UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



|(Mark One)
|----------
|[X]       

For the quarterly period ended December 31, 2001
OR



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------

For the transition period from  to Commission File No. 0-9600CPAC, INC.(Exact name of registrant as specified in its charter)



|New York(State or other jurisdiction of
incorporation or organization) |  | 16-0961040(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------- |  | ----------------------------------------------

2364 Leicester Rd.
Leicester, New York 14481

(585) 382-3223
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 [    ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

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



|Class                               | Number of Shares Outstanding at December 31, 2001                       
|----------------------------------- | ------------------------------------------------------------------------
|Common Stock, $.01 par value        | 5,123,499                                                               
|                                    |                                                                         
|Options Outstanding & Not Exercised | Shares to cover the options will not be issued until they are exercised.
|1,125,838                          

<PAGE 1>

CPAC, INC. AND SUBSIDIARIESINDEX



|        |                                                                                                                                                                       | Page No.
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|        | PART I -- FINANCIAL INFORMATION                                                                                                                                       |         
|Item 1. | Financial Statements.                                                                                                                                                 |         
|        | CPAC, Inc. and Subsidiaries Consolidated Balance Sheets -- December 31, 2001 (Unaudited), and March 31, 2001                                                          | 3       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income -- Nine Months Ended December 31, 2001, and December 31, 2000 (Unaudited)  | 4       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income -- Three Months Ended December 31, 2001, and December 31, 2000 (Unaudited) | 5       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Cash Flows -- Nine Months Ended December 31, 2001, and December 31, 2000 (Unaudited)                           | 6       
|        | Notes to Consolidated Financial Statements                                                                                                                            | 7       
|Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations.                                                                                | 9       
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.                                                                                                           | 11      
|        |                                                                                                                                                                       |         
|        | PART II -- OTHER INFORMATION                                                                                                                                          |         
|Item 1. | Legal Proceedings.                                                                                                                                                    | 12      
|Item 2. | Changes in Securities and Use of Proceeds.                                                                                                                            | 12      
|Item 3. | Defaults Upon Senior Securities.                                                                                                                                      | 12      
|Item 4. | Submission of Matters to a Vote of Security Holders.                                                                                                                  | 12      
|Item 5. | Other Information.                                                                                                                                                    | 12      
|Item 6. | Exhibits and Reports on Form 8-K.                                                                                                                                     | 12      
|        | SIGNATURE PAGE                                                                                                                                                        | 13      
|        | EXHIBIT INDEX                                                                                                                                                         | 14      



<PAGE 2>



PART I -- FINANCIAL INFORMATION

Item 1.     FINANCIAL STATEMENTS.

CPAC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



|                                                                                                   |                                                                                                                                         | December 31, 2001(Unaudited) |            | March 31, 2001(Note) |  
|-------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ---------- | -------------------- | -
|ASSETS                                                                                             |                                                                                                                                        
|Current assets:                                                                                    |                                                                                                                                         |                              |            |                     
|                                                                                                   | Cash and cash equivalents                                                                                                               | $ 10,016,081                 |            | $   8,859,885        |  
|                                                                                                   | Accounts receivable (net of allowance for doubtful accounts
      of $773,000 and $645,000, respectively)                               | 11,839,776                   |            | 14,341,047           |  
|                                                                                                   | Inventory                                                                                                                               | 19,216,834                   |            | 17,500,006           |  
|                                                                                                   | Prepaid expenses and other current assets                                                                                               | 2,797,147                    |            | 2,345,282            |  
|                                                                                                   | Total current assets                                                                                                                    | 43,869,838                   |            | 43,046,220           |  
|Property, plant and equipment, net                                                                 | 17,662,875                                                                                                                              |                              | 18,960,122 |                     
|Goodwill and intangible assets (net of amortization of
   $3,214,556 and $2,751,116, respectively) | 12,321,715                                                                                                                              |                              | 12,799,458 |                     
|Other assets                                                                                       | 2,780,638                                                                                                                               |                              | 2,630,353  |                     
|                                                                                                   |                                                                                                                                         | $ 76,635,066                 |            | $ 77,436,153         |  
|                                                                                                   |                                                                                                                                        
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                               |                                                                                                                                        
|Current liabilities:                                                                               |                                                                                                                                         |                              |            |                     
|                                                                                                   | Current portion of long-term debt                                                                                                       | $      861,278               |            | $   1,263,577        |  
|                                                                                                   | Accounts payable                                                                                                                        | 4,615,605                    |            | 5,035,909            |  
|                                                                                                   | Accrued payroll and related expenses                                                                                                    | 1,536,765                    |            | 1,532,263            |  
|                                                                                                   | Accrued income taxes payable                                                                                                            | 985,897                      |            | 483,370              |  
|                                                                                                   | Other accrued expenses and liabilities                                                                                                  | 3,241,512                    |            | 3,227,685            |  
|                                                                                                   | Total current liabilities                                                                                                               | 11,241,057                   |            | 11,542,804           |  
|                                                                                                   |                                                                                                                                         |                              |            |                      |  
|Long-term debt, net of current portion                                                             | 7,667,191                                                                                                                               |                              | 7,731,913  |                     
|Other long-term liabilities                                                                        | 5,695,565                                                                                                                               |                              | 5,435,088  |                     
|Shareholders' equity:                                                                              |                                                                                                                                         |                              |            |                     
|                                                                                                   | Common stock, par value $0.01 per share;
   Authorized 30,000,000 shares;
   Issued 5,208,806 shares and 5,500,477 shares, respectively | 52,088                       |            | 55,004               |  
|                                                                                                   | Additional paid-in capital                                                                                                              | 10,538,823                   |            | 12,372,174           |  
|                                                                                                   | Retained earnings                                                                                                                       | 43,714,385                   |            | 42,299,580           |  
|                                                                                                   | Accumulated other comprehensive income (loss)                                                                                           | (1,683,855                   | )          | (1,410,222           | )
|                                                                                                   |                                                                                                                                         | 52,621,441                   |            | 53,316,536           |  
|Less: Treasury stock, at cost, 85,307 shares                                                       | (590,188                                                                                                                                | )                            | (590,188   | )                   
|                                                                                                   | Total shareholders' equity                                                                                                              | 52,031,253                   |            | 52,726,348           |  
|                                                                                                   |                                                                                                                                         | $ 76,635,066                 |            | $ 77,436,153         |  

