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Article by DailyStocks_admin    (10-07-08 09:04 AM)

Cenveo Inc. CEO ROBERT G SR BURTON bought 110350 shares on 9-26-2008 at $7.54

BUSINESS OVERVIEW

The Company

We are one of the largest diversified printing companies in North America, according to the December 2007 Printing Impressions 400 report. Our broad portfolio of products includes envelope, form, and label manufacturing, commercial printing and packaging and publisher offerings. We operate from a global network of approximately 78 printing and manufacturing, content management and distribution facilities, which we refer to as manufacturing facilities, serving a diverse base of customers. Since late 2005, under our new management team’s leadership, we have significantly improved profitability by re-aligning our operating segments, centralizing and leveraging our purchasing spend, consolidating plants and reducing corporate and field staff. In addition, we have divested non-strategic businesses and made investments in our businesses through acquisitions of highly complementary companies and capital expenditures. We were incorporated in Colorado in 1997 as the successor to Mail-Well, Inc., a Delaware corporation.

We operate our business in two complementary segments: envelopes, forms and labels and commercial printing.

Envelopes, Forms and Labels

Our envelopes, forms and labels segment operates approximately 38 manufacturing facilities, primarily in North America and produces approximately 39 billion envelopes annually and more than 2,400 custom labels orders per day. In 2007 we grew our envelopes, forms and labels business with the acquisition of Commercial Envelope Manufacturing Co. Inc., which we refer to as Commercial Envelope, and PC Ink Corp., which we refer to as Printegra. Envelopes, forms and labels had net sales of $897.7 million, $780.7 million and $767.4 million and operating income of $117.3 million, $82.8 million and $51.8 million, in 2007, 2006 and 2005, respectively. Total assets for envelopes, forms and labels were $833.3 million and $494.3 million, as of December 31, 2007 and 2006, respectively.

On August 30, 2007, we acquired all of the stock of Commercial Envelope, one of the largest envelope manufacturers in the United States. Prior to our acquisition, Commercial Envelope had annual revenues of approximately $160.0 million. Commercial Envelope’s facilities collectively produce over 41 million envelopes per day. The acquisition of Commercial Envelope increased our market share in the U.S. envelope market and is creating efficiencies as we integrate our respective operations. The total cash consideration for the acquisition, excluding assumed debt of approximately $20.3 million, was approximately $218.0 million, including approximately $3.8 million of related expenses. We financed the acquisition of Commercial Envelope with a new $175.0 million senior unsecured loan and borrowings under our existing credit facilities. See Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K .

On February 12, 2007, we acquired all of the stock of Printegra, a leading producer of printed business communication documents, labels and envelopes regularly used by small and large businesses. Prior to our acquisition, Printegra had annual revenues of approximately $90.0 million. With the acquisition of Printegra, we expanded our offerings of short-run documents, labels and envelope products. Additionally, the acquisition facilitates access for Printegra’s historical customer base to our extensive product offerings. The aggregate purchase price for Printegra was approximately $78.1 million, which included $0.5 million of related expenses.

Commercial Printing

Our commercial printing segment operates approximately 40 manufacturing facilities in the United States, Canada, the Caribbean Basin and Asia. The segment primarily offers print, design and content management offerings covering a wide array of products for a broad group of customers. We completed two commercial printing acquisitions in 2007: Madison/Graham ColorGraphics, Inc., which we refer to as ColorGraphics, and Cadmus Communications Corporation, which we refer to as Cadmus. Commercial printing had net sales of $1.1 billion, $730.5 million and $827.4 million and operating income (loss) of $55.1 million, $13.6 million and $(30.7) million, in 2007, 2006 and 2005, respectively. Total assets for commercial printing were $1.1 billion and $394.0 million, as of December 31, 2007 and 2006, respectively.

On July 9, 2007, we acquired all of the stock of ColorGraphics, one of the largest commercial printers in the western United States. Prior to our acquisition, ColorGraphics had annual revenues of approximately $170.0 million. ColorGraphics produces printed annual reports, booklets, brochures, advertising inserts, direct mail and other corporate communication materials. The total cash consideration for the ColorGraphics acquisition, excluding assumed debt of approximately $28.6 million, was approximately $71.7 million, including approximately $0.9 million of related expenses.
On March 7, 2007, we acquired all of the stock of Cadmus for $24.75 per share, by merging an indirect wholly owned subsidiary of Cenveo with and into Cadmus. As a result, Cadmus became an indirect wholly owned subsidiary of Cenveo. Following the merger, Cadmus was merged into Cenveo Corporation. Cadmus is one of the world’s largest providers of content management and printing to scientific, technical and medical journal publishers, one of the largest periodicals printers in North America and a leading provider of specialty packaging and promotional printing products. Prior to our acquisition, Cadmus had annual revenues of approximately $450.0 million. The total cash consideration for the Cadmus acquisition, excluding assumed debt of approximately $210.1 million, was approximately $249.3 million, consisting of: (1) $228.9 million in cash for all of the common stock of Cadmus, (2) payments of $18.3 million for vested stock options and restricted shares of Cadmus and for change in control provisions in Cadmus’ incentive plans, and (3) $2.1 million of related expenses.

See Note 19 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the operating income of our reportable segments.

Our Products and Services

Envelopes, Forms and Labels. This segment primarily specializes in the design, manufacturing and printing of:



•

direct mail and customized envelopes for advertising, billing and remittance;


•

custom labels and specialty forms; and


•

stock envelopes, labels and business forms.

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 credit card companies. We manufacture and print customized envelopes used as inserts within wholesale and retail product catalogs. We print a diverse line of custom labels and specialty forms for a broad range of industries including manufacturing, warehousing, packaging, food and beverage, and health and beauty, which we sell through an extensive network of resale distributors. For our small and mid-size business forms and labels customers, we print a diverse line of custom products, including both traditional and specialty forms and labels for use with desktop PCs and laser printers. Our printed office products include business documents, specialty documents and short-run secondary labels, which are made of paper or film affixed with pressure sensitive adhesive and are used for mailing, messaging, bar coding and other applications. We produce pressure-sensitive prescription labels for the retail pharmacy chain market. We also produce a broad line of stock envelopes, labels and traditional business forms that are sold through independent distributors, contract stationers, national catalogs for the office products market and office products superstores.

Commercial Printing. Our commercial printing segment provides one-stop print, design and content management offerings, including:



•

high-end color printing of a wide range of premium products for national and regional customers;


•

general commercial printing for regional and local customers;


•

scientific, technical and medical (“STM”) journals and special interest and trade magazines for not-for-profit organizations, educational institutions and specialty publishers; and


•

specialty packaging and high quality promotional materials for multinational consumer products companies.

Our commercial print offerings primarily include electronic prepress, digital asset archiving, direct-to-plate technology, high-quality color printing on web and sheet-fed presses and digital printing. The commercial printing products we produce include annual reports, car brochures, direct mail products, specialty packaging, journals and specialized periodicals, advertising literature, corporate identity materials, financial printing, books, directories, calendars, brand marketing materials, catalogs, and maps. In our journal and specialty magazine business, we offer complete solutions, including editing, content processing, content management, electronic peer review, production, distribution and reprint marketing. Our primary customers for our specialty packaging and promotional products are pharmaceutical, apparel, technology and other large multinational consumer product companies. Our commercial printing segment primarily caters to the financial services, publishing, telecommunications, pharmaceutical, and consumer products industries.

Our Strategy

Our goals are to improve on profitability and pursue disciplined growth. The principal features of our strategy are:

Improve our Cost Structure and Profitability. We have implemented two cost savings plans: the 2007 Cost Savings and Integration Plan, which we refer to as the 2007 Plan, and the 2005 Cost Savings and Restructuring Plan, which we refer to as the 2005 Plan. The 2007 Plan relates to activities undertaken in connection with our 2007 acquisitions of Commercial Envelope, ColorGraphics, Cadmus and Printegra, which we refer to as the 2007 Acquisitions. Under the 2007 Plan, we closed six manufacturing facilities and integrated those operations into acquired and existing operations. The 2005 Plan, which was completed in the fourth quarter of 2007, included such actions as consolidating our purchasing activities and manufacturing platform including closing two manufacturing facilities in 2007 that were integrated into existing operations, reducing corporate and field personnel, streamlining our information technology infrastructure and eliminating discretionary spending.

