<PAGE>

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

                                    FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

                                       OR

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

For the transition period from _____ to_____


Commission File Number 1-16431

                       APPLIED GRAPHICS TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its charter)


                 DELAWARE                                     13-3864004
(State or other jurisdiction of incorporation             (I.R.S. Employer
            or organization)                             Identification No.)

                              450 WEST 33RD STREET
                                  NEW YORK, NY
                    (Address of principal executive offices)
                                      10001
                                   (Zip Code)

                                  212-716-6600
              (Registrant's telephone number, including area code)

                                       N/A

     (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[ ]

The number of shares of the registrant's common stock outstanding as of October
31, 2002, was 9,147,565.
<PAGE>
                         PART I - FINANCIAL INFORMATION

      Item 1. Financial Statements.

                       APPLIED GRAPHICS TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS

                                   (Unaudited)
               (In thousands of dollars, except per-share amounts)

<TABLE>
<CAPTION>
                                                                                             September 30,        December 31,
                                                                                                 2002                2001
                                                                                               ---------           ---------
<S>                                                                                          <C>                  <C>
ASSETS
Current assets:

   Cash and cash equivalents                                                                   $   5,290           $   4,949
   Trade accounts receivable (net of allowances of $7,370 in 2002 and $7,981 in 2001)             86,152              90,353
   Due from affiliates                                                                               730               4,028
   Inventory                                                                                      18,568              14,837
   Prepaid expenses                                                                                4,637               3,658
   Deferred income taxes                                                                          17,861              19,973
   Other current assets                                                                            4,771               2,325
   Net assets of discontinued operations                                                                              37,498
                                                                                               ---------           ---------

          Total current assets                                                                   138,009             177,621
Property, plant, and equipment - net                                                              58,614              63,307
Goodwill                                                                                          77,059             405,839
Other intangible assets - net                                                                      1,403               1,210
Deferred income taxes                                                                              3,229
Other assets                                                                                      10,126               9,991
                                                                                               ---------           ---------

          Total assets                                                                         $ 288,440           $ 657,968
                                                                                               =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:

   Accounts payable                                                                            $  14,653           $  12,088
   Accrued expenses                                                                               55,597              50,549
   Current portion of long-term debt and obligations under capital leases                        177,986              15,398
   Due to affiliates                                                                                 581               1,278
   Other current liabilities                                                                      39,937              44,071
                                                                                               ---------           ---------

          Total current liabilities                                                              288,754             123,384
Long-term debt                                                                                       937             195,140
Subordinated notes                                                                                29,161              27,012
Obligations under capital leases                                                                     136                 593
Deferred income taxes                                                                                                  1,485
Other liabilities                                                                                 12,149              12,874
                                                                                               ---------           ---------

          Total liabilities                                                                      331,137             360,488
                                                                                               ---------           ---------
Commitments and contingencies

Minority interest - Redeemable Preference Shares issued by subsidiary                             41,176              38,776
                                                                                               ---------           ---------

Stockholders' Equity (Deficit):
   Preferred stock (no par value, 10,000,000 shares authorized; no shares
      outstanding)
   Common stock ($0.01 par value, 150,000,000 shares authorized;
      shares issued and outstanding: 9,147,565 in 2002 and 9,067,565 in 2001)                         91                  91
   Additional paid-in capital                                                                    390,597             389,464
   Accumulated other comprehensive loss                                                             (855)               (239)
   Retained deficit                                                                             (473,706)           (130,612)
                                                                                               ---------           ---------

           Total stockholders' equity (deficit)                                                  (83,873)            258,704
                                                                                               ---------           ---------

           Total liabilities and stockholders' equity (deficit)                                $ 288,440           $ 657,968
                                                                                               =========           =========
</TABLE>

             See Notes to Interim Consolidated Financial Statements

                                       1
<PAGE>
                       APPLIED GRAPHICS TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                    (In thousands, except per-share amounts)

<TABLE>
<CAPTION>
                                                               For the Nine Months Ended      For the Three Months Ended
                                                                      September 30,                   September 30,
                                                               -------------------------       -------------------------
                                                                 2002             2001            2002           2001
                                                               ---------       ---------       ---------       ---------
<S>                                                            <C>             <C>            <C>              <C>
Revenues                                                       $ 311,526       $ 346,990       $ 107,072       $ 110,399
Cost of revenues                                                 209,192         241,827          70,188          76,103
                                                               ---------       ---------       ---------       ---------
Gross profit                                                     102,334         105,163          36,884          34,296

Selling, general, and administrative expenses                     90,513         103,990          29,891          34,011
Amortization of intangibles                                          259          10,113              85           3,335
Loss on disposal of property and equipment                           301           2,242             182             266
Restructuring charges                                              2,059           1,167           2,059
Impairment of goodwill                                             1,440
Other impairment charges                                             361                             361
                                                               ---------       ---------       ---------       ---------

Operating income (loss)                                            7,401         (12,349)          4,306          (3,316)
Interest expense                                                 (14,328)        (18,910)         (5,090)         (7,161)
Interest income                                                      162             474              37             137
Other income (expense) - net                                      (1,468)          2,130          (1,351)            (40)
                                                               ---------       ---------       ---------       ---------

Loss from continuing operations before benefit for income
   taxes and minority interest                                    (8,233)        (28,655)         (2,098)        (10,380)
Benefit for income taxes                                            (688)         (4,780)           (202)         (2,300)
                                                               ---------       ---------       ---------       ---------
Loss from continuing operations before minority interest          (7,545)        (23,875)         (1,896)         (8,080)
Minority interest                                                 (1,828)         (1,778)           (638)           (592)
                                                               ---------       ---------       ---------       ---------
Loss from continuing operations                                   (9,373)        (25,653)         (2,534)         (8,672)
Income (loss) from discontinued operations                        (5,846)          3,839                           2,879
Extraordinary item - loss on debt extinguishment, net of
     taxes of $2,451                                                              (3,410)                         (3,410)
Cumulative effect of change in accounting principle             (327,875)
                                                               ---------       ---------       ---------       ---------
Net loss                                                        (343,094)        (25,224)         (2,534)         (9,203)
Other comprehensive loss                                            (616)         (1,237)           (660)           (402)
                                                               ---------       ---------       ---------       ---------
Comprehensive loss                                             $(343,710)        (26,461)      $  (3,194)         (9,605)
                                                               =========       =========       =========       =========
Basic loss per common share:

  Loss from continuing operations                              $   (1.03)      $   (2.83)      $   (0.28)      $   (0.95)
  Income (loss) from discontinued operations                       (0.64)           0.43                            0.32
  Extraordinary loss                                                               (0.38)                          (0.38)
  Cumulative effect of change in accounting principle             (35.95)
                                                               ---------       ---------       ---------       ---------
  Total                                                        $  (37.62)      $   (2.78)      $   (0.28)      $   (1.01)
                                                               =========       =========       =========       =========

Diluted loss per common share:

  Loss from continuing operations                              $   (1.03)      $   (2.83)      $   (0.28)      $   (0.95)
  Income (loss) from discontinued operations                       (0.64)           0.43                            0.32
  Extraordinary loss                                                               (0.38)                          (0.38)
  Cumulative effect of change in accounting principle             (35.95)
                                                               ---------       ---------       ---------       ---------

  Total                                                        $  (37.62)      $   (2.78)      $   (0.28)      $   (1.01)
                                                               =========       =========       =========       =========

Weighted average number of common shares:

  Basic                                                            9,121           9,068           9,148           9,068
  Diluted                                                          9,121           9,068           9,148           9,068
</TABLE>