Note: The balance sheet at March 31, 2001 has been taken from the audited financial statements as of that date.

The accompanying notes are an integral part of the financial statements.

<PAGE 3>





CPAC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDEDDECEMBER 31, 2001 AND DECEMBER 31, 2000
UNAUDITED



|                                   |                                                  | 2001               |               | 2000               |  
|---------------------------------- | ------------------------------------------------ | ------------------ | ------------- | ------------------ | -
|                                   |                                                  |                    |               |                    |  
|Net sales                          | $  73,680,202                                    |                    | $  79,326,574 |                   
|                                   |                                                  |                    |               |                    |  
|Costs and expenses:                |                                                  |                    |               |                   
|                                   | Cost of sales                                    | 40,582,112         |               | 43,928,368         |  
|                                   | Selling, administrative and engineering expenses | 28,310,696         |               | 27,992,348         |  
|                                   | Research and development expense                 | 470,125            |               | 478,177            |  
|                                   | Interest expense, net                            | 399,520            |               | 632,231            |  
|                                   |                                                  |                    |               |                    |  
|                                   |                                                  | 69,762,453         |               | 73,031,124         |  
|Income before income tax expense   | 3,917,749                                        |                    | 6,295,450     |                   
|                                   |                                                  |                    |               |                    |  
|Provision for income tax expense   | 1,407,000                                        |                    | 2,435,000     |                   
|                                   |                                                  |                    |               |                    |  
|                                   | Net income                                       | $    2,510,749     |               | $    3,860,450     |  
|                                   |                                                  |                    |               |                    |  
|Income per common share:           |                                                  |                    |               |                   
|                                   | Basic                                            | $             0.48 |               | $             0.69 |  
|                                   | Diluted                                          | $             0.48 |               | $             0.69 |  
|Average common shares outstanding: |                                                  |                    |               |                   
|                                   | Basic                                            | 5,226,228          |               | 5,562,822          |  
|                                   | Diluted                                          | 5,238,901          |               | 5,591,798          |  
|                                   |                                                  |                    |               |                    |  
|Comprehensive income:              |                                                  |                    |               |                   
|                                   | Net income                                       | $    2,510,749     |               | $    3,860,450     |  
|                                   | Other comprehensive income (loss)                | (273,633           | )             | (623,451           | )
|                                   |                                                  |                    |               |                    |  
|                                   | Comprehensive income                             | $    2,237,116     |               | $    3,236,999     |  



The accompanying notes are an integral part of the financial statements.