We continue to implement cost-savings initiatives that will improve our profitability, both in connection with acquisitions and our ongoing operations. We regularly assess our operations with a view toward eliminating operations that are not aligned with our core United States operations or are underperforming. For example, we divested our Canadian envelope manufacturing business, Supremex, Inc., and certain other assets through a series of transactions in 2007 and 2006. In 2006, we sold three small and non-strategic businesses and closed three facilities that were underperforming. We continue to evaluate the sale or closure of facilities that do not meet our strategic goals or performance targets.

Capitalize on Scale Advantages . We believe there are significant advantages to being a large competitor in a highly fragmented industry. We seek to capitalize on our size, geographic footprint and broad product lines to offer one-stop shopping and enhance our overall value proposition. As we grow in scale and increase our operating leverage, we seek to realize better profit margins through improvements in manufacturing facility utilization.

Enhance the Supply Chain. We continue to work with our core suppliers to improve all aspects of our purchasing and other logistics as well as to ensure a stable source of supply. We seek to lower costs through more favorable pricing and payment terms, more effective inventory management and improved communications with vendors. We continue to consolidate our suppliers of key production inputs such as paper and ink, and believe that significant opportunities exist in optimizing the rest of our supply chain.

Seek Products and Processing Improvements . We encourage regular review of our product offerings, manufacturing processes and distribution methods to ensure that we take advantage of new technology when practical and to meet the changing needs of our customers and the demands of a global economy. We seek to enter into growth product markets in which we may have competitive advantages based on our existing infrastructure, operating expertise and customer relationships. Pharmaceutical labels, direct mail, and specialty packaging are examples of growth areas into which we recently expanded. By expanding our product offerings, we intend to increase cross-selling opportunities to our existing customer base and mitigate the impact of any decline in a given market.

Pursue Strategic Acquisitions . We continue to selectively review opportunities to expand within growing niche markets, broaden our product offerings and increase our economies of scale through acquisitions. We will pursue reasonably-priced opportunities that we expect to yield greater profitability and cash flow or improved operating efficiencies, such as increased utilization of our assets. Since July 2006, we have completed five acquisitions that we believe will continue to enhance our operating margins and deliver economies of scale. We believe our acquisition strategy will allow us to both realize increased revenue and cost-saving synergies, and apply our management expertise to improve the operations of acquired entities. For example, our acquisition of Commercial Envelope strengthened our position in the direct mail market and will allow us to enhance our raw material purchasing power and rationalize our manufacturing platform. Our acquisition of Rx Technology in July 2006 gave us an entry into the pharmaceutical labels business, which has high barriers to entry, while also allowing us to cross-sell a broader product platform to new and existing customers.

Our Industry

The United States printing industry is large and highly fragmented with approximately 39,000 participants and aggregate revenues of approximately $165 billion, according to the 2006 PIA/GATF Print Market Atlas. These printing businesses operate in a broad range of sectors, including commercial printing, envelopes, forms and labels, specialty printing, trade publishing, and specialty packaging among others. The printing industry is comprised of a few large companies with sales in excess of $1 billion, several mid-sized companies with sales in excess of $100 million and thousands of smaller operations. We estimate that the ten largest North American commercial printers represent approximately 19% of the market, while we estimate that the market sectors in which we primarily compete have total annual sales of approximately $115 billion serviced by over 25,000 printing businesses.

Raw Materials

The primary materials used in our businesses are paper, ink, film, offset plates, chemicals and cartons, with paper accounting for the majority of total material costs. We purchase these materials from a number of key suppliers and have not experienced any significant difficulties in obtaining the raw materials necessary for our operations, though, in times of limited supply, we have occasionally experienced minor delays in delivery. We believe that we purchase our materials and supplies at competitive prices primarily due to the size of our spend.

The printing industry continues to experience pricing pressure related to increases in the cost of materials used in the manufacture of our products. Industry prices for most of the raw materials we use in our business, including uncoated freesheet paper, coated freesheet paper, ink, window film, adhesives and printing plates, have increased in both 2006 and 2007, and are expected to increase again in 2008.

While we expect to continue to be able to pass on a substantial portion of the price increases we receive for raw materials through the pricing of our products, any price increase carries the risk of an offsetting decrease in demand for our products.

Patents, Trademarks and Trade Names

We market products under a number of trademarks and trade names. We also hold or have rights to use various patents relating to our businesses. Our patents and trademarks expire at various times through 2023. Our sales do not materially depend upon any single patent or group of related patents.

Competition

In selling our envelope products, we compete with a few multi-plant and many single-plant companies that primarily service regional and local markets. We also face competition from alternative sources of communication and information transfer such as electronic mail, the Internet, interactive video disks, interactive television, electronic retailing and facsimile machines. Although these sources of communication and advertising may eliminate some domestic envelope sales in the future, we believe that we will experience continued demand for envelope products due to: (1) the ability of our customers to obtain a relatively low-cost information delivery vehicle that may be customized with text, color, graphics and action devices to achieve the desired presentation effect; (2) the ability of our direct-mail customers to penetrate desired markets as a result of the widespread delivery of mail to residences and businesses through the U.S. Postal Service and (3) the ability of our direct mail customers to include return materials inside their mailings. Principal competitive factors in the envelope business are quality, service and price. Although all three are equally important, various customers may emphasize one or more over the others. In selling our printed business forms and labels products, we compete with other document and label print facilities with nationwide manufacturing locations, and regional and local printers, which typically sell within a 100- to 300-mile radius of their plants. Printed business forms and labels competition is based mainly on quick-turn customization quality of products and customer service levels.

Our commercial printing segment provides offerings designed to give customers complete solutions for communicating their messages to targeted audiences. The environment is highly competitive in most of our product categories and geographic regions. Competition is based largely on price, quality and servicing the special needs of customers. Management believes that overcapacity exists in most commercial printing markets, therefore, competition is intense. In this competitive pricing environment, companies have focused on reducing costs in order to preserve operating margins. Management believes this environment will continue to lead to more consolidation within the commercial print industry as companies seek economies of scale, broader customer relationships, geographic coverage and product breadth to overcome or offset excess industry capacity and pricing pressures.

Seasonality

Our commercial printing plants experience seasonal variations. For example, revenues from annual reports are generally concentrated from February through April. Revenues associated with consumer publications, such as holiday catalogs and automobile brochures, tend to be concentrated from July through October. Revenues associated with the educational and scholarly market and promotional materials tend to decline in the summer. As a result of these seasonal variations, some of our commercial printing operations operate at or near capacity at certain times throughout the year.

In addition, certain sectors of the envelope and direct mail markets experience seasonality with a higher percentage of volume of products sold to these markets occurring during the fourth quarter of the year. This seasonality is due to the increase in sales to the direct mail market due to holiday purchases.

Backlog

At December 31, 2007 and 2006, the backlog of customer orders to be produced or shipped was approximately $127.2 million and $77.8 million, respectively.

Employees

We employed approximately 10,700 people as of December 31, 2007, approximately 15% of whom were members of various local labor unions. Collective bargaining agreements, each of which cover the workers at a particular facility, expire from time to time and are negotiated separately. Accordingly, we believe that no single collective bargaining agreement is material to our operations as a whole.

Environmental Regulations

Our operations are subject to federal, state and local environmental laws and regulations including those relating to air emissions; waste generation, handling, management and disposal; and remediation of contaminated sites. We have implemented environmental programs designed to ensure that we operate in compliance with the applicable laws and regulations governing environmental protection. Our policy is that management at all levels be aware of the environmental impact of operations and direct such operations in compliance with applicable standards. We believe that we are in substantial compliance with applicable laws and regulations relating to environmental protection. We do not anticipate that material capital expenditures will be required to achieve or maintain compliance with environmental laws and regulations. However, there can be no assurance that newly discovered conditions, or new or more stringent interpretations of existing laws and regulations, will not result in material expenses.

CEO BACKGROUND

Robert G. Burton , Sr . Mr. Burton, 68, has been Cenveo’s Chairman and Chief Executive Officer since September 2005. In January 2003, he formed Burton Capital Management, LLC, a company that invests in middle market manufacturing companies, and has been its Chairman, Chief Executive Officer and sole managing member since its formation. From December 2000 through December 2002, Mr. Burton was the Chairman, President and Chief Executive Officer of Moore Corporation Limited, a leading printing company with over $2.0 billion in revenue for fiscal year 2002. Preceding his employment at Moore, Mr. Burton was Chairman, President, and Chief Executive Officer of Walter Industries, Inc., a diversified holding company. From April 1991 through October 1999, he was the Chairman, President and Chief Executive Officer of World Color Press, Inc., a leading commercial printing company. From 1981 through 1991, he held a series of senior executive positions at Capital Cities/ABC, including President of ABC Publishing. Mr. Burton was also employed for 10 years as a senior executive of SRA, the publishing division of IBM.


