##### 



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

|                               |  |                       
|------------------------------ |  | ----------------------
|October 31, 2002               |  | 1-6528                
|                               |  |                       
|For the quarterly period ended |  | Commission file number

WALLACE COMPUTER SERVICES, INC.

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 36-2515832                          
|                                                               |  |                                     
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |  |            | 
|---------------------------------------- |  |  | ---------- | 
|2275 Cabot Drive Lisle, Illinois         |  |  | 60532      | 
|                                         |  |  |            | 
|(Address of Principal Executive Offices) |  |  | (ZIP CODE) | 

|                                                     |  |  |  |                                                             
|---------------------------------------------------- |  |  |  | ------------------------------------------------------------
|(630) 588-5000                                       |  |  |  | 41,847,081                                                  
|                                                     |  |  |  |                                                             
|(Registrants Telephone Number,
Including Area Code) |  |  |  | (Number of Common Shares Outstanding
as of December 9, 2002)

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.

|      |  |     
|----- |  | ----
|x Yes |  | o No





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Page 2

Wallace Computer Services, Inc.
FORM 10-Q
For the Quarter Ended October 31, 2002

INDEX

|                              |        |                                                |                                                             |  |    |    |          |  | 
|----------------------------- | ------ | ---------------------------------------------- | ----------------------------------------------------------- |  | -- | -- | -------- |  | 
|                              |        |                                                |                                                             |  |    |    | Page No. | 
|                              |        |                                                |                                                             |  |    |    |          | 
|Part
I: Financial Information |        |                                                |                                                             | 
|                             
|                              | Item 1 |                                                | Financial Statements                                        |  |    | 3  |         
|                              |        | Condensed
Consolidated Statement of Operations |                                                             |  | 3  |   
|                              |        | Condensed Consolidated Balance Sheet           |                                                             |  | 4  |   
|                              |        | Condensed Consolidated Statement of Cash Flows |                                                             |  | 5  |   
|                              |        |                                                |                                                             |  |    |    |          | 
|                              | Item 2 |                                                | Management's Discussion and Analysis of Financial Condition |  |    |    |         
|                              |        | and Results of Operations                      |                                                             |  | 11 |   
|                              | Item 3 |                                                | Quantitative and Qualitative Disclosures about Market Risk  |  |    | 15 |         
|                              | Item 4 |                                                | Controls and Procedures                                     |  |    | 15 |         
|                              |        |                                                |                                                             |  |    |    |          | 
|Part
II: Other Information    |        |                                                |                                                             | 
|                              |        |                                                |                                                             |  |    |    |          | 
|                              | Item 1 |                                                | Legal Proceedings                                           |  |    | 16 |         
|                              | Item 6 |                                                | Exhibits and Reports on Form 8-K                            |  |    | 16 |         
|                              |        |                                                |                                                             |  |    |    |          | 
|Signatures                    |        |                                                |                                                             |  |    |    | 17       | 
|                              |        |                                                |                                                             |  |    |    |          | 
|Certifications                |        |                                                |                                                             |  |    |    |          | 





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Page 3

Wallace Computer Services, Inc.
FORM 10-Q
For the Quarterly Period Ended October 31, 2002

Part I Financial Information

Item 1. Financial Statements

Wallace Computer Services, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)

|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         |  |       |       |      | 
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------ | ------- | -------------------------- | ------- |  | ----- | ---- | ---- | - | -------- | -------- | ------- |  | ----- | ----- | ---- | 
|                                                                                            |                                                                                          |                          |         | For the Three Months Ended |        
|                                                                                            |                                                                                          |                          |         | October 31                 |        
|                                                                                            |                                                                                          |                          |         |                            |        
|                                                                                            |                                                                                          |                          |         |                            |         |  |       | %    |      |   |          |          |         |  | %     |      
|(In thousands, except per share amounts)                                                    |                                                                                          | 2002                     |         |                            | Sales   |  |       | 2001 |      |   | Sales    |         
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|Net Sales                                                                                   |                                                                                          | $                        | 384,930 |                            |         |  | 100.0 |      |      | $ | 408,433  |          |         |  | 100.0 |      
|Cost and Expenses                                                                           |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         |  |       |      
|                                                                                            | Cost of goods sold                                                                       |                          |         | 278,688                    |         |  |       | 72.4 |      |   |          | 303,358  |         |  |       | 74.3  |     
|                                                                                            | Selling and administrative expenses                                                      |                          |         | 65,794                     |         |  |       | 17.1 |      |   |          | 59,744   |         |  |       | 14.6  |     
|                                                                                            | Provision for depreciation and
amortization                                              |                          |         | 15,575                     |         |  |       | 4.0  |      |   |          | 17,775   |         |  |       | 4.4   |     
|                                                                                            | Restructuring charges                                                                    |                          |         | 643                        |         |  |       | 0.2  |      |   |          | 2,560    |         |  |       | 0.6   |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|                                                                                            |                                                                                          | Total costs and expenses |         |                            | 360,700 |  |       |      | 93.7 |   |          |          | 383,437 |  |       |       | 93.9 | 
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|                                                                                            | Operating income                                                                         |                          |         | 24,230                     |         |  |       | 6.3  |      |   |          | 24,996   |         |  |       | 6.1   |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|                                                                                            | Interest income                                                                          |                          |         | (384                       | )       |  |       | (0.1 | )    |   |          | (331     | )       |  |       | (0.1  | )   
|                                                                                            | Interest expense                                                                         |                          |         | 4,733                      |         |  |       | 1.2  |      |   |          | 6,189    |         |  |       | 1.5   |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|                                                                                            | Income before income taxes and the cumulative
effect of a change in accounting
principle |                          |         | 19,881                     |         |  |       | 5.2  |      |   |          | 19,138   |         |  |       | 4.7   |     
|                                                                                            | Provision for income taxes                                                               |                          |         | 7,555                      |         |  |       | 2.0  |      |   |          | 7,311    |         |  |       | 1.8   |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|                                                                                            | Income before the cumulative effect of a
change in accounting principle 
net of tax     |                          |         | 12,326                     |         |  |       | 3.2  |      |   |          | 11,827   |         |  |       | 2.9   |     
|                                                                                            | Cumulative effect of a change in accounting
principle  net of tax                       |                          |         |                           |         |  |       |     |      |   |          | (144,078 | )       |  |       | (35.3 | )   
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|Net Income (Loss)                                                                           |                                                                                          | $                        | 12,326  |                            |         |  | 3.2   |      |      | $ | (132,251 | )        |         |  | (32.4 | )    
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |         
|Basic Earnings per Share Before the Cumulative
Effect of a Change in Accounting Principle   |                                                                                          | $                        | 0.29    |                            |         |  |       |      |      | $ | 0.29     |          |         |  |       |      
|                                                                                            | Cumulative effect of a change in accounting
principle                                    |                          |         |                           |         |  |       |      |      |   |          | (3.50    | )       |  |       |       |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|                                                                                            | Basic earnings (loss) per share                                                          |                          | $       | 0.29                       |         |  |       |      |      |   | $        | (3.22    | )       |  |       |       |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|Diluted Earnings per Share Before the Cumulative
Effect of a Change in Accounting Principle |                                                                                          | $                        | 0.29    |                            |         |  |       |      |      | $ | 0.29     |          |         |  |       |      
|                                                                                            | Cumulative effect of a change in accounting
principle                                    |                          |         |                           |         |  |       |      |      |   |          | (3.48    | )       |  |       |       |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|                                                                                            | Diluted earnings (loss) per share                                                        |                          | $       | 0.29                       |         |  |       |      |      |   | $        | (3.19    | )       |  |       |       |     
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|Average Common Shares Outstanding                                                           |                                                                                          |                          | 41,828  |                            |         |  |       |      |      |   | 41,109   |          |         |  |       |      
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|Diluted Common Shares Outstanding                                                           |                                                                                          |                          | 42,135  |                            |         |  |       |      |      |   | 41,408   |          |         |  |       |      
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 
|Dividends Declared Per Share                                                                |                                                                                          | $                        | 0.165   |                            |         |  |       |      |      | $ | 0.165    |          |         |  |       |      
|                                                                                            |                                                                                          |                          |         |                            |         |  |       |      |      |   |          |          |         | 

