##### Table of Contents



UNITED STATES
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

|                               |  |                       
|------------------------------ |  | ----------------------
|January 31, 2003               |  | 1-6528                
|                               |  |                       
|For the quarterly period ended |  | Commission file number

WALLACE COMPUTER SERVICES, INC.

|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Delaware                                 |  | 36-2515832                          
|                                         |  |                                     
|(State or Other Jurisdiction of          |  | (I.R.S. Employer Identification No.)
|Incorporation or Organization)           |  |                                     
|                                         |  |                                     
|2275 Cabot Drive Lisle, Illinois         |  | 60532                               
|                                         |  |                                     
|(Address of Principal Executive Offices) |  | (ZIP CODE)                          
|                                         |  |                                     
|(630) 588-5000                           |  | 42,244,363                          
|                                         |  |                                     
|(Registrants Telephone Number,          |  | (Number of Common Shares Outstanding
|Including Area Code)                     |  | as of February 21, 2003)            

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

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

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





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TABLE OF CONTENTS



|                             |                                                                                               |                                                      |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I Financial Information
|                             | Item 1. Financial Statements                                                                 
|                             |                                                                                               | Condensed Consolidated Statement of Operations      
|                             |                                                                                               | Condensed Consolidated Balance Sheet                
|                             |                                                                                               | Condensed Consolidated Statement of Cash Flows      
|                             |                                                                                               | Notes to Condensed Consolidated Financial Statements
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                             | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                             | Item 4. Controls and Procedures                                                              
|Part II Other Information   
|                             | Item 1: Legal Proceedings                                                                    
|                             | Item 4: Submission of Matters to a Vote of Security Holders                                  
|                             | Item 6: Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                  
|Certifications              
|Certification of CEO        
|Certification of CFO        



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##### Table of Contents



Page 2

Wallace Computer Services, Inc.
FORM 10-Q
For the Quarter Ended January 31, 2003

INDEX

|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|                              |  | Page No.                                                                             
|Part I: Financial Information |  |                                                                                      
|                              |  |                                                                                       |  |   
|Item 1.                       |  | Financial Statements                                                                  |  | 3 
|                              |  |                                                                                       |  |   
|                              |  | Condensed Consolidated Statement of Operations                                        |  | 3 
|                              |  |                                                                                       |  |   
|                              |  | Condensed Consolidated Balance Sheet                                                  |  | 5 
|                              |  |                                                                                       |  |   
|                              |  | Condensed Consolidated Statement of Cash Flows                                        |  | 6 
|                              |  |                                                                                       |  |   
|                              |  | Notes to the Condensed Consolidated Financial Statements                              |  | 7 
|                              |  |                                                                                       |  |   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  | 14
|                              |  |                                                                                       |  |   
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 19
|                              |  |                                                                                       |  |   
|Item 4.                       |  | Controls and Procedures                                                               |  | 19
|                              |  |                                                                                       |  |   
|Part II: Other Information    |  |                                                                                      
|                              |  |                                                                                       |  |   
|Item 1.                       |  | Legal Proceedings                                                                     |  | 19
|                              |  |                                                                                       |  |   
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 19
|                              |  |                                                                                       |  |   
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                      |  | 19
|                              |  |                                                                                       |  |   
|Signatures                    |  | 20                                                                                   
|                              |  |                                                                                       |  |   
|Certifications                |  |                                                                                      





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Page 3

Wallace Computer Services, Inc.
FORM 10-Q
For the Quarterly Period Ended January 31, 2003










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 |      |   |         |         |        
|                                         |                                             |                          |         | January 31 |        
|                                         |                                             |                          |         |            |        
|                                         |                                             |                          |         |            |         |  |       | %                          |      |   |         |         |         |  | %     |     
|(In thousands, except per share amounts) |                                             | 2003                     |         |            | Sales   |  |       | 2002                       |      |   | Sales   |        
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|Net Sales                                |                                             | $                        | 379,958 |            |         |  | 100.0 |                            |      | $ | 396,380 |         |         |  | 100.0 |     
|Cost and Expenses                        |                                             |                          |         |            |         |  |       |                            |      |   |         |         |         |  |       |     
|                                         | Cost of goods sold                          |                          |         | 277,271    |         |  |       | 73.0                       |      |   |         | 292,908 |         |  |       | 73.9 |      
|                                         | Selling and administrative expenses         |                          |         | 58,957     |         |  |       | 15.5                       |      |   |         | 62,347  |         |  |       | 15.7 |      
|                                         | Provision for depreciation and
amortization |                          |         | 15,273     |         |  |       | 4.0                        |      |   |         | 16,976  |         |  |       | 4.3  |      
|                                         | Restructuring charges                       |                          |         |           |         |  |       | 0.0                        |      |   |         | 30,272  |         |  |       | 7.6  |      
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|                                         |                                             | Total costs and expenses |         |            | 351,501 |  |       |                            | 92.5 |   |         |         | 402,503 |  |       |      | 101.5 | 
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|                                         | Operating income (loss)                     |                          |         | 28,457     |         |  |       | 7.5                        |      |   |         | (6,123  | )       |  |       | (1.5 | )    
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|                                         | Interest income                             |                          |         | (422       | )       |  |       | (0.1                       | )    |   |         | (204    | )       |  |       | (0.0 | )    
|                                         | Interest expense                            |                          |         | 4,990      |         |  |       | 1.3                        |      |   |         | 5,875   |         |  |       | 1.5  |      
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|                                         | Income (loss) before income taxes           |                          |         | 23,889     |         |  |       | 6.3                        |      |   |         | (11,794 | )       |  |       | (3.0 | )    
|                                         | Provision (benefit) for income taxes        |                          |         | 9,078      |         |  |       | 2.4                        |      |   |         | (4,447  | )       |  |       | (1.1 | )    
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|Net Income (Loss)                        |                                             | $                        | 14,811  |            |         |  | 3.9   |                            |      | $ | (7,347  | )       |         |  | (1.9  | )   
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |        
|Basic earnings (loss) per share          |                                             | $                        | 0.35    |            |         |  |       |                            |      | $ | (0.18   | )       |         |  |       |     
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |         |         | 
|Diluted earnings (loss) per share        |                                             | $                        | 0.35    |            |         |  |       |                            |      | $ | (0.18   | )       |         |  |       |     
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |         |         | 
|Average common shares outstanding        |                                             |                          | 41,917  |            |         |  |       |                            |      |   | 41,098  |         |         |  |       |     
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |         |         | 
|Diluted common shares outstanding        |                                             |                          | 42,483  |            |         |  |       |                            |      |   | 41,098  |         |         |  |       |     
|                                         |                                             |                          |         |            |         |  |       |                            |      |   |         |         |         | 
|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 Statement of Operations
(Unaudited)

