<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                             ---------------------
 
                                   FORM 10-K
       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
<TABLE>
<S>           <C>
 (MARK ONE)
    /X/                   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                             OF THE SECURITIES EXCHANGE ACT OF 1934
                                    FOR THE FISCAL YEAR ENDED
                                        DECEMBER 31, 1997
 
                                               OR
    / /                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                             OF THE SECURITIES EXCHANGE ACT OF 1934
                            FOR THE TRANSACTION PERIOD FROM       TO
</TABLE>
 
                         COMMISSION FILE NUMBER 0-29474
 
                           BIG FLOWER HOLDINGS, INC.
                                ----------------
 
                         COMMISSION FILE NUMBER 1-14084
 
                        BIG FLOWER PRESS HOLDINGS, INC.
          (Exact names of registrants as specified in their charters)
 
<TABLE>
<S>                                                 <C>
                     DELAWARE                                          13-397-1556]
                     DELAWARE                                          13-376-8322
         (State or other jurisdiction of                             (I.R.S. Employer
          incorporation or organization)                           Identification Nos.)
</TABLE>
 
                               3 East 54th Street
                            New York, New York 10022
                                 (212) 521-1600
 
  (Address, including zip code, and telephone number, including area code, of
                   Registrants' Principal Executive Offices)
                           --------------------------
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<S>                                                       <C>
                  TITLE OF EACH CLASS                            NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------------------------  --------------------------------------------------------
 Common Stock, $0.01 par value, of Big Flower Holdings,                   New York Stock Exchange
                          Inc.
   Series A Junior Preferred Stock, $0.01 par value,                      New York Stock Exchange
              of Big Flower Holdings, Inc.
</TABLE>
 
                           --------------------------
 
        Securities registered pursuant to Section 12(g) of the Act: None
                           --------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes /X/  No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  /X/
 
    The aggregate market value of voting stock held by non-affiliates on March
16, 1998 was $469,744,919. For purposes of the foregoing calculation only, all
directors and executive officers of the registrant have been deemed affiliates.
 
    As of March 16, 1998, there were 19,412,850 shares of the registrant's
common stock, par value $0.01 per share, outstanding.
 
    Documents Incorporated By Reference: None
 
--------------------------------------------------------------------------------
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<PAGE>
"CRAIGBOND," "CRAIGSEAL," "ELECTROWEB," "LEAP," "MAXCESS," "REPLICOLOR," "SCENT-
SATIONAL," "SLAPSTICK," "WEBCRAFT," "WEBNETICS," "WIN-PACK," "WYSDOM," "W
(STYLIZED)," "BIAS" AND "BUYLINE" ARE REGISTERED TRADEMARKS OF BIG FLOWER
HOLDINGS, INC. OR ITS SUBSIDIARIES. IN ADDITION, SERVICE MARK APPLICATIONS HAVE
BEEN FILED FOR UFO ULTRALARGE FILM OUTPUT, VIXNET VIRTUAL IMAGING XTRANET,
VISION BANK, LIQUID GRAPHIX AND LIQUID PICTURES.
<PAGE>
                                     PART I
 
               SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
 
    THIS ANNUAL REPORT ON FORM 10-K (THE "REPORT") CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933.
DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN ITEMS 1,
3, AND 7 HEREOF, AS WELL AS WITHIN THIS REPORT GENERALLY. IN ADDITION, WHEN USED
IN THIS REPORT, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE
COULD DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF MANY FACTORS OUTSIDE THE CONTROL OF BIG FLOWER HOLDINGS, INC.,
INCLUDING FLUCTUATIONS IN THE COST OF RAW MATERIALS USED BY THE COMPANY, CHANGES
IN THE ADVERTISING AND MARKETING SERVICES MARKETS, THE FINANCIAL CONDITION OF
THE COMPANY'S CUSTOMERS, THE GENERAL CONDITION OF THE UNITED STATES AND OTHER
ECONOMIES, AND THE MATTERS SET FORTH IN THIS REPORT GENERALLY. CONSEQUENTLY,
SUCH FORWARD-LOOKING STATEMENTS SHOULD BE REGARDED SOLELY AS THE COMPANY'S
CURRENT PLANS, ESTIMATES AND BELIEFS. THE COMPANY DOES NOT UNDERTAKE AND
SPECIFICALLY DECLINES ANY OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT ANY
FUTURE EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT
THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
 
ITEM 1. BUSINESS
 
                                  INTRODUCTION
 
    The Company is a leading advertising and marketing services company with
three principal lines of business: advertising insert and newspaper products,
direct mail and direct marketing products, and digital services. Advertising
insert and newspaper products are provided through Treasure Chest Advertising
Company, Inc. ("TC Advertising"), a leading producer of advertising insert
programs, TV listing magazines, Sunday comics, Sunday magazines and special
supplements for many of the most widely circulated U.S. newspapers. The second
operating unit, Webcraft, Inc. (formerly known as Webcraft Technologies, Inc.
"Webcraft"), is a market leader in design, development and production of highly
personalized, targeted direct mail; specialty advertising; direct marketing;
database solutions and response management services; and fragrance samplers. The
Company's third line of business is conducted through Big Flower Digital
Services, Inc. ("Digital Services"), which offers an array of digital services
through its two subsidiaries: Laser Tech Color, Inc. ("Laser Tech") and
Columbine JDS Systems, Inc. ("Columbine"). Laser Tech is a leading provider of
outsourced, digital premedia and content management services to retailers,
advertising agencies, and consumer product companies. Columbine is a leading
provider of software products and related services to the advertising agency,
cable, satellite and terrestrial broadcast industries in both the United States
and internationally. The Company and its subsidiaries operate in the advertising
and marketing services industry, focusing their products and services on three
sectors of this industry. For information regarding the revenues, operating
profit and identifiable assets of the Company and its subsidiaries for the year
ended December 31, 1997, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Notes 1 and 2 to the
Consolidated Financial Statements of Big Flower Holdings, Inc. and Subsidiaries
(the "Consolidated Financial Statements").
 
    On October 17, 1997, as part of a reorganization of the Company's legal
structure, Big Flower Holdings, Inc. became the parent of Big Flower Press
Holdings, Inc. ("Big Flower Press"). Unless otherwise indicated or the context
clearly implies otherwise, all references in the Report to the "Company" or "Big
Flower" refer to Big Flower Holdings, Inc. and its subsidiaries, including Big
Flower Press, and all references to the common stock, certificate of
incorporation and by-laws, board of directors, agreements and other incidents of
Big Flower shall be references to such matters with respect to Big Flower Press
prior to such reorganization and to Big Flower Holdings, Inc. thereafter. Big
Flower was incorporated in Delaware in 1997. Big Flower Press was incorporated
in Delaware in 1993. Big Flower's and Big Flower
 
                                       1
<PAGE>
Press' principal executive offices are located at 3 East 54th Street, New York,
New York 10022 and their telephone number is (212) 521-1600.
 
INDUSTRY SECTORS
 
    MARKET DATA USED THROUGHOUT THIS REPORT WAS OBTAINED FROM INDUSTRY
PUBLICATIONS AND INTERNAL COMPANY ESTIMATES. WHILE THE COMPANY BELIEVES SUCH
INFORMATION IS RELIABLE, ITS ACCURACY HAS NOT BEEN INDEPENDENTLY VERIFIED AND
CANNOT BE GUARANTEED.
 
    ADVERTISING INSERTS.  The Company believes that the advertising inserts
industry sector generates revenues of $9 billion per year, with approximately
45% of this amount attributable to the production of inserts and the balance to
distribution of the product. The Company believes this industry sector will
continue to grow as non-traditional insert users and national advertisers have
begun including inserts in their media plans and traditional users such as
retailers are spending more of their advertising dollars in this medium.
 
    The Company further believes advertising insert usage will expand as
advertisers are offered the opportunity to distribute more versions of their
inserts and target distribution services for their messages. According to the
Newspaper Association of America, local retail advertisers have increased their
reliance on inserts as advertisers demand more targeting of their message.
 
    DIRECT MAIL.  The Company believes that in this industry sector, customized
direct mail expenditures account for $37.4 billion per year, with approximately
33% going to the production of direct mail and the remainder to other services,
including agency services, data analysis and manipulation and creative
development.
 
    DIGITAL SERVICES.  The traditional pre-media segment of the digital services
industry sector is estimated to be approximately $5.3 billion annually. This
does not, however, reflect the newer digital services that cross into
non-traditional markets that include digital illustration, high speed digital
telecommunications for the movement of image and graphic data, digital asset
management, and new media products. The traditional business model for the
pre-press industry is continuing to evolve from one of traditional pre-press
film and proofs for point of sale, packaging, insert, and collateral advertising
materials to newer digital services. These services are designed to take
advantage of emerging technology which include providing media asset management,
high speed digital telecommunications for the movement of image and graphic
data, as well as state of the art Video Teleconferencing and remote file
annotation. The Company believes that in the future advertisers will need
greater flexibility in the production of digital advertising media, and the need
for collaboration worldwide should drive the delivery of new and innovative
solutions. The delivery of these solutions is most evident in the arena of
facilities management and customer outsourcing, which continues to be a key
growth area.
 
    The Company believes that overall spending in the domestic broadcast
services segment of the digital services industry sector (including production,
distribution and airtime purchasing), is approximately a $50 billion annual
business. The Company believes that the digital broadcast services sector will
continue to grow, both domestically and internationally, with the emergence of
digital, multi-channel broadcasting environments and the increase in the number
of channels which carry advertising content.
 
INDUSTRY BUSINESS STRATEGY
 
    The Company's strategic objective is to enhance its position as an
integrated provider of a diverse range of advertising and marketing services
across a broad spectrum of media. Through internal growth and acquisitions, Big
Flower aims to broaden its technology and services in a manner that allows its
subsidiaries to interact dynamically to create both new services for existing
customers and new customers for its traditional products.
 
                                       2
<PAGE>
    Marketers aim to reach target customers efficiently with the most effective
message and the greatest possible impact. Technological advancements
increasingly allow marketers to understand customer preferences and to
differentiate and individualize advertising messages. Big Flower's strategy is
to assist its customers by providing a broad array of advertising and marketing
services which capitalize on these advancements. Key elements of this strategy
include the following:
 
    PROVIDE INTEGRATED ADVERTISING SOLUTIONS FOR CUSTOMERS.  The Company
believes that by combining the products and services of TC Advertising, Webcraft
and Digital Services, it can work with customers to develop cost-effective and
comprehensive solutions to their particular advertising and marketing needs. Big
Flower has the expertise to work with customers from inception of an advertising
concept through layout design and production, to targeting and distribution of
the printed product, thereby helping customers achieve their advertising goals
in a cost-effective manner. For example, for a major building and hardware
distributor, TC Advertising and Laser Tech presented a comprehensive advertising
package, including insert production, digital photography, page/version creation
and desktop proofing that streamlined the customer's advertising and outsourcing
process. This integrated advertising solution resulted in a multi-year,
outsourced facilities management contract for the Company. The Company believes
that by integrating its digital premedia services, advertising insert
capabilities, newspaper publications, geographic and demographic insert
targeting programs, highly customized direct mail and specialty products, and
broadcast industry software products, it offers its customers certain solutions
not offered by the Company's competitors.
 
    DEVELOP TARGETED ADVERTISING PROGRAMS.  The Company's customers are
increasingly targeting their advertising messages based on more detailed
knowledge of consumers and what they buy. Big Flower has responded to this trend
throughout the Company as follows:
 
    - TC ADVERTISING'S Target Reach system enables the Company to attract new
    categories of customers by providing them with tools to utilize the targeted
    distribution capabilities of major market newspapers. Advertisers can
    customize their advertising to match the demographic characteristics and
    other targeting requirements of over 18,000 newspaper delivery zones in the
    nation's top 300 designated market areas. In addition, the underlying
    software and analysis capabilities of Target Reach have been found valuable
    by newspapers, advertising agencies and national advertisers.
 
    - WEBCRAFT'S highly individualized, multiple component direct mail campaigns
    utilize information refined from customers' databases in combination with
    Webcraft's own expertise in direct mail personalization techniques.
    Webcraft's analytical capabilities--database management, telemarketing and
    response management--allow it to offer a broad array of articulated services
    to current and prospective clients.
 
    - DIGITAL SERVICES' constant innovation of new products fulfills the growing
    needs of its clients. With the addition of Liquid Pictures and Liquid
    Graphics studios located in several of Laser Tech's key locations, Laser
    Tech is working closely with clients to produce high impact two-and
    three-dimensional illustrations, design implementation, and multi-media
    effects. The creation of these services provides reduction in cycle time as
    well an integrated approach to design for print applications. Laser Tech's
    image management software and network distribution systems allow customers
    to gain efficiency in production and to multiply the use of images, thereby
    allowing for greater breadth of advertising message delivery. Columbine's
    array of software analysis tools for broadcasters, rep firms and ad agencies
    allows them to buy or sell advertising in electronic media in an efficient
    manner. For example, its TV Works software product for TV stations allows
    sales representatives and managers to make sophisticated presentations to
    clients, offering highly specific demographic targeting. On the agency side,
    Columbine's MediaLine software provides a powerful analysis of efficiency in
    media planning and buying.
 
                                       3
<PAGE>
    MAXIMIZE CROSS-SELLING OPPORTUNITIES.  Currently, TC Advertising serves a
large customer base of regional and national retailers and newspapers, while
Webcraft's and Laser Tech's customer base consists mainly of consumer product
companies, advertising agencies and national retailers. Columbine's customer
base is mainly TV and radio broadcasters, cable operators and satellite
broadcasters. Big Flower has established employee incentive compensation
programs to promote cross-selling of the entire Big Flower products and services
lines. For example, TC Advertising has begun providing advertising insert
programs to Webcraft's direct mail customers, while Webcraft has begun to
deliver targeted direct mail advertising on behalf of TC Advertising's retail
clients. TC Advertising also has begun to provide Webcraft's commercial games to
its retail customers. In addition, certain premedia, ad design, digital
photography and content management functions previously performed by customers
of TC Advertising and Webcraft are now performed by Laser Tech at its facilities
or under facilities management agreements, and some of Laser Tech's customers
purchase advertising services from TC Advertising and Webcraft. Digital
Services' operating units, Columbine and Laser Tech, are also developing joint
service strategies for advertising agencies, and TC Advertising's Target Reach
software is being promoted to advertising agencies by Columbine's sales force.
 
    CAPITALIZE ON NATIONAL DIGITAL WORKFLOW PLATFORM.  The Company continues to
optimize its nationwide digital communication network to create an Extranet
environment linking TC Advertising's and Laser Tech's facilities, enabling the
Company and its customers to conceive, manipulate, transmit, produce and
distribute their advertising concepts seamlessly on a national scale. This open
standard platform is continuously refined in response to market opportunities.
At December 31, 1997, the Company's digital network connected customers and the
production centers at all Laser Tech facilities and all TC Advertising's
production facilities. TC Advertising production facilities are meeting the
rapid output requirements of highly-versioned insert advertising programs, using
efficient state of the art, digital page processing systems. Laser Tech has
introduced a proprietary, secure telecommunications service called VixNet. It is
an open architecture, extranet-based system which allows two-way graphics, text,
video and voice communications aimed primarily at advertisers and agencies.
Columbine has announced a plan to build a data warehousing service for domestic
broadcasters. It will facilitate the exchange of information between an
increasingly large broadcasting group as well as make a significant contribution
to the development of electronic data interchange between stations and
advertising agencies.
 
    PURSUE STRATEGIC ACQUISITIONS.  Big Flower continues to review opportunities
to extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Digital Services business
units. In addition, Big Flower adds value to strategic acquisitions by
identifying operating synergies and cross-selling opportunities, effective cost
savings and improving efficiency. Since its initial acquisitions of TC
Advertising, Laser Tech and Webcraft, Big Flower has expanded its products and
services through a number of strategic acquisitions that increased the span and
scope of each of these industry sectors and have diversified the Company further
into the digital services sector, as summarized in the table below:
 
<TABLE>
<CAPTION>
BUSINESS UNIT              BUSINESS ACQUIRED                 DATE                   STRATEGIC SIGNIFICANCE
-----------------  ---------------------------------  ------------------  -------------------------------------------
<S>                <C>                                <C>                 <C>
TC Advertising     KTB Associates, Inc. and               April 1994      - Increased TC Advertising's capacity and
                   Retail Graphics Holding                                  broadened its customer base in the
                   Company                                                  advertising insert industry sector
                                                                          - Expanded TC Advertising's capacity and
                                                                            customer base in newspaper TV magazines
 
                   PrintCo., Inc.                        October 1996     - Added significant retail accounts and new
                                                                            production capacity
 
                   Riverside County Publishing           October 1997     - Expanded presence in the Western United
                   Company                                                  States
</TABLE>
 
                                       4
<PAGE>
<TABLE>
<CAPTION>
BUSINESS UNIT              BUSINESS ACQUIRED                 DATE                   STRATEGIC SIGNIFICANCE
-----------------  ---------------------------------  ------------------  -------------------------------------------
<S>                <C>                                <C>                 <C>
Webcraft           Scanforms, Inc.                       October 1996     - Expanded customer base among leading
                                                                            financial services and publishing
                                                                            companies
                                                                          - Added additional high-quality laser
                                                                            personalization capabilities
 
                   Olwen Direct Mail, Limited           September 1997    - Established international platform for
                                                                            the Company
                                                                          - Provided multinational direct mail
                                                                            expertise
                                                                          - Enhanced database management capabilities
 
                   IMPCO Enterprises, Inc.              November 1997     - Expanded direct marketing capabilities to
                                                                            include database services and response
                                                                            management
                                                                          - Positioned Webcraft as a fully integrated
                                                                            direct marketing service provider
 
Digital Services:  Pacific Color Connection, Inc.        October 1996     - Enhanced expertise in digital premedia
                                                                            services
                                                                          - Expanded presence in California
                                                                          - Added internet production services
                                                                          - Expanded product lines to include large
                                                                            format advertising products
 
                   Designer Color Systems, Ltd.         December 1996     - Added capability to produce interactive
                                                                            multimedia systems for electronic
                                                                            catalogs and ordering systems
 
                   Digital Dimensions, Inc.             December 1996     - Enhanced digital imaging services
                                                                            platform
                                                                          - Added capability to provide Web site
                                                                            design and execution
 
                   Gamma One, Inc.                       October 1997     - Provided strategic Northeast presence
                                                                          - Enhanced digital image management and
                                                                            facilitated management capabilities
 
                   Troypeak Limited and                   March 1998      - Added digital premedia services capacity
                   Pismo Limited                                            in Europe
 
                                                                          - Expanded the Company's network for image
                                                                            movement and management to Europe
 
                   Columbine JDS Systems, Inc.           October 1997     - Diversified Big Flower into broadcast
                                                                            media services
                                                                          - Provided strategic coordination between
                                                                            digital moving images and digital still
                                                                            images
                                                                          - Offered software and technology expertise
                                                                            that can be leveraged throughout Big
                                                                            Flower
</TABLE>
 
                                       5
<PAGE>
<TABLE>
<CAPTION>
BUSINESS UNIT              BUSINESS ACQUIRED                 DATE                   STRATEGIC SIGNIFICANCE
-----------------  ---------------------------------  ------------------  -------------------------------------------
<S>                <C>                                <C>                 <C>
                   Broadcast Systems Software           November 1997     - Expanded Columbine's presence in the
                   Limited                                                  United Kingdom Limited
                                                                          - Provided PC-based software for television
                                                                            programming
</TABLE>
 
ORGANIZATIONAL STRUCTURE
 
    The following chart sets forth the current organizational structure of Big
Flower. Big Flower directly or indirectly owns 100% of all of its subsidiaries.
 
                                     [LOGO]
 
               ADVERTISING INSERT PROGRAMS AND NEWSPAPER PRODUCTS
 
    The Company produces advertising insert programs for leading retailers and
Sunday magazines, TV listing guides and special supplements for some of the most
widely circulated U.S. newspapers. For the 1997 fiscal year, the Company
produced approximately 26 billion advertising inserts, 1.6 billion Sunday
comics, 173 million locally edited Sunday magazines and 767 million TV listing
guides. The Company estimates that this represents 22%, 50%, 22% and 24%,
respectively, of the total advertising inserts, Sunday comics, Sunday magazines
and TV listing guides produced in the U.S. in 1997. The Company believes it is
the largest producer of advertising insert programs in the United States. TC
Advertising, the Company's operating unit in this industry sector, is
headquartered in Baltimore, Maryland and operates a national network of 20
production facilities.
 
PRODUCTS AND SERVICES
 
    BACKGROUND.  The Company believes the advertising insert programs industry
sector in the U.S. has grown at a faster rate in recent years than overall
newspaper retail ROP growth and exceeded $10 billion in 1997. Industry research
indicates that more than 75% of consumers read advertising inserts appearing in
 
                                       6
<PAGE>
their Sunday newspaper. In addition, between 46% and 56% of adult readers use
advertising inserts for making their purchasing decisions in key retail
categories.
 
    ADVERTISING INSERT PROGRAMS.  Advertising inserts are stand-alone
advertisements, generally in color, which display a broad range of products sold
by a single retailer or manufacturer. The primary users of advertising insert
programs are general merchandisers, specialty retailers, grocery stores, home
improvement centers and drug stores. Advertising inserts are placed in
newspapers, mailed to consumers or distributed in stores. Advertising inserts
can be produced in color on better quality paper than the reproductions that
typically appear in newspapers. Advertising insert programs also allow users to
vary layout, artwork, design, trim size, paper types, color and formats. TC
Advertising's mix of printing capabilities, which include both heatset and cold
web offset presses, enables it to provide a variety of formats and designs to
meet the diverse needs of its retailing customer base. TC Advertising produces
advertising insert programs for leading U.S. retailers such as American Drug
Stores; Circuit City; The Home Depot; Kmart; Lowe's Companies, Inc.; J.C.
Penney; Safeway, Inc.; Walgreen's and Wal-Mart.
 
    OTHER NEWSPAPER AND PUBLICATIONS PRODUCTS.  The Company produces TV listing
magazines, Sunday comics, Sunday magazines and special supplements for over 300
newspapers, including approximately two-thirds of the 50 most widely circulated
newspapers in the United States.
 
    TC Advertising is the largest single producer of newspaper TV listing guides
in the United States. As of December 31, 1997, TC Advertising produced newspaper
TV listing guides for 36 newspapers including The Baltimore Sun, The Boston
Globe, The Los Angeles Times, The Newark Star-Ledger, Newsday, The New York
Times, The Philadelphia Inquirer and The San Francisco Chronicle.
 
    TC Advertising is the largest producer of Sunday comics nationwide. As of
December 31, 1997, TC Advertising produced Sunday comics for approximately 290
newspapers, including The Atlanta Journal, The Baltimore Sun, The Denver Post,
The Los Angeles Times, The Miami Herald, The Newark Star-Ledger and The
Philadelphia Inquirer.
 
    OTHER SERVICES.  In connection with its advertising insert programs and
other newspaper publications, the Company offers a number of related services,
including creative and composition, digital photography, image management, film
output, digital file transfer and facilities management.
 
ADVERTISING INSERT SECTOR BUSINESS STRATEGY
 
    The Company's business strategy for this industry sector is to maximize the
effectiveness of the advertising insert medium for its customers. Successful
application of this strategy will enable TC Advertising's customers to deliver
their advertising and marketing messages on a cost efficient basis, and will
drive profitability for the Company in this industry sector. The cornerstone of
this strategy is the continued development of an organization that focuses on
assisting customers in maximizing the effectiveness of their advertising
dollars. Key elements of this strategy include:
 
    NATIONWIDE VERSIONING CAPABILITY.  As the only advertising insert producer
offering a national network of both heatset and cold web offset production
facilities, TC Advertising is able to meet the diverse needs of its customers
and achieve significant cost and distribution advantages. TC Advertising
simultaneously produces major national advertising insert programs and other
products in multiple locations, which shortens turnaround time and reduces
shipping costs to the customers' locations. Furthermore, this nationwide network
allows TC Advertising's customers to use a single advertising insert producer to
target specific distribution areas or distribute different versions of an insert
program in different targeted parts of the United States. As the Company
continues to develop its national digital work-flow platform, TC Advertising
expects to improve efficiencies for insert versioning, improve the timeliness of
advertising inserts by reducing the production and distribution cycle time and
enhance the cost-effectiveness of advertising inserts versus other advertising
media.
 
                                       7
<PAGE>
    TARGETED DISTRIBUTION PROGRAM.  TC Advertising has developed a database
information system known as Target Reach, which enables advertisers to use
insert programs to target messages specifically to potential customers who meet
the advertisers' desired geographic, demographic and purchase pattern profiles,
resulting in more cost-effective advertising.
 
    MEASURED MEDIA APPROACH.  TC Advertising is marketing advertising insert
programs as a specific category of measured media, like radio or television. TC
Advertising believes that if insert programs are considered a specific measured
media category, TC Advertising may be in a better position to compete for
advertising budgets. To establish advertising insert programs as a specific
measured media category, TC Advertising has developed proprietary research that
positions the power of advertising inserts against other types of measured
media.
 
    COMPETITIVE COST POSITION.  TC Advertising maintains stringent cost controls
and has implemented programs to enhance efficiency and improve profitability in
recent years. These programs have resulted in increased press speeds, reduced
paper waste and improved capacity utilization. As one of the largest consumers
of newsprint and ink in the United States, TC Advertising believes it is able to
achieve significant purchasing economies under most market conditions.
 
    PRODUCTION LOAD-LEVELING.  TC Advertising has implemented targeted programs
which focus on the newspaper, grocery and other industry groups whose production
needs are weekly in frequency. Printing services for these industry groups
create a more balanced, load-leveling production environment, allowing TC
Advertising to improve planning and utilization of its production capacity. In
addition, TC Advertising is constantly refining its pressline configurations to
optimize equipment utilization, thereby improving operating efficiencies,
service and flexibility and enabling TC Advertising to meet the changing needs
of its customers.
 
    SALES AND CUSTOMERS
 
    The Company's sales force in this industry sector is organized into
geographic business groups. Its three regional geographic groups in this
industry sector cover the northern, southern and western United States. These
sales professionals draw upon their industry expertise, their knowledge of
retailing and the Company's production capabilities to help customers achieve
their advertising objectives on a cost-effective basis. The Company's top ten
customers in this industry sector, which accounted for approximately 36% of the
Company's sales in this industry sector in 1997, were American Drug Stores;
Circuit City; The Home Depot; Kmart; Lowe's Companies, Inc.; Montgomery Ward;
Safeway, Inc.; Walgreen's; Wal-Mart and Western Colorprint. No single customer
represented more than 5.1% of such sales in 1997. As of December 31, 1997, the
average length of the Company's relationship with such top ten customers was
approximately 13 years. Consistent with industry practice, TC Advertising
generally does not have long-term contracts with its retail customers requiring
them to use its products or services. The Company does not believe that the loss
of any single customer of TC Advertising would have a material adverse effect on
the Company's consolidated financial condition or results of operations.
 
                                       8
<PAGE>
    The following table presents the sales by type of customer as a percentage
of total TC Advertising sales:
 
<TABLE>
<CAPTION>
                                                                                                     PERCENTAGE OF
                                                                                                    TC ADVERTISING
CUSTOMER TYPE                                                                                        SALES IN 1997
--------------------------------------------------------------------------------------------------  ---------------
<S>                                                                                                 <C>
General merchandisers.............................................................................          19.9%
Grocery stores....................................................................................          18.0
Specialty retail and furniture....................................................................          17.8
Home improvement centers..........................................................................          13.5
Drug stores.......................................................................................          12.2
Non-retail products...............................................................................           3.7
                                                                                                           -----
      Total advertising inserts...................................................................          85.1
Newspaper TV listing guides.......................................................................           6.2
Sunday comics.....................................................................................           4.9
Other newspaper products and other publications...................................................           3.8
                                                                                                           -----
      Total.......................................................................................         100.0%
                                                                                                           -----
                                                                                                           -----
</TABLE>
 
    COMPETITION
 
    This industry sector is highly fragmented, and TC Advertising competes with
numerous regional and local companies for the production of advertising insert
programs. TC Advertising also competes for national accounts with several large
producers, some of which have greater resources than the Company. TC Advertising
believes that it and three other companies account for approximately 50% of the
advertising insert market in the United States, with more than 140 regional and
local producers accounting for the balance. In addition, TC Advertising's
products compete with television, radio and other forms of print media. TC
Advertising's main independent competitor in the production of Sunday newspaper
comics is American Color Graphics, although some newspapers print their own
comics and others could do so. TC Advertising's newspaper TV listing guides,
Sunday magazine and newspaper supplement operations also face strong competition
both from other printers and newspapers. TC Advertising's major competitors in
these areas are R.R. Donnelley & Sons Company, Quebecor, Inc., American Color
Graphics and World Color Press. Although commercial printing in the United
States remains highly fragmented, recent technological developments and
over-capacity in the printing industry have increased industry consolidation and
competitive pressures. The principal methods of competition in these businesses
are pricing, quality, timeliness of delivery, customer service and value-added
services. Pricing is dependent in large part upon the prices of paper and ink,
which are the major components of TC Advertising's products. Pricing is also
influenced by shipping costs, operating efficiencies and the ability to control
costs. TC Advertising believes that the introduction of new technologies and
continued excess capacity in this industry sector, combined with the cost
pressures facing its customers resulting from among other things, the cost of
paper and postal rates, have resulted in downward pricing pressures and
increased competition in its core businesses. See "-Additional Company
Information-Raw Materials."
 
