10-Q

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2011

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 0-01097

THE STANDARD REGISTER COMPANY

(Exact name of registrant as specified in its charter)

OHIO	31-0455440
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)
600 ALBANY STREET, DAYTON OHIO	45417
(Address of principal executive offices)	(Zip Code)

(937) 221-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]   No [  ]

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes [X]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes [  ]   No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of July 3, 2011
Common stock, $1.00 par value	24,347,813 shares
Class A stock, $1.00 par value	4,725,000 shares

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 3, 2011

INDEX

				Page
Part I – Financial Information
	Item 1. Consolidated Financial Statements
		a)	Consolidated Statements of Income and Comprehensive Income
			for the 13 and 26-Week Periods Ended July 3, 2011 and July 4, 2010	3
		b)	Consolidated Balance Sheets
			as of July 3, 2011 and January 2, 2011	4
		c)	Consolidated Statements of Cash Flows
			for the 26-Week Periods Ended July 3, 2011 and July 4, 2010	6
		d)	Notes to Consolidated Financial Statements	7
	Item 2. Management's Discussion and Analysis of Financial Condition			16
			and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure About Market Risk			24
	Item 4. Controls and Procedures			24
Part II – Other Information
	Item 1. Legal Proceedings			24
	Item 1A. Risk Factors			24
	Item 2. Unregistered Sales of Equity Securities and Use of  Proceeds			25
	Item 3. Defaults upon Senior Securities			25
	Item 4. Reserved			25
	Item 5. Other Information			25
	Item 6. Exhibits			25
Signatures				25

PART I - FINANCIAL INFORMATION
THE STANDARD REGISTER COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share amounts)
	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
REVENUE
Products	$	140,585		$	141,226		$	279,961		$	286,580
Services		23,700			23,456			49,213			45,525
Total revenue		164,285			164,682			329,174			332,105
COST OF SALES
Products		97,412			97,380			191,956			196,760
Services		15,969			15,584			32,682			30,018
Total cost of sales		113,381			112,964			224,638			226,778
GROSS MARGIN		50,904			51,718			104,536			105,327
OPERATING EXPENSES
Selling, general, and administrative		52,030			50,508			104,333			104,653
Pension settlements		453			-			453			-
Restructuring and other exit costs		(251	)		1,026			(177	)		1,458
Total operating expenses		52,232			51,534			104,609			106,111
(LOSS) INCOME FROM OPERATIONS		(1,328	)		184			(73	)		(784	)
OTHER INCOME (EXPENSE)
Interest expense		(572	)		(601	)		(1,144	)		(991	)
Other income		493			190			498			192
Total other expense		(79	)		(411	)		(646	)		(799	)
LOSS BEFORE INCOME TAXES		(1,407	)		(227	)		(719	)		(1,583	)
INCOME TAX BENEFIT		(497	)		(117	)		(344	)		(660	)
NET LOSS	$	(910	)	$	(110	)	$	(375	)	$	(923	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.03	)	$	-		$	(0.01	)	$	(0.03	)
Dividends per share declared for the period	$	0.05		$	0.05		$	0.10		$	0.10
NET LOSS	$	(910	)	$	(110	)	$	(375	)	$	(923	)
Net actuarial loss reclassification, net of $(2,495), $(1,901),
$(4,952), and $(3,803) deferred income tax benefit		3,788			2,887			7,518			5,775
Net prior service credit reclassification, net of $487, $398,
$974, and $795 deferred income tax expense		(740	)		(603	)		(1,479	)		(1,207	)
Cumulative translation adjustment		(22	)		(44	)		(1	)		(31	)
COMPREHENSIVE INCOME	$	2,116		$	2,130		$	5,663		$	3,614
See accompanying notes.

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THE STANDARD REGISTER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
	July 3,		January 2,
A S S E T S	2011		2011
CURRENT ASSETS
Cash and cash equivalents	$	554	$	531
Accounts and notes receivable, less allowance for doubtful
accounts of $3,128 and $2,816		110,144		122,308
Inventories		31,189		29,253
Deferred income taxes		11,991		11,991
Prepaid expense		10,823		8,962
Total current assets		164,701		173,045
PLANT AND EQUIPMENT
Land		2,221		2,221
Buildings and improvements		65,137		65,111
Machinery and equipment		178,309		181,808
Office equipment		164,203		165,600
Construction in progress		5,309		1,431
Total		415,179		416,171
Less accumulated depreciation		345,094		342,022
Total plant and equipment, net		70,085		74,149
OTHER ASSETS
Goodwill		6,557		6,557
Intangible assets, net		2,179		2,265
Deferred tax asset		99,574		102,996
Other		11,028		10,819
Total other assets		119,338		122,637
Total assets	$	354,124	$	369,831
See accompanying notes.

4

THE STANDARD REGISTER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
	July 3,			January 2,
LIABILITIES AND SHAREHOLDERS' EQUITY	2011			2011
CURRENT LIABILITIES
Current portion of long-term debt	$	1,456		$	1,467
Accounts payable		36,764			34,110
Accrued compensation		12,347			15,056
Accrued restructuring and other exit costs		551			1,689
Deferred revenue		2,297			2,225
Other current liabilities		21,970			24,216
Total current liabilities		75,385			78,763
LONG-TERM LIABILITIES
Long-term debt		40,887			42,926
Pension benefit obligation		169,500			185,174
Retiree healthcare obligation		4,849			4,931
Deferred compensation		6,363			6,306
Environmental liabilities		3,734			3,823
Other long-term liabilities		3,198			3,060
Total long-term liabilities		228,531			246,220
COMMITMENTS AND CONTINGENCIES - see Note 11
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value:
Authorized 101,000,000 shares
Issued 26,362,133 and 26,227,199 shares		26,362			26,227
Class A stock, $1.00 par value:
Authorized 9,450,000 shares
Issued - 4,725,000		4,725			4,725
Capital in excess of par value		64,519			63,401
Accumulated other comprehensive losses		(136,861	)		(142,900	)
Retained earnings		141,688			143,562
Treasury stock at cost:
2,014,320 and 1,996,952 shares		(50,225	)		(50,167	)
Total shareholders' equity		50,208			44,848
Total liabilities and shareholders' equity	$	354,124		$	369,831
See accompanying notes.

5

THE STANDARD REGISTER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
	26 Weeks Ended			26 Weeks Ended
	July 3,			July 4,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(375	)	$	(923	)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization		10,620			12,279
Restructuring charges		(177	)		1,458
Pension and postretirement benefit expense		9,682			7,042
Deferred tax benefit		(556	)		(660	)
Other		1,612			1,141
Changes in operating assets and liabilities:
Accounts and notes receivable		11,478			2,943
Inventories		(1,936	)		3,930
Restructuring spending		(961	)		(3,450	)
Accounts payable and accrued expenses		(750	)		(6,689	)
Pension and postretirement benefit obligations		(15,420	)		(15,546	)
Deferred compensation payments		(430	)		(766	)
Other assets and liabilities		(1,276	)		(1,224	)
Net cash provided by (used in) operating activities		11,511			(465	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment		(6,555	)		(4,346	)
Acquisition		-			(2,460	)
Proceeds from sale of plant and equipment		19			65
Net cash used in investing activities		(6,536	)		(6,741	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings under revolving credit facility		(1,328	)		9,570
Principal payments on long-term debt		(721	)		(777	)
Proceeds from issuance of common stock		92			95
Dividends paid		(2,925	)		(2,909	)
Purchase of treasury stock		(58	)		(34	)
Net cash (used in) provided by financing activities		(4,940	)		5,945
Effect of exchange rate changes on cash		(12	)		(25	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		23			(1,286	)
Cash and cash equivalents at beginning of period		531			2,404
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	554		$	1,118
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease recorded for equipment	$	-		$	4,311
Loan payable recorded for professional services		-			1,598
See accompanying notes.

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THE STANDARD REGISTER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

NOTE 1 – BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of The Standard Register Company and its wholly-owned subsidiaries (collectively, the Company) after elimination of intercompany transactions, profits, and balances.  The consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 2, 2011 (Annual Report).

In our opinion, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included.  The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.

Certain prior-year amounts have been reclassified to conform to the current-year presentation.

NOTE 2 – RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

In 2011, we adopted Accounting Standards Update (ASU) 2009-13 which amended the revenue recognition standards related to non-software multiple-element revenue arrangements.The standard requires the allocation of the overall consideration to each deliverable based on its estimated selling price in the absence of other objective evidence of selling prices and expands the required disclosures for multiple-element arrangements.  The standard permitted retrospective or prospective adoption, and we elected prospective adoption for revenue arrangements entered into or materially modified beginning in fiscal 2011.  Adoption of this standard did not have a material impact on our consolidated results of operation, financial position, or cash flows.

NOTE 3 – REVENUE RECOGNITION

When a customer arrangement involves multiple deliverables, we evaluate all deliverables to determine whether they represent separate units of accounting, allocate the arrangement consideration to the separate units, and recognize revenue in accordance with generally accepted accounting principles for revenue recognition.  We have one type of non-software multiple-element arrangement which consists of three deliverables: custom-printed products, warehousing services, and custom-delivery services.  Under this type of an arrangement, we provide warehousing and custom-delivery services for customers who want just-in-time delivery of custom-printed products.

For the majority of our contractual arrangements, at the customer’s request we print and store custom-printed products that remain in our inventory until the customer’s specified future delivery.  For these arrangements, title and risk of ownership for these products remains with us until the product is shipped to the customer.  Therefore, the product is considered to be delivered last, and the customer is invoiced when the product is delivered to the customer.

Under certain other contractual arrangements, at the customer’s request we print and store the custom-printed products for the customer’s specified future delivery.  Such products are stored in our warehouses and are not used to fill other customers’ orders.  For these products, manufacturing is complete, the finished product is not included in our inventory, and title and risk of loss have transferred to the customer.  In these transactions, the customer is invoiced under normal billing and credit terms when the product is placed in the warehouse for storage.  As such, the product is considered to be delivered first and warehousing and custom-delivery services are delivered last.

Fees for warehousing and custom-delivery services are often bundled into the price of the products and are therefore invoiced when the product is considered delivered.  However, if requested by the customer, these fees may also be invoiced separately as the services are performed.

Multiple-element arrangements entered into or materially modified beginning in 2011

For arrangements entered into or materially modified beginning in fiscal 2011, we determine whether each deliverable in the arrangement represents a separate unit of accounting based on the following criteria:

● Whether the delivered item has value to the customer on a standalone basis; and

● If the arrangement includes a general right of return relative to the delivered item, whether delivery or performance of the undelivered item is considered probable and is substantially in our control.

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We then allocate the consideration received to each deliverable in the arrangement based on the relative selling prices of each deliverable.

Determination of selling prices

Selling prices are determined based on the following hierarchy: vendor-specific objective evidence of fair value (VSOE), third-party evidence of selling price (TPE), or best estimate of selling price (ESP).  For each deliverable, we review historical sales data to determine if we have sufficient stand-alone sales that are within an acceptable range to establish VSOE.  VSOE is considered established if 80% of stand-alone sales are within +/-15% of the median sales price.  Available third-party evidence is evaluated to determine if TPE can be established for items where VSOE does not exist.  In absence of VSOE and TPE, ESP is used.  Determining ESP requires significant judgment due to the nature of factors that must be considered and the subjectivity involved in determining the impact each of these factors should have on ESP.

Custom-printed products

Due to the variances in pricing for available stand-alone sales and custom nature of our products, VSOE or TPE cannot be established.  To develop ESP, we consider numerous internal and external factors including: internal cost experience for materials, labor, manufacturing and administrative costs; external pricing for similar products; level of  market competition and potential for market share gain; stage in the product life cycle; industry served; profit margins; current market conditions; length of typical agreements; and anticipated volume.

Warehousing services

VSOE cannot be established for warehousing services, as we generally do not sell these services separately.  Although some third-party evidence is readily available for certain aspects of our warehousing services, an adequate amount of data for services similar to our offering is not available to establish TPE.  ESP is developed by utilizing a pricing process which considers the following internal and external factors: cost driver activity such as full versus partial carton shipments, storage space utilized, type of product stored, and shipping frequency; internal cost experience; profit margins; volume-related discounts; current market conditions; and to a lesser degree, pricing from third-party providers when available.

Custom-delivery services

For custom-delivery services, no stand-alone sales are available as we do not sell these services separately; therefore, VSOE cannot be established.  TPE is developed by utilizing individual pricing templates for each customer.  The pricing templates consider profit margins, volume, and expected shipping addresses for the customer applied to a freight rate table that is developed from negotiated rates with our third-party logistics partners.

Timing of revenue recognition

For arrangements where warehousing and custom-delivery services are delivered last, revenue allocated to the product is recognized when it is placed in the warehouse for storage.  Revenue allocated to warehousing and custom-delivery services is recognized as the services are performed.

For arrangements where the product is delivered last, revenue allocated to the product is recognized when shipped from the warehouse to the customer.  Revenue allocated to warehousing and distribution services is recognized as the services are performed.

Multiple-element arrangements entered into prior to 2011

Arrangements entered into prior to 2011 continue to be accounted for in accordance with the revenue recognition standards effective prior to 2011.  Under previous revenue recognition guidance, deliverables represent separate units of accounting if the following criteria are met:

● The delivered item has value to the customer on a standalone basis;

● Objective and reliable evidence exists for the fair value of the undelivered item; and

● If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and is substantially in our control.

We previously determined that objective and reliable evidence of fair value exists for the warehousing and custom-delivery services but not for the products due to the custom nature of our printed products and lack of consistent pricing in stand-alone sales.  Accordingly, in customer arrangements where warehousing and delivery services are delivered last, we utilize the residual method to allocate arrangement consideration to the products based on the fair value of the warehousing and delivery services and recognize revenue for the product when placed in the warehouse.  Revenue allocated to warehousing and delivery services is recognized as the services are performed.

8

In arrangements where the products are delivered last, we are unable to allocate arrangement consideration to the deliverables due to the lack of objective evidence of fair value for the products.  Therefore, the arrangement is recognized as a single unit of accounting, and all revenue is recognized when the products are delivered to the customer.

Changes in revenue recognition as a result of adopting ASU 2009-13

For arrangements entered into or materially modified in 2011, we continue to recognize custom-printed products, warehousing services, and custom-delivery services as separate units of accounting for arrangements where warehousing and delivery services are delivered last.  For arrangements where custom-printed products are delivered last, we previously accounted for these arrangements as one unit of accounting and recognized the arrangement consideration as product revenue.  Due to the establishment of ESP for the custom-printed products, we now recognize the products, warehousing services, and custom-delivery services as separate units of accounting.  This change resulted in an increase in reported services revenue in the accompanying Consolidated Statements of Income.

The pattern and timing of revenue recognition did not change for our arrangements where warehousing and delivery services are delivered last.  For arrangements where products are delivered last, we now recognize warehousing services as performed rather than as the product is delivered.  However, this change did not materially impact the timing of revenue recognition and is not expected to have a material effect in the near term.

NOTE 4 – RESTRUCTURING AND OTHER EXIT COSTS

The 2009 and 2008 restructuring plans and other exit activities are described in Note 4 to the Consolidated Financial Statements included in our Annual Report.  All related costs are included in restructuring and other exit costs in the accompanying Consolidated Statements of Income.

2009 Plans

Restructuring and other exit costs of $148 in 2011 and $1,428 in 2010 relate to costs required to be expensed as incurred, primarily for the termination of contracts and the relocation of equipment.  In addition, in 2011, we reversed $325 of involuntary termination costs primarily as result of lower than expected employee severance costs.