The accompanying notes are an integral part of these statements.





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Page 4

Wallace Computer Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet (Unaudited)

|                                                |                                                                                                     |                                                   |                      |                           |               |         |          |         |        |         |         | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------- | ------------------------- | ------------- | ------- | -------- | ------- | ------ | ------- | ------- | 
|(In thousands, except share amounts)            |                                                                                                     | October 31, 2002                                  |                      |                           | July 31, 2002 |        
|                                                |                                                                                                     |                                                   |                      |                           |               |        
|Assets                                          |                                                                                                     |                                                   |                      |                           |               |         |          |        
|Current assets:                                 |                                                                                                     |                                                   |                      |                           |               |         |          |        
|                                                | Cash and cash equivalents                                                                           |                                                   | $                    | 37,365                    |               |         | $        | 25,178  |       
|                                                | Accounts receivable                                                                                 |                                                   |                      | 263,962                   |               |         |          | 254,575 |       
|                                                | Less-allowance for doubtful accounts                                                                |                                                   |                      | (9,385                    | )             |         |          | (9,434  | )     
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                |                                                                                                     |                                                   | Net receivables      |                           |               | 254,577 |          |         |        | 245,141 |        
|                                                | Inventories                                                                                         |                                                   |                      | 95,328                    |               |         |          | 85,437  |       
|                                                | Assets held for sale                                                                                |                                                   |                      | 7,629                     |               |         |          | 12,467  |       
|                                                | Current and deferred income taxes                                                                   |                                                   |                      | 22,210                    |               |         |          | 31,363  |       
|                                                | Advances and prepaid expenses                                                                       |                                                   |                      | 6,136                     |               |         |          | 5,329   |       
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                |                                                                                                     |                                                   | Total current assets |                           |               | 423,245 |          |         |        | 404,915 |        
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|Property, plant and equipment, at cost          |                                                                                                     |                                                   | 824,481              |                           |               |         | 820,933  |        
|Less-reserves for depreciation and amortization |                                                                                                     |                                                   | (511,453             | )                         |               |         | (502,595 | )      
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                | Net property, plant and equipment                                                                   |                                                   |                      | 313,028                   |               |         |          | 318,338 |       
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|Goodwill                                        |                                                                                                     |                                                   | 139,101              |                           |               |         | 139,098  |        
|Cash surrender value of life insurance          |                                                                                                     |                                                   | 16,059               |                           |               |         | 15,861   |        
|System development costs, net of amortization   |                                                                                                     |                                                   | 46,546               |                           |               |         | 49,003   |        
|Other assets                                    |                                                                                                     |                                                   | 3,207                |                           |               |         | 2,779    |        
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                | Total assets                                                                                        |                                                   | $                    | 941,186                   |               |         | $        | 929,994 |       
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|Liabilities and Stockholders Equity            |                                                                                                     |                                                   |                      |                           |               |         |          |        
|Current liabilities:                            |                                                                                                     |                                                   |                      |                           |               |         |          |        
|                                                |                                                                                                     | Current maturities of long-term debt              |                      | $                         | 1,120         |         |          | $       | 1,233  |        
|                                                |                                                                                                     | Accounts payable                                  |                      |                           | 76,138        |         |          |         | 78,403 |        
|                                                |                                                                                                     | Accrued salaries, wages, profit sharing and other |                      |                           | 98,431        |         |          |         | 89,840 |        
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                |                                                                                                     |                                                   |                      | Total current liabilities |               |         | 175,689  |         |        |         | 169,476 | 
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|Long-term debt                                  |                                                                                                     |                                                   | 207,862              |                           |               |         | 209,303  |        
|Deferred income taxes                           |                                                                                                     |                                                   | 49,340               |                           |               |         | 49,525   |        
|Deferred compensation and retirement benefits   |                                                                                                     |                                                   | 44,053               |                           |               |         | 43,130   |        
|Other long-term liabilities                     |                                                                                                     |                                                   | 9,429                |                           |               |         | 9,431    |        
|Commitments and contingencies                   |                                                                                                     |                                                   |                     |                           |               |         |         |        
|Stockholders equity                            |                                                                                                     |                                                   |                      |                           |               |         |          |        
|                                                | Preferred stock, $50 par value, authorized 500,000
shares, none issued                              |                                                   |                      |                          |               |         |          |        |       
|                                                | Common stock  issued shares of 45,764,055 at
October 31, 2002 and July 31, 2002                    |                                                   |                      | 45,764                    |               |         |          | 45,764  |       
|                                                | Additional capital                                                                                  |                                                   |                      | 41,355                    |               |         |          | 41,355  |       
|                                                | Deferred compensation                                                                               |                                                   |                      | 3,095                     |               |         |          | 3,095   |       
|                                                | Retained earnings                                                                                   |                                                   |                      | 431,393                   |               |         |          | 426,067 |       
|                                                | Treasury stock, at cost- 4,096,319 shares at
October 31, 2002 and 4,117,653 shares at
July 31, 2002 |                                                   |                      | (66,113                   | )             |         |          | (66,471 | )     
|                                                | Accumulated other comprehensive loss                                                                |                                                   |                      | (681                      | )             |         |          | (681    | )     
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|                                                | Total stockholders equity                                                                          |                                                   |                      | 454,813                   |               |         |          | 449,129 |       
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         
|Total liabilities and stockholders equity      |                                                                                                     | $                                                 | 941,186              |                           |               | $       | 929,994  |        
|                                                |                                                                                                     |                                                   |                      |                           |               |         |         

The accompanying notes are an integral part of these statements.