                                       9
<PAGE>
                DIRECT MAIL AND OTHER DIRECT MARKETING SERVICES
 
    The Company designs, develops and produces highly-personalized, targeted
direct mail; specialty advertising; direct marketing; database solutions and
response management services; and fragrance samplers. With the recent
acquisition of IMPCO Enterprises, Inc. ("IMPCO"), Webcraft is now well
positioned in the high value-added strategic database and response management
businesses, allowing it to provide fully integrated direct marketing solutions.
The Company's main operating unit in this industry sector, Webcraft, is
headquartered in Lawrenceville, New Jersey and has production facilities in
Bristol and Chalfont, Pennsylvania, Rochester, New York, Newark and North
Brunswick, New Jersey, Salisbury, Maryland and Croyden, England.
 
PRODUCTS AND SERVICES
 
BACKGROUND
 
    The Company believes that in the individualized direct mail industry sector
in which Webcraft operates, customized direct mail expenditures account for
$37.4 billion per year, with approximately 33% going to the production of direct
mail and the remainder to other services, including agency services, data
analysis and manipulation, and creative development. Media expenditures for
direct mail advertising grew at an average annual rate of 8% for the period from
1992 to 1997, and are projected to continue to grow at an annual rate of 6.4%
through 2002, according to the 1997 DMA/WEFA Group Study--"Economic Impact: U.S.
Direct Marketing Today." The Company believes more advertisers will use more
sophisticated individualized direct mail techniques as prospect and customer
databases grow in both volume of information stored and sophistication.
 
SPECIALTY PRODUCTION
 
    PERSONALIZED DIRECT MAIL.  The majority of the Company's revenues in this
industry sector are derived from the in-line production of personalized
advertising mailings which are produced by ink-jet, laser and electropress
systems, integrated with an advanced data processing capability. Personalized
direct mail enables consumer goods companies and other marketers to communicate
with their customers on an individual-by-individual basis rather than relying on
the broad non-targeted mailings which typically generate lower response rates.
The Company can develop, customize, process and manipulate databases to enable
its customers to target direct mail recipients based on a combination of more
than a dozen attributes, including the recipient's age, gender, address,
spending habits, such as type of car owned, or whether the recipient is a pet
owner. Personalized direct mail is frequently used in conjunction with larger
print, radio or television promotional campaigns.
 
    The primary users of the Company's personalized direct mail products are
consumer goods and financial services companies and non-profit institutions.
Major customers include Chrysler Corp.; Dean Witter; Publishers Clearing House;
Reader's Digest Association, Inc.; RJR Nabisco Holdings Corp., U.S. Sales and
Brown and Williamson.
 
    STRATEGIC DATABASE SERVICES.  The IMPCO acquisition adds leading edge
database technology and analytical tools "upstream" from Webcraft's core direct
mail production business. As direct marketing becomes increasingly data and
information driven, sophisticated database capabilities become critical to
successful direct marketers, with a growing reliance on outsourcing. The third
party direct marketing information services sector is estimated to be $5.6
billion and growing rapidly. IMPCO's database marketing capabilities include
strategic and tactical consulting, database development and management, modeling
analysis, customized list development and response analysis.
 
    RESPONSE MANAGEMENT SERVICES.  The IMPCO acquisition also adds important
value-added response management services "downstream" from Webcraft's core
direct mail print production, providing the ability to close the direct response
"promotional loop" on the behalf of the customer. These types of
 
                                       10
<PAGE>
programs could range from a lead management and fulfillment program in support
of a high-tech sales force, to managing and fulfilling an on-going prescription
drug sampling program for a leading pharmaceutical manufacturer. Some of the key
capabilities and technology IMPCO brings to this business include tactical
consulting and program development, account management, teleservices (inbound,
outbound, & automated IVR), data entry, fulfillment, and database management.
 
NON-SPECIALTY PRODUCTS AND SERVICES
 
    A significant portion of Webcraft's non-specialty production involves the
production of enhanced envelopes, which are essentially simple printed products
involving the formation of an envelope such as catalog order forms, film mailers
and airline ticket jackets. Webcraft also produces specialty chemicals,
adhesives and coatings. In 1997, approximately 83% of these products were sold
to industry customers and the remainder were used internally. The Company also
produces fragrance samplers, which are product samples, typically of perfume,
which are distributed to potential purchasers of the fragrance through magazine
inserts or as billing statement stuffers for major department stores. Webcraft
is a leading producer of highly specialized fragrance samplers because of its
ability to produce an accurate rendition of the perfume being marketed and its
technological expertise in the microencapsulation of the fragrance. Webcraft
recently patented technology that allows for multiple uses of a single magazine
scent strip. Webcraft's customers in fragrance samplers include Calvin Klein,
Inc.; Elizabeth Arden, Co. and Liz Claiborne. In addition, Webcraft utilizes its
extensive creative design capabilities in combination with in-line finishing to
produce targeted products which are bound into magazines, inserted into packages
or distributed by other means. There are no significant recurring customers in
this area of Webcraft's business.
 
DIRECT MAIL SECTOR BUSINESS STRATEGY
 
    The Company's business strategy in this industry sector is to increase
revenues and maximize profitability in its core business of direct mail products
and customized advertising products, while continuing to de-emphasize non-core
products, such as commercial printing services. The cornerstone of this strategy
is to improve the effectiveness of its customers' advertising products by
developing customized formats and offering complex personalization capabilities
designed to increase response rates. With the addition of strategic database and
response management services, a key component of the overall business strategy
is now to become a leading provider of integrated direct marketing services
across selected key markets, assisting our customers in developing comprehensive
and cost effective direct response solutions. As the trend towards third party
outsourcing of key direct marketing and "customer care" activities accelerates
within the Fortune 1000 companies, the demand for well-positioned integrated
solutions providers should intensify, enhancing profitability and client
loyalty. The key elements of this strategy include:
 
    TECHNOLOGICAL EXPERTISE.  Webcraft believes that the continued development
of its production processes enables it to consistently provide high quality
products and services at competitive prices. Webcraft's technological focus is
on its in-line finishing process that combines the personalizing, folding,
cutting and collecting of several multi-color pieces into a formed envelope in
one step, shortening the time needed to produce complex finished products.
Additionally, its unique combination of format design, multi-stage
personalization and outer wrap (envelope) configurations often provides
customers with superior response rates to their direct marketing programs. These
same processes also enable Webcraft to provide its products more rapidly than
many of its competitors. Webcraft believes that these capabilities are becoming
increasingly important as lead time becomes more compressed and customers demand
faster turn around times to respond to time-sensitive market opportunities. In
addition, with the acquisition of Scanforms, Webcraft's ink-jet technology is
now complemented by Scanforms' traditional laser imaged direct mail.
Furthermore, the conversion of new customers from the more traditional method of
laser imaging of Scanforms to Webcraft's in-line method is made easier because
Webcraft will initially be able to
 
                                       11
<PAGE>
provide services to these new customers in the laser process they are familiar
with before they are converted to Webcraft's in-line method as appropriate.
 
    NEW PRODUCTS.  Webcraft will continue to work with its customers to develop
new products to meet their advertising needs. Webcraft's in-line process,
coupled with advanced design and personalization capabilities, gives Webcraft an
advantage over its competitors in improving the effectiveness of its customers'
direct mail products.
 
    NEW CAPABILITIES AND SERVICES.  With the acquisition of IMPCO, Webcraft is
now positioned in the high value-added strategic database and response
management businesses, allowing it to provide fully integrated direct marketing
solutions. Most of Webcraft's clients today are utilizing these services in some
fashion, in their direct marketing activities and related "customer care"
programs, creating many cross selling opportunities that should further
strengthen customer relationships. As a well positioned, direct marketing
integrated solutions provider, Webcraft should be in an advantageous position to
more aggressively attract new business, as well as capitalize on new market
opportunities.
 
    ENTER NEW MARKETS.  Webcraft will also continue to develop new customers and
will work with TC Advertising and Digital Services to target the retail
industry. Webcraft and its recently-acquired U.K. subsidiary, Olwen Direct Mail,
Limited ("Olwen"), will also target domestic and foreign clients with
multinational direct mail needs.
 
    INTERNATIONAL EXPANSION.  With the recent acquisition of London-based Olwen,
Webcraft has now established an initial foothold into the European direct
marketing industry sector. Olwen enjoys a strong reputation for targeted, high
impact direct mail production. Olwen's wide range of capabilities span from five
color sheet fed printing to sophisticated data processing and personalization,
to complex finishing processes, resulting in high-performing direct mail
programs. Webcraft believes there may be opportunities to incrementally leverage
key domestic client relationships, particularly in the financial services and
publishing arenas, relevant to their European marketing activities. Olwen, with
its satellite Baltimore, Maryland operation, also provides Webcraft with
international address formatting technology, along with the experience of
supporting mail programs for countries throughout the world. Webcraft expects
growing cross selling opportunities as many of its domestic clients expand their
marketing activities internationally.
 
    LEVERAGE DATABASE EXPERTISE.  Webcraft intends to use its expertise in
managing database information to work with its customers to design more
cost-effective campaigns.
 
    COST CONTROL AND PRODUCTIVITY IMPROVEMENTS.  Webcraft has developed a cost
control program which focuses on minimizing waste, reducing labor-intensive
processes and making its selling effort more efficient. In addition, management
has implemented several programs to improve profitability, including
reorganizing its management information systems and business acquisition
systems, which allow Webcraft to utilize press time more effectively. Webcraft
has implemented a new order confirmation system that strengthens its
relationships with its customers, by providing accurate and detailed job
specifications and electronic templates for ease of customer formatting.
Webcraft has also instituted a new make-ready program, resulting in significant
reduction of make-ready time. This has resulted in lowering set-up costs and
increasing total production capacity of the installed base of equipment.
Furthermore, the acquisition of Scanforms strengthens Webcraft's position in the
financial services market because it greatly expands capacity for magnetic ink
readable code checks products.
 
SALES AND CUSTOMERS
 
    The Company employs 63 sales representatives in this industry sector. They
are based in 14 U.S. sales offices or production facilities located in 11
states, the District of Columbia and the United Kingdom. While the majority of
sales are made directly to end users, the Company also sells its direct mail
products
 
                                       12
<PAGE>
and services through advertising agencies, brokers and other agents. The
Company's principal customer groups include consumer goods manufacturers, mail
order and catalog publishers, fragrance marketers, financial institutions,
non-profit organizations and other government agencies. The Company's ten
largest customers in this industry sector (including Calvin Klein, Inc.;
Publishers Clearing House; RJR Nabisco Holdings Corp. and U.S. Sales), accounted
for approximately 35% of its sales in this industry sector in 1997. On average,
these customers had over a ten year relationship with the Company.
 
    Webcraft's sales are typically covered by purchase orders from the client
and signed sales confirmations from Webcraft. These documents detail the terms
and conditions of sale. Prices typically vary from project to project because
each direct mail campaign is unique with its own variables, including run
quantity, dimensions of the printed piece, personalization, special materials
such as scratch off, die cuts and a number of other criteria. The Company does
not believe that the loss of any single customer of Webcraft would have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
 
COMPETITION
 
    In this industry sector, the Company competes with a number of different
firms in each of its principal lines of direct mail business. The primary
competitive factors in its specialty markets are quality, flexibility, service,
timeliness of delivery and price. However, in certain non-specialty markets,
such as the enhanced envelope and government printing markets, price is often
the dominant factor. In the personalized direct mail product category, the
Company's major competitors are Banta Direct Marketing Group, a division of
Banta Corporation; Moore Response Marketing Services, a division of Moore
Business Forms, Inc.; Communicolor, a division of Standard Register Company; and
World Color Press, Inc. In the fragrance sampler line of business, the Company
believes that its major competitors are Arcade, Inc. and Quebecor Inc. The
Company's primary competitor in commercial games products and services is
Dittler Brothers, Inc. In the non-specialty category, the products produced do
not have the same complexity as products produced in Webcraft's specialty
printing services. Because of this lack of complexity, there are a number of
printers capable of competing with the Company in this area. Major competitors
in the non-specialty market include Cyril-Scott Company, Double Envelope Corp.
(Convertagraphics) and RR Donnelly Specialty Products. Increases in printing
press capacity in this segment have led to over-capacity in recent years, with
resulting pricing pressures. Webcraft's management has responded to these
pressures by lowering its cost structure for producing non-specialty products,
de-emphasizing this line of business and growing the specialty products lines to
replace non-specialty products.
 
                                DIGITAL SERVICES
 
    Digital Services is the parent company of Columbine and Laser Tech and is
the third industry sector in which the Company operates. The Company believes
that there are strategic benefits to coordinating Laser Tech's expertise in
digital management of still images, use of server technology and capacity of
broadband telecommunications networks with Columbine's expertise in the digital
management of moving images used in advertising and programming services.
 
    Laser Tech believes it provides an unprecedented range of digital pre-media
services for the commercial advertising, retail catalog and packaging
industries. Services and technology include two-and three-dimensional
illustrations, digital photography, design fulfillment, desktop publishing,
turn-key catalog and insert advertising production, electronic retouching,
ultra-large format film, large display ad production, photopolymer platemaking,
client/server software and hardware, digital asset management for high speed
image retrieval, digital telecommunications for the movement of image and
graphic data, and video teleconferencing. Laser Tech is headquartered in Irving,
Texas and offers its customers services in twelve full service outsourcing
centers, three specialty service facilities and six facilities which Laser Tech
manages at its client locations.
 
                                       13
<PAGE>
PREMEDIA PRODUCTS AND SERVICES
 
    BACKGROUND.  The Company believes that premedia products and services
business exceeds $5.3 billion annually. Laser Tech believes that the digital
premedia business will continue to grow with the emergence of new distribution
technologies such as CD-ROM and the World Wide Web that use digitized images.
Furthermore, the acceleration of digital technologies used in premedia services
has necessitated greater data processing expertise and comparatively greater
capital expenditure, leading many businesses to outsource their premedia
requirements.
 
    ELECTRONIC PREMEDIA ("EPM") OPERATIONS.  EPM involves the electronic capture
of black and white or full color pictures and image retouching combined with
text and graphics into a page layout suitable for distribution in a print or new
media format such as CD-ROM or the World Wide Web. The Company's comprehensive
line of EPM services include the following:
 
        DIGITAL PHOTOGRAPHY.  The Company operates twelve fully equipped digital
    photography studios capable of capturing images greater than 100 megabytes
    for an output print size of up to 20" x 30".
 
        ELECTRONIC RETOUCHING.  The Company offers its customers high-end
    facilities for electronic creation or retouching of visual images. The
    resulting digital image can be output as color transparency or offset film
    or distributed for Internet or CD-ROM publication.
 
        DIGITAL IMAGE SCANNING.  The Company scans and color corrects
    transparencies, photo prints or illustrations, then outputs the digital
    image file to a variety of media for print or electronic distribution.
 
        PAGE ASSEMBLY.  The Company places digital image files into customer
    page layouts to form finished printable advertising materials. These same
    digital files can be re-formatted for output to digital media such as
    Internet or multi-media. The Company utilizes MacIntoshO and Windows NTO
    desktop publishing technologies as well as UNIX-basedO client/server
    technologies from Silicon Graphics, Inc., Sun Microsystems, Inc., Digital
    Equipment Corporation, Inc. and others.
 
        ELECTRONIC OUTPUT.  The Company outputs completed digital image files to
    a variety of output media, including regular and oversize lithographic
    films, color transparency, digital printing plate, digital new media such as
    the Internet or CD-ROM as well as direct digital color display graphics.
 
        PROOFING.  For each digital image file produced, the Company offers a
    variety of color proofing methods from direct digital methods in which the
    digital file is output to a color proof prior to final media output, to
    conventional analog proofs in which lithographic films are exposed onto
    color proofing materials. The Company operates low cost remote digital
    proofing facilities at many customer locations to provide the customer
    virtually instantaneous access to final digital files.
 
        PACKAGING.  The Company offers full service specialized services to
    packaging customers in image capture, art production, page assembly,
    proofing and photopolymer platemaking tailored for both lithographic and
    flexographic packaging products. Packaging products require different skill
    sets and capabilities than advertising materials due to the varied
    manufacturing technologies peculiar to consumer packaging reproduction.
 
        FACILITIES MANAGEMENT.  Laser Tech's Facilities Management division
    specializes in providing on-site digital premedia services to agencies,
    corporate advertisers or printers. Services may include only one or all of
    Laser Tech's service offerings. Facilities Management sites typically
    involve long-term contracts and minimum annual revenue commitments.
 
        DIGITAL ASSET MANAGEMENT.  Laser Tech has developed a range of digital
    asset management applications designed to provide a turn-key technology
    solution to advertisers who desire to manage their digital assets for re-use
    or re-sale to third parties. Laser Tech's Digital Solutions Group is
    developing additional applications to meet the ever expanding needs of
    corporations and advertisers
 
                                       14
<PAGE>
    to store, retrieve and distribute electronically their digital assets.
    Vision Bank, Laser Tech's most recent service offering, is a web accessible
    content data base, enabling customers to warehouse, search and retrieve
    media assets.
 
    The Company's objective in this business is to become the leading provider
of outsourced, digital premedia and content management services to retailers,
advertising agencies, and consumer product companies. Key elements of this
strategy include:
 
    DEVELOP DIGITAL IMAGE MANAGEMENT NETWORKS.  Laser Tech continues to develop
systems to provide its customers with greater access to and control over their
advertising content. Accordingly, it has formed the Digital Solutions Group to
develop an interactive content management service suite which links advertisers
and graphic designers with a database of images, text and graphics. The database
enables them to avoid re-creation costs and streamline production flows by
creating, storing, retrieving, and editing their advertisements through on-line
connections from their offices. Laser Tech continues to work with TC Advertising
to integrate its digital premedia communications network with TC Advertising's
production facilities.
 
    ENTER NEW MEDIA MARKETS.  Laser Tech is leveraging its electronic premedia
services into the emerging technology markets of electronic distribution of
information via the World Wide Web, CD-ROM and other electronic delivery
methods. Laser Tech's traditional customer base is actively seeking to exploit
these emerging media distribution channels. Laser Tech believes that these new
distribution methods, combined with an increasing need for digital archiving and
retrieval of digital images, present significant growth opportunities for Laser
Tech.
 
    EXPAND OUTSOURCING FACILITIES.  Laser Tech maintains multiple facilities in
major markets across the country as well as "outsourced services" sites on
customers' premises and at various TC Advertising production sites. Electronic
imaging hubs are being developed to service Laser Tech's regional and national
customer base. These hubs will provide first-line and overflow imaging
manufacturing support for regional and national sales efforts.
 
    LEVERAGE EXISTING MARKETS.  In conjunction with TC Advertising, Laser Tech
is focusing on providing services to the substantial retail customer base of TC
Advertising, including electronic premedia services, image storage and retrieval
services, and customized application software for increased production
efficiency for both print and new media distribution channels. Furthermore, the
acquisition of Designer Color Systems, Ltd. enhanced Laser Tech's ability to
service its retail customer base with its significant retail advertising insert
and catalog production expertise. The acquisition of Gamma One further extends
Laser Tech's ability to leverage cross selling opportunities between TC
Advertising and Webcraft with the addition of Gamma One's broad-based client
list. The acquisitions of Troypeak Limited and Pismo Limited expand the
Company's service capabilities to Europe, allowing customer development in the
U.S. and Europe and providing seamless image transport across the Atlantic.
 
    Columbine provides a full line of software products and related services to
the advertising agency, cable, satellite and terrestrial broadcast industries in
both the United States and international markets. Services and technology
include a proprietary suite of software products that manage the buying and
selling processes for advertising and the placement of broadcast advertisements,
programming material and sales information data for television stations, radio
stations, broadcast and cable networks, cable operators and direct broadcast
satellite providers. The Company currently provides software products and/ or
services to clients in all 50 states and in approximately 30 countries around
the world. These clients are in the top 50 markets and consist of approximately
950 television stations, approximately 50 radio stations, approximately 80 cable
networks and DBS operators, approximately 190 cable MSOs, and approximately 35
advertising agencies, media buyers and national rep firms. The Company's
operating unit in the broadcast services sector, Columbine, is headquartered in
Denver, Colorado and has three development and support facilities in the United
States and the U.K.
 
                                       15
<PAGE>
    BACKGROUND.  The Company believes that domestic broadcast services spending,
including production, distribution and airtime purchasing, is approximately a
$50 billion annual business. Columbine believes that the digital broadcast
services sector will continue to grow with the emergence of digital, multi-
channel broadcasting environments. This should result in a substantial expansion
of the number of channels on which advertising content will be carried and
consequently expand the utilization of Columbine's advertising insertion
software.
 
    PROPRIETARY SOFTWARE APPLICATIONS.  The Company's software assists
advertising agencies and media representation firms in the buying and selling of
advertising time. All or part of these systems schedule and time commercials,
produce sales analysis and proposals, offer master control automation and
provide program management and accounting and finance functions. The Company's
software products are licensed to customers through long-term contracts with
terms generally ranging from three to five years.
 
    Columbine has begun the introduction of its Paradigm Integrated Broadcast
System, a next-generation software system which integrates and automates all
information management activities and day-to-day operating support for digital,
multi-channel broadcasting environments. The Company believes that Paradigm is
uniquely positioned to service complex international environments and is the
only software solution to successfully address the multiple channel, time-zone,
censorship, language and currency needs of international broadcasters. In
addition to the international opportunities, Paradigm is positioned to address
the complexity of regional direct broadcast satellite systems and other new
international delivery systems that require more sophisticated business
solutions.
 
    CONSULTING SERVICES.  In addition to its proprietary software products, the
Company's expert staff provides related products and services to the electronic
media industry including management consulting, temporary personnel, custom
software development, on-site training, custom business forms and 24-hour
technical support. The Company also serves as a reseller of hardware and
software technologies for its major technology partners that include IBM,
Tektronix, Hewlett Packard and Microsoft.
 
    The Company's objective in this business is to leverage its products and
services, customer relationships and market position as the leading global
provider of broadcast services to the electronic media in order to expand its
international presence and develop solutions for a complex industry. Key
elements to this strategy include:
 
    LEVERAGE STRONG CUSTOMER RELATIONSHIPS.  The Company's success in developing
long-term customer relationships has resulted in over 50% of the company's
customers using the Company's products for more than 10 years. Through the
development of next generation technology and through superior customer service,
the Company will leverage customer relationships in order to capture new
business opportunities resulting from consolidation, digitization and other
industry trends.
 
    EXPAND THE DELIVERY OF THE PARADIGM SYSTEM TO THE INTERNATIONAL AND DOMESTIC
MARKETS.  Paradigm is a total end-to-end solution consisting of many integrated
subsystems. A single relational database serves all modules in the system,
eliminating duplication of data entry and coordinating all activities and
functions. Paradigm integrates all of the key elements in the advertising
buy/sell process and enhances interdepartmental communication. The Company
launched Paradigm in 1997 after a significant investment of 200 man years and
development dollars and intends to control its delivery to ensure that its
customers receive the highest level of service.
 
    DEVELOP NEW MARKETS AND SERVICES.  The rapidly changing requirements of the
electronic media environment result in the demand for complex regional direct
broadcast satellite systems. Internationally, the privatization of existing
state-owned broadcast facilities and the issuance of new licenses for commercial
broadcasters around the world are creating demand for traffic systems on a
global basis. Domestically, the current transition from analog to digital
technology is expected to result in a significant increase in the number of
channels of program delivery through cable and satellite. Increased channels
will further refine viewing audiences and allow more focused audience targeting
for advertisers. The logistics of scheduling delivery of advertisements to
target audiences will require traffic scheduling systems, creating a significant
 
                                       16
<PAGE>
increase in the number of potential purchasers of Columbine's products and
providing increased cross-selling opportunities for Digital Services.
 
SALES AND CUSTOMERS
 
    The Company's premedia sales force is organized into four market categories
with 73 sales representatives in 23 offices. The Company's principal customer
groups in the premedia sector include magazine, retail catalog and advertising
insert producers, consumer product packaging manufacturers, advertising
agencies, and retailers. The largest of these customers include Tracy Locke
Partnership; True North Communications, Inc.; Kraft Foods; Office Depot; RJR
Nabisco Holdings Corp.; Tyson Foods, Inc. and Wal-Mart. The Company does not
believe that the loss of any single customer of Laser Tech would have a material
adverse effect on the Company's consolidated financial condition or results of
operations.
 
    The Company sells and markets its broadcast-related products in the United
States and internationally through a direct field sales organization with 53
sales and marketing people in 7 offices. The Company's principal customer groups
in the broadcast services sector include approximately 950 U.S. and Canadian
broadcast television stations, approximately 550 radio stations, approximately
190 cable operators, approximately 80 cable networks and approximately 35
advertising agencies. The largest of these customers include TV Azteca, S.A. de
C.V., Star TV, M-Net Broadcast Service, Telerep, Inc. Harrington Righter, Foxtel
Management, Ltd., MTV Networks, Rainbow Programming, Telemundo Network, Inc. New
York Times Broadcast Group, Campbell Ewald, Grey Advertising, Univision, WTTO-TV
and Fox Sports Network. The Company does not believe the loss of any single
customer of Columbine would have a material adverse effect on the Company's
consolidated financial condition or results of operation.
 
COMPETITION
 
    The premedia business is highly fragmented and undergoing a period of
consolidation. The Company's major competitors in this sector are Applied
Graphics Technologies, Inc., Wace USA and Schawk, Inc. The major competitive
factors in the premedia business are price, quality of finished products,
distribution capabilities, ongoing customer service and availability of time on
equipment which is appropriate in size and function for a given project. The
consolidation of customers within certain of the Company's premedia businesses
provides both greater competitive pricing pressures and opportunities for
increased volume solicitation.
 
    The Company's main competitor in the broadcast television business, Indenet,
is the second largest provider of such services in this segment and, the Company
believes, has a smaller number of domestic television stations than Columbine.
There are numerous other small software companies providing traffic and related
systems, particularly in the radio station segment of the market. The
advertising agency segment is highly fragmented, both domestically and
internationally, with a number of relatively small suppliers, with the largest
such supplier being Donovan Data Systems.
 
                         ADDITIONAL COMPANY INFORMATION
 
RAW MATERIALS
 
    In 1997, Big Flower spent approximately $630 million on raw materials. The
primary raw materials required in the Company's printing operations are paper,
ink, plates and adhesives and in its premedia operations are film, chemicals,
computer supplies and proofing materials. The Company believes that there are
adequate sources of supply for its primary raw materials and that its
relationships with its suppliers yield improved quality, pricing and overall
service to its customers. Although there can be no assurance that the Company's
sources of supply for its paper will be adequate in all circumstances, in the
event that such sources are not adequate, the Company believes that alternative
sources can be developed in a timely manner.
 
    The Company's results of operations depend to a large extent on the cost of
paper and the ability of the Company to pass along to its customers any
increases in these costs and remain competitive when there are decreases. In
recent years, the Company has substantially reduced the number of its suppliers
of paper
 
                                       17
<PAGE>
and has formed stronger commercial relationships with those suppliers, resulting
in its ability to negotiate favorable price discounts and achieve more assured
sourcing of high quality paper that meets the Company's specifications.
 
    In connection with its acquisition by Big Flower, TC Advertising entered
into a long-term ink supply agreement with a single supplier, effective July 31,
1993, as amended in 1997, pursuant to which it is obligated to purchase from
such supplier a substantial portion of its annual requirements for ink. The
terms of this agreement represent the results of an arms-length negotiation and
are confidential.
 