Components of 2009 restructuring and other exit costs consist of the following:

	Total		Total			Cumulative
	Expected		Q2 2011			To-Date
	Costs		Expense			Expense
Involuntary termination costs	$	3,150	$	(304	)	$	3,077
Contract termination costs		2,600		31			1,463
Other associated exit costs		8,600		22			8,142
Total	$	14,350	$	(251	)	$	12,682

A summary of the 2009 restructuring accrual activity is as follows:

	Balance		Incurred			Reversed			Balance
	2010		in 2011			in 2011			2011
Involuntary termination costs	$	878	$	(358	)	$	(324	)	$	196
Contract termination costs		811		(456	)		-			355
Total	$	1,689	$	(814	)	$	(324	)	$	551

2008 Plans

Restructuring and other exit costs of $30 in 2010 primarily relate to contract termination costs that were required to be expensed as incurred.

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NOTE 5 – INCOME TAXES

The effective tax rate for the 26-week period ending July 3, 2011 was 47.9% compared to 41.7% for the 26-week period ending July 4, 2010.  The rate in 2011 was more favorable primarily due to the following factors: a higher proportion of taxable income during 2011 attributable to our operations in Mexico which is taxed at a lower rate than the United States; and a decrease in our liability for unrecognized tax benefits.  The effective tax rate for the 13-week period ending July 3, 2011 was 35.4% compared to 51.4% for the 13-week period ended July 4, 2010.  Permanent differences primarily related to share-based compensation awards resulted in the less favorable effective tax rate during the period.

We review the potential future tax benefits of all deferred tax assets on an ongoing basis.  Our review includes consideration of historical and projected future operating results, reversals of existing deferred tax liabilities, tax planning strategies, and the eligible carryforward period of each deferred tax asset to determine whether a valuation allowance is appropriate.  Although realization is not assured, management believes it is more likely than not that all of the remaining deferred tax assets will be realized.  The amount of the deferred tax asset considered realizable; however, could be reduced in the near term if estimates of future taxable income are reduced.

NOTE 6 – EARNINGS PER SHARE

The number of shares outstanding for calculation of earnings per share (EPS) is as follows:

	13 Weeks Ended				26 Weeks Ended
	July 3,		July 4,		July 3,		July 4,
(Shares in thousands)	2011		2010		2011		2010
Weighted average shares outstanding - basic		29,048		28,912		29,012		28,893
Effect of potentially dilutive securities		-		-		-		-
Weighted average shares outstanding - diluted		29,048		28,912		29,012		28,893

Due to the loss from continuing operations for the 13 and 26-week periods ending July 3, 2011 and July 4, 2010, no outstanding options or nonvested shares were included in the diluted EPS computation because they would automatically result in anti-dilution.

NOTE 7 – SHARE BASED COMPENSATION

In 2011, we adopted the 2011 Equity Incentive Plan, which provides for the granting of a maximum of 5,780,000 shares.  Awards in any form other than options or stock appreciation rights are counted as two shares for every one share actually issued.  The 2011 plan permits the grant of incentive or nonqualified stock options, restricted stock awards, performance share awards, and stock appreciation rights.  A committee of the Board of Directors (Committee) administers the plan and has the authority to determine the employees to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards.  Key employees, including any executive officer or employee-director, and non-employee directors are eligible to receive awards under the plan.

The contractual term and exercise price for stock options granted under the plan are determined by the Committee.  However, the contractual term may not exceed 10 years, and the exercise price may not be lower than the fair market value of a share on the date of grant.  Options vest over periods determined when granted, generally four years, and are exercisable until the term expires.

Under the 2011 plan, shares subject to restricted stock award may be issued when the award is granted or at a later date.  The stock awards are subject to terms determined by the Committee, may have voting rights, and may include specified performance objectives.  The sale or transfer of these shares is restricted during the vesting period.  Recipients of restricted stock awards generally earn dividends during the vesting period that are paid only if the shares vest.

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Total share-based compensation expense by type of award is as follows:

	13 Weeks Ended				26 Weeks Ended
	July 3,		July 4,		July 3,		July 4,
	2011		2010		2011		2010
Nonvested stock awards, service based	$	137	$	135	$	249	$	227
Nonvested stock awards, performance based		143		88		242		118
Stock options		415		254		670		512
Total share-based compensation expense		695		477		1,161		857
Income tax benefit		276		189		461		340
Net expense	$	419	$	288	$	700	$	517

Stock Options

The weighted-average fair value of stock options granted in 2011 was estimated at $1.64 per share, using the Black-Scholes option-pricing model.  Expense is being amortized on a straight-line basis over a 4-year vesting period.  The significant assumptions used to estimate the fair value of options granted are as follows:

Risk-free interest rate		1.4	%
Dividend yield		4.4	%
Expected term	4 years
Expected volatility		79.9	%

A summary of our stock option activity and related information for 2011 is as follows:

	Number			Weighted-Average
	of Shares			Exercise Price
Outstanding at January 2, 2011		2,817,650		$	9.54
Granted		1,506,924			3.38
Exercised		-			-
Forfeited/Canceled		(48,750	)		10.59
Outstanding at July 3, 2011		4,275,824		$	7.36
Exercisable at July 3, 2011		1,720,074		$	11.88

Performance-Based Stock Awards

During the second quarter of 2011, the Company awarded 472,575 shares of performance-based restricted stock.  The performance-based stock awards will vest only upon the achievement of specific measurable performance criteria, and continued employment for two additional years.  Twenty-five percent of the shares will vest upon the achievement of specific performance goals by the Company for 2011.  The remaining shares will vest as follows: 25% in April 2012 and 50% in April 2013.  These shares have voting rights and accrue dividends during the performance period which will be paid if the shares vest.

The performance goals allow partial vesting if a minimum level of performance is attained.  If the minimum level of performance is not attained by the end of 2011, these stock awards will be forfeited and canceled, and all expense recognized to date will be reversed.  The amount of shares that ultimately vest could range from 50% to 150% of the initial shares granted.  Additional shares will be granted upon performance above the target level.

The fair value of the performance-based stock awards was based on the closing market price of our common stock on the date of award.  Expense for performance-based awards with graded vesting is recognized under the accelerated recognition method, whereby each vesting is treated as a separate award with expense for each vesting recognized ratably over the requisite service period.  We recognize compensation expense for awards subject to performance criteria when it is probable that the performance goal will be achieved.  Compensation expense is being recognized for the total amount of performance-based shares expected to vest and is subject to adjustment based on the actual level of achievement of the performance goal.

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For performance shares issued in 2010, the performance goals allowed partial vesting if a minimum level of performance was attained in 2010.  Based on the level of performance achieved, 163,574 shares were earned and 76,979 shares were forfeited and canceled in 2011.

A summary of our performance-based stock award activity and related information for 2011 is as follows:

				Weighted-
	Number			Average
	of			Grant Date
	Shares			Fair Value
Nonvested at January 2, 2011		240,550		$	5.82
Granted		472,575			3.39
Vested		(40,898	)		5.82
Forfeited/Canceled		(76,979	)		5.82
Nonvested at July 3, 2011		595,248		$	3.89

Service-Based Stock Awards

The fair value of the service-based stock awards granted in 2011 was based on the closing market price of our common stock on the date of award and is being amortized to expense on a straight-line basis over a vesting period of 4 years.  A summary of our service-based stock award activity and related information for 2011 is as follows:

	Number			Weighted-Average
	of Shares			Fair Value
Nonvested at January 2, 2011		198,556		$	5.66
Granted		153,400			3.39
Vested		(66,441	)		6.56
Forfeited/Canceled		(125	)		13.07
Nonvested at July 3, 2011		285,390		$	4.23

NOTE 8 – PENSION PLANS

Net periodic benefit cost includes the following components:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Interest cost on projected benefit obligation	$	5,455		$	6,099		$	10,919		$	12,199
Expected return on plan assets		(5,857	)		(6,463	)		(11,715	)		(12,926	)
Amortization of prior service costs		-			148			-			296
Amortization of net actuarial losses from prior periods		6,069			4,668			12,142			9,336
Settlement loss		453			-			453			-
Total	$	6,120		$	4,452		$	11,799		$	8,905

As a result of associates retiring in 2011 and electing a lump-sum payment of their pension benefits under our non-qualified retirement plan, we recognized a settlement loss during the second quarter of 2011.  A pension settlement is recorded when the total lump sum payments for a year exceed total service and interest costs to be recognized for that year.  As part of the settlement, we recognized a pro-rata portion of the unrecognized net losses included in accumulated other comprehensive losses equal to the percentage reduction in the pension benefit obligation.  This non-cash charge is included in net periodic benefit cost.

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NOTE 9 – POSTRETIREMENT BENEFIT PLANS

Net postretirement benefit cost includes the following components:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Interest cost	$	54		$	96		$	108		$	192
Amortization of prior service cost		(1,227	)		(1,150	)		(2,453	)		(2,299	)
Amortization of net actuarial losses from prior periods		114			123			228			244
Total	$	(1,059	)	$	(931	)	$	(2,117	)	$	(1,863	)

NOTE 10 – SEGMENT REPORTING

In 2011, we reclassified certain customers between our segments to better align them with the core markets served.  Segment information for 2010 has been revised from previously reported information to reflect the current presentation.  In addition, we changed the allocation methodology for our finance, technology, and other corporate general and administrative expenses.  Previously, these expenses were allocated based on the business unit’s actual revenue as a percentage of actual consolidated revenue.  Beginning in 2011, these expenses are now allocated based on the business unit’s budgeted revenue as a percentage of budgeted consolidated revenue.

Information about our operations by segment for the 13-week periods ended July 3, 2011 and July 4, 2010 is as follows:

		Healthcare		Financial Services		Commercial Markets			Industrial			Total
Revenue from external customers	2011	$	59,051	$	43,174	$	41,640		$	20,420		$	164,285
	2010		59,003		43,406		44,256			18,017			164,682
Operating income (loss)	2011	$	3,824	$	1,359	$	(330	)	$	(401	)	$	4,452
	2010		4,062		2,370		(393	)		(663	)		5,376

Information about our operations by segment for the 26-week periods ended July 3, 2011 and July 4, 2010 is as follows:

		Healthcare		Financial Services		Commercial Markets			Industrial			Total
Revenue from external customers	2011	$	119,723	$	86,480	$	81,971		$	41,000		$	329,174
	2010		123,264		88,120		85,907			34,814			332,105
Operating income (loss)	2011	$	8,507	$	3,050	$	(623	)	$	388		$	11,322
	2010		8,024		3,467		(2,532	)		(1,537	)		7,422

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Reconciling information between reportable segments and our consolidated financial statements is as follows:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Segment operating income	$	4,452		$	5,376		$	11,322		$	7,422
Restructuring and other exit costs		251			(1,026	)		177			(1,458	)
Amortization of net actuarial losses		(6,069	)		(4,668	)		(12,142	)		(9,336	)
Pension settlement		(453	)		-			(453	)		-
Other unallocated pension		402			364			796			727
Other unallocated		(54	)		(76	)		(94	)		(11	)
LIFO adjustment		143			214			321			1,872
Total other expense		(79	)		(411	)		(646	)		(799	)
Loss before income taxes	$	(1,407	)	$	(227	)	$	(719	)	$	(1,583	)

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has participated with other Potentially Responsible Parties (“PRPs”) in the investigation, study, and remediation of the Pasco Sanitary Landfill Superfund Site (the “Pasco Site”) in eastern Washington State since 1998.  The Company was a member of a PRP Group known as the Industrial Waste Area Generators Group II (the “IWAG Group”).  In 2000, the IWAG Group and several other PRP groups entered into agreed orders with the Department of Ecology for implementation of interim remedial actions and expansion of groundwater monitoring.  In September 2010, the group entered into a new agreement creating the IWAG Group III.  The new agreement changed the allocation of responsibility among the members, which resulted in a significant decrease in our level of participation.  Based upon new investigations, it was also deemed probable that participation by certain other PRPs would increase for costs expected to be incurred after 2010.  At this time, an agreement has not yet been reached on the final remediation approach.  We have accrued our best estimate of our obligation and have an undiscounted liability of $1,101 that we currently believe is adequate to cover our portion of the total future potential costs of remediation.  We expect the costs to be incurred over a period of 60 years; however, the current proposed remediation approach could require monitoring for a longer period of time.  This estimate is contingent upon the final remedy agreed upon, the participation of other PRPs, the length of monitoring required, and the final agreed upon allocation.  Until a final remediation approach is approved and a final agreement is reached among all PRPs, it is reasonably possible that one or more of these factors could change our estimate; however, we are unable to determine the impact at this time.

From 1995 through 2003, the Company participated with other PRPs in the investigation, study, and remediation of the Valleycrest Landfill Site (the “Valleycrest Site”) in western Ohio.  The Company is a member of a PRP Group known as the Valleycrest Landfill Site Group (the “VLSG”).  In 2003, General Motors Corporation (“GM”) stepped into the Company’s position under the Site Participation Agreement and, in return for $270, agreed to indemnify the Company against certain future liability in connection with the Valleycrest Landfill Site.  Therefore, we did not previously record a liability for potential remediation costs.  In 2009, we were notified that in connection with GM’s bankruptcy filing, GM does not plan to continue contributions to the site, including its contractual obligation to indemnify the Company for future liability.  We believe that it is probable the Company will participate in remediation actions.  A remedial investigation and feasibility study was conducted by the VLSG which indicated a range of viable remedial approaches.  During 2010, we obtained an updated estimate of costs for possible final remedies.  At this early stage, a final remediation approach has not been selected, and we have accrued the estimate of our obligation based on the most likely approach.  In addition, we have also determined that GM will likely not be required to fund their originally allocated portion of the environmental costs.  However, we believe it is probable that we will be able to recover a portion of these costs through bankruptcy settlements.  We have an undiscounted long-term liability of $2,350 that we currently believe is adequate to cover our portion of the total future potential costs of remediation, which are expected to be incurred over a period of 30 years.  This estimate is contingent upon the final remedy agreed upon, the participation of other PRPs not currently in the VLSG, and the final agreed upon allocation.  Until a final remediation approach is approved and a final agreement is reached among all PRPs, it is reasonably possible that one or more of these factors could change our estimate; however, we are unable to determine the impact at this time.

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NOTE 12 – FAIR VALUE MEASUREMENTS

We have financial assets and liabilities that are not recorded at fair value but which require disclosure of their fair value.  The carrying value of cash equivalents approximates fair value due to the short-term maturity of these instruments and is not material.  We believe the carrying value of outstanding amounts under our secured revolving credit facility and capital lease obligation approximate fair value based on currently available market rates.

NOTE 13 – SUBSEQUENT EVENTS

The Company has evaluated for disclosure all subsequent events through the date the financial statements were issued and filed with the United States Securities and Exchange Commission.

On July 6, 2011, we acquired 100% of the ownership interest in iMedConsent, LLC (dba Dialog Medical) for approximately $5.2 million in cash, plus up to an additional $2.0 million in contingent payments based upon performance of the acquired business through the two-year anniversary of the transaction.  Dialog Medical provides solutions for managing the patient informed consent process and will be operated as a wholly-owned subsidiary reporting through our Healthcare business unit.  We believe this acquisition strengthens and broadens our leadership in the healthcare market and will enable us to help our customers advance their reputations by improving patient safety, compliance, critical patient communications and operational performance.  We are currently in the process of determining the initial accounting for this acquisition.

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Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in Millions, Except Per Share Amounts)

FORWARD-LOOKING INFORMATION

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995.  A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur.  Forward-looking statements include statements in which we use words such as "anticipates," "projects," "expects," "plans," "intends," "believes," "estimates," "targets," and other similar expressions that indicate trends and future events.  Among other things, all statements regarding expectations related to our

● decline in legacy products

● expansion in core growth products

● future financial condition, revenue trends, and cash flows

● revenue from in-mold label products

● projected costs or cost savings

● capital expenditures

are forward-looking statements that involve certain risks and uncertainties.  Because forward-looking statements deal with future events, actual results for fiscal year 2011 and beyond could differ materially from our current expectations depending on a variety of factors including, but not limited to

● the success of our plans to deal with the threats and opportunities brought by digital technology

● the pace at which digital technologies erode the demand for certain traditional printed documents

● our ability to attract and retain key personnel

● variation in demand and acceptance of the Company's products and services

● frequency, magnitude, and timing of paper and other raw material price changes

● timing of the completion and integration of acquisitions

● results of cost-containment strategies.

