportable segments for the same periods. Our results for the three months ended April 2, 2011 include the operating results of EPG for less than a full three months. Our results for the three months ended April 2, 2011 do not include the operating results of Nesbitt.

The overall printing industry is highly fragmented which creates overcapacity and price sensitivity in many of our businesses. The uncertainty that remains with the current United States and global economic conditions most likely will continue to affect our results of operations and financial position. These uncertainties about future economic conditions in a challenging operating environment make it difficult for us to forecast our future operating results. We believe our efforts to reduce our operating cost structure, which we implemented at the beginning of the economic downturn, allowed us to mitigate significant impacts to our operating performance and to our business over the past two years. Therefore, we continue to pursue additional cost savings opportunities in an effort to mitigate any further potential impact on our operations from the remaining uncertainty surrounding the current economic conditions.

111/2% Notes and 7% Notes Offerings and 2012 Refinancing

On March 28, 2012, we issued of $225 million aggregate principal amount of 111/2% senior notes due 2017, which we refer to as the 111/2% Notes. The 111/2% Notes were issued at a discount of approximately $8.3 million, of which substantially all remains unamortized as of March 31, 2012.

Concurrently with the 111/2% Notes, we issued $86.25 million aggregate principal amount of senior exchangeable notes due 2017, which we refer to as the 7% Notes. The 7% Notes are exchangeable at any time prior to the close of business on the business day immediately preceding the maturity date for shares of our common stock at an exchange rate of 241.5167 shares per $1,000 principal amount of 7% Notes, which is equal to an exchange price of approximately $4.14 per share, subject to adjustment under certain specified circumstances. This represents a premium of 22.5% above the last reported sale price of our common stock on the New York Stock Exchange on Thursday, March 22, 2012, which was $3.38 per share.

Net proceeds of the 111/2% Notes and 7% Notes together with borrowings under our $170 million revolving credit facility, due 2014, which we refer to as the 2010 Revolving Credit Facility, were used to fund the cash tender offers for any and all of our 83/8% senior subordinated notes due 2014, which we refer to as the 83/8% Notes, and 101/2% senior notes due 2016, which we refer to as the 101/2% Notes, plus $45 million aggregate principal amount of our 77/8% senior subordinated notes due 2013, which we refer to as the 77/8% Notes, and to repurchase an additional $73.4 million of 77/8% Notes through open market, negotiated purchases to refinance such indebtedness, and to pay related fees and expenses, all of which we collectively refer to as the 2012 Refinancing.

Discontinued Operations
In 2011, we began exploring our opportunities to divest certain non-strategic or underperforming businesses within our manufacturing platform. As a result, in the fourth quarter of 2011, the financial results of our documents and forms business as well as our wide-format papers business were accounted for as discontinued operations, which we refer to collectively as the Discontinued Operations, resulting in our historical consolidated balance sheets, statement of operations and comprehensive income (loss) and statement of cash flows being reclassified to reflect these discontinued operations separately from our continuing operations.

In February of 2012, we completed the sale of our documents and forms business, which we refer to as the Documents Group, for cash proceeds of $40.0 million, of which $4.0 million will remain in escrow for a certain period of time subject to terms of the sale agreement. In January of 2012, we completed the sale of our wide-format papers business and received proceeds of $4.7 million.

Reportable Segments

In the first quarter of 2012, we realigned our reportable segments as a result of the sale of the Discontinued Operations combined with the realignment of management responsibilities and strategy. Previously, we reported our segments as envelopes, forms and labels and commercial printing. Beginning January 1, 2012, we realigned our segments into two complementary reportable segments: the print and envelope segment and the label and packaging segment.

A summary of our condensed consolidated statements of operations is presented below. The summary presents reported net sales and operating income. See Segment Operations below for a summary of net sales and operating income of our reportable segments that we use internally to assess our operating performance. Our fiscal quarters end on the Saturday closest to the last day of the calendar month. Our reporting periods for the three month periods ended March 31, 2012 and April 2, 2011 each consisted of 13 weeks.

                                                                   Three Months Ended
                                                            March 31, 2012     April 2, 2011
                                                                  (in thousands, except
                                                                   per share amounts)
Net sales                                                  $      455,583     $      476,971
Operating income:
Print and envelope                                         $        9,621     $       20,309
Label and packaging                                                12,203             10,488
Corporate                                                          (7,585 )          (11,522 )
Total operating income                                             14,239             19,275
Gain on bargain purchase                                                -            (10,539 )
Interest expense, net                                              27,852             30,217
Loss on early extinguishment of debt, net                          10,629                  -
Other expense, net                                                    298                189
Loss from continuing operations before income taxes               (24,540 )             (592 )
Income tax benefit                                                 (1,956 )           (1,605 )
(Loss) income from continuing operations                          (22,584 )            1,013
(Loss) income from discontinued operations, net of taxes           (4,634 )            1,771
Net (loss) income                                          $      (27,218 )   $        2,784
Income (loss) per share-basic and diluted:
Continuing operations                                      $        (0.36 )   $         0.02
Discontinued operations                                             (0.07 )             0.02
Net (loss) income                                          $        (0.43 )   $         0.04

Net Sales

Net sales decreased $21.4 million, or 4.5%, in the first quarter of 2012, as compared to the first quarter of 2011, due to lower sales from our print and envelope segment of $20.6 million and our label and packaging segment of $0.8 million. See Segment Operations below for a detailed discussion of the primary factors affecting the change in our net sales by reportable segment.