|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |         |       |       |      |      | 
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------------------------ | ------- | ------- | ----- | ---- | ---- | ---- | -------- | -------- | ------- | ------- | ----- | ----- | ---- | ---- | 
|                                                                                            |                                                                                          |                                             |                          | For the Six Months Ended
|                                                                                            |                                                                                          |                                             |                          | January 31              
|                                                                                            |                                                                                          |                                             |                          |                          |        
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      | %    |      |          |          |         |         |       | %     |     
|(In thousands, except per share amounts)                                                    |                                                                                          | 2003                                        |                          |                          | Sales   |         |       | 2002 |      |      | Sales    |         
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|Net Sales                                                                                   |                                                                                          | $                                           | 764,888                  |                          |         |         | 100.0 |      |      | $    | 804,813  |          |         |         | 100.0 |      
|Cost and Expenses                                                                           |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |         |       |      
|                                                                                            |                                                                                          | Cost of goods sold                          |                          |                          | 555,959 |         |       |      | 72.7 |      |          |          | 596,266 |         |       |       | 74.1 |     
|                                                                                            |                                                                                          | Selling and administrative expenses         |                          |                          | 124,751 |         |       |      | 16.3 |      |          |          | 122,091 |         |       |       | 15.2 |     
|                                                                                            |                                                                                          | Provision for depreciation and
amortization |                          |                          | 30,848  |         |       |      | 4.0  |      |          |          | 34,751  |         |       |       | 4.3  |     
|                                                                                            |                                                                                          | Restructuring charges                       |                          |                          | 643     |         |       |      | 0.1  |      |          |          | 32,832  |         |       |       | 4.1  |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|                                                                                            |                                                                                          |                                             | Total costs and expenses |                          |         | 712,201 |       |      |      | 93.1 |          |          |         | 785,940 |       |       |      | 97.7 | 
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|                                                                                            | Operating income                                                                         |                                             |                          | 52,687                   |         |         |       | 6.9  |      |      |          | 18,873   |         |         |       | 2.3   |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|                                                                                            | Interest income                                                                          |                                             |                          | (806                     | )       |         |       | (0.1 | )    |      |          | (535     | )       |         |       | (0.1  | )   
|                                                                                            | Interest expense                                                                         |                                             |                          | 9,723                    |         |         |       | 1.3  |      |      |          | 12,064   |         |         |       | 1.5   |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|                                                                                            | Income before income taxes and the cumulative
effect of a change in accounting principle |                                             |                          | 43,770                   |         |         |       | 5.7  |      |      |          | 7,344    |         |         |       | 0.9   |     
|                                                                                            | Provision for income taxes                                                               |                                             |                          | 16,633                   |         |         |       | 2.2  |      |      |          | 2,864    |         |         |       | 0.3   |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|                                                                                            | Income before the cumulative effect of a change
in accounting principle                  |                                             |                          | 27,137                   |         |         |       | 3.5  |      |      |          | 4,480    |         |         |       | 0.6   |     
|                                                                                            | Cumulative effect of a change in accounting
principle  net of tax                       |                                             |                          |                         |         |         |       |     |      |      |          | (144,078 | )       |         |       | (17.9 | )   
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|Net Income (Loss)                                                                           |                                                                                          | $                                           | 27,137                   |                          |         |         | 3.5   |      |      | $    | (139,598 | )        |         |         | (17.3 | )    
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |         
|Basic earnings per share before the cumulative effect
of a change in accounting principle   |                                                                                          | $                                           | 0.65                     |                          |         |         |       |      |      | $    | 0.11     |          |         |         |       |      
|                                                                                            | Cumulative effect of a change in accounting principle
 net of tax                       |                                             |                          |                         |         |         |       |      |      |      |          | (3.51    | )       |         |       |       |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|                                                                                            | Basic earnings (loss) per share                                                          |                                             | $                        | 0.65                     |         |         |       |      |      |      | $        | (3.40    | )       |         |       |       |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|Diluted earnings per share before the cumulative effect
of a change in accounting principle |                                                                                          | $                                           | 0.64                     |                          |         |         |       |      |      | $    | 0.11     |          |         |         |       |      
|                                                                                            | Cumulative effect of a change in accounting principle
 net of tax                       |                                             |                          |                         |         |         |       |      |      |      |          | (3.47    | )       |         |       |       |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|                                                                                            | Diluted earnings (loss) per share                                                        |                                             | $                        | 0.64                     |         |         |       |      |      |      | $        | (3.36    | )       |         |       |       |     
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|Average common shares outstanding                                                           |                                                                                          |                                             | 41,872                   |                          |         |         |       |      |      |      | 41,103   |          |         |         |       |      
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|Diluted common shares outstanding                                                           |                                                                                          |                                             | 42,309                   |                          |         |         |       |      |      |      | 41,466   |          |         |         |       |      
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        
|Dividends declared per share                                                                |                                                                                          | $                                           | 0.330                    |                          |         |         |       |      |      | $    | 0.330    |          |         |         |       |      
|                                                                                            |                                                                                          |                                             |                          |                          |         |         |       |      |      |      |          |          |         |        



| |                                                                 
| | ----------------------------------------------------------------
| | The accompanying notes are an integral part of these statements.