             See Notes to Interim Consolidated Financial Statements


                                       2
<PAGE>
                       APPLIED GRAPHICS TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                                                                        For the Nine Months Ended
                                                                                              September 30,
                                                                                      -----------------------------
                                                                                        2002                2001
                                                                                      ---------           ---------
<S>                                                                                   <C>                 <C>
Cash flows from operating activities:
Net loss                                                                              $(343,094)          $ (25,224)
Adjustments to reconcile net loss to net cash from operating activities:
      Loss (income) from discontinued operations                                          5,846              (3,839)
      Depreciation and amortization                                                      13,228              25,966
      Deferred taxes                                                                     (2,715)             (7,860)
      Loss on disposal of property and equipment                                            301               2,242
      Provision for bad debts                                                              (758)              2,288
      Cumulative effect of change in accounting principle                               328,529
      Extraordinary loss                                                                                      5,861
      Restructuring charges                                                               2,059               1,167
      Non-cash impairment charges                                                         1,801
      Other                                                                               1,638               2,294
Changes in Operating Assets and Liabilities, net of effects of dispositions:
      Trade accounts receivable                                                           5,684               4,659
      Due from/to affiliates                                                              2,601               1,051
      Inventory                                                                          (3,628)                337
      Other assets                                                                       (1,652)              1,739
      Accounts payable and accrued expenses                                               4,165             (14,865)
      Other liabilities                                                                  (6,164)                357
      Net cash provided by operating activities of discontinued operations                  795               7,856
                                                                                      ---------           ---------
Net cash provided by operating activities                                                 8,636               4,029
                                                                                      ---------           ---------

Cash flows from investing activities:
      Property, plant, and equipment expenditures                                        (9,082)            (11,636)
      Proceeds from the sale of a business                                               33,502
      Proceeds from sale of property and equipment                                          416
      Proceeds from sale of available-for-sale securities                                                     1,675
      Other                                                                                (720)             (2,967)
      Net cash used in investing activities of discontinued operations                      (93)               (509)
                                                                                      ---------           ---------
Net cash provided by (used in) investing activities                                      24,023             (13,437)
                                                                                      ---------           ---------

Cash flows from financing activities:
      Repayments of notes and capital lease obligations                                    (858)             (1,035)
      Repayments of term loans                                                          (37,125)             (6,240)
      Borrowings under revolving credit line - net                                        5,900              15,795
      Payment of debt extinguishment fees                                                                    (2,000)
      Net cash used in financing activities of discontinued operations                     (279)                (68)
                                                                                      ---------           ---------
Net cash provided by (used in) financing activities                                     (32,362)              6,452
                                                                                      ---------           ---------

Net increase (decrease) in cash and cash equivalents                                        297              (2,956)
Effect of exchange rate changes on cash and cash equivalents                                 44                 (25)
Cash and cash equivalents at beginning of period                                          4,949               6,406
                                                                                      ---------           ---------

Cash and cash equivalents at end of period                                            $   5,290           $   3,425
                                                                                      =========           =========
</TABLE>


             See Notes to Interim Consolidated Financial Statements


                                       3
<PAGE>
                       APPLIED GRAPHICS TECHNOLOGIES, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                   (Unaudited)
                            (In thousands of dollars)

<TABLE>
<CAPTION>
                                                          For the nine months ended September 30, 2002
                                                          --------------------------------------------
                                                                                Accumulated
                                                                 Additional        other
                                                   Common         paid-in      comprehensive       Retained
                                                   stock          capital          loss            deficit
                                                   -----          -------          ----            -------
<S>                                                <C>           <C>           <C>               <C>
Balance at January 1, 2002                          $ 91         $ 389,464        $ (239)        $ (130,612)

Issuance of 80,000 common shares as
   additional consideration in connection
   with prior period acquisition                                       720

Fair value of warrants issued to banks                                 404

Compensation cost of vested stock options
   issued to non-employees                                               9

Reclassification adjustment for losses
   realized in net income                                                            174

Reclassification of cumulative effect of
   change in accounting principle                                                     17

Unrealized loss from foreign currency
   translation adjustments                                                          (807)

Net loss                                                                                           (343,094)
                                                   ------        ---------        ------         ----------
Balance at September 30, 2002                       $ 91         $ 390,597        $ (855)        $ (473,706)
                                                   ======        =========        ======         ==========
</TABLE>


             See Notes to Interim Consolidated Financial Statements


                                       4
<PAGE>
                       APPLIED GRAPHICS TECHNOLOGIES, INC.
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                            (In thousands of dollars)


1.    BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements of
Applied Graphics Technologies, Inc., and its subsidiaries (the "Company"), which
have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles, should be read in
conjunction with the notes to consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001. In
the opinion of the management of the Company, all adjustments (consisting
primarily of normal recurring accruals) necessary for a fair presentation have
been included in the financial statements. The operating results of any quarter
are not necessarily indicative of results for any future period.

      Certain prior-period amounts in the accompanying financial statements have
been reclassified to conform with the 2002 presentation.

2.    SALE OF PUBLISHING BUSINESS

      On April 10, 2002, the Company sold its publishing business. Net proceeds
from the sale were approximately $33,500, of which $31,500 were used to repay
term loans outstanding under the Company's credit facility and $2,000 were
originally held in escrow under the terms of the sale. The Company received $500
from the escrow in November 2002, with the remaining $1,500 of escrow available
to satisfy any claims related to contractual warranties. All proceeds from the
escrow, including any remaining escrow balance as of March 31, 2003, will be
used to further repay the outstanding term loans.

      The Company recognized a loss on disposal of the publishing business of
$6,943 that was based on the terms of the sale and is subject to change based on
potential working capital adjustments resulting from the finalization of the
closing date balance sheet. The loss on disposal is included as a component of
the loss from discontinued operations in the Consolidated Statement of
Operations for the nine months ended September 30, 2002.

      The accompanying financial statements have been presented to reflect the
operation of the publishing business as a discontinued operation. The results of
operations of the publishing business for the nine months ended September 30,
2002 and 2001, and for the three months ended September 30, 2001, are presented
as Discontinued Operations in the accompanying Consolidated Statements of
Operations as follows:


                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                              Nine months           Three months
                                                                ended                  ended
                                                             September 30,         September 30,
                                                       ------------------------    -------------
                                                         2002            2001          2001
                                                       --------        --------      --------
<S>                                                    <C>             <C>           <C>
Revenues                                                $ 22,083       $ 61,142      $ 25,135
                                                        ========       ========      ========

Income from operations before income taxes              $  1,814       $  6,160      $  4,562
Provision equivalent to income taxes                         717          2,551         1,683
                                                       --------        --------      --------
Income from operations                                     1,097          3,609         2,879
Gain (loss) on disposal                                   (6,943)           230
                                                        --------       --------      --------

Income (loss) from discontinued operations              $ (5,846)      $  3,839      $  2,879
                                                        ========       ========      ========
</TABLE>

      The results of operations of the publishing business include an allocation
of interest expense of $580 and $1,004 for the nine months ended September 30,
2002 and 2001, respectively, and $358 for the three months ended September 30,
2001. The allocated interest expense consisted solely of the interest expense on
the Company's borrowings under its credit facility, which represents the
interest expense not directly attributable to the Company's other operations.
Interest expense was allocated based on the ratio of the net assets of the
discontinued operation to the sum of the consolidated net assets of the Company
and the outstanding borrowings under the Company's credit facility.