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Page 5

Wallace Computer Services, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)

|                                               |                                                                                          |                                                       |        |                            |        |   |   |          |         |  
|---------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------ | -------------------------- | ------ | - | - | -------- | ------- | -
|                                               |                                                                                          |                                                       |        | For the Three Months Ended |       
|(In thousands)                                 |                                                                                          | October 31                                            |       
|                                               |                                                                                          |                                                       |       
|                                               |                                                                                          | 2002                                                  |        |                            | 2001   |  
|                                               |                                                                                          |                                                       |        |                            |        |  
|Cash Flows from Operating Activities:          |                                                                                          |                                                       |        |                            |        |   |   |         
|                                               | Net income (loss)                                                                        |                                                       | $      | 12,326                     |        |   | $ | (132,251 | )      
|                                               | Adjustments to reconcile
net income (loss) to net
cash provided by operating activities: |                                                       |        |                            |        |   |   |          |        
|                                               |                                                                                          | Cumulative effect of a change in accounting
principle |        |                            |       |   |   |          | 144,078 |  
|                                               |                                                                                          | Depreciation                                          |        |                            | 12,627 |   |   |          | 15,072  |  
|                                               |                                                                                          | Amortization                                          |        |                            | 2,948  |   |   |          | 2,703   |  
|                                               |                                                                                          | Restructuring charges, non-cash                       |        |                            | (947   | ) |   |          |        |  
|                                               |                                                                                          | Debt cost amortization                                |        |                            | 461    |   |   |          | 423     |  
|                                               |                                                                                          | Deferred taxes                                        |        |                            | (185   | ) |   |          | (3,455  | )
|                                               |                                                                                          | Loss on disposal of property                          |        |                            | 20     |   |   |          | 69      |  
|                                               | Changes in assets and liabilities                                                        |                                                       |        |                            |        |   |   |          |        
|                                               |                                                                                          | Accounts receivable                                   |        |                            | (9,436 | ) |   |          | 1,082   |  
|                                               |                                                                                          | Inventories                                           |        |                            | (9,892 | ) |   |          | (6,311  | )
|                                               |                                                                                          | Advances and prepaid expenses                         |        |                            | (1,080 | ) |   |          | 333     |  
|                                               |                                                                                          | Prepaid taxes                                         |        |                            | 9,154  |   |   |          | 5,228   |  
|                                               |                                                                                          | Other assets                                          |        |                            | (713   | ) |   |          | 2,309   |  
|                                               |                                                                                          | Accounts payable and other liabilities                |        |                            | 6,315  |   |   |          | 6,326   |  
|                                               |                                                                                          | Deferred compensation and retirement benefits         |        |                            | 924    |   |   |          | 1,413   |  
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|                                               | Net cash provided by operating activities                                                |                                                       |        | 22,522                     |        |   |   | 37,019   |        
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|Cash Flows from Investing Activities:          |                                                                                          |                                                       |        |                            |        |   |   |         
|                                               | Capital expenditures                                                                     |                                                       |        | (7,487                     | )      |   |   | (6,182   | )      
|                                               | Proceeds from disposal of property                                                       |                                                       |        | 5,801                      |        |   |   | 39       |        
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|                                               | Net cash used in investing activities                                                    |                                                       |        | (1,686                     | )      |   |   | (6,143   | )      
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|Cash Flows from Financing Activities:          |                                                                                          |                                                       |        |                            |        |   |   |         
|                                               | Cash dividends paid                                                                      |                                                       |        | (6,901                     | )      |   |   | (6,805   | )      
|                                               | Net retirements of short-term debt                                                       |                                                       |        | (113                       | )      |   |   | (1,134   | )      
|                                               | Amounts paid on long-term debt                                                           |                                                       |        | (1,902                     | )      |   |   | (30,000  | )      
|                                               | Proceeds from issuance of long-term debt                                                 |                                                       |        |                           |        |   |   | 10,000   |        
|                                               | Proceeds from issuance of common stock                                                   |                                                       |        | 267                        |        |   |   | 1,544    |        
|                                               | Purchase of treasury stock                                                               |                                                       |        |                           |        |   |   | (4,481   | )      
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|                                               | Net cash used in financing activities                                                    |                                                       |        | (8,649                     | )      |   |   | (30,876  | )      
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|Net Changes in Cash and Cash Equivalents       |                                                                                          |                                                       | 12,187 |                            |        |   |  |         
|Cash and Cash Equivalents at Beginning of Year |                                                                                          |                                                       | 25,178 |                            |        |   |  |         
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|Cash and Cash Equivalents at October 31        |                                                                                          | $                                                     | 37,365 |                            |        | $ |  |         
|                                               |                                                                                          |                                                       |        |                            |        |   |  
|Supplemental Disclosure:                       |                                                                                          |                                                       |        |                            |        |   |   |         
|                                               | Interest paid (net of interest capitalized)                                              |                                                       | $      | 6,966                      |        |   | $ | 8,443    |        
|                                               | Income taxes paid (net of refunds received)                                              |                                                       | $      | 1,387                      |        |   | $ | 2,332    |        

The accompanying notes are an integral part of these statements.





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Page 6

Wallace Computer Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2002
(Unaudited)

Note 1  Basis of Presentation

The accompanying condensed consolidated financial statements of Wallace
Computer Services, Inc and Subsidiaries (Company) as of October 31, 2002 and
for the three months ended October 31, 2002 and 2001 have been prepared by the
Company, without audit, pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The July 31, 2002 consolidated balance
sheet as presented in this 10-Q was condensed from the audited financial
statements and as such does not include all disclosures required by generally
accepted accounting principles. However, the Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K for the fiscal year ended July 31, 2002.