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Page 5




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

|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |         |   |         | 
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------- | ------------------------- | ------- | ------------- | ------- | -------- | ------- | - | ------- | 
|(In thousands, except share and par value information)    |                                                                                                                                                                                      | January 31, 2003                                                       |                           |         | July 31, 2002 |        
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |        
|Assets                                                    |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|Current assets:                                           |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|                                                          | Cash and cash equivalents                                                                                                                                                            |                                                                        | $                         | 58,777  |               |         | $        | 25,178  |  
|                                                          | Accounts receivable                                                                                                                                                                  |                                                                        |                           | 239,148 |               |         |          | 254,575 |  
|                                                          | Less: allowance for doubtful accounts                                                                                                                                                |                                                                        |                           | (9,266  | )             |         |          | (9,434  | )
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          |                                                                                                                                                                                      |                                                                        | Net receivables           |         |               | 229,882 |          |         |   | 245,141 | 
|                                                          | Inventories                                                                                                                                                                          |                                                                        |                           | 89,799  |               |         |          | 85,437  |  
|                                                          | Assets held for sale                                                                                                                                                                 |                                                                        |                           | 7,342   |               |         |          | 12,467  |  
|                                                          | Current and deferred income taxes                                                                                                                                                    |                                                                        |                           | 24,471  |               |         |          | 31,363  |  
|                                                          | Advances and prepaid expenses                                                                                                                                                        |                                                                        |                           | 9,253   |               |         |          | 5,329   |  
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          |                                                                                                                                                                                      |                                                                        | Total current assets      |         |               | 419,524 |          |         |   | 404,915 | 
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|Property, plant and equipment, at cost                    |                                                                                                                                                                                      |                                                                        | 830,217                   |         |               |         | 820,933  |        
|Less: accumulated depreciation and amortization           |                                                                                                                                                                                      |                                                                        | (522,472                  | )       |               |         | (502,595 | )      
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          | Net property, plant and equipment                                                                                                                                                    |                                                                        |                           | 307,745 |               |         |          | 318,338 |  
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|Goodwill                                                  |                                                                                                                                                                                      |                                                                        | 139,101                   |         |               |         | 139,098  |        
|Cash surrender value of life insurance                    |                                                                                                                                                                                      |                                                                        | 16,304                    |         |               |         | 15,861   |        
|System development costs, net of accumulated amortization |                                                                                                                                                                                      |                                                                        | 45,523                    |         |               |         | 49,003   |        
|Other assets                                              |                                                                                                                                                                                      |                                                                        | 3,050                     |         |               |         | 2,779    |        
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          | Total assets                                                                                                                                                                         |                                                                        | $                         | 931,247 |               |         | $        | 929,994 |  
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|Liabilities and Stockholders Equity                      |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|Current liabilities:                                      |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|                                                          | Current maturities of long-term debt                                                                                                                                                 |                                                                        | $                         | 679     |               |         | $        | 1,233   |  
|                                                          | Accounts payable                                                                                                                                                                     |                                                                        |                           | 68,942  |               |         |          | 78,403  |  
|                                                          | Accrued salaries, wages, profit sharing and other                                                                                                                                    |                                                                        |                           | 86,241  |               |         |          | 89,840  |  
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          |                                                                                                                                                                                      |                                                                        | Total current liabilities |         |               | 155,862 |          |         |   | 169,476 | 
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|Long-term debt                                            |                                                                                                                                                                                      |                                                                        | 208,228                   |         |               |         | 209,303  |        
|Deferred income taxes                                     |                                                                                                                                                                                      |                                                                        | 46,264                    |         |               |         | 49,525   |        
|Deferred compensation and retirement benefits             |                                                                                                                                                                                      |                                                                        | 42,687                    |         |               |         | 43,130   |        
|Other long-term liabilities                               |                                                                                                                                                                                      |                                                                        | 9,223                     |         |               |         | 9,431    |        
|Commitments and contingencies                             |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|Stockholders equity                                      |                                                                                                                                                                                      |                                                                        |                           |         |               |         |          |        
|                                                          |                                                                                                                                                                                      | Preferred stock, $50 par value, authorized 500,000 shares,
none issued |                           |         |              |         |          |         |  |        
|                                                          | Common stock, $1.00 par value, authorized 100,000,000 shares;
issued 45,764,055 shares; and outstanding 41,993,771 shares at
January 31, 2003 and 41,646,402 shares at July 31, 2002 |                                                                        |                           | 45,764  |               |         |          | 45,764  |  
|                                                          | Additional capital                                                                                                                                                                   |                                                                        |                           | 42,095  |               |         |          | 41,355  |  
|                                                          | Deferred compensation                                                                                                                                                                |                                                                        |                           | 3,152   |               |         |          | 3,095   |  
|                                                          | Retained earnings                                                                                                                                                                    |                                                                        |                           | 438,703 |               |         |          | 426,067 |  
|                                                          | Treasury
stock, at cost, 3,770,284 shares at
January 31, 2003 and 4,117,653 shares at
July 31, 2002                                                                                  |                                                                        |                           | (60,050 | )             |         |          | (66,471 | )
|                                                          | Accumulated other comprehensive loss                                                                                                                                                 |                                                                        |                           | (681    | )             |         |          | (681    | )
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|                                                          | Total stockholders equity                                                                                                                                                           |                                                                        |                           | 468,983 |               |         |          | 449,129 |  
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         
|Total liabilities and stockholders equity                |                                                                                                                                                                                      | $                                                                      | 931,247                   |         |               | $       | 929,994  |        
|                                                          |                                                                                                                                                                                      |                                                                        |                           |         |               |         |         



| |                                                                 
| | ----------------------------------------------------------------
| | The accompanying notes are an integral part of these statements.





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##### Table of Contents



Page 6




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

|                                               |                                                                                          |                                                                   |        |                          |         |   |      |          |         |  
|---------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------ | ------------------------ | ------- | - | ---- | -------- | ------- | -
|                                               |                                                                                          |                                                                   |        | For the Six Months Ended |        
|(Dollars in thousands)                         |                                                                                          | January 31                                                        |       
|                                               |                                                                                          |                                                                   |       
|                                               |                                                                                          |                                                                   |        | 2003                     |         |   | 2002 |         
|                                               |                                                                                          |                                                                   |        |                          |         |   |      |         
|Cash Flows from Operating Activities:          |                                                                                          |                                                                   |        |                          |         |   |      |         
|                                               | Net income (loss)                                                                        |                                                                   | $      | 27,137                   |         |   | $    | (139,598 | )      
|                                               | Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |                                                                   |        |                          |         |   |      |          |        
|                                               |                                                                                          | Cumulative effect of a change in accounting
principle, net of tax |        |                          |        |   |      |          | 144,078 |  
|                                               |                                                                                          | Depreciation                                                      |        |                          | 25,264  |   |      |          | 29,123  |  
|                                               |                                                                                          | Amortization                                                      |        |                          | 5,584   |   |      |          | 5,628   |  
|                                               |                                                                                          | Restructuring charges, non-cash                                   |        |                          | (946    | ) |      |          | 21,791  |  
|                                               |                                                                                          | Debt cost amortization                                            |        |                          | 931     |   |      |          | 855     |  
|                                               |                                                                                          | Deferred taxes                                                    |        |                          | (3,261  | ) |      |          | (3,415  | )
|                                               |                                                                                          | Tax benefit-stock option exercises                                |        |                          | 740     |   |      |          |        |  
|                                               |                                                                                          | Loss on disposal of property                                      |        |                          | 196     |   |      |          | 47      |  
|                                               | Changes in assets and liabilities, net of effects of acquisitions
and divestitures       |                                                                   |        |                          |         |   |      |          |        
|                                               |                                                                                          | Accounts receivable                                               |        | 15,259                   |         |   |      | 28,476   |        
|                                               |                                                                                          | Inventories                                                       |        |                          | (4,362  | ) |      |          | 2,873   |  
|                                               |                                                                                          | Advances and prepaid expenses                                     |        |                          | (4,191  | ) |      |          | (2,897  | )
|                                               |                                                                                          | Prepaid taxes                                                     |        |                          | 6,893   |   |      |          | (14,936 | )
|                                               |                                                                                          | Other assets                                                      |        |                          | (2,418  | ) |      |          | 1,563   |  
|                                               |                                                                                          | Accounts payable and other liabilities                            |        |                          | (13,284 | ) |      |          | (14,240 | )
|                                               |                                                                                          | Deferred compensation and retirement benefits                     |        |                          | (443    | ) |      |          | 1,952   |  
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|                                               | Net cash provided by operating activities                                                |                                                                   |        | 53,099                   |         |   |      | 61,300   |        
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|Cash Flows from Investing Activities:          |                                                                                          |                                                                   |        |                          |         |   |      |         
|                                               | Capital expenditures                                                                     |                                                                   |        | (15,067                  | )       |   |      | (11,603  | )      
|                                               | Proceeds from disposal of property                                                       |                                                                   |        | 6,134                    |         |   |      | 3,069    |        
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|                                               | Net cash used in investing activities                                                    |                                                                   |        | (8,933                   | )       |   |      | (8,534   | )      
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|Cash Flows from Financing Activities:          |                                                                                          |                                                                   |        |                          |         |   |      |         
|                                               | Cash dividends paid                                                                      |                                                                   |        | (13,805                  | )       |   |      | (13,567  | )      
|                                               | Net retirements of short-term debt                                                       |                                                                   |        | (554                     | )       |   |      | (1,298   | )      
|                                               | Amounts paid on long-term debt                                                           |                                                                   |        | (2,006                   | )       |   |      | (61,067  | )      
|                                               | Proceeds from issuance of long-term debt                                                 |                                                                   |        |                         |         |   |      | 20,000   |        
|                                               | Proceeds from issuance of common stock                                                   |                                                                   |        | 5,798                    |         |   |      | 7,647    |        
|                                               | Purchase of treasury stock                                                               |                                                                   |        |                         |         |   |      | (4,481   | )      
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|                                               | Net cash used in financing activities                                                    |                                                                   |        | (10,567                  | )       |   |      | (52,766  | )      
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|Net Changes in Cash and Cash Equivalents       |                                                                                          |                                                                   | 33,599 |                          |         |   |     |         
|Cash and Cash Equivalents at Beginning of Year |                                                                                          |                                                                   | 25,178 |                          |         |   |     |         
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|Cash and Cash Equivalents at January 31        |                                                                                          | $                                                                 | 58,777 |                          |         | $ |     |         
|                                               |                                                                                          |                                                                   |        |                          |         |   |     
|Supplemental Disclosure:                       |                                                                                          |                                                                   |        |                          |         |   |      |         
|                                               | Interest paid, net of interest capitalized                                               |                                                                   | $      | 7,188                    |         |   | $    | 9,372    |        
|                                               | Income taxes paid, net of refunds received                                               |                                                                   | $      | 12,426                   |         |   | $    | 18,115   |        



| |                                                                 
| | ----------------------------------------------------------------
| | The accompanying notes are an integral part of these statements.