The Company undertakes no obligation to update forward-looking statements as a result of new information, since these statements may no longer be accurate or timely. You should read this Management’s Discussion and Analysis in conjunction with the financial statements and related notes included in this Quarterly Report on Form 10-Q (Quarterly Report) and included on Form 10-K for the year ended January 2, 2011 (Annual Report).

This Management’s Discussion and Analysis includes the following sections:

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

● Results of Operations—An analysis of consolidated results of operations and segment results for the second quarter and first half of 2011 and 2010.

● Liquidity and Capital Resources—An analysis of cash flows and discussion of financial condition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing the accompanying unaudited financial statements and accounting for the underlying transactions and balances, we applied the accounting policies disclosed in the Notes to the Consolidated Financial Statements contained in our Annual Report.  Preparation of these unaudited financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  Although we believe our estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates.

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We believe that some of the more critical estimates and related assumptions are in the areas of pension benefit plan assumptions, fair value measurements, deferred taxes, inventories, environmental liabilities, revenue recognition, and share-based and incentive compensation.  For a detailed discussion of these critical accounting estimates, see the Management’s Discussion and Analysis included in our Annual Report.  The following is a discussion of changes to those policies and estimates during 2011.

We have discussed the development and selection of the critical accounting policies and the related disclosures included in this Quarterly Report with the Audit Committee of our Board of Directors.

Revenue Recognition

We enter into arrangements with customers that contain multiple elements or deliverables such as custom-printed products, warehousing services, and custom-delivery services.  During 2011, we adopted a new accounting standard that requires us to use a hierarchy to allocate arrangement consideration to each element in a multiple-element arrangement.  The hierarchy requires the use of vendor specific evidence of fair value (VSOE), third-party evidence of selling price (TPE), or best estimate of selling price (ESP).  VSOE represents the price of the deliverable when sold on a stand-alone basis, while TPE represents the price that outside vendors charge on a stand-alone basis.  ESP is management’s best estimate of the selling price on a stand-alone basis using available internal and external data and should be used only when VSOE or TPE cannot be established.

Two of our deliverables, custom-printed products and warehousing services, require the use of ESP.  Determining ESP requires us to make judgments and assumptions regarding the value of these deliverables on a stand-alone basis.  To determine ESP, we consider internally-generated data such as estimated costs for materials, labor, manufacturing and administrative costs, as well as external data such as observable pricing for similar products and current industry and competitive market conditions.  In addition, we consider product life cycle stages, profit margins, assumed volume/activity levels, and typical agreement terms.  We routinely update, analyze, and weight this data based on the significance we believe each assumption bears on the selling prices we ultimately could charge.  As such, our determination of ESP requires significant judgment.

We adopted the new accounting standard on a prospective basis for new or materially modified arrangements beginning in 2011.  The adoption of this standard did not have a material effect on our financial statements; however, future changes in the assumptions utilized or judgments could change the timing or amount of revenue that we report in future periods.

Share-Based and Incentive Compensation

During the second quarter of 2011, the Company awarded 472,575 shares of performance-based restricted stock.  Twenty-five percent of the shares will vest upon the achievement of specific performance goals by the Company in 2011.  The remaining shares will vest as follows: 25% in April 2012 and 50% in April 2013.

The performance goals allow partial vesting if a minimum level of performance is attained.  If the minimum level of performance is not attained by the end of 2011, these stock awards will be forfeited and canceled, and all expense recognized to that date will be reversed.  The amount of shares that ultimately vest could range from 50% to 150% of the initial shares granted.  Additional shares will be granted upon performance above the target level.

The Company also has an approved management incentive plan for 2011 that will allow payment of cash awards based upon the achievement of three separate performance goals by the Company and its operating segments by the end of 2011.  Awards will be determined based upon the level of achievement of each of the performance goals, with no awards for performance under a minimum level.  Awards are also subject to a maximum payout once a certain level of performance is achieved.

The amount of compensation expense recognized under these arrangements is dependent on the total amount of performance-based shares we expect to vest and the expected achievement level of performance goals.  This requires us to evaluate the probability of achieving the annual performance goals and assess the level of goal achievement each quarter.  We are currently accruing expense based upon achieving performance sufficient to earn 50% of the performance-based shares.  Total expense over the three-year vest period for these awards would be approximately $0.8 million at this performance level, of which $0.1 million has been accrued.  For the management incentive plan, we are currently accruing expense based upon achieving performance sufficient to earn awards in the amount of $2.4 million for 2011, of which $1.2 million has been accrued.  The actual amount of compensation expense recorded in future periods could increase or decrease based on changes in our expectations and the actual level of achievement of the performance goals.

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Goodwill

During the second quarter of 2011, we performed the annual impairment test for goodwill.  The test was performed at the reporting unit level using the two-step approach required by generally accepted accounting principles.

The first step of the test required us to compare the fair value of the reporting units to the carrying value of the assets assigned to those reporting units, including goodwill.  If the fair value exceeds the carrying value, goodwill is not impaired and no further testing is performed.  If the carrying amount of a reporting unit exceeds the estimated fair value, step two is completed to determine the amount of the impairment loss.

To determine fair value, we followed an income approach utilizing a discounted future cash flow methodology.  The determination of the fair value of the reporting units required us to make significant estimates and assumptions, including revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions.  In addition, we made certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.  Though we believe our assumptions are reasonable, actual financial results could be different due to unanticipated events and circumstances that may occur.  The following describes the key assumptions used in our fair value calculations:

●	Revenue and cost assumptions:  Using historical trending and internal forecasting techniques, we projected revenue and costs for the remainder of 2011 through 2014.  Factory cost/revenue forecasts were based on both historical information and the Company’s current strategic plan.  A terminal value was then applied to the projected cash flow stream based on the three-year cash flow.
	We calculated three outcomes: a most likely, a best case, and a worst case based on future cash flow projections.  All outcomes were weighted to arrive at an overall projected cash flow.
●	Discount rate determination: We used the industry weighted-average cost of capital that reflects the weighted average return on debt and equity of our peer group from a market participant perspective.

The results of our test indicated that the fair values of our reporting units were greater than their carrying value; therefore, goodwill was not impaired.

In addition to calculating a range of possible outcomes, we also performed a sensitivity analysis designed to understand the relative impact of the major assumptions used in our calculations.  If our estimate of expected future cash flows had been 5% lower, or there was a 1% variation in either the terminal value or the discount rate , the expected future cash flows would still have exceeded the carrying value of the assets, including goodwill.

Recently Adopted and Issued Accounting Pronouncements

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

EXECUTIVE SUMMARY

During the first half of 2011, we continued advancing core growth products, with increased revenue in these products in each of our business units.  New products aligned with our strategic focus were also introduced, and initial responses to these solutions have been positive.  Our market focus allowed us to continue to expand sales to existing customers and acquire new customers.  However, declines in the overall demand for our legacy products continued to slightly outpace these advancements, with declines in our Commercial business unit exceeding anticipated rates of decline.

To overcome the declines in our legacy products, we expect to accelerate the advancement of our core growth solutions, expand sales with existing customers, and increase our customer base in the second half of 2011.  Consistent with these plans, subsequent to the end of the second quarter, we acquired 100% of the ownership interest in iMedConsent, LLC (dba Dialog Medical).  Dialog Medical provides solutions for managing the patient informed consent process and will be operated as a wholly-owned subsidiary reporting through our Healthcare business unit.  We believe this acquisition strengthens and broadens our leadership in the healthcare market, compliments our portfolio of solutions, and enhances our ability to continue to advance our core growth products in the healthcare market.

We also remained focused on controlling costs through our continuous cost improvement program and realized cost savings as compared to 2010.  The savings allowed us to maintain our gross margin percentage and improve profit during the first half of 2011 despite lower revenue and higher costs related to newly acquired business and material costs.

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Key financial results for the first half of 2011 were:

● Revenue for the second quarter of 2011 was relatively flat compared to 2010.  Increased sales in growth products during the second quarter offset slow growth in the first quarter, resulting in a slight decline in revenue for the first half 2011 of approximately 1% compared with 2010.

● The net loss improved from $0.9 million or $0.03 per share in the first half of 2010 to $0.4 million or $0.01 per share in 2011.

● Cash flow on a net debt basis was a positive $1.3 million compared to a negative $10.9 million in the first half of 2010.

RESULTS OF OPERATIONS

The discussion that follows provides information which we believe is relevant to an understanding of our consolidated results of operations and financial condition, supplemented by a discussion of segment results where appropriate.

In addition, the following table presents “Non-GAAP net income,” which is a non-GAAP financial measure and represents net income excluding pension loss amortization, pension settlements, restructuring charges, and asset impairments.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows where amounts are either excluded or included not in accordance with generally accepted accounting principles.  The presentation of non-GAAP information is not meant to be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.  We believe that this non-GAAP financial measure provides a more complete understanding of our current underlying operating performance, a clearer comparison of current period results with past reports of financial performance, and greater transparency regarding information used by management in its decision making.  This presentation is consistent with the manner in which our Board of Directors internally evaluates performance.

	13 Weeks Ended									26 Weeks Ended
Consolidated Results	July 3, 2011			July 4, 2010			% Change			July 3, 2011			July 4, 2010			% Change
Revenue	$	164.3		$	164.7			0	%	$	329.2		$	332.1			-1	%
Cost of sales		113.3			113.0			0	%		224.6			226.8			-1	%
Gross margin		51.0			51.7			-1	%		104.6			105.3			-1	%
Gross margin % of sales		31.0	%		31.4	%					31.8	%		31.7	%
SG&A expense		52.0			50.5			3	%		104.3			104.6			0	%
Pension settlement		0.5			-			100	%		0.5			-			100	%
Restructuring and other exit costs		(0.2	)		1.0			-120	%		(0.2	)		1.5			-113	%
Other expense, net		0.1			0.4			-75	%		0.7			0.8			-13	%
Loss before income taxes		(1.4	)		(0.2	)		-600	%		(0.7	)		(1.6	)		56	%
Income tax benefit		(0.5	)		(0.1	)		400	%		(0.3	)		(0.7	)		-57	%
% rate		35.4	%		51.4	%					47.9	%		41.7	%
Net loss	$	(0.9	)	$	(0.1	)		-800	%	$	(0.4	)	$	(0.9	)		56	%
Non-GAAP net income:
Net loss	$	(0.9	)	$	(0.1	)				$	(0.4	)	$	(0.9	)
Adjustments:
Pension loss amortization		6.0			4.6						12.1			9.3
Pension settlement		0.5			-						0.5			-
Restructuring and other exit costs		(0.2	)		1.1						(0.2	)		1.5
Income tax effect of adjustments (at statutory tax rates)		(2.5	)		(2.3	)					(4.9	)		(4.3	)
Non-GAAP net income	$	2.9		$	3.3					$	7.1		$	5.6

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Revenue and cost of sales

The following table details the estimated changes in revenue and cost of sales due to units and price for the second quarter and first half of 2011.  Changes in product mix did not materially contribute to the changes.

	% of Revenue Change						% Cost of Sales Change
	Quarter			Year-to-Date			Quarter			Year-to-Date
Units		-1	%		-2	%		-1	%		-2	%
Price		1	%		1	%		1	%		1	%
		-			-1	%		-			-1	%

Unit declines in revenue and cost of sales during the second quarter and first half of 2011 were driven primarily by declines in legacy products.  Increased sales of our core growth products, primarily marketing solutions and certain label products, partially offset these declines, with higher rates of expansion during the second quarter.

Increases in revenue due to price for the quarter and the first half of 2011 were driven primarily by the pass-through of material price increases. Cost of sales increased due to price in the first half of 2011 by approximately $3.0 million as a result of higher material costs and increased costs associated with newly acquired customers.  Costs also increased in the first half of 2011 as compared to 2010 due to a $1.6 million less favorable LIFO adjustment.  However, we realized savings of approximately $3.0 million from previously implemented cost reduction initiatives, which partially offset these increases.  As a result, the gross margin percentages for the second quarter and first half of 2011 were relatively consistent with 2010.

SG&A expense

We continued to realize benefits from previously implemented restructuring and cost reduction initiatives, primarily in selling compensation and related expenses, communication service costs, and facility costs.  In addition, employee healthcare costs and planned technology spending were lower in 2011 as compared with 2010.  However, increased pension amortization of approximately $2.8 million for the first half of 2011 combined with the absence of one-time sales tax refunds of approximately $1 million during the second quarter of 2011 offset these savings.  As a result, total SG&A expense increased during the second quarter of 2011 but was slightly lower for the first half of 2011 as compared to 2010.

Pension settlement

As a result of associates retiring and electing a lump-sum payment of their pension benefit, we recorded non-cash settlement charges of $0.5 million in the second quarter related to our non-qualified retirement plan.  A pension settlement charge is recorded when the total lump sum payments for a year exceed total service and interest costs recognized for that year.  The settlement charge recognizes a pro-rata portion of the unrecognized actuarial losses at the date of the settlement.

Restructuring

During the second quarter of 2011, approximately $0.3 million of severance expense related to our 2009 restructuring plan was reversed to reflect current estimates of actual severance expected to be paid.

Taxes

The year-to-date effective tax rate for 2011 was more favorable compared with 2010 primarily as a result of the following factors: a higher proportion of taxable income during 2011 attributable to our operations in Mexico which is taxed at a lower rate than the United States; and a decrease in our liability for unrecognized tax benefits.  Permanent differences primarily related to share-based compensation awards resulted in a less favorable effective tax rate during the second quarter of 2011 as compared with 2010.

Net loss

Net loss for the first half of 2011 improved from a loss of $0.9 million to a loss of $0.4 million due primarily to reduced restructuring expenses.  Excluding pension loss amortization, pension settlement, and restructuring, non-GAAP net income for the first half of 2011 improved to $7.1 million compared with $5.6 million in 2010.

Due to increased SG&A expenses and less favorable tax expense during the second quarter, the net loss for the second quarter increased from a loss of $0.1 million in 2010 to a loss of $0.9 million in 2011.

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Segment Operating Results

The following table presents Revenue, Gross Margin, and Operating Income (Loss) for each of our reportable segments for the 13 and 26-week periods ended July 3, 2011 and July 4, 2010.  During the first quarter of 2011, we reclassified certain customers between our segments to better align them with the core markets served.  Segment information for 2010 has been revised from previously reported information to reflect the current presentation.  In addition, we changed the allocation methodology for our finance, technology, and other corporate general and administrative expenses.  Previously, these expenses were allocated based on the business unit’s actual revenue as a percentage of actual consolidated revenue.  Beginning in 2011, these expenses are now allocated based on the business unit’s budgeted revenue as a percentage of budgeted consolidated revenue.