<PAGE 4>





CPAC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDEDDECEMBER 31, 2001 AND DECEMBER 31, 2000
UNAUDITED



|                                   |                                                  | 2001                 |               | 2000               |  
|---------------------------------- | ------------------------------------------------ | -------------------- | ------------- | ------------------ | -
|                                   |                                                  |                      |               |                    |  
|Net sales                          | $   23,144,135                                   |                      | $  24,679,815 |                   
|                                   |                                                  |                      |               |                    |  
|Costs and expenses:                |                                                  |                      |               |                   
|                                   | Cost of sales                                    | 12,448,030           |               | 13,747,655         |  
|                                   | Selling, administrative and engineering expenses | 9,304,377            |               | 8,902,648          |  
|                                   | Research and development expense                 | 164,209              |               | 150,614            |  
|                                   | Interest expense, net                            | 119,910              |               | 162,862            |  
|                                   |                                                  |                      |               |                    |  
|                                   |                                                  | 22,036,526           |               | 22,963,779         |  
|Income before income tax expense   | 1,107,609                                        |                      | 1,716,036     |                   
|                                   |                                                  |                      |               |                    |  
|Provision for income tax expense   | 382,000                                          |                      | 660,000       |                   
|                                   |                                                  |                      |               |                    |  
|                                   | Net income                                       | $        725,609     |               | $    1,056,036     |  
|                                   |                                                  |                      |               |                    |  
|Income per common share:           |                                                  |                      |               |                   
|                                   | Basic                                            | $               0.14 |               | $             0.19 |  
|                                   | Diluted                                          | $               0.14 |               | $             0.19 |  
|Average common shares outstanding: |                                                  |                      |               |                   
|                                   | Basic                                            | 5,139,722            |               | 5,514,810          |  
|                                   | Diluted                                          | 5,152,800            |               | 5,530,351          |  
|                                   |                                                  |                      |               |                    |  
|Comprehensive income:              |                                                  |                      |               |                   
|                                   | Net income                                       | $        725,609     |               | $    1,056,036     |  
|                                   | Other comprehensive income (loss)                | 351,278              |               | (412,877           | )
|                                   |                                                  |                      |               |                    |  
|                                   | Comprehensive income                             | $     1,076,887      |               | $        643,159   |  



The accompanying notes are an integral part of the financial statements.



<PAGE 5>



CPAC, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED
DECEMBER 31, 2001 AND DECEMBER 31, 2000
UNAUDITED



|                                                 |                                                                                       | 2001            |                | 2000           |  
|------------------------------------------------ | ------------------------------------------------------------------------------------- | --------------- | -------------- | -------------- | -
|                                                 |                                                                                       |                 |                |                |  
|Cash flows from operating activities:            |                                                                                       |                 |                |               
|                                                 | Net income                                                                            | $     2,510,749 |                | $    3,860,450 |  
|                                                 | Adjustments to reconcile net income to net cash provided
    by operating activities: |                 |                |                |  
|                                                 | Depreciation and amortization                                                         | 2,149,109       |                | 2,174,284      |  
|                                                 | Amortization of intangible assets                                                     | 474,958         |                | 511,234        |  
|                                                 | Changes in assets and liabilities, net of effects of business 
    acquisitions:      |                 |                |                |  
|                                                 | Accounts receivable                                                                   | 2,470,608       |                | 1,238,981      |  
|                                                 | Inventory                                                                             | (1,766,596      | )              | 115,790        |  
|                                                 | Accounts payable                                                                      | (432,258        | )              | (1,212,446     | )
|                                                 | Accrued expenses & liabilities                                                        | 503,049         |                | (582,352       | )
|                                                 | Other changes, net                                                                    | (379,812        | )              | (261,878       | )
|                                                 | Total adjustments                                                                     | 3,019,058       |                | 1,983,613      |  
|                                                 | Net cash provided by operating activities                                             | 5,529,807       |                | 5,844,063      |  
|                                                 |                                                                                       |                 |                |                |  
|Cash flows from investing activities:            |                                                                                       |                 |                |               
|                                                 | Purchase of property, plant, and equipment, net                                       | (897,605        | )              | (928,271       | )
|                                                 | Net cash used in investing activities                                                 | (897,605        | )              | (928,271       | )
|                                                 |                                                                                       |                 |                |                |  
|Cash flows from financing activities:            |                                                                                       |                 |                |               
|                                                 | Common stock repurchase                                                               | (1,836,267      | )              | (978,995       | )
|                                                 | Proceeds from long-term borrowings                                                    |                 |                | 1,555,300      |  
|                                                 | Repayment of long-term borrowings                                                     | (541,484        | )              | (2,192,954     | )
|                                                 | Payment of cash dividends                                                             | (1,095,944      | )              | (1,175,780     | )
|                                                 | Net cash used in financing activities                                                 | (3,473,695      | )              | (2,792,429     | )
|                                                 |                                                                                       |                 |                |                |  
|                                                 | Effect of exchange rate changes on cash                                               | (2,311          | )              | (32,115        | )
|                                                 |                                                                                       |                 |                |                |  
|                                                 | Net increase in cash and cash equivalents                                             | 1,156,196       |                | 2,091,248      |  
|                                                 |                                                                                       |                 |                |                |  
|Cash and cash equivalents -- beginning of period | 8,859,885                                                                             |                 | 4,436,509      |               
|                                                 |                                                                                       |                 |                |                |  
|Cash and cash equivalents -- end of period       | $  10,016,081                                                                         |                 | $    6,527,757 |               