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Page 7




Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 1  Basis of Presentation

The accompanying condensed consolidated financial statements of Wallace
Computer Services, Inc and its Subsidiaries (Company) as of January 31, 2003
and for the three and six months ended January 31, 2003 and 2002 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 accounting principles generally accepted in the United States
of America 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 condensed 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, the Company has made all adjustments (which
include normal recurring adjustments except as disclosed herein) necessary to
present a fair statement of the Companys financial position as of January 31,
2003, results of operations, cash flows and stockholders equity for the three
and six months ended January 31, 2003 and January 31, 2002. The results of
operations for the three and six month periods ended January 31, 2003 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 (SFAS) No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 provides a single accounting
model for long-lived assets to be disposed of and replaces SFAS No. 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 (FASB) issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. 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.

In November 2002, the FASB issued FASB Interpretation No. (FIN) 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the company must recognize an initial liability for the
fair value, or market value, of the obligations it assumes under that guarantee
and must disclose that information in its interim and annual financial
statements. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 had no effect on the Companys results of
operations, financial position, cash flows or disclosure requirements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 Accounting for Stock-Based
Compensation, to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. The
increased disclosure requirements will apply to the Companys interim and
annual financial statements beginning in the third quarter of the current fiscal year. At the present time, the Company does not
intend to transition to the use of a fair value method of accounting for
stock-based compensation and will continue to apply the disclosure-only
provisions.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. FIN 46 requires that if an entity has a controlling financial
interest in a variable interest entity, the assets, liabilities and results of
activities of the variable interest entity should be included in the
consolidated financial statements of the entity. FIN 46 requires that its
provisions are effective immediately for all arrangements entered into after
January 31, 2003. The Company does not have any variable interest entities,
thus FIN 46 has no effect on the Company.





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Page 8

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 3  Inventories

Inventories at January 31, 2003, and July 31, 2002, were as follows:

|                  |  |                  |        |  |               |   |        | 
|----------------- |  | ---------------- | ------ |  | ------------- | - | ------ | 
|(In thousands)    |  | January 31, 2003 |        |  | July 31, 2002 |  
|                  |  |                  |        |  |               |  
|Raw materials     |  | $                | 11,810 |  |               | $ | 12,365 | 
|Work in process   |  |                  | 19,237 |  |               |   | 17,978 | 
|Finished products |  |                  | 58,752 |  |               |   | 55,094 | 
|                  |  |                  |        |  |               |  
|                  |  | $                | 89,799 |  |               | $ | 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.

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 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. Under the terms of the Credit Facility, the Company may borrow at the London Interbank Offered Rate plus a margin based upon the Companys credit rating. As of January 31, 2003 this margin was 82.5 basis points.
At January 31, 2003, 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, annual reports, 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
Fiscal Year 2002 Annual Report on Form 10-K. Management evaluates segment
performance based on segment profit or loss before interest, income taxes and
certain items as described below not allocated to the segments. Transfers
between segments, which are not significant, are accounted for at standard
cost.





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Page 9

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 5  Segment Reporting (continued)

The Company has no significant non-cash items other than depreciation,
amortization, asset impairments related to the restructuring and the one-time
charge related to the adoption of SFAS 142, Goodwill and Other Intangible
Assets.

Segment data excludes 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, contract settlement costs, merger costs, and
restructuring charges.

Summarized segment data and a reconciliation to the consolidated totals for the
three and six month periods ended January 31, 2003 and 2002 are as follows:

|                     |  |                    |         |  |                                   |   |         |             |  |   |             |   |  |   |         |  
|-------------------- |  | ------------------ | ------- |  | --------------------------------- | - | ------- | ----------- |  | - | ----------- | - |  | - | ------- | -
|                     |  | Three Months Ended |        
|                     |  | (In thousands)     |        
|                     |  |                    |         |  |                                   |   |         |             |  |   |            
|                     |  | Net Sales          |         |  | Income
(loss) before income taxes |  
|                     |  |                    |         |  |                                   |  
|                     |  | January 31,        |         |  | January 31,                       |   |         | January 31, |  |   | January 31, |  
|                     |  | 2003               |         |  | 2002                              |   |         | 2003        |  |   | 2002        |  
|                     |  |                    |         |  |                                   |   |         |             |  |   |             |  
|Forms and Labels     |  | $                  | 200,184 |  |                                   | $ | 199,358 |             |  | $ | 19,913      |   |  | $ | 20,005  |  
|Integrated Graphics  |  |                    | 179,774 |  |                                   |   | 197,022 |             |  |   | 9,362       |   |  |   | 4,144   |  
|Restructuring charge |  |                    |        |  |                                   |   |        |             |  |   |            |   |  |   | (30,272 | )
|Merger costs         |  |                    |        |  |                                   |   |        |             |  |   | (818        | ) |  |   |        |  
|Net interest expense |  |                    |        |  |                                   |   |        |             |  |   | (4,568      | ) |  |   | (5,671  | )
|                     |  |                    |         |  |                                   |   |         |             |  |   |             |  
|Consolidated         |  | $                  | 379,958 |  |                                   | $ | 396,380 |             |  | $ | 23,889      |   |  | $ | (11,794 | )
|                     |  |                    |         |  |                                   |   |         |             |  |   |             |  

|                     |  |                  |         |  |                                |   |         |             |  |                                |             |   |  |   |         |  
|-------------------- |  | ---------------- | ------- |  | ------------------------------ | - | ------- | ----------- |  | ------------------------------ | ----------- | - |  | - | ------- | -
|                     |  | Six Months Ended |        
|                     |  | (In thousands)   |        
|                     |  |                  |         |  |                                |   |         |             |  |                                |            
|                     |  |                  |         |  |                                |   |         |             |  | Income before income taxes and |            
|                     |  |                  |         |  |                                |   |         |             |  | the cumulative effect of a     |            
|                     |  | Net Sales        |         |  | change in accounting principle |  
|                     |  |                  |         |  |                                |  
|                     |  | January 31,      |         |  | January 31,                    |   |         | January 31, |  |                                | January 31, |  
|                     |  | 2003             |         |  | 2002                           |   |         | 2003        |  |                                | 2002        |  
|                     |  |                  |         |  |                                |   |         |             |  |                                |             |  
|Forms and Labels     |  | $                | 403,095 |  |                                | $ | 402,804 |             |  | $                              | 44,933      |   |  | $ | 39,919  |  
|Integrated Graphics  |  |                  | 361,793 |  |                                |   | 402,009 |             |  |                                | 18,109      |   |  |   | 11,786  |  
|Restructuring charge |  |                  |        |  |                                |   |        |             |  |                                | (643        | ) |  |   | (32,832 | )
|Merger costs         |  |                  |        |  |                                |   |        |             |  |                                | (2,112      | ) |  |   |        |  
|Contract settlement  |  |                  |        |  |                                |   |        |             |  |                                | (7,600      | ) |  |   |        |  
|Net interest expense |  |                  |        |  |                                |   |        |             |  |                                | (8,917      | ) |  |   | (11,529 | )
|                     |  |                  |         |  |                                |   |         |             |  |                                |             |  
|Consolidated         |  | $                | 764,888 |  |                                | $ | 804,813 |             |  | $                              | 43,770      |   |  | $ | 7,344   |  
|                     |  |                  |         |  |                                |   |         |             |  |                                |             |  