3.    GOODWILL AND OTHER INTANGIBLE ASSETS

      On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." Under SFAS No.
142, acquired goodwill and other intangible assets with indefinite useful lives
are no longer amortized over an estimated useful life, but instead are subject
to an annual impairment test. Intangible assets with finite useful lives
continue to be amortized over their useful lives.

      Upon the initial application of SFAS No. 142, the Company incurred an
impairment charge of $328,529 relating to its goodwill, of which $321,952
related to the Company's content management services business and $6,577 related
to the Company's broadcast media distribution services business. The fair value
of each reporting unit was determined based on applying a multiple to each
reporting unit's earnings before interest, taxes, depreciation, and
amortization. The Company reported the impairment charge, net of a tax benefit
of $654, as a cumulative effect of a change in accounting principle. The Company
will perform its annual impairment test of goodwill at December 31 of each year.

      In the second quarter of 2002, the Company made a contingent payment
totaling $1,440 consisting of $720 in cash and 80,000 shares of common stock as
additional consideration for the acquisition of one of its digital services
businesses. In June 2002, the Company recognized a charge for the impairment of
goodwill for this $1,440 of additional consideration based on the estimated fair
value of this business. The impairment charge was determined using the same
methodology that the Company used upon the adoption of SFAS No. 142. The Company
reviewed the value of the goodwill associated with this business due to having
incurred a similar impairment charge in the prior year.



                                       6
<PAGE>
      The Company's intangible assets not subject to amortization under SFAS No.
142 consist entirely of goodwill. The changes in the carrying amount of goodwill
during the nine months ended September 30, 2002, and the full year ended
December 31, 2001, were as follows:

<TABLE>
<CAPTION>
                                                     2002                            2001
                                          -------------------------       -------------------------
                                           Content          Other          Content          Other
                                          Management      Operating      Management       Operating
                                          Services        Segments        Services        Segments
                                          ---------       ---------       ---------       ---------
<S>                                       <C>             <C>            <C>              <C>
Balance at beginning of period            $ 397,087       $   8,752       $ 405,973       $  15,716
Impairment losses                          (321,952)         (8,017)                         (7,176)
Contingent purchase price                                     1,440                           1,440
Amortization                                                                (11,579)         (1,086)
Other                                          (251)                          2,693            (142)
                                          ---------       ---------       ---------       ---------
Balance at end of period                  $  74,884       $   2,175       $ 397,087       $   8,752
                                          =========       =========       =========       =========
</TABLE>

      The Company's intangible assets subject to amortization under SFAS No. 142
consist entirely of contract acquisition costs, which represent consideration
paid by the Company to enter into certain long-term contracts with customers.
Contract acquisition costs are amortized on a straight-line basis over the life
of the underlying contract. The gross carrying amount and accumulated
amortization of contract acquisition costs were as follows:

<TABLE>
<CAPTION>
                                     September 30,       December 31,
                                         2002               2001
                                        -------           -------
<S>                                  <C>                 <C>
Gross carrying amount                   $ 2,897           $ 2,821
Accumulated amortization                 (1,494)           (1,611)
                                        -------           -------

Net carrying amount                     $ 1,403           $ 1,210
                                        =======           =======
</TABLE>

      The Company incurred an impairment charge of $150 during the third quarter
of 2002 for the write off of the unamortized balance of contract acquisition
costs related to a customer contract with an affiliate that was terminated prior
to its expiration. Such charge is included as a component of "Other impairment
charges" in the Consolidated Statements of Operations.

      Amortization expense associated with contract acquisition costs was $259
and $599 for the nine months ended September 30, 2002 and 2001, respectively,
and $85 and $200 for the three months ended September 30, 2002 and 2001,
respectively. The estimated amortization expense for the remainder of 2002 and
for each of the next four full fiscal years is as follows:

<TABLE>
<S>                                        <C>
        2002                               $  77
        2003                               $ 355
        2004                               $ 355
        2005                               $ 325
        2006                               $ 291
</TABLE>




                                       7
<PAGE>
      The adjusted net loss and loss per share for the nine months and three
months ended September 30, 2001, reflecting the add back of the amortization of
goodwill, were as follows:

<TABLE>
<CAPTION>
                                                             Nine months ended    Three months ended
                                                            September 30, 2001    September 30, 2001
                                                            ------------------    ------------------
<S>                                                         <C>                   <C>
Net loss as reported                                            $ (25,224)             $ (9,203)
Add back: Amortization of goodwill - net of tax                     8,915                 2,937
                                                                ---------              --------

Adjusted net loss                                               $ (16,309)             $ (6,266)
                                                                =========              ========

Loss per share as reported (basic and diluted)                  $   (2.78)             $ (1.01)
Amortization of goodwill                                             0.98                 0.32
                                                                ---------              --------

Adjusted loss per share (basic and diluted)                     $   (1.80)             $ (0.69)
                                                                =========              ========
</TABLE>

4.    RESTRUCTURING

      The Company initiated a plan during the third quarter of 2002 (the "2002
Third Quarter Plan") to consolidate its Grand Rapids, MI, and Battle Creek, MI,
operations into a new facility in Battle Creek, and to consolidate its Dallas,
TX, operation into less space at its existing location. The Company terminated
nine employees as part of the 2002 Third Quarter Plan. The results of operations
for the nine months and three months ended September 30, 2002, include a charge
of $2,059 for the 2002 Third Quarter Plan, which consisted of $1,828 for
facility closure costs, $155 for future rental obligations on abandoned
equipment, and $76 for employee termination costs. The Company expects to
substantially complete the 2002 Third Quarter Plan during the fourth quarter of
2002. The Company also incurred an impairment charge of $211 related to
equipment abandoned in connection with the 2002 Third Quarter Plan. Such charge
is included as a component of "Other impairment charges" in the Consolidated
Statements of Operations.

      In addition, the Company initiated various restructuring plans in prior
periods (the "2001 Fourth Quarter Plan," the "2001 Second Quarter Plan," the
"2000 Second Quarter Plan," the "1999 Fourth Quarter Plan," and the "1998 Fourth
Quarter Plan," respectively) under which it continues to make certain payments.
During the nine months ended September 30, 2002, the Company paid $5,222 related
to its various restructuring plans, and the Company had a liability of $10,567
included in "Other current liabilities" in the accompanying Consolidated Balance
Sheet as of September 30, 2002, for the future payments associated with the
various restructuring plans. The remaining liability for future payments and
the amounts charged against the respective restructuring liabilities during the
nine months ended September 30, 2002, were as follows:

<TABLE>
<CAPTION>
                                             2002 Third         2001 Fourth         2001 Second
                                             Quarter Plan       Quarter Plan        Quarter Plan
                                             ------------       ------------        ------------
<S>                                          <C>                <C>                 <C>
Balance at January 1, 2002                                        $ 11,994             $  594

Restructuring charge                           $ 2,059
Facility closure costs                             (23)             (2,940)
Employee termination costs                         (40)             (1,232)              (320)
Abandoned equipment                                 (7)               (211)
                                               -------            --------             ------
Balance at September 30, 2002                  $ 1,989            $  7,611             $  274
                                               =======            ========             ======
</TABLE>


                                       8
<PAGE>
<TABLE>
<CAPTION>
                                             2000 Second       1999 Fourth        1998 Fourth
                                            Quarter Plan       Quarter Plan      Quarter Plan
                                            ------------       ------------      ------------
<S>                                         <C>                <C>               <C>
Balance at January 1, 2002                     $ 584             $  382              $ 176

Facility closure costs                          (132)              (193)               (32)
Abandoned equipment                                                 (92)
                                               -----             ------              -----
Balance at September 30, 2002                  $ 452             $   97              $ 144
                                               =====             ======              =====
</TABLE>

      The number of employees paid during the nine months ended September 30,
2002, that resulted in a reduction of the restructuring plans' liabilities for
employee termination costs were seven for the 2002 Third Quarter Plan, 95 for
the 2001 Fourth Quarter Plan, and five for the 2001 Second Quarter Plan.