The accompanying notes are an integral part of the financial statements.

<PAGE 6>



CPAC, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED

1 -- CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheets, the consolidated statements of operations and comprehensive income, and the consolidated statements of cash flows for the nine-month period ended December 31, 2001 and December 31, 2000 have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and changes in cash flows at December 31, 2001 (which include only normal recurring adjustments), have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 2001, Annual Report to Shareholders. The results of operations for the nine-months ended December 31, 2001 are not necessarily indicative of the operating results for the full year.



2 -- INVENTORY

Inventory is summarized as follows:



|                                  | December 31, 2001 |  | March 31, 2001
|--------------------------------- | ----------------- |  | --------------
|Raw materials and purchased parts | $    7,574,030    |  | $   7,016,807 
|Work-in-process                   | 1,140,580         |  | 945,243       
|Finished goods                    | 10,502,224        |  | 9,537,956     
|                                  | $  19,216,834     |  | $ 17,500,006  



3 -- EARNINGS PER SHARE

Basic earnings per share are based upon the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average common shares outstanding during the period plus the dilutive effect of shares issuable through stock options and warrants. The shares used in calculating basic and diluted earnings per share are reconciled as follows:



|                                                       | Three Months Ended
December 31, | Nine Months Ended
December 31, |          
|------------------------------------------------------ | ------------------------------- | ------------------------------ | ---------
|                                                       | 2001                            |                                | 2000     
|Basic weighted average number
   of shares outstanding | 5,139,722                       |                                | 5,514,810
|Effect of dilutive stock options                       | 13,078                          |                                | 15,541   
|Dilutive shares outstanding                            | 5,152,800                       |                                | 5,530,351

Unexercised stock options to purchase 1,005,311 and 744,061 shares of the Company's common stock as of December 31, 2001 and 2000, respectively, were not included in the computations of diluted earnings per share because the options' exercise prices were greater than the average market price of the Company's common stock during the respective periods. These options, issued at various dates from 1995 to 2001, are still outstanding at the end of the period.



4 -- COMPREHENSIVE INCOME

Other comprehensive income (loss) includes foreign currency translation adjustments.

<PAGE 7>

5 -- SEGMENT INFORMATION

For purposes of financial reporting, the Company operates in two industry segments: the Fuller Brands segment and the Imaging segment. Information concerning the Company's business segments for the quarters ended December 31, 2001 and 2000 are as follows:



|                             | Three Months Ended
December 31, |   | Nine Months Ended
December 31, |  
|---------------------------- | ------------------------------- | - | ------------------------------ | -
|                             | 2001                            |   | 2000                           |  
|Net sales to customers:      |                                 |   |                                |  
|Fuller Brands                | $  12,951,874                   |   | $  14,104,826                  |  
|Imaging                      | 10,192,261                      |   | 10,574,989                     |  
|                             |                                 |   |                                |  
|Total net sales to customers | $  23,144,135                   |   | $  24,679,815                  |  
|                             |                                 |   |                                |  
|Operating income:            |                                 |   |                                |  
|Fuller Brands                | $        751,901                |   | $    1,304,903                 |  
|Imaging                      | 533,344                         |   | 838,092                        |  
|                             | 1,285,245                       |   | 2,142,995                      |  
|Corporate income (loss)      | (57,726                         | ) | (264,097                       | )
|Interest expense, net        | (119,910                        | ) | (162,862                       | )
|                             |                                 |   |                                |  
|Consolidated pretax income   | $     1,107,609                 |   | $    1,716,036                 |  

Sales between segments are not material.

6 -- SHAREHOLDERS' EQUITY

Stock Repurchase

For the nine months ended December 31, 2001 and 2000, respectively, the Company repurchased 291,671 and 133,056 shares of its common stock at an average cost of $6.29 and $7.36 per share, for a total cost of approximately $1,836,000 and $979,000 as part of previously announced Board of Directors' authorized stock buyback programs.