In the opinion of management, all adjustments (which include normal recurring
adjustments except as disclosed herein) necessary to present a fair statement
of financial position as of October 31, 2002, results of operations, cash flows
and stockholders equity for the three months ended October 31, 2002 and
October 31, 2001, have been made. The results of operations for the three
months ended October 31, 2002 are not necessarily indicative of the operating
results for the full fiscal year or any future periods. Certain prior year
amounts have been reclassified to conform to the current year presentation.

Note 2  Accounting Policies

During the first quarter of fiscal year 2003, the Company adopted Statement of
Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144). SFAS 144 provides a single
accounting model for long-lived assets to be disposed of and replaces SFAS 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of. The adoption of SFAS 144 had no effect on the Companys results
of operations, financial position or cash flows.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146). SFAS 146 requires that a liability for costs associated with an exit or
disposal activity be recognized and measured initially at fair value only when
the liability is incurred. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002, and as such, the
provisions of SFAS 146 will be applied prospectively when it impacts the
Company through relevant restructuring activities or other disposal or exit
activities.

Note 3  Inventories

Inventories at October 31, 2002, and July 31, 2002, were as follows:

|                       |  |                  |        |  |               |   |        | 
|---------------------- |  | ---------------- | ------ |  | ------------- | - | ------ | 
|(Dollars in thousands) |  | October 31, 2002 |        |  | July 31, 2002 |  
|                       |  |                  |        |  |               |  
|Raw materials          |  | $                | 14,296 |  |               | $ | 12,365 | 
|Work in process        |  |                  | 21,535 |  |               |   | 17,978 | 
|Finished products      |  |                  | 59,497 |  |               |   | 55,094 | 
|                       |  |                  |        |  |               |  
|                       |  | $                | 95,328 |  |               | $ | 85,437 | 
|                       |  |                  |        |  |               |  

Certain inventories are stated on the last-in, first-out (LIFO) basis for
their labor and material content, and other inventories are stated on the
first-in, first-out (FIFO) basis.





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Page 7

Wallace Computer Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2002
(Unaudited)

Note 3  Inventories (continued)

Because the inventory determination under the LIFO method can only be made at
the end of each fiscal year based on the inventory levels and costs at that
time, interim period LIFO determinations must necessarily be based upon
managements estimates of expected year-end inventory levels and costs.

Note 4  Debt

On September 30, 2002, the Company entered into a new $150 million Senior
Credit Facility that replaced the previous $200 million Credit Facility. The
decrease in the size of the Credit Facility is due to lower future expected
needs for such borrowings. The new Credit Facility expires on September 30,
2005. The new interest rate is based on London Interbank Offered Rate (LIBOR)
plus a margin. At October 31, 2002, there were no borrowings under this Senior
Credit Facility.

Note 5  Segment Reporting

The Company operates in two business segments: the Forms and Labels segment and
the Integrated Graphics segment.

The Forms and Labels segment is made up of forms, labels and office product
operations. The principal products and services supplied by the Forms and
Labels segment include the design and manufacture of paper-based forms, the
manufacture of both electronic data processing (EDP) labels and packaging
labels, and the manufacture and distribution of a standard line of office
products. The Integrated Graphics segment is made up of a nationwide network
of commercial print and targeted communications facilities. The principal
products and services supplied by the Integrated Graphics segment include the
design, manufacture, kitting and distribution of high color marketing and
promotional printed materials; variable imaging; digital printing; and the
manufacture of direct response printed materials. The Companys management has
aggregated the divisions within the reportable segments because of strong
similarities in the economic characteristics, nature of products and services,
production processes, class of customer and distribution methods used. Both
segments offer services to customers, including warehousing and distribution,
kitting and fulfillment, print on demand and contract outsourcing.

The Companys accounting policies for the segments are the same as those
described in the Summary of Significant Accounting Policies in the Companys
2002 Annual Report on Form 10-K. Management evaluates segment performance
based on segment profit or loss before interest and income taxes. Net interest
expense and income taxes are not allocated to segments. Transfers between
segments, which are not significant, are accounted for at standard cost. The
Company has no significant non-cash items other than depreciation, amortization
and restructuring write-downs.

Segment data exclude one-time charges related to the cumulative effect of a
change in accounting principle due to the adoption of SFAS 142, Goodwill and
Other Intangible Assets.





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Page 8

Wallace Computer Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2002
(Unaudited)

Note 5  Segment Reporting (continued)

Summarized segment data and a reconciliation to the consolidated totals for the
quarters ended October 31, 2002 and 2001 are as follows:

|                                   |  |          |         |  |               |   |       |               |  |   |        |   | 
|---------------------------------- |  | -------- | ------- |  | ------------- | - | ----- | ------------- |  | - | ------ | - | 
|Quarter Ended October 31, 2002     |  | External |         |  | Restructuring |   |       | Income before | 
|(In thousands)                     |  | Sales    |         |  | Charge        |   |       | Income Taxes  | 
|                                   |  |          |         |  |               |   |       |               | 
|Forms and Labels Segment           |  | $        | 202,911 |  |               | $ | 69    |               |  | $ | 24,033 |  
|Integrated Graphics Segment        |  |          | 182,019 |  |               |   | 370   |               |  |   | 8,440  |  
|                                   |  |          |         |  |               |   |       |               |  |  
|Segment Total                      |  |          | 384,930 |  |               |   | 439   |               |  |   | 32,473 |  
|                                   |  |          |         |  |               |   |       |               |  |  
|Corporate / (Net Interest Expense) |  |          |        |  |               |   |      |               |  |   | (4,349 | )
|Restructuring Charge  Corporate   |  |          |        |  |               |   | 204   |               |  |   | (643   | )
|Contract Settlement  Corporate    |  |          |        |  |               |   |      |               |  |   | (7,600 | )
|                                   |  |          |         |  |               |   |       |               |  |  
|Consolidated                       |  | $        | 384,930 |  |               | $ | 643   |               |  | $ | 19,881 |  
|                                   |  |          |         |  |               |   |       |               |  |  
|                                  
|Quarter Ended October 31, 2001     |  | External |         |  | Restructuring |   |       | Income before | 
|(In thousands)                     |  | Sales    |         |  | Charge        |   |       | Income Taxes  | 
|                                   |  |          |         |  |               |   |       |               | 
|Forms and Labels Segment           |  | $        | 203,446 |  |               | $ | 0     |               |  | $ | 19,914 |  
|Integrated Graphics Segment        |  |          | 204,987 |  |               |   | 683   |               |  |   | 7,642  |  
|                                   |  |          |         |  |               |   |       |               | 
|Segment Total                      |  |          | 408,433 |  |               |   | 683   |               |  |   | 27,556 |  
|                                   |  |          |         |  |               |   |       |               | 
|Corporate / (Net Interest Expense) |  |          |        |  |               |   |      |               |  |   | (5,858 | )
|Restructuring Charge  Corporate   |  |          |        |  |               |   | 1,877 |               |  |   | (2,560 | )
|                                   |  |          |         |  |               |   |       |               | 
|Consolidated                       |  | $        | 408,433 |  |               | $ | 2,560 |               |  | $ | 19,138 |  
|                                   |  |          |         |  |               |   |       |               | 

Segment assets as of October 31, 2002 were $468.1 million for Integrated
Graphics, $339.5 million for Forms and Labels, and $133.6 million for Corporate
versus $466.1 million for Integrated Graphics, $335.0 million for Forms and
Labels, and $128.9 million for Corporate as of July 31, 2002.