Operating Income

Operating income decreased $5.0 million, or 26.1%, in the first quarter of 2012, as compared to the first quarter of 2011. This decrease was primarily due to decreases from our print and envelope segment of $10.7 million, partially offset by increases in operating income from our label and packaging segment of $1.7 million and lower corporate expenses of $3.9 million. See Segment Operations below for a more detailed discussion of the primary factors for the changes in operating income by reportable segment.

Gain on Bargain Purchase

During the first quarter of 2011, in connection with the acquisition of EPG, we recognized a preliminary bargain purchase gain of approximately $10.5 million.

Interest Expense

Interest expense decreased $2.4 million to $27.9 million in the first quarter of 2012, as compared to $30.2 million in the first quarter of 2011. The decrease is primarily due to the lower average outstanding debt balances primarily as a result of debt repayments using cash flow from operations and lower weighted average interest rates primarily from the expiration of higher cost interest rate swaps in the first quarter of 2011. Interest expense in the first quarter of 2012 reflected average outstanding debt of approximately $1.3 billion and a weighted average interest rate of 7.9%, as compared to average outstanding debt of $1.4 billion and a weighted average interest rate of 8.1% in the first quarter of 2011. We expect higher interest expense in 2012, as compared to 2011, largely due to our 2012 Refinancing.

Loss on Early Extinguishment of Debt

During the first three months of 2012, in connection with the 2012 Refinancing we incurred a loss on early extinguishment of debt of $12.7 million, of which $9.6 million relates to tender and consent fees paid to consenting lenders, $3.1 million relates to the write-off of previously unamortized debt issuance costs. The loss on early extinguishment of debt related to the 2012 Refinancing is partially offset by the gains on early extinguishment of debt of $2.1 million related to the repurchase of $13.8 million of our 77/8% Notes, $5.0 million of our 101/2% Notes, and $2.0 million of our 83/8% Notes plus accrued and unpaid interest thereon.

Income Taxes

                                                      Three Months Ended
                                              March 31, 2012      April 2, 2011
                                                       (in thousands)
Income tax benefit from U.S. operations      $        (2,123 )   $      (2,294 )
Income tax expense from foreign operations               167               689
Income tax benefit                           $        (1,956 )   $      (1,605 )
Effective income tax rate                                8.0 %           271.1 %

In the first quarter of 2012, we had an income tax benefit of $2.0 million, compared to an income tax benefit of $1.6 million in the first quarter of 2011. The tax benefit for both periods primarily related to income tax benefits on our domestic operations. Our effective tax rate in the first quarter of 2012 was lower than the federal statutory rate, primarily due to non-deductible expenses and state income taxes. Our effective tax rate in the quarter ended April 2, 2011 was higher than the federal statutory rate, primarily due to non-deductible expenses and state income taxes.

We assess the recoverability of our deferred tax assets and, to the extent recoverability does not satisfy the "more likely than not" recognition criteria, record a valuation allowance against our deferred tax assets. We consider all positive and negative evidence in evaluating our ability to realize our net deferred tax assets, including our operating results, ongoing tax planning, and forecast of future taxable income, on a jurisdiction by jurisdiction basis. Significant judgment is required with respect to the determination of whether or not a valuation allowance is required for certain of our deferred tax assets. As of March 31, 2012, the total valuation allowance on our net U.S. deferred tax assets was approximately $21.5 million.

Income from Discontinued Operations, net of taxes Income from discontinued operations represents the results of operations, including tax effects of our Discontinued Operations. The results for the first quarter of 2012 include the loss on sale of our Discontinued Operations of $5.0 million, net of a tax benefit of $3.2 million. Income from discontinued operations of $0.4 million, net of taxes of $0.2 million for the first quarter of 2012, include the reduction of a liability of $1.8 million, net of tax expense of $1.2 million, due to the expiration of certain statutes of limitations related to a previous divestiture.

Segment Operations

Our Chief Executive Officer monitors the performance of the ongoing operations
of our two reportable segments. We assess performance based on net sales and
operating income.