Mark S. Hiltwein Mr. Hiltwein, 44, has served as Cenveo’s Chief Financial Officer since July 2007. From July 2005 to July 2007, he was President of Smartshipper.com, an online third party logistics company. From February 2002 through July 2005, Mr. Hiltwein was Executive Vice President and Chief Financial Officer of Moore Wallace Incorporated, a $3.5 billion dollar printing company. Prior to that, he served as Senior Vice President and Controller from December 2000 to February 2002. Mr. Hiltwein served in various financial positions from 1992 through 2000 with L.P. Thebault Company, a commercial printing company, including Chief Financial Officer from 1997 through 2000. Mr. Hiltwein began his career at Mortenson and Associates, a regional public accounting firm where he held various positions in the audit department. He is a CPA and received his bachelor’s degree in accounting from Kean University.

Dean Cherry Mr. Cherry, 47, has been Cenveo’s President of Envelope Operations since February 1, 2008. From October 2006 through January 2008, he was a private investor in Renovatio Ventures, LLC, From 2004 to 2006, he was RR Donnelley’s Group President of Short-Run Commercial, and Group President of Integrated Print Communications and Global Solutions, a $4.5 billion division of RR Donnelley. In this position, Mr. Cherry had global P&L responsibility for Direct Mail, Commercial Print, Global Capital Markets, Business Communication Services, Forms and Labels and Astron (outsourcing), as well as RR Donnelley’s Latin American business. From 2001 to 2004, he held the positions of President, International & Subsidiary Operations and President, Commercial and Subsidiary Operations, for Moore Corporation Limited, a division of RR Donnelley. From 1991 to 1998 he held various management positions at World Color Press, Inc. From 1985 to 1991, he held various financial positions at Capital Cities/ABC Publishing division including Vice President, Finance and Operations. Mr. Cherry is a member of the Dean’s Advisory Council for the College of Business of Murray State University, and a Trustee for the Murray State University Foundation.

Timothy M. Davis Mr. Davis, 53, has served as Cenveo’s Senior Vice President, General Counsel and Secretary since January 2006. From July 1989 until he joined the Company, he was Senior Vice President, General Counsel and Secretary of American Color Graphics, Inc., a commercial printing company.

Sean S. Sullivan Mr. Sullivan, 40, has served as Cenveo’s President of Commercial Print and Packaging division since July 2007. He was previously Cenveo’s Chief Financial Officer from September 2005 to June 2007. He served as the Executive Vice President—Chief Financial Officer of Spencer Press, Inc., a privately-held printer that produced catalogs, direct mail and general commercial print products, from October 2004 until September 2005. Prior to that, he served as the Executive Vice President of BCM from May 2003 to September 2004. Prior to May 2003, Mr. Sullivan served as the Senior Vice President, Finance and Corporate Development for Moore Corporation Limited from August 2001 to June 2002. Prior to Moore Corporation, Mr. Sullivan served as the Vice President of Mergers and Acquisitions for Engage, Inc., an enterprise marketing software and interactive media company. Mr. Sullivan began his career at Ernst & Young and held various positions in the audit and M&A groups from 1989 through 1998. Mr. Sullivan is a certified public accountant.

MANAGEMENT DISCUSSION FROM LATEST 10K
Introduction and Executive Overview

We are one of the largest diversified printing companies in North America, according to the December 2007 Printing Impressions 400 report. Our broad portfolio of products includes envelope, form, and label manufacturing, commercial printing and packaging and publisher offerings. We operate from a global network of approximately 78 printing and manufacturing, content management and distribution facilities, which we refer to as manufacturing facilities, serving a diverse base of customers. Since late 2005, under our new management team’s leadership, we have significantly improved profitability by re-aligning our operating segments, centralizing and leveraging our purchasing spend, consolidating plants and reducing corporate and field staff. In addition, we have divested non-strategic businesses and made investments through acquisitions of highly complementary companies and capital expenditures.

We operate in two complementary segments: Envelopes, Forms and Labels and Commercial Printing.

Envelopes, Forms and Labels . The segment operates approximately 38 manufacturing facilities, primarily in North America and primarily specializes in the design, manufacturing and printing of:



•

direct mail and customized envelopes for advertising, billing and remittance;


•

custom labels and specialty forms; and


•

stock envelopes, labels and business forms.

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 credit card companies. We manufacture and print customized envelopes used as inserts within wholesale and retail product catalogs. We print a diverse line of custom labels and specialty forms for a broad range of industries including manufacturing, warehousing, packaging, food and beverage, and health and beauty, which we sell through an extensive network of resale distributors. For our small and mid-size business forms and labels customers, we print a diverse line of custom products, including both traditional and specialty forms and labels for use with desktop PCs and laser printers. Our printed office products include business documents, specialty documents and short-run secondary labels, which are made of paper or film affixed with pressure sensitive adhesive and are used for mailing, messaging, bar coding and other applications. We produce pressure-sensitive prescription labels for the retail pharmacy chain market. We also produce a broad line of stock envelopes, labels and traditional business forms that are sold through independent distributors, contract stationers, national catalogs for the office products market and office products superstores .

Commercial Printing . The segment operates approximately 40 manufacturing facilities in the United States, Canada, the Caribbean Basin and Asia and primarily offers print, design and content management offerings covering a wide array of products for a broad group of customers. Our commercial printing segment provides one-stop print, design and content management offerings, including:



•

high-end color printing of a wide range of premium products for national and regional customers;


•

general commercial printing for regional and local customers;


•

scientific, technical and medical (“STM”) journals and special interest and trade magazines for not-for-profit organizations, educational institutions and specialty publishers; and


•

specialty packaging and high quality promotional materials for multinational consumer products companies.

Our commercial print offerings primarily include electronic prepress, digital asset archiving, direct-to-plate technology, high-quality color printing on web and sheet-fed presses and digital printing. The commercial printing products we produce include annual reports, car brochures, direct mail products, specialty packaging, journals and specialized periodicals, advertising literature, corporate identity materials, financial printing, books, directories, calendars, brand marketing materials, catalogs, and maps. In our journal and specialty magazine business, we offer complete solutions, including editing, content processing, content management, electronic peer review, production and reprint marketing. Our primary customers for our specialty packaging and promotional products are pharmaceutical, apparel, technology and other large multi-national consumer product companies. Our commercial printing segment primarily caters to the financial services, publishing, telecommunications, pharmaceutical, and consumer products industries.

Business Strategy . Our goals are to improve on profitability and pursue disciplined growth. The principal features of our strategy are:



•

Improve our Cost Structure and Profitability . We have implemented two cost savings plans: the 2007 Cost Savings and Integration Plan, which we refer to as the 2007 Plan, and the 2005 Cost Savings and Restructuring Plan, which we refer to as the 2005 Plan. The 2007 Plan relates to activities undertaken in connection with our 2007 acquisitions of Printegra, Cadmus, ColorGraphics and Commercial Envelope, which we refer to as the 2007 Acquisitions. Under the 2007 Plan, we closed six manufacturing facilities and integrated those operations into acquired and existing operations. The 2005 Plan, which was completed in the fourth quarter of 2007, included such actions as consolidating our purchasing activities and manufacturing platform including closing two manufacturing facilities in 2007 that were integrated into existing operations, reducing corporate and field personnel, streamlining our information technology infrastructure and elimination of discretionary spending.

We continue to implement cost-savings initiatives that will improve our profitability, both in connection with acquisitions and our ongoing operations. We regularly assess our operations with a view toward eliminating operations that are not aligned with our core United States operations or are underperforming. For example, we divested our Canadian envelope manufacturing business, Supremex, Inc., and certain other related assets through a series of transactions in 2007 and 2006. In 2006, we sold three small and non-strategic businesses and closed three facilities that were underperforming. We continue to evaluate the sale or closure of facilities that do not meet our strategic goals or performance targets.



•

Capitalize on Scale Advantages . We believe there are significant advantages to being a large competitor in a highly fragmented industry. We seek to capitalize on our size, geographic footprint and broad product lines to offer one-stop shopping and enhance our overall value proposition. As we grow in scale and increase our operating leverage, we seek to realize better profit margins through improvements in manufacturing facility utilization.