Note 6  Restructuring

In the first quarter of fiscal year 2002, the Company began a restructuring
initiative aimed at improving the overall level of organizational efficiency
and effectiveness of the Company, including consolidating and rationalizing
existing facilities and processes, and reducing the overall cost base of the
Company. The first quarters of fiscal year 2002 and 2003 results include
pretax charges of $2.6 million and $0.6 million, respectively, related to this
restructuring initiative. The charges include asset write-downs, employee
severance costs, equipment moving costs, consulting charges directly related to
the restructuring and other miscellaneous costs. The Company does not expect
any additional restructuring expense in future quarters related to this
initiative.





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##### 



Page 9

Wallace Computer Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2002
(Unaudited)

Note 6  Restructuring (continued)

The following table summarizes the activity in the restructuring reserve during
the first quarter of fiscal year 2003:

|                                    |  |              |      |   |             |   |      |         |  |   |               |   |  |   |        |  
|----------------------------------- |  | ------------ | ---- | - | ----------- | - | ---- | ------- |  | - | ------------- | - |  | - | ------ | -
|(In thousands)                      |  |              |      |   |             |   |      |         |  |   |               |   |  |   |        |  
|                                    |  | Asset Write- |      |   | Employee    |   |      | Other   |  |   | Total         |  
|                                    |  | Downs        |      |   | Termination |   |      | Charges |  |   | Restructuring |  
|                                    |  |              |      |   |             |   |      |         |  |   |               |  
|Reserve balance at July 31, 2002    |  | $            |     |   |             | $ | 284  |         |  | $ | 1,789         |   |  | $ | 2,073  |  
|                                    |  |              |      |   |             |   |      |         |  |   |               |  
|Restructuring Charges               |  |              |     |   |             |   | 438  |         |  |   | 1,017         |   |  |   | 1,455  |  
|Adjustments                         |  |              | (812 | ) |             |   |     |         |  |   |              |   |  |   | (812   | )
|                                    |  |              |      |   |             |   |      |         |  |   |               |  
|Cash Payments                       |  |              |     |   |             |   | (549 | )       |  |   | (1,334        | ) |  |   | (1,883 | )
|Non-cash items                      |  |              | 812  |   |             |   |     |         |  |   | 134           |   |  |   | 946    |  
|                                    |  |              |      |   |             |   |      |         |  |   |               |  
|Reserve balance at October 31, 2002 |  | $            |     |   |             | $ | 173  |         |  | $ | 1,606         |   |  | $ | 1,779  |  
|                                    |  |              |      |   |             |   |      |         |  |   |               |  

Asset Write-Downs

The 2002 restructuring plan included the closing or sale of six manufacturing
facilities, one distribution and fulfillment center, and one multi-use
facility. As of October 31, 2002, approximately
$7.6 million was recorded as
assets held for sale in the current asset portion of the balance sheet. Cash
proceeds are being derived through the sale of these assets which include
equipment and buildings. During the first quarter of fiscal year 2003, the
Company recorded adjustments to reflect a gain realized on the sale of an
asset, offset by additional reductions in the estimated recovery values of the
remaining assets held for sale to reflect current poor market conditions. The
Company anticipates the remaining assets will be sold within twelve months.

Employee Termination

The 2002 restructuring plan included workforce reductions in excess of 10% of
the total workforce. During the first quarter of fiscal year 2003, an
additional $0.4 million was charged to restructuring for 43 employees who were
severed. The charge includes severance pay and related benefits and
outplacement costs. As of October 31, 2002, 840 employees had been terminated
as a part of the 2002 restructuring plan, 792 of which were from plant
locations and 48 from the corporate headquarters. The terminations related to
the 2002 restructuring plan are complete.

Other Charges

Other charges totaled $1.0 million during the first quarter of fiscal year 2003
and include approximately $0.5 million in costs to move equipment that were
expensed as incurred and approximately $0.5 million in additional costs related
to ongoing maintenance of the facilities held for sale and other miscellaneous
items.





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Page 10

Wallace Computer Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2002
(Unaudited)

Note 7  Earnings per Share

Below is the computation of basic and diluted earnings per share for the three
months ended October 31, 2002 and 2001.

|                                                                                            |  |      |        |  |      |   |          |  
|------------------------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | -------- | -
|(In thousands, except per share amounts)                                                    |  | 2002 |        |  | 2001 |  
|                                                                                            |  |      |        |  |      |  
|Net income before the cumulative effect of a change
in accounting principle                 |  | $    | 12,326 |  |      | $ | 11,827   |  
|Cumulative effect of a change in accounting
principle                                       |  |      |       |  |      |   | (144,078 | )
|                                                                                            |  |      |        |  |      |  
|Net income (loss)                                                                           |  | $    | 12,326 |  |      | $ | (132,251 | )
|                                                                                            |  |      |        |  |      |  
|Weighted-average number of shares outstanding                                               |  |      | 41,655 |  |      |   | 40,929   |  
|Add: Weighted-average number of shares held in
grantor trust                                |  |      | 173    |  |      |   | 180      |  
|                                                                                            |  |      |        |  |      |  
|Shares applicable to basic earnings                                                         |  |      | 41,828 |  |      |   | 41,109   |  
|                                                                                            |  |      |        |  |      |  
|Add: net shares from assumed exercise of options                                            |  |      | 307    |  |      |   | 299      |  
|                                                                                            |  |      |        |  |      |  
|Shares applicable to diluted earnings                                                       |  |      | 42,135 |  |      |   | 41,408   |  
|                                                                                            |  |      |        |  |      |  
|Basic earnings per share before the cumulative effect
of a change in accounting principle   |  | $    | 0.29   |  |      | $ | 0.29     |  
|Cumulative effect of a change in accounting
principle per share                             |  |      |       |  |      |   | (3.50    | )
|                                                                                            |  |      |        |  |      |  
|Basic earnings (loss) per share                                                             |  | $    | 0.29   |  |      | $ | (3.22    | )
|                                                                                            |  |      |        |  |      |  
|Diluted earnings per share before the cumulative effect
of a change in accounting principle |  | $    | 0.29   |  |      | $ | 0.29     |  
|Cumulative effect of a change in accounting
principle per share                             |  |      |       |  |      |   | (3.48    | )
|                                                                                            |  |      |        |  |      |  
|Diluted earnings (loss) per share                                                           |  | $    | 0.29   |  |      | $ | (3.19    | )
|                                                                                            |  |      |        |  |      |  