5.    INVENTORY

      The components of inventory were as follows:

<TABLE>
<CAPTION>
                                     September 30,      December 31,
                                         2002              2001
                                         ----              ----
<S>                                  <C>                <C>
Work-in-process                       $  16,707          $ 12,465
Raw materials                             1,861             2,372
                                      ---------          --------

Total                                 $  18,568          $ 14,837
                                      =========          ========
</TABLE>


6.    LONG TERM DEBT AND SUBORDINATED NOTES

      The terms of the Company's credit facility contain certain milestones in
connection with raising amounts to repay borrowings. The consummation of the
sale of the publishing business satisfied one such milestone and resulted in the
elimination of a previous increase in interest rates of 100 basis points that
had been in effect since January 1, 2002. The Company did not satisfy two other
milestones with deadlines of February 28, 2002, and April 30, 2002. Not
satisfying the first milestone resulted in a fee of $500 being paid to the
Company's lenders. Not satisfying the second milestone resulted in, effective
May 1, 2002, an increase in interest rates of 100 basis points and the issuance
of warrants with an exercise price of $0.01 to the Company's lenders to purchase
453,377 shares of the Company's common stock. Such warrants, which become
exercisable upon the earlier of January 15, 2003, or an event of default under
the credit facility, had a fair value of $404 on the date of issuance. The
warrants were recorded as deferred financing costs, which are being amortized
over the remaining term of the Company's credit facility and, since the warrants
are to be settled in shares of the Company's common stock, as an increase in
additional paid-in capital.



                                       9
<PAGE>
      In March 2002, the Company entered into an amendment to its credit
facility (the "Sixth Amendment") that extended the maturity through April 2003.
In connection with the Sixth Amendment, the Company incurred fees of $250 and
became obligated to issue additional warrants with an exercise price of $0.01 to
its lenders to purchase 453,377 shares of the Company's common stock if a
definitive agreement for an overall restructuring of the credit facility was not
reached by September 30, 2002. Such warrants, which are exercisable immediately
upon issuance, were issued in October 2002 and had a fair value of $170. These
warrants will be accounted for in the same manner as the warrants issued in May
2002.

      As part of its overall effort to restructure its debt, the Company
initiated a tender offer in July 2002 to acquire all of its outstanding
subordinated notes for an aggregate purchase price of $3,000. The tender offer
was originally scheduled to expire on July 30, 2002, but was extended until
August 27, 2002, as the minimum tender condition was not satisfied. The tender
offer did not succeed and lapsed on August 27, 2002, with none of the tendered
subordinated notes being accepted by the Company for payment. Consequently, the
semi-annual interest payment on the subordinated notes, which was due on July
31, 2002, but was not paid by the Company as a result of the tender offer being
extended, was paid on August 30, 2002. Such failure to pay the interest on its
initial due date did not constitute an event of default since payment was made
by the expiration of a 30-day grace period. In connection with the lapsed tender
offer, the Company incurred expenses of $338 that are included as a component of
"Other income (expense)" in the Consolidated Statements of Operations for the
nine months and three months ended September 30, 2002.

      At September 30, 2002, all amounts outstanding under the Company's credit
facility, which matures in April 2003, are classified as a current liability in
the accompanying Consolidated Balance Sheet. The Company is currently pursuing
two separate alternatives to address its current financial position. The Company
continues to be engaged in discussions with its lenders to renegotiate the terms
of its credit facility, with such discussions currently focused on an extension
of the maturity date. In connection with any such agreement, the lenders would
likely receive additional consideration. Concurrently with its discussion with
its lenders, the Company is pursuing an overall recapitalization that would
include an infusion of outside equity and the settlement, at a significant
discount, of amounts due to the lenders for amounts borrowed under the credit
facility, amounts due to holders of the Company's subordinated notes, and
amounts due to holders of preference shares of a subsidiary of the Company. Such
discussions are at a preliminary stage. There can be no assurances as to the
terms or the success of any renegotiation of the Company's credit facility or
any recapitalization, including the amount of new equity and the amount of
capital stock to be issued in connection therewith. The potential impact of any
such recapitalization on the holders of the Company's presently outstanding
common stock is similarly unknown at this time.



                                       10
<PAGE>
7.    DERIVATIVES

      The fair value of the Company's interest rate swaps was a net loss of
$1,862 and $2,705 at September 30, 2002 and 2001, respectively. The Company
recognized a non-cash benefit of $46 and a non-cash charge of $1,458 for the
nine months ended September 30, 2002 and 2001, respectively, and non-cash
charges of $17 and $1,472 for the three months ended September 30, 2002 and
2001, respectively, which consisted of the following:

<TABLE>
<CAPTION>
                                                          Nine months ended       Three months ended
                                                            September 30,            September 30,
                                                         -------------------     ---------------------
                                                          2002        2001        2002         2001
                                                         -------     -------     -------      -------
<S>                                                      <C>         <C>         <C>          <C>
Change in fair market value of swaps not
   designated as hedges                                  $  (373)    $   801     $   (92)     $   801
Ineffectiveness of swaps designated as hedges                             79                       62
Reclassification of loss in "Accumulated other
   comprehensive income (loss)"                              298         611         100          611
Reclassification of cumulative effect recorded
   upon adoption of SFAS No. 133                              29         (33)          9           (2)
                                                         -------     -------     -------      -------

Total charge (benefit)                                   $   (46)    $ 1,458     $    17      $ 1,472
                                                         =======     =======     =======      =======
</TABLE>

      The Company expects $85 of the loss in "Accumulated other comprehensive
income (loss)" to be reclassified into earnings through the maturity of the
swaps in August 2003.

8.    INCOME TAXES

      In connection with the impairment of goodwill incurred upon the initial
adoption of SFAS No. 142 (see Note 3 to the Interim Consolidated Financial
Statements), the Company recognized a deferred tax asset of $16,806. At
September 30, 2002, the Company had a consolidated deferred tax asset balance
before valuation allowance of $37,242. Based on its most recent projections, the
Company does not believe that it is more likely than not that the benefit
associated with the deferred tax assets will be entirely realized in the future.
During the nine months ended September 30, 2002, the Company established a
valuation allowance in the amount of $16,152, all of which was included as part
of the cumulative effect of a change in accounting principle.



                                       11
<PAGE>
9.    RELATED PARTY TRANSACTIONS

      Sales to, purchases from, and administrative charges incurred with related
parties during the nine months and three months ended September 30, 2002 and
2001, were as follows:

<TABLE>
<CAPTION>
                                  Nine months ended            Three months ended
                                    September 30,                September 30,
                                    -------------                -------------
                                2002           2001           2002         2001
                                ----           ----           ----         ----
<S>                            <C>           <C>            <C>          <C>
Affiliate sales                $ 3,842       $ 7,697        $ 1,079      $ 2,613
Affiliate purchases            $   322       $    50        $   114      $     2
Administrative charges         $ 1,135       $ 1,602        $   332      $   541
</TABLE>

      Administrative charges include charges for rent incurred for leases with
affiliates and for certain legal, administrative, and computer services provided
by affiliates.