•

Enhance the Supply Chain . We continue to work with our core suppliers to improve all aspects of our purchasing and other logistics as well as to ensure a stable source of supply. We seek to lower costs through more favorable pricing and payment terms, more effective inventory management and improved communications with vendors. We continue to consolidate our suppliers of key production inputs such as paper and ink, and believe that significant opportunities exist in optimizing the rest of our supply chain.



•

Seek Products and Processing Improvements . We encourage regular review of our product offerings, manufacturing processes and distribution methods to ensure that we take advantage of new technology when practical and meet the changing needs of our customers and the demands of a global economy. We seek to enter into growth product markets in which we may have competitive advantages based on our existing infrastructure, operating expertise and customer relationships. Pharmaceutical labels, direct mail, and specialty packaging are examples of growth areas into which we recently expanded. By expanding our product offerings, we intend to increase cross-selling opportunities to our existing customer base and mitigate the impact of any decline in a given market.



•

Pursue Strategic Acquisitions . We continue to selectively review opportunities to expand within growing niche markets, broaden our product offerings and increase our economies of scale through acquisitions. We will pursue reasonably-priced opportunities that we expect to yield greater profitability and cash flow or improved operating efficiencies, such as increased utilization of our assets. Since July 2006, we have completed five acquisitions that we believe will continue to enhance our operating margins and deliver economies of scale. We believe our acquisition strategy will allow us to both realize increased revenue and cost-saving synergies, and apply our management expertise to improve the operations of acquired entities. For example, our acquisition of Commercial Envelope strengthened our position in the direct mail market and will allow us to enhance our raw material purchasing power and rationalize our manufacturing platform. Our acquisition of Rx Technology in July 2006 gave us an entry into the pharmaceutical labels business, which has high barriers to entry, while also allowing us to cross-sell a broader product platform to new and existing customers.

See Part 1 Item 1 of this Annual Report on Form 10-K for a more complete description of our business.

Consolidated Operating Results

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes an overview of our consolidated results for 2007, 2006 and 2005 followed by a discussion of the results of each of our business segments for the same period and gives effect to the restatement in 2006. See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Our results for the year ended December 31, 2007 include the operating results of the 2007 Acquisitions, subsequent to their respective acquisition dates, except for ColorGraphics which is included in our operating results from July 1, 2007. Since the 2007 Acquisitions results are not included for a full year in 2007, we expect that our net sales and operating income will increase next year. See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

In 2007, we continued to encounter competitive pricing pressures that result from excess capacity in the industry in concert with declining or weak volume growth in many of our markets. In addition, the cost of paper, film and other raw materials for our products has increased. To compete effectively in an environment of excess capacity and rising costs, we are focused on improving productivity and creating operating leverage by reducing our costs. In 2007, we closed two commercial printing plants and consolidated three commercial printing plants, four documents plants and two envelope plants in connection with the integration of the 2007 Acquisitions. In 2006, we sold three small non-core printing operations, closed three printing operations and consolidated six envelope plants and two printing operations. These consolidation activities have assisted us in becoming more efficient at operating our plants at higher levels of utilization. We also continue to redeploy our assets throughout our manufacturing platform to reduce future capital expenditures.

A summary of our consolidated statement of operations is presented below. The summary presents reported net sales and operating income (loss). See Segment Operations below for a summary of net sales and operating income (loss) of our operating segments that we use internally to assess our operating performance. Division net sales exclude sales of divested operations.

Net Sales

Net sales for 2007 increased $535.5 million, as compared to 2006. This increase was primarily due to the $629.9 million of incremental sales generated by the 2007 Acquisitions, with no corresponding amounts in 2006 and the additional sales generated by Rx Label Technology Corporation, which we refer to as Rx, in 2007, since it was not included in our results for a full year in 2006. This increase was offset in part by lower sales from our commercial printing segment of $51.8 million and lower sales from our envelopes, forms and labels segment of $33.3 million. See Segment Operations below for a more detailed discussion of the primary factors affecting the change in our net sales by reportable segment.

Net sales decreased $83.6 million in 2006 as compared to 2005, primarily due to lower sales of $96.9 million from our commercial printing segment, partially offset by an increase in sales of $13.3 million from our envelopes, forms and labels segment. See Segment Operations below for a more detailed discussion of the primary factors for our net sales changes.

Operating Income

Operating income for 2007 increased $74.2 million, as compared to 2006. This increase was primarily due to $49.2 million of incremental operating income generated by the 2007 Acquisitions, with no corresponding amounts in 2006, the additional operating income generated by Rx since it was not included in our results for a full year in 2006 and the $23.7 million of increased operating income primarily resulting from our cost savings initiatives. See Segment Operations below for a more detailed discussion of the primary factors for the changes in operating income by reportable segment.

Operating income increased $89.7 million in 2006 as compared to 2005. This increase was primarily due to the positive results of implementing our cost savings programs throughout our business and decreased restructuring and impairment charges of $36.2 million, partially offset by an increase in corporate expenses of $12.6 million. See Segment Operations below for a more detailed discussion of the primary factors for the operating income changes for our segments.

Loss on Sale of Non-Strategic Businesses . During 2006, we sold three small non-strategic businesses and recognized losses on those sales of $2.0 million.

Interest Expense . Interest expense increased $30.5 million to $91.5 million in 2007, as compared to $61.0 million in 2006, primarily due to the additional debt we incurred to finance the 2007 Acquisitions. This increase was offset in part by lower interest expense resulting from reduced interest rates from amending and refinancing our senior credit facilities in March 2007, and lower interest rates due to market conditions in the fourth quarter of 2007. Interest expense in 2007 reflects average outstanding debt of approximately $1.2 billion and a weighted average interest rate of 7.5%, as compared to average outstanding debt of $721.5 million and a weighted average interest rate of 8.1% in 2006. We expect higher interest expense in 2008 due to our increased debt level resulting from the 2007 Acquisitions. See Long-Term Debt below and Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Interest expense decreased approximately $12.8 million to $61.0 million in 2006 from $73.8 million in 2005, primarily due to lower average debt balances outstanding. Interest expense during 2006 reflects average outstanding debt of $721.5 million and a weighted average interest rate of approximately 8.1%, compared to the average outstanding debt of $820.9 million and a weighted average interest rate of 8.3% during 2005. See Long-Term Debt below and Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Loss on Early Extinguishment of Debt . In 2007, we: (i) retired the remaining $10.5 million of our 9⅝% senior notes due 2012, which we refer to as the 9⅝% Senior Notes, (ii) executed a tender offer for repayment on March 19, 2007 of $20.9 million of Cadmus’ 8⅜% senior subordinated notes due 2014, which we refer to as the 8⅜% Notes and (iii) in connection with the Cadmus acquisition and the refinancing of our existing $525.0 million senior secured credit facilities, which we refer to as the Credit Facilities, and incurred losses on early extinguishment of debt of $9.3 million. In June 2006, we incurred a $32.7 million loss on early extinguishment of debt related to our debt refinancing. See Long-Term Debt below and Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

In 2007, we had income tax expense of $9.9 million, which primarily relates to taxes on our domestic operations. Our effective tax rate in 2007 was lower than the statutory rate primarily due to release of valuation allowances. See the Critical Accounting Matters section of this MD&A.

In 2006, we had an income tax benefit of $21.1 million, which included $0.2 million of taxes on our Canadian operations, $3.2 million of taxes relating to the deconsolidation of the Company’s U.S. income tax group, $0.4 million of state and local taxes and the recognition of deferred tax assets of $24.9 million. During 2006, we provided income taxes for our Canadian operations at an effective rate of approximately 34.0%.

In 2005, we had income tax expense of $42.3 million on the loss from continuing operations before income taxes results primarily from establishing valuation allowances on our net U.S. deferred tax assets and the tax expense recorded for foreign operations that generated taxable income.