The restructuring charges, merger costs and the contract settlement are not
allocated to the segments for internal management reporting purposes.
Restructuring charges for the six months ended January 31, 2003 and 2002
related to the segments is as follows:

|                    |  |             |     |  |             |   |      | 
|------------------- |  | ----------- | --- |  | ----------- | - | ---- | 
|                    |  | January 31, |     |  | January 31, |  
|(In millions)       |  | 2003        |     |  | 2002        |  
|                    |  |             |     |  |             |  
|Forms and Labels    |  | $           | 0.1 |  |             | $ | 4.6  | 
|Integrated Graphics |  |             | 0.3 |  |             |   | 24.8 | 
|Corporate           |  |             | 0.2 |  |             |   | 3.4  | 
|                    |  |             |     |  |             |  
|                    |  | $           | 0.6 |  |             | $ | 32.8 | 
|                    |  |             |     |  |             |  

Segment assets as of January 31, 2003 were $446.1 million for Integrated
Graphics, $326.9 million for Forms and Labels, and $158.2 million for
Corporate. Segment assets as of July 31, 2002 were $466.1 million for
Integrated Graphics, $335.0 million for Forms and Labels, and $128.9 million
for Corporate.





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Page 10

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 6  Restructuring

In the first quarter of fiscal year 2002, the Company began a restructuring
initiative (2002 restructuring plan) aimed at improving the overall level of
organizational efficiency and effectiveness, including consolidating and
rationalizing existing facilities and processes, and reducing the overall cost
base of the Company. The first six months of fiscal year 2003 and 2002 results
include pretax charges of $0.6 million and $32.8 million, respectively, related
to this restructuring initiative. The charges included asset write-downs,
employee severance costs, equipment moving costs, consulting charges directly
related to the restructuring and other miscellaneous costs. The activities
related to this restructuring were completed in the first quarter of 2003, and
the Company does not expect any additional restructuring expense in future
quarters related to this initiative.

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

|                                    |                       |   |                   |      |   |                      |     |      |               |   |       |                     |   |   |       |        |  
|----------------------------------- | --------------------- | - | ----------------- | ---- | - | -------------------- | --- | ---- | ------------- | - | ----- | ------------------- | - | - | ----- | ------ | -
|(In thousands)                      |                       |   |                   |      |   |                      |     |      |               |   |       |                     |   |   |       |       
|                                    |                       |   | Asset Write-Downs |      |   | Employee Termination |     |      | Other Charges |   |       | Total 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 |       
|                                    | Cash payments         |   |                   |     |   |                      |     | (126 | )             |   |       | (403                | ) |   |       | (529   | )
|                                    |                       |   |                   |      |   |                      |     |      |               |   |      
|Reserve balance at January 31, 2003 |                       | $ |                  |      |   | $                    | 47  |      |               | $ | 1,203 |                     |   | $ | 1,250 |       
|                                    |                       |   |                   |      |   |                      |     |      |               |   |      

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 January 31, 2003, approximately $7.3 million is recorded as
assets held for sale in the current asset portion of the balance sheet. Cash
proceeds will be derived by the sale of these assets, which is comprised of
three buildings. During the first quarter of fiscal year 2003, the Company
recorded adjustments to reflect a gain realized on the sale of an asset. This
gain was partially offset by additional reductions in the estimated recovery
values of the remaining assets held for sale to reflect current market
conditions. The Company anticipates the remaining assets will be sold within
nine 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 January 31, 2003, 840 employees had been terminated
as part of the 2002 restructuring plan, 792 of whom were from plant locations
and 48 of whom were 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 included 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 11

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 7  Change in Accounting Principle

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses financial accounting and reporting for acquired
goodwill and other intangible assets. The Company was required to adopt the
provisions of SFAS 142 on August 1, 2002, but had the option of adopting early,
as of August 1, 2001. The Company elected early adoption of SFAS 142.
Accordingly, the Company has stopped amortization of goodwill effective August
1, 2001. Under SFAS 142, goodwill is no longer amortized, and the rules for
measuring goodwill impairment use a fair-value-based test. Under the new
rules, a fair value of each of the Companys reporting units with assigned
goodwill must be calculated using either market comparables or a discounted
cash flow approach, or a combination thereof. Once the fair value of the
reporting unit has been determined, the book value of net assets, including
intangibles, of that reporting unit must be compared to the total market value
derived in the first step to determine impairment.

In completing the transitional impairment test required under SFAS 142, the
Company determined the carrying amount of each of its various reporting units
and compared that amount to its fair value. The reporting units for purposes
of SFAS 142 are defined as the Company divisions which are one level below the
segment level. Fair value was determined with the assistance of an outside
professional services firm using a combination of market comparables and
discounted cash flow approaches. The carrying amount of the Companys
Commercial Print division was above its fair value and, as a result, impairment
existed. The amount of impairment was determined using the implied fair
value of the Commercial Print division reporting unit as required by SFAS 142.
As a result of the impairment test, the Company recognized an impairment
charge to write-off goodwill in the amount of $147.5 million ($144.1 million
net of tax) relating to the Commercial Print division in the Integrated
Graphics segment. The impairment loss, net of tax, is recognized in the
statement of operations under the caption cumulative effect of a change in
accounting principle. In accordance with SFAS 142, this charge was recorded
as of the beginning of fiscal year 2002.

Note 8  Earnings per Share

Below is the computation of basic and diluted earnings per share for the three
months ended January 31, 2003 and 2002:

|                                                             |  |      |        |  |      |   |        |  
|------------------------------------------------------------ |  | ---- | ------ |  | ---- | - | ------ | -
|(In thousands, except per share amounts)                     |  | 2003 |        |  | 2002 |  
|                                                             |  |      |        |  |      |  
|Net income (loss)                                            |  | $    | 14,811 |  |      | $ | (7,347 | )
|                                                             |  |      |        |  |      |  
|Weighted-average number of shares                            |  |      | 41,744 |  |      |   | 40,920 |  
|Add: Weighted-average number of shares held in
grantor trust |  |      | 173    |  |      |   | 178    |  
|                                                             |  |      |        |  |      |  
|Shares applicable to basic earnings                          |  |      | 41,917 |  |      |   | 41,098 |  
|Add: net shares from assumed exercise of options             |  |      | 566    |  |      |   |       |  
|                                                             |  |      |        |  |      |  
|Shares applicable to diluted earnings                        |  |      | 42,483 |  |      |   | 41,098 |  
|                                                             |  |      |        |  |      |  
|Basic earnings (loss) per share                              |  | $    | 0.35   |  |      | $ | (0.18  | )
|                                                             |  |      |        |  |      |  
|Diluted earnings (loss) per share                            |  | $    | 0.35   |  |      | $ | (0.18  | )
|                                                             |  |      |        |  |      |  

Shares assumed from the exercise of options were not added to the 2002
calculation as they would have had an antidilutive effect.