    Webcraft also has an ink supply agreement with a supplier pursuant to which
Webcraft is obligated until August 1998 to purchase from such supplier not less
than 80% of Webcraft's annual requirements for ink for heatset and flexographic
inks at all plants operated by Webcraft. Price is determined on a price per
pound basis that is subject to adjustments based on competitive pricing. In
addition, Webcraft enjoys an incentive program based on annual purchase levels.
 
    A Webcraft subsidiary has an agreement expiring October, 2001 with a
supplier to purchase all of its requirements for mailing services (inserting,
sorting, tying, bagging and applying postage to direct mail). Prices are
negotiated annually. As part of this agreement, this subsidiary's mailing
services receive priority over other customers of this supplier.
 
    The Company internally produces most of the adhesives needed for its
printing operations, through its adhesives and coatings subsidiary, Webcraft
Chemicals, Inc., but believes that there are other ready sources for these
products. This subsidiary also supplies a variety of specialty chemicals for
unusual format applications.
 
TRADE NAMES, TRADEMARKS AND PATENTS
 
    The Company owns certain trade names, trademarks and patents used in its
business. The loss of any such trade name, trademark or patent would not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
 
SEASONALITY
 
    While TC Advertising's advertising circular business is seasonal in nature,
the addition of other businesses has reduced the overall seasonality of the
Company's revenues. On a pro forma basis, assuming all businesses owned at
December 31, 1997 had been owned for the full year, net sales for the Company
for 1997 would have been 23% in the first quarter, 24% in the second quarter,
26% in the third quarter and 27% in the fourth quarter. Profitability, however,
continues to follow a more seasonal pattern due to the higher margins and
efficiency during the Christmas production season and lower margins in the first
quarter that do not fully leverage fixed depreciation, amortization, interest
and preferred dividend costs incurred evenly throughout the year. Based on its
historical experience and projected operations, the Company expects its
operating results in the near future to be highest in the fourth quarter and
lowest in the first quarter.
 
ENVIRONMENTAL MATTERS
 
    Certain of the operations of the Company's subsidiaries are subject to
federal, state and local environmental laws and regulations concerning health
and safety issues and the discharge, emission, storage, handling and disposal of
hazardous or toxic substances. Such laws and regulations provide for significant
penalties for violations. The Company cannot predict what other environmental
legislation or regulations will be enacted in the future or how existing or
future laws or regulations will be administered or interpreted.
 
    The Company's acquisition of Webcraft resulted in certain obligations under
the New Jersey Industrial Site Recovery Act, formerly known as the Environmental
Cleanup Responsibility Act (together, "ISRA"), which is triggered by the
transfer of industrial property. At two sites, Webcraft and the New Jersey
Department of Environmental Protection ("NJDEP") agreed that Webcraft would
continue to
 
                                       18
<PAGE>
maintain financial guarantees that were previously established pursuant to ISRA,
continue site investigations that were already underway, and institute
remediation measures as appropriate. The Company has obtained an indemnification
from the selling shareholders of Webcraft for certain costs resulting from pre-
existing conditions pertaining to Webcraft, including but not limited to
environmental matters. With respect to Webcraft's ISRA obligations, the Company
believes, based on the indemnification agreement, potential contribution from a
third party for contamination at one site, and existing investigatory and
remediation cost estimates, that its liability for such matters will not have a
material adverse effect on the Company's consolidated financial position or
results of operations. However, there can be no assurance that such matters will
not ultimately have such an effect.
 
    Pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund") and analogous state
laws, TC Advertising and Webcraft have been identified as potentially
responsible parties ("PRPs") for the cleanup of contamination resulting from
alleged disposals of hazardous waste. Courts have interpreted CERCLA to impose
strict, joint and several liability upon all persons liable for response costs
at a site if the harm is indivisible. This generally means that each responsible
party could be held liable for the entire costs of investigation and cleanup. As
a practical matter, however, where there are multiple PRPs, response costs
typically are allocated, according to a volumetric or other standard, among the
parties.
 
    TC Advertising has been identified as a PRP at three sites to which it
allegedly sent waste in the past. Based on a review of the data available to the
Company regarding each site, including the number and viability of other PRPs,
the minor volumes of waste which TC Advertising is alleged to have contributed,
the range of likely cleanup costs, and a comparison of TC Advertising's alleged
liability to settlements previously reached by TC Advertising in similar cases,
the Company believes that such matters will not have a material adverse effect
on the Company's consolidated financial position or results of operations.
Nonetheless, because neither the final cleanup costs at each of the sites have
been ascertained nor TC Advertising's final proportionate share determined,
there can be no assurance that such matters, or any similar liabilities that
arise in the future, will not ultimately have such an effect.
 
    In 1990, the United States Environmental Protection Agency ("EPA")
identified Webcraft, among others, as a PRP for regional groundwater
contamination near Webcraft's Chalfont, Pennsylvania facility. Webcraft
responded by disclaiming any responsibility. EPA, Webcraft and other PRPs are in
the early stages of negotiation. Based on information currently available to the
Company, including the possibility of indemnification from the prior site owner
and indemnification from the selling shareholders of Webcraft, the Company
believes that its liability, if any, will not have a material adverse effect on
the Company's consolidated financial position or results of operations. However,
because of the early stage of this matter, there can be no assurance that it
will not ultimately have such an effect.
 
EMPLOYEES
 
    As of December 31, 1997, the Company had approximately 8,500 employees, of
which approximately 2,100 were salaried and 6,400 were hourly. Most of
Webcraft's hourly employees at its North Brunswick and Newark, New Jersey
facilities (approximately 280 employees) are represented by the United Paper
Workers International Union, AFL-CIO. Webcraft entered into a new three-year
contract with this union on February 1, 1998. Under this agreement, represented
employees received an hourly base rate increase of 2% for 1998, a 2% lump sum
bonus in 1998 and a 3% hourly base rate increase in each of 1999 and 2000. The
Company believes it has satisfactory employee and labor relations.
 
ITEM 2. PROPERTIES
 
    The Company maintains a large number of diverse properties. Management
believes that these properties, taken as a whole, are generally well maintained
and are adequate for current and foreseeable business needs. The majority of
these properties are leased. Substantially all of the Company's materially
important physical properties are being fully utilized. The Company's properties
are covered by all-risk and liability insurance which the Company believes is
customary for the industry.
 
                                       19
<PAGE>
EXECUTIVE OFFICES
 
    Big Flower, TC Advertising, Webcraft, and Digital Services each lease their
executive offices in New York City, New York; Baltimore, Maryland;
Lawrenceville, New Jersey; Irving, Texas and Denver, Colorado, respectively. The
lease terms for Big Flower's, Webcraft's, Laser Tech's and Columbine's
facilities expire in November 2006, August 1999, September 1999 and December
2007, respectively. TC Advertising occupies its executive offices pursuant to
two leases that expire in December 2000 and December 2005, respectively.
 
PRODUCTION FACILITIES
 
    As of December 31, 1997, the Company owned 13 and leased 42 production
facilities, with lease terms expiring from April 30, 1998 to December 25, 2013.
 
    TC Advertising owned 8 and leased 12 production facilities, with an
aggregate square footage of approximately 2,150,000 feet. Webcraft's production
facilities consisted of 5 owned and 6 leased locations, with an aggregate square
footage of approximately 1,000,000 feet. Laser Tech leased its 18 production
facilities, with an aggregate square footage of approximately 277,000 feet.
Columbine's production facilities consisted of 6 leased locations, with an
aggregate square footage of approximately 142,000 feet.
 
SALES OFFICES AND OTHER FACILITIES
 
    As of December 31, 1997, the Company had 49 sales offices and 11 other
facilities. All of the sales offices and other facilities are leased, with lease
terms expiring from April 30, 1998 to December 31, 2007.
 
ITEM 3. LEGAL PROCEEDINGS
 
    Certain claims, suits and complaints (including those involving
environmental matters) which arise in the ordinary course of the Company's
business have been filed or are pending against the Company. The Company
believes that all such matters would not have a material adverse effect on the
Company's consolidated financial condition or results of operations, if
adversely determined against the Company.
 
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
 
    On June 24, 1997, the Company held its Annual Meeting of Stockholders. At
the Annual Meeting, Peter G. Diamandis and Joan D. Manley were reelected to
serve as Directors of the Company, each for an additional term of three years.
The following individuals continue to serve on the Company's Board of Directors:
R. Theodore Ammon, Robert M. Kimmitt, Newton N. Minow and Edward T. Reilly. At
the Annual Meeting, the stockholders also approved certain amendments to the Big
Flower Press Holdings, Inc. Restated 1993 Stock Award and Incentive Plan and
ratified the appointment of Deloitte & Touche LLP as the Company's independent
certified public accountants.
 
    The voting on the above matters is set forth below:
 
ELECTION OF DIRECTORS
 
<TABLE>
<CAPTION>
NOMINEE                                                                                VOTES FOR    VOTES WITHHELD
------------------------------------------------------------------------------------  ------------  --------------
<S>                                                                                   <C>           <C>
Peter G. Diamandis..................................................................    15,848,473       166,958
Joan D. Manley......................................................................    15,848,473       166,958
</TABLE>
 
    PROPOSAL 2--Approval of Certain Amendments to the Big Flower Press Holdings,
Inc. Restated 1993 Stock Award and Incentive Plan: There were 10,362,405 votes
for, 1,609,570 votes against, and 22, 946 abstentions.
 
    PROPOSAL 3--Ratification of the Appointment of Deloitte & Touche LLP: There
were 15,923,334 votes for, 53,341 votes against, and 38,756 abstentions.
 
                                       20
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
MARKET INFORMATION FOR COMMON STOCK
 
    The common stock of Big Flower Holdings, Inc. ("Common Stock") is traded on
the New York Stock Exchange, Inc. under the symbol "BGF". Each share of Common
Stock is traded together with a right entitling the holder to purchase one
one-hundredth of a share of Series A Junior Preferred Stock.
 
    The common stock of Big Flower Press first traded on the New York Stock
Exchange on November 22, 1995. Prior to November 22, 1995, there was no
established trading market for such common stock. In connection with its
corporate reorganization on October 17, 1997, the common stock of Big Flower
Press ceased to so trade, and the common stock of Big Flower Holdings, Inc.
began to trade. Set forth below are the high and low closing prices for the
Common Stock for the period indicated, as reported on the New York Stock
Exchange Composite Tape.
 
FISCAL YEAR ENDED:
 
<TABLE>
<CAPTION>
                                                                                  HIGH         LOW
                                                                                  -----        ---
<S>                                                                            <C>          <C>
DECEMBER 1997
  First Quarter ended March 31...............................................   $      207/8 $      177/8
  Second Quarter ended June 30...............................................          217/8        181/8
  Third Quarter ended September 30...........................................          251 /16        203/8
  Fourth Quarter ended December 31...........................................          243/4        21
 
DECEMBER 1996
  First Quarter ended March 31...............................................   $      191/8 $      107/8
  Second Quarter ended June 30...............................................          145/8        117/8
  Third Quarter ended September 30...........................................          14          121/2
  Fourth Quarter ended December 31...........................................          183/4        121/4
 
TRANSITION PERIOD 1995
  November 22, 1995 to December 31, 1995.....................................   $      153/4 $      15
</TABLE>
 
    As of March 16, 1998, there were approximately 240 holders of record of the
Common Stock.
 
DIVIDENDS
 
    Big Flower has not paid cash dividends on its Common Stock and intends to
continue this policy for the foreseeable future and retain funds for repayment
of indebtedness and investment in its business.
 
    Because Big Flower is a holding company, holders of its debt and equity
securities, including holders of the Common Stock, are dependent primarily upon
the cash flow from Big Flower's subsidiaries for payment of principal, interest
and dividends. Potential dividends and other advances and transfers from Big
Flower's subsidiaries represent its most significant sources of cash flow.
Applicable state laws and the provisions of the debt instruments by which Big
Flower's principal subsidiaries are bound limit the ability of such companies to
declare dividends or otherwise provide funds to Big Flower. On June 12, 1997,
Big Flower Press entered into a revolving credit facility (as amended to date,
the "Credit Agreement"). The Credit Agreement limits the ability of Big Flower
Press to pay dividends to the Company.
 
    In addition, the indenture governing the 8 7/8% Notes due July 1, 2007 of
Big Flower Press imposes certain restrictions on Big Flower Press' ability to
make distributions to Big Flower. Also, the indenture governing the 6%
Convertible Quarterly Income Preferred Securities of Big Flower Trust I
restricts the payment of dividends by Big Flower on its Common Stock in certain
circumstances.
 
                                       21
<PAGE>
    For additional information regarding these securities see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" and Notes 5, 9 and 15 to the
Consolidated Financial Statements.
 
ITEM 6. SELECTED FINANCIAL DATA
 
    The following table sets forth the selected financial data of predecessor TC
Advertising prior to its acquisition by Big Flower Press ("Predecessor TC
Advertising") and of Big Flower and its subsidiaries (including TC Advertising)
thereafter. The selected financial data as of and for the fiscal year ended June
30, 1993 and for the 42 days ended August 11, 1993 were derived from the audited
consolidated financial statements of Predecessor TC Advertising. The selected
financial data for all other periods were derived from the audited financial
statements of Big Flower. The financial data for Big Flower Press Holdings, Inc.
and Subsidiaries as of and for the year ended December 31, 1997 is substantially
equivalent to that of Big Flower for the same period. For additional
information, see the consolidated financial statements of Predecessor TC
Advertising and Big Flower and the notes thereto. The selected historical
financial data should also be read in conjunction with Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
                            SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                        PREDECESSOR
                                       TC ADVERTISING                                 BIG FLOWER
                                   ----------------------  -----------------------------------------------------------------
<S>                                <C>        <C>          <C>          <C>        <C>            <C>           <C>
                                     YEAR       42 DAYS     323 DAYS      YEAR      SIX MONTHS        YEAR          YEAR
                                     ENDED       ENDED        ENDED       ENDED        ENDED         ENDED         ENDED
                                   JUNE 30,   AUGUST 11,    JUNE 30,    JUNE 30,   DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                     1993        1993         1994        1995         1995           1996          1997
                                   ---------  -----------  -----------  ---------  -------------  ------------  ------------
 
<CAPTION>
                                                            IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S>                                <C>        <C>          <C>          <C>        <C>            <C>           <C>
OPERATING DATA:
Net sales........................  $ 555,013   $  59,584    $ 587,630   $ 920,149    $ 546,840     $1,201,860    $1,376,706
Operating income.................     22,436         665       25,488      50,712       39,739         69,343        96,694
Interest expense.................      6,792         578       19,735      37,452       19,076         36,165        40,300
Amortization of deferred
  financing costs................      2,435         126        1,936       3,437        1,594          1,802         1,696
Income (loss) before income
  taxes..........................     10,204        (228)        (549)      5,268       12,694          4,998       (11,626)
Income (loss) before
  extraordinary item.............      4,685        (139)      (3,277)     (1,612)       6,491         (3,285)      (33,571)
Extraordinary losses from early
  extinguishment of debt, net....                                                      (19,248)        (2,078)      (13,463)
Net income (loss)................      4,685        (139)      (3,277)     (1,612)     (12,757)        (5,363)      (47,034)
Per share:
  (Loss) income before
    extraordinary item--basic....                           $   (0.29)  $   (0.13)   $    0.36     $    (0.18)   $    (1.79)
  Net loss--basic................                               (0.29)      (0.13)       (1.07)         (0.30)        (2.51)
  (Loss) income before
    extraordinary
    item--diluted................                               (0.29)      (0.13)        0.35          (0.18)        (1.79)
  Net loss--diluted..............                               (0.29)      (0.13)       (1.03)         (0.30)        (2.51)
Average shares outstanding:
  Basic..........................                              11,218      12,382       13,451         18,046        18,704
  Diluted........................                              11,218      12,382       13,919         18,046        18,704
 
OTHER DATA:
EBITDA (a).......................     34,560       1,901       54,238      93,699       58,372        122,588       164,016
Capital Expenditures.............      6,967       1,280        6,133       8,496       16,812         55,391        74,045
Cash flows provided by (used in)
  operating activities (b).......     21,823      (6,363)      31,514      47,597       27,881        135,936       120,637
Cash flows provided by (used in)
  investing activities (b).......     10,708      (1,280)    (270,223)     (7,013)     (19,050)      (170,849)     (316,601)
Cash flows (used in) provided by
  financing activities (b).......    (31,453)      6,209      241,975     (39,789)      (4,326)        29,941       197,071
</TABLE>
 
                                       22
<PAGE>
<TABLE>
<CAPTION>
                                        PREDECESSOR
                                       TC ADVERTISING                                 BIG FLOWER
                                   ----------------------  -----------------------------------------------------------------
                                     YEAR       42 DAYS     323 DAYS      YEAR      SIX MONTHS        YEAR          YEAR
                                     ENDED       ENDED        ENDED       ENDED        ENDED         ENDED         ENDED
                                   JUNE 30,   AUGUST 11,    JUNE 30,    JUNE 30,   DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                     1993        1993         1994        1995         1995           1996          1997
                                   ---------  -----------  -----------  ---------  -------------  ------------  ------------
                                                            IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S>                                <C>        <C>          <C>          <C>        <C>            <C>           <C>
BALANCE SHEET DATA (AT PERIOD
  END):
Working Capital (c)..............  $  (3,597)               $  25,198   $  34,173    $  29,797     $  (30,821)   $  (17,468)
Net property, plant and
  equipment......................     62,850                  152,306     137,081      145,323        296,426       366,876
Total assets.....................    160,356                  521,461     502,939      573,393        749,742     1,059,047
Long-term debt, net of current
  portion........................     34,485                  331,940     301,935      274,161        430,766       590,045
Redeemable convertible preferred
  securities of a subsidiary
  trust..........................                                                                                   115,000
Redeemable preferred stock of a
  subsidiary.....................                              16,913      19,357
Common stockholders' equity......     32,663                   19,449      16,593       84,476         96,350        71,538
</TABLE>
 
------------------------
 
(a) "EBITDA" represents the sum of operating income, depreciation, amortization
    of intangibles and merger costs. EBITDA does not include costs associated
    with the A/R Securitization facility and is presented here to provide
    additional information about the Company's ability to meet its future debt
    service, capital expenditure and working capital requirements. It should not
    be construed as a better indicator of operating performance than operating
    income as determined in accordance with generally accepted accounting
    principles ("GAAP"), or a better indicator of liquidity than cash flow from
    operating activities as determined in accordance with GAAP. The Company's
    definition of EBITDA might not be the same as that of other companies.
 
(b) Cash flows from operating, investing and financing activities are
    significantly affected by acquisitions. See the consolidated statements of
    cash flows and the related notes and Item 7. "Management's Discussion and
    Analysis of Financial Condition and Results of Operations."
 
(c) In 1996, the Company entered into an A/R Securitization agreement (See
    discussion in Item 7. "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" and Note 6 to the Consolidated
    Financial Statements). Accordingly, 1996 and 1997 results and balances
    reflect the effects of this securitization agreement.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
GENERAL
 
    Operating results reflect the impact of acquisitions in all years presented,
as well as non-operational charges and expenses incurred in connection with
acquisition and refinancing transactions. The changing mix of businesses as
acquired companies are integrated into the Company may also affect the
comparability of results from one period to another.
 
    The cost of paper is a principal factor in TC Advertising's pricing to
certain customers. As TC Advertising is the Company's largest operating unit,
the cost of paper significantly affects the Company's net sales. TC Advertising
is generally able to pass increases in the cost of paper to its customers, while
decreases in paper costs generally result in lower prices to customers.
Volatility in paper costs results in a corresponding volatility in the Company's
net sales, but generally has not affected volume or profits to any significant
extent.
 
                                       23
<PAGE>
RESULTS OF OPERATIONS
 
    The following table presents the major components of the Consolidated
Statements of Operations as a percentage of net sales:
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED    YEAR ENDED    YEAR ENDED
                                                    DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                                        1997          1996        1995 (1)
                                                    ------------  ------------  ------------
<S>                                                 <C>           <C>           <C>
Net sales.........................................        100.0%        100.0%        100.0%
                                                    ------------  ------------  ------------
Costs of production...............................         77.9          80.9          84.0
Selling, general and administrative...............         10.2           8.9           5.6
Depreciation......................................          3.6           2.9           2.1
Amortization of intangibles.......................          1.3           1.4           1.9
Merger costs......................................                        0.1
                                                    ------------  ------------  ------------
                                                           93.0          94.2          93.6
                                                    ------------  ------------  ------------
Operating income..................................          7.0%          5.8%          6.4%
                                                    ------------  ------------  ------------
                                                    ------------  ------------  ------------
OTHER DATA:
EBITDA (in thousands).............................   $  164,016    $  122,588    $  103,502
                                                    ------------  ------------  ------------
                                                    ------------  ------------  ------------
EBITDA as a percentage of net sales...............         11.9%         10.2%         10.4%
                                                    ------------  ------------  ------------
                                                    ------------  ------------  ------------
Cash flows provided by operating activities.......   $  120,637    $  135,936(2)  $   66,297
Cash flows used in investing activities...........     (316,601)     (170,849)      (23,131)
Cash flows provided by (used in) financing
  activities......................................      197,071        29,941       (36,319)
</TABLE>
 
------------------------
 
(1)  The results for the year ended December 31, 1995 are presented for
    comparative purposes only.
 
(2)  Includes $91.6 million from the initial sale of accounts receivable.
 
    "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles and merger costs. EBITDA is presented here to provide additional
information regarding the Company's ability to meet its future debt service,
capital expenditures and working capital requirements. EBITDA is not a measure
of financial performance in accordance with GAAP and should not be considered an
alternative to net income as a measure of operating performance or to cash flows
from operating activities as a measure of liquidity.
 
   COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 WITH THE YEAR ENDED DECEMBER
     31, 1996
 
    Net sales increased to $1.4 billion in 1997, compared to $1.2 billion in
1996, an increase of 14.5%. Adjusting to include the businesses acquired in 1996
and 1997 for the entire comparable periods, and to exclude the net sales of the
Webcraft Games business divested in the fourth quarter of 1996, net sales were
flat with 1996. These results reflect, primarily, the impact of changing
materials prices on the Company's revenues. Adjusting further for the impact of
paper and ink prices on the advertising insert business, net sales increased
approximately 8% for comparable businesses owned. The increase was due to
organic growth in the advertising insert, direct mail and digital services
businesses, as well as increased cross-selling activity whereby two or more
operating units have teamed to provide services to each other's customers.
 
    The organic growth at TC Advertising was achieved by an increase in the
customer base, as home improvement, home furnishings and, particularly, grocery
chains either were added as new customers or increased their volume of
advertising. Volume of production (measured in hours of press operation)
increased 8% over the prior year, exclusive of the impact of 1997 acquisitions.
Much of the added volume was in categories with year-round advertising activity,
serving to reduce the seasonality of the business.
 
                                       24
<PAGE>
Sales gains were also achieved by increasing the customer base for newspaper
television listing guides, higher demand for higher margin heatset printing and
versioning services. The increase was also aided by TC Advertising's new Target
Reach operation.
 
    Sales at Webcraft's direct mail business continued to show strength, with an
18% increase over 1996 excluding the impact of acquisitions. Increases were
achieved primarily in sales to publishing, non-profit, entertainment and
telecommunications customers. Additionally, new products such as magnetic stripe
technology for prepaid telephone cards have added to the volume of this
business. These gains were partially offset by the continued softness in
commercial printing categories, particularly production of catalogs.
 
    Excluding the impact of the Columbine acquisition, growth in Digital
Services was fueled by Laser Tech expanding its national production network to
meet the needs of existing customers with larger volume requirements and to
capitalize upon generally higher demand for outsourced digital premedia
services. Sales gains were strongest in commercial and consumer goods packaging,
augmented by the addition of new image management services.
 
    Operating income for 1997 rose 39.4%, increasing to 7.0% of net sales from
5.8% last year. Adjusting to include businesses acquired in 1996 and 1997 for
the entire comparable periods and to exclude the business sold, operating income
increased approximately 23%. Adjusting further to exclude non-operational
charges, primarily related to acquisitions ($6.3 million in 1997 and $4.2
million in 1996, described below), operating income increased approximately 24%
over the prior year.
 
    Costs of production decreased to 77.9% of net sales from 80.9% in 1996,
reflecting the lower cost of paper and higher proportion of paper supplied by
customers, increased demand for higher margin products and businesses acquired
where paper is less of a component of production costs. Paper costs were 36% of
total net sales in 1997 as compared to 42% in 1996.
 
    Selling, general and administrative expenses increased to 10.2% of net sales
from 8.9% in the prior year. The increase is principally due to the changing mix
of the Company's businesses and their relative contribution to the consolidated
results. Excluding non-operational charges, the category represented 9.7% of net
sales in 1997 versus 8.7% in 1996. Depreciation was 3.6% of net sales in the
current year as compared to 2.9% in the prior year, reflecting acquisitions and
increased capital expenditures.
 
    Net interest expense, including the amortization of deferred financing costs
but excluding costs related to the A/R Securitization facility, was $41.6
million in 1997 as compared to $37.3 million in 1996. The higher expense in 1997
reflects higher borrowings related to acquisitions, although the average rate of
interest incurred declined to 8.39% of average borrowings, compared to 9.01% in
1996. Including the effect of redeemable convertible preferred securities, the
average cost of funds was 8.22% in 1997.
 
    A one-time, non-cash charge of $58.2 million was recorded in connection with
the fourth quarter 1997 acquisition of Columbine, to reflect the cost of
in-process acquired technology for software in development. A loss of $14.3
million was recorded in the fourth quarter of 1996 in connection with the sale
of the Webcraft Games business.
 
    Other expenses consist primarily of costs related to the A/R Securitization
Facility (see Note 6 to the Consolidated Financial Statements). The higher
balance in 1996 also reflects $5.2 million of charges for financing transactions
related to the acquisition of Webcraft.
 
    Extraordinary losses recorded in 1997 and 1996 reflect costs related to the
early extinguishment of debt instruments in connection with refinancing and
acquisition transactions (see Notes 3 and 9 to the Consolidated Financial
Statements).
 
    The Company's effective tax rates exceeded the federal statutory rate due
primarily to state and local taxes and non-deductible expenses such as the 1997
write off of in-process acquired technology costs, a portion of the loss on the
sale of Webcraft Games in 1996, and amortization of certain goodwill.
 
                                       25
<PAGE>
    Adjusted to exclude non-operational pre-tax charges of $64.5 million in 1997
and $23.7 million in 1996, as well as extraordinary losses, net earnings per
diluted share would have been $1.41 in 1997 compared to $0.77 in 1996. The
non-operational charges in 1997 comprised (i) $5.7 million of costs related to
acquisitions, (ii) $0.6 million of costs related to a secondary stock offering
in June and (iii) the write off of in-process acquired technology costs. The
charges in 1996 comprised (i) $1.5 million of merger costs, $2.7 million of
administrative costs and $5.2 million of financing costs related to acquisitions
and (ii) the loss on sale of Webcraft Games.
 
   COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER
     31, 1995
 
    Net sales growth in 1996 was primarily a result of the acquisitions of Laser
Tech in November 1995 and Webcraft in March 1996, as well as acquisitions in the
fourth quarter of 1996 added to TC Advertising and Laser Tech. This increase was
offset partially by decreased net sales at TC Advertising due to a soft retail
advertising environment and decreased paper costs.
 
    Operating income decreased to 5.8% of net sales for the year ended December
31, 1996 from 6.4% in 1995 (on an annualized basis). Costs of production as a
percentage of net sales decreased from 84.0% to 80.9%, principally attributable
to changing business mix due to companies acquired in 1995 and 1996. In
addition, declining paper costs affected costs of production as a percentage of
net sales for TC Advertising. Selling, general and administrative costs and
depreciation expense increased as a percentage of net sales due to the cost
structures of businesses acquired.
 
    Net interest expense declined in 1996 as average borrowings were reduced by
proceeds from the Company's November 1995 initial public offering and subsequent
refinancing transactions.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The operations of the Company historically have been funded with internally
generated funds, borrowings under revolving credit facilities, sales of accounts
receivable and proceeds from the Company's initial public offering. During 1997,
the Company and its subsidiaries completed several financing transactions,
including replacement of its credit facility with a more flexible one, the
issuance of $350 million of 8 7/8% notes, the redemption of its 10 3/4% notes,
the addition of a L50 million UK credit facility (as amended to date) and the
issuance of $115 million of convertible preferred securities (see Notes 5, 9 and
15 to the Consolidated Financial Statements). Management believes that the
facilities in place, as well as the Company's cash flows, will be sufficient to
meet operational needs for the near future. At December 31, 1997, the Company
had the ability to borrow up to $153 million without restriction under its
revolving credit facility. In addition, subject to restrictions in that credit
facility and the indenture governing its 8 7/8% notes borrowings, the Company
had the ability to borrow additional amounts for acquisitions, capital
expenditures and other purposes.
 