Print and Envelope

                                                      Three Months Ended
                                               March 31, 2012     April 2, 2011
                                                         (in thousands)
Segment net sales                             $      342,853     $      363,409
Segment operating income                      $        9,621     $       20,309
Operating income margin                                  2.8 %              5.6 %
Restructuring, impairment and other charges   $       13,486     $        3,167

Segment Net Sales

Segment net sales for our print and envelope segment decreased $20.6 million, or 5.7%, in the first quarter of 2012, as compared to the first quarter of 2011. Net sales for our commercial printing operations declined $22.4 million, primarily due to: (i) lower sales volumes due to customer product launches that occurred in the first quarter of 2011, but did not repeat in the first quarter of 2012 and continued declines in the circulation of journals and periodicals, and (ii) lower sales due to price pressures that continue to exist within the print industry. Net sales of our envelope operations increased $1.9 million primarily due to: (i) the integration of EPG into our operations, including the impact of work transitioned from our existing operations to EPG and vice versa, as EPG was not included in our results for a full quarter in the first quarter of 2011, and (ii) higher sales due to our ability to pass along material price increases to our customers. The increases in our envelope net sales were substantially offset by lower sales volumes from our direct mail customers, primarily financial institutions, related to lower demand for customer solicitations.

Segment Operating Income

Segment operating income for our print and envelope segment decreased $10.7 million, or 52.6%, in the first quarter of 2012, as compared to the first quarter of 2011. This decrease was primarily due to: (i) higher restructuring, impairment and other charges of $10.3 million, primarily due to a print plant closure and consolidation into our existing print operations and (ii) lower gross margins of $6.0 million, primarily due to pricing pressures and lower byproduct recoveries. These decreases were offset in part by lower selling, general and administrative expenses of $5.6 million, primarily due to lower commission expense and a lower cost structure due to the integration of EPG into our existing envelope operations.

Label and Packaging

                                                      Three Months Ended
                                               March 31, 2012     April 2, 2011
                                                        (in thousands)
Segment net sales                             $      112,730     $      113,562
Segment operating income                      $       12,203     $       10,488
Operating income margin                                 10.8 %              9.2 %
Restructuring, impairment and other charges   $          447     $          565

Segment Net Sales

Segment net sales for our label and packaging segment decreased $0.8 million, or 0.7%, in the first quarter of 2012, as compared to the first quarter of 2011. Net sales from our label operations declined $1.4 million, primarily due to our decision to exit certain low margin business within our long-run label customer accounts, offset in part by increased sales from our custom label business, primarily due to initiatives taken to enhance our e-commerce solution for our customers. Net sales from our packaging operations increased $0.6 million, primarily due to our ability to pass along material price increases to our customers, offset in part by lower sales due to our decision to exit certain low margin customer accounts.

Segment Operating Income

Segment operating income for our label and packaging segment increased $1.7 million, or 16.4%, in the first quarter of 2012, as compared to the first quarter of 2011. This increase was due to increased gross margins of $1.8 million, primarily due to our lower cost structure as a result of cost savings initiatives taken in 2011. Selling, general and administrative expenses and restructuring, impairment and other charges for our label and packaging segment remained relatively consistent in the first quarter of 2012, as compared to the first quarter of 2011.

Corporate Expenses

Corporate expenses include the costs of running our corporate headquarters. Corporate expenses were lower by $3.9 million, or 34.2% in the first quarter of 2012, as compared to the first quarter of 2011, primarily due to lower compensation related expenses.

Restructuring, Impairment and Other Charges

During the first quarter of 2012, we announced the closure and consolidation of a print plant into our existing print operations. Additionally, we began implementing a cost savings initiative, which collectively with the print plant closure and consolidation, we refer to as the 2012 Plan. The cost saving initiative is primarily focused on our print and envelope segment and our corporate expenses. This initiative will focus on consolidation of office and warehouse space and other overhead cost elimination plans, including targeted headcount reductions of approximately 150 employees.

During the first quarter of 2012, as a result of the 2012 Plan, our EPG integration plan and our residual restructuring and cost savings actions, we incurred $14.0 million of restructuring, impairment and other charges, which included $1.8 million of employee separation costs, asset impairments, net of $6.3 million, equipment moving expenses of $0.1 million, lease termination expenses of $0.3 million, multi-employer pension withdrawal expenses of $4.8 million and building clean-up and other expenses of $0.6 million. During the first quarter of 2011, as a result of our EPG integration plan and residual restructuring and cost savings actions, we incurred $3.8 million of restructuring, impairment and other charges, which included $0.5 million of employee separation costs, asset impairments, net of $1.0 million, equipment moving expenses of $0.7 million, lease termination expenses of $0.6 million and building clean-up and other expenses of $1.0 million.

As of the quarter ended March 31, 2012, our total restructuring liability was $33.0 million, of which $6.0 million is included in other current liabilities and $27.0 million, which is expected to be paid through 2032, is included in other liabilities in our condensed consolidated balance sheet. Our multi-employer pension withdrawal liabilities are $26.8 million of our remaining restructuring liabilities. We believe these liabilities represent our anticipated ultimate withdrawal liabilities; however, we are exposed to significant risks and uncertainties arising from our participation in these multi-employer pension plans. While it is not possible to quantify the potential impact of our future actions or the future actions of other participating employers from the multi-

. . .