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Page 12

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 8  Earnings per Share (continued)

Below is the computation of basic and diluted earnings per share for the six
months ended January 31, 2003 and 2002:

|                                                                                            |  |      |        |  |      |   |          |  
|------------------------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | -------- | -
|(In thousands, except per share amounts)                                                    |  | 2003 |        |  | 2002 |  
|                                                                                            |  |      |        |  |      |  
|Net income before the cumulative effect of a change
in accounting principle                 |  | $    | 27,137 |  |      | $ | 4,480    |  
|Cumulative effect of a change in accounting
principle, net of tax                           |  |      |       |  |      |   | (144,078 | )
|                                                                                            |  |      |        |  |      |  
|Net income (loss)                                                                           |  | $    | 27,137 |  |      | $ | (139,598 | )
|                                                                                            |  |      |        |  |      |  
|Weighted-average number of shares                                                           |  |      | 41,699 |  |      |   | 40,924   |  
|Add: Weighted-average number of shares held in
grantor trust                                |  |      | 173    |  |      |   | 179      |  
|                                                                                            |  |      |        |  |      |  
|Shares applicable to basic earnings                                                         |  |      | 41,872 |  |      |   | 41,103   |  
|Add: net shares from assumed exercise of options                                            |  |      | 437    |  |      |   | 363      |  
|                                                                                            |  |      |        |  |      |  
|Shares applicable to diluted earnings                                                       |  |      | 42,309 |  |      |   | 41,466   |  
|                                                                                            |  |      |        |  |      |  
|Basic earnings per share before the cumulative effect
of a change in accounting principle   |  | $    | 0.65   |  |      | $ | 0.11     |  
|Cumulative effect of a change in accounting
principle per share, net of tax                 |  |      |       |  |      |   | (3.51    | )
|                                                                                            |  |      |        |  |      |  
|Basic earnings (loss) per share                                                             |  | $    | 0.65   |  |      | $ | (3.40    | )
|                                                                                            |  |      |        |  |      |  
|Diluted earnings per share before the cumulative
effect
of a change in accounting principle |  | $    | 0.64   |  |      | $ | 0.11     |  
|Cumulative effect of a change in accounting
principle per share, net of tax                 |  |      |       |  |      |   | (3.47    | )
|                                                                                            |  |      |        |  |      |  
|Diluted earnings (loss) per share                                                           |  | $    | 0.64   |  |      | $ | (3.36    | )
|                                                                                            |  |      |        |  |      |  

Options to purchase shares of common stock within certain price ranges were
outstanding during the each of the reported periods of fiscal year 2003 and
2002 but were not included in the computation of diluted earnings per share
because the options exercise prices were greater than the average market price
of the common shares. The period, number of option shares, price ranges and
expiration dates are noted below.

|                                    |  |        |           |  |             |  |               |                 |  |  |             | 
|----------------------------------- |  | ------ | --------- |  | ----------- |  | ------------- | --------------- |  |  | ----------- | 
|Period                              |  | Shares |           |  | Price Range |  |               | Expiration Date | 
|                                    |  |        |           |  |             |  |               |                 | 
|Three Months Ended January 31, 2003 |  |        | 1,030,031 |  |             |  | 21.44 - 39.19 |                 |  |  | 2003 - 2012 | 
|Three Months Ended January 31, 2002 |  |        | 1,447,338 |  |             |  | 18.88 - 39.19 |                 |  |  | 2003 - 2011 | 
|Six Months Ended January 31, 2003   |  |        | 1,033,128 |  |             |  | 21.44 - 39.19 |                 |  |  | 2003 - 2012 | 
|Six Months Ended January 31, 2002   |  |        | 1,501,258 |  |             |  | 17.55 - 39.19 |                 |  |  | 2003 - 2011 | 

Note 9  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 to selling and
administrative expenses during the first quarter of fiscal year 2003 of
approximately $7.6 million.





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Page 13

Wallace Computer Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
January 31, 2003
(Unaudited)

Note 10  Proposed Merger

On January 17, 2003, the Company announced a merger agreement under which the
Company will be acquired by Moore Corporation Limited (Moore). Based on the
closing price of Moores common stock on January 16, 2003, the transaction is
valued at approximately $1.3 billion. Each share of Company common stock
outstanding immediately prior to the merger will be converted into, at the
election of the Companys stockholders and subject to proration, either (i) a
number of common shares of Moore equal to 1.05 plus the quotient of 14.40
divided by the average of the high and low sales prices per share of Moore on
the New York Stock Exchange Composite Tape on the last trading day before the
closing of the merger, or (ii) cash in an amount equal to $14.40 plus the
product of 1.05 multiplied by the average of the high and low sales prices per
share of Moore on the New York Stock Exchange Composite Tape on the last
trading day before the closing of the merger. No Company stockholder, however,
will be assured of receiving either all Moore common shares or all cash,
notwithstanding his or her choice. In any case, for each share of Company
common stock owned by a Company stockholder, he or she will receive value, as
determined on the last trading day before the closing of the merger, equal to
$14.40 in cash and 1.05 Moore common shares. The merger was unanimously
approved by the Boards of Directors of the Company and of Moore but remains
subject to customary closing conditions that include, among others, receipt of
required approval from the Companys stockholders, required regulatory
approvals and closing of the required financing. The transaction may not be
completed if any of the closing conditions are not satisfied. Under certain
terms specified in the merger agreement, the Company or Moore may terminate the
agreement, and as a result, either party may be required to pay a termination
fee of up to $27.5 million to the other party.





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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

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions, and estimates that affect
the amounts reported in the condensed 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 for the fiscal year
ended July 31, 2002, 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 annually performs 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.

Postretirement Benefits

The Company records annual amounts relating to its postretirement and pension
plans based on calculations specified by generally accepted accounting
principles which include various actuarial assumptions, such as discount rates
and health care cost trend rates. The Company reviews its actuarial
assumptions on an annual basis and makes modifications to the assumptions based
on current rates and trends when it is deemed appropriate to do so.
The Companys policy is to record the effect of any changes in
assumptions used in the year of the change. Significant changes in
the discount rate and/or health care cost trend rates may impact the
liabilities recorded and the Company's operating results.