    The Company's current liabilities exceeded current assets by $17.5 million
at December 31, 1997 and $30.8 million at December 31, 1996, an increase in
working capital of $13.3 million. Excluding the effects of the A/R
Securitization (see Note 6 to the Consolidated Financial Statements), working
capital at December 31, 1997 and 1996 would have been $83.6 million and $49.0
million, respectively. The ratio of current assets to current liabilities as of
December 31, 1997 was 0.93 to 1 (1.36 to 1 excluding the A/R Securitization)
compared to 0.84 to 1 in 1996 (1.25 to 1 excluding the A/R Securitization). The
increase is due to higher accounts receivable and inventory balances, primarily
as a result of acquisitions.
 
    Net cash provided by operating activities in 1997 was $120.6 million,
compared to $44.4 million in 1996 (excluding the initial proceeds from the sale
of accounts receivable). This increase was primarily due to higher earnings
before non-cash charges, offset by increased inventory levels. Additionally, a
significantly higher level of cash was used in 1996 for payment of current
liabilities assumed in connection with acquisitions.
 
                                       26
<PAGE>
    Cash from operations and borrowings under the revolving credit facility
funded capital expenditures of $74.0 million and $55.4 million in 1997 and 1996,
respectively. The Company currently expects to spend approximately $80-85
million in 1998 for capital additions. Acquisitions in 1997 were funded by
borrowings under credit facilities and issuances of debt and redeemable
convertible preferred securities.
 
    Big Flower has grown through acquisitions, and expects to continue to seek
to acquire entities in similar or complementary businesses. Such acquisitions
are likely to require the incurrence and/or assumption of indebtedness and/or
obligations, the issuance of equity securities or some combination thereof. In
addition, Big Flower may from time to time determine to sell or otherwise
dispose of certain of its existing businesses. Big Flower cannot predict if any
such transactions will be consummated, nor the terms or forms of consideration
which might be required in any such transactions.
 
SEASONALITY
 
    While TC Advertising's advertising circular business is seasonal in nature,
the addition of other businesses has reduced the overall seasonality of the
Company's revenues. On a pro forma basis, assuming all businesses owned at
December 31, 1997 had been owned for the full year, net sales for the Company
for 1997 would have been 23% in the first quarter, 24% in the second, 26% in the
third and 27% in the fourth. Profitability, however, continues to follow a more
seasonal pattern due to the higher margins and efficiency during the Christmas
production season and lower margins in the first quarter that do not fully
leverage fixed depreciation, amortization, interest and preferred dividend costs
that are incurred evenly throughout the year. Based on its historical experience
and projected operations, the Company expects its operating results in the near
future to be highest in the fourth quarter and lowest in the first.
 
YEAR 2000
 
    As a result of computer programs being written using two digits rather than
four to define an applicable year, any of the Company's computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.
 
    The Company is currently working to determine and resolve any potential
impact of this issue on the processing of date-sensitive information by the
Company's computerized operations and information systems. Based on a recent
assessment, the Company has determined that it will need to modify or replace
certain portions of its software to process such information correctly. The
Company believes that such modifications or replacements will mitigate the
potential impact of the date recognition issue, although if such modifications
are not made or not completed timely, there could be a material impact on the
Company's consolidated financial statements.
 
    The Company has initiated formal communications with its significant
suppliers and customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own year 2000
issues. There can be no guarantee that the systems of other companies on which
the Company or its systems rely will be converted timely. Similarly, there can
be no guarantee that a failure of another company's systems to work compatibly
with the Company's systems or to provide necessary resources would not have a
material effect on the consolidated financial statements of Big Flower and its
subsidiaries. The Company is working with its customers to make necessary
modifications to the products Columbine has sold and believes that it has no
significant exposure to contingencies related to the year 2000 issue for those
products.
 
    The Company will utilize both internal and external resources to reprogram
or replace systems and test them for year 2000 compliance. The Company plans to
complete any necessary modifications on a timely basis. The total cost of the
assessment mentioned above has not been material to the Company's
 
                                       27
<PAGE>
operating results. At this time, projected expenditures for modifications,
testing and capital expenditures are not expected to have a significant impact
on the Company's consolidated financial statements. The costs of the project and
the planned completion dates are based upon management's best estimates, which
were derived utilizing numerous assumptions of future events including the
availability of certain resources, third party modifications and other factors.
There can be no guarantee, however, that these estimates will be achieved and
actual circumstances could differ materially from those plans. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    Not applicable.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    Reference is made to the Index to Consolidated Financial Statements and
Schedules on page F-1 for Big Flower's consolidated financial statements and
notes thereto and supplementary schedules. All other schedules have been omitted
as not required or not applicable or because the information required to be
presented is included in the consolidated financial statements and related
notes.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    Not applicable.
 
                                       28
<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The following table sets forth certain information regarding the directors
and executive officers of Big Flower Holdings, Inc., all of whom are U.S.
citizens.
 
<TABLE>
<CAPTION>
NAME                                      AGE                                    POSITIONS
------------------------------------      ---      ---------------------------------------------------------------------
<S>                                   <C>          <C>
R. Theodore Ammon...................          48   Class III Director; Chairman of the Board
Peter G. Diamandis..................          66   Class II Director
Robert M. Kimmitt...................          50   Class I Director
Joan D. Manley......................          65   Class II Director
Newton N. Minow.....................          72   Class I Director
Edward T. Reilly....................          51   Class III Director; President and Chief Executive Officer
Mark A. Angelson....................          47   Executive Vice President and General Counsel and Secretary of the
                                                     Board of Directors
Richard L. Ritchie..................          51   Executive Vice President and Chief Financial Officer
</TABLE>
 
    The board of directors of Big Flower Press consists of Messrs. Ammon, Reilly
and Angelson. The executive officers of Big Flower Press are the same as the
executive officers of Big Flower Holdings, Inc.
 
    Certain information regarding each person listed above, including such
person's principal occupation during the past five years and current
directorships, is set forth below. Unless indicated otherwise, all directors and
executive officers have had the indicated principal occupations for the past
five years.
 
    R. THEODORE AMMON has been the Chairman of the Board of the Company since
its inception and was Chief Executive Officer of Big Flower Press from that date
until April 1997. Mr. Ammon is also a director of Big Flower Press and Digital
Services. Mr. Ammon was a General Partner of Kohlberg Kravis Roberts & Co. (a
New York and San Francisco-based investment firm) from 1990 to 1992, and an
executive of such firm prior to 1990. Mr. Ammon is also a member of the Board of
Directors of Host Marriott Corporation, Culligan Water Technologies, Inc. and
Samsonite Corporation. In addition, Mr. Ammon serves on the Board of Directors
of the New York YMCA, Jazz @ Lincoln Center and the Institute of International
Education, and on the Board of Trustees of Bucknell University.
 
    PETER G. DIAMANDIS has been a Director of the Company since September 1994.
Mr. Diamandis was Vice Chairman of Donnelley Marketing, Inc., a marketing
company, from 1991 through 1996. He has also been the Chairman of TVSM, Inc., a
magazine publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served
as President and Chief Executive Officer of Hachette Publications, which
purchased Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr.
Diamandis served as Chairman, President and Chief Executive Officer of Diamandis
Communications Inc., a publisher of special interest magazines. In 1982, Mr.
Diamandis joined CBS Magazines ("CBS") as Vice President, Group Publisher,
Women's Day, and served as President of CBS from September 1983 to 1987. Mr.
Diamandis is a former Chairman of Magazine Publishers of America. Mr. Diamandis
serves on the Board of Trustees of Bucknell University.
 
    ROBERT M. KIMMITT has been a Director of the Company since November 1996.
Since May 1997, he has been a partner in the law firm of Wilmer, Cutler &
Pickering. From 1993 to May 1997, Mr. Kimmitt was a managing director of Lehman
Brothers and head of its Washington office. Prior to joining Lehman Brothers,
Mr. Kimmitt served from 1991 to 1993 as American Ambassador to Germany, and from
1989 to 1991 as Under Secretary of State for Political Affairs. He was a partner
in the Washington office of Sidley & Austin from 1987 to 1989. Mr. Kimmitt
served as a member of the National Security Council staff at the White House
from 1978 to 1985 and General Counsel of the Department of the Treasury from
1985 to 1987. Mr. Kimmitt serves on the supervisory boards of Mannesmann AG of
Duesseldorf, Germany, a global industrial, automotive, and telecommunications
company, and Siemens AG of Munich, Germany, a
 
                                       29
<PAGE>
global electronics, power generation and engineering company, and on the U.S.
Group Council of BMW Corporation of Munich, Germany. He is also on the Board of
the German Marshall Fund.
 
    JOAN D. MANLEY has been a Director of the Company since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Aon Corporation, Sara Lee Corporation and Viking Office Products,
Inc. and is a Trustee of the Keystone Center.
 
    NEWTON N. MINOW has been a Director of the Company since September 1996.
Since 1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of Sara
Lee Corporation, Aon Corporation, and Manpower, Inc. Mr. Minow is former
Chairman of the Carnegie Corporation of New York, an Advisory Trustee and former
Chairman of the Board of Trustees of The RAND Corporation and former Chairman of
the Board of Governors of the Public Broadcasting Service. Mr. Minow is also a
Life Trustee of the University of Notre Dame and a Life Trustee of Northwestern
University.
 
    EDWARD T. REILLY has been Chief Executive Officer of the Company since April
1997, President of the Company since March 1996 and a Director of the Company
since June 1996. He was also the Chief Operating Officer of Big Flower Press
from March 1996 until April 1997. He is also a director of Big Flower Press, TC
Advertising, Digital Services and Webcraft. Prior to joining Big Flower, Mr.
Reilly held a variety of executive positions with McGraw-Hill, Inc., a
publishing and communications company, in their Broadcast and Publication groups
from 1968 to 1996, and served as President of McGraw-Hill Broadcasting from 1987
to 1996. Mr. Reilly has been active in television industry affairs, having
served as the Chairman of the Television Bureau of Advertising, a member of the
Board of Directors of the Ad Council and a member of the Board of Directors of
the National Association of Broadcasters. Mr. Reilly is also a Trustee of
Lynchburg College.
 
    MARK A. ANGELSON has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of the Company since March 1996. He is also
a director of Big Flower Press, TC Advertising, Digital Services and Webcraft.
Prior to joining Big Flower, Mr. Angelson practiced law with Sidley & Austin
from 1982 to 1996. Mr. Angelson was Co-Chair of Sidley's international
operations, founder of the firm's English law practice and manager of the firm's
offices in Singapore, New York and London. Mr. Angelson is admitted to practice
law in the State of New York, and as a solicitor in England and Wales. He is
also a Trustee of American School in London Foundation, Inc., a Fellow of Royal
Society of Arts, a member of the Advisory Board of Jobs for the Future, Inc. and
a member of the Pilgrims of Great Britain.
 
    RICHARD L. RITCHIE has been Executive Vice President and Chief Financial
Officer of the Company since January 1997. Prior to joining Big Flower, Mr.
Ritchie served as Senior Vice President and Chief Financial Officer of
Harte-Hanks Communications, Inc. from 1986 to 1996.
 
    The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Kimmitt and Minow; the
Class II directors are Mr. Diamandis and Ms. Manley; and the Class III directors
are Messrs. Ammon and Reilly. The Class I directors were initially elected, in
the case of Mr. Kimmitt, and reelected, in the case of Mr. Minow, at the 1996
Annual Meeting of Stockholders to hold office until the date of the 1999 Annual
Meeting of Stockholders; the Class II directors were reelected at the 1997
Annual Meeting of Stockholders to hold office until the date of the 2000 Annual
Meeting of Stockholders; and the Class III directors were elected to hold office
until the date of the 1998 Annual Meeting of Stockholders and, in each case,
until his or her successor is elected and qualified and subject to his or her
prior death, resignation, retirement, disqualification or removal. At each
annual meeting of stockholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors
 
                                       30
<PAGE>
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. The term
of office of each executive officer is until the organizational meeting of the
Board of Directors of the Company following the next annual meeting of the
Company's stockholders and until his successor is elected and qualified or until
his prior death, resignation, retirement, disqualification or removal.
 
COMPENSATION OF DIRECTORS
 
    Directors of Big Flower who are also executive officers of Big Flower or its
subsidiaries do not receive any additional compensation for service as a member
of the Board of Directors of Big Flower or any of its committees. For
information relating to compensation of the Company's management directors, see
"Employment Arrangements with Executive Officers" below.
 
    All other directors of Big Flower (each, a "non-employee director") are paid
an annual fee of $25,000 for serving on the Board. In addition, effective as of
June 24, 1997, (a) the Chairman of each of the Corporation's Standing Committees
(consisting of the Audit, Compensation and Nominating Committees) who is a
non-employee director is paid an annual retainer of $2,500 and (b) each member
of such Standing Committees (including any Chairman who is a non-employee
director) is paid a fee of $1,000 for each Standing Committee meeting attended
by such member. In addition, each non-employee director is given the option of
electing to receive all or a portion of their annual retainer and meeting fees
in the form of (a) shares of common stock, par value $0.01 per share, of the
Company ("Common Stock"), (b) options to purchase shares of Common Stock, or (c)
cash. Furthermore, each member of the Board of Directors of Big Flower who is
not an employee of Big Flower, any of its subsidiaries or any of its affiliates
(a "non-management director") receives (i) an option to purchase 13,400 shares
of Common Stock (the "Initial Election Option") on the date that such director
is first elected to the Board of Directors and (ii) an option to purchase 1,000
shares of Common Stock (the "Reelection Option") on each anniversary of the date
that such director is elected to the Board of Directors. Each Initial Election
Option has a term of ten years, and each Reelection Option has a term of five
years. Each such option vests immediately upon the date of grant. Each such
option has an exercise price equal to the closing price (the "Closing Price") of
a share of Common Stock on the New York Stock Exchange on the date of grant,
which exercise price may be paid in cash, by check or in previously-acquired
unrestricted shares of Common Stock, valued at the Closing Price on the date of
such exercise.
 
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
    Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Big Flower's directors, executive officers, and
persons who own more than ten percent of Big Flower's Common Stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Directors, executive officers and greater than ten percent stockholders are
required by the SEC regulations to furnish Big Flower with copies of all Forms
3, 4 and 5 they file.
 
    Based solely on Big Flower's review of the copies of such forms it has
received, or written representations from certain reporting persons that no Form
5's were required for these persons, Big Flower believes that all its directors,
executive officers and greater than ten percent beneficial owners complied with
all filing requirements applicable to them with respect to Fiscal 1997.
 
                                       31
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
 
    The following table sets forth the compensation paid in respect of the
fiscal year ended December 31, 1997, December 31, 1996, the transition period
from July 1, 1995 to December 31, 1995 ("TP95") and for the fiscal year ended
June 30, 1995, to R. Theodore Ammon, Chairman of Big Flower, Edward T. Reilly,
the Chief Executive Officer of Big Flower, and to each of the other most highly
paid executive officers of the Company (collectively, the "Named Executive
Officers").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                               LONG-TERM
                                                                                             COMPENSATION
                                                                                                AWARDS
                                                     ANNUAL COMPENSATION                  -------------------
                                     ---------------------------------------------------      SECURITIES          ALL OTHER
                                                                          OTHER ANNUAL        UNDERLYING        COMPENSATION
NAME AND PRINCIPAL POSITION           PERIOD    SALARY($)   BONUS($)    COMPENSATION ($)  OPTIONS/SARS (#)(1)      ($)(2)
-----------------------------------  ---------  ---------  -----------  ----------------  -------------------  ---------------
<S>                                  <C>        <C>        <C>          <C>               <C>                  <C>
R. Theodore Ammon..................       1997    750,000      799,875              (3)           --                  2,400
  Chairman of Big Flower                  1996    750,000      339,844              (3)           --                  2,178
                                          TP95    344,750      114,844              (3)          300,000             --
                                          1995    643,750      392,600              (3)           --                  2,310
 
Edward T. Reilly (4)...............       1997    533,333      586,575              (3)          200,000              2,400
President and Chief Executive             1996    375,000    287,000(5)             (3)          200,000              1,593
  Officer of Big Flower                   TP95     --          --              --                 --                 --
                                          1995     --          --              --                 --                 --
 
Mark A. Angelson (4)...............       1997    468,750      506,588              (3)           58,300              2,400
Executive Vice President and              1996    315,000      225,000       343,982(6)          150,000             --
  General Counsel and Secretary of        TP95     --          --              --                 --                 --
  the Board of Big Flower                 1995     --          --              --                 --                 --
 
Richard L. Ritchie(7)..............       1997    395,641    451,600(8)             (3)          100,000              2,400
Executive Vice President and Chief        1996     --          --              --                 --                 --
  Financial Officer of Big Flower         TP95     --          --              --                 --                 --
                                          1995     --          --              --                 --                 --
</TABLE>
 
------------------------
 
(1) All stock option grants were made pursuant to the Big Flower Holdings, Inc.
    Restated 1993 Stock Award and Incentive Plan (the "Plan") and are described
    below under "Options Granted in Fiscal 1997" and "Employment Arrangements
    with Executive Officers."
 
(2) Represents amounts contributed to 401(k) plan by the Company on behalf of
    the Named Executive Officer.
 
(3) Perquisites and other personal benefits did not exceed the lesser of $50,000
    or 10% of the total annual salary and bonus reported under the headings of
    "Salary" and "Bonus."
 
(4) The Named Executive Officer began his employment with Big Flower in Fiscal
    1996; therefore the Named Executive Officer did not receive any compensation
    from Big Flower prior to that time.
 
(5) Includes a one-time signing bonus of $37,000 to reimburse Mr. Reilly for
    certain costs incurred in connection with his leaving his previous position.
 
(6) Includes relocation costs of $335,862 (including tax gross up).
 
(7) The Named Executive Officer began his employment with Big Flower in Fiscal
    1997; therefore the Named Executive Officer did not receive any compensation
    from Big Flower prior to that time.
 
(8) Includes a lump sum payment of $25,000 for incidental moving expenses.
 
                                       32
<PAGE>
    The following table sets forth certain information with respect to options
to purchase shares of Common Stock granted to the Named Executive Officers
during Fiscal 1997. The Company did not grant any stock appreciation rights to
any of the Named Executive Officers and no stock options were exercised by any
Named Executive Officer during Fiscal 1997.
 
                         OPTIONS GRANTED IN FISCAL 1997
 
<TABLE>
<CAPTION>
                                                           INDIVIDUAL GRANTS
                                         ------------------------------------------------------
                                          NUMBER OF     % OF TOTAL                                GRANT DATE VALUE
                                         SECURITIES       OPTIONS                                -------------------
                                         UNDERLYING     GRANTED TO     EXERCISE OR                   GRANT DATE
                                           OPTIONS     EMPLOYEES IN    BASE PRICE   EXPIRATION    PRESENT VALUE ($)
NAME                                     GRANTED (#)    FISCAL 1997     ($/SHARE)      DATE              (1)
---------------------------------------  -----------  ---------------  -----------  -----------  -------------------
<S>                                      <C>          <C>              <C>          <C>          <C>
Edward T. Reilly (2)...................     100,000           5.62%     $  18.375      4/29/07         1,132,960
Edward T. Reilly (3)...................     100,000           5.62%     $   21.13      4/29/07         1,042,517
Mark A. Angelson (4)...................      58,300           3.27%     $  18.125      3/25/07           652,033
Richard L. Ritchie (5).................     100,000           5.62%     $   18.00       1/6/07         1,060,717
</TABLE>
 
------------------------
 
(1) These values were calculated using a Black-Scholes option pricing model. The
    actual value, if any, that an executive may realize will depend on the
    excess, if any, of the stock price over the exercise price on the date the
    options are exercised, and no assurance exists that the value realized by an
    executive will be at or near the value estimated by the Black-Scholes model.
    The following assumptions were used in the calculations:
 
    (a) assumed option term of 10 years;
 
    (b) stock price volatility factor of 0.4123
 
    (c) 6.25% annual discount rate;
 
    (d) no dividend payment; and
 
    (e) 3% discount to Black-Scholes ratio for each year an option remains
       unvested.
 
(2) These options were granted on April 29, 1997 and vest in full on the first
    anniversary of the date of grant. The exercise price of $18.375 was equal to
    the closing price of Big Flower Press' common stock on the date of the grant
    as reported on the New York Stock Exchange. The options will be exercisable
    at any time between the date of vesting and the tenth anniversary of the
    date of grant.
 
(3) These options were granted on April 29, 1997. 33 1/3% of these options will
    vest on each anniversary of the date of grant. The exercise price of $21.13
    was equal to 115% of the closing price of Big Flower Press' common stock on
    the date of the grant as reported on the New York Stock Exchange. The
    options will be exercisable at any time between the date of vesting and the
    tenth anniversary of the date of grant.
 
(4) Mr. Angelson's options were granted on March 25, 1997 and vest in full on
    the first anniversary of the date of grant. The exercise price of $18.125
    was equal to the closing price of Big Flower Press' common stock on the date
    of the grant as reported on The New York Stock Exchange. The options will be
    exercisable at any time between the date of vesting and the tenth
    anniversary of the date of grant.
 
(5) Mr. Ritchie's options were granted on January 6, 1997. 25% of these options
    will vest on each anniversary of the date of grant. The exercise price of
    $18.00 was equal to the closing price of Big Flower Press' common stock on
    the date of the grant as reported on The New York Stock Exchange. The
    options will be exercisable at any time between the date of vesting and the
    tenth anniversary of the date of grant.
 
                                       33
<PAGE>
OPTION VALUES AT END OF FISCAL 1997
 
    The following table sets forth certain information concerning the number and
the value at the end of Fiscal 1997 of unexercised in-the-money options to
purchase Common Stock granted to the Named Executive Officers as of the end of
Fiscal 1997. No stock appreciation rights have been granted to any of the Named
Executive Officers.
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                                             VALUE OF
                                                                                NUMBER OF SECURITIES        UNEXERCISED
                                                                                     UNDERLYING            IN-THE-MONEY
                                                                                 UNEXERCISED OPTIONS          OPTIONS
                                                                                 AT FISCAL 1997 END     AT FISCAL 1997 END
                                                                                         (#)                    ($)
                                               SHARES                           ---------------------  ---------------------
                                             ACQUIRED ON           VALUE            EXERCISABLE/           EXCERCISABLE/
NAME                                        EXERCISE (#)       REALIZED ($)         UNEXERCISABLE        UNEXERCISABLE (1)
----------------------------------------  -----------------  -----------------  ---------------------  ---------------------
<S>                                       <C>                <C>                <C>                    <C>
R. Theodore Ammon.......................              0                  0           200,000/100,000     1,625,000/812,500
Edward T. Reilly........................              0                  0            80,000/320,000       910,000/2,239,500
Mark A. Angelson........................              0                  0            37,500/170,800       431,250/1,643,550
Richard L. Ritchie......................              0                  0                 0/100,000             0/612,500
</TABLE>
 
------------------------
 
(1) Based on the closing price of $24.125 of Big Flower's Common Stock on
    December 31, 1997, the last trading day of Fiscal 1997, less the exercise
    price payable for such shares.
 
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
 
    The following table sets forth annual amounts payable to the Named Executive
Officers' upon their retirement under TC Advertising's supplemental executive
retirement plan (the "SERP").
 
                               PENSION PLAN TABLE
 
<TABLE>
<CAPTION>
                                                                           YEARS OF SERVICE
                                                   ----------------------------------------------------------------
REMUNERATION                                           5         10         15         20         25         30
-------------------------------------------------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                                <C>        <C>        <C>        <C>        <C>        <C>
$150,000.........................................  $   7,500  $  15,000  $  22,000  $  30,000  $  37,500  $  45,000
 175,000.........................................      8,750     17,500     26,250     35,000     43,750     52,500
 200,000.........................................     10,000     20,000     30,000     40,000     50,000     60,000
 225,000.........................................     11,250     22,500     33,750     45,000     56,250     67,500
 250,000.........................................     12,500     25,000     37,500     50,000     62,500     75,000
 275,000.........................................     13,750     27,500     41,250     55,000     68,750     82,500
 300,000.........................................     15,000     30,000     45,000     60,000     75,000     90,000
 500,000.........................................     25,000     50,000     75,000    100,000    125,000    150,000
 600,000.........................................     30,000     60,000     90,000    120,000    150,000    180,000
 700,000.........................................     35,000     70,000    105,000    140,000    175,000    210,000
 800,000.........................................     40,000     80,000    120,000    160,000    700,000    240,000
 900,000.........................................     45,000     90,000    135,000    180,000    225,000    270,000
</TABLE>
 
    The compensation covered by the SERP includes the executive's entire annual
base salary. Messrs. Ammon, Reilly, Angelson and Ritchie, currently have 4, 2, 2
and 1 year/s of service, respectively. See "Employment Arrangements with
Executive Officers" below. Benefits under the SERP are computed by multiplying
the participant's average salary for the last five years prior to retirement by
a percentage equal to one percent for each year of service up to a maximum of 30
years. Benefits under the SERP are not subject to a deduction for Social
Security or other offset amounts.
 
                                       34
<PAGE>
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
 
    AMMON EMPLOYMENT AGREEMENT. The Company has entered into an employment
agreement with Mr. Ammon, effective November 20, 1995 (as amended to date, the
"Ammon Agreement"), pursuant to which Mr. Ammon currently serves as Chairman of
the Board and served as Chief Executive Officer of the Company until April 1997.
The initial term of the Ammon Agreement is three years, subject to automatic
one-year extensions commencing on the second anniversary of the Ammon Agreement,
unless either the Company or Mr. Ammon provides specified notice to the
contrary. Mr. Ammon is required to devote to the Company the time necessary for
the effective conduct of his duties under the Ammon Agreement and is permitted
to engage in outside business interests that do not conflict with such duties or
otherwise compete with the Company. Mr. Ammon is entitled to receive an initial
base salary equal to $750,000 per year; an annual bonus targeted at not less
than 50% of base salary (assuming bonus targets under The Company's Executive
Incentive Plan (the "EIP") are met); an annual payment of $108,000 with respect
to life insurance premiums; and certain fringe benefits, including participation
in the SERP. Mr. Ammon was granted an option to purchase 300,000 shares of
Common Stock (a) with a ten-year term, (b) at an exercise price equal to $16.00
per share and (c) vesting ratably over a three-year period. Pursuant to the
Ammon Agreement, the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") conducted an annual review of Mr. Ammon's
compensation and determined to increase his annual bonus target to not less than
75% of his base salary (assuming bonus targets under the EIP are met).
 
    If Mr. Ammon's employment with the Company is terminated other than for
"cause" (as defined in the Ammon Agreement), Mr. Ammon will be entitled to
receive a supplemental retirement benefit, subject to certain vesting and
benefit accrual requirements and subject to being offset by amounts payable
under the SERP, of up to 50% of his final average compensation (including salary
and EIP bonus), which benefit would commence at age 60. Mr. Ammon will have the
right to terminate the Ammon Agreement in the event of the material breach
thereof by the Company or for other "good reason" (as defined in the Ammon
Agreement). In such event, or if the Company terminates Mr. Ammon's employment
without cause, (i) Mr. Ammon will be entitled generally to receive the salary
and bonus otherwise payable to him over the greater of (x) the remaining term of
the Ammon Agreement and (y) a period of six months; (ii) all outstanding equity
incentive awards (including stock options) would immediately vest; (iii) Mr.
Ammon would receive additional service credit for purposes of the supplemental
retirement benefit; and (iv) the life insurance and certain fringe benefits
would continue during the severance period. Upon the termination of his
employment following a "change in control" of the Company (as defined in the
Ammon Agreement), Mr. Ammon would (i) be entitled to receive a lump sum amount
equal to three times his base salary and bonus, (ii) become vested in all
outstanding equity incentive awards, (iii) have the right to receive a cash
payment equal to the spread on all outstanding stock options, (iv) receive a
lump sum payment with respect to foregone fringe benefits, (v) receive
additional service credit for purposes of the supplemental retirement benefit
and (vi) be entitled to a payment sufficient to offset the effects of any excise
tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"). During the term of the Ammon Agreement (and, in the event Mr.
Ammon terminates his employment other than for good reason or the Company
terminates Mr. Ammon's employment for cause, for a period of one year beyond the
expiration of the employment term), Mr. Ammon will be subject to certain non-
competition and non-solicitation requirements.
 