	13 Weeks Ended										26 Weeks Ended
	July 3,					July 4,					July 3,					July 4,
	2011					2010			% Chg		2011					2010			% Chg
Revenue
Healthcare	$	59.1				$	59.0		0.1	%	$	119.7				$	123.3		-2.9	%
Financial Services		43.2					43.4		-0.5	%		86.5					88.1		-1.8	%
Commercial Markets		41.6					44.3		-6.1	%		82.0					85.9		-4.5	%
Industrial		20.4					18.0		13.3	%		41.0					34.8		17.8	%
Consolidated Revenue	$	164.3				$	164.7		-0.2	%	$	329.2				$	332.1		-0.9	%
				% Rev					% Rev					% Rev					% Rev
Gross Margin
Healthcare	$	20.9		35.4	%	$	21.5		36.4	%	$	43.5		36.3	%	$	45.0		36.5	%
Financial Services		12.8		29.6	%		13.5		31.1	%		25.9		29.9	%		26.8		30.4	%
Commercial Markets		11.6		27.9	%		11.7		26.2	%		22.8		27.8	%		22.0		25.6	%
Industrial		5.4		26.9	%		4.8		27.1	%		12.0		29.3	%		9.6		27.5	%
Total Segments (1)	$	50.7		30.9	%	$	51.5		31.3	%	$	104.2		31.7	%	$	103.4		31.7	%
Operating Income (Loss)
Healthcare	$	3.8		6.4	%	$	4.0		6.8	%	$	8.5		7.1	%	$	8.0		6.5	%
Financial Services		1.3		3.0	%		2.3		5.3	%		3.0		3.5	%		3.4		3.9	%
Commercial Markets		(0.3	)	-0.7	%		(0.4	)	-0.9	%		(0.6	)	-0.7	%		(2.5	)	-2.9	%
Industrial		(0.4	)	-2.0	%		(0.6	)	-3.7	%		0.4		1.0	%		(1.5	)	-4.3	%
Total Segments (1)	$	4.4		2.7	%	$	5.3		3.2	%	$	11.3		3.4	%	$	7.4		2.2	%

(1) Segment gross margin excludes LIFO adjustments that are included in consolidated gross margin in the Consolidated Statements of Income and Comprehensive Income.   A reconciliation of operating income per segment to consolidated income from operations is provided in Note 10-Segment Reporting of the Notes to Financial Statements.

Healthcare

The following table details the estimated changes in revenue and cost of sales due to units and price for the second quarter and first half of 2011.

	% of Revenue Change					% Cost of Sales Change
	Quarter		Year-to-Date			Quarter			Year-to-Date
Units		-		-3	%		-			-3	%
Price		-		-			1	%		-
		-		-3	%		1	%		-3	%

Unit declines in revenue and cost of sales in the first half of 2011 were driven primarily by reduced demand for administrative and clinical forms.  However, expansion in our core growth solutions, particularly during the second quarter, and an expansion in our customer base for administrative and clinical forms partially offset these declines.  Cost of sales increased in the second quarter primarily as a result of higher material costs.

21

In July 2011, we acquired Dialog Medical, a recognized leader in standardizing, automating and documenting the informed consent process.  Its iMedConsent(TM) solution is used by approximately 200 hospitals and 15,000 physicians.  The solution is used for educating and informing patients about conditions, diagnoses, and treatments.  It streamlines internal practices, standardizes communication across the enterprise, and better documents informed consent encounters.The acquisitionis expected to strengthen and broaden our leadership in the healthcare market and help our customers advance their reputations by improving patient safety, compliance, critical patient communications, and operational performance.

We expect to continue expanding in our core growth products and increasing our market share in administrative and clinical forms.  This growth combined with increased sales as a result of the Dialog Medical acquisition is expected to increase revenue for 2011 as compared to 2010.  However, slower than anticipated rates of expansion in our core growth products during the last half of 2011and the potential loss of revenue from one customer during the fourth quarter could impede our ability to realize an increase in total revenue for the year as compared with 2010.

Financial Services

The following table details the estimated changes in revenue and cost of sales due to units and price for the second quarter and first half of 2011.

	% of Revenue Change					% Cost of Sales Change
	Quarter		Year-to-Date			Quarter			Year-to-Date
Units		-		-2	%		-			-1	%
Price		-		-			1	%		-
		-		-2	%		1	%		-1	%

For the second quarter and first half of 2011, revenue and cost of sales declined primarily due to units.  We continued to see the effects of technology erosion within the market, with unit declines in specialized print solutions accounting for a decline in revenue of approximately 6% for the first half of 2011.  However, we continued to expand in marketing and customer communication solutions, which fully offset these declines in the second quarter.

Cost of sales increased during the second quarter due to higher material costs and initial costs associated with newly acquired customers.  These increases offset continued improvements in cost of sales from previously implemented cost reduction initiatives.  In addition, the pass-through of recent material price increases was slower than anticipated.  As a result, the gross margin percentage for the second quarter and first half of 2011 declined as compared to 2010.

Commercial Markets

The following table details the estimated changes in revenue and cost of sales due to units, price, and mix for the second quarter and first half of 2011.

	% of Revenue Change						% Cost of Sales Change
	Quarter			Year-to-Date			Quarter			Year-to-Date
Units		-7	%		-6	%		-6	%		-5	%
Price		1	%		1	%		-1	%		-1	%
Mix		-			-			-1	%		-1	%
		-6	%		-5	%		-8	%		-7	%

Revenue and cost of sales declined primarily due to units for the second quarter and first half of 2011.  Non-repeat orders in marketing solutions and reduced demand for legacy products, offset partially by a slight expansion in some core growth products, drove the declines.  Revenue increased due to price primarily as a result of the pass through of material cost increases.

Cost of sales declined due to price for the second quarter and the first half of 2011 as we continued to realize savings from previously implemented cost initiatives.  These savings offset increased material prices of approximately 1% for the second quarter and first half of 2011.  Changes in product mix from some lower margin legacy products to higher margin core growth products during the second quarter also decreased costs approximately 1%.  As a result, the gross margin percentages improved for the second quarter and first half of 2011 as compared with 2010.

22

Industrial

The following table details the estimated changes in revenue and cost of sales due to units and price for the second quarter and first half of 2011.

	% of Revenue Change						% Cost of Sales Change
	Quarter			Year-to-Date			Quarter			Year-to-Date
Units		11	%		11	%		10	%		11	%
Price		2	%		7	%		4	%		4	%
		13	%		18	%		14	%		15	%

Revenue and cost of sales increased due to units as a result of expansion in sales to new and existing customers of our in-mold label products, specialized print solutions, and marketing solutions and higher order levels with existing customers resulting from improved economic conditions.  Revenue from in-mold label products was approximately $1.7 million in the first half of 2011, an increase of approximately 95% as compared with 2010.

For the first half of 2011, pricing increases in revenue were driven by targeted efforts to improve profit margins and the pass-through of material price increases.  These improvements, combined with the increased volume, drove the improvement in gross margin percentage and operating profit for the first half of 2011 as compared with 2010.  The rate of increase in the second quarter was lower primarily as a result of one-time price adjustments and reductions in pricing in accordance with certain contracts during the quarter.

The price increase in cost of sales for the quarter and first half of 2011 was due to material cost increases and higher production costs due to lower than expected volume levels.  We expect upward pressure on material prices to continue throughout the year.  To offset these increases, we will continue to pass through a portion of these costs pursuant to our agreements with our customers and improve our cost structure through additional productivity improvements.

We had originally expected annual 2011 revenue from in-mold label products to be approximately $11 million.  However, revenue for 2011 is now expected to be lower than projected due to delays in acquiring and implementing new customers.

LIQUIDITY AND CAPITAL RESOURCES

Our discussion will provide information on cash flow and capital structure.  This discussion also presents financial measures that are considered non-GAAP.  The presentation of non-GAAP information is not meant to be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.  Because our credit facility is borrowed under a revolving credit agreement which currently permits us to borrow and repay at will up to a balance of $100 million (subject to limitations related to receivables, inventories, and letters of credit), we take the measure of cash flow performance prior to borrowing or repayment of the credit facility.  In effect, we evaluate cash flow and capital structure as the change in net debt (credit facility less cash and cash equivalents).

Summarized Statements of Cash Flows are presented below:

	26 Weeks Ended
	July 3,			July 4,
	2011			2010
Net cash provided by (used in) operating activities		11.5			(0.5	)
Net cash used in investing activities		(6.5	)		(6.8	)
Net cash (used in) provided by financing activities		(5.0	)		6.0
Net change in cash	$	-		$	(1.3	)
Memo:
Add back credit facility repaid (borrowed)		1.3			(9.6	)
Cash flow on a net debt basis	$	1.3		$	(10.9	)

Net cash provided by operating activities increased in 2011 primarily due to higher collections on accounts receivable.  As a result, cash flow on a GAAP basis improved from a negative $1.3 million in 2010 to neutral in 2011.  We expect to make contributions to our qualified pension plan of approximately $24 to $30 million in 2011, of which $13 million was made during the first half of 2011.

23

Net cash used in investing activities consisted of capital expenditures.  We expect higher expenditures in future quarters, with total capital expenditures expected to be in the range of $18 to $21 million for the year.  Additionally, subsequent to the end of the second quarter, we acquired 100% of the ownership interest in iMedConsent, LLC.  We paid approximately $5.2 million at the time of purchase and will pay up to an additional $2.0 million in contingent payments based upon performance of the acquired business through the two-year anniversary of the transaction.

The increase in cash used in financing activities was driven by higher repayments on our Credit Facility compared with 2010.  Excluding these repayments, overall cash flow on a net-debt basis was $12.2 million higher in 2011 as compared with 2010.

Capital Structure

	July 3,			January 2,
	2011			2011			Change
Credit Facility	$	38.4		$	39.7		$	(1.3	)
Less Cash and Cash Equivalents		(0.6	)		(0.5	)		(0.1	)
Net Debt		37.8			39.2			(1.4	)
Capitalized Lease Obligation		3.3			3.7			(0.4	)
Loan Payable		0.6			0.9			(0.3	)
Total Debt		41.7			43.8			(2.1	)
Equity		50.2			44.8			5.4
Total Capital	$	91.9		$	88.6		$	3.3
Total Debt:Total Capital		45	%		49	%
Total Debt:Total Capital on a GAAP basis		46	%		50	%

Net debt decreased in 2011 due to a reduction in outstanding borrowings under our Credit Facility enabled by increased collections from accounts receivable.

At quarter end, we had $52.7 million available under the Credit Facility.  We believe that the combination of our internally-generated funds, available cash reserves, and our credit facility are sufficient to fund our operations, capital expenditures, and investments in growth initiatives over the next year.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures over financial reporting (Disclosure Controls) as of July 3, 2011.  The evaluation was carried out under the supervision, and with the participation, of our management including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Based on that evaluation, our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our Disclosure Controls were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the SEC and that material information relating to The Standard Register Company is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

Changes in Internal Control

During the second quarter of fiscal 2011, there have been no significant changes in our internal controls or in other factors that could significantly affect these controls, and no corrective actions taken with regard to material weaknesses in such controls.

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

There have been no material legal proceedings within the reporting period that the Company has been involved with beyond those conducted in a normal course of business.

ITEM 1A - RISK FACTORS

Not applicable

24

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  RESERVED

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

Exhibit  #		Description
	2	Plan of acquisition, reorganization, arrangement,
		liquidation or succession	Not applicable
	3	Articles of incorporation and bylaws	Not applicable
	4	Instruments defining the rights of security holders,
		including indentures	Not applicable
	10.1	The Standard Register Company 2011 Equity Incentive Plan	Included
	10.2	Third Amendment to The Standard Register Company Management	Included
		Incentive Compensation Plan
	11	Statement re: computation of per share earnings	Not applicable
	15	Letter re: unaudited interim financial information	Not applicable
	18	Letter re: change in accounting principles	Not applicable
	19	Report furnished to security holders	Not applicable
	22	Published reports regarding matters submitted
		to vote of security holders	Not applicable
	23.1	Consent of Independent Registered Public Accounting Firm	Included
	24	Power of attorney	Not applicable
	31.1	Certification of Chief Executive Officer pursuant to
		Section 302 of the Sarbanes-Oxley Act of 2002	Included
	31.2	Certification of Chief Financial Officer pursuant to
		Section 302 of the Sarbanes-Oxley Act of 2002	Included
	32	Certifications pursuant to 18 U.S.C Section 1350, as adopted
		Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Included
	99.1	Report of Independent Registered Public Accounting Firm	Included
	101	The following financial information from The Standard Register
		Company Quarterly Report on Form 10-Q for the quarter ended
		July 3, 2011, formatted in XBRL (eXtensible Business Reporting Language):
		Consolidated Statements of Income and Comprehensive Income,
		Consolidated Balance Sheets, Consolidated Statements of Cash Flows,
		and Notes to Consolidated Financial Statements	Included

SIGNATURE

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 5, 2011

THE STANDARD REGISTER COMPANY

(REGISTRANT)

/S/ ROBERT M. GINNAN

By: Robert M. Ginnan, Vice President, Treasurer and Chief

           Financial Officer

(On behalf of the Registrant and as Chief Accounting Officer)

25

EX-10.1

EXHIBIT 10.1

THE STANDARD REGISTER COMPANY

2011 EQUITY INCENTIVE PLAN

1.Purpose:  The purpose of The Standard Register Company 2011 Equity Incentive Plan (the "Plan") is to promote the best interests of The Standard Register Company (together with any successor thereto, the "Company") and its shareholders by providing Key Employees of the Company and its Affiliates (as defined below), and certain members of the Company's Board of Directors who are not employees of the Company, with an opportunity to acquire a, or increase their, proprietary interest in the Company. It is intended that the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those Key Employees who are primarily responsible for shaping and carrying out the long-range plans of the Company and securing the Company's continued growth and financial success. Also, by encouraging stock ownership by directors, the Company seeks to attract and retain on its Board of Directors persons of exceptional competence and to furnish an added incentive for them to continue their association with the Company.

2.Definitions:  As used in the Plan, the following terms shall have the respective meanings set forth below:

Affiliate: Any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company.

Award: Any Option, Stock Appreciation Right, Restricted Stock, Restricted Share Unit, or Performance Share or other award granted under the Plan.

Award Agreement: Any written agreement, contract or other instrument or document evidencing any Award granted under the Plan.

Board:  The Company’s Board of Directors.

Cause: The willful repeated or habitual misconduct of a Participant, the embezzlement or theft of corporate funds, conviction of a felony, the breach of any trade secrecy or similar statutory or contractual confidentiality provisions, the direct or indirect competition with the Company's business or other breach of any noncompetition agreement with the Company, and/or "cause" as defined in any employment agreement to which a Participant is a party.

Change in Control:  The event which shall be deemed to have occurred if any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or (ii) a trustee under the John Q. Sherman Testamentary Trust or the William C. Sherman Testamentary Trust or the William C. Sherman Intervivos Trust dated December 29, 1939, becomes the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company's then outstanding securities.

Code:  The Internal Revenue Code of 1986, as amended from time to time.

Commission:  The Securities and Exchange Commission.

Committee:  A committee of the Board (including any applicable subcommittee thereof) designated by such Board to administer the Plan in whole or in part, consisting of not less than two Non-Employee Directors, each of whom shall qualify as a "non-employee director" within the meaning of Rule 16b-3 and as an "outside director" under Section 162(m)(4)(C) of the Code or any successor provisions thereto.  Unless otherwise directed by the Board, the Committee shall be the Board’s standing Compensation Committee.

Exchange Act:  The Securities Exchange Act of 1934, as amended from time to time.

Fair Market Value:  With respect to Shares, as of any given date, the reported closing sale prices of Shares on the New York Stock Exchange on that date, or on the most recent trading date on which sales of Shares were reported if none were reported on that date.  With respect to any property other than Shares, and for Shares if they are then no longer publicly traded, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.

Good Reason.  The occurrence of one or more of the following circumstances following a Change in Control without the Participant’s express written consent, which circumstance(s) are not remedied by the Company within 30 days of its receipt of a written notice from the Participant describing the applicable circumstances in detail (which notice must be provided by the Participant within 90 days of the Participant obtaining knowledge of the applicable circumstances): (i) any material change in the Participant’s duties, responsibilities, authority, reporting structure, title, office or status; (ii) a material reduction of the Participant’s base salary or bonus eligibility; (iii) a geographical relocation of the Participant’s principal office location by more than 50 miles; (iv) any material breach by the Company of any material contractual obligation of the Company to the Participant; (v) the Participant’s Permanent and Total Disability; or (vi) the failure by the Company or any successor to the Company to assume or confirm all of the Participant’s Awards outstanding at the time of a Change in Control on a basis which is economically equivalent to the Participant, or to assume or confirm any other material contractual obligations of the Company to the Participant, following a Change in Control.

Incentive Stock Option:  An option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code (or any successor provision thereto).