7 -- SUBSEQUENT EVENT

On January 4, 2002, the Company expanded its distribution agreements with TURA AG of Düren, West Germany, by purchasing a 19% equity interest in TURA AG for approximately $1,900,000. TURA AG is a manufacturer and supplier of photographic paper and film emulsion products to the worldwide silver halide photographic market, as well as a manufacturer of wide format inkjet printing consumables.

8 -- ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138, was effective for the Company on April 1, 2001. The adoption of this pronouncement did not have any effect on the Company's financial position, results of operations, or cash flows.

Statements of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets" were approved by the Financial Accounting Standards Board on June 30, 2001. SFAS No. 141 eliminates the pooling of interests method for business combinations and requires use of the purchase method. SFAS No. 142 changes the accounting for goodwill from an amortization approach to a non-amortization (impairment) approach. The Statement requires amortization of goodwill recorded in connection with previous business combinations to cease upon adoption of the Statement. Once adopted, companies are required to compare the implied fair value of their reporting units with their carrying values, including goodwill, and to adjust carrying values if less. At December 31, 2001, approximately $10,543,000 of the approximate $12,322,000 total goodwill and intangible assets recorded on the consolidated balance sheet related to the Company's fiscal 1998 acquisition of Cleaning Technologies Group. In light of current economic conditions, and the potential impact of Kmart declaring Chapter 11 bankruptcy, the Company is currently evaluating whether these conditions are temporary or permanent, and if impairment has occurred. The permanence of these economic factors will determine whether any adjustment to its financial statements would be required, when the Company adopts SFAS No. 142 in its 2003 fiscal first quarter.

9 -- LITIGATION

No material litigation is pending to which the Company and/or its subsidiaries are a party, or which property of the Company and/or its subsidiaries is the subject.

<PAGE 8>



Item 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations continued to generate strong cash flow during the quarter ended December 31, 2001, despite the reduced sales levels of both segments. Cash increased over two million dollars during the quarter and for the nine months ended December 31, 2001 has increased approximately $1,156,000 to $10,016,081. Cash from operations for the nine months ended December 31, 2001 was approximately $5,530,000, allowing the Company to invest in new property and equipment of approximately $898,000; spend approximately $1,836,000 with its stock buyback program; reduce borrowings by approximately $541,000; and continue paying dividends of approximately $1,096,000.

The Company maintains a line of credit with Bank of America with a borrowing capacity of $20,000,000. At December 31, 2001, the Company's borrowings under such line were zero. The interest rate is the lower of prime or the 30-day LIBOR rate plus .75%. The Company is currently negotiating an extension of the credit facility, as it matures in October 2002. The facility maintains certain financial covenants, with which the Company was in compliance at December 31, 2001.

CPAC Asia Imaging Products Limited (formerly CPAC Asia LTD.) also has a line of credit with an international bank of 19,600,000 baht (approximately $441,000 based on the third quarter conversion rate in Thailand), with interest at prime plus 1% (Thailand prime was 8.75%) and collateralized by a standby letter of credit (LOC) guaranteed by CPAC, Inc. At the end of its third quarter, CPAC Asia Imaging Products Limited had approximately 10,191,000 baht (approximately $229,000 based on the third quarter conversion rate in Thailand) outstanding against the line.

CPAC Asia Imaging has two other debt obligations, funded through an international bank, to finance its Thailand-based facility. The first obligation, amounting to approximately 15,617,000 baht (approximately $351,000 based on the third quarter conversion rate) with interest at 5.25% was extended for one year in December 2001, and matures in December 2002. The second obligation amounting to approximately 41,919,000 baht (approximately $943,000), with interest at 7.35%, requires quarterly payments of interest and principal, with the obligations maturing in 2006. All obligations are collateralized with standby letters of credit guaranteed by CPAC, Inc.

The Company's working capital ratios at December 31, 2001, March 31, 2001, and December 31, 2000 were 3.90 to 1; 3.73 to 1; and 4.14 to l, respectively. The working capital improvement at December 31, 2001 versus March 31, 2001 was due to reduced debt and improved cash levels, while the decrease for the same period as compared to December 31, 2000, was a function of higher current liability levels for the current assets supported.

During January 2002, the Company's available cash decreased as a result of its investment in TURA, as well as the continued softness in segment sales. However, the Company believes it will continue to generate sufficient cash flows to meet normal working capital requirements. It is anticipated that additional financing would be required to fund future Company acquisitions.