10.   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

      Payments of interest and income taxes for the nine months ended September
30, 2002 and 2001, were as follows:

<TABLE>
<CAPTION>
                                                      2002           2001
                                                      ----           ----
<S>                                                 <C>           <C>
Interest paid                                       $ 14,976      $ 18,160
Income taxes paid - net of refunds                  $  1,416      $  2,718
</TABLE>

      Noncash investing and financing activities for the nine months ended
September 30, 2002 and 2001, were as follows:

<TABLE>
<CAPTION>
                                                                        2002           2001
                                                                        ----           ----
<S>                                                                     <C>            <C>
Fair value of vested stock options issued to
   non-employees                                                        $   9          $  58
Additions to goodwill for contingent payments                           $ 720          $ 720
Fair value of warrants issued to banks                                  $ 404
Reduction of goodwill from amortization of excess tax -
   deductible goodwill                                                                 $  92
</TABLE>


                                       12
<PAGE>
11.   SEGMENT INFORMATION

      Segment information relating to results of operations for the nine months
and three months ended September 30, 2002 and 2001, was as follows:

<TABLE>
<CAPTION>
                                                   Nine months ended                   Three months ended
                                                     September 30,                        September 30,
                                              ---------------------------         ---------------------------
                                                 2002              2001             2002               2001
                                              ---------         ---------         ---------         ---------
<S>                                           <C>               <C>               <C>               <C>
Revenue:

Content Management Services                   $ 290,539         $ 327,056         $  99,286         $ 104,364
Other operating segments                         20,987            19,934             7,786             6,035
                                              ---------         ---------         ---------         ---------

Total                                         $ 311,526         $ 346,990         $ 107,072         $ 110,399
                                              =========         =========         =========         =========

Operating Income (Loss):

Content Management Services                   $  31,049         $  24,686         $  12,494         $   8,775
Other operating segments                            524              (995)              583              (558)
                                              ---------         ---------         ---------         ---------

Total                                            31,573            23,691            13,077             8,217
Other business activities                       (19,752)          (22,518)           (6,084)           (7,932)
Amortization of intangibles                        (259)          (10,113)              (85)           (3,335)
Loss on disposal of property and
   equipment                                       (301)           (2,242)             (182)             (266)
Restructuring charges                            (2,059)           (1,167)           (2,059)
Impairment charges                               (1,801)                               (361)
Interest expense                                (14,328)          (18,910)           (5,090)           (7,161)
Interest income                                     162               474                37               137
Other income (expense)                           (1,468)            2,130            (1,351)              (40)
                                              ---------         ---------         ---------         ---------
Consolidated loss before provision for
   income taxes and minority interest         $  (8,233)        $ (28,655)        $  (2,098)        $ (10,380)
                                              =========         =========         =========         =========
</TABLE>



                                       13
<PAGE>
      Segment information relating to the Company's assets as of September 30,
2002, and December 31, 2001, was as follows:

<TABLE>
<CAPTION>
                                                       September 30,      December 31,
                                                           2002              2001
                                                           ----              ----
<S>                                                    <C>                <C>
Total Assets:

Content Management Services                             $ 248,600         $ 579,460
Other operating segments                                   13,895            20,997
Other business activities                                  25,945            20,013
Net assets of discontinued operations                                        37,498
                                                        ---------         ---------
Total                                                   $ 288,440         $ 657,968
                                                        =========         =========
</TABLE>

      The total assets of the content management services segment and other
operating segments decreased by $330,860 and $7,102, respectively, due primarily
to the impairment of goodwill recorded upon the initial adoption of SFAS No. 142
(see Note 3 to the Interim Consolidated Financial Statements).

12.   RECENTLY ISSUED ACCOUNTING STANDARDS

      Statement of Financial Accounting Standards (SFAS) No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities," was issued in June 2002,
and is effective for exit or disposal activities initiated after December 31,
2002. SFAS No. 146 addresses financial accounting and reporting for costs
incurred in connection with exit or disposal activities, including
restructurings, and supercedes Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
Under SFAS No. 146, a liability related to an exit or disposal activity is not
recognized until such liability has actually been incurred, as opposed to a
liability being recognized at the time of a commitment to an exit plan, which
was the standard for liability recognition under EITF Issue No. 94-3. The impact
of the adoption of SFAS No. 146 on the Company's financial condition or results
of operations is not determinable since SFAS No. 146 only affects restructuring
efforts initiated in future periods.



                                       14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

      Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking" statements (within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended). Such statements involve known and
unknown risks, uncertainties, and other factors that may cause actual results,
performance, or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: the ability of the Company to successfully
renegotiate the terms of its credit facility or achieve a recapitalization of
the Company; the ability of the Company to maintain compliance with the
financial covenant requirements under its credit facility; the ability of Kmart
Corporation ("Kmart") to successfully emerge from bankruptcy; the impact of
technological advancements on the ability of customers and competitors to
provide services comparable to those provided by the Company; the continued
softness in the advertising market; the success of the Company's restructuring
plans and integration efforts; the rate and level of capital expenditures; and
the adequacy of the Company's credit facility and cash flows to fund cash needs.

      The results of operations of the Company's publishing business are
reported as a discontinued operation for all periods presented. The following
discussion and analysis (in thousands of dollars) should be read in conjunction
with the Company's Interim Consolidated Financial Statements and notes thereto.

      Management must make certain estimates and assumptions in preparing the
financial statements of the Company. Certain of these estimates and assumptions
relate to matters that are inherently uncertain as they pertain to future
events. These estimates and assumptions include the fair value of goodwill,
future estimated taxable income, the collectibility of accounts receivable, and
the timing and amount of the settlement on certain lease obligations relating to
vacant properties. While management believes that the estimates and assumptions
used were appropriate, actual results could differ significantly from those
estimates under different conditions.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2002, COMPARED WITH 2001

      Revenues in the first nine months of 2002 were $35,464, or 10.2%, lower
than in the comparable period in 2001. Revenues in the 2002 period decreased by
$36,517 from content management services and $1,532 from digital services, and
were partially offset by increased revenues of $2,585 from broadcast media
distribution services. Decreased revenues from content management services
primarily resulted from a weaker advertising market in the first nine months of
2002 as compared to the 2001 period, which adversely impacted the Company's
operations servicing advertising agencies and magazine publishers. Increased
revenues from broadcast media distribution services resulted from additional
volume of premium services provided for which the Company receives higher rates.

      Gross profit decreased by $2,829 in the first nine months of 2002. The
gross profit percentage in the first nine months of 2002 was 32.8% as compared
to 30.3% in the 2001 period. The increase in the gross profit percentage
primarily resulted from improved operating efficiencies and cost cutting related
to the Company's operational restructuring and integration efforts. This
increase was partially offset by a decline in margins as a result of a 40%
decrease in revenue at the Company's Chicago facility that services advertising
agencies and consumer goods companies.



                                       15
<PAGE>
      Selling, general, and administrative expenses in the first nine months of
2002 were $13,477 lower than in the 2001 period primarily as a result of the
Company's cost cutting initiatives in response to the decrease in revenue.
Selling, general, and administrative expenses as a percent of revenue were 29.1%
in the 2002 period and 30.0% in the 2001 period. Selling, general, and
administrative expenses in the 2002 period include charges of $1,710 for
nonrestructuring-related employee termination costs and $1,010 for consultants
retained to assist the Company with its restructuring and integration efforts.
Selling, general, and administrative expenses in 2001 include charges of $1,622
for nonrestructuring-related employee termination costs and $2,186 for
consultants retained to assist the Company with its restructuring and
integration efforts. Adjusting for these other charges, selling, general, and
administrative expenses as a percent of revenue were 28.2% and 28.9% in 2002 and
2001, respectively.