Key Employee:  Any officer or other key employee of the Company or of any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate, as determined by the Committee in its discretion.

Non-Employee Director:  Any member of the Company's Board of Directors who is not an employee of the Company or of any Affiliate.

Non-Qualified Stock Option:  An option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

Option:  An Incentive Stock Option or a Non-Qualified Stock Option.

Participant:  A Key Employee or Non-Employee Director who is granted an Award under the Plan.

Performance Goal:  Any one or more of the following performance criteria, either individually, alternatively or in any combination, and subject to such modifications or variations as specified by the Committee, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee:  cash flow; cash flow from operations; earnings (including, but not limited to, earnings before interest, taxes, depreciation and amortization); earnings per share, diluted or basic, earnings per share from continuing operations; net assets turnover; inventory turnover; capital expenditures; debt; debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; cost of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record; stock price; return on equity; total stock holder return; return on capital; return on assets or net assets; revenue; income or net income; operating income or net operating income; operating profit or net operating profit; gross margin, operating margin or profit margin; and completion of acquisitions, business expansion, product diversification, new or expanded market penetration and other non-financial operating and management performance objectives.

Performance Period:  Any period for which Performance Goal(s) or goals have been established with respect to an Award.

Performance Share:  Any Award granted under Section 6(d) of the Plan that will be paid out as a Share upon the achievement of specified Performance Goals (which, in specified circumstances, may be a Restricted Security).

Permanent and Total Disability:  Any medically determinable physical or mental impairment rendering an individual unable to engage in any substantial gainful activity, which disability can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

Person:  Any individual, corporation, partnership, association, joint-stock company, limited liability company, trust, unincorporated organization or government or political subdivision thereof.

Qualifying Termination.  The termination of a Participant’s employment or status as a Non-Employee Director which is initiated at any time within the 24 calendar months after the effective date of a Change in Control (i) by the Company (or its successor) for any reason other than Cause or due to the Participant’s Permanent and Total Disability or (ii) by the Participant for Good Reason.

Released Securities:  Shares with respect to which all applicable restrictions have expired, lapsed or been waived.

Restricted Securities:  Awards under which issued and outstanding Shares are held subject to certain restrictions pursuant to the Plan or an Award Agreement.

Retained Dividends.  Dividends otherwise payable with respect to Shares subject to an outstanding Award which are to be held by the Company for such purpose for later payment when and if the Award results in the actual issuance of Shares or as otherwise specified herein or in the Award Agreement.

Restricted Stock:  Any Share granted under Section 6(c) of the Plan.

Restricted Stock Unit.  An Award granted under Section 6(e) of the Plan which provides for the issuance of Shares to a Participant who remains a Key Employee or Independent Director for the period(s) of time specified in the Award Agreement.

Rule 16b-3:  Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto.

Shares:  Shares of Common Stock of the Company, and such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(d) of the Plan.

Stock Appreciation Right:  Any right granted under Section 6(b) of the Plan.

3.Administration:  The Plan shall be administered by the Committee; provided, however, that if at any time the Committee shall not be in existence, the functions of the Committee as specified in the Plan shall be exercised by the Board and all references to the Committee herein shall include the Board. The Committee may delegate specific aspects of its administrative authority hereunder to one or more subcommittees, provided the members thereof meet all legal or regulatory qualifications applicable to their respective subcommittees’ delegated responsibilities, and all references herein to the Committee shall include any such subcommittees.  To the extent permitted by applicable law, the Board may delegate to another committee of the Board or to one or more senior officers of the Company any or all of the authority and responsibility of the Committee with respect to the Plan, other than with respect to Participants who are subject to Section 16 of the Exchange Act or Section 162(m) of the Code. To the extent that the Board has delegated to such other committee or one or more officers the authority and responsibility of the Committee, all references to the Committee herein shall include such other committee or one or more officers.

Subject to the terms of the Plan and applicable laws and without limitation by reason of enumeration, the Committee shall have full discretionary power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards granted to Participants; (iv) determine the terms and conditions of any Award granted to a Participant; (v) determine whether, to what extent and under what circumstances Awards granted to Participants may be settled or exercised in cash, Shares, other securities, other Awards or other property, and the method or methods by which Awards may be settled, exercised, cancelled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares, other Awards and other amounts payable with respect to an Award granted to Participants under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan (including, without limitation, any Award Agreement); (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time or from time to time, and shall be final, conclusive and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any shareholder and any employee of the Company or of any Affiliate.

4.Shares Available for Award:

 (a)Total Shares Available. The total number of Shares reserved and available for distribution pursuant to Awards granted under the Plan shall be 5,780,000 provided, however, that any Shares issued to Participants pursuant to Awards in any form other than Options or Stock Appreciation Rights shall be counted against such 5,780,000 Share limit as two Shares for every one Share actually issued pursuant to such Award other than a Option or Stock Appreciation Right.

 (b)     Accounting for Awards. The number of Shares covered by an Award under the Plan, or to which such Award relates, shall be counted on the date of grant of such Award against the number of Shares available for granting Awards under the Plan.  If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which any Award relates, are forfeited or if an option otherwise terminates, expires or is cancelled prior to the delivery of all of the Shares or of other consideration issuable or payable pursuant to such Award, then the number of Shares counted against the number of Shares available under the Plan in connection with the grant of such Award, to the extent of any such forfeiture, termination, expiration or cancellation, shall again be available for granting of additional Awards under the Plan.  Any Shares otherwise issuable to a Participant upon the exercise of an Award which the Participant elects to have withheld or not issued by the Company in lieu of the Participant’s payment of any consideration such Participant is required to pay shall be deemed to have been issued for purposes of the Plan and therefore no longer available for future grant under the Plan.Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares and/or treasury Shares as designated by the Committee.

 (c)     Individual Limitation.The maximum number of Shares with respect to which Awards may be granted under this Plan to any single Participant in any fiscal year of the Company shall be 1,500,000 in the case of Options and Stock Appreciation Rights and 750,000 in the case of Restricted Stock, Performance Shares, and Restricted Share Units.

 (d)Adjustments. In the event the Company effects a stock dividend or other distribution in the form of Shares or other Company securities, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event that affects all of the Company’s outstanding Common Stock, then the Committee shall proportionately adjust any or all of (i) the number and type of Shares subject to the Plan and which thereafter may be made the subject of Awards under the Plan; (ii) the number and type of Shares subject to outstanding Awards; and (iii) the grant, purchase or exercise price with respect to any Award; provided, further, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b) of the Code (or any successor provision thereto); and provided further that the number of Shares subject to any Award payable or denominated in Shares shall always be a whole number.

5.Eligibility:  Any Key Employee, including any executive officer or employee-director of the Company or of any Affiliate, and any Non-Employee Director, shall be eligible to be designated a Participant.

6.Awards:

 (a)    Option Awards. The Committee is hereby authorized to grant Options to Key Employees and Non-Employee Directors upon the terms and conditions set forth below and such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine in its discretion;provided, however, that Non-Employee Directors may not be granted Incentive Stock Options.

(i)Exercise Price. The exercise price per share of an Option granted pursuant to this Section 6(a) shall be determined by the Committee; provided, however, that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant.  Upon exercise of an Option, the exercise price shall be payable in cash or, unless otherwise provided by the Committee in the Award Agreement, by the surrender of Shares previously owned by the Participant or the withholding of Shares to be issued upon the exercise of the Option, or in any combination thereof, or in such other form as the Committee may authorize from time to time. All such Shares so surrendered or withheld shall be valued at their Fair Market Value on the date of surrender or withholding.

(ii)Option Term.  The term of each Option shall be fixed by the Committee; provided, however, that in no event shall the term of any Option exceed a period of ten years from the date of its grant.

(iii)    Exercisability.  An Option shall become exercisable in such manner and within such period or periods and in such installments or otherwise as shall be determined by the Committee; provided, however, that regardless of any other exercise or vesting period specified in any Award Agreement with respect to any Option, each Option granted under the Plan to a Participant shall become immediately exercisable in full for a period of time equal to the lesser of one year or the remainder of the Option term automatically upon the occurrence of a Qualifying Termination of the Participant.

(iv)    Termination of Options.  An Option will terminate as follows:

A.Upon exercise or expiration by its term.

B.Upon termination of a Participant’s employment or status as a Non-Employee Director for Cause, all Options then held by such Participant shall immediately terminate.  Except as provided in Subsections 6(a)(iv) D, E and F, upon termination of employment or status as a Non-Employee Director for reasons other than Cause, the then-exercisable portion of any Option will terminate on the 90th day after the date of termination, and the portion of any Option not then exercisable will terminate on the date of termination of employment or status as a Non-Employee Director.  For purposes of the Plan, a leave of absence approved by the Company shall not be deemed to be a termination of employment.

C.Subject to any limitation imposed by Section 422 of the Code, all Incentive Stock Options which have been outstanding for at least 12 months will vest in their entirety and be exercisable for the full number of shares called for by the Option upon termination of employment if such termination is due to retirement in accordance with the Company's normal retirement policy after age 62, death, or upon the occurrence of a Permanent and Total Disability.

D.     Unless otherwise provided in the applicable Award Agreement and subject to Subsection 6(a)(iv)E, all Nonqualified Stock Options shall continue to vest and be exercisable after termination of employment in accordance with the terms upon which they were originally granted if such termination of employment is due to retirement (including retirement which also constitutes a Qualifying Termination) in accordance with the Company's normal retirement policy after age 62.

E.        Unless otherwise provided in the applicable Award Agreement, if a Participant holding an Option dies or becomes subject to a Permanent and Total Disability while employed by the Company or within 90 days after termination of employment, such Option may be exercised, to the extent exercisable as of the date of the occurrence of the event which triggers the operation of this paragraph, at any time within one year after the date of such Participant’s termination of employment, by the estate or guardian of such Participant or by those persons to whom the Option may have been transferred by will or by the laws of descent and distribution.

F.      If a Participant holding an Option violates any terms of any written employment or noncompetition agreement between the Company and the Participant or the Participant is otherwise terminated for Cause, all existing Options held by such Participant will terminate.  In addition, if at the time of any such violation or termination the Participant has exercised Options but has not yet received certificates for the Shares to be issued, the Company may void the Option and its exercise.  Any such action by the Company shall be in addition to any other rights or remedies available to the Company in such circumstances.

(v)Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code (or any successor provision thereto) and any regulations promulgated thereunder. Notwithstanding any provision in the Plan to the contrary, no Incentive Stock Option may be granted hereunder after the tenth anniversary of the adoption of the Plan by the Board.

(b)    Stock Appreciation Rights.

(i)Issuance.  The Committee is hereby authorized to grant Stock Appreciation Rights to Key Employees and Non-Employee Directors. Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of the Fair Market Value of one Share on the date of exercise over the grant price of the Stock Appreciation Right as specified by the Committee, which shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right.

(ii)Terms and Conditions.  Subject to the terms of the Plan, the grant price, term, methods of exercise, methods of settlement (including whether the Participant will be paid in cash, Shares, other securities, other Awards, or other property or any combination thereof), and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee in its discretion; provided, however, that in no event shall the term of any Stock Appreciation Right exceed a period of ten years from the date of its grant, and provided further that regardless of any other exercise or vesting period specified in any Award Agreement with respect to any Stock Appreciation Right, each Stock Appreciation Right granted under the Plan to a Participant shall become immediately exercisable in full for a period of time equal to the lesser of one year or the remainder of the Stock Appreciation Right term automatically upon the occurrence of a Qualifying Termination of the Participant.  The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.

(iii)Continued Vesting after Termination.  Unless otherwise provided in the Applicable Award Agreement:

A.Subject to Subsection 6(b)(iii)B, each Stock Appreciation Right will continue to vest and be exercisable after termination of employment in accordance with the terms upon which it was originally granted if such termination of employment is due to retirement (including retirement which also constitutes a Qualifying Termination) in accordance with the Company’s normal retirement policy after age 62.

B.If a Participant holding a Stock Appreciation Right dies or becomes subject to a Permanent and Total Disability while employed by the Company or within 90 days after termination of employment for reasons other than Cause, such Stock Appreciation Right may be exercised, to the extent exercisable as of the date of such Participant’s death or the date such Participant first becomes subject to a Permanent and Total Disability, at any time within one year after such date, by the estate or guardian of such Participant or by the those persons to whom the Option may have been transferred by will or by the laws of descent and distribution.

C.If a Participant holding a Stock Appreciation Right violates any terms of any written employment or noncompetition agreement between the Company and the Participant, or the Participant is otherwise terminated for Cause, all existing Stock Appreciation Rights held by such Participant will terminate.  In addition, if at the time of any such violation or termination the Participant has given a notice of exercise of the Stock Appreciation Right but has not yet received payment therefor, the Company may void the Stock Appreciation Right and its exercise.  Any such action by the Company shall be in addition to any other rights or remedies available to the Company in such circumstances.

(c)Restricted Stock Awards.

(i)Issuance. The Committee is hereby authorized to grant Awards of Restricted Stock to Key Employees and Non-Employee Directors.

(ii)Restrictions.  Shares of Restricted Stock granted to Participants shall be subject to such restrictions as the Committee may impose in its discretion (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate in its discretion; provided, however, that in the event of the Qualifying Termination of a Participant (A) in the case of Shares of Restricted Stock which are subject to time vesting or other restriction time period specified in the applicable Award Agreement, each Share of Restricted Stock granted under such Award Agreement to such Participant immediately shall become a Released Security and (B) in the case of Shares of Restricted Stock which are subject to a Performance Period, a prorated number of Shares of Restricted Stock shall immediately become Released Securities, based upon the percentage of the maximum performance goals contained in the applicable Award Agreement represented by the Company’s and the Participant’s actual performance through the date of the Change in Control which preceded the Qualifying Termination.

(iii)    Registration.  Any Restricted Stock granted under the Plan to a Participant may be evidenced in such manner as the Committee may deem appropriate in its discretion, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan to a Participant, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend (as determined by the Committee) referring to the terms, conditions and restrictions applicable to such Restricted Stock.

(iv)    Dividends.  All dividends declared by the Company which would otherwise be payable with respect to outstanding Restricted Stock shall be held by the Company as Retained Dividends which shall be paid to the Participant when and as the Restricted Stock becomes Released Securities, or shall be forfeited when and as Restricted Stock is forfeited.

(v)    Payment Of Restricted Stock. At the end of the applicable restriction period relating to Restricted Stock granted to a Participant, one or more stock certificates for the appropriate number of Shares of Released Securities, free of restrictions imposed under the Plan and the Award Agreement plus an amount of cash equal to all Retained Dividends associated with such Released Securities, shall be delivered to the Participant or, if the Participant received stock certificates representing the Restricted Stock at the time of grant, the legends placed on such certificates shall be removed.

(vi)  Forfeiture.  Except as otherwise determined by the Committee in its discretion, upon termination of employment or status as a Non-Employee Director of a Participant (as determined under criteria established by the Committee in its discretion) for any reason during the applicable restriction period, all Shares of Restricted Stock still subject to restriction under the Plan or an Award Agreement, and all Retained Dividends associated with such Shares, shall be forfeited by the Participant; provided, however, that the Committee may, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock held by a Participant.

(d)     Performance Share Awards.

(i)      Issuance. The Committee is hereby authorized to grant Awards of Performance Shares to Key Employeesand Non-Employee Directors.

(ii)     Performance Goals and Other Terms.  The Committee shall determine in its discretion the Performance Period, the Performance Goal(s) to be achieved during any Performance Period, the proportion of payments, if any, to be made for performance between the minimum and full performance levels, the restrictions applicable to Shares constituting Restricted Securities to be received upon payment of Performance Shares (if Performance Shares are to be delivered in such manner), and any other terms, conditions and rights relating to a grant of Performance Shares the Committee deems appropriate; provided, however, that regardless of any other requirements or restrictions specified in an Award Agreement with respect to Performance Shares, upon the occurrence of a Qualifying Termination of a Participant each Performance Share granted under the Plan to such Participant shall become immediately payable to the extent provided in the last sentence of this Section 6(d)(ii). In the case of a Performance Share Award held by a Participant who is the subject of a Qualifying Termination, the number of Performance Shares to be issued to the Participant shall be proportionately adjusted from the maximum potential number available under the applicable Award based upon the Company’s actual performance through the date of the Change in Control which preceded the Qualifying Termination as a percentage of the relevant maximum performance goals set forth in the applicable Award Agreement.