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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)

Proposed Merger

On January 17, 2003, the Company announced a merger agreement under which the
Company will be acquired by Moore Corporation Limited (Moore). Based on the
closing price of Moores common stock on January 16, 2003, the transaction is
valued at approximately $1.3 billion. Each share of Company common stock
outstanding immediately prior to the merger will be converted into, at the
election of the Companys stockholders and subject to proration, either (i) a
number of common shares of Moore equal to 1.05 plus the quotient of 14.40
divided by the average of the high and low sales prices per share of Moore on
the New York Stock Exchange Composite Tape on the last trading day before the
closing of the merger, or (ii) cash in an amount equal to $14.40 plus the
product of 1.05 multiplied by the average of the high and low sales prices per
share of Moore on the New York Stock Exchange Composite Tape on the last
trading day before the closing of the merger. No Company stockholder, however,
will be assured of receiving either all Moore common shares or all cash,
notwithstanding his or her choice. In any case, for each share of Company
common stock owned by a Company stockholder, he or she will receive value, as
determined on the last trading day before the closing of the merger, equal to
$14.40 in cash and 1.05 Moore common shares. The merger was unanimously
approved by the Boards of Directors of the Company and of Moore but remains
subject to customary closing conditions that include, among others, receipt of
required approval from the Companys stockholders, required regulatory
approvals and closing of the required financing. The transaction may not be
completed if any of the closing conditions are not satisfied. Under certain
terms specified in the merger agreement, the Company or Moore may terminate the
agreement, and as a result, either party may be required to pay a termination
fee of up to $27.5 million to the other party.

Results of Operations

For the three-month period ended January 31, 2003, net sales decreased 4.1% to
$380.0 million from the quarter ended January 31, 2002. The $16.4 million
decrease in sales was primarily caused by a decrease in the Integrated Graphics
segment revenue as the Forms and Labels segment revenue was essentially flat.
The Integrated Graphics segments sales decreased $17.2 million in the second
quarter of fiscal year 2003 compared to the second quarter of fiscal year 2002.
Approximately $9.9 million of this decrease was due to the closing of plants,
wherein the revenue dollars were not moved to other plants, in conjunction with
the Companys 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 management believes to
be the Companys business area most affected by the slower economy.

For the six-month period ended January 31, 2003, net sales decreased 5.0% to
$764.9 million from the same period in the prior year. The major causes for
the six-month period decline are consistent with those of the second quarter.

Contractual sales continued to increase in both the Integrated Graphics segment
and 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 goods sold for the second quarter of fiscal year 2003 was 73.0% of net
sales as compared to 73.9% in the second quarter of fiscal year 2002. Cost of
goods sold for the six-month period ended January 31, 2003 was 72.7% of net
sales compared to 74.1% in the same period a year ago. The improvement shown
in the second half of fiscal year 2002 continued during this first half of
fiscal year 2003 as the Company continues to show the benefits of its fiscal
year 2002 restructuring activities along with cost management efforts in both
segments.

The Forms and Labels segments quarterly net sales increased 0.4% to $200.2
million, with operating income of $19.9 million and operating margin of 9.9%,
versus operating income of $20.0 million and an operating margin of 10.0% in
the second quarter of last year. The cost of goods sold for the second quarter
of fiscal year 2003 was 70.9% of net sales, which was relatively consistent
with the prior years second quarter cost of goods sold of 70.2%. Although net
sales were relatively flat quarter-over-quarter, increased service offerings
offset a decrease of approximately $5.7 million in net sales from the Companys
fiscal year 2002 exit of the low margin stock and computer paper production
business.

For the six-month period ended January 31, 2003, the Forms and Labels segments
net sales increased 0.1% to $403.1 million, with operating income of $44.9
million and an operating margin of 11.1%, versus operating income of $39.9
million and an operating margin of 9.9% in the prior year-to-date period.
Although approximately $12.2





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Page 16

Wallace Computer Services, Inc. and Subsidiaries

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

million of net sales was lost from the Companys exit of the low margin stock
and computer paper production business, it was recovered through increases in
service offerings. The effects of the fiscal year 2002 restructuring activities
and associated cost savings resulted in the year-over-year improvement in
operating margin.

The Integrated Graphics segments quarterly net sales decreased 8.8% to $179.8
million, with operating income of $9.4 million and operating margin of 5.2%,
versus operating income of $4.1 million and an operating margin of 2.1% in the
second quarter of last year. As part of the fiscal year 2002 restructuring
plan, the Company closed two and sold three plants in this segment. Local
transactional sales lost as a result of the 2002 plant closures are responsible
for approximately $9.9 million (or 58%) of the segments quarterly net sales
decline versus the comparable second quarter in fiscal year 2002. The
remaining decrease is primarily attributable to competitive pricing and
economic pressures. The cost of goods sold for the second quarter of fiscal
year 2003 was 76.6% of net sales, which is 2.2% of net sales improvement over
the prior years second quarter cost of goods sold of 78.8%. This improvement
is due to lower levels of fixed costs and the elimination of unprofitable
plants as a part of the fiscal year 2002 restructuring.

For the six-month period ended January 31, 2003, the Integrated Graphics
segments net sales decreased 10.0% to $361.8 million, with operating income of
$18.1 million and operating margin of 5.0%, versus operating income of $11.8
million and an operating margin of 2.9% in the prior year-to-date period.
Local transactional sales lost as a result of the 2002 plant closures are
responsible for approximately $22.1 million (or 55%) of the year-to-date
decrease with the remaining decrease primarily attributable to competitive
pricing and economic pressures.

Selling and administrative expenses as a percent of net sales for the second
quarter of fiscal year 2003 were 15.5% versus 15.7% last year. Selling and
administrative expenses decreased 5.4% from the prior years second quarter.
Included in the second quarter fiscal year 2003 amount is approximately $0.8
million in costs associated with the proposed merger with Moore. Excluding
this item, selling and administrative expenses for the second quarter of
2003 would be $58.1 million or 15.3% of net sales. This equates to a 6.7%
decrease from the prior years second quarter due to continued cost containment
measures initiated with the fiscal year 2002 restructuring plan.

Year-to-date selling and administrative expenses increased 2.2% to 16.3% of net
sales versus 15.2% of net sales for the same period last year. Included in
selling and administrative expenses for the first six months of fiscal year
2003 is $7.6 million for the settlement of a contract dispute with a third
party and $2.1 million in Moore-related merger costs. Excluding these items,
selling and administrative expenses on a year-to-date basis would be $115.1
million, or 15.0% of net sales.

Depreciation and amortization expense for the second quarter of fiscal year
2003 was $15.3 million, or 4.0% of net sales, versus $17.0 million, or 4.3% of
net sales, in the second quarter a year ago. Depreciation and amortization
expense declined 10.0%, or $1.7 million, from the second quarter of fiscal year
2002 primarily as a result of disposing of assets in the restructuring.

Depreciation and amortization expense for the six-month period ended January
31, 2003 was $30.8 million, or 4% of net sales, down from $34.8 million, or
4.3% of net sales, in the same period of fiscal year 2002. Depreciation and
amortization expense for the six-month period ended January 31, 2003 decreased
11.2% from the same period in fiscal year 2002 primarily due to the reduced
depreciation due to assets disposed in the restructuring.

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. There were no restructuring
charges recorded in the second quarter of fiscal year 2003 compared to $30.3
million of charges in the second quarter of fiscal year 2002. On a
year-to-date basis, the Company had $0.6 million and $32.8 million in
restructuring charges, for fiscal year 2003 and 2002, respectively. There will
be no additional charges related to this restructuring program.

Interest expense for the quarter was $5.0 million, down from $5.9 million last
year. Interest expense for the six-month period ended January 31, 2003 was
$9.7 million, down from $12.1 million in the prior year-to-date period. The
decrease in interest expense in the quarter and for the six-month period can be
attributed to debt reduction during fiscal year 2002. Interest income
increased $0.2 million for the quarter and $0.3 million for the six-month
period ended January 31, 2003 due to an increase in interest earning cash
balances.