    REILLY EMPLOYMENT AGREEMENT.  The Company has entered into an employment
agreement with Mr. Reilly, effective March 29, 1996 (the "Reilly Agreement"),
pursuant to which Mr. Reilly serves as President and Chief Executive Officer of
the Company. The initial term of the Reilly Agreement is three years, subject to
automatic one-year extensions commencing on the second anniversary of the Reilly
Agreement, unless either the Company or Mr. Reilly provides specified notice to
the contrary. Mr. Reilly is required to devote to the Company all of his working
time, attention and efforts. Under the Reilly Agreement Mr. Reilly currently
receives a base salary of $550,000 per year; an annual bonus targeted at
 
                                       35
<PAGE>
not less than 75% of base salary (assuming bonus targets under the EIP are met);
and certain fringe benefits, including participation in the SERP. In connection
with his entering into the Reilly Agreement, Mr. Reilly was granted an option to
purchase 200,000 shares of Common Stock (a) with a ten-year term, (b) at an
exercise price of $12.75 per share (the closing price of a share of common stock
of the Company on the New York Stock Exchange on the date of grant), and (c)
vesting in installments of 20% each on December 31, 1996, 1997, 1998, and 1999
and the remaining 20% on the fourth anniversary of the Reilly Agreement,
provided, that all such options will immediately vest upon the occurrence of a
"change in control" of the Company (as defined in the Reilly Agreement). For
information regarding options granted to Mr. Reilly in 1997, see "Options
Granted in Fiscal 1997" above.
 
    Mr. Reilly will have the right to terminate the Reilly Agreement in the
event of the material breach thereof by the Company or for other "good reason"
(as defined in the Reilly Agreement). In such event, or if the Company
terminates Mr. Reilly's employment without "cause" (as defined in the Reilly
Agreement), (i) Mr. Reilly will be entitled to receive a lump sum amount equal
to the sum of (A) two times the sum of (x) his then base salary plus (y) the
highest annual performance bonus Mr. Reilly received in the three years
preceding such termination of employment, plus (B) the present value of all
fringe benefits payable under the remaining term of the Reilly Agreement, (ii)
all outstanding equity incentive awards (including stock options) will
immediately vest and remain exercisable for a period of one year following the
date of such termination (or, if earlier, until the end of the option term), and
(iii) Mr. Reilly would be entitled to receive a payment sufficient to offset the
effects of any excise tax imposed under Section 4999 of the Code. During the
term of the Reilly Agreement (and, in the event Mr. Reilly terminates his
employment other than for good reason or the Company terminates Mr. Reilly's
employment for cause, for a period of one year beyond the expiration of the
employment term), Mr. Reilly will be subject to certain non-competition and
non-solicitation requirements.
 
    ANGELSON EMPLOYMENT AGREEMENT.  The Company has entered into an employment
agreement with Mr. Angelson, effective March 21, 1996 (the "Angelson
Agreement"), pursuant to which Mr. Angelson serves as Executive Vice President
and General Counsel and Secretary of the Board of Directors of the Company. The
initial term of the Angelson Agreement is three years, subject to automatic
one-year extensions commencing on the second anniversary of the Angelson
Agreement, unless either the Company or Mr. Angelson provides specified notice
to the contrary. Mr. Angelson is required to devote to the Company and its
affiliates all of his working time, attention and efforts. Under the Angelson
Agreement, Mr. Angelson currently receives a base salary of $515,000 per year;
an annual bonus targeted at not less than 75% of base salary (assuming bonus
targets under the EIP are met); annual premium payments during the term of
employment with respect to a $2 million split-dollar life insurance policy owned
by Mr. Angelson; and certain fringe benefits, including participation in the
SERP. In connection with his entering into the Angelson Agreement, Mr. Angelson
was granted an option to purchase 150,000 shares of Common Stock (a) with a
ten-year term, (b) at an exercise price of $12.625 per share (the closing price
of a share of common stock of the Company on the New York Stock Exchange on the
date of grant), and (c) vesting in installments of 10% on December 31, 1996, 15%
on the first anniversary of the Angelson Agreement and 25% on each of the next
three anniversaries of the Angelson Agreement, provided, that all such options
will immediately vest upon the occurrence of a "change in control" of the
Company (as defined in the Angelson Agreement). For information regarding
options granted to Mr. Angelson in 1997, see "Options Granted in Fiscal 1997"
above.
 
    Mr. Angelson will have the right to terminate the Angelson Agreement in the
event of the material breach thereof by the Company or for other "good reason"
(as defined in the Angelson Agreement). In such event, or if the Company
terminates Mr. Angelson's employment without "cause" (as defined in the Angelson
Agreement), (i) Mr. Angelson will be entitled to receive a lump sum amount equal
to the sum of (A) two times the sum of (x) his then base salary plus (y) the
highest annual performance bonus Mr. Angelson received in the three years
preceding such termination of employment, plus (B) the present value of all
insurance premium payments and other fringe benefits payable under the remaining
term of
 
                                       36
<PAGE>
the Angelson Agreement, (ii) all outstanding equity incentive awards (including
stock options) will immediately vest and remain exercisable for a period of one
year following the date of such termination (or, if earlier, until the end of
the option term), and (iii) Mr. Angelson would be entitled to receive a payment
sufficient to offset the effects of any excise tax imposed under Section 4999 of
the Code. During the term of the Angelson Agreement (and, in the event Mr.
Angelson terminates his employment other than for good reason or the Company
terminates Mr. Angelson's employment for cause, for a period of one year beyond
the expiration of the employment term), Mr. Angelson will be subject to certain
non-competition and non-solicitation requirements.
 
    RITCHIE EMPLOYMENT ARRANGEMENTS.  The Company entered into a letter
agreement with Mr. Ritchie on December 13, 1996 (the "Ritchie Agreement"),
pursuant to which Mr. Ritchie serves as Executive Vice President and Chief
Financial Officer of the Company. Mr. Ritchie is required to devote to the
Company all of his working time, attention and efforts. In the event that Mr.
Ritchie's employment should be terminated by the Company other than for "cause"
(as defined in the Executive Severance Agreement discussed below) prior to a
"change in control" of the Company (as defined in the Executive Severance
Agreement discussed below), Mr. Ritchie will be entitled to a payment equal to
one year's base salary. Under the Ritchie Agreement, Mr. Ritchie currently
receives a base salary of $425,000 per year; an annual bonus targeted at not
less than 75% of base salary (assuming bonus targets under the EIP are met); and
certain fringe benefits, including participation in the SERP. In connection with
his entering into the Ritchie Agreement, Mr. Ritchie was granted an option to
purchase 100,000 shares of Common Stock (a) with a ten-year term, (b) at an
exercise price of $18.00 per share (the closing price of a share of common stock
of the Company on the New York Stock Exchange on the date of grant), and (c)
vesting in installments of 25% on January 6 of each of 1998, 1999, 2000 and
2001, provided that all such options will immediately vest upon the occurrence
of a "change in control" of the Company.
 
    In addition, the Company has entered into a severance agreement with Mr.
Ritchie, effective January 6, 1997 (the "Executive Severance Agreement"), which
provides that if Mr. Ritchie's employment is terminated by the Company other
than for "cause" or by Mr. Ritchie for "good reason" (as defined in the
Executive Severance Agreement) following a "change in control" of the Company,
Mr. Ritchie will receive a lump sum amount equal to two times the sum of (x) the
greater of his annual base salary in effect immediately prior to the termination
of employment and his annual base salary in effect immediately prior to the
"change in control" and (y) the greater of the target bonus for Mr. Ritchie
under the EIP in the year immediately preceding that in which the termination
occurs and the average such bonus for the three years immediately preceding the
"change in control." In addition, (i) all outstanding stock incentive awards
(including stock options) will immediately vest and remain exercisable until at
least 90 days following the "change in control," and (ii) Mr. Ritchie would be
entitled to two years of continued medical and other insurance benefits. The
total amount of benefits payable to Mr. Ritchie would be limited to the extent
necessary to preserve the Company's deduction pursuant to Section 280G of the
Code.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The following table sets forth the beneficial ownership as of March 16, 1998
by each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock (constituting the only class of voting
stock of the Company), each director of the Company, each Named Executive
Officer, and all directors and current executive officers as a group.
 
                                       37
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                    SHARES BENEFICIALLY OWNED
                                                                            -----------------------------------------
                                                                            AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER                                         OF OWNERSHIP (A)    PERCENTAGE OF CLASS
--------------------------------------------------------------------------  ------------------  ---------------------
<S>                                                                         <C>                 <C>
 
R. Theodore Ammon (b).....................................................        2,417,144                12.3%
  c/o Big Flower Holdings, Inc.
  3 East 54th Street
  New York, New York 10022
 
EnTrust Capital Inc.......................................................        4,100,341                21.1%
  650 Madison Avenue
  New York, New York 10022
 
FMR Corp..................................................................        2,218,231                11.4%
  82 Devonshire Street
  Boston, Massachusetts 02109
 
The Prudential Insurance Company of America...............................        1,210,500                 6.2%
  751 Broad Street
  Newark, New Jersey 07102-3777
 
Peter G. Diamandis (c)....................................................           20,660               *
  700 Canal Street
  Stamford, Connecticut 06902
 
Robert M. Kimmitt (d).....................................................           19,561               *
  Wilmer, Cutler & Pickering
  2445 M Street, N.W.
  Washington, D.C. 20037-1420
 
Joan D. Manley (e)........................................................           15,965               *
  P. O. Box 1353
  Dillon, Colorado 80435
 
Newton N. Minow (f).......................................................           29,561               *
  c/o Sidley & Austin
  One First National Plaza
  Suite 4800
  Chicago, Illinois 60603
 
Edward T. Reilly (g)......................................................          221,133                 1.1%
  c/o Big Flower Holdings, Inc.
  3 East 54th Street
  New York, New York 10022
 
Mark A. Angelson (h)......................................................          138,500               *
  c/o Big Flower Holdings, Inc.
  3 East 54th Street
  New York, New York 10022
 
Richard L. Ritchie (i)....................................................           25,000               *
  c/o Big Flower Holdings, Inc.
  3 East 54th Street
  New York, New York 10022
 
All directors and current executive officers
  as a group (7 persons) (j)..............................................        2,857,963                14.3%
</TABLE>
 
------------------------
 
*   Less than one percent
 
                                       38
<PAGE>
(a) This column includes shares which directors and executive officers have the
    right to acquire within 60 days. Except as otherwise indicated, each person
    and entity has sole voting and dispositive power with respect to the shares
    set forth in the table.
 
(b) Includes (x) 6,000 shares held by Mr. Ammon as general partner of a
    partnership in which certain family members are the limited partners and
    have 99% of the economic interests, (y) options to purchase 200,000 shares
    of Common Stock which are presently exercisable and (z) 200 shares owned by
    Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
    ownership. Additionally, Mr. Ammon holds unvested options to purchase
    100,000 shares of Common Stock, which would vest in November 1998.
 
(c) Represents options to purchase 20,660 shares of Common Stock which are
    presently exercisable.
 
(d) Represents options to purchase 19,561 shares of Common Stock which are
    presently exercisable.
 
(e) Includes option to purchase 14,400 shares of Common Stock which are
    presently exercisable.
 
(f) Includes options to purchase 19,561 shares of Common Stock which are
    presently exercisable.
 
(g) Includes options to purchase 80,000 shares of Common Stock which are
    presently exercisable and options to purchase 133,333 shares of Common Stock
    which will become exercisable within 60 days.
 
(h) Includes options to purchase 37,500 shares of Common Stock which are
    presently exercisable and options to purchase 95,800 shares of Common Stock
    which will become exercisable within 60 days.
 
(i) Includes options to purchase 25,000 shares of Common Stock which are
    presently exercisable.
 
(j) Includes options to purchase 645,815 shares of Common Stock which are
    presently exercisable or which will become exercisable within 60 days.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    From January 1, 1997 until June 20, 1997, the Company paid approximately (x)
$5,625,000 in fees to BT Securities Corporation, an affiliate of BT Investment
Partners, Inc. ("BTIP"), which until June 20, 1997 was a beneficial owner of
more than 5% of the outstanding shares of the Company's capital stock, for
advice and underwriting services in connection with certain of the Company's
debt and (y) $2,700,000 to Bankers Trust Company, an affiliate of BTIP, in
connection with its role as agent and lender under the Credit Agreement.
 
                                       39
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
    (a)(1) Financial Statements. Reference is made to Section "1" of the Index
to Consolidated Financial Statements and Schedules on page F-1.
 
    (a)(2) Financial Statement Schedules. Reference is made to Section "1" of
the Index to Consolidated Financial Statements and Schedules on page F-1. All
other schedules have been omitted as not required, not applicable or because the
information required to be presented is included in the financial statements and
related notes.
 
    (a)(3) Exhibits. The following exhibits are filed as a part of this report
or incorporated by reference and will be furnished to any security holder upon
request for such exhibit and payment of any reasonable expenses incurred by the
Company. Send any such request to the Company at 3 East 54th Street, New York,
New York 10022; Attention: Secretary.
 
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                                     DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------
<C>          <S>
 
       2.1   Agreement and Plan of Merger, dated as of May 10, 1993, by and among Robert E. Milhous, The Robert E.
             Milhous Trust, Paul B. Milhous, The Paul Ballard Milhous Trust, Treasure Chest Advertising Company, Inc.,
             Big Flower Press, Inc. and TCA Merger Corp.(1)
 
       2.2   Amendment to Agreement and Plan of Merger, dated as of July 30, 1993, by and among Robert E. Milhous, The
             Robert E. Milhous Trust, Paul B. Milhous, The Paul Ballard Milhous Trust, Treasure Chest Advertising
             Company, Inc., Big Flower Press, Inc. and TCA Merger Corp.(2)
 
       2.3   Stock Purchase Agreement, dated as of January 14, 1994, by and among Lee A. Thompson, John G. Brown and
             BFP Holdings Corp.(3)
 
       2.4   Stock Purchase Agreement, dated as of January 14, 1994, by and among Gary W. Pestello, Thomas G. Hansen
             and BFP Holdings Corp.(3)
 
       2.5   Asset Purchase Agreement, dated as of January 14, 1994, by and BFP Holdings Corp. and D. Enterprises,
             Inc.(3)
 
       2.6   Assignment and Assumption Agreement, dated April 5, 1994, by and between BFP Holdings Corp. and Treasure
             Chest Advertising Company, Inc.(5)
 
       2.7   Purchase and Sale Agreement, dated as of March 16, 1994, by and among BFP Holdings Corp., KTB Associates,
             Inc., Tomsons Properties, TKB Properties, Thomas Clemente, Brian Clemente and Joseph Clemente.(4)
 
       2.8   Stock Purchase Agreement, dated as of November 27, 1995, between Big Flower Press, Inc. and Brian
             Mason.(10)
 
       2.9   Agreement and Plan of Merger, dated February 1, 1996, among Big Flower Press Holdings, Inc., WTI
             Acquisition Corp., and Webcraft Technologies, Inc.(10)
 
      2.10   Agreement and Plan of Merger, dated as of July 31, 1996, by and among Big Flower Press Holdings, Inc.,
             Scanforms, Inc. and Scanforms Acquisition Corp.(15)
 
      2.11   Purchase Agreement, dated as of October 1, 1996, by and between Treasure Chest Advertising Company, Inc.,
             the stockholders of PrintCo., Inc. named therein, Park Properties and the partners in Park Properties
             named therein.(16)
 
      2.12   Stock Purchase Agreement, dated as of October 1, 1996, among Laser Tech Color, Inc. and the stockholders
             of Pacific Color Connection, Inc. named therein.(16)
 
      2.13   Agreement and Plan of Reorganization, dated as of October 17, 1997, among Big Flower Press Holdings,
             Inc., Big Flower Holdings, Inc. and Big Flower Merger Co.(17)
</TABLE>
 
                                       40
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                                     DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------
<C>          <S>
      2.14   Agreement, dated September 18, 1997, between Big Flower Limited and Peter Rivett, Andrew Ruddle and 3i
             Group PLC.(18)
 
      2.15   Asset Purchase Agreement, dated as of September 19, 1997, between Gruner + Jahr Printing & Publishing Co.
             and Treasure Chest Advertising Company, Inc.(19)
 
      2.16   Stock Purchase Agreement, dated as of September 19, 1997, among Big Flower Press Holdings, Inc.,
             Columbine JDS Systems, Inc., Columbine BIAS, Ltd., each of the shareholders who is a signatory thereto
             and each of the optionees who is a signatory thereto.(20)
 
      2.17   First Amendment to Stock Purchase Agreement, dated as of October 29, 1997, by and among Big Flower Press
             Holdings, Inc., Big Flower Holdings, Inc., Columbine JDS Systems, Inc. and its stockholders and option
             holders.(20)
 
       3.1   Restated Certificate of Incorporation of Big Flower Holdings, Inc., effective October 20, 1997.(21)
 
       3.2   Amended and Restated By-Laws of Big Flower Holdings, Inc., effective October 20, 1997.(21)
 
       3.3   Certificate of Designation, Preferences and Rights of Series A Junior Preferred Stock of Big Flower
             Holdings, Inc. (21)
 
       4.1   Rights Agreement, dated as of November 28, 1995, between Big Flower Holdings, Inc. and The Bank of New
             York, as Rights Agent.(21)
 
       4.2   Indenture, dated as of June 20, 1997, between Big Flower Press Holdings, Inc. and State Street Bank and
             Trust Company (as successor in interest to Fleet National Bank), as Trustee.(22)
 
       4.3   Registration Rights Agreement, dated as of June 20, 1997, between Big Flower Press Holdings, Inc. and BT
             Securities Corporation, Credit Suisse First Boston and Goldman, Sachs & Co.(22)
 
       4.4   Amended and Restated Trust Agreement, dated as of October 14, 1997, among (i) Big Flower Holdings, Inc.,
             (ii) The Bank of New York as property trustee, (iii) The Bank of New York (Delaware), as Delaware trustee
             and (iv) Mark A. Angelson and Richard L. Ritchie, as Administrative Trustees, relating to the Preferred
             Securities of Big Flower Trust I.(17)
 
       4.5   Guarantee Agreement, dated as of October 20, 1997, between Big Flower Holdings, Inc., and The Bank of New
             York, as Guarantee Trustee, relating to the Preferred Securities of Big Flower Trust I. (17)
 
       4.6   Indenture dated as of October 20, 1997, between Big Flower Holdings, Inc. and The Bank of New York, as
             Trustee, relating to the 6% Convertible Subordinated Debentures due October 15, 2027, of Big Flower
             Holdings, Inc., issued to Big Flower Trust I. (17)
 
       4.7   Registration Rights Agreement, dated as of October 20, 1997, among Big Flower Trust I, Big Flower
             Holdings, Inc., and Goldman, Sachs & Co., on behalf of the purchasers listed therein.(17)
 
      10.1   Credit Agreement, dated as of June 12, 1997, between Big Flower Press Holdings, Inc., the Banks from time
             to time party thereto, Bank of America NT & SA and The Industrial Bank of Japan, Limited as Co Agents,
             Credit Suisse First Boston as Documentation Agent and Bankers Trust Company as Administrative Agent. (23)
 
      10.2   First Amendment to the Credit Facility, dated June 13, 1997, among Big Flower Press Holdings, Inc., the
             financial institutions party to the Credit Facility, Bank of America NT & SA and The Industrial Bank of
             Japan, Limited as Co Agents, Credit Suisse First Boston as Documentation Agent and Bankers Trust Company
             as Administrative Agent. (23)
</TABLE>
 
                                       41
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                                     DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------
<C>          <S>
      10.3   Second Amendment to the Credit Agreement, dated as of October 15, 1997, among Big Flower Press Holdings,
             Inc., the financial institutions party to the Credit Agreement, Bank of America NT & SA and The
             Industrial Bank of Japan, Limited, as Co Agents, Credit Suisse First Boston, as Documentation Agent, and
             Bankers Trust Company, as Administrative Agent. (17)
 
      10.4   Sterling Pound Credit Facility Letter provided by Bankers Trust Company (London Branch) to Big Flower
             Limited and Olwen Direct Mail Limited, dated as of September 18, 1997. (17)
 
      10.5   Guarantee of Big Flower Press Holdings, Inc. in favor of Bankers Trust Company in respect of obligations
             of Big Flower Limited under a Facility Letter dated as of September 18, 1997. (17)
 
      10.6   Certificate Purchase Agreement (Series 1996-1), dated as of March 19, 1996, by BFP Receivables
             Corporation, Big Flower Press Holdings, Inc., the Purchasers described therein, Credit Suisse, as
             Co-Agent, and Bankers Trust Company, as Agent. (13)
 
      10.7   Receivables Purchase Agreement, dated as of March 19, 1996, as amended as of April 25, 1996, June 10,
             1996 and September 24, 1996 (the "Receivables Purchase Agreement"), among Big Flower Press Holdings,
             Inc., as initial Servicer, certain subsidiaries of Big Flower Press Holdings, Inc., as Sellers, and BFP
             Receivables Corporation, as Buyer. (24)
 
      10.8   Amendment to the Receivables Purchase Agreement, dated January 31, 1997. (24)
 
      10.9   Big Flower Receivables Master Trust Pooling and Servicing Agreement, dated as of March 19, 1996, as
             amended as of April 25, 1996, June 10, 1996 and September 24, 1996, among BFP Receivables Corporation, as
             Transferor, Big Flower Press Holdings, Inc., as Servicer, and Manufacturers and Traders Trust Company, as
             Trustee (the "Pooling and Servicing Agreement"). (24)
 
     10.10   Series 1996-2 Supplement to the Pooling and Servicing Agreement, dated as of October 4, 1996, among BFP
             Receivables Corporation, as Transferor, Big Flower Press Holdings, Inc., as Servicer, and Manufacturers
             and Traders Trust Company, as Trustee. (24)
 
     10.11   Series 1996-3 Supplement to the Pooling and Servicing Agreement, dated as of October 4, 1996, among BFP
             Receivables Corporation, as Transferor, Big Flower Press Holdings, Inc., as Servicer, and Manufacturers
             and Traders Trust Company, as Trustee. (24)
 
     10.12   Purchase Agreement (Series 1996-2), dated September 25, 1996, among Big Flower Press Holdings, Inc., BFP
             Receivables Corporation, BT Securities Corporation, Bankers Trust International PLC, and CS First Boston
             Corporation. (24)
 
     10.13   Certificate Purchase Agreement (Series 1996-3), dated as of October 4, 1996, among BFP Receivables
             Corporation, Big Flower Press Holdings, Inc., the purchasers described therein, and Caisse Nationale de
             Credit Agricole, as Agent. (24)
 
     10.14   Non-Competition Agreement, dated November 27, 1995, between Big Flower Press Holdings, Inc. and Brian
             Mason. (10)
 
     10.15   Non-Competition Agreement, dated as of April 27, 1994, by and among Lee A. Thompson, BFP Holdings Corp.,
             Treasure Chest Advertising Company, Inc. and Retail Graphics Holding Company. (5)
 
     10.16   Non-Competition Agreement, dated as of April 27, 1994, by and among John G. Brown, BFP Holdings Corp.,
             Treasure Chest Advertising Company, Inc. and Retail Graphics Holding Company. (5)
 
     10.17   Non-Competition Agreement, dated as of April 27, 1994, by and among Thomas G. Hansen, BFP Holdings Corp.,
             Treasure Chest Advertising Company, Inc. and Retail Graphics Holding Company. (5)
</TABLE>
 
                                       42
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                                     DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------
<C>          <S>
     10.18   Non-Competition Agreement, dated as of April 27, 1994, by and among Gary W. Pestello, BFP Holdings Corp.,
             Treasure Chest Advertising Company, Inc. and Retail Graphics Holding Company. (5)
 
     10.19   Non-Competition Agreement, dated April 27, 1994, by and between Brian T. Clemente and Treasure Chest
             Advertising Company, Inc. (24)
 
     10.20   Non-Competition Agreement, dated August 5, 1993, by and among Big Flower Press, Inc., Robert E. Milhous
             and Paul B. Milhous, together with assignment to Treasure Chest Advertising Company, Inc. (14)
 
     10.21   Employment Agreement, effective March 21, 1996, by and between Mark A. Angelson, Big Flower Press
             Holdings, Inc. and Treasure Chest Advertising Company, Inc. (13)
 
     10.22   Employment Agreement, effective March 29, 1996, by and among Edward T. Reilly, Big Flower Press Holdings,
             Inc. and Treasure Chest Advertising Company, Inc. (13)
 
     10.23   Employment Agreement, dated November 27, 1995, by and between Laser Tech Color, Inc. and Damien Gough.
             (14)
 
     10.24   Employment Agreement, dated November 20, 1995, by and between Big Flower Press Holdings, Inc., Treasure
             Chest Advertising Company, Inc. and R. Theodore Ammon. (10)
 
     10.25   Executive Change in Control Severance Agreement, dated January 6, 1997, by and between Big Flower Press
             Holdings, Inc. and Richard L. Ritchie. (24)
 
     10.26   Letter Agreement, dated December 12, 1996, by and between Big Flower Press Holdings, Inc. and Richard L.
             Ritchie. (24)
 
     10.27   Employment Agreement, dated April 27, 1994, between Treasure Chest Advertising Company, Inc. and Thomas
             R. Clemente. (5)
 
     10.28   Employment Agreement, dated April 27, 1994, between Treasure Chest Advertising Company, Inc. and Joseph
             T. Clemente. (5)
 
     10.29   Employment Agreement, dated April 27, 1994, between Treasure Chest Advertising Company, Inc. and Kevin
             Clemente. (5)
 
     10.30   Big Flower Holdings, Inc. Restated 1993 Stock Award and Incentive Plan. (25)
 
     10.31   Form of Treasure Chest Advertising Company, Inc.'s Supplemental Executive Retirement Plan, effective
             January 1, 1994. (5)
 
     10.32   Registration Rights Agreement, dated as of August 12, 1993, by and among BFP Holdings Corp., each of the
             purchasers listed on Schedule 1 thereto, Theodore Ammon, Berenson Minella & Company, and each other
             purchaser who executed the agreement ("Registration Rights Agreement"). (5)
 
     10.33   Amendment to Registration Rights Agreement, dated as of April 27, 1994, by and among BFP Holdings Corp.,
             each of the purchasers listed on Schedule 1 thereto, Theodore Ammon, Berenson Minella & Company, and each
             other purchaser who executed the agreement. (5)
 
     10.34   Boca Raton Letter Agreement, dated May 10, 1993, by and among Robert E. Milhous, Paul B. Milhous, Big
             Flower Press, Inc. and Treasure Chest Advertising Company, Inc.(1)
 
     10.35   Ink Supply Requirements Agreement, dated as of July 31, 1993, between Treasure Chest Advertising Company,
             Inc. and Marpax, Inc. (the "Ink Supply Agreement"). (6)
 
     10.36   Amendment to Ink Supply Agreement, dated as of July 1, 1997.* +
 
     10.37   Master Lease Agreement, dated December 21, 1993, between KTB Associates, Inc. and Chase Equipment
             Leasing, Inc. (5)
</TABLE>
 
                                       43
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                                                     DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------
<C>          <S>
     10.38   Master Lease Agreement No. Atel/Trea3, dated as of August 31, 1993, between ATEL Financial Corporation
             and Treasure Chest Advertising Company, Inc. (5)
 
     10.39   Master Lease, dated as of July 7, 1993, between General Electric Capital Corporation and Treasure Chest
             Advertising Company, Inc. (5)
 
     10.40   Master Lease, dated as of December 28, 1992, between ITT Capital Finance division of ITT Commercial
             Finance Corp. and Treasure Chest Advertising Company, Inc. (9)
 
     10.41   Master Equipment Lease Agreement, dated as of July 28, 1992, between AT&T Commercial Finance Corporation
             and Treasure Chest Advertising Company, Inc.(5)
 
     10.42   Master Lease Agreement, dated June 22, 1990, between KTB Associates, Inc. and Chase Lincoln Lease/Way,
             Inc.(5)
 
     10.43   Master Lease Agreement, dated May 16, 1991, between KTB Associates, Inc. and Chase Lincoln Lease/Way,
             Inc. 10.43 (5)
 
     10.44   Master Lease, dated as of June 21, 1991 (and as amended through 08/31/93), between The CIT
             Group/Equipment Financing, Inc. and Treasure Chest Advertising Company, Inc.(5)
 
      21.1   Subsidiaries of Big Flower Holdings, Inc.*
 
      23.1   Consent of Deloitte & Touche LLP (included in their opinions appearing on pages F-2 and F-23 hereof).
 
     27.1-   Financial Data Schedules submitted to the Securities and Exchange Commission in electronic format.*
      27.5
 
        99   Form 11-K for the Treasure Chest Advertising Company, Inc. 401 (k) Savings Plus Plan to be filed on or
             before June 30, 1998.
</TABLE>
 
------------------------
 
*   being filed herewith
 
+  Confidential treatment has been requested for material redacted from this
    exhibit
 
(1) Incorporated by reference to TCA Holdings Corp. Form S-1, filed on May 26,
    1993 (File # 33-63392).
 