(iii)    Rights and Benefits During the Performance Period.  The Committee may provide that during the Performance Period, an amount of money equal to all dividends declared by the Company during the Performance Period which would be payable with respect to the Performance Shares if the Performance Shares would then have been issued and outstanding, shall be retained and held by the Company as Retained Dividends which shall be paid to the Participant if and when such Shares are issued by the Company and delivered to the Participant.  Participants shall have no voting rights with respect to Performance Shares held by them.

(iv)Adjustments with Respect to Performance Shares.  With respect to Awards that are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code and to the extent consistent with Section 162(m) and the regulations promulgated thereunder, the Committee shall, unless otherwise determined by the Committee at the time the Performance Goals are established, adjust the Performance Goals to exclude the adverse affect of any of the following events that occur during a Performance Period: the impairment of tangible or intangible assets; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; business combinations, reorganizations and/or restructuring programs that have been approved by the Board; reductions in force and early retirement incentives; and any extraordinary, unusual, infrequent or non-recurring items separately identified in the financial statements and/or notes thereto in accordance with generally accepted accounting principles. Notwithstanding the foregoing and with respect to Awards that are not intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, the Committee may, in its discretion, adjust Performance Goals as it considers necessary or appropriate.

(v)    Delivery of Performance Shares. As soon as is reasonably practicable following the end of the applicable Performance Period (but in no event later than two months and ten days following the end of the applicable Performance Period), one or more certificates representing the number of Shares equal to the number of Performance Shares payable shall be registered in the name of and delivered to the Participant; provided, however, that any Shares of Restricted Securities payable in connection with Performance Shares shall, pending the expiration, lapse, or waiver of the applicable restrictions, be evidenced in the manner set forth in Section 6(c)(iii) hereof.

(e)Restricted Share Units.

(i)Issuance.  The Committee is hereby authorized to grant Awards of Restricted Share Units to Key Employees and Non-Employee Directors.

(ii)     Delivery Period(s) and Other Terms.  The Committee shall determine in its discretion the period(s) of time during which the Participant must remain either a Key Employee or an Non-Employee Director in order to become entitled to the delivery of Shares with respect to the Restricted Share Unit, the restrictions applicable to Shares of Restricted Securities upon the attainment of such periods (if Restricted Stock Units are to be satisfied in such manner), and any other terms, conditions and rights relating to a grant of Restricted Share Units the Committee deems appropriate.

(iii)    Rights and Benefits Prior to Delivery.  The Committee may provide that during the period after the date of an Award of Restricted Share Unit is made and prior to the delivery of Shares with respect to such Award, an amount of money equal to all dividends declared by the Company during such period which would be payable with respect to the Shares underlying such Award where such Shares then outstanding shall be held by the Company as Retained Dividends which shall be paid to the Participant if and when such Shares are issued by the Company and delivered to the Participant.  Participants shall have no voting rights with respect to Shares underlying Restricted Share Units until such time as such Shares are issued and delivered.

(iv)   Delivery of Shares Underlying Restricted Share Units.  Within 30 days following the end of a period described in Section 6(e)(ii) above, one or more certificates representing the Shares issuable under the applicable Award Agreement shall be registered in the name of and delivered to the Participant; provided, however, that any Shares issued as Restricted Securities shall, pending the expiration, lapse or waiver of the applicable restrictions, be evidenced in the manner determined by the Committee.

(f) Other Awards.

(i)Other Stock-Based Awards. Other awards, valued in whole or in part by reference to, or otherwise based on, Shares may be granted either alone or in addition to or in conjunction with other Awards for such consideration, if any, and in such amounts and having such terms and conditions as the Committee may determine.

(ii)Other Benefits. The Committee shall have the right to provide types of benefits under the Plan in addition to those specifically listed if the Committee believes that such benefits would further the purposes for which the Plan was established.

(g)General.

(i)No Consideration for Awards.  Awards shall be granted to Participants for no cash consideration unless otherwise determined by the Committee.

(ii)Award Agreements. Each Award granted under the Plan shall be evidenced by an Award Agreement in such form or forms (consistent with the terms of the Plan) as shall have been approved by the Committee.  The provisions of the various Award Agreements entered into under the Plan need not be identical.

(iii)Awards May be Granted Separately or Together. Awards to Participants under the Plan may be granted either alone or in addition to, in tandem with, or in substitution for, any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to, or in tandem with, other Awards, or in addition to, or in tandem with, awards granted under any other plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

(iv)Forms of Payment Under Awards.  Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award to a Participant may be made in such form or forms as the Committee shall determine, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee in its discretion. Such rules and procedures may include, without limitation, provision for the payment or crediting of interest on installment or deferred payments.

(v)     Limits on Transfer of Awards. No Award (other than Released Securities), and no right under any such Award, shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or by the laws of descent and distribution (or, in the case of an Award of Restricted Securities, to the Company); provided, however, that a Participant at the discretion of the Committee may be entitled, in the manner established by the Committee, (A) to designate a beneficiary or beneficiaries to exercise his or her rights, and to receive any property distributable, with respect to any Award upon the death of the Participant or (B) to transfer any Award. No Award (other than Released Securities), and no right under any such Award, may be pledged, alienated, attached or otherwise, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.

(vi)    Term of Awards.  Except as otherwise provided in the Plan, the term of each Award shall be for such period as may be determined by the Committee.

(vii)   Share Certificates; Representation.  In addition to any other restrictions imposed pursuant to Section 6 hereof, all certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Commission, the New York Stock Exchange or any stock exchange or other market upon which such Shares are then listed or traded, and any applicable federal or state securities laws, rules and regulations and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. The Committee may require each Participant or other Person who acquires Shares under the Plan by means of an Award originally made to a Participant to represent to the Company in writing that such Participant or other Person is acquiring the Shares without a view to the distribution thereof.

(viii)Requirement of Notification of Election Under Section 83(b) of the Code.  If a Participant, in connection with the acquisition of Shares under the Plan, is permitted to make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amount specified in Code Section 83(b) notwithstanding the continuing transfer restrictions) and the Participant makes such an election, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code Section 83(b).

(ix)    Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code.  If any Participant shall make any disposition of Shares issued pursuant to the exercise of Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof.

(x)Termination for Cause.  In the event of the termination of the employment, directorship (as applicable)of a Participant that is for Cause, any Award held by such Participant, to the extent not theretofore exercised, shall forthwith terminate.  If within one year of a Participant's exercise, vesting or realization of income with respect to any Award, such Participant is terminated for Cause (or if still employed by the Company or serving as a Non-Employee Director, engages in any activity that would constitute a basis for a termination for Cause or within one year of a termination for reasons other than Cause, is determined to have engaged in activities as an employee or director that would have constituted Cause), then any gain realized by the Participant from the realization event shall be paid by the Participant to the Company upon notice from the Company.  Such gain shall be determined on a gross basis, without reduction from any taxes incurred, as of the date of the realization event, without regard to any subsequent change in the Fair Market Value of a Share.  The Company shall have the right to offset such gain against any amounts otherwise owed to the Participant by the Company (whether as wages, vacation pay, or pursuant to any benefit plan or other compensatory arrangement).

(xi)   Change of Status.  Awards shall not be affected by any change of employment or directorship (as applicable) so long as the Participant continues to be an employee or Non-Employee Director (as applicable) of the Company or an Affiliate.  The Award Agreement may contain such provisions as the Committee shall approve with reference to the effect of approved leaves of absence.

(xii)Waiver of Conditions.  The Committee may in whole or in part, waive any conditions or other restrictions with respect to any award.

(xiii)Award Repricing.  Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards, or replacement Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights, without shareholder approval.

7.      Amendment and Termination of the Plan; Correction of Defects and Omissions

 (a)Amendments To And Termination Of The Plan. The Board may at any time amend, alter, suspend, discontinue or terminate the Plan; provided, however, that shareholder approval of any amendment of the Plan shall also be obtained if otherwise required by: (i) the Code or any rules promulgated thereunder (in order to allow for Incentive Stock Options to be granted under the Plan); (ii) the quotation or listing requirements of the New York Stock Exchange or any securities exchange or market on which the Shares are then traded or listed (in order to maintain the quotation or the listing of the Shares thereon); (iii) the amendment proposes to increase the number of shares available under the Plan; or (iv) would eliminate the requirement of obtaining shareholder approval of Award repricings contained in Section 6(g)(xiii). To the extent permitted by applicable law and subject to such shareholder approval as may be required above, the Committee may also amend the Plan, provided that any such amendments shall be reported to the Board. Neither termination nor amendment of the Plan shall detrimentally affect or change the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.

 (b)     Correction of Defects, Omissions and Inconsistencies. The Committee may in its discretion correct any defect, supply any omission or reconcile any inconsistency in any Award or Award Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect.

8.      General Provisions:

      (a)     No Rights To Awards. No Key Employee, Non-Employee Director, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Key Employees, Non-Employee Directors, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant.

 (b)    Withholding. No later than the date as of which an amount first becomes includable in the gross income of a Participant for federal income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising with respect to Awards to Participants under the Plan may be settled with Shares previously owned by the Participant.  The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares.

 (c)     No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

 (d)Rights and Status of Recipients of Awards. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of or as a Non-Employee Director of the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. Except for rights accorded under the Plan and under any applicable Award Agreement, Participants shall have no rights as holders of Shares as a result of the granting of Awards hereunder.  Notwithstanding any other provisions of this Plan, in no event will the continuation of the term of any Award beyond the date of termination of a Participant's employment or status as a Non-Employee Director allow the Participant, or his or her beneficiaries or heirs, to accrue additional rights under the Plan, or to acquire more Shares under an Award, than could have been accrued or acquired on the day of termination, except to the extent expressly permitted under this Plan.

 (e)     Unfunded Status of The Plan. Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company or the Committee and any Participant or other Person. To the extent any Person holds any right by virtue of a grant under the Plan, such right (unless otherwise determined by the Committee) shall be no greater than the right of an unsecured general creditor of the Company.

 (f)     Dodd-Frank Compliance.  The Company is required under applicable provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and regulations of the Securities and Exchange Commission promulgated thereunder to adopt and maintain a policy, applicable in the event of an accounting restatement by the Company due to the Company’s material noncompliance with any financial reporting requirement under applicable securities laws, requiring the Company to recover amounts paid to its executive officers as incentive-based compensation that exceed the compensation they would have received from the Company if such accounting restatement had not occurred.  Participants who are executive officers of the Company shall be required, as a condition to the receipt of any Awards under this Plan, to acknowledge the applicability of the Company’s Dodd-Frank policy to them and to agree to surrender to the Company any amounts such policy may require the Company to recover from them in the event of a covered accounting restatement.

 (g)    Governing Law.  The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Ohio and applicable federal law.

 (h)    Severability. If any provision of the Plan or any Award Agreement or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan, any Award Agreement or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, any Award Agreement or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan, any such Award Agreement and any such Award shall remain in full force and effect.

 (i)No Fractional Shares. No fractional Shares or other securities shall be issued or delivered pursuant to the Plan, any Award Agreement or any Award, and the Committee shall determine (except as otherwise provided in the Plan) whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights thereto shall be cancelled, terminated or otherwise eliminated.

 (j)Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

9.Effective Date of the Plan:  The Plan shall be effective as of __________, 2011, the date it was first adopted by the Board, subject, however, to the approval thereof by the Company’s shareholders within 12 months following the date of its adoption by the Board.

10.Term of the Plan:  No Award shall be granted under the Plan following the tenth anniversary of the effective date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date and, to the extent set forth in the Plan, the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or restrictions with respect to any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.

EX-10.2

EXHIBIT 10.2

Third Amendment to The Standard Register Company

Management Incentive Compensation Plan

This Third Amendment to The Standard Register Company Management Incentive Compensation Plan ("Plan") is made effective this 10th day of December, 2010, provided that the shareholder approval required in Section XV of the Plan is obtained.

WHEREAS, The Standard Register Company ("Company") adopted the Plan effective January 1, 1997; and

WHEREAS, the Plan provides that it may be amended by action of the Company Board of Directors, subject to approval by the affirmative vote of a majority of the votes cast by the holders of the voting securities of the Company represented at a meeting and entitled to vote thereon; and

WHEREAS, the Company has determined it would be advisable to amend the Plan.

NOW THEREFORE, the Plan is amended as follows:

Article IX( c) is deleted and the following is substituted therefor:

IX ( c ) Performance Goals.  The Performance Goals established by the Committee at the time a Special Incentive Award is granted will be based on one or more of the following performance criteria, either individually, alternatively or in any combination, and subject to such modifications or variations as specified by the Committee, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination:  cash flow; cash flow from operations; earnings (including, but not limited to, earnings before interest, taxes, depreciation and amortization); earnings per share, diluted or basic, earnings per share from continuing operations; net assets turnover; inventory turnover; capital expenditures; debt; debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; cost of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record; stock price; return on equity; total stock holder return; return on capital; return on assets or net assets; revenue; income or net income; operating income or net operating income, operating profit or net operating profit, economic profit; gross margin, operating margin or profit margin; and completion of acquisitions, business expansion, product diversification, new or expanded market penetration, net promoter scores and other similar customer satisfaction surveys, measures of employee commitment, engagement and development, and such other measures as the Committee determines are appropriate; provided, however, that all Performance Goals shall be objective performance goals satisfying the requirements for "performance-based compensation" within the meaning of Section 162(m)(4) of the Code.  Such Performance Goals also may be based on the attainment of levels of performance of the Company and/or any Affiliates under one or more other measures described above relative to the performance of other corporations.

In all other respects the Plan is ratified and confirmed.
	The Standard Register Company
	By
		Gerard D. Sowar
		Vice President, General Counsel & Secretary

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED

 PUBLIC ACCOUNTING FIRM

We have made a review, in accordance with standards established by the Public Company Accounting Oversight Board (United States), of the unaudited interim financial information of The Standard Register Company for the twenty-six week period ended July 3, 2011, as indicated in our report dated August 5, 2011; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, is incorporated by reference in this Form 10-Q, into the Company's previously filed Registration Statements File No.'s 333-02683, 333-05231, 333-15851, 333-43055, 333-51189, 333-51181, 333-57779, 333-84483, 333-86492 and 333-173805.

We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/S/ BATTELLE & BATTELLE LLP

Dayton, Ohio

August 5, 2011

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph P. Morgan, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Standard Register Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
		(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
		(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
		(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 5, 2011

/S/ JOSEPH P. MORGAN, JR.

Joseph P. Morgan, Jr.

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert M. Ginnan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Standard Register Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
		(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
		(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
		(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 5, 2011

/S/ ROBERT M. GINNAN

Robert M. Ginnan

Vice President, Treasurer and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Standard Register Company (the “Company”) on Form 10-Q for the period ending July 3, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph P. Morgan, Jr., President and Chief Executive Officer, and I, Robert M. Ginnan, Senior Vice President, Treasurer and Chief Financial Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2011

/S/ JOSEPH P. MORGAN, JR.

Joseph P. Morgan, Jr.

President and Chief Executive Officer

/S/ ROBERT M. GINNAN

Robert M. Ginnan

Vice President, Treasurer and

Chief Financial Officer

EX-99.1

Exhibit 99.1

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Board of Directors

The Standard Register Company

Dayton, Ohio

We have reviewed the accompanying consolidated balance sheet of The Standard Register Company as of July 3, 2011, the related consolidated statements of income and comprehensive income for the thirteen and twenty-six week periods July 3, 2011 and July 4, 2010, and the related consolidated statement of cash flows for the twenty-six week periods ended July 3, 2011 and July 4, 2010. These financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based upon our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of The Standard Register Company as of January 2, 2011, and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 4, 2011, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 2, 2011 is fairly stated, in all material respects.