Options to purchase 1,962,176 shares of common stock at a price range of $17.99
-$39.19 per share were outstanding during the first quarter of fiscal year 2003
but were not included in the computation of diluted earnings per share because
the options exercise price was greater than the average market price of the
common shares. The options, which expire between 2003 and 2012, were still
outstanding as of October 31, 2002.

Note 8  Contractual Dispute

On November 4, 2002, the Company announced the settlement of a previously
disclosed contract dispute with a third party. The settlement, plus other
related expenses, resulted in a one-time pre-tax charge during the first
quarter of fiscal year 2003 to selling and administrative expenses of
approximately $7.6 million of which $7.4 million was included in Accrued
salaries, wages, profit sharing and other on the condensed consolidated
balance sheet as of October 31, 2002.





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Page 11

Wallace Computer Services, Inc. and Subsidiaries

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with generally accepted accounting principles requires management to make
judgments, assumptions, and estimates that affect the amounts reported in the
Consolidated Financial Statements and accompanying notes. The U.S. Securities
and Exchange Commission has defined a companys most critical accounting
policies as the ones that are most important to the portrayal of the companys
financial condition and results of operations, and which require the company to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. Note 1 to the
consolidated financial statements of the Companys Annual Report on Form 10-K
describes the significant accounting policies and methods used in the
preparation of the consolidated financial statements. Although the Company
believes that the estimates and assumptions are reasonable, these estimates and
assumptions are based upon information presently available. Actual results may
differ significantly from these estimates.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the Companys assessment of the
collectibility of specific customer accounts and the aging of accounts
receivable. If there were a sudden or unexpected deterioration of a major
customers creditworthiness or if actual defaults were significantly higher
than the Companys historical experience, the allowance for doubtful accounts,
as estimated, may not be adequate and could be understated which could have an
adverse impact on the Companys operating income.

Inventory Allowances

Inventory allowances are based upon inventory age, forecasted demand and
customer creditworthiness. If there were to be a sudden and significant
decrease in demand for the Companys products, inventory allowances may not be
adequate and such a situation could adversely affect operating income. Also,
due to the custom nature of much of the Companys inventory, any deterioration
in a customers creditworthiness could adversely impact the Companys ability
to recover the value of the custom inventory.

Long-lived Assets

Long-lived assets are comprised of property, plant and equipment and goodwill.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An estimate of undiscounted future cash flows produced by the
asset, or the appropriate grouping of assets, is compared with the carrying
value to determine whether an impairment exists, pursuant to the provisions of
Statement of Financial Accounting Standards (SFAS) No.144, Accounting for
the Impairment or Disposal of Long-Lived Assets. If an asset is determined to
be impaired, the loss is measured based on quoted market prices in active
markets, if available. If quoted market prices are not available, the estimate
of fair value is based on various valuation techniques, including a discounted
value of estimated future cash flows and fundamental analysis. The Company
reports an asset to be disposed of at the lower of its carrying value or its
estimated net realizable value.

During the first quarter of fiscal year 2002, the Company adopted the
provisions of SFAS No. 142 Goodwill and Other Intangible Assets and recorded
a $144.1 million impairment charge, net of tax. The Company will annually
perform a goodwill impairment test in the fourth quarter of each fiscal year
which requires the Company to make assumptions regarding estimated future cash
flows, capital market and economic conditions and other factors to determine
the fair value of the asset.





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Page 12

Wallace Computer Services, Inc. and Subsidiaries

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations(continued)

Results of Operations

For the three-month period ended October 31, 2002, net sales decreased 5.8% to
$384.9 million from the quarter ended October 31, 2001. The decrease in sales
was primarily from the Integrated Graphics segment as the Forms and Labels
segment revenue was essentially flat. The Integrated Graphics segments sales
decreased $23.0 million in the first quarter of fiscal year 2003 compared to
the first quarter of 2002. Approximately $12.0 million of the decrease was due
to the closing of plants in conjunction with the fiscal year 2002
restructuring. The remainder of the decrease was driven by a decrease in local
transactional sales, where a local sales force seeks order by order business in
its local market, which continues to be the area most affected by the slower
economy.

Contractual sales increased 6.3% in the Integrated Graphics segment, while they
were flat in the Forms and Labels segment. The Company believes that continued
growth in contractual sales is important to provide stability to the Companys
profitability and utilization rates.

Cost of sales for the first quarter of fiscal year 2003 was 72.4% of sales as
compared to 74.3% in the first quarter of fiscal year 2002. The improvement
shown in the second half of fiscal year 2002 continued during this first
quarter as the Company continues to show the benefits of its prior
restructuring efforts in both segments.

The Forms and Labels segments quarterly sales decreased 0.3% to $202.9
million, with operating income of $24.0 million and operating margin of 11.8%
versus operating income of $19.9 million and an operating margin of 9.8% in the
first quarter of last year. Increased service offerings offset decreases of
approximately $7.0 million from the exit of the low margin stock and computer
paper production business. The cost of sales for the first quarter of fiscal
year 2003 was 68.7% of sales, an improvement of 2.3% of sales over the prior
years first quarter cost of sales of 71.0%. As the effects of cost cutting
and other restructuring measures have been realized, operating margin has
continued to improve, returning to the levels seen in the first quarter of
fiscal year 2000.

The Integrated Graphics segments quarterly sales decreased 11.2% to $182.0
million, with operating income of $8.4 million and operating margin of 4.6%
versus operating income of $7.6 million and an operating margin of 3.7% in the
first quarter of last year. The Company believes that competition and economic
pressures have been a significant cause in the decreased sales of this segment.
As part of the prior years restructuring plan, the Company closed two and
disposed of three plants in this segment in fiscal year 2002. The plant
closures and plant sales are responsible for approximately $12 million (or
about half) of the segments quarterly sales decline. The cost of sales for
the first quarter of fiscal year 2003 was 77.8% of sales, which is a 0.8% of
sales improvement over the prior years first quarter cost of sales of 78.6%.