Income from Discontinued Operations, net of taxes . Income from discontinued operations for 2007 includes the $17.0 million gain on sale of our remaining interest in the Supremex Income Fund, which we refer to as the Fund, on March 13, 2007, net of taxes of $8.4 million, and equity income related to our retained interest in the Fund from January 1, 2007 through March 13, 2007. Income from discontinued operations for 2006 primarily represents the revenues and expenses of Supremex, which we sold to the Fund on March 31, 2006, and does not include an allocation of interest expense on our debt. Income from discontinued operations for 2006 includes the gain on the sale of Supremex and certain other assets of $113.5 million, net of taxes of $22.5 million and equity income pertaining to our retained interest in the Fund from April 1, 2006 through December 31, 2006. See Notes 4 and 16 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Segment Operations

Our Chief Executive Officer monitors the performance of the ongoing operations of our two reportable segments. We assess performance based on division net sales and operating income (loss). The summaries of net sales and operating income (loss) of our two segments have been presented to show each segment without the sales of divested operations, as applicable, and to show the operating income (loss) of each reportable segment. See Note 19 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Restructuring, Impairment and Other Charges . In the fourth quarter 2007, we completed our cost savings and restructuring plan initiated in September 2005, including the consolidation of purchasing activities, the rationalization of our manufacturing platform, corporate and field human resources reductions, implementation of company-wide purchasing initiatives and streamlining of information technology infrastructure. In addition, we implemented cost savings and integration initiatives related to the 2007 Acquisitions and anticipate substantially completing the integration of those operations during 2008. See Notes 3 and 12 to the consolidated financial statements included herein. As of December 31, 2007, our total restructuring liability was $16.8 million.

2007. During 2007, we incurred $40.1 million of restructuring and impairment charges, which included $10.2 million of employee separation costs, $12.0 million of asset impairment charges, net, equipment moving expenses of $3.9 million, a pension withdrawal liability of $2.1 million, lease termination expenses of $5.4 million, and building clean-up and other expenses of $6.5 million. We anticipate lower restructuring and impairment charges in 2008.

2006. During 2006, we incurred $41.1 million of restructuring and impairment charges, which included $19.9 million of employee separation costs, $3.6 million of asset impairments, net, equipment moving expenses of $6.4 million, lease termination costs of $4.0 million and building clean-up and other expenses of $7.2 million.

2005. During 2005, we incurred $77.3 million of restructuring, impairment and other charges, which included $26.4 million for employee separation costs, $26.3 million for asset impairments, $5.7 million for lease termination costs and other exit costs of $2.2 million and $16.7 million of other charges primarily related to a special meeting of shareholders and the accelerated vesting of equity awards resulting from the change in the makeup of the board of directors.

Division Net Sales

Division net sales for our envelopes, forms and labels segment increased $117.0 million, or 15.0%, in 2007, as compared to the same period in 2006. This increase was primarily due to $150.3 million of incremental sales generated by Commercial Envelope and Printegra in 2007, including the impact of sales changes for work transitioned primarily from a plant closure as a result of the Commercial Envelope acquisition, with no corresponding amounts in 2006 and additional sales generated by Rx, which was not included in our results for a full year in 2006. This increase was offset in part by: (1) lower sales volume of approximately $21.7 million, primarily from our envelope operations due to the reorganization and closing of operations and the retirement of less efficient assets to maximize profitability, a decline in the overall market due in part to the U.S. Postal Service’s rate increases in the middle of the second quarter of 2007, the closure of a forms plant in connection with the integration of Printegra’s operations, and an overall decline in the traditional documents business, mainly as a result of customers’ improved ability to print high quality documents on their own, offset in part by higher sales volume from the office product retail superstore market due to a shift toward generic products from custom products, and (2) lower pricing and product mix of approximately $11.6 million, primarily from our envelope operations and the office product retail superstore market due to a shift toward generic products, offset in part by improvement in the product mix from our documents operation to higher value added products.

Division net sales for our envelopes, forms and labels segment increased $21.8 million, or 2.9%, in 2006 as compared to 2005. This increase was primarily due to $20.7 million of incremental sales generated by Rx Technology in 2006, with no corresponding amounts in 2005, and increased sales of $16.8 million from pricing and product mix, primarily from our envelope operations. These increases were offset in part by lower sales volume of approximately $16.0 million, primarily from our envelope operations due to the reorganization and closing of two operations and the retirement of less efficient assets to maximize profitability, the closure of two forms plants and the overall decline in the traditional documents business, mainly as a result of customers’ improved ability to print high quality documents on their own, offset in part by higher sales volume from the office product retail superstore market.

Segment Operating Income

Segment operating income for our envelopes, forms and labels segment increased $34.6 million, or 41.8%, in 2007, as compared to 2006. This increase was primarily due to $16.1 million of operating income generated by Commercial Envelope and Printegra in 2007, with no corresponding amounts in 2006 and additional operating income generated by Rx since it was not included in our results for a full year in 2006, improved gross margin of $3.4 million and reduced selling, general and administrative expenses of $8.1 million from plant consolidations and our cost reduction programs and reduced restructuring and impairment charges of $7.0 million.

Segment operating income of the envelopes, forms and labels segment increased $30.9 million, or 59.7%, in 2006 as compared to 2005. This increase was primarily due to improved margins and lower selling, general and administrative expenses. Gross margins improved approximately $25.5 million, primarily due to increased sales and reduced manufacturing costs. Plant consolidations and other cost reduction programs also contributed to reduce selling, general and administrative expenses by approximately $10.9 million. These increases were partially offset by increased restructuring and impairment charges of $5.8 million.

Division Net Sales

Division net sales for our commercial printing segment increased $427.8 million, or 59.3%, in 2007, as compared to 2006. This increase was primarily due to the $479.6 million of incremental sales generated by ColorGraphics and Cadmus in 2007, including the impact of sales changes for work transitioned primarily from two plants that we closed as a result of the ColorGraphics acquisition, with no corresponding amounts in 2006. This increase was offset by the impact of closed plants in 2007 and 2006 of approximately $37.8 million and lower sales due to pricing and product mix and lower sales volume, partially offset by paper price increases and foreign currency fluctuations.

Division net sales of the commercial printing segment declined $70.9 million, or 9.0%, in 2006, as compared to 2005. This decline was due primarily to the loss of $66.5 million of sales from eight plants that we closed in 2006 and in 2005 and lower sales due to pricing and product mix and lower sales volume, partially offset by paper price increases.

Segment Operating Income

Segment operating income for our commercial printing segment increased $41.5 million, or 304.9%, in 2007, as compared to 2006. This increase was primarily due to: (1) $33.1 million of operating income generated by ColorGraphics and Cadmus during 2007, with no corresponding amounts in 2006, (2) improved gross margins of approximately $8.1 million and reduced selling, general and administrative expenses of $5.9 million from our cost reduction programs at our ongoing operations, and (3) reduced costs of approximately $1.1 million from plants we closed or divested in 2006. These increases were partially offset by increased restructuring and impairment charges of $6.7 million.

Segment operating income of the commercial printing segment increased $44.3 million, or 144.4%, in 2006 as compared to 2005. This increase was primarily due to lower selling, general and administrative expenses of $17.3 million and improved margins of $6.0 million from our ongoing printing operations, reduced restructuring and impairment charges of $14.8 million and net cost savings of $6.2 million from plants we closed or divested. At our ongoing printing operations, margins improved primarily due to reduced manufacturing costs and from significantly reducing the cost structure of this segment through headcount reductions and lowering expenses.

Corporate Expenses . Corporate expenses include the costs of running our corporate headquarters. Corporate expenses in 2007 were fairly consistent with 2006. Corporate expenses were higher in 2006 as compared to 2005, primarily due to certain back-office functions being assumed by the corporate office in Stamford, Connecticut, and from increased compensation expense, including the expense recorded under Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. See Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. We expect that corporate expenses will increase in the first quarter of fiscal 2008 due to the internal review conducted by our audit committee. See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Liquidity and Capital Resources

Net Cash Provided by (Used in) Continuing Operating Activities . Net cash provided by continuing operating activities was $86.2 million in 2007, which was primarily due to net income adjusted for non-cash items of $146.6 million, offset in part by an increase in our working capital of $50.6 million. The increase in our working capital primarily resulted from an increase in receivables primarily due to the timing of collections and increased sales from our 2007 Acquisitions, lower accrued compensation and related liabilities and the timing of payments for restructuring activity.

CONF CALL

Rob Burton

Good morning, ladies and gentlemen. This is Rob Burton. Welcome to Cenveo's 2008 second quarter conference call. Today's call will be hosted by Robert G. Burton, the company's Chairman and Chief Executive Officer, and members of the senior management team.

Before I turn the call over to Mr. Burton, I'd like to remind everyone that certain materials covered on today's call are considered forward-looking and are covered under the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995.

Also, any forward-looking estimates given on today's call will exclude any effects of restructuring, impairment, and other related acquisition charges. For further details regarding these factors, please reference pages 11 and 12 of the company's press release that was issued last night.

And with that, I'd like to turn the call over to Mr. Burton.

Robert Burton, Sr.