/S/ BATTELLE & BATTELLE LLP

Dayton, Ohio

August 5, 2011

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jul. 03, 2011	Jul. 04, 2010	Jul. 03, 2011	Jul. 04, 2010
Net actuarial loss reclassification, deferred income tax benefit	$ (2,495)	$ (1,901)	$ (4,952)	$ (3,803)
Net prior service credit reclassification, deferred income tax expense	$ 487	$ 398	$ 974	$ 795

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Jul. 03, 2011	Jan. 02, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 554	$ 531
Accounts and notes receivable, less allowance for doubtful accounts of $3,128 and $2,816	110,144	122,308
Inventories	31,189	29,253
Deferred income taxes	11,991	11,991
Prepaid expense	10,823	8,962
Total current assets	164,701	173,045
PLANT AND EQUIPMENT
Land	2,221	2,221
Buildings and improvements	65,137	65,111
Machinery and equipment	178,309	181,808
Office equipment	164,203	165,600
Construction in progress	5,309	1,431
Total	415,179	416,171
Less accumulated depreciation	345,094	342,022
Total plant and equipment, net	70,085	74,149
OTHER ASSETS
Goodwill	6,557	6,557
Intangible assets, net	2,179	2,265
Deferred tax asset	99,574	102,996
Other	11,028	10,819
Total other assets	119,338	122,637
Total assets	354,124	369,831
CURRENT LIABILITIES
Current portion of long-term debt	1,456	1,467
Accounts payable	36,764	34,110
Accrued compensation	12,347	15,056
Accrued restructuring and other exit costs	551	1,689
Deferred revenue	2,297	2,225
Other current liabilities	21,970	24,216
Total current liabilities	75,385	78,763
LONG-TERM LIABILITIES
Long-term debt	40,887	42,926
Pension benefit obligation	169,500	185,174
Retiree healthcare obligation	4,849	4,931
Deferred compensation	6,363	6,306
Environmental liabilities	3,734	3,823
Other long-term liabilities	3,198	3,060
Total long-term liabilities	228,531	246,220
COMMITMENTS AND CONTINGENCIES - see Note 11
SHAREHOLDERS' EQUITY
Capital in excess of par value	64,519	63,401
Accumulated other comprehensive losses	(136,861)	(142,900)
Retained earnings	141,688	143,562
Treasury stock at cost: 2,014,320 and 1,996,952 shares	(50,225)	(50,167)
Total shareholders' equity	50,208	44,848
Total liabilities and shareholders' equity	354,124	369,831
Common stock
SHAREHOLDERS' EQUITY
Common stock	26,362	26,227
Common Class A
SHAREHOLDERS' EQUITY
Common stock	$ 4,725	$ 4,725

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Document and Entity Information	6 Months Ended
	Jul. 03, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 03, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	SR
Entity Registrant Name	STANDARD REGISTER CO
Entity Central Index Key	0000093456
Current Fiscal Year End Date	--01-01
Entity Filer Category	Smaller Reporting Company
Common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	24,347,813
Class A stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	4,725,000

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EARNINGS PER SHARE

6 Months Ended

Jul. 03, 2011

EARNINGS PER SHARE

NOTE 6 – EARNINGS PER SHARE

The number of shares outstanding for calculation of earnings per share (EPS) is as follows:

	13 Weeks Ended				26 Weeks Ended
	July 3,		July 4,		July 3,		July 4,
(Shares in thousands)	2011		2010		2011		2010
Weighted average shares outstanding - basic		29,048		28,912		29,012		28,893
Effect of potentially dilutive securities		-		-		-		-
Weighted average shares outstanding - diluted		29,048		28,912		29,012		28,893

Due to the loss from continuing operations for the 13 and 26-week periods ending July 3, 2011 and July 4, 2010, no outstanding options or nonvested shares were included in the diluted EPS computation because they would automatically result in anti-dilution.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jul. 03, 2011

COMMITMENTS AND CONTINGENCIES

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has participated with other Potentially Responsible Parties (“PRPs”) in the investigation, study, and remediation of the Pasco Sanitary Landfill Superfund Site (the “Pasco Site”) in eastern Washington State since 1998.  The Company was a member of a PRP Group known as the Industrial Waste Area Generators Group II (the “IWAG Group”).  In 2000, the IWAG Group and several other PRP groups entered into agreed orders with the Department of Ecology for implementation of interim remedial actions and expansion of groundwater monitoring.  In September 2010, the group entered into a new agreement creating the IWAG Group III.  The new agreement changed the allocation of responsibility among the members, which resulted in a significant decrease in our level of participation.  Based upon new investigations, it was also deemed probable that participation by certain other PRPs would increase for costs expected to be incurred after 2010.  At this time, an agreement has not yet been reached on the final remediation approach.  We have accrued our best estimate of our obligation and have an undiscounted liability of $1,101 that we currently believe is adequate to cover our portion of the total future potential costs of remediation.  We expect the costs to be incurred over a period of 60 years; however, the current proposed remediation approach could require monitoring for a longer period of time.  This estimate is contingent upon the final remedy agreed upon, the participation of other PRPs, the length of monitoring required, and the final agreed upon allocation.  Until a final remediation approach is approved and a final agreement is reached among all PRPs, it is reasonably possible that one or more of these factors could change our estimate; however, we are unable to determine the impact at this time.

From 1995 through 2003, the Company participated with other PRPs in the investigation, study, and remediation of the Valleycrest Landfill Site (the “Valleycrest Site”) in western Ohio.  The Company is a member of a PRP Group known as the Valleycrest Landfill Site Group (the “VLSG”).  In 2003, General Motors Corporation (“GM”) stepped into the Company’s position under the Site Participation Agreement and, in return for $270, agreed to indemnify the Company against certain future liability in connection with the Valleycrest Landfill Site.  Therefore, we did not previously record a liability for potential remediation costs.  In 2009, we were notified that in connection with GM’s bankruptcy filing, GM does not plan to continue contributions to the site, including its contractual obligation to indemnify the Company for future liability.  We believe that it is probable the Company will participate in remediation actions.  A remedial investigation and feasibility study was conducted by the VLSG which indicated a range of viable remedial approaches.  During 2010, we obtained an updated estimate of costs for possible final remedies.  At this early stage, a final remediation approach has not been selected, and we have accrued the estimate of our obligation based on the most likely approach.  In addition, we have also determined that GM will likely not be required to fund their originally allocated portion of the environmental costs.  However, we believe it is probable that we will be able to recover a portion of these costs through bankruptcy settlements.  We have an undiscounted long-term liability of $2,350 that we currently believe is adequate to cover our portion of the total future potential costs of remediation, which are expected to be incurred over a period of 30 years.  This estimate is contingent upon the final remedy agreed upon, the participation of other PRPs not currently in the VLSG, and the final agreed upon allocation.  Until a final remediation approach is approved and a final agreement is reached among all PRPs, it is reasonably possible that one or more of these factors could change our estimate; however, we are unable to determine the impact at this time.

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RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jul. 03, 2011

RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 2 – RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

In 2011, we adopted Accounting Standards Update (ASU) 2009-13 which amended the revenue recognition standards related to non-software multiple-element revenue arrangements.The standard requires the allocation of the overall consideration to each deliverable based on its estimated selling price in the absence of other objective evidence of selling prices and expands the required disclosures for multiple-element arrangements.  The standard permitted retrospective or prospective adoption, and we elected prospective adoption for revenue arrangements entered into or materially modified beginning in fiscal 2011.  Adoption of this standard did not have a material impact on our consolidated results of operation, financial position, or cash flows.

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PENSION PLANS

6 Months Ended

Jul. 03, 2011

PENSION PLANS

NOTE 8 – PENSION PLANS

Net periodic benefit cost includes the following components:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Interest cost on projected benefit obligation	$	5,455		$	6,099		$	10,919		$	12,199
Expected return on plan assets		(5,857	)		(6,463	)		(11,715	)		(12,926	)
Amortization of prior service costs		-			148			-			296
Amortization of net actuarial losses from prior periods		6,069			4,668			12,142			9,336
Settlement loss		453			-			453			-
Total	$	6,120		$	4,452		$	11,799		$	8,905

As a result of associates retiring in 2011 and electing a lump-sum payment of their pension benefits under our non-qualified retirement plan, we recognized a settlement loss during the second quarter of 2011.  A pension settlement is recorded when the total lump sum payments for a year exceed total service and interest costs to be recognized for that year.  As part of the settlement, we recognized a pro-rata portion of the unrecognized net losses included in accumulated other comprehensive losses equal to the percentage reduction in the pension benefit obligation.  This non-cash charge is included in net periodic benefit cost.

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SUBSEQUENT EVENTS

6 Months Ended

Jul. 03, 2011

SUBSEQUENT EVENTS

NOTE 13 – SUBSEQUENT EVENTS

The Company has evaluated for disclosure all subsequent events through the date the financial statements were issued and filed with the United States Securities and Exchange Commission.

On July 6, 2011, we acquired 100% of the ownership interest in iMedConsent, LLC (dba Dialog Medical) for approximately $5.2 million in cash, plus up to an additional $2.0 million in contingent payments based upon performance of the acquired business through the two-year anniversary of the transaction.  Dialog Medical provides solutions for managing the patient informed consent process and will be operated as a wholly-owned subsidiary reporting through our Healthcare business unit.  We believe this acquisition strengthens and broadens our leadership in the healthcare market and will enable us to help our customers advance their reputations by improving patient safety, compliance, critical patient communications and operational performance.  We are currently in the process of determining the initial accounting for this acquisition.

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POSTRETIREMENT BENEFIT PLANS

6 Months Ended

Jul. 03, 2011

POSTRETIREMENT BENEFIT PLANS

NOTE 9 – POSTRETIREMENT BENEFIT PLANS

Net postretirement benefit cost includes the following components:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Interest cost	$	54		$	96		$	108		$	192
Amortization of prior service cost		(1,227	)		(1,150	)		(2,453	)		(2,299	)
Amortization of net actuarial losses from prior periods		114			123			228			244
Total	$	(1,059	)	$	(931	)	$	(2,117	)	$	(1,863	)

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SHARE BASED COMPENSATION

6 Months Ended

Jul. 03, 2011

SHARE BASED COMPENSATION

NOTE 7 – SHARE BASED COMPENSATION

In 2011, we adopted the 2011 Equity Incentive Plan, which provides for the granting of a maximum of 5,780,000 shares.  Awards in any form other than options or stock appreciation rights are counted as two shares for every one share actually issued.  The 2011 plan permits the grant of incentive or nonqualified stock options, restricted stock awards, performance share awards, and stock appreciation rights.  A committee of the Board of Directors (Committee) administers the plan and has the authority to determine the employees to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards.  Key employees, including any executive officer or employee-director, and non-employee directors are eligible to receive awards under the plan.

The contractual term and exercise price for stock options granted under the plan are determined by the Committee.  However, the contractual term may not exceed 10 years, and the exercise price may not be lower than the fair market value of a share on the date of grant.  Options vest over periods determined when granted, generally four years, and are exercisable until the term expires.

Under the 2011 plan, shares subject to restricted stock award may be issued when the award is granted or at a later date.  The stock awards are subject to terms determined by the Committee, may have voting rights, and may include specified performance objectives.  The sale or transfer of these shares is restricted during the vesting period.  Recipients of restricted stock awards generally earn dividends during the vesting period that are paid only if the shares vest.

Total share-based compensation expense by type of award is as follows:

	13 Weeks Ended				26 Weeks Ended
	July 3,		July 4,		July 3,		July 4,
	2011		2010		2011		2010
Nonvested stock awards, service based	$	137	$	135	$	249	$	227
Nonvested stock awards, performance based		143		88		242		118
Stock options		415		254		670		512
Total share-based compensation expense		695		477		1,161		857
Income tax benefit		276		189		461		340
Net expense	$	419	$	288	$	700	$	517

Stock Options

The weighted-average fair value of stock options granted in 2011 was estimated at $1.64 per share, using the Black-Scholes option-pricing model.  Expense is being amortized on a straight-line basis over a 4-year vesting period.  The significant assumptions used to estimate the fair value of options granted are as follows:

Risk-free interest rate		1.4	%
Dividend yield		4.4	%
Expected term	4 years
Expected volatility		79.9	%

A summary of our stock option activity and related information for 2011 is as follows:

	Number			Weighted-Average
	of Shares			Exercise Price
Outstanding at January 2, 2011		2,817,650		$	9.54
Granted		1,506,924			3.38
Exercised		-			-
Forfeited/Canceled		(48,750	)		10.59
Outstanding at July 3, 2011		4,275,824		$	7.36
Exercisable at July 3, 2011		1,720,074		$	11.88

Performance-Based Stock Awards

During the second quarter of 2011, the Company awarded 472,575 shares of performance-based restricted stock.  The performance-based stock awards will vest only upon the achievement of specific measurable performance criteria, and continued employment for two additional years.  Twenty-five percent of the shares will vest upon the achievement of specific performance goals by the Company for 2011.  The remaining shares will vest as follows: 25% in April 2012 and 50% in April 2013.  These shares have voting rights and accrue dividends during the performance period which will be paid if the shares vest.

The performance goals allow partial vesting if a minimum level of performance is attained.  If the minimum level of performance is not attained by the end of 2011, these stock awards will be forfeited and canceled, and all expense recognized to date will be reversed.  The amount of shares that ultimately vest could range from 50% to 150% of the initial shares granted.  Additional shares will be granted upon performance above the target level.

The fair value of the performance-based stock awards was based on the closing market price of our common stock on the date of award.  Expense for performance-based awards with graded vesting is recognized under the accelerated recognition method, whereby each vesting is treated as a separate award with expense for each vesting recognized ratably over the requisite service period.  We recognize compensation expense for awards subject to performance criteria when it is probable that the performance goal will be achieved.  Compensation expense is being recognized for the total amount of performance-based shares expected to vest and is subject to adjustment based on the actual level of achievement of the performance goal.

For performance shares issued in 2010, the performance goals allowed partial vesting if a minimum level of performance was attained in 2010.  Based on the level of performance achieved, 163,574 shares were earned and 76,979 shares were forfeited and canceled in 2011.