(2) Incorporated by reference to Big Flower Press, Inc. Amendment No. 3 to the
    Form S-1, filed on August 4, 1993 (File # 33-63392).
 
(3) Incorporated by reference to Big Flower Press, Inc. Form 8-K, dated as of
    January 24, 1994 (File # 33-63392).
 
(4) Incorporated by reference to Big Flower Press, Inc. Form 8-K, dated as of
    April 27, 1994 (File # 33-63392).
 
(5) Incorporated by reference to BFP Holdings Corp. Form S-1, filed on May 26,
    1994 (File # 33-79406).
 
(6) Incorporated by reference to Big Flower Press, Inc. Amendment No. 2 to the
    Form S-1, filed on July 19, 1993 (File #33-63392).
 
(7) Incorporated by reference to Big Flower Press, Inc. Form 10-Q for the
    quarterly period ended September 30, 1993 (File # 33-63392).
 
(8) Incorporated by reference to BFP Holdings, Corp. Amendment No. 2 to Form
    S-1, filed on August 2, 1994 (File # 33-79406).
 
(9) Incorporated by reference to Big Flower Press Holdings, Inc. Form S-1, filed
    on September 19, 1995 (File # 33-97082).
 
                                       44
<PAGE>
(10) Incorporated by reference to Big Flower Press Holdings, Inc. Form 10-Q for
    the quarterly period ended December 31, 1995 (File # 1-14084).
 
(11) Incorporated by reference to Big Flower Press Holdings, Inc. Amendment No.
    2 to the Form S-1, filed on November 14, 1995 (File #33-97082).
 
(12) Incorporated by reference to Big Flower Press Holdings, Inc. Form 10-K for
    the fiscal year ended June 30, 1995 (File #33-79406).
 
(13) Incorporated by reference to Big Flower Press Holdings, Inc. Form 10-Q
    filed on May 15, 1996 (Accession # 0000912057-96-009947).
 
(14) Incorporated by reference to Big Flower Press Holdings, Inc. Form 10-K for
    the transition period from July 1, 1995 to December 31, 1995 (File #
    1-14084).
 
(15) Incorporated by reference to Annex I to the Proxy Statement/Prospectus
    dated September 6, 1996, forming part of the Registration Statement on Form
    S-4 (Registration No. 333-11225) of Big Flower Press Holdings, Inc.
 
(16) Incorporated by reference to Big Flower Press Holdings, Inc. Form 8-K,
    dated October 1, 1996 (File # 1-14084).
 
(17) Incorporated by reference to Big Flower Holdings, Inc. Form 10-Q for the
    quarterly period ended September 30, 1997 (File # 0-29474).
 
(18) Incorporated by reference to Big Flower Press Holdings, Inc. Current Report
    on Form 8-K, dated September 18, 1997 (File # 1-14084).
 
(19) Incorporated by reference to Big Flower Press Holdings, Inc. Current Report
    on Form 8-K, dated October 15, 1997 (File # 1-14084).
 
(20) Incorporated by reference to Big Flower Holdings, Inc. Current Report on
    Form 8-K, dated October 31, 1997 (File # 0-29474).
 
(21) Incorporated by reference to Big Flower Holdings, Inc. Registration
    Statement on Form S-8 and Post-Effective Amendment No. 1 to Registration
    Statement No. 333-2152, filed on November 4, 1997 (File # 1-14084).
 
(22) Incorporated by reference to Big Flower Press Holdings, Inc. Registration
    Statement on Form S-4 (Registration No. 333-32141).
 
(23) Incorporated by reference to Big Flower Press Holding, Inc. Current Report
    on Form 8-K, dated June 13, 1997 (File # 1-14084).
 
(24) Incorporated by reference to Big Flower Press Holdings, Inc. Form 10-K for
    the fiscal year ended December 31, 1996 (File # 1-14084).
 
(25) Incorporated by reference to Big Flower Press Holdings, Inc. Notice of
    Annual Meeting of Stockholders and Proxy Statement, dated May 13, 1997 (File
    # 1-14084).
 
    (B) FORM OF REPORTS ON FORM 8-K.
 
    During the period from October 1, 1997 to December 31, 1997, the Registrant
filed the following reports on Form 8-K:
 
        (i) Current Report on Form 8-K, dated September 18, 1997, concerning
    Registrant's acquisition of Olwen Direct Mail Limited;
 
        (ii) Current Report on Form 8-K, dated October 3, 1997, concerning
    Registrant's intention to adopt a new corporate legal structure;
 
                                       45
<PAGE>
        (iii) Current Report on Form 8-K, dated October 15, 1997, concerning
    Registrant's acquisition of Riverside County Publishing Company;
 
        (iv) Current Report on Form 8-K, dated October 17, 1997, concerning
    Registrant's adoption of a new corporate legal structure;
 
        (v) Current Report on Form 8-K, dated October 31, 1997, concerning the
    Registrant's acquisition of Columbine JDS Systems, Inc.; and
 
        (vi) Current Report on Form 8-K/A, dated September 18, 1997, amending
    the Form 8-K which was filed on October 3, 1997, to include certain pro
    forma financial data.
 
    (c) The exhibits required by Item 601 of Regulation S-K filed as part of
this report or incorporated herein by reference are listed in Item 14(a)(3)
above, and the exhibits filed herewith are listed on the Index to Exhibits which
accompanies this report.
 
    (d) See Item 14(a)(2) of this report.
 
                                       46
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) 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.
 
<TABLE>
<S>                                          <C>        <C>
                                             BIG FLOWER HOLDINGS, INC.
                                             (REGISTRANT)
 
                                             By                    /s/ R. THEODORE AMMON
                                                        ------------------------------------------
                                                                     R. Theodore Ammon
                                                                         CHAIRMAN
</TABLE>
 
Dated: March 26, 1998
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                         TITLE                         DATE
------------------------------------------------------  --------------------------------------  -----------------
<C>                                                     <S>                                     <C>
 
                /s/ R. THEODORE AMMON
     -------------------------------------------        Chairman and Director (Principal         March 26, 1998
                 (R. Theodore Ammon)                      Executive Officer)
 
                 /s/ EDWARD T. REILLY                   President, Chief Executive Officer and
     -------------------------------------------          Director (Principal Operating          March 26, 1998
                  (Edward T. Reilly)                      Officer)
 
                /s/ RICHARD L. RITCHIE                  Executive Vice President and Chief
     -------------------------------------------          Financial Officer (Principal           March 26, 1998
                 (Richard L. Ritchie)                     Financial and Accounting Officer)
 
                /s/ PETER G. DIAMANDIS
     -------------------------------------------                                                 March 26, 1998
                 (Peter G. Diamandis)                   Director
 
                /s/ ROBERT M. KIMMITT
     -------------------------------------------                                                 March 26, 1998
                 (Robert M. Kimmitt)                    Director
 
                  /s/ JOAN D. MANLEY
     -------------------------------------------                                                 March 26, 1998
                   (Joan D. Manley)                     Director
 
                 /s/ NEWTON N. MINOW
     -------------------------------------------                                                 March 26, 1998
                  (Newton N. Minow)                     Director
</TABLE>
 
                                       47
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) 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.
 
                                BIG FLOWER PRESS HOLDINGS, INC.
                                (REGISTRANT)
 
                                By             /s/ R. THEODORE AMMON
                                     -----------------------------------------
                                                 R. Theodore Ammon
                                                      CHAIRMAN
 
Dated: March 26, 1998
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
 
          SIGNATURE                        TITLE                    DATE
------------------------------  ---------------------------  -------------------
 
    /s/ R. THEODORE AMMON       Chairman and Director
------------------------------    (Principal Executive         March 26, 1998
     (R. Theodore Ammon)          Officer)
 
                                President, Chief Executive
     /s/ EDWARD T. REILLY         Officer and Director
------------------------------    (Principal Operating         March 26, 1998
      (Edward T. Reilly)          Officer)
 
     /s/ MARK A. ANGELSON       Director
------------------------------                                 March 26, 1998
      (Mark A. Angelson)
 
                                Executive Vice President
    /s/ RICHARD L. RITCHIE        and Chief Financial
------------------------------    Officer (Principal           March 26, 1998
     (Richard L. Ritchie)         Financial and Accounting
                                  Officer)
 
                                       48
<PAGE>
                           BIG FLOWER HOLDINGS, INC.
 
                        BIG FLOWER PRESS HOLDINGS, INC.
 
                             INDEX TO CONSOLIDATED
                       FINANCIAL STATEMENTS AND SCHEDULES
 
<TABLE>
<S>        <C>        <C>
1.         FINANCIAL STATEMENTS:
 
F-2        Independent Auditors' Report and Consent re: Big Flower Holdings, Inc.
 
F-3        Consolidated Balance Sheets of Big Flower Holdings, Inc. and subsidiaries at December 31,
           1997 and 1996.
 
F-4        Consolidated Statements of Operations of Big Flower Holdings, Inc. and subsidiaries for the
           Years Ended December 31, 1997 and 1996, the Six Months Ended December 31, 1995, and the Year
           Ended June 30, 1995.
 
F-5        Consolidated Statements of Stockholders' Equity of Big Flower Holdings, Inc. and
           subsidiaries for the Years Ended December 31, 1997 and 1996, the Six Months Ended December
           31, 1995, and the Year Ended June 30, 1995.
 
F-6        Consolidated Statements of Cash Flows of Big Flower Holdings, Inc. and subsidiaries for the
           Years Ended December 31, 1997 and 1996, the Six Months Ended December 31, 1995, and the Year
           Ended June 30, 1995.
 
F-7        Notes to Consolidated Financial Statements of Big Flower Holdings, Inc. and subsidiaries.
 
F-23       Independent Auditors' Report and Consent re: Big Flower Press Holdings, Inc.
 
F-24       Consolidated Balance Sheet of Big Flower Press Holdings, Inc. and subsidiaries at December
           31, 1997.
 
F-25       Consolidated Statement of Operations and Accumulated Deficit of Big Flower Press Holdings,
           Inc. and subsidiaries for the Year Ended December 31, 1997.
 
F-26       Consolidated Statement of Cash Flows of Big Flower Press Holdings, Inc. and subsidiaries for
           the Year Ended December 31, 1997.
 
F-27       Notes to Consolidated Financial Statements of Big Flower Press Holdings, Inc. and
           subsidiaries.
 
2.         FINANCIAL STATEMENT SCHEDULES:
 
F-28       I.         Condensed Financial information of Big Flower Holdings, Inc. for the Period Ended
                      December 31, 1997.
 
F-32       I.         Condensed Financial information of Big Flower Press Holdings, Inc. for the Years
                      Ended December 31, 1997 and 1996, the Six Months Ended December 31, 1995, and the
                      Year Ended June 30, 1995.
 
F-36       II.        Valuation and Qualifying Accounts of Big Flower Holdings, Inc. and subsidiaries
                      for the Years Ended December 31, 1997 and 1996, the Six Months Ended December 31,
                      1995 and the Year Ended June 30, 1995.
</TABLE>
 
                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
To the Stockholders of
  Big Flower Holdings, Inc.:
 
    We have audited the accompanying consolidated balance sheets of Big Flower
Holdings, Inc. and subsidiaries ("the Company") as of December 31, 1997 and 1996
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1997 and 1996, the six months ended
December 31, 1995, and the year ended June 30, 1995. Our audits also included
the consolidated financial statement schedules listed in the Index on page F-1.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedules based on
our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and 1996, and the results of its operations and its cash flows for the
years ended December 31, 1997 and 1996, the six months ended December 31, 1995,
and the year ended June 30, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
 
DELOITTE & TOUCHE LLP
New York, New York
February 9, 1998
 
                         INDEPENDENT AUDITORS' CONSENT
            TO INCORPORATION BY REFERENCE IN REGISTRATION STATEMENTS
                            ON FORM S-3 AND FORM S-8
 
    We consent to the incorporation by reference in Big Flower Holdings, Inc.'s
Registration Statement No. 333-39443 on Form S-8 and Registration No. 333-44445
on Form S-3 of our report dated February 9, 1998 appearing on page F-2 of the
Annual Report on Form 10-K for the year ended December 31, 1997.
 
DELOITTE & TOUCHE LLP
New York, New York
March 26, 1998
 
                                      F-2
<PAGE>
\
 
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                     IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,  DECEMBER 31,
                                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                     ASSETS
Current Assets:
  Cash and cash equivalents..........................................................   $    5,307    $    4,200
  Accounts receivable, net...........................................................      140,112       105,270
  Inventories........................................................................       46,510        30,126
  Prepaid expenses and other current assets..........................................        4,625         5,622
  Deferred income taxes and income tax receivable....................................       19,827        17,286
                                                                                       ------------  ------------
      Total current assets...........................................................      216,381       162,504
Property, plant and equipment, net...................................................      366,876       296,426
Goodwill, net of accumulated amortization of $25,413 and $16,696.....................      415,601       248,532
Other assets, net....................................................................       60,189        42,280
                                                                                       ------------  ------------
      Total Assets...................................................................   $1,059,047    $  749,742
                                                                                       ------------  ------------
                                                                                       ------------  ------------
                                             LIABILITIES AND EQUITY
Current Liabilities:
  Accounts payable...................................................................   $  133,648    $  116,513
  Compensation and benefits payable..................................................       45,281        38,087
  Accrued interest...................................................................       13,775         6,706
  Other current liabilities..........................................................       41,145        32,019
                                                                                       ------------  ------------
      Total current liabilities......................................................      233,849       193,325
Long-term debt, net of current portion...............................................      590,045       430,766
Deferred income taxes................................................................       27,811        13,073
Other long-term liabilities..........................................................       20,804        16,228
                                                                                       ------------  ------------
      Total liabilities..............................................................      872,509       653,392
                                                                                       ------------  ------------
Company-obligated mandatorily redeemable convertible preferred securities of a
  subsidiary trust whose sole assets are the convertible subordinated debentures of
  the Company........................................................................      115,000
                                                                                       ------------
Stockholders' equity:
  Preferred stock--authorized 10,000; $0.01 par value; none issued
  Common stock--authorized 50,000; $0.01 par value; issued and outstanding 19,512 and
    16,880...........................................................................          195           169
  Class B common stock--authorized 2,500 in 1996; $0.01 par value; issued and
    outstanding 1,739 in 1996........................................................                         17
  Additional paid-in capital.........................................................      140,798       119,019
  Accumulated deficit................................................................      (68,548)      (21,514)
  Other..............................................................................         (907)       (1,341)
                                                                                       ------------  ------------
      Total stockholders' equity.....................................................       71,538        96,350
                                                                                       ------------  ------------
      Total Liabilities and Equity...................................................   $1,059,047    $  749,742
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-3
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
 
<TABLE>
<CAPTION>
                                                                                        SIX MONTHS
                                                            YEAR ENDED    YEAR ENDED      ENDED      YEAR ENDED
                                                           DECEMBER 31,  DECEMBER 31,  DECEMBER 31,   JUNE 30,
                                                               1997          1996          1995         1995
                                                           ------------  ------------  ------------  -----------
<S>                                                        <C>           <C>           <C>           <C>
Net sales................................................   $1,376,706    $1,201,860    $  546,840    $ 920,149
                                                           ------------  ------------  ------------  -----------
Operating expenses:
  Costs of production....................................    1,072,296       971,789       459,788      775,033
  Selling, general and administrative....................      140,394       107,483        28,680       51,417
  Depreciation...........................................       49,222        34,756        10,533       20,869
  Amortization of intangibles............................       18,100        17,003         8,100       22,118
  Merger costs...........................................                      1,486
                                                           ------------  ------------  ------------  -----------
                                                             1,280,012     1,132,517       507,101      869,437
                                                           ------------  ------------  ------------  -----------
Operating income.........................................       96,694        69,343        39,739       50,712
                                                           ------------  ------------  ------------  -----------
Other expenses (income):
  Interest expense.......................................       40,300        36,165        19,076       37,452
  Amortization of deferred financing costs...............        1,696         1,802         1,594        3,437
  Interest income........................................         (349)         (712)         (442)        (279)
  In-process acquired technology write off...............       58,192
  Loss on sale of Webcraft Games, Inc....................                     14,277
  Other, net.............................................        7,141        12,813         5,749        2,390
  Preferred dividends of a subsidiary trust (1997) or
    subsidiary (1995)....................................        1,340                       1,068        2,444
                                                           ------------  ------------  ------------  -----------
                                                               108,320        64,345        27,045       45,444
                                                           ------------  ------------  ------------  -----------
(Loss) income before income taxes and extraordinary
  item...................................................      (11,626)        4,998        12,694        5,268
Income tax expense.......................................       21,945         8,283         6,203        6,880
                                                           ------------  ------------  ------------  -----------
(Loss) income before extraordinary item..................      (33,571)       (3,285)        6,491       (1,612)
Extraordinary item, net of income tax benefit of $8,800,
  $1,400 and $11,300.....................................      (13,463)       (2,078)      (19,248)
                                                           ------------  ------------  ------------  -----------
Net loss.................................................   $  (47,034)   $   (5,363)      (12,757)   $  (1,612)
                                                           ------------  ------------                -----------
                                                           ------------  ------------                -----------
Premium on redemption of preferred stock of a
  subsidiary.............................................                                   (1,682)
                                                                                       ------------
Net loss attributable to common stockholders.............                               $  (14,439)
                                                                                       ------------
                                                                                       ------------
(Loss) income per share--basic:
  (Loss) income before extraordinary item................   $    (1.79)   $    (0.18)   $     0.36    $   (0.13)
  Extraordinary item, net................................        (0.72)        (0.12)        (1.43)
                                                           ------------  ------------  ------------  -----------
  Net loss...............................................   $    (2.51)   $    (0.30)   $    (1.07)   $   (0.13)
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
  Weighted average shares outstanding--basic.............       18,704        18,046        13,451       12,382
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
(Loss) income per share--diluted:
  (Loss) income before extraordinary item................   $    (1.79)   $    (0.18)   $     0.35    $   (0.13)
  Extraordinary item, net................................        (0.72)        (0.12)        (1.38)
                                                           ------------  ------------  ------------  -----------
  Net loss...............................................   $    (2.51)   $    (0.30)   $    (1.03)   $   (0.13)
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
  Weighted average shares outstanding--diluted...........       18,704        18,046        13,919       12,382
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-4
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                        ADDITIONAL   ACCUMU-
                                                             COMMON      PAID-IN      LATED
                                                 SHARES       STOCK      CAPITAL     DEFICIT      OTHER      TOTAL
                                                ---------  -----------  ----------  ----------  ---------  ----------
<S>                                             <C>        <C>          <C>         <C>         <C>        <C>
BALANCE AT JULY 1, 1994.......................      6,425   $      64   $   21,574  $   (1,782) $    (407) $   19,449
  Net loss....................................                                          (1,612)                (1,612)
  Unearned compensation.......................                               1,412                 (1,412)
  Amortization of unearned compensation.......                                                         96          96
  Reclassification of common stock subject to
    redemption................................                              (1,340)                            (1,340)
                                                ---------       -----   ----------  ----------  ---------  ----------
BALANCE AT JUNE 30, 1995......................      6,425          64       21,646      (3,394)    (1,723)     16,593
  Stock split.................................      4,875          49          (49)
  Net issuance of common stock................      5,500          55       80,355                             80,410
  Net loss....................................                                         (12,757)               (12,757)
  Premium on redemption of preferred stock of
    a subsidiary..............................                              (1,682)                            (1,682)
  Amortization of unearned compensation.......                                                        141         141
  Reclassification of common stock subject to
    redemption................................        434           4        2,030                   (263)      1,771
                                                ---------       -----   ----------  ----------  ---------  ----------
BALANCE AT DECEMBER 31, 1995..................     17,234         172      102,300     (16,151)    (1,845)     84,476
  Issuance of common stock....................        895           9       15,212                             15,221
  Net loss....................................                                          (5,363)                (5,363)
  Amortization of unearned compensation.......                                                        803         803
  Repayment of subscription note..............                                                        196         196
  Reclassification of common stock subject to
    redemption................................        489           5        1,504                   (495)      1,014
  Stock option exercise.......................          1                        3                                  3
                                                ---------       -----   ----------  ----------  ---------  ----------
BALANCE AT DECEMBER 31, 1996..................     18,619         186      119,019     (21,514)    (1,341)     96,350
  Issuance of common stock and options for
    companies acquired........................      1,040          10       27,246                             27,256
  Net loss....................................                                         (47,034)               (47,034)
  Amortization of unearned compensation.......                                                        120         120
  Repayment of subscription note..............                                                        314         314
  Repurchase of common stock..................       (284)         (1)      (5,980)                            (5,981)
  Shares issued related to compensation
    plans.....................................        137                      513                                513
                                                ---------       -----   ----------  ----------  ---------  ----------
BALANCE AT DECEMBER 31, 1997..................     19,512   $     195   $  140,798  $  (68,548) $    (907) $   71,538
                                                ---------       -----   ----------  ----------  ---------  ----------
                                                ---------       -----   ----------  ----------  ---------  ----------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-5
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                          SIX MONTHS     YEAR
                                                              YEAR ENDED    YEAR ENDED      ENDED        ENDED
                                                             DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  JUNE 30,
                                                                 1997          1996          1995        1995
                                                             ------------  ------------  ------------  ---------
<S>                                                          <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.................................................   $  (47,034)   $   (5,363)   $  (12,757)  $  (1,612)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
    In-process acquired technology write off...............       58,192
    Loss on sale of Webcraft Games, Inc....................                     14,277
    Extraordinary item net.................................       13,463         2,078        19,248
    Depreciation and amortization..........................       67,322        51,759        18,633      42,987
    Deferred income taxes..................................        4,866         2,548             5      (5,348)
    Other..................................................        9,131         9,419         9,026      15,885
    Changes in operating assets and liabilities (excluding
      effect of acquisitions and disposition):
      (Increase) decrease in accounts receivable...........       (3,343)        4,580       (28,922)      4,794
      Proceeds from initial sale of accounts receivable....                     91,567
      (Increase) decrease in inventories...................       (5,905)       26,371         6,677     (23,655)
      (Increase) decrease in prepaid expenses and other
        assets.............................................       (1,317)       (2,510)         (449)      2,712
      Increase (decrease) in accounts payable and other
        liabilities........................................       25,262       (58,790)       16,420      11,834
                                                             ------------  ------------  ------------  ---------
Net cash provided by operating activities..................      120,637       135,936        27,881      47,597
                                                             ------------  ------------  ------------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of businesses, net of cash acquired..........     (242,233)     (122,144)       (2,584)
  Capital expenditures.....................................      (74,045)      (55,391)      (16,812)     (8,496)
  Proceeds from sale of property, plant and equipment and
    divested assets........................................          344         6,686           346       1,483
  Software development costs capitalized...................         (667)
                                                             ------------  ------------  ------------  ---------
Net cash used in investing activities......................     (316,601)     (170,849)      (19,050)     (7,013)
                                                             ------------  ------------  ------------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of long-term debt.............................     (239,257)     (153,514)     (200,046)     (6,999)
  Proceeds from issuance of redeemable convertible
    preferred securities...................................      115,000
  Proceeds from issuance of long-term debt.................      350,125        75,000           255       4,187
  Net borrowings (repayments) under lines of credit........        8,177        82,865       134,253     (30,777)
  (Decrease) increase in cash overdraft....................      (14,650)       26,713        10,215      (5,698)
  Deferred financing costs.................................      (17,048)       (1,313)       (7,306)       (302)
  Proceeds from issuance of common stock...................          705           190        80,410         572
  Repurchase of common stock...............................       (5,981)
  Purchase of redeemable preferred stock of a subsidiary...                                  (22,107)
  Other....................................................                                                 (772)
                                                             ------------  ------------  ------------  ---------
Net cash provided by (used in) financing activities........      197,071        29,941        (4,326)    (39,789)
                                                             ------------  ------------  ------------  ---------
Net increase (decrease) in cash and cash equivalents.......        1,107        (4,972)        4,505         795
                                                             ------------  ------------  ------------  ---------
Cash and cash equivalents at beginning of period...........        4,200         9,172         4,667       3,872
                                                             ------------  ------------  ------------  ---------
Cash and cash equivalents at end of period.................   $    5,307    $    4,200    $    9,172   $   4,667
                                                             ------------  ------------  ------------  ---------
                                                             ------------  ------------  ------------  ---------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-6
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION
 
    PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
those of Big Flower Holdings, Inc. ("Holdings") and its subsidiaries (together,
the "Company"). All material intercompany balances and transactions have been
eliminated.
 
    BUSINESS--The Company is a leading advertising and marketing services
company that provides integrated advertising solutions.
 
    CORPORATE REORGANIZATION--On October 17, 1997, the Company reorganized its
legal structure and the common shares of Big Flower Press Holdings, Inc.
("Press"), the previous parent company, were automatically exchanged for common
shares of Holdings. As a result of this reorganization, Press became a
wholly-owned subsidiary of Holdings. The reorganization had no impact on
reported stockholders' equity.
 
    USE OF ESTIMATES--In preparing financial statements in conformity with
generally accepted accounting principles, management must make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
 
    RECLASSIFICATIONS--Certain amounts for prior periods have been reclassified
to conform to the current period presentation.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    REVENUE RECOGNITION--Revenue from printing and direct mail operations is
recognized on a units-of-work-performed method, with revenue and related
accounts receivable recognized for orders in process and orders completed but
not yet delivered.
 
        Revenue from premedia operations is recognized upon completion of
    orders, including those not yet delivered.
 
        Initial software license revenue is recognized after all Company
    obligations have been fulfilled as specified in customer contracts. System
    fee revenue, for the use and service components of software sales, is
    recognized over the terms of the related contracts. Consulting and service
    revenue is recognized on a percentage-of-completion basis. Computer hardware
    sales are recognized upon shipment, while hardware maintenance fees are
    recognized over the terms of the related contracts.
 
    CASH AND CASH EQUIVALENTS--Cash equivalents include all investments with
initial maturities of 90 days or less.
 
    INVENTORIES--Inventories are recorded at the lower of cost or market
determined primarily on the first-in, first-out method.
 
    LONG-LIVED ASSETS--PROPERTY, PLANT AND EQUIPMENT are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the assets' estimated useful lives or, when applicable, the terms of the leases,
if shorter.
 
        GOODWILL arising from acquisitions is amortized over periods of 15 to 40
    years.
 
        SOFTWARE DEVELOPMENT COSTS are expensed until technological feasibility
    is determined, after which costs are capitalized until the product is ready
    for general release and sale. These costs are amortized
 
                                      F-7
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    over five to seven-year lives beginning at the respective release dates.
    Other assets at December 31, 1997 included $18.0 million of capitalized
    costs, including amounts acquired.
 
        OTHER INTANGIBLE ASSETS, primarily non-compete agreements, are amortized
    over the terms of the related agreements. Deferred financing costs are
    amortized over the terms of the related financing instruments.
 
        When changes in business circumstances warrant, the Company reviews the
    recoverability of long-lived assets to determine if there has been any
    permanent impairment. This assessment is based on estimated undiscounted
    future cash flows compared with the assets' carrying value. If impairment is
    indicated, a write-down to fair value (normally measured by discounting
    estimated cash flows) would be taken.
 
    INCOME TAXES--Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and operating
loss and tax credit carryforwards.
 
    EARNINGS PER SHARE--The Company calculates earnings per share in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which became effective in 1997. Basic earnings per share equals net
earnings divided by the weighted average shares outstanding during the period.
Diluted earnings per share equals net earnings divided by the weighted average
shares outstanding plus dilutive common stock equivalents and shares assumed
issued if convertible securities were converted. All prior period amounts have
been restated accordingly.
 