Good morning, ladies and gentlemen. This is Bob Burton speaking. And as you know, I am your senior manager at Cenveo. For the past 37 months, I've been reporting the Cenveo results.

Historically, when we have these calls, I get up in the morning and turn the news on just hoping that it's positive instead of negative, as it was today, with a lot of people reporting not so great news. But what we got to report is very good news. We are going to be reporting our results for the quarter and how we delivered the quarter.

We are going to be talking about the back half of the year and how positive we feel about the year. And talking about how we get to where we're at and where we're going. So this is going to be a positive kind of upbeat versus some of the other calls you've had where people have missed numbers and have excuses.

We started back in 2005 here at Cenveo delivering a full year EBITDA of $96 million and a second quarter performance of $20 million of EBITDA. And today, we are delivering EBITDA of $65.3 million versus a budget we gave you of $64 million, and that $65 million relates to the $20 million that Cenveo delivered the first year we were here.

And the $300 million EBITDA number that we are going to be talking about for the full year relates to the $96 million that Cenveo did for the full year in 2005. So we've come a long way. We've come a long way, and we've got a much further to go. But we are delivering what we say we were going to deliver, and I think that's a very positive thing.

Once again, we were able to achieve our financial commitments and post record results, despite facing a challenging economic environment that has to be the worst that I have ever faced in my business career.

And we did this during our seasonally slowest quarter. And during this quarter, we were able to, number one, we were able to improve our operating margins from 8.1% to 9%, you know our long-term goal is a 10% margin number.

Number two, we generated strong cash flow of $126 million of cash flow from our continuing operations for the first six months of this year.

Number three, we've decreased our debt by approximately $14 million during the quarter despite paying for the acquisition Rex and despite paying our seasonal highest cash interest payment during the second quarter. So if you look at those benchmarks, those are all very positive.

During our March 14th 2008 conference call, as most of you remember very well, we reported on our fourth quarter results and alerted you to the fact that we were seeing a major slowdown in the so-called multiple color financial mailings that we're a leader in, in this market.

And the question keeps coming up. Why are we able to deliver our budget when other so-called printing companies are missing their numbers? And we were one of the first to talk about problems in the economy when we talked to you on that conference call and talked about the lack of information in the direct mail market, but we immediately, after that call, and before that call, implemented a plan that we will call cost reduction improvement plan 2008.

And that was a plan that we committed that we were going to deliver $300 million of EBITDA. And we had a lot going on for us. Most people think you can just go and layoff a lot of people and make numbers. And you can do that, but we don't do that. That's part of the plan. But the other part of the plan is a continuous improvement and focus in areas that most people don't look at. And there are 10 of them. And I just want to run through those 10 just to remind you that when we talk about cost savings and improvement plan, there is more to that than just cutting discretionary expenses.

So number one is headcount, everybody does that. And the only thing we don't give out the numbers of headcount because it's competitive information, and competition takes that number and add a couple zeros to it, so we don't do that. But we did reduce heads, and we reduced heads where we felt we had margin improvement to go.

Number two, we also did discretionary cost reductions across the board. And by the way, we have those identified when we put our budget together for 2008.

Number three, we've talked to you about productivity improvement in our plants and how it takes three to four years of actually getting presses to run at certain speed and having certain kind efficiencies. We are seeing that improvement now.

Number four, in the workmen comp area, it is without a doubt, we do the most superior job in this industry of making sure that we keep workmen comp numbers down and a leader in the industry, and we continued to do that this year.

Number five, medical costs. We've put together medical plans that benefits our employees where they can pay less and the company benefits more by the structure of the plans that we implement.

Number six, waste paper, which people normally – when we first got here they thought it was the stuff you just throw and put them in the waste can. This waste paper has turned in to be a profit center for us at our company and is doing very well for us in 2008.

Executive sales, we talk about all the time of looking in that large accounts that we haven't been in. We have been working on that before, and we have been very successful in closing some of those as long as we have, with item eight, in cross selling, which I started at World Color and everybody seems to say they are doing that, but we have been very successful this year in cross selling our products.

And that's because of leadership of our three Presidents, who actually are pushing cross selling within their own area of responsibility and beyond that.

Number nine, when we first got here, the purchasing department made a commitment to come up with new supplier contracts. And we have done that and we have continued to reap benefits from that because we really were asleep at the clutch before we got here on what we were signing up for.

And lastly, the vendor improvements, on everything we do and everything we spend, we try to get the best possible price, and we have done that through the leadership of our purchasing department.

So, if you look at how do we constantly deliver our numbers on what we talk about, it's because we have a mix of cost reductions and all these other pieces that we've developed over the years that help us deliver what we say we have going to deliver. And I told you all along, we always have a plan every year to get to where we want to go.

And on top of that, on top of these 10 improvement items, we really, when you look at our business, we really are a targeted niche product offering, but that we offer our customers as the rest of the printing industry really doesn't have the same kind of products and doesn't have the same kind of growth potential we have with the products that we offer our customers.

So if you put all that together, that's the reason why that the $65.3 million is up 17% versus prior year and that sales are up some 6% versus last year.

And on the subject of sales, I just want to remind all of you – and we sometimes get lost in this that our primary focus is and has been on profits. It's not revenues. And it's not that we don't focus on revenues we do, because we look at the top accounts and we look at the sales people, we constantly rotate the sales individuals where we are not getting performance. But our focus is on profits and not revenues.

And to improve profits and margins, we do consolidations, we do close downs the plants, we close down back office functions and just functions in corporate. And we do those close downs part of our ongoing operations, especially doing acquisitions and that improves results.

And we have been doing these integrations since 1991 at World Color, we did them at Moore, and we are doing them at Cenveo. And these actions allow us to improve margins, like at Cenveo, we are going from 2% to our 9% this quarter.

And some of you want to add these acquisitions that we do to our current revenue total and come up with new total. It just doesn't work, because of the way we operate. And we are really not in the business of counting same-store sales each quarter.

But we do integrate a lot of businesses, and you will find that in some businesses we are doing multiple locations, and we are selling products, and we may close down one location to improve another location, but it's not a primary focus, and you hear us talk about profits and EBITDA, as I told you, was our primary focus, and that's the reason why.

But if you look at our revenues for this year, just for the record and for your models, we are going to be looking at about $2.2 billion or $2.3 billion in that range, give or take between now and the end of the year. I just want to say that again it's not something that we don't talk about much, but the profit allows us to do a lot of things that we haven't been able to do before.

So, following our normal format of a one hour meeting, Mark Hiltwein, our CFO, is going to review our financial results, and then I'm going to come back and cover four business items, and then we will open up the call for Q&A.

Now, the four items that I plan to discuss, one is I want to give you an update on our acquisitions and what's going on there, both small and large.

Secondly, I want to talk to you about something we are very proud of, our employees scholarship plan for the children of our employees.

Number three, I want to talk about the third quarter and full year guidance for 2008, and item four, I want to talk to you about purchasing stock and what's going on with stock with us.

And now, I am going to ask Mark to review our second quarter and six month results. Mark?

Mark Hiltwein

Thank you, Bob. Today, I will be covering the following topics. First, I will provide a highlight of some key financial measurements for the quarter, and then I will give a general business and segment overview, and lastly, I will review the financial statements including restructuring and integration activities and key balance sheet and cash flow items.

Net sales for the second quarter of 2008 increased 6% to $524.5 million from $497 million in 2007, an increase of $27.5 million. This was primarily due to the acquisitions of ColorGraphics, Commercial Envelope, and Rex Corp.

Gross profit margins increased from 19.1% last year to 20.5% this year. This was significant because we have seen an increase in material costs, and we have been able to offset the impact of the increases with all of our cost savings initiatives and by passing on increases to our customers.

Non-GAAP operating income increased $7.1 million from $40.3 million in the second quarter of 2007 to $47.4 million this quarter, representing margins of just over 9%. Non-GAAP income from continuing operations was $18.3 million or $0.34 per share, compared to $15.9 million or $0.29 per share last year. EBITDA for the second quarter was $65.3 million, an increase of $9.4 million or 17% over prior year.

Our cash flow continued to be strong as we generated $72 million in net cash from operating activities for the quarter. The major contributor to this was the $26 million cash flow from the reduction of our accounts receivable. For the quarter, we reduced our DSOs from 52 days to 49 days, and we expect to see that continued improvement through the back half of the year.

The cash generated was used to pay down our debt. Our debt balance was reduced by $14 million versus the first quarter ending balance. This was accomplished in the quarter in which we acquired Rex Corporation and the Rex facility for approximately $50 million and made cash interest payments of approximately $35 million.