A summary of our performance-based stock award activity and related information for 2011 is as follows:

				Weighted-
	Number			Average
	of			Grant Date
	Shares			Fair Value
Nonvested at January 2, 2011		240,550		$	5.82
Granted		472,575			3.39
Vested		(40,898	)		5.82
Forfeited/Canceled		(76,979	)		5.82
Nonvested at July 3, 2011		595,248		$	3.89

Service-Based Stock Awards

The fair value of the service-based stock awards granted in 2011 was based on the closing market price of our common stock on the date of award and is being amortized to expense on a straight-line basis over a vesting period of 4 years.  A summary of our service-based stock award activity and related information for 2011 is as follows:

	Number			Weighted-Average
	of Shares			Fair Value
Nonvested at January 2, 2011		198,556		$	5.66
Granted		153,400			3.39
Vested		(66,441	)		6.56
Forfeited/Canceled		(125	)		13.07
Nonvested at July 3, 2011		285,390		$	4.23

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	6 Months Ended
	Jul. 03, 2011	Jul. 04, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS	$ (375)	$ (923)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	10,620	12,279
Restructuring charges	(177)	1,458
Pension and postretirement benefit expense	9,682	7,042
Deferred tax benefit	(556)	(660)
Other	1,612	1,141
Changes in operating assets and liabilities:
Accounts and notes receivable	11,478	2,943
Inventories	(1,936)	3,930
Restructuring spending	(961)	(3,450)
Accounts payable and accrued expenses	(750)	(6,689)
Pension and postretirement benefit obligations	(15,420)	(15,546)
Deferred compensation payments	(430)	(766)
Other assets and liabilities	(1,276)	(1,224)
Net cash provided by (used in) operating activities	11,511	(465)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment	(6,555)	(4,346)
Acquisition		(2,460)
Proceeds from sale of plant and equipment	19	65
Net cash used in investing activities	(6,536)	(6,741)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings under revolving credit facility	(1,328)	9,570
Principal payments on long-term debt	(721)	(777)
Proceeds from issuance of common stock	92	95
Dividends paid	(2,925)	(2,909)
Purchase of treasury stock	(58)	(34)
Net cash (used in) provided by financing activities	(4,940)	5,945
Effect of exchange rate changes on cash	(12)	(25)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	23	(1,286)
Cash and cash equivalents at beginning of period	531	2,404
CASH AND CASH EQUIVALENTS AT END OF PERIOD	554	1,118
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease recorded for equipment		4,311
Loan payable recorded for professional services		$ 1,598

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REVENUE RECOGNITION

6 Months Ended

Jul. 03, 2011

REVENUE RECOGNITION

NOTE 3 – REVENUE RECOGNITION

When a customer arrangement involves multiple deliverables, we evaluate all deliverables to determine whether they represent separate units of accounting, allocate the arrangement consideration to the separate units, and recognize revenue in accordance with generally accepted accounting principles for revenue recognition.  We have one type of non-software multiple-element arrangement which consists of three deliverables: custom-printed products, warehousing services, and custom-delivery services.  Under this type of an arrangement, we provide warehousing and custom-delivery services for customers who want just-in-time delivery of custom-printed products.

For the majority of our contractual arrangements, at the customer’s request we print and store custom-printed products that remain in our inventory until the customer’s specified future delivery.  For these arrangements, title and risk of ownership for these products remains with us until the product is shipped to the customer.  Therefore, the product is considered to be delivered last, and the customer is invoiced when the product is delivered to the customer.

Under certain other contractual arrangements, at the customer’s request we print and store the custom-printed products for the customer’s specified future delivery.  Such products are stored in our warehouses and are not used to fill other customers’ orders.  For these products, manufacturing is complete, the finished product is not included in our inventory, and title and risk of loss have transferred to the customer.  In these transactions, the customer is invoiced under normal billing and credit terms when the product is placed in the warehouse for storage.  As such, the product is considered to be delivered first and warehousing and custom-delivery services are delivered last.

Fees for warehousing and custom-delivery services are often bundled into the price of the products and are therefore invoiced when the product is considered delivered.  However, if requested by the customer, these fees may also be invoiced separately as the services are performed.

Multiple-element arrangements entered into or materially modified beginning in 2011

For arrangements entered into or materially modified beginning in fiscal 2011, we determine whether each deliverable in the arrangement represents a separate unit of accounting based on the following criteria:

● Whether the delivered item has value to the customer on a standalone basis; and

● If the arrangement includes a general right of return relative to the delivered item, whether delivery or performance of the undelivered item is considered probable and is substantially in our control.

We then allocate the consideration received to each deliverable in the arrangement based on the relative selling prices of each deliverable.

Determination of selling prices

Selling prices are determined based on the following hierarchy: vendor-specific objective evidence of fair value (VSOE), third-party evidence of selling price (TPE), or best estimate of selling price (ESP).  For each deliverable, we review historical sales data to determine if we have sufficient stand-alone sales that are within an acceptable range to establish VSOE.  VSOE is considered established if 80% of stand-alone sales are within +/-15% of the median sales price.  Available third-party evidence is evaluated to determine if TPE can be established for items where VSOE does not exist.  In absence of VSOE and TPE, ESP is used.  Determining ESP requires significant judgment due to the nature of factors that must be considered and the subjectivity involved in determining the impact each of these factors should have on ESP.

Custom-printed products

Due to the variances in pricing for available stand-alone sales and custom nature of our products, VSOE or TPE cannot be established.  To develop ESP, we consider numerous internal and external factors including: internal cost experience for materials, labor, manufacturing and administrative costs; external pricing for similar products; level of  market competition and potential for market share gain; stage in the product life cycle; industry served; profit margins; current market conditions; length of typical agreements; and anticipated volume.

Warehousing services

VSOE cannot be established for warehousing services, as we generally do not sell these services separately.  Although some third-party evidence is readily available for certain aspects of our warehousing services, an adequate amount of data for services similar to our offering is not available to establish TPE.  ESP is developed by utilizing a pricing process which considers the following internal and external factors: cost driver activity such as full versus partial carton shipments, storage space utilized, type of product stored, and shipping frequency; internal cost experience; profit margins; volume-related discounts; current market conditions; and to a lesser degree, pricing from third-party providers when available.

Custom-delivery services

For custom-delivery services, no stand-alone sales are available as we do not sell these services separately; therefore, VSOE cannot be established.  TPE is developed by utilizing individual pricing templates for each customer.  The pricing templates consider profit margins, volume, and expected shipping addresses for the customer applied to a freight rate table that is developed from negotiated rates with our third-party logistics partners.

Timing of revenue recognition

For arrangements where warehousing and custom-delivery services are delivered last, revenue allocated to the product is recognized when it is placed in the warehouse for storage.  Revenue allocated to warehousing and custom-delivery services is recognized as the services are performed.

For arrangements where the product is delivered last, revenue allocated to the product is recognized when shipped from the warehouse to the customer.  Revenue allocated to warehousing and distribution services is recognized as the services are performed.

Multiple-element arrangements entered into prior to 2011

Arrangements entered into prior to 2011 continue to be accounted for in accordance with the revenue recognition standards effective prior to 2011.  Under previous revenue recognition guidance, deliverables represent separate units of accounting if the following criteria are met:

● The delivered item has value to the customer on a standalone basis;

● Objective and reliable evidence exists for the fair value of the undelivered item; and

● If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and is substantially in our control.

We previously determined that objective and reliable evidence of fair value exists for the warehousing and custom-delivery services but not for the products due to the custom nature of our printed products and lack of consistent pricing in stand-alone sales.  Accordingly, in customer arrangements where warehousing and delivery services are delivered last, we utilize the residual method to allocate arrangement consideration to the products based on the fair value of the warehousing and delivery services and recognize revenue for the product when placed in the warehouse.  Revenue allocated to warehousing and delivery services is recognized as the services are performed.

In arrangements where the products are delivered last, we are unable to allocate arrangement consideration to the deliverables due to the lack of objective evidence of fair value for the products.  Therefore, the arrangement is recognized as a single unit of accounting, and all revenue is recognized when the products are delivered to the customer.

Changes in revenue recognition as a result of adopting ASU 2009-13

For arrangements entered into or materially modified in 2011, we continue to recognize custom-printed products, warehousing services, and custom-delivery services as separate units of accounting for arrangements where warehousing and delivery services are delivered last.  For arrangements where custom-printed products are delivered last, we previously accounted for these arrangements as one unit of accounting and recognized the arrangement consideration as product revenue.  Due to the establishment of ESP for the custom-printed products, we now recognize the products, warehousing services, and custom-delivery services as separate units of accounting.  This change resulted in an increase in reported services revenue in the accompanying Consolidated Statements of Income.

The pattern and timing of revenue recognition did not change for our arrangements where warehousing and delivery services are delivered last.  For arrangements where products are delivered last, we now recognize warehousing services as performed rather than as the product is delivered.  However, this change did not materially impact the timing of revenue recognition and is not expected to have a material effect in the near term.

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RESTRUCTURING AND OTHER EXIT COSTS

6 Months Ended

Jul. 03, 2011

RESTRUCTURING AND OTHER EXIT COSTS

NOTE 4 – RESTRUCTURING AND OTHER EXIT COSTS

The 2009 and 2008 restructuring plans and other exit activities are described in Note 4 to the Consolidated Financial Statements included in our Annual Report.  All related costs are included in restructuring and other exit costs in the accompanying Consolidated Statements of Income.

2009 Plans

Restructuring and other exit costs of $148 in 2011 and $1,428 in 2010 relate to costs required to be expensed as incurred, primarily for the termination of contracts and the relocation of equipment.  In addition, in 2011, we reversed $325 of involuntary termination costs primarily as result of lower than expected employee severance costs.

Components of 2009 restructuring and other exit costs consist of the following:

	Total		Total			Cumulative
	Expected		Q2 2011			To-Date
	Costs		Expense			Expense
Involuntary termination costs	$	3,150	$	(304	)	$	3,077
Contract termination costs		2,600		31			1,463
Other associated exit costs		8,600		22			8,142
Total	$	14,350	$	(251	)	$	12,682

A summary of the 2009 restructuring accrual activity is as follows:

	Balance		Incurred			Reversed			Balance
	2010		in 2011			in 2011			2011
Involuntary termination costs	$	878	$	(358	)	$	(324	)	$	196
Contract termination costs		811		(456	)		-			355
Total	$	1,689	$	(814	)	$	(324	)	$	551

2008 Plans

Restructuring and other exit costs of $30 in 2010 primarily relate to contract termination costs that were required to be expensed as incurred.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jul. 03, 2011

FAIR VALUE MEASUREMENTS

NOTE 12 – FAIR VALUE MEASUREMENTS

We have financial assets and liabilities that are not recorded at fair value but which require disclosure of their fair value.  The carrying value of cash equivalents approximates fair value due to the short-term maturity of these instruments and is not material.  We believe the carrying value of outstanding amounts under our secured revolving credit facility and capital lease obligation approximate fair value based on currently available market rates.

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INCOME TAXES

6 Months Ended

Jul. 03, 2011

INCOME TAXES

NOTE 5 – INCOME TAXES

The effective tax rate for the 26-week period ending July 3, 2011 was 47.9% compared to 41.7% for the 26-week period ending July 4, 2010.  The rate in 2011 was more favorable primarily due to the following factors: a higher proportion of taxable income during 2011 attributable to our operations in Mexico which is taxed at a lower rate than the United States; and a decrease in our liability for unrecognized tax benefits.  The effective tax rate for the 13-week period ending July 3, 2011 was 35.4% compared to 51.4% for the 13-week period ended July 4, 2010.  Permanent differences primarily related to share-based compensation awards resulted in the less favorable effective tax rate during the period.

We review the potential future tax benefits of all deferred tax assets on an ongoing basis.  Our review includes consideration of historical and projected future operating results, reversals of existing deferred tax liabilities, tax planning strategies, and the eligible carryforward period of each deferred tax asset to determine whether a valuation allowance is appropriate.  Although realization is not assured, management believes it is more likely than not that all of the remaining deferred tax assets will be realized.  The amount of the deferred tax asset considered realizable; however, could be reduced in the near term if estimates of future taxable income are reduced.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data	Jul. 03, 2011	Jan. 02, 2011
Accounts and notes receivable, allowance for doubtful accounts	$ 3,128	$ 2,816
Treasury stock, shares	2,014,320	1,996,952
Common stock
Common stock, par value	$ 1.00	$ 1.00
Common stock, Authorized	101,000,000	101,000,000
Common stock, Issued	26,362,133	26,227,199
Common Class A
Common stock, par value	$ 1.00	$ 1.00
Common stock, Authorized	9,450,000	9,450,000
Common stock, Issued	4,725,000	4,725,000

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BASIS OF PRESENTATION

6 Months Ended

Jul. 03, 2011

BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of The Standard Register Company and its wholly-owned subsidiaries (collectively, the Company) after elimination of intercompany transactions, profits, and balances.  The consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 2, 2011 (Annual Report).

In our opinion, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included.  The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.

Certain prior-year amounts have been reclassified to conform to the current-year presentation.

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SEGMENT REPORTING

6 Months Ended

Jul. 03, 2011

SEGMENT REPORTING

NOTE 10 – SEGMENT REPORTING

In 2011, we reclassified certain customers between our segments to better align them with the core markets served.  Segment information for 2010 has been revised from previously reported information to reflect the current presentation.  In addition, we changed the allocation methodology for our finance, technology, and other corporate general and administrative expenses.  Previously, these expenses were allocated based on the business unit’s actual revenue as a percentage of actual consolidated revenue.  Beginning in 2011, these expenses are now allocated based on the business unit’s budgeted revenue as a percentage of budgeted consolidated revenue.

Information about our operations by segment for the 13-week periods ended July 3, 2011 and July 4, 2010 is as follows:

		Healthcare		Financial Services		Commercial Markets			Industrial			Total
Revenue from external customers	2011	$	59,051	$	43,174	$	41,640		$	20,420		$	164,285
	2010		59,003		43,406		44,256			18,017			164,682
Operating income (loss)	2011	$	3,824	$	1,359	$	(330	)	$	(401	)	$	4,452
	2010		4,062		2,370		(393	)		(663	)		5,376

Information about our operations by segment for the 26-week periods ended July 3, 2011 and July 4, 2010 is as follows:

		Healthcare		Financial Services		Commercial Markets			Industrial			Total
Revenue from external customers	2011	$	119,723	$	86,480	$	81,971		$	41,000		$	329,174
	2010		123,264		88,120		85,907			34,814			332,105
Operating income (loss)	2011	$	8,507	$	3,050	$	(623	)	$	388		$	11,322
	2010		8,024		3,467		(2,532	)		(1,537	)		7,422

Reconciling information between reportable segments and our consolidated financial statements is as follows:

	13 Weeks Ended						26 Weeks Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
Segment operating income	$	4,452		$	5,376		$	11,322		$	7,422
Restructuring and other exit costs		251			(1,026	)		177			(1,458	)
Amortization of net actuarial losses		(6,069	)		(4,668	)		(12,142	)		(9,336	)
Pension settlement		(453	)		-			(453	)		-
Other unallocated pension		402			364			796			727
Other unallocated		(54	)		(76	)		(94	)		(11	)
LIFO adjustment		143			214			321			1,872
Total other expense		(79	)		(411	)		(646	)		(799	)
Loss before income taxes	$	(1,407	)	$	(227	)	$	(719	)	$	(1,583	)

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jul. 03, 2011	Jul. 04, 2010	Jul. 03, 2011	Jul. 04, 2010
REVENUE
Products	$ 140,585	$ 141,226	$ 279,961	$ 286,580
Services	23,700	23,456	49,213	45,525
Total revenue	164,285	164,682	329,174	332,105
COST OF SALES
Products	97,412	97,380	191,956	196,760
Services	15,969	15,584	32,682	30,018
Total cost of sales	113,381	112,964	224,638	226,778
GROSS MARGIN	50,904	51,718	104,536	105,327
OPERATING EXPENSES
Selling, general, and administrative	52,030	50,508	104,333	104,653
Pension settlements	453		453
Restructuring and other exit costs	(251)	1,026	(177)	1,458
Total operating expenses	52,232	51,534	104,609	106,111
(LOSS) INCOME FROM OPERATIONS	(1,328)	184	(73)	(784)
OTHER INCOME (EXPENSE)
Interest expense	(572)	(601)	(1,144)	(991)
Other income	493	190	498	192
Total other expense	(79)	(411)	(646)	(799)
LOSS BEFORE INCOME TAXES	(1,407)	(227)	(719)	(1,583)
INCOME TAX BENEFIT	(497)	(117)	(344)	(660)
NET LOSS	(910)	(110)	(375)	(923)
BASIC AND DILUTED LOSS PER SHARE	$ (0.03)		$ (0.01)	$ (0.03)
Dividends per share declared for the period	$ 0.05	$ 0.05	$ 0.10	$ 0.10
NET LOSS	(910)	(110)	(375)	(923)
Net actuarial loss reclassification, net of $(2,495), $(1,901), $(4,952), and $(3,803) deferred income tax benefit	3,788	2,887	7,518	5,775
Net prior service credit reclassification, net of $487, $398, $974, and $795 deferred income tax expense	(740)	(603)	(1,479)	(1,207)
Cumulative translation adjustment	(22)	(44)	(1)	(31)
COMPREHENSIVE INCOME	$ 2,116	$ 2,130	$ 5,663	$ 3,614