Selling and administrative expenses as a percent of sales for the first quarter
of fiscal year 2003 were 17.1% versus 14.6% last year. Selling and
administrative expenses increased 10.1% from the prior years first quarter.
Included in selling and administrative expenses for the first quarter of fiscal
year 2003 is $7.6 million for the settlement of a contract dispute with a third
party. Excluding this item, selling and administrative expenses would be $58.2
million, or 15.1% of sales which is a 0.5% of sales increase and a $1.5 million
decrease from the prior years first quarter.

Depreciation and amortization for the first quarter of fiscal year 2003 was
$15.6 million, or 4.0% of sales, versus $17.8 million, or 4.4% of sales, in the
first quarter a year ago. Software amortization expense is up 8.7% over the
prior years first quarter due to enhancements made to the Companys order
entry, customer service, and inventory management systems in the past year.
Depreciation expense declined 16% from the first quarter of fiscal year 2002 as
a result of disposing of assets in the restructuring.





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Page 13

Wallace Computer Services, Inc. and Subsidiaries

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations(continued)

During the first quarter of fiscal year 2002, the Company implemented a
restructuring program aimed at improving the overall level of organizational
efficiency and effectiveness, consolidating and rationalizing existing
facilities and processes, and reducing the overall cost base of the Company.
The restructuring charges include employee severance costs, asset write-downs,
equipment moving costs, consulting charges directly related to the
restructuring and other miscellaneous costs. Total charges recorded in the
first quarter of fiscal year 2003 are $0.6 million, consisting of new charges
of $0.4 million for severance and $1.0 million for other
charges and reflecting ($0.8) million related to assets held for
sale, including a gain of $1.2 million, offset by additional
write downs of $0.4 million compared to $2.6 million of charges in the
first quarter of fiscal year 2002. There will be no additional charges related
to this restructuring program.

Interest expense for the quarter was $4.7 million, down from $6.2 million last
year. The decrease in interest expense can be attributed to debt reduction
during fiscal year 2002. Interest income for the quarter was consistent
year-to-year.

The effective tax rate was 38.0% and 38.2% for the first quarters of fiscal
years 2003 and 2002, respectively. It is expected that the annual effective
tax rate for fiscal year 2003 will be 38.0%. The annual effective income tax
rate in fiscal year 2002 was 35.7%, which was lower due to two state tax
related non-recurring items that favorably impacted the tax rate by 3.3%.

Income before the cumulative effect of a change in accounting principle for the
first quarter was $12.3 million, or $0.29 per share, up from $11.8 million, or
$0.29 per share, in the same quarter a year ago.

Liquidity and Capital Resources

Working capital increased by $12.1 million from July 31, 2002 to October 31,
2002. The increase in accounts receivables is in line with the increase in
sales over the fourth quarter of fiscal year 2002. The ratio of current assets
to current liabilities at October 31, 2002 was 2.4 to 1.

The Company believes the increase in inventory levels is adequate to support
the inventory levels necessary to satisfy customer demand. Moreover, the
Company anticipates having sufficient sources of raw materials to meet future
business requirements.

The Company has $200 million of Senior Term Notes with institutional investors
that have a book value of $187.7 million and are classified as long-term debt
with the earliest maturity in 2006. The Company has a treasury rate lock
agreement related to the Senior Term Notes which is being amortized over the
term of the notes. There are several debt covenants related to the Senior
Notes. Under the most restrictive of the covenants, the Company must maintain
a debt-to-capitalization ratio not greater than 65% and must maintain minimum
net worth levels. Of the remaining long-term debt, $15.0 million is made up of
industrial revenue bonds with interest rates ranging from 2.53% to 2.63%. The
balance of $6.3 million, including current maturities of long term debt, is
comprised of property mortgages and promissory notes related to acquisitions.

Based upon the interest rates currently available to the Company for
borrowings with similar terms and maturities, the fair value of the
Companys debt and other financial instruments, after adjusting for the
deferred expense related to the treasury lock, was approximately $243.7
million at October 31, 2002. The balance of the deferred expense related
to the treasury lock on the Senior Notes was $12.3 million as of October
31, 2002 and $12.8 million as of July 31, 2002.





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Page 14

Wallace Computer Services, Inc. and Subsidiaries

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations(continued)

On September 30, 2002, the Company entered into a new $150 million Senior
Credit Facility, that replaced the previous $200 million Credit Facility. The
decrease in the size of the Credit Facility is due to lower future expected
needs for such borrowings. The new Credit Facility expires on September 30,
2005. The new interest rate is based on the London Interbank Offered Rate
(LIBOR) plus a margin. There were no borrowings under the Credit Facility at
October 31, 2002. In addition, the Company has unsecured money market lines of
$25.0 million, under which there were no borrowings at October 31, 2002.

As of October 31, 2002, total debt represented 31.5% of total capitalization.

In the first quarter of fiscal year 2003, capital expenditures totaled $7.5
million. The level of capital expenditures was slightly higher than the first
quarter of fiscal year 2002 as the Company repositioned assets during fiscal
year 2002 in conjunction with the restructuring activities. For fiscal year
2003, the Company estimates that capital and software development expenditures
will total between $40.0 million and $50.0 million.

The Company believes that it has adequate financing
and cash flows to fund currently expected operating requirements,
acquisitions, stock repurchases, dividend payments and/or capital
expenditures now and in the foreseeable future.

The Company has a history of paying dividends and anticipates continued
dividend payments. Annual dividends during fiscal year 2002 were $0.66 per
share and were last raised 3.1% in September 1999.