      The results of operations for the nine months ended September 30, 2002,
include a restructuring charge of $2,059 related to a plan initiated by the
Company during the third quarter of 2002 (the "2002 Third Quarter Plan"). Under
the 2002 Third Quarter Plan, the Company consolidated its Grand Rapids, MI, and
Battle Creek, MI, operations into a new facility in Battle Creek, and
consolidated its Dallas, TX, operation into less space at its existing location.
The Company terminated nine employees as part of the 2002 Third Quarter Plan.
The charge of $2,059 consisted of $1,828 for facility closure costs, $155 for
future rental obligations on abandoned equipment, and $76 for employee
termination costs.

      The results of operations for the nine months ended September 30, 2002,
include an impairment charge of $1,440 relating to goodwill associated with a
contingent payment made during the period for a prior period acquisition. The
results of operations also include other impairment charges of $361, of which
$211 related to equipment abandoned in connection with the 2002 Third Quarter
Plan and $150 related to the write off of the unamortized balance of contract
acquisition costs resulting from the termination of a customer contract with an
affiliate.

      Interest expense in the first nine months of 2002 was $4,582 lower than in
the 2001 period due primarily to reduced borrowings outstanding under the
Company's credit facility and a non-cash benefit of $1,504 as compared to the
2001 period associated with the Company's interest rate swap arrangements. In
April 2002, the Company used the net proceeds from the sale of its publishing
business to repay borrowings under its credit facility.

      Other expense of $1,468 for the nine months ended September 30, 2002,
includes $987 for a litigation settlement, including legal fees, and $338 of
expenses related to a tender offer to acquire the Company's outstanding
subordinated notes that did not succeed and lapsed in August 2002.

      The Company recorded an income tax benefit of $688 in the first nine
months of 2002. The benefit recognized was at a lower rate than the statutory
rate due primarily to the projected annual permanent items related to the
nondeductible portion of the goodwill impairment charge and meals and
entertainment expenses.

      The Company incurred a loss on disposal of $6,943 in the first nine months
of 2002 in connection with the sale of its publishing business in April 2002.
Such loss is included as a component of the loss from discontinued operations in
the Consolidated Statement of Operations for the nine months ended September 30,
2002.



                                       16
<PAGE>
      On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." Under SFAS No.
142, acquired goodwill and other intangible assets with indefinite useful lives
are no longer amortized over an estimated useful life, but instead are subject
to an annual impairment test. Intangible assets with finite useful lives
continue to be amortized over their useful lives. Upon the initial application
of SFAS No. 142, the Company incurred an impairment charge of $328,529 relating
to its goodwill. The Company reported the impairment charge, net of a tax
benefit of $654, as a cumulative effect of a change in accounting principle.

      Revenues from business transacted with affiliates for the nine months
ended September 30, 2002 and 2001, totaled $3,842 and $7,697, respectively,
representing 1.2% and 2.2%, respectively, of the Company's revenues.

THREE MONTHS ENDED SEPTEMBER 30, 2002, COMPARED WITH 2001

      Revenues in the third quarter of 2002 were $3,327, or 3.0%, lower than in
the comparable period in 2001. Revenues in the 2002 period decreased by $5,078
from content management services and $278 from digital services, and were
partially offset by increased revenues of $2,029 from broadcast media
distribution services. Decreased revenues from content management services
primarily resulted from a weaker advertising market in the third quarter of 2002
as compared to the 2001 period, which adversely impacted the Company's
operations servicing advertising agencies and magazine publishers. Increased
revenues from broadcast media distribution services resulted from additional
volume of premium services provided for which the Company receives higher rates.

      Gross profit increased by $2,588 in the third quarter of 2002. The gross
profit percentage in the third quarter of 2002 was 34.4% as compared to 31.1% in
the 2001 period. The increase in the gross profit percentage primarily resulted
from improved operating efficiencies and cost cutting related to the Company's
operational restructuring and integration efforts and from improved margins in
the Company's broadcast media distribution services operations as a result of a
50% increase in revenue during the period.

      Selling, general, and administrative expenses in the third quarter of 2002
were $4,120 lower than in the 2001 period primarily as a result of the Company's
cost cutting initiatives in response to the decrease in revenue. Selling,
general, and administrative expenses as a percent of revenue decreased to 27.9%
in the 2002 period from 30.8% in the 2001 period. Selling, general, and
administrative expenses in the 2002 period include charges of $476 for
nonrestructuring-related employee termination costs and $217 for consultants
retained to assist the Company with its restructuring and integration efforts.
Selling, general, and administrative expenses in 2001 include a charge of $856
for nonrestructuring-related employee termination costs and $1,012 for
consultants retained to assist the Company with its restructuring and
integration efforts. Adjusting for these other charges, selling, general, and
administrative expenses as a percent of revenue were 27.3% and 29.1% in 2002 and
2001, respectively.

      The results of operations in the third quarter of 2002 include a
restructuring charge of $2,059 related to the 2002 Third Quarter Plan.

      During the third quarter of 2002, the Company incurred an impairment
charge of $361 consisting of an impairment of $211 related to equipment
abandoned in connection with the 2002 Third Quarter Plan and $150 related to the
write off of the unamortized balance of contract acquisition costs resulting
from the termination of a customer contract with an affiliate.

      Other expense of $1,351 for the three months ended September 30, 2002,
includes $987 for a litigation settlement, including legal fees, and $338 of
expenses related to a tender offer to acquire the Company's outstanding
subordinated notes that did not succeed and lapsed in August 2002.



                                       17
<PAGE>
      Interest expense in the third quarter of 2002 was $2,071 lower than in the
2001 period due primarily to reduced borrowings outstanding under the Company's
credit facility and a non-cash benefit of $1,455 as compared to the 2001 period
associated with the Company's interest rate swap agreements.

      The Company recorded an income tax benefit of $202 in the third quarter of
2002. The provision recognized was at a lower rate than the statutory rate due
primarily to the projected annual permanent items related to the nondeductible
portion of the goodwill impairment charge and meals and entertainment expenses.

      Revenues from business transacted with affiliates for the three months
ended September 30, 2002 and 2001, totaled $1,079 and $2,613, respectively,
representing 1.0% and 2.4%, respectively, of the Company's revenues.

      FINANCIAL CONDITION

      The terms of the Company's credit facility contain certain milestones in
connection with raising amounts to repay borrowings. The consummation of the
sale of the publishing business satisfied one such milestone and resulted in the
elimination of a previous increase in interest rates of 100 basis points that
had been in effect since January 1, 2002. The Company did not satisfy two other
milestones with deadlines of February 28, 2002, and April 30, 2002. Not
satisfying the first milestone resulted in a fee of $500 being paid to the
Company's lenders. Not satisfying the second milestone resulted in, effective
May 1, 2002, an increase in interest rates of 100 basis points and the issuance
of warrants with an exercise price of $0.01 to the Company's lenders to purchase
453,377 shares of the Company's common stock. Such warrants become exercisable
upon the earlier of January 15, 2003, or an event of default under the credit
facility.

      In March 2002, the Company entered into an amendment to its credit
facility (the "Sixth Amendment") that extended the maturity through April 2003.
In connection with the Sixth Amendment, the Company incurred fees of $250 and
became obligated to issue warrants with an exercise price of $0.01 to its
lenders to purchase 453,377 shares of the Company's common stock if a
definitive agreement for an overall restructuring of the credit facility was
not reached by September 30, 2002. Such warrants, which are exercisable
immediately upon issuance, were issued in October 2002. Also as part of the
Sixth Amendment, available borrowings under the Company's revolving credit line
were reduced to $66,000 from $81,000. The Company does not believe that the
reduced borrowing capacity will have a material adverse effect on its financial
condition or liquidity. The Company had available borrowing capacity under its
revolving credit line of approximately $32,000 as of September 30, 2002.