    For all periods prior to the Company's initial public offering in 1995 (the
"IPO"), common share amounts represent equivalent shares based on common stock
and options issued within one year prior to the IPO, calculated using the
treasury stock method. These amounts reflect the 2 for 1 stock split effected
immediately prior to the IPO. Supplemental income per share before extraordinary
item for the six months ended December 31, 1995 reflecting the impact of the IPO
and related transactions was $0.57 per basic share and $0.56 per diluted share.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company determines the fair value
of its financial instruments as follows:
 
        CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE AND ACCOUNTS
    PAYABLE--Carrying amounts approximate fair value because of the short
    maturities of these instruments.
 
        REVOLVING CREDIT FACILITIES AND TERM LOAN--Carrying amounts approximate
    fair value because their interest rates are based on variable reference
    rates.
 
        LONG-TERM DEBT (EXCLUDING REVOLVING CREDIT FACILITIES AND TERM
    LOAN)--The aggregate fair values at December 31, 1997 and 1996, based upon
    available market information, was approximately $353.5 million and $133.9
    million, respectively.
 
        REDEEMABLE CONVERTIBLE PREFERRED SECURITIES--The fair value at December
    31, 1997, based upon available market information, was approximately $118.2
    million.
 
    CONCENTRATION OF CREDIT RISK--The Company provides services to a wide range
of clients who operate in many industry sectors in varied geographic areas. The
Company grants credit to all qualified clients and does not believe that it is
exposed to undue concentration of credit risk to any significant degree.
 
                                      F-8
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    EMPLOYEE STOCK OPTIONS--Options are generally granted with an exercise price
equal to the market price on the grant date. In these instances, the Company
does not recognize compensation expense for the issuance of stock options. The
Company follows the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and continues to apply the accounting provisions of
APB Opinion No. 25, "Accounting for Stock Issued to Employees".
 
    FOREIGN CURRENCY TRANSLATION--The Company translates the financial
statements of foreign subsidiaries by recording assets and liabilities at
exchange rates in effect at the balance sheet date and income statement accounts
at average rates for the applicable periods. Translation gains and losses,
recorded in Other Stockholders Equity, and transaction gains and losses,
recorded in Other Expenses, were immaterial in 1997.
 
    NEW ACCOUNTING PRONOUNCEMENTS--The Company adopted SFAS No. 125 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" for applicable transactions after December 31, 1996. Adoption of
this statement did not have a material effect on the Company's operating
results.
 
    In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income", which requires a statement of
comprehensive income for fiscal years beginning after December 15, 1997. The
Company will report such required information beginning with the first quarter
of 1998.
 
    In 1997, the FASB also issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which must be adopted by the end of
1998. SFAS No. 131 requires disclosure of certain information about operating
segments and about products and services, geographic areas in which the Company
operates and major customers. The Company will report the results of multiple
segments as defined in this statement beginning with the first quarter of 1998.
 
    In 1997, the FASB also issued Statement of Opinion 97-2, "Software Revenue
Recognition" ("SOP 97-2"), which is effective for fiscal years beginning after
December 31, 1997. SOP 97-2 provides guidance on when revenue should be
recognized for software products and related services. Adoption of this standard
is not expected to have a material impact on the consolidated financial
statements as the Company is currently in compliance with its provisions.
 
3. ACQUISITIONS
 
    On October 4, 1996, the Company completed its acquisition of Scanforms, Inc.
("Scanforms") in exchange for 1.5 million shares of common stock. This
acquisition was accounted for as a pooling of interests and, accordingly, the
consolidated financial statements include the results of Scanforms for all
periods presented.
 
                                      F-9
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. ACQUISITIONS (CONTINUED)
    During 1995, 1996 and 1997, the Company completed the following
acquisitions, all accounted for as purchases:
 
    - November 1995, the Company acquired Laser Tech Color, Inc. ("Laser Tech")
      for $21.1 million, including a note that converted into 281,000 shares of
      common stock in January 1996.
 
    - In March 1996, the Company acquired Webcraft, Inc. ("Webcraft") for $111.0
      million in cash.
 
    - During the fourth quarter of 1996, the Company acquired all of the
      outstanding capital stock of PrintCo., Inc. ("PrintCo"), Pacific Color
      Connection, Inc. ("Pacific Color"), Designer Color Systems, Ltd.
      ("Designer Color") and Digital Dimensions, Inc. ("Digital Dimensions").
      The aggregate purchase price was $57.5 million, including 500,000 shares
      of common stock.
 
    - In September 1997, the Company acquired Olwen Direct Mail, Ltd. ("Olwen"),
      the Company's first business outside the U.S. During October 1997, the
      Company acquired the assets of businesses operating as Riverside County
      Publishing Company ("RCPC"), the stock of Columbine JDS Systems, Inc.
      ("Columbine") and the assets of Gamma One, Inc. ("Gamma One"). The
      aggregate purchase price, including debt repaid and 1.0 million shares of
      common stock and options to purchase 396,000 shares of common stock (with
      a collective fair value of $27.3 million), was $290.0 million.
 
    - In November 1997, the Company acquired the assets of IMPCO Enterprises,
      Inc. ("IMPCO") and Broadcast Systems Software Limited ("BSS"). These
      transactions were not material to the assets or operations of the Company.
 
    Aggregate goodwill recorded in connection with these acquisitions was $167.2
million in 1997, $96.3 million in 1996 and $20.8 million in 1995. Amounts and
allocations of costs recorded in 1997 may require adjustment based upon
information coming to the attention of the Company that is not currently
available.
 
    In connection with the Columbine acquisition, the Company recorded a $58.2
million write off of a portion of the purchase price, representing in-process
technology costs. Subsequent to the acquisitions of Webcraft, PrintCo and Olwen,
the Company repurchased substantially all of their respective outstanding debt
which generated aggregate extraordinary losses of $0.3 million in 1997 and $2.1
million in 1996, net of income tax benefits.
 
                                      F-10
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. ACQUISITIONS (CONTINUED)
    The results of operations for all of these businesses are included in the
consolidated financial statements from their respective dates of acquisition.
The following supplemental unaudited pro forma information has been prepared as
though the purchase acquisitions had occurred at January 1, 1996:
 
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED    YEAR ENDED
                                                                                  DECEMBER 31,  DECEMBER 31,
                                                                                      1997          1996
                                                                                  ------------  ------------
<S>                                                                               <C>           <C>
                                                                                  (IN THOUSANDS, EXCEPT PER
                                                                                        SHARE AMOUNTS)
Net sales.......................................................................   $1,596,812    $1,594,207(2)
Income before extraordinary item................................................       24,117(1)       8,337(2)
Net income......................................................................       10,654(1)       6,259(2)
 
Per share:
  Income before extraordinary item--basic.......................................   $     1.23(1)  $     0.42(2)
  Net income--basic.............................................................         0.54(1)        0.32(2)
  Income before extraordinary item--diluted.....................................         1.15(1)        0.41(2)
  Net income--diluted...........................................................         0.60(1)        0.31(2)
</TABLE>
 
------------------------
 
(1)  Excludes the in-process acquired technology write off related to the
    Columbine acquisition, $5.7 million of non-operational charges related to
    other 1997 acquisitions and $0.6 million of costs related to the Company's
    secondary stock offering (see Note 5).
 
(2)  Excludes the operating results of, and the $14.7 million loss on the sale
    of, Webcraft Games (see Note 4), $1.5 million of Scanforms merger costs and
    $2.7 million of non-operational charges related to other 1996 acquisitions.
 
4. SALE OF WEBCRAFT GAMES, INC.
 
    In December 1996, Webcraft sold the stock of its lottery production
division, Webcraft Games, Inc., for $6.7 million. A loss of $14.3 million was
recorded in connection with the sale.
 
5. RECAPITALIZATIONS AND PUBLIC OFFERINGS
 
    On November 22, 1995, Press consummated an IPO of 6.7 million shares of its
common stock ("Common Shares"), of which Press sold 5.5 million shares and
existing stockholders sold 1.2 million shares. The net proceeds to Press of
$80.4 million, together with borrowings under a credit agreement (see Note 9)
were used to redeem a portion of previously outstanding debt, purchase all
outstanding shares of a subsidiary's preferred stock and terminate interest rate
swap agreements (see Note 9). The termination of the swap agreements and the
early repayment of debt generated an extraordinary loss of $19.2 million (net of
income tax benefit of $11.3 million).
 
    Simultaneous with the IPO, Press:
 
    - Converted all outstanding shares of previous classes of common stock
      (except for 869,000 shares of Class B common stock) to Common Shares,
 
    - Declared a 2 for 1 stock split (including Class B common stock) effected
      in the form of a stock dividend, and
 
                                      F-11
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
5. RECAPITALIZATIONS AND PUBLIC OFFERINGS (CONTINUED)
    - Converted options to purchase shares of previous classes of common stock
      to options to purchase Common Shares.
 
    In addition, the put rights of the holders of vested Class C common stock
expired.
 
    In June 1997, Press completed a secondary offering of its Common Shares in
which 6.7 million shares were sold by shareholders and the remaining shares of
Class B common stock were converted to Common Shares and sold in the offering.
There were no proceeds to the Company as a result of the secondary offering and
no change to the number of common shares outstanding.
 
6. ACCOUNTS RECEIVABLE
 
    Accounts receivable consisted of the following:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1996
                                                                   ------------  ------------
<S>                                                                <C>           <C>
                                                                         (IN THOUSANDS)
Trade--billed....................................................   $  124,508    $   90,989
Trade--unbilled..................................................       22,630        13,786
Other receivables................................................        5,316         9,075
                                                                   ------------  ------------
                                                                       152,454       113,850
Allowance for doubtful accounts..................................      (12,342)       (8,580)
                                                                   ------------  ------------
                                                                    $  140,112    $  105,270
                                                                   ------------  ------------
                                                                   ------------  ------------
</TABLE>
 
    In October 1996, the Company entered into a six-year agreement (the "A/R
Securitization") under which it may sell interests in certain accounts
receivable. The maximum amount to be sold is $150 million and the amount
outstanding at any time depends upon the level of eligible receivables. The
Company retains substantially the same risk of credit loss as if the receivables
had not been sold and, accordingly, any allowance for doubtful accounts related
to the receivables sold is retained. At December 31, 1997 and 1996, interests of
$101.1 million and $79.8 million, respectively, had been sold under the A/R
Securitization. These amounts are reflected as reductions of accounts
receivable. Fees of this program vary based on a Eurodollar rate plus an average
margin of 3/8% per year on the amount of interest sold. These fees, which were
$6.2 million in 1997 and $5.3 million in 1996, are included in Other Expenses.
 
7. INVENTORIES
 
    Inventories consisted of the following:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1996
                                                                   ------------  ------------
<S>                                                                <C>           <C>
                                                                         (IN THOUSANDS)
Paper............................................................   $   34,324    $   22,315
Ink and chemicals................................................        5,447         2,680
Other............................................................        6,739         5,131
                                                                   ------------  ------------
                                                                    $   46,510    $   30,126
                                                                   ------------  ------------
                                                                   ------------  ------------
</TABLE>
 
                                      F-12
<PAGE>
8. PROPERTY, PLANT AND EQUIPMENT
 
    The components and useful lives of property, plant and equipment were:
 
<TABLE>
<CAPTION>
                                                             ESTIMATED    DECEMBER     DECEMBER
                                                            USEFUL LIFE      31,          31,
                                                              (YEARS)       1997         1996
                                                            -----------  -----------  -----------
                                                                              (IN THOUSANDS)
<S>                                                         <C>          <C>          <C>
Land......................................................                $   8,877    $   6,952
Machinery and equipment...................................     5 to 12      375,468      268,899
Buildings and leasehold improvements......................     3 to 40       73,807       62,104
Furniture and fixtures....................................     5 to 10       21,164        9,036
Vehicles..................................................      3 to 4        1,980        1,198
Construction in progress and deposits on equipment
  purchases...............................................                   20,519       36,230
                                                                         -----------  -----------
                                                                            501,815      384,419
Accumulated depreciation and amortization.................                 (134,939)     (87,993)
                                                                         -----------  -----------
                                                                          $ 366,876    $ 296,426
                                                                         -----------  -----------
                                                                         -----------  -----------
</TABLE>
 
9. LONG-TERM DEBT
 
    Long-term debt consisted of the following:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1996
                                                                   ------------  ------------
<S>                                                                <C>           <C>
                                                                         (IN THOUSANDS)
Revolving credit facilities......................................   $  236,352    $  227,365
8 7/8% Notes due 2007............................................      350,122
10 3/4% Notes and BFP Notes......................................                    125,166
Term loan........................................................                     74,250
Other notes......................................................        5,850         5,361
                                                                   ------------  ------------
                                                                       592,324       432,142
Current portion, included in other current liabilities...........       (2,279)       (1,376)
                                                                   ------------  ------------
                                                                    $  590,045    $  430,766
                                                                   ------------  ------------
                                                                   ------------  ------------
</TABLE>
 
    In connection with acquisitions in 1993 and 1994, Press issued $150 million
of 10 3/4% senior subordinated notes due 2003 (the "10 3/4% Notes"), $40 million
of senior subordinated notes due 2003 (the "BFP Notes"), $15 million of 11%
Debentures due 2005 (the "11% Debentures") and $76.5 million of 13 1/2% Notes
due 2004 (the "13 1/2% Notes"). In connection with the IPO (see Note 5), the 11%
Debentures, the 13 1/2% Notes and a portion of each of the 10 3/4% Notes and of
the BFP Notes were repaid. In 1996, the Company amended its then existing $350
million revolving credit facility to add a $75 million term loan.
 
    During 1997, the Company refinanced its debt through the following actions:
 
    - In June, Press replaced the previous credit facility (including the term
      loan) with a new $475 million revolving credit facility maturing in 2002
      (as amended to date, the "Credit Facility") with no repayment of principal
      until maturity. Interest is payable at Press' option either (a) at a base
      rate plus a margin of 0.00% to 0.75% or (b) at a Eurodollar-based rate
      plus a margin ranging from 0.50% to 1.75%. Replacement of the previous
      credit facility generated an extraordinary loss of $3.0 million, net of
      tax benefit.
 
                                      F-13
<PAGE>
9. LONG-TERM DEBT (CONTINUED)
    - Also in June, Press issued $250 million of 8 7/8% senior subordinated
      notes due 2007 (the "8 7/8% Notes") and used the proceeds to pay down
      amounts outstanding under the Credit Facility. Interest on the notes is
      payable semi-annually.
 
    - In connection with the issuance of the 8 7/8% Notes, Press commenced a
      tender offer for all of the remaining 10 3/4% Notes and BFP Notes and
      purchased substantially all of them for $137 million, funded through
      borrowings under the Credit Facility. Repurchase of these notes generated
      an extraordinary loss of $10.2 million, net of tax benefit.
 
    - In connection with the Olwen acquisition (see Note 3), a subsidiary of
      Press entered into a revolving credit facility (as amended to date, the
      "UK Credit Facility") providing for borrowings of up to L50 million
      (approximately $82 million at December 31, 1997). The UK Credit Facility
      expires in 1998, and Press intends to renew it or amend the Credit
      Facility to allow borrowings in foreign currencies.
 
    - In connection with the other 1997 acquisitions (see Note 3) Press issued
      an additional $100 million of 8 7/8% Notes at a premium and a subsidiary
      trust of Holdings issued $115 million of redeemable convertible preferred
      securities (see Note 15). The proceeds of these two offerings were used to
      pay down borrowings under the Credit Facility.
 
    Future minimum payments on long-term debt (excluding revolving credit
facilities) are:
 
<TABLE>
<S>                                                                              <C>
                                                                                 (IN THOUSANDS)
1998...........................................................................  $       2,279
1999...........................................................................          1,308
2000...........................................................................            560
2001...........................................................................            199
2002...........................................................................       --
Thereafter.....................................................................        351,626
                                                                                 -------------
                                                                                 $     355,972
                                                                                 -------------
                                                                                 -------------
</TABLE>
 
    The Credit Facility and the 8 7/8% Notes contain certain customary covenants
including, among other things, restrictions on dividends, investments and
indebtedness and maintenance of specified levels of interest coverage and cash
flows.
 
    At December 31, 1997, the weighted average interest rates on the Credit
Facility and the UK Credit Facility were 7.31% and 8.67%, respectively. The
weighted average interest rate on credit facilities outstanding at December 31,
1996 (including the term loan) was 7.51%.
 
10. LEASES
 
    Facilities and certain equipment are leased under agreements that expire at
various dates through 2009. Rental expense under operating leases for the years
ended December 31, 1997 and 1996, the six months ended December 31, 1995, and
the year ended June 30, 1995, was $33.5 million, $32.7 million, $17.1 million
and $28.2 million, respectively.
 
                                      F-14
<PAGE>
10. LEASES (CONTINUED)
    Minimum annual rentals under non-cancelable operating leases (net of
subleases) were:
 
<TABLE>
<S>                                                              <C>
1998...........................................................   $  32,165
1999...........................................................      25,467
2000...........................................................      17,891
2001...........................................................      11,250
2002...........................................................       7,183
Thereafter.....................................................      19,358
                                                                 -----------
                                                                  $ 113,314
                                                                 -----------
                                                                 -----------
</TABLE>
 
    Commitments under the lease agreements also extend in most instances to
property taxes, insurance and maintenance and certain leases contain escalation
clauses and extension options.
 
11. INCOME TAXES
 
    Income tax expense consisted of the following components:
 
<TABLE>
<CAPTION>
                                                                                         SIX MONTHS
                                                            YEAR ENDED    YEAR ENDED        ENDED      YEAR ENDED
                                                           DECEMBER 31,  DECEMBER 31,   DECEMBER 31,    JUNE 30,
                                                               1997          1996           1995          1995
                                                           ------------  -------------  -------------  -----------
<S>                                                        <C>           <C>            <C>            <C>
                                                                               (IN THOUSANDS)
Current:
  Federal................................................   $   11,284     $    (741)     $   4,642     $   8,561
  State and foreign......................................        5,224          (317)         1,556         3,667
                                                           ------------       ------         ------    -----------
                                                                16,508        (1,058)         6,198        12,228
                                                           ------------       ------         ------    -----------
Deferred:
  Federal................................................        4,733         8,938            123        (3,644)
  State and foreign......................................          704           403           (118)       (1,704)
                                                           ------------       ------         ------    -----------
                                                                 5,437         9,341              5        (5,348)
                                                           ------------       ------         ------    -----------
Total income tax expense.................................   $   21,945     $   8,283      $   6,203     $   6,880
                                                           ------------       ------         ------    -----------
                                                           ------------       ------         ------    -----------
</TABLE>
 
    The Company's foreign pre-tax income was immaterial. No U.S. income taxes
have been provided for unremitted earnings of foreign subsidiaries as the
Company intends to reinvest those profits overseas.
 
                                      F-15
<PAGE>
11. INCOME TAXES (CONTINUED)
    The following is a reconciliation of the U.S. statutory federal income tax
rate to the Company's effective tax rates:
 
<TABLE>
<CAPTION>
                                                                                            SIX MONTHS
                                                            YEAR ENDED     YEAR ENDED          ENDED        YEAR ENDED
                                                           DECEMBER 31,   DECEMBER 31,     DECEMBER 31,      JUNE 30,
                                                               1997           1996             1995            1995
                                                           ------------  ---------------  ---------------  -------------
<S>                                                        <C>           <C>              <C>              <C>
                                                                         PERCENT OF PRE-TAX INCOME (LOSS)
Statutory income tax rate................................         35.0%          35.0%            35.0%           35.0%
Amortization and write off of goodwill...................        (19.7)          97.7              5.5            39.1
In-process acquired technology write off.................       (175.2)
Preferred dividends of a subsidiary......................                                          3.4            19.8
State income taxes, net of federal income tax benefits...        (24.8)          20.2              3.1            28.4
Original issue discount..................................                                          1.3             7.3
Non-deductible acquisition expenses......................                         9.7
Other non-deductible expenses............................         (4.1)           3.0              0.6             1.0
                                                           ------------         -----              ---           -----
Effective tax rate.......................................       (188.8)%        165.6%            48.9%          130.6%
                                                           ------------         -----              ---           -----
                                                           ------------         -----              ---           -----
</TABLE>
 
    At December 31, 1997, alternative minimum tax credit carryforwards were $1.0
million, state investment tax credit carryforwards were $1.5 million (which
expire in 2001), and federal net operating loss carryforwards were $25.3 million
(which expire at various dates through 2010).
 
    The tax effects of significant items comprising deferred income taxes were:
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,  DECEMBER 31,
                                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                                                             (IN THOUSANDS)
Tax credit carryfoward...............................................................   $    3,132    $    7,158
Net operating loss carryforward......................................................        9,366        13,870
Allowance for doubtful accounts......................................................        5,121         3,869
Nonqualified benefit plan............................................................        4,017         3,515
Workers' compensation................................................................        3,323         3,737
Other deductible differences.........................................................       19,186        15,175
                                                                                       ------------  ------------
                                                                                            44,145        47,324
                                                                                       ------------  ------------
Depreciation.........................................................................      (47,663)      (34,936)
Other taxable differences............................................................                     (1,914)
                                                                                       ------------  ------------
                                                                                           (47,663)      (36,850)
                                                                                       ------------  ------------
Valuation allowance..................................................................       (6,261)       (6,261)
                                                                                       ------------  ------------
Net deferred income tax (liability) asset............................................   $   (9,779)   $    4,213
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
    The valuation allowance was established primarily as a result of IRS
limitations on the utilization of net operating loss carryforwards. The
valuation allowance increased by $5.1 million in 1996 as a result of
acquisitions.
 
12. COMMITMENTS AND CONTINGENCIES
 
    Certain claims, suits and allegations that arise in the ordinary course of
business and certain environmental claims have been filed or are pending against
the Company. Management believes that all
 
                                      F-16
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
such matters in the aggregate would not have a material effect on the Company's
consolidated financial position or results of operations.
 
13. RETIREMENT PLANS
 
    PENSION PLANS--The Company maintains defined benefit pension plans covering
substantially all the employees of Webcraft. Benefits are generally calculated
according to benefit formulas based on age, total credited service and
compensation or based on years of credited service multiplied by a specific
dollar amount. The Company's policy is to fund the minimum required by the
Employee Retirement Income Security Act and, therefore, the plans are not fully
funded.
 
    SUPPLEMENTAL RETIREMENT PLAN--TC Advertising maintains a Supplemental
Executive Retirement Plan to provide benefits to certain management and highly
compensated employees. Benefits under this unfunded plan vest at 10% per year
beginning with the participants' sixth year of service and are payable after age
65. Participants may elect early retirement benefits beginning at age 62 or
after attaining 15 years of service and 55 years of age. The liability is
accrued over the participants' estimated remaining periods of employment.
 
    Net periodic cost for the Webcraft and TC Advertising plans included the
following components:
 
<TABLE>
<CAPTION>
                                                                                           SIX MONTHS
                                                            YEAR ENDED     YEAR ENDED         ENDED        YEAR ENDED
                                                           DECEMBER 31,   DECEMBER 31,    DECEMBER 31,      JUNE 30,
                                                               1997           1996            1995            1995
                                                           -------------  -------------  ---------------  -------------
<S>                                                        <C>            <C>            <C>              <C>
                                                                                  (IN THOUSANDS)
Service costs............................................    $   1,546      $     843       $     401       $     226
Interest cost............................................        1,819          1,260             199             352
Actual return on assets..................................       (2,489)          (376)
Net amortization and deferral............................        1,197           (460)
                                                                ------         ------           -----           -----
Net periodic cost........................................    $   2,073      $   1,267       $     600       $     578
                                                                ------         ------           -----           -----
                                                                ------         ------           -----           -----
</TABLE>
 
    The funded status of the plans was as follows:
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,  DECEMBER 31,
                                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                                                             (IN THOUSANDS)
Actuarial present value of benefit obligations:
  Vested benefit obligation..........................................................   $   22,514    $   21,126
  Nonvested benefit obligation.......................................................        1,946         1,497
                                                                                       ------------  ------------
  Accumulated benefit obligation.....................................................   $   24,460    $   22,623
                                                                                       ------------  ------------
                                                                                       ------------  ------------
Projected benefit obligation.........................................................   $   29,074    $   23,524
Plan assets at fair value............................................................       17,134        13,214
                                                                                       ------------  ------------
Projected benefit obligation in excess of plan assets................................       11,940        10,310
Unrecognized prior service cost......................................................         (644)
Unrecognized (loss) gain.............................................................         (971)          792
                                                                                       ------------  ------------
Accrued benefit liability............................................................   $   10,325    $   11,102
                                                                                       ------------  ------------
                                                                                       ------------  ------------
Assumptions:
  Weighted average discount rate.....................................................         7.00%    7.00-7.75%
  Expected return on plan assets.....................................................         9.00%         9.00%
  Annual compensation increase.......................................................    3.00-3.75%    3.00-3.75%
</TABLE>
 
    Plan assets consist of a variety of investment funds holding diversified
debt and equity securities.
 
                                      F-17
<PAGE>
13. RETIREMENT PLANS (CONTINUED)
    DEFERRED COMPENSATION--TC Advertising also maintains a Deferred Compensation
Plan in which certain management, highly compensated employees and certain
former employees may defer up to 100% of their total compensation through the
date of their retirement. Long-term liabilities include $2.6 million and $2.1
million for deferred compensation as of December 31, 1997 and 1996,
respectively.
 
    401(K) PLAN--The Company maintains 401(k) and other investment plans for
eligible employees. The Company recorded $5.0 million, $3.1 million, $1.4
million and $2.4 million in expense for the years ended December 31, 1997 and
1996, the six months ended December 31, 1995 and the year ended June 30, 1995,
respectively.
 
14. EARNINGS PER SHARE
 
    For the years ended December 31, 1997, December 31, 1996 and June 30, 1995,
the diluted loss per share equals the basic loss per share as the impact of
common stock equivalents (in all periods) and the potential conversion of
convertible securities (in 1997) would have been anti-dilutive.The following
table illustrates the calculation of basic and diluted earnings per share for
the six months ended December 31, 1995:
 
<TABLE>
<CAPTION>
                                                                  INCOME     SHARES     PER SHARE
                                                                 ---------  ---------  -----------
<S>                                                              <C>        <C>        <C>
                                                                       (IN THOUSANDS, EXCEPT
                                                                        PER SHARE AMOUNTS)
Basic earnings per share before extraordinary item.............  $   4,809     13,451   $    0.36
Effect of dilutive stock options...............................                   468
                                                                 ---------  ---------       -----
Diluted earnings per share before extraordinary item...........  $   4,809     13,919   $    0.35
                                                                 ---------  ---------       -----
                                                                 ---------  ---------       -----
</TABLE>
 
15. REDEEMABLE CONVERTIBLE PREFERRED SECURITIES
 
    On October 20, 1997, Big Flower Trust I (the "Trust") issued $115 million of
30-year, 6% convertible Quarterly Income Preferred Securities ("QUIPS"). The
Trust is a wholly-owned subsidiary of Holdings whose sole assets are $118.6
million aggregate principal amount of 6% Convertible Subordinated Debentures due
2027 (the "Debentures"), which were issued by Holdings. The QUIPS are non-voting
securities, carry a liquidation value of $50 per security and are convertible
into the Company's common stock at an initial rate of 1.7344 shares per security
(equivalent to an initial conversion price of $28.83 per share). They are
convertible at any time at the holders' option and are redeemable, at the
Company's option, after three years, subject to certain conditions. No
securities were converted in 1997.
 
    Holders of the QUIPS are entitled to preferential cumulative cash
distributions from the Trust at an annual rate of 6% of the liquidation value,
accruing from the original issue date and payable quarterly in arrears beginning
January 15, 1998. The distribution rate and dates will correspond to the
interest rate and payment dates for the Debentures. Holdings may defer interest
payments on the Debentures for up to 20 consecutive quarters, but not beyond the
maturity date of the Debentures. If interest payments on the Debentures are
deferred, so are payments on the QUIPS. Under this circumstance, Holdings will
not be able to declare or pay any cash distributions with respect to its capital
stock or other debt ranking on par with or junior to the Debentures.
 
    Holdings has executed a guarantee with regard to payment of the QUIPS to the
extent that the Trust has sufficient funds to make the required payments. This
guarantee is not a guarantee of collection by QUIPS holders.
 
    Separate financial statements of the Trust are not presented because the
Trust has no independent operations and because of the Company's guarantee
described above.
 
                                      F-18
<PAGE>
16. STOCKHOLDERS' EQUITY
 
    COMMON STOCK--During 1997, the Company repurchased 284,000 shares of common
stock and cancelled the shares. Also during 1997, the Company issued 1.0 million
new common shares in connection with acquisitions (see Note 3).
 