Next, I would like to provide an overview of the business. The second quarter can best be described as a solid performance in a difficult environment, achieved through aggressive cost reduction programs. The cost reduction programs were not only attained through head count reductions but also through manufacturing efficiencies, waste and spoils reductions, safety initiatives, and an overall discipline on all discretionary spending.

The overall general economic conditions had a direct impact on both of our segments. Most of our customers are working to produce their products at reduced budgets. They are looking for ways for us to help them cut their costs. In addition, we are seeing rising input and distribution costs that are passed to us from our vendors. This has caused us to adjust paper grades, basis weight of paper, and the facilities where the work is to be produced.

One of our competitive advantages is the strong geographic footprint we have across North America with our 78 facilities. In our Envelope group we have just finalized the system integration of all of our facilities. This allows us to estimate, price, and schedule work across our entire platform, which provides us with the best opportunity to place work into the best plants for distribution purposes. This also allows us to provide our customers with better service and better response times.

At the end of the first quarter, we announced and executed on our $25 million cost savings program. These savings were primarily achieved through head count reductions. These reductions did not impact sales or manufacturing and actually improved our estimating, scheduling, pricing, and customer service functions.

We continue to meet weekly with our field operation leaders and continue to make the necessary adjustments in our cost structure to align our costs with our expected revenues. Although we've made significant progress in the cost savings area, we believe that there is room for additional cost to be driven out of the organization, and we are focusing daily to deliver on our commitments.

The Envelope group continues to experience the same trends we discussed in the first quarter concerning the financial institutions' reluctance to use high-end direct mail envelopes. Recently though we have seen an increase in quoting and testing and believe that this will eventually translate into increased business.

Our labels and forms business continued its positive performance. This was achieved by rationalizing the documents manufacturing platform as well as excellent operating performance from our custom label facilities.

In relation to our commercial printing business, we feel very good about the prospect for margin improvement. We have talked at length about the state of our general commercial business and the fact that we were not at all satisfied with the results and the margins. The change in management that occurred has improved the prospect for margin growth and provided significant cost savings opportunities as well.

We have seen an increase in sales activities as we have concentrated on cross selling across all of our business lines. Our journal and specialty magazine and our packaging business continue to be strong contributors with steady revenues and solid margins.

With regard to our segment information, our Commercial Print segment consists of general commercial printing, Cadmus, which is our short run journal and specialty magazine business, and our packaging business.

Our second quarter Commercial Print revenue of $296.6 million was relatively flat with the prior quarter and approximately $12.6 million higher than the second quarter of 2007. The increase over prior year relates to the acquisitions of ColorGraphics and Rex, offset by lower sales resulting from plant closures, the impact of the economic environment, offset partly by higher sales as a result of material cost increases.

In regards to operating income, the Commercial Print operating income was $13.3 million, which includes restructuring, integration, and acquisition charges of $5.8 million and includes the benefits relating to the implementation of our $25 million cost savings program instituted in the first quarter.

When you add back the impact of the restructuring and related charges, the Commercial Print non-GAAP operating income was $19.1 million or a 6.4% EBIT margin.

Consistent with our strategy, we have been successful in growing the journal and packaging business to mitigate some of the exposure that the general Commercial Printing product experiences during economic downturns. Our journal and packaging business continued to do well even in the current environment. And specifically, our Rex Corp. exceeded our expectations for contribution in the second quarter.

With our current management alignment in our Commercial Printing platform, we believe that we have seen the bottom in the Commercial market and are now positioned to increase our margins through improved manufacturing efficiencies, reduction in waste, and by achieving sales wins through our cross selling efforts.

Turning to our Envelopes, Forms, and Label segment, our EFL revenue for the quarter increased approximately $15 million to $227.9 million compared to $212.9 million last year. The increase over the prior year is due to sales generated by the Commercial Envelope acquisition as well as price increases due to paper costs.

This was offset in part by plant closures associated with the integration of Printegra, lower volume due to the general economic environment, and the impact which is being felt in our high color direct mail envelope business.

In regards to operating income, our Envelopes, Forms, and Labels operating income was $32.2 million or 14.1% of sales. Sequential growth in operating income from the first quarter of 2008 to the second quarter was $6.6 million or a 26% improvement. This is a clear indication that the cost savings initiatives that were executed on in the first quarter are taking hold, and we are gaining traction daily.

The restructuring, impairment, and integration charges for the EFL segment were $1 million in the quarter. Our EFL non-GAAP operating income after adding back the impact of restructuring and integration charges was $33.2 million or 14.6% of sales. The first quarter of 2008 non-GAAP operating income margins were 11.5%.

The improvement in the Envelope business has been achieved despite the financial institutions continuing not to use any high end direct mail envelopes.

Our Label and Forms business continued to perform well both from a revenue and profit perspective. This product segment is driven by our custom label and prescription drug label business that continued to prosper. They have also done a tremendous job on the cost side and continue to look for opportunities to achieve greater results through organic and acquisition growth or as a result of continued cost savings.

Next, I would like to provide a summary of our financial statements. As highlighted in the press release, our GAAP income from continuing operations for the second quarter of 2008 was $3.1 million or $0.06 per diluted share. Our non-GAAP income from continuing operations for the period is $18.3 million or $0.34 per diluted share.

The differences between our GAAP and non-GAAP net income from continuing operations for the quarter can be summarized by the following. Restructuring, impairment, and other charges of $5.4 million.

These charges relate to employee separation, asset impairment, lease terminations, and building cleanup. $4.3 million relating to non-cash stock-based compensation. A loss on the early extinguishment of debt of $4.2 million relating to the conversion and issuance of the $175 million, 10.5% Senior Notes.

Integration acquisition and other charges of $1.6 million, and the tax expense was adjusted to reflect the company's cash tax rate of approximately 11%. Cash restructuring for the quarter was approximately $6 million.

Continuing down our income statement, on a consolidated basis, our non-GAAP operating income for the second quarter was $47.4 million, an increase over last year of 17%. Our interest expense was $26.2 million for the second quarter of 2008. The increase was primarily due to additional debt incurred for the acquisitions in 2007 as well as Rex Corp. in 2008, partially offset by lower rates.

Interest expense in the quarter reflects average outstanding debt of approximately $1.4 billion and a weighted average interest rate of 7% compared to an average outstanding debt of approximately $1.1 billion and a weighted average interest rate of 7.4% in the second quarter of 2007.

Our goal for the remainder of the year is to reduce our leverage ratio closer to the 4.5 times. Our next maturity is in June 2012. This is our revolving credit facility which had only $27 million outstanding at June 28, 2008. And our debt portfolio is 90% fixed versus variable as of the end of the second quarter.

Some key balance sheet and cash flow items include the following. Cash balance of $12.5 million at quarter end compared to $15.9 million at December 31st 2007. Total debt of $1.38 billion versus $1.44 billion at December 31st 2007, a decrease of approximately $63 million even after the acquisition of Rex.

Net cash provided by operating activities was $126.4 million for the six months ended June 2008, a 233% increase over prior year. CapEx for the quarter was $16.3 million, and $25.4 million for the six months. Cash interest for the quarter was $34.9 million. Cash taxes for the quarter was less than $100,000. Keep in mind that we still have approximately $220 million of net operating loss carry forwards.

In summary, this difficult economic environment has required us to reassess our costs platform constantly and ensure that as trends in the business environment change, we can proactively adjust our cost platform. Our cash flow remains strong, and we will continue to pay down debt. And when appropriate we will make acquisitions in the product segment that we feel provide us the best growth opportunities and the strongest profit margins.

With that, I would like to return the call to Bob.

Robert Burton, Sr.

Thank you, Mark. I will now update you on the business items that I would like to discuss. Item one is acquisition update. Our primary focus has been to generate cash and pay down debt for the last six months. We're not out of the acquisition business as we are doing some very small deals that we talked about, this Rex and a couple of others that we are looking at, small deals meaning the $20 million to $50 million revenue kind of deals.

And the economy really has made these deals more reasonable to purchase and more likely to happen in this kind of environment. And as you know, no one does a better job than Cenveo with acquisitions on cost cutting and being accretive. And I am very proud of the fact that we have done 63 acquisitions in my business career, and we plan to do more in the future. But we need to do bigger deals to reach our short-term goals.