      Upon issuance of the warrants in October 2002, the Company's lenders held
warrants issued directly by the Company that are convertible into approximately
9.0% of the Company's outstanding common stock. In addition, in July 2001,
Applied Printing Technologies, L.P. ("Applied Printing"), an affiliate
beneficially owned by Mortimer Zuckerman, the former Chairman of the Board of
Directors and a director of the Company, granted a call option to the Company's
lenders to purchase 680,067 shares of the Company's common stock held by Applied
Printing at a purchase price of $0.01 per share. This call option becomes
exercisable upon the earlier of January 15, 2003, or an event of default under
the credit facility. The combination of the call option granted by Applied
Printing and the warrants issued directly by the Company provide the Company's
lenders with instruments that are convertible into approximately 15.8% of the
Company's common stock.



                                       18
<PAGE>
      As part of its overall effort to restructure its debt, the Company
initiated a tender offer in July 2002 to acquire all of its outstanding
subordinated notes for an aggregate purchase price of $3,000. The tender offer
was originally scheduled to expire on July 30, 2002, but was extended until
August 27, 2002, as the minimum tender condition was not satisfied. The tender
offer did not succeed and lapsed on August 27, 2002, with none of the tendered
subordinated notes being accepted by the Company for payment. Consequently, the
semi-annual interest payment on the subordinated notes, which was due on July
31, 2002, but was not paid by the Company as a result of the tender offer being
extended, was paid on August 30, 2002. Such failure to pay the interest on its
initial due date did not constitute an event of default since payment was made
by the expiration of a 30-day grace period. In connection with the lapsed tender
offer, the Company incurred expenses of $338 that are included as a component of
"Other income (expense)" in the Consolidated Statements of Operations for the
nine months and three months ended September 30, 2002.

      The Company is currently pursuing two separate alternatives to address its
current financial position. The Company continues to be engaged in discussions
with its lenders to renegotiate the terms of its credit facility, with such
discussions currently focused on an extension of the maturity date. In
connection with any such agreement, the lenders would likely receive additional
consideration. Concurrently with its discussion with its lenders, the Company is
pursuing an overall recapitalization that would include an infusion of outside
equity and the settlement, at a significant discount, of amounts due to the
lenders for amounts borrowed under the credit facility, amounts due to holders
of the Company's subordinated notes, and amounts due to holders of preference
shares of a subsidiary of the Company. Such discussions are at a preliminary
stage. In the event the Company is unable to successfully restructure its credit
facility or obtain other sources of financing, the Company would be unable to
repay the borrowings under the credit facility upon maturity in April 2003.
There can be no assurances as to the terms or the success of any renegotiation
of the Company's credit facility or any recapitalization, including the amount
of new equity and the amount of capital stock to be issued in connection
therewith. The potential impact of any such recapitalization on the holders of
the Company's presently outstanding common stock is similarly unknown at this
time.

      Under the terms of its credit facility, the Company must comply with
certain quarterly covenants related to leverage ratios, interest coverage
ratios, fixed charge coverage ratios, and capital spending. In addition, the
Company must satisfy a monthly minimum cumulative EBITDA (as defined in the
credit facility) covenant. If the Company does not satisfy such minimum
cumulative EBITDA covenant for any non-quarter month end, the Company's
short-term borrowing availability would be limited until such time as the
Company is in compliance with the covenant, but such failure would not
constitute an event of default. The Company was in compliance with all covenants
at September 30, 2002. Based on current projections, the Company believes that
it will be able to remain in compliance with the covenant requirements
throughout 2002, although there can be no assurance that such compliance will be
maintained.

      On January 22, 2002, Kmart, one of the Company's two largest customers,
filed for protection under Chapter 11 of the United States Bankruptcy Code. A
particular class of vendors was afforded critical vendor status by the
bankruptcy court. The Company has been treated as a critical vendor, and has
been paid substantially all of its accounts receivable for services rendered to
Kmart prior to its bankruptcy filing. The Company continues to be paid under its
normal trade terms for services rendered to Kmart subsequent to January 22,
2002.

      During the first nine months of 2002, goodwill decreased by $328,780 due
primarily to the impairment charge recognized upon the initial adoption of SFAS
No. 142 (see Note 3 to the Interim Consolidated Financial Statements).



                                       19
<PAGE>
      During the first nine months of 2002, the Company made a $31,500 mandatory
repayment of term loans and deposited $2,000 into an escrow account with
proceeds from the sale of its publishing business. In addition, the Company made
a $5,625 scheduled repayment of term loans, invested $9,082 in facility
construction and new equipment, and repaid $858 of notes and capital lease
obligations. Such amounts were primarily funded by borrowings under its
revolving credit facility and cash from operating activities.

      Cash flows from operating activities of continuing operations during the
first nine months of 2002 increased by $11,668 as compared to the comparable
period in 2001 due primarily to the timing of vendor payments and cash generated
from operations, partially offset by payments made during the period related to
the Company's restructuring plans and growth in inventory due to the timing of
work performed for retailers.

      The Company expects to spend approximately $14,000 over the course of the
next twelve months for capital improvements, essentially all of which is for
modernization. The Company intends to finance these expenditures under leasing
arrangements, with working capital, or with borrowings under its credit
facility.

      Statement of Financial Accounting Standards (SFAS) No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities," was issued in June 2002,
and is effective for exit or disposal activities initiated after December 31,
2002. SFAS No. 146 addresses financial accounting and reporting for costs
incurred in connection with exit or disposal activities, including
restructurings, and supercedes Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
Under SFAS No. 146, a liability related to an exit or disposal activity is not
recognized until such liability has actually been incurred, as opposed to a
liability being recognized at the time of a commitment to an exit plan, which
was the standard for liability recognition under EITF Issue No. 94-3. The impact
of the adoption of SFAS No. 146 on the Company's financial condition or results
of operations is not determinable since SFAS No. 146 only affects restructuring
efforts initiated in future periods.

      The Company believes that the cash flow from operations, including
potential improvements in operations as a result of its integration and
restructuring efforts, and available borrowing capacity, subject to the
Company's ability to remain in compliance with the financial covenants under its
credit facility, will provide sufficient cash flows to fund its cash needs
throughout 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

      The Company's primary exposure to market risk is interest rate risk. The
Company had $176,786 outstanding under its credit facility at September 30,
2002. Interest rates on funds borrowed under the Company's credit facility vary
based on changes to the prime rate or LIBOR. The Company partially manages its
interest rate risk through two interest rate swap agreements under which the
Company pays a fixed rate and is paid a floating rate based on the three month
LIBOR rate. The notional amounts of the two interest rate swaps totaled $50,000
at September 30, 2002. A change in interest rates of 1.0% would result in a
change in income before taxes of $1,268 based on the outstanding balance under
the Company's credit facility and the notional amounts of the interest rate swap
agreements at September 30, 2002.



                                       20
<PAGE>
Item 4. Controls and Procedures.

      (a) The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is
accumulated and communicated to the Company's management, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. The Company's management,
including its principal executive officer and principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

      Within 90 days prior to the filing date of this quarterly report on Form
10-Q, the Company has carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's principal
executive officer and the Company's principal financial officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on such evaluation, the Company's principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective.

      (b) There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of their evaluation in connection with the
preparation of this quarterly report on Form 10-Q.



                                       21
<PAGE>
                          PART II. - OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds.