Asset Turnover Ratios



|                                  | December 31, 2001 | March 31, 2001 | December 31, 2000
|--------------------------------- | ----------------- | -------------- | -----------------
|(1)  Receivables-days outstanding | 48.9 days         | 51.3 days      | 49.8 days        
|(2)  Annual inventory turns       | 2.9 times         | 3.2 times      | 3.1 times        

Receivable days outstanding improved over March 31, 2001 and December 31, 2000 due largely to a reduction in Fuller receivables.

Inventory turns decreased, on an annualized basis, due partially to the slowdown in customer ordering patterns, as well as a bulk purchase of raw materials made at CPAC Asia Imaging.



RESULTS OF OPERATIONS

For purposes of financial reporting, the Company operates in two industry segments: the Fuller Brands segment, which includes the manufacture and sale of specialty chemical cleaning products and related accessories (brushes, brooms, mops) for commercial, janitorial, and consumer use, as well as personal care products such as soaps, shampoos, and skin care items, and the Imaging segment which includes the manufacture and sale of prepackaged chemical formulations, supplies, and

<PAGE 9>

equipment systems to the imaging industry. The products of each segment are manufactured and marketed both in the U.S. and in other parts of the world. Sales between segments are not material.

Consolidated sales for the quarter ended December 31, 2001 decreased 6.2% over the quarter ended December 31, 2000 and decreased 7.1% for the nine months ended December 31, 2001 over nine months ended December 31, 2000. Sales for the third quarter and nine months ended December 31, 2001 in the Fuller Brands segment decreased 8.2% and 6.3%, respectively, as compared with the quarter and nine months ended December 31, 2000. The decrease in the quarter was largely a result of a decline in sales of the segment's CTG operation, which was adversely effected by a suspension of orders from Kmart, its largest retail customer, as well as the general retail slowdown which began in late summer and intensified after the September 11, 2001 terrorist attacks. The decrease for the nine-month period is again due to CTG's lower sales and a decline in the Company's Stanley Home Products' direct sales business during the first six months of the fiscal year. The subsequent Chapter 11 bankruptcy filing by Kmart may continue to impact CTG and Fuller Brands' sales overall for the remainder of calendar 2002, although the Company does not have exposure with open accounts receivables as a result of the filing. For the Imaging segment, overall sales for the third quarter and nine months ended December 31, 2001 declined 3.6% and 8.3%, respectively, as compared with the quarter and nine months ended December 31, 2000. Continued sales decline in the medical imaging market due to competitive forces, as well as significant reductions in the domestic photographic imaging market for both chemistry and equipment, overshadowed strong growth in the Company's international Imaging market for the quarter and nine months ended December 31, 2001. The Company believes that future imaging sales growth will be led by its international operations, buoyed by its investment and business partnering with TURA AG. International growth could be affected, however, by worldwide currency pressures and economic conditions in Europe, Africa, and Asia.

Consolidated gross margins were 46.2% for this quarter versus 43.7% for the year ended March 31, 2001 and 44.3% for the same quarter last year. Gross margins in the Fuller Brands segment were 52.0%, 48.3%, and 49.6% for the quarter ended December 31, 2001, the year ended March 31, 2001, and the quarter ended December 31, 2000. Increase over previous periods reflects lower CTG sales, which historically have lower gross margins than the segment's Fuller and Stanley Home Products' businesses. However, without an increase in sales and throughput through the segment's Great Bend factory, unabsorbed, fixed costs may cause future gross margins to decline. Gross margins in the Imaging segment were 38.9% for the quarter ended December 31, 2001, as compared to 37.2% for the year ended March 31, 2001 and 37.2% for the quarter ended December 31, 2000. The increase is a function of stronger international than domestic operations, which, due to product mix sold, have higher gross margins.

Consolidated selling, administrative and engineering costs this quarter were 40.2%, versus 35.3% for the year ended March 31, 2001, versus 36.1% for the same quarter last year. In the Fuller Brands segment, selling, administrative and engineering costs for this quarter increased to 45.2% from 40.2% for the year ended March 31, 2001 and 39.5% for the same quarter last year. The increase over prior periods reflects the impact of lower CTG sales and higher Fuller and Stanley Home Products' sales, which carry higher levels of selling and administrative costs. The Company is currently reviewing the Fuller Brands segment's fixed costs and has begun selectively reducing them, to match levels of costs with current and projected revenue levels. In the Imaging segment, selling, administrative and engineering costs for the quarter were 33.3% versus 28.9% for the year ended March 31, 2001 and 29.0% for the same quarter last year. The increase over prior periods is a result of the decline in the domestic Imaging operation's sales. Without an increase in domestic business, this percentage will continue for the short-term to exceed fiscal 2001 levels. The Company is currently reviewing the individual businesses and may be forced to curtail certain levels of spending in the next six months, until the domestic economy improves.