Summary of Contractual Obligations

A summary of the Companys future contractual payments by fiscal year related
to debt and lease obligations is as follows:

|                    |  |       |       |  |           |       |      |       |  |   |       | 
|------------------- |  | ----- | ----- |  | --------- | ----- | ---- | ----- |  | - | ----- | 
|                    |  |       |       |  |           | Total |      |       |  |   |      
|                    |  | Total |       |  | Operating |       |      |       |  |  
|(In millions)       |  | Debt  |       |  | Leases    |       |      | Total | 
|                    |  |       |       |  |           |       |      |       | 
|2003 (9 months)     |  | $     | 1.1   |  |           | $     | 9.6  |       |  | $ | 10.7  | 
|2004                |  |       | 1.4   |  |           |       | 10.4 |       |  |   | 11.8  | 
|2005                |  |       | 0.5   |  |           |       | 8.5  |       |  |   | 9.0   | 
|2006                |  |       | 65.5  |  |           |       | 5.2  |       |  |   | 70.7  | 
|2007                |  |       | 7.4   |  |           |       | 3.7  |       |  |   | 11.1  | 
|2008 and thereafter |  |       | 145.4 |  |           |       | 8.6  |       |  |   | 154.0 | 
|                    |  |       |       |  |           |       |      |       | 
|Total               |  | $     | 221.3 |  |           | $     | 46.0 |       |  | $ | 267.3 | 
|                    |  |       |       |  |           |       |      |       | 





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##### 



Page 15

Wallace Computer Services, Inc. and Subsidiaries

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)



| |  | Forward Looking Statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Certain statements in this filing and elsewhere (such as in other filings
by the Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management, and oral
statements) may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Words such as expects, anticipates, intends, plans,
believes, estimates, variations of such words and similar expressions
are intended to identify such forward-looking statements. These
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results,
performance or achievements of the Company to materially differ from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include (among other things):
general economic, market or business conditions; changes in laws or
regulations; the opportunities (or lack thereof) that may be presented to
and pursued by the Company and its subsidiaries; successful integration
of acquisitions; labor market conditions; changes in postal rates and
paper prices; the ability of the Company to retain its customers who
generally do not operate under long-term contracts with the Company; the
potential unpredictability of the Companys net sales due to seasonal and
other factors, which can lead to fluctuations in quarterly and annual
operating results; the ability of the Company to keep pace with
technological advancements in the industry; the effect of technical
advancements on the demand for the Companys goods and services; and the
risk of damage to the Companys data centers and manufacturing facilities
or interruptions in the Companys telecommunications links. All
forward-looking statements speak only as of the date of this report or,
in the case of any document incorporated by reference, the date of that
document. The Company does not undertake any obligation to update or
publicly release any revisions to forward-looking statements to reflect
events, circumstances or changes in expectations after the date of this
report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk



| |  | During the first quarter of fiscal year 2003, there were no material
changes to the disclosures about Market Risk in the Companys Annual
Report on Form 10-K for the year ended July 31, 2002.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 4. Controls and Procedures



| |  | The Companys management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), within 90 days preceding the filing
of this report, has conducted an evaluation of the effectiveness of the
Companys disclosure controls and procedures pursuant to Exchange Act
Rules 13a-14(c) and 15d-14(c). Based on that evaluation, the CEO and CFO
have concluded that the Companys disclosure controls and procedures are
effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission
rules and forms.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | There have been no significant changes in internal controls, or in
factors that could significantly affect internal controls, subsequent to
the date the CEO and CFO completed their evaluation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 





---



##### 



Page 16

Wallace Computer Services, Inc. and Subsidiaries

Part II Other Information

Item 1: Legal Proceedings

On November 4, 2002, the Company announced the settlement of a previously
disclosed contract dispute with a third party. The settlement, plus other
related expenses, resulted in a one-time pre-tax charge during the first
quarter of fiscal year 2003 to selling and administrative expenses of
approximately $7.6 million.

Item 6: Exhibits and Reports on Form 8-K

(a) Exhibits

|     |  |                                                                                                                                                                                                                                                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amendment No. 1 to Amended and Restated By-Laws of the
Company as adopted on July 1, 1998, filed herewith.                                                                                                                                                                 
|10.1 |  | $150,000,000 Credit Agreement dated as of September 30,
2002, among Wallace Computer Services, Inc. as the Borrower,
Bank of America, N.A., as Administrative Agent, Swing Line
Lender and L/C Issuer and the other lenders from time to
time party hereto, filed herewith.
|99.1 |  | Certificate of Chief Executive Officer under Section 906 of
the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 
|99.2 |  | Certificate of Chief Financial Officer under Section 906 of
the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 

(b) Reports on Form 8-K

|    |  |                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | A report on Form 8-K was filed on October 23, 2002, to report
the Statements Under Oath of the Principal Executive Officer and
Principal Financial Officer of Wallace Computer Services, Inc.
|(2) |  | A report of Form 8-K was filed on November 4, 2002, regarding
the settlement of a third party contract dispute.                                                                              

Items 2, 3, 4 and 5 are not applicable and have been omitted.





---



##### 



Page 17

SIGNATURES

Pursuant to the requirements 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.

WALLACE COMPUTER SERVICES, INC.

|                      |  |                                                                                                                  
|--------------------- |  | -----------------------------------------------------------------------------------------------------------------
|December 13, 2002Date |  | /s/ M. David JonesM. David Jones
Chairman of the Board and Chief Executive Officer                               
|                     
|December 13, 2002Date |  | /s/ Vicki L. AvrilVicki L. Avril
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer)





---



##### 



Certification of the Principal Executive Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)

I, M. David Jones, the Chairman and Chief Executive Officer of Wallace Computer
Services, Inc. certify that:



| |                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) I have reviewed this quarterly
report on Form 10-Q of Wallace Computer Services, Inc. (the
"Registrant");                                                                                                                                                                                                                     
|
| | (2) Based on my knowledge, this quarterly 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 quarterly report;
|
| | (3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|
| | (4) The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and we
have:                                                                                                      



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures 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
quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of the Registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) The Registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrants auditors and the audit
committee of Registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data
and have identified for the Registrants auditors any material
weaknesses in internal controls; and
|
| | (b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        



| |                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) The Registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ M. David Jones

M. David Jones
Wallace Computer Services, Inc.
Chairman and Chief Executive Officer

December 13, 2002





---



##### 



Certification of the Principal Financial Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Vicki L. Avril, the Senior Vice President and Chief Financial Officer of
Wallace Computer Services, Inc. certify that:



| |                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) I have reviewed this quarterly
report on Form 10-Q of Wallace Computer Services, Inc. (the
Registrant);                                                                                                                                                                                                                     
|
| | (2) Based on my knowledge, this quarterly 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 quarterly report;
|
| | (3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|
| | (4) The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and we
have:                                                                                                      



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures 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
quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of
the Registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        



| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) The Registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrants auditors and the audit
committee of Registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data
and have identified for the Registrants auditors any material
weaknesses in internal controls; and
|
| | (b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        



| |                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) The Registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ Vicki L. Avril

Vicki L. Avril
Wallace Computer Services, Inc.
Senior Vice President and Chief Financial Officer

December 13, 2002