    PREFERRED STOCK--The Company has authorized 10 million shares of preferred
stock, none of which have been issued. Of the shares authorized, 250,000 have
been designated as Series A Junior Preferred Stock.
 
    RIGHTS--The Company has distributed a preferred stock purchase right (a
"Right") for each outstanding share of common stock. Each Right entitles the
holder to purchase from the Company a unit consisting of 1/100 share of Series A
Junior Preferred Stock at an exercise price of $55 per unit in an event that
certain entities acquire a required percentage of the Company's outstanding
stock.
 
17. STOCK AWARD AND INCENTIVE PLAN
 
    The Big Flower Holdings, Inc. Restated 1993 Stock Award and Incentive Plan
(the "1993 Stock Plan") authorized grants of common stock and options to
purchase shares of common stock. Options under the 1993 Stock Plan generally
expire in ten years, and become exercisable at varying times. Under the 1993
Stock Plan, as amended in 1997, 5,484,000 shares of common stock are authorized
for issuance and 1,488,000 were available for issuance at December 31, 1997.
 
    In connection with the acquisition of Columbine (see Note 3), 396,000
options were issued at an exercise price equal to one-half the market value of
the Company's stock on the date of grant. The excess of the market value over
the exercise price was credited to additional paid-in capital and recorded as a
component of the acquisition cost.
 
    Information concerning options outstanding at December 31, 1997 is as
follows:
 
<TABLE>
<CAPTION>
                                                                          WEIGHTED     WEIGHTED                  WEIGHTED
                                                            OPTIONS       AVERAGE      AVERAGE      OPTIONS      AVERAGE
                        RANGE OF                          OUTSTANDING    REMAINING     EXERCISE   EXERCISABLE    EXERCISE
                    EXERCISE PRICES                       (THOUSANDS)   TERM (YEARS)    PRICE     (THOUSANDS)     PRICE
--------------------------------------------------------  -----------   ------------   --------   ------------   --------
<S>                                                       <C>           <C>            <C>        <C>            <C>
$ 0.68- 3.82............................................       498          6.1         $2.70          395        $ 2.61
$11.00-16.00............................................     1,080          7.7         13.03          741         12.74
$18.00-22.75............................................     1,362          9.3         19.16           21         20.13
                                                             -----                                   -----
                                                             2,940                                   1,157
                                                             -----                                   -----
                                                             -----                                   -----
</TABLE>
 
                                      F-19
<PAGE>
17. STOCK AWARD AND INCENTIVE PLAN (CONTINUED)
    Transactions under the 1993 Stock Plan were as follows:
 
<TABLE>
<CAPTION>
                                                                                   NUMBER
                                                                                  OF SHARES    WEIGHTED AVERAGE
                                                                                 (THOUSANDS)    EXERCISE PRICE
                                                                                -------------  -----------------
<S>                                                                             <C>            <C>
Outstanding at July 1, 1994...................................................          236        $    4.66
Granted.......................................................................           71             7.46
Expired or canceled...........................................................          (26)            5.29
                                                                                      -----
Outstanding at June 30, 1995..................................................          281             5.29
Granted.......................................................................          300            16.00
Stock split...................................................................          281
                                                                                      -----
Outstanding at December 31, 1995..............................................          862             7.30
Granted.......................................................................          507            10.59
Exercised.....................................................................           (1)            2.33
Expired or canceled...........................................................           (5)           12.63
                                                                                      -----
Outstanding at December 31, 1996..............................................        1,363             8.51
Granted.......................................................................        1,780            17.34
Exercised.....................................................................         (132)            2.47
Expired or canceled...........................................................          (71)            8.92
                                                                                      -----
Outstanding at December 31, 1997..............................................        2,940        $   14.12
                                                                                      -----           ------
                                                                                      -----           ------
Exercisable at December 31, 1997..............................................        1,157        $    9.41
                                                                                      -----           ------
                                                                                      -----           ------
</TABLE>
 
    Pro forma results of the Company's operations reflecting compensation cost
for the fair value of option awards in 1997 and 1996 were:
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED    YEAR ENDED
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1996
                                                                   ------------  ------------
<S>                                                                <C>           <C>
                                                                     (IN THOUSANDS, EXCEPT
                                                                       PER SHARE AMOUNTS)
Net loss
  As reported....................................................   $  (47,034)   $   (5,363)
  Pro forma......................................................      (53,289)       (6,521)
Net loss per share--basic and diluted
  As reported....................................................   $    (2.51)   $    (0.30)
  Pro forma......................................................        (2.85)        (0.36)
</TABLE>
 
    No pro forma adjustment to the Company's net income is required for 1995.
The weighted average fair value per option at the date of grant for options
granted in 1997 and 1996 (excluding options issued for the Columbine
acquisition) was $12.14 and $8.35, respectively. The fair value per option
issued in connection with the Columbine acquisition in 1997 was $15.84.
 
                                      F-20
<PAGE>
17. STOCK AWARD AND INCENTIVE PLAN (CONTINUED)
    The fair value of options granted during 1997 and 1996 is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions:
 
<TABLE>
<CAPTION>
                                                                               1997       1996
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Expected volatility........................................................      41.23%     52.36%
Risk-free interest rate....................................................       6.56%      6.50%
Dividend yield.............................................................       0.00%      0.00%
Expected option life (years)...............................................         10         10
</TABLE>
 
18. QUARTERLY FINANCIAL INFORMATION--UNAUDITED
 
    Summarized quarterly financial information is as follows:
 
<TABLE>
<CAPTION>
                                                                FIRST           SECOND           THIRD            FOURTH
                                                               QUARTER          QUARTER         QUARTER          QUARTER
                                                              ----------       ---------       ----------       ----------
<S>                                                           <C>              <C>             <C>              <C>
                                                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1997
Net sales...................................................  $  297,501       $ 316,838       $  341,579       $  420,788
Income (loss) before income taxes...........................       3,296           8,384(1)        11,915(2)       (35,221)(3)
Income (loss) before extraordinary item.....................       1,681           4,393(1)         6,060(2)       (45,705)(3)
Extraordinary item, net.....................................                      (2,959)         (10,504)
Net income (loss)...........................................       1,681           1,434(1)        (4,444)(2)      (45,705)(3)
Per share--basic
  Income (loss) before extraordinary item...................        0.09            0.24(1)          0.33(2)         (2.38)(3)
  Extraordinary item, net...................................                       (0.16)           (0.57)
  Net income (loss).........................................        0.09            0.08(1)         (0.24)(2)        (2.38)(3)
Per share--diluted
  Income (loss) before extraordinary item...................        0.09            0.23(1)          0.31(2)         (2.38)(3)
  Extraordinary item, net...................................                       (0.16)           (0.54)
  Net income (loss).........................................        0.09            0.07(1)         (0.23)(2)        (2.38)(3)
 
YEAR ENDED DECEMBER 31, 1996
Net sales...................................................  $  229,128       $ 301,910       $  313,248       $  357,574
Income (loss) before income taxes...........................      (9,046)(4)       4,811(5)         7,204(4)(5)      2,029(6)
Income (loss) before extraordinary item.....................      (4,423)(4)       2,556(5)         3,035(4)(5)     (4,453)(6)
Extraordinary item, net.....................................      (1,892)                                             (186)
Net income (loss)...........................................      (6,315)(4)       2,556(5)         3,035(4)(5)     (4,639)(6)
Per share--basic
  Income (loss) before extraordinary item...................       (0.25)(4)        0.14(5)          0.17(4)(5)      (0.25)(6)
  Extraordinary item, net...................................       (0.10)                                            (0.01)
  Net income (loss).........................................       (0.35)(4)        0.14(5)          0.17(4)(5)      (0.26)(6)
Per share--diluted
  Income (loss) before extraordinary item...................       (0.25)(4)        0.14(5)          0.16(4)(5)      (0.25)(6)
  Extraordinary item, net...................................       (0.10)                                            (0.01)
  Net income (loss).........................................       (0.35)(4)        0.14(5)          0.16(4)(5)      (0.26)(6)
</TABLE>
 
------------------------------
(1) Includes $0.6 million of costs related to the Company's secondary stock
    offering (see Note 5).
 
(2) Includes $3.2 million of costs related to the Olwen acquisition (see Note
    3).
 
(3) Includes $58.2 million in-process acquired technology write off related to
    the Columbine acquisition and $2.5 million of costs related to other
    acquisitions (see Note 3).
 
                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)
 
                                      F-21
<PAGE>
18. QUARTERLY FINANCIAL INFORMATION--UNAUDITED (CONTINUED)
 
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
 
(4) Includes financing costs related to the Webcraft acquisition of $5.0 million
    and $0.2 million in the first and third quarters, respectively (see Note 3).
 
(5) Includes Scanforms merger costs of $0.1 million and $0.4 million in the
    second and third quarters, respectively (see Note 3).
 
(6) Includes $2.7 million of costs related to acquisitions and $0.9 million of
    Scanforms merger costs (see Note 3) and $14.3 million loss on the sale of
    Webcraft Games (see Note 4).
 
19. SUPPLEMENTAL CASH FLOW INFORMATION
 
    Supplemental cash flow information is as follows:
 
<TABLE>
<CAPTION>
                                                                                        SIX MONTHS
                                                            YEAR ENDED    YEAR ENDED      ENDED      YEAR ENDED
                                                           DECEMBER 31,  DECEMBER 31,  DECEMBER 31,   JUNE 30,
                                                               1997          1996          1995         1995
                                                           ------------  ------------  ------------  -----------
<S>                                                        <C>           <C>           <C>           <C>
                                                                              (IN THOUSANDS)
Interest paid............................................   $   34,744    $   34,835    $   23,343    $  26,893
Income taxes paid........................................   $    6,766    $   10,494    $    7,098    $   9,261
Non-cash investing and financing activities:
  Cash paid for acquisitions.............................   $  245,134    $  158,605    $    3,000
  Fair value of common stock and options issued..........       27,257         9,045
  Notes issued...........................................                      2,000        18,119
  Assets acquired........................................      347,558       367,993        35,078
                                                           ------------  ------------  ------------
  Liabilities assumed....................................   $   75,167    $  198,343    $   13,959
                                                           ------------  ------------  ------------
                                                           ------------  ------------  ------------
  Conversion of note payable into common stock...........                 $    4,500
                                                                         ------------
                                                                         ------------
</TABLE>
 
                                      F-22
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Stockholder of
  Big Flower Press Holdings, Inc.:
 
    We have audited the accompanying consolidated balance sheet of Big Flower
Press Holdings, Inc. and subsidiaries ("the Company") as of December 31, 1997
and the related consolidated statements of operations and accumulated deficit
and cash flows for the year then ended. Our audit also included the consolidated
financial statement schedules listed in the Index on page F-1. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audit.
 
    We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
 
DELOITTE & TOUCHE LLP
New York, New York
February 9, 1998
 
                         INDEPENDENT AUDITORS' CONSENT
            TO INCORPORATION BY REFERENCE IN REGISTRATION STATEMENTS
                              ON FORMS S-8 AND S-4
 
    We consent to the incorporation by reference in Big Flower Press Holdings,
Inc.'s Registration Statement Nos. 333-2152 and 333-14637 on Form S-8 and
Registration Statement Nos. 333-32141 and 333-42745 on Form S-4 of our report
dated February 9, 1998 appearing on page F-23 of the Annual Report on Form 10-K
for the year ended December 31, 1997.
 
DELOITTE & TOUCHE LLP
New York, New York
March 26, 1998
 
                                      F-23
<PAGE>
                BIG FLOWER PRESS HOLDINGS, INC. AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
                                                      ASSETS
Current Assets:
  Cash and cash equivalents.........................................................................   $    5,307
  Accounts receivable, net..........................................................................      140,112
  Inventories.......................................................................................       46,510
  Prepaid expenses and other current assets.........................................................        4,625
  Deferred income taxes and income tax receivable...................................................       19,827
                                                                                                      ------------
    Total current assets............................................................................      216,381
Property, plant and equipment, net..................................................................      366,876
Goodwill, net of accumulated amortization of $25,413................................................      415,601
Other assets, net...................................................................................       55,410
                                                                                                      ------------
    Total Assets....................................................................................   $1,054,268
                                                                                                      ------------
                                                                                                      ------------
 
                                       LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
  Accounts payable..................................................................................   $  133,648
  Compensation and benefits payable.................................................................       45,281
  Accrued interest..................................................................................       13,775
  Other current liabilities.........................................................................       40,196
                                                                                                      ------------
    Total current liabilities.......................................................................      232,900
Due to parent.......................................................................................        3,466
Long-term debt, net of current portion..............................................................      590,045
Deferred income taxes...............................................................................       27,811
Other long-term liabilities.........................................................................       20,804
                                                                                                      ------------
    Total liabilities...............................................................................      875,026
                                                                                                      ------------
Stockholder's equity:
  Accumulated deficit...............................................................................      (67,643)
  Other.............................................................................................      246,885
                                                                                                      ------------
    Total stockholder's equity......................................................................      179,242
                                                                                                      ------------
    Total liabilities and stockholder's equity......................................................   $1,054,268
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
  See Notes to Consolidated Financial Statements of Big Flower Press Holdings,
                             Inc. and subsidiaries.
 
                                      F-24
<PAGE>
                BIG FLOWER PRESS HOLDINGS, INC. AND SUBSIDIARIES
 
          CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                       YEAR ENDED
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
Net sales...........................................................................................   $1,376,706
Operating expenses:
  Costs of production...............................................................................    1,072,296
  Selling, general and administrative...............................................................      140,394
  Depreciation......................................................................................       49,222
  Amortization of intangibles.......................................................................       18,100
                                                                                                      ------------
                                                                                                        1,280,012
                                                                                                      ------------
Operating income....................................................................................       96,694
                                                                                                      ------------
Other expenses (income):
  Interest expense..................................................................................       40,380
  Amortization of deferred financing costs..........................................................        1,660
  Interest income...................................................................................         (349)
  In-process acquired technology write off..........................................................       58,192
  Other, net........................................................................................        7,141
                                                                                                      ------------
                                                                                                          107,024
                                                                                                      ------------
Loss before income taxes and extraordinary item.....................................................      (10,330)
Income tax expense..................................................................................       22,336
                                                                                                      ------------
Loss before extraordinary item......................................................................      (32,666)
Extraordinary item, net of income tax benefit of $8,800.............................................      (13,463)
                                                                                                      ------------
Net loss............................................................................................      (46,129)
Accumulated deficit at beginning of year............................................................      (21,514)
                                                                                                      ------------
Accumulated deficit at end of year..................................................................   $  (67,643)
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
  See Notes to Consolidated Financial Statements of Big Flower Press Holdings,
                             Inc. and subsidiaries.
 
                                      F-25
<PAGE>
                BIG FLOWER PRESS HOLDINGS, INC. AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                       YEAR ENDED
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..........................................................................................   $  (46,129)
  Adjustments to reconcile net loss to net cash provided by operating activities:
    In-process acquired technology write off........................................................       58,192
    Extraordinary item, net.........................................................................       13,463
    Depreciation and amortization...................................................................       67,322
    Deferred income taxes...........................................................................        4,866
    Other...........................................................................................        9,095
    Changes in operating assets and liabilities (excluding effect of acquisitions):
      Increase in accounts receivable...............................................................       (3,343)
      Increase in inventories.......................................................................       (5,905)
      Increase in prepaid expenses and other assets.................................................       (1,317)
      Increase in accounts payable and other liabilities............................................       21,844
                                                                                                      ------------
Net cash provided by operating activities...........................................................      118,088
                                                                                                      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of businesses, net of cash acquired...................................................     (242,233)
  Capital expenditures..............................................................................      (74,045)
  Proceeds from sale of property, plant and equipment...............................................          344
  Software development costs capitalized............................................................         (667)
                                                                                                      ------------
Net cash used in investing activities...............................................................     (316,601)
                                                                                                      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt..........................................................      350,125
  Repayments of long-term debt......................................................................     (239,257)
  Capital contribution by parent....................................................................      111,148
  Net borrowings under lines of credit..............................................................        8,177
  Decrease in cash overdraft........................................................................      (14,650)
  Deferred financing costs..........................................................................      (12,233)
  Proceeds from issuance of common stock............................................................          574
  Repurchase of common stock........................................................................       (4,264)
                                                                                                      ------------
Net cash provided by financing activities...........................................................      199,620
                                                                                                      ------------
Net increase in cash and cash equivalents...........................................................        1,107
                                                                                                      ------------
Cash and cash equivalents at beginning of year......................................................        4,200
                                                                                                      ------------
Cash and cash equivalents at end of year............................................................   $    5,307
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
  See Notes to Consolidated Financial Statements of Big Flower Press Holdings,
                             Inc. and subsidiaries.
 
                                      F-26
<PAGE>
                BIG FLOWER PRESS HOLDINGS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION
 
    Prior to the formation of Big Flower Holdings, Inc. and the related
reorganization on October 17, 1997 (see Note 1 to the Company's Consolidated
Financial Statements), the consolidated financial statements of the Company
represented the accounts of Press and its subsidiaries. Information in the Notes
to the Company's consolidated financial statements for periods prior to the
reorganization represent that of Press and its subsidiaries. Separate footnotes
are not provided for the December 31, 1997 financial statements as the
information in Notes 1-13 and 16-19 to the Company's consolidated financial
statements is substantially equivalent to that required for the consolidated
financial statements of Press and its subsidiaries. Earnings per share data is
not provided as Press is a wholly-owned subsidiary of Holdings.
 
2. CAPITAL CONTRIBUTIONS
 
    In October 1997, in connection with acquisitions and the issuance of
redeemable convertible preferred securities, Holdings contributed $111.1 million
of cash to Press. The proceeds of this contribution were used to repay
borrowings under Press' revolving credit facility.
 
    Also in October 1997, Holdings contributed its investment in Columbine to
Press at the fair value of the common stock and stock options issued for the
Columbine acquisition ($21.3 million).
 
                                      F-27
<PAGE>
                           BIG FLOWER HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                            CONDENSED BALANCE SHEET
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
                                                      ASSETS
 
Investments in and advances to subsidiaries.........................................................   $  185,653
Other assets........................................................................................        4,779
                                                                                                      ------------
      Total Assets..................................................................................   $  190,432
                                                                                                      ------------
                                                                                                      ------------
 
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
 
Long-term debt......................................................................................   $  118,600
                                                                                                      ------------
 
Stockholders' equity:
  Common stock......................................................................................          195
  Additional paid-in capital........................................................................      140,798
  Accumulated deficit...............................................................................      (68,548)
  Other.............................................................................................         (613)
                                                                                                      ------------
    Total stockholders' equity......................................................................       71,832
                                                                                                      ------------
      Total Liabilities and Stockholders' Equity....................................................   $  190,432
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-28
<PAGE>
                           BIG FLOWER HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
           CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                      PERIOD ENDED
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
Interest expense, net...............................................................................   $    1,296
Preferred dividends of a subsidiary trust...........................................................        1,340
                                                                                                      ------------
Loss before income taxes and extraordinary item.....................................................       (2,636)
Income tax benefit..................................................................................         (391)
                                                                                                      ------------
                                                                                                           (2,245)
Equity in loss of subsidiaries......................................................................      (31,326)
                                                                                                      ------------
Loss before extraordinary item......................................................................      (33,571)
Extraordinary item, net.............................................................................      (13,463)
                                                                                                      ------------
Net loss............................................................................................      (47,034)
Accumulated deficit at beginning of period..........................................................      (21,514)
                                                                                                      ------------
Accumulated deficit at end of period................................................................   $  (68,548)
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-29
<PAGE>
                           BIG FLOWER HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                       CONDENSED STATEMENT OF CASH FLOWS
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                                      PERIOD ENDED
                                                                                                      DECEMBER 31,
                                                                                                          1997
                                                                                                      ------------
<S>                                                                                                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..........................................................................................   $  (47,034)
  Adjustments to reconcile net loss to net cash provided by operating activities:
    Equity in loss of subsidiaries..................................................................       31,326
    Extraordinary item, net.........................................................................       13,463
    Preferred dividends of a subsidiary trust.......................................................        1,340
    Noncash interest expense........................................................................        1,344
    Accounts receivable/payable--affiliate..........................................................        2,472
    Other, net......................................................................................         (353)
                                                                                                      ------------
Net cash flows provided by operating activities.....................................................        2,558
                                                                                                      ------------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in subsidiary..........................................................................     (111,148)
                                                                                                      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt..........................................................      115,000
  Proceeds from issuance of common stock............................................................          121
  Repurchase of common stock........................................................................       (1,716)
  Deferred financing costs..........................................................................       (4,815)
                                                                                                      ------------
Net cash flows provided by financing activities.....................................................      108,590
                                                                                                      ------------
 
Net change in cash and cash equivalents.............................................................       --
                                                                                                      ------------
 
Cash and cash equivalents at beginning of period....................................................       --
                                                                                                      ------------
Cash and cash equivalents at end of period..........................................................       --
                                                                                                      ------------
                                                                                                      ------------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-30
<PAGE>
                           BIG FLOWER HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                    NOTES TO CONDENSED FINANCIAL INFORMATION
 
1. LONG-TERM DEBT
 
    See Note 9 to the consolidated financial statements for details of long-term
debt.
 
2. INVESTMENTS IN SUBSIDIARIES
 
    The Company accounts for the investments in its subsidiaries using the
equity method.
 
                                      F-31
<PAGE>
                        BIG FLOWER PRESS HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                            CONDENSED BALANCE SHEETS
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,  DECEMBER 31,
                                                                                           1997          1996
                                                                                       ------------  ------------
<S>                                                                                    <C>           <C>
                                                     ASSETS
Current assets:
  Cash and cash equivalents..........................................................   $      132    $       10
  Prepaid expenses and other current assets..........................................          671            98
                                                                                       ------------  ------------
      Total current assets...........................................................          803           108
Investments in and advances to subsidiaries..........................................      723,053       222,626
Property, plant and equipement, net..................................................        1,209
Deferred income taxes................................................................          445           196
Other assets.........................................................................       11,906         5,762
                                                                                       ------------  ------------
      Total Assets...................................................................   $  737,416    $  228,692
                                                                                       ------------  ------------
                                                                                       ------------  ------------
 
                                      LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accrued expenses and other current liabilities.....................................   $    8,526    $    6,207
Long-term debt, net of current portion...............................................      548,989       125,166
Stockholder's equity:
  Accumulated deficit................................................................      (67,643)      (21,514)
  Other..............................................................................      247,544       118,833
                                                                                       ------------  ------------
  Total stockholder's equity.........................................................      179,901        97,319
                                                                                       ------------  ------------
      Total Liabilities and Stockholder's Equity.....................................   $  737,416    $  228,692
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-32
<PAGE>
                        BIG FLOWER PRESS HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
           CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                        SIX MONTHS
                                                            YEAR ENDED    YEAR ENDED      ENDED      YEAR ENDED
                                                           DECEMBER 31,  DECEMBER 31,  DECEMBER 31,   JUNE 30,
                                                               1997          1996          1995         1995
                                                           ------------  ------------  ------------  -----------
<S>                                                        <C>           <C>           <C>           <C>
Selling, general and administrative expense..............   $   14,006    $    8,107    $      938    $     602
Interest expense, net....................................       17,466         6,129        10,335        7,957
Depreciation and amortization............................          243
Other expenses, net......................................          548
Preferred dividends of a subsidiary......................                                    1,068
                                                           ------------  ------------  ------------  -----------
Loss before income taxes and extraordinary item..........      (32,263)      (14,236)      (12,341)      (8,559)
Income tax benefit.......................................       15,320         7,081         3,943        2,891
                                                           ------------  ------------  ------------  -----------
                                                               (16,943)       (7,155)       (8,398)      (5,668)
 
Equity in (loss) income of subsidiaries..................      (15,723)        3,870        14,889        4,056
                                                           ------------  ------------  ------------  -----------
(Loss) income before extraordinary item..................      (32,666)       (3,285)        6,491       (1,612)
Extraordinary item, net..................................      (13,463)       (2,078)      (19,248)
                                                           ------------  ------------  ------------  -----------
 
Net loss.................................................      (46,129)       (5,363)      (12,757)      (1,612)
Accumulated deficit at beginning of period...............      (21,514)      (16,151)       (3,394)      (1,782)
                                                           ------------  ------------  ------------  -----------
Accumulated deficit at end of period.....................   $  (67,643)   $  (21,514)   $  (16,151)   $  (3,394)
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-33
<PAGE>
                        BIG FLOWER PRESS HOLDINGS, INC.
 
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                       CONDENSED STATEMENTS OF CASH FLOWS
 
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                                                        SIX MONTHS
                                                            YEAR ENDED    YEAR ENDED      ENDED      YEAR ENDED
                                                           DECEMBER 31,  DECEMBER 31,  DECEMBER 31,   JUNE 30,
                                                               1997          1996          1995         1995
                                                           ------------  ------------  ------------  -----------
<S>                                                        <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...............................................   $  (46,129)   $   (5,363)   $  (12,757)   $  (1,612)
  Adjustments to reconcile net loss to net cash (used in)
    provided by operating activities:
    Equity in loss (income) of subsidiaries..............       15,723        (3,870)      (14,889)      (4,056)
    Extraordinary item, net..............................       13,463         2,078        19,248
    Noncash interest expense.............................        1,111           758         3,603        7,595
    Preferred dividends of a subsidiary..................                                    1,068
    Depreciation and amortization........................          243
    Deferred income taxes................................         (452)          161          (678)      (2,269)
    Accounts receivable/payable--affiliate...............                      3,730        (2,063)         352
    Other, net...........................................        1,198           (11)         (201)          14
                                                           ------------  ------------  ------------  -----------
Net cash (used in) provided by operating activities......      (14,843)       (2,517)       (6,669)          24
                                                           ------------  ------------  ------------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments in and advances to subsidiaries............     (491,436)                     (3,000)
  Capital expenditures...................................         (274)
  Distributions from subsidiaries........................                      1,325       101,595
                                                           ------------  ------------  ------------
Net cash (used in) provided by investing activities......     (491,710)        1,325        98,595
                                                           ------------  ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt...............      350,125
  Repayment of long-term debt............................     (125,166)                   (146,721)
  Capital contribution by parent.........................      111,148
  Net borrowings under lines of credit...................      186,793
  Proceeds from issuance of common stock.................          270                      80,250          733
  Repurchase of common stock.............................       (4,264)                                    (772)
  Purchase of redeemable preferred stock.................                                  (22,107)
  Deferred financing costs...............................      (12,231)                     (2,220)        (102)
                                                           ------------                ------------  -----------
Net cash provided by (used in) financing activities......      506,675                     (90,798)        (141)
                                                           ------------                ------------  -----------
Net increase (decrease) in cash and cash equivalents.....          122        (1,192)        1,128         (117)
                                                           ------------  ------------  ------------  -----------
Cash and cash equivalents at beginning of period.........           10         1,202            74          191
                                                           ------------  ------------  ------------  -----------
Cash and cash equivalents at end of period...............   $      132    $       10    $    1,202    $      74
                                                           ------------  ------------  ------------  -----------
                                                           ------------  ------------  ------------  -----------
</TABLE>
 
                 See Notes to condensed financial information.
 
                                      F-34
<PAGE>
                        BIG FLOWER PRESS HOLDINGS, INC.
           SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                    NOTES TO CONDENSED FINANCIAL INFORMATION
 
1. LONG-TERM DEBT
 
    See Note 9 to the consolidated financial statements for details of long-term
debt.
 
2. INVESTMENTS IN SUBSIDIARIES
 
    The Company accounts for the investments in its subsidiaries using the
equity method.
 
                                      F-35
<PAGE>
                   BIG FLOWER HOLDINGS, INC. AND SUBSIDIARIES
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                  IN THOUSANDS
 
<TABLE>
<CAPTION>
                                                          BALANCE AT   CHARGED TO   WRITE OFFS                  BALANCE
                                                           BEGINNING    COSTS AND     NET OF                    AT END
                                                           OF PERIOD    EXPENSES    RECOVERIES    OTHER (A)    OF PERIOD
                                                          -----------  -----------  -----------  -----------  -----------
<S>                                                       <C>          <C>          <C>          <C>          <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended June 30, 1995................................   $   5,674    $   1,702    $  (1,633)                $   5,743
Six months ended December 31, 1995......................       5,743        2,538         (777)   $     264        7,768
Year ended December 31, 1996............................       7,768          658       (1,619)       1,773        8,580
Year ended December 31, 1997............................       8,580        1,371       (1,208)       3,599       12,342
</TABLE>
 
------------------------
 
(a) Amounts related to acquired companies as of the respective dates of
    acquisition.
 
                                      F-36