Net interest expense for the quarter and nine months ended December 31, 2001 decreased, as compared to the third quarter and nine months ended December 31, 2000, due to decreased debt and lower domestic interest rates.

The provision for income taxes as a percentage of pretax income for the quarter ended December 31, 2001 was 34.5% versus 37.2% for the year ended March 31, 2001, and versus 38.5% for the quarter ended December 31, 2000. The decrease, as compared to the prior periods, is due partially to the impact of the tax holiday in Asia, which exempts most of CPAC Asia Imaging Products Limited's operating income from tax, as well as lower state taxes due to decreased domestic earnings. The Company expects its consolidated, effective tax rate to remain in the 35.0% -- 37.0% range for the remainder of fiscal 2002.

Net income for the quarter and nine months ended December 31, 2001 decreased 31.3% and 35.0%, respectively, over the comparable quarter and nine months last year. The decrease is a direct result of the sales downturn experienced in both segments.

Foreign Operations

Foreign operations' net sales for the quarter ended December 31, 2001 increased 8.1% versus the comparable period last year, while sales for the nine months ended December 31, 2001increased 4.2% over the comparable period last year. Strong performance from the Company's Asian and Belgian subsidiary for the quarter and nine months ended December 31, 2001 offset net sales declines from the Company's Italian and South African subsidiaries.

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Pretax profits for the combined foreign operations increased 5.9% for the quarter ended December 31, 2001 largely as a result of the Company's European operations. For the nine months ended December 31, 2001, pretax profits decreased 5.3%, with the losses from the early part of fiscal 2002 in Belgium, offsetting profits in Asia. The Company expects its strategic investment in TURA AG will increase business opportunities in fiscal 2003 and allow its international subsidiaries to continue to increase sales and profits. TURA AG U.S.'s business may also help open up sales opportunities to the Company's domestic chemical and equipment operations.

The Company's foreign operations have been impacted by negative currency pressures year to date, although its European operations had slight improvements during the third quarter. With the adoption of the Euro, the Company is uncertain as to the extent of any currency pressures that may effect its European operations in subsequent periods, or whether the world economy will continue to have currency impacts on its Asian and African operations, as well as Europe. While the Company in the past has used hedging programs (primarily forward foreign currency exchange contracts) to help minimize the impact of these fluctuations on results of operations, it does not currently hold any of these contracts. The Company does not hold or issue derivatives for trading purposes and is not a party to leveraged derivative transactions. On a consolidated basis, foreign currency transaction losses are included in income or expense as incurred and are not material to the results of operations.

Forward-Looking Information

This Form 10-Q contains forward-looking statements that are based on current expectations, estimates, and projections about the industries in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The Future Factors that may affect the operations, performance and results of the Company's business include the following:



|a. | general economic and competitive conditions in the markets and countries in which the Company operates, and the risks inherent in international operations;                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | the level of competition and consolidation within the commercial cleaning supply industry;                                                                                                                                              
|c. | the impact of Kmart's Chapter 11 filing on Cleaning Technologies Group's business;                                                                                                                                                      
|d. | the effect of changes in the distribution channels for Fuller Brands;                                                                                                                                                                   
|e. | the level of domestic demand for the Company's Imaging products and the impact of digital imaging;                                                                                                                                      
|f. | the ability to increase volume through the Great Bend manufacturing plant to absorb fixed overhead; and                                                                                                                                 
|g. | the strength of the U.S. dollar against currencies of other countries where the Company operates, as well as cross-currencies between the Company's operations outside of the U.S. and other countries with whom they transact business.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements. The Company does not intend to update forward-looking statements.



Item 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There has been no material change in the Company's assessment of its sensitivity to interest rate or foreign currency risks since its disclosure in Item 7(a) of the Company's Form 10-K.