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Page 17

Wallace Computer Services, Inc. and Subsidiaries

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

The effective tax rate was 38.0% and 37.7% for the second quarters of fiscal
years 2003 and 2002, respectively. The effective tax rate was 38.0% and 39.0%
for the six-month periods ended January 31, 2003 and 2002, respectively. It is
expected that the annual effective tax rate for fiscal year 2003 will be 38.0%.
The fiscal year 2002 annual effective income tax rate of 35.7% was lower due
to two state tax related non-recurring items that favorably impacted the tax
rate by 3.3%.

Net income for the second quarter was $14.8 million, or $0.35 per share, up
from a loss of $7.3 million, or ($0.18) per share, in the same quarter a year
ago. Income before the cumulative effect of a change in accounting principle
for the six-month period ended January 31, 2003 increased to $27.1 million, or
$0.64 per share, from $4.5 million, or $0.11 per share, in the prior
year-to-date period. The improvement in results in both time periods is due to
larger restructuring charges in fiscal year 2002 and improved operating results
in fiscal year 2003.

Liquidity and Capital Resources

Working capital increased by $28.2 million from July 31, 2002 to January 31,
2003 due primarily to the increase in cash balances of $33.6 million and
decrease in accounts payable of $9.5 million offset by decreases in net
accounts receivable of $15.3 million. The decrease in accounts receivables is
representative of the five day decrease in DSO (days sales outstanding) during
the second quarter of fiscal year 2003 as the Company improved its collection
efforts. The ratio of current assets to current liabilities at January 31,
2003 was 2.7 to 1.

The Companys January 31, 2003, inventory levels increased approximately $4.4
million from July 31, 2002. The Company believes the inventory levels are
adequate to support 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 $188.2 million and are classified as long-term debt
with the earliest maturity in 2006. The Company has a terminated 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. The Company is currently in compliance with all debt
covenants. 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 $5.7 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 $252.8
million at January 31, 2003. The balance of the deferred expense related
to the treasury lock on the Senior Notes was $11.8 million as of January
31, 2003 and $12.8 million as of July 31, 2002.

On September 30, 2002, the Company entered into a $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 Senior Credit Facility expires on September 30, 2005. The
interest rate is based on the London Interbank Offered Rate (LIBOR) plus a
margin. There were no borrowings under the Senior Credit Facility at January
31, 2003.

As of January 31, 2003, total debt represented 30.8% of total capitalization.

For the first six months of fiscal year 2003, capital expenditures totaled
$15.1 million and software development expenditures totaled $1.6 million. The
level of capital expenditures was higher than the first six months of fiscal
year 2002 as the Company reduced its capital requirements by repositioning
assets during fiscal year 2002 in conjunction with the restructuring
activities. Based on the first six months of expenditures, the Company
estimates that total fiscal year 2003 capital and software development
expenditures will total between $30.0 million and $40.0 million. These capital
expenditures are of an ongoing nature for replacement and upgrades of the asset
base and are primarily for machinery and equipment.

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.





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Page 18

Wallace Computer Services, Inc. and Subsidiaries

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

The Company has a history of paying dividends. Annual dividends during fiscal
year 2002 were $0.66 per share and were last raised 3.1% in September 1999.
However, Moore suspended payment of dividends on its common shares in 2001 and
does not currently declare dividend payments on its common shares. Therefore,
the future of dividends is highly uncertain.

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 (6 months)     |  | $     | 0.6   |  |           | $     | 6.8  |       |  | $ | 7.4   | 
|2004                |  |       | 1.3   |  |           |       | 11.4 |       |  |   | 12.7  | 
|2005                |  |       | 0.5   |  |           |       | 9.4  |       |  |   | 9.9   | 
|2006                |  |       | 65.5  |  |           |       | 5.7  |       |  |   | 71.2  | 
|2007                |  |       | 7.4   |  |           |       | 3.7  |       |  |   | 11.1  | 
|2008 and thereafter |  |       | 145.4 |  |           |       | 8.6  |       |  |   | 154.0 | 
|                    |  |       |       |  |           |       |      |       | 
|Total               |  | $     | 220.7 |  |           | $     | 45.6 |       |  | $ | 266.3 | 
|                    |  |       |       |  |           |       |      |       | 

Total debt on the balance sheet is shown net of the $11.8 million treasury lock
and totals $208.9 million.

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): the effect of the
proposed merger with Moore if and when consummated; 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.





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##### Table of Contents



Page 19

Wallace Computer Services, Inc. and Subsidiaries




Item 3. Quantitative and Qualitative Disclosures about Market Risk



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the second 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 Securities and
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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                




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 4: Submission of Matters to a Vote of Security Holders

The Company held its annual meeting of stockholders on December 4, 2002. The
results of the two proposals put to a stockholder vote are as follows:

1) Election of directors for the 2005 class of directors:

|                      |  |     |            |  |          |  |           | 
|--------------------- |  | --- | ---------- |  | -------- |  | --------- | 
|                      |  | For |            |  | Withheld | 
|                      |  |     |            |  |          | 
|Michael T. Riordan    |  |     | 35,563,074 |  |          |  | 2,276,323 | 
|Neele E. Stearns, Jr. |  |     | 36,383,825 |  |          |  | 1,455,572 | 

After the annual meeting, in addition to Mr. Riordan and Mr. Stearns, the following directors
remained on the Companys board of directors: M. David Jones, William J. Devers, Jr., Andrew J. McKenna and
John C. Pope.

2) Ratification of the appointment of Deloitte & Touche LLP as the Companys independent public
accountants for fiscal year 2003:

|           |  |         |         |  |         |  |        | 
|---------- |  | ------- | ------- |  | ------- |  | ------ | 
|For        |  | Against |         |  | Abstain | 
|           |  |         |         |  |         | 
|36,907,652 |  |         | 904,683 |  |         |  | 27,062 | 




Item 6: Exhibits and Reports on Form 8-K

(a)  Exhibits



| |      |                                                                                                                                                                                                                                                      
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1  | Agreement and Plan of Merger, dated as of January 16, 2003,
by and among Moore Corporation Limited, M-W Acquisition, Inc. and
Wallace Computer Services, Inc. (incorporated herein by reference
to the Report on Form 8-K filed on January 17, 2003.)
|
| | 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 January 17, 2003, to
report the Agreement and Plan of Merger, dated January 16, 2003,
among Moore Corporation Limited, M-W Acquisition, Inc. and Wallace
Computer Services, Inc.

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





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##### Table of Contents



Page 20




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.

|              |  |                                                  
|------------- |  | -------------------------------------------------
|March 7, 2003 |  | /s/ M. David Jones                               
|              |  |                                                  
|Date          |  | M. David Jones                                   
|              |  | Chairman of the Board and Chief Executive Officer
|              |  |                                                  
|March 7, 2003 |  | /s/ Vicki L. Avril                               
|              |  |                                                  
|Date          |  | Vicki L. Avril                                   
|              |  | Senior Vice President and Chief Financial Officer
|              |  | (Principal Accounting Officer)                   





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##### Table of Contents






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 the 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

March 7, 2003





---



##### Table of Contents



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, 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 the 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

March 7, 2003