And those short-term goals we have outlined to you is the $3 billion of revenues and the $400 million of EBITDA. But we really need to look at these bigger deals where they have the right price, they fit within our platform, they have good management, and they give us an opportunity to grow with our company.

And this is what we do better than anybody in the printing industry in manufacturing, and I just want to advise all of you that we're actively looking at these larger deals, at the same time doing the smaller deals, and we feel that there is an opportunity out there in the marketplace and hopefully the financing is going to get better as the year progresses along.

But we are active in all of these things because again this is what we do, we do it better, and we think there's some opportunities to help us reach these kinds of goals and even help us in some cases to delever.

And there has been a lot of rumors around about us getting back into the long run magazine business. And I will tell you we have been approached several times by certain investors that feel that we could add some value into some of the businesses that used to be in that or are in it.

But right now we think our platform that platform that consists of the journals, the labels, the envelopes and the packaging and commercial, and especially the international packaging really gives us more opportunity to grow faster and to protect ourselves for short-term. So, there is a lot going on there and a lot of opportunities, and we will continue to look at some of these other things as they come up. But I just want to keep you advised that we are active in these areas.

The scholarship program may not sound like a lot. You say how does – what does that have to do with the business? It has a lot to do with the business. We need to, as managers, to really communicate to our employees and let them fully understand that we are all in this thing together and we want to do what we can to help, especially in light of the difficult economy that we're in.

When we first took over the management of Cenveo, I outlined a 15 point program that we wanted to take place after the proxy fight took place. And we committed to developing a scholarship program for the children of our employees. And I feel very strongly about this.

Most of you know that I have said this about 100 times that if I hadn't received a scholarship to go to college I never would have gone and probably still be in that same coal mining town that most of the guys that I went to high school are in. But we started this same type of program at World Color, and we started a program at Moore. And the program is pretty simple. It is funded by the senior management and the board of directors.

And I just want you to know to show you my commitment. I personally donated $100,000 for the first year, and have donated or committed to donate another $100,000 per year for the next nine years for a $1 million commitment. And again, I feel very strongly about this program. And there is nothing that we can do that sends a clearer message to our management and our employees that, hey, we do have some programs and we want to help out.

And you should be assured that there is no Cenveo dollars that are being spent on this program that assists the children on our full time employees to attend college. We are paying for all of it ourselves, and I think that's good. The application process is (inaudible) already gone out.

We sent these applications out to our employees or to the HR department. And we plan to go through a process here where we are hopefully – we are going to be mailing about 100 checks to 100 students by the end of the year, which I think is pretty good.

And again, we feel very strongly about giving back on this. And I don't know how many companies actually have these programs. I think a lot of them have some matching programs, but I don't know of any company that management is actually funding the program, and we have treated this the same way we treat contributions, that, that ought to be a personal thing and not a company thing.

So I wanted you to know that we are doing some good things with our employees, and we think it is going to pay dividends over the long haul.

Item three, I talked about the third quarter and full year guidance. I want to again remind all of you that EBITDA and free cash flow are the key measurements for our business.

We talked about that and we will continue to talk about.

That's what's going to determine if someone is going to buy us or if we are going to be integrated or how we are going to end up this story. EBITDA is the measurement, and we talk about it every day on our calls, and everyday in all of our meetings is our primary focus.

So if we look at the full year forecast, probably sounds like a record just keep going over and over again, but the EBITDA we are still forecasting $300 million. It may not sound like a lot to you, but last year, we did $256 million and that $300 million is a 17% increase in a very, very difficult kind of marketplace.

And I would venture to say most people would have backed down on that early in the first quarter and look for new numbers, and we haven't done that. We have committed to deliver that $300 million because we think it's the foundation for where we need to go in the next several years.

The free cash flow number is going to be at least $130 million. And the CapEx number that we have committed to is $40 million, and that's the full year number. And some of you asked how can we do that with so little? You got to remember that the acquisitions, the major acquisitions that we've made, we have made sure that capital had been spent; dollars have been spent before we acquired those companies.

And that's a major reason for us to buy certain select companies. But the CapEx number of $40 million is still a good number for us.

If you look at the third quarter, and that third quarter number is for EBITDA is $80 million. That's a big number, but you got to remember we did $69.4 million last year, and we are looking for a 15.2% increase in that number. We feel good about it because we know that is a busy time of the year.

Mark talked about a lot of activity of quoting that we have seen. And we are still not counting on any major improvement in the direct mail. We still haven't seen it. We have seen bits and pieces, but we haven't seen the major take and I still think that's a 2009 event.

So, for the third quarter, we are looking at $80 million and that's the third step to get us to the $300 million. And the free cash flow number is $50 million. So again, for the third quarter, $80 million for EBITDA and $50 million for free cash flow.

The last item, I call, purchasing stock, and I have been thinking about this for a long time. Never could understand it. As most of you know, the Burton family owns 5.3 million shares of the Cenveo stock. When I say family that sounds like some kind of trust, it isn't. It's the money that we made on all the other printing deals that we have been involved in. And that's the money we have invested here.

And I will tell you we have most of our net worth invested in this company. And I think it's good for you to know that, that we probably sleep less than you do at night worrying about what's going on with the stock price.

We are the largest individual shareholder when you think as an individual, and rank number two in total stock ownership, plus we own some bonds, probably $10 million to $12 million of Cenveo bonds. We started purchasing those because we wanted to have a deeper ownership in several areas.

But each quarter, I have personally purchased Cenveo stock in the open window, and I plan to do that this quarter. And I say that because actually three quarters ago I didn't say that, and there's an individual who sold out his entire section of stock because he thought we were going to have some problems that I wasn't buying. But I want you to know that the window opens this afternoon, and I plan to buy in this open window.

And most of the time, I spend over $1 million in purchasing stock in this open window. And I have bought not on the downs; I have bought every month whatever the price is. And I don't try to figure it out anything, I just basically call my broker and he probably wants me to say his name, but I'm not and actually give him an order to buy Cenveo stock.

And this does not include what I buy on the employee stock purchase plan, which I spend the max every month of buying, which is $10,000 a month. And everyone around this table here that are on this call and the senior managers also are in the employee stock purchase plan, and most of them buy in the open windows as some of the board members buy in the open window.

But when I think about it, that this is the same company that was selling for $26 not too long ago, and here we are at $9 and $10 and change and the company hasn't changed at all. We have delivered every number. Our growth plans are on target.

We did have a bump in the road with the Jacksonville Dallas controller issue which really turned out to be an isolated case, where we spent fortune on, where you are seeing still some of the dollars that we're paying. But that's behind us, and that's a good learning experience, and it will never happen again.

And I have always said that this is a $30 stock and when the market gets better, I am going to be the guy with a big smile. And I tell our employees constantly that they need to prepare and do for the future and buy whatever they want to buy, not necessarily Cenveo stock.

But if you work here and you're a senior manager, we have requirements for all of our people. And it's basically 5 to 2 times I think on their base and bonus and that is a requirement. And we don't really have to tell them that. They know that, because they want to actually show that they are investing.

But I always wonder how much impact it has upon investors that I purchase $1 million of stock each quarter when there is some of our competitors who don't buy anything at all. I would say for them to know what a Form 4 would be a strange question to ask.

And I just ask myself to ask our investors how many CEOs do you know, and you actually own their stock, who is committed to their companies that I am of buying the stock and not having wealth to do that with. I am changing assets to spend that $1 million each quarter because I believe in it that strongly and know what we have done before and what will happen.

And I think if you really look at it, and I have asked myself this many times. Would I buy stock in a company that the management wasn't buying? I don't think so. I think I would buy stock in the company where management is buying and where the CEO has a lot at risk.

And I have never sold a share of stock in my life. I sold my stock at World Color when Quebecor bought us. I wouldn't even think about selling a share now, and none of our managers would think about selling a share. They have hardships. We will figure out some other way to loan money personally. But I am just telling you, we wouldn't do that.

And I bring this up for a reason just to let you know what our commitment is. Our commitment is all the way through. We are going to ride this thing through. I have signed up for a long time. I am not going away until this stock is at $30, and we have a plan to get there. And I keep saying that, and we do, and we implement, and I just hope that you have some comfort in us the fact that we are delivering what we say we are going to deliver.

Also, I would like to mention in all the downturn when the stock really failed – or not the stock market failed, that in our top 10 investors, none of them sold, which shows you a lot of confidence and makes us work 10 times harder to know that they are still counting on us to deliver the stock price that where we should be at. So with that, that's item four.

Operator, I would like to now open up the call for Q&A and we have some time for some couple questions.

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