<PAGE 11>



PART II -- OTHER INFORMATION



|Item 1. | Legal Proceedings.
None                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. | Changes in Securities and Use of Proceeds.
None                                                                                                                                                                                                                        
|Item 3. | Defaults Upon Senior Securities.
None                                                                                                                                                                                                                                  
|Item 4. | Submission of Matters to a Vote of Security Holders
None                                                                                                                                                                                                               
|Item 5. | Other Information.
None                                                                                                                                                                                                                                                
|Item 6. | Exhibits and Reports on Form 8-K.                                                                                                                                                                                                                                      
|        | a.   Exhibits
The following Exhibits, as applicable, are attached to this Quarterly Report (Form 10-Q). The Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits follow on the pages immediately succeeding the Exhibit Index.
|        | (2)   Plan of acquisition, regarding organization, arrangement, liquidation, or succession -- Not applicable                                                                                                                                                           
|        | (3)   Articles of Incorporation, By-laws                                                                                                                                                                                                                               
|        | 3.1                                                                                                                                                                                                                                                                    
|        | 3.2                                                                                                                                                                                                                                                                    
|        | (4)   Instruments defining the rights of security holders, including indentures                                                                                                                                                                                        
|        | 4.1                                                                                                                                                                                                                                                                    
|        | (10)  Material contracts                                                                                                                                                                                                                                               
|        | 10.1                                                                                                                                                                                                                                                                   
|        | 10.2                                                                                                                                                                                                                                                                   

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| | 10.3                                                                                             | CPAC, Inc. 1996 Nonemployee Directors Stock Option Plan, incorporated herein by reference to Form S-8 Registration Statement filed October 3, 1996, as amended and incorporated by reference to Form S-8 Registration Statements filed on October 14, 1997, November 24, 1998, September 24, 1999, September 29, 2000 and September 7, 2001                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.4                                                                                             | Deferred Compensation Arrangement between Thomas N. Hendrickson and CPAC, Inc. dated October 13, 1992, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1992, and amended by Amendment to Deferred Compensation Arrangement dated July 20, 1998, incorporated herein by reference to Form 10-K filed for the period ended March 31, 1999, and further amended by Amendment to Deferred Compensation Arrangement dated October 25, 2001, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 2001
| | 10.5                                                                                             | CPAC, Inc. Nonqualified Deferred Compensation Plan dated December 30, 1999, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1999                                                                                                                                                                                                                                                                                                                                                                                                  
| | (11)  Statement regarding computation of per share earnings (loss) -- Not applicable            
| | (15)  Letter regarding unaudited interim financial information -- Not applicable                
| | (18)  Letter regarding change in accounting principles -- Not applicable                        
| | (19)  Report furnished to security holders -- Not applicable                                    
| | (22)  Published report regarding matters submitted to vote of security holders -- Not applicable
| | (23)  Consents of experts and counsel -- Not applicable                                         
| | (24)  Power of attorney -- Not applicable                                                       
| | (27)  Financial data schedule -- Not applicable                                                 
| | (99)  Additional exhibits -- Not applicable                                                     
| | b.   Reports Filed on Form 8-K
None                                                             

SIGNATURES

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



|                         |    | CPAC, INC.                                                                                    
|------------------------ | -- | ----------------------------------------------------------------------------------------------
|                         |    |                                                                                               
|                         |    |                                                                                               
|Date   February 13, 2002 | By | /s/ Thomas N. Hendrickson
Thomas N. Hendrickson,
President, Chief Executive Officer, Treasurer
|                         |    |                                                                                               
|Date   February 13, 2002 | By | /s/ Thomas J. Weldgen
Thomas J. Weldgen,
Vice President Finance and Chief Financial Officer   
|                         |    |                                                                                               
|Date   February 13, 2002 | By | /s/ James W. Pembroke
James W. Pembroke,
Chief Accounting Officer                             

<PAGE 13>

EXHIBIT INDEX



|Exhibit | Page                                                                                
|------- | ------------------------------------------------------------------------------------
|2.      | Plan of acquisition, regarding organization, arrangement, liquidation, or succession
|3.      | Articles of incorporation, By-laws                                                  
|        | 3.1                                                                                 
|        | 3.2                                                                                 
|4.      | Instruments defining the rights of security holders, including indentures           
|        | 4.1                                                                                 
|10.     | Material contracts                                                                  
|        | 10.1                                                                                
|        | 10.2                                                                                
|        | 10.3                                                                                
|        | 10.4                                                                                
|        | 10.5                                                                                
|11.     | Statement regarding computation of per share earnings (loss)                        
|15.     | Letter regarding unaudited interim financial information                            
|18.     | Letter regarding change in accounting principles                                    
|19.     | Report furnished to security holders                                                
|22.     | Published report regarding matters submitted to vote of security holders            
|23.     | Consents of experts and counsel                                                     
|24.     | Power of attorney                                                                   
|27.     | Financial data schedule                                                             
|99.     | Additional exhibits                                                                 

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