      In October 2002, pursuant to the terms of its credit facility, the Company
issued warrants with an exercise price of $0.01 to its lenders to purchase
453,377 shares of the Company's common stock. Such warrants became exercisable
immediately upon their issuance. The issuance of such securities by the Company
were effected without registration based on reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933 for private
placements.

Item 3. Defaults Upon Senior Securities.

      As previously disclosed in its Annual Report on Forms 10-K for the years
ended December 31, 2001 and 2000, a subsidiary of the Company, Wace Group
Limited ("Wace"), is in arrears on the dividend payments related to its 8%
Cumulative Convertible Redeemable Preference Shares. Wace has been prohibited
from making dividend payments due to its lack of distributable reserves, and has
not made a dividend payment since July 1999. The arrearage, which is included as
part of "Minority interest" in the Consolidated Balance Sheets, totals
$7,729,000 at October 31, 2002.

Item 6. Exhibits and Reports on Form 8-K.

      (a) Exhibits:

<TABLE>
<S>                                     <C>
                              2.1       Agreement and Plan of Merger, dated as of February 13, 1998,
                                        by and among Devon Group, Inc., Applied Graphics
                                        Technologies, Inc., and AGT Acquisition Corp. (Incorporated
                                        by reference to Exhibit No. 2.2 forming part of the
                                        Registrant's Report on Form 10-K (File No. 0-28208) filed
                                        with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, for the fiscal
                                        year ended December 31, 1997).

                              2.2       Stock Purchase Agreement dated as of April 11, 2002, by and
                                        among DPG Holdings, Inc., Devon Group, Inc., and Applied
                                        Graphics Technologies, Inc. (Incorporated by reference to
                                        Exhibit No. 2.2 forming part of the Registrant's Report on
                                        Form 10-Q (File No. 1-16431) filed with the Securities and
                                        Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended March 31,
                                        2002).

                              3.1(a)    First Restated Certificate of Incorporation (Incorporated by
                                        reference to Exhibit No. 3.1 forming part of the
                                        Registrant's Registration Statement on Form S-1 (File No.
                                        333-00478) filed with the Securities and Exchange Commission
                                        under the Securities Act of 1933, as amended).

                              3.1(b)    Certificate of Amendment of First Restated Certificate of
                                        Incorporation (Incorporated by reference to Exhibit No.
                                        3.1(b) forming part of the Registrant's Report on Form 10-Q
                                        (File No. 0-28208) filed with the Securities and Exchange
                                        Commission under the Securities Exchange Act of 1934, as
                                        amended, for the quarterly period ended June 30, 1998).
</TABLE>


                                                 22
<PAGE>
<TABLE>
<S>                                     <C>
                              3.1(c)    Second Certificate of Amendment of First Restated
                                        Certificate of Incorporation (Incorporated by reference to
                                        Exhibit No. 3.1(c) forming part of the Registrant's Report
                                        on Form 10-K (File No. 0-28208) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the fiscal year ended December 31,
                                        2000).

                              3.2(a)    Amended and Restated By-Laws of Applied Graphics
                                        Technologies, Inc. (Incorporated by reference to Exhibit No.
                                        3.2 forming part of Amendment No. 3 to the Registrant's
                                        Registration Statement on Form S-1 (File No. 333-00478)
                                        filed with the Securities and Exchange Commission under the
                                        Securities Act of 1933, as amended).

                              3.2(b)    Amendment to Amended and Restated By-Laws of Applied
                                        Graphics Technologies, Inc. (Incorporated by reference to
                                        Exhibit No. 3.3 forming part of the Registrant's
                                        Registration Statement on Form S-4 (File No. 333-51135)
                                        filed with the Securities and Exchange Commission under the
                                        Securities Act of 1933, as amended).

                              3.2(c)    Amendment to Amended and Restated By-Laws of Applied
                                        Graphics Technologies, Inc. (Incorporated by reference to
                                        Exhibit No. 3.2(c) forming part of Registrant's Report on
                                        Form 10-Q (File No. 0-28208) filed with the Securities and
                                        Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended September
                                        30, 2000).

                              4         Specimen Stock Certificate (Incorporated by reference to
                                        Exhibit 7 forming part of Registrant's Registration
                                        Statement on Form 8-A (File No. 1-16431) filed with the
                                        Securities and Exchange Commission under the Securities
                                        Exchange Act of 1934, as amended, on April 5, 2001).

                              10.2      Applied Graphics Technologies, Inc. 1996 Stock Option Plan
                                        (Incorporated by reference to Exhibit No. 10.2 forming part
                                        of Amendment No. 3 to the Registrant's Registration
                                        Statement on Form S-1 (File No. 333-00478) filed with the
                                        Securities and Exchange Commission under the Securities Act
                                        of 1933, as amended).

                              10.3      Applied Graphics Technologies, Inc. Non-Employee Directors
                                        Nonqualified Stock Option Plan (Incorporated by reference to
                                        Exhibit No. 10.3 forming part of Amendment No. 3 to the
                                        Registrant's Registration Statement on Form S-1 (File No.
                                        333-00478) filed with the Securities and Exchange Commission
                                        under the Securities Act of 1933, as amended).

                           10.6(a)(i)   Employment Agreement, effective as of November 30, 2000,
                                        between the Company and Joseph D. Vecchiolla (Incorporated
                                        by reference to Exhibit No. 10.6(a) forming part of the
                                        Registrant's Report on Form 10-K (File No. 0-28208) filed
                                        with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, for the fiscal
                                        year ended December 31, 2000).
</TABLE>



                                                 23
<PAGE>
<TABLE>
<S>                                     <C>
                           10.6(a)(ii)  Amendment No. 1 to Employment Agreement, dated as of March
                                        1, 2002, by and between the Company and Joseph D.
                                        Vecchiolla. (Incorporated by reference to Exhibit No.
                                        10.6(a)(ii) forming part of the Registrant's Report on Form
                                        10-K (File No. 1-16431) filed with the Securities and
                                        Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the fiscal year ended December 31,
                                        2001).

                              10.6(b)   Agreement and General Release, effective June 4, 2000,
                                        between the Company and Louis Salamone, Jr. (Incorporated by
                                        reference to Exhibit No. 10.6(b) forming part of the
                                        Registrant's Report on Form 10-Q (File No. 0-28208) filed
                                        with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, for the
                                        quarterly period ended June 30, 2000).

                              10.6(c)   Agreement and General Release, dated December 15, 2000,
                                        between the Company and Derek Ashley (Incorporated by
                                        reference to Exhibit No. 10.6(c)(ii) forming part of the
                                        Registrant's Report on Form 10-K (File No. 0-28208) filed
                                        with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, for the fiscal
                                        year ended December 31, 2000).

                              10.6(d)   Separation Agreement, effective December 18, 2000, between
                                        the Company and Scott Brownstein (Incorporated by reference
                                        to Exhibit No. 10.6(d)(iii) forming part of the Registrant's
                                        Report on Form 10-K (File No. 0-28208) filed with the
                                        Securities and Exchange Commission under the Securities
                                        Exchange Act of 1934, as amended, for the fiscal year ended
                                        December 31, 2000).

                              10.7      Form of Registration Rights Agreement (Incorporated by
                                        reference to Exhibit No. 10.7 forming part of Amendment No.
                                        3 to the Registrant's Registration Statement on Form S-1
                                        (File No. 333-00478) filed with the Securities and Exchange
                                        Commission under the Securities Act of 1933, as amended).

                              10.8      Applied Graphics Technologies, Inc., 1998 Incentive
                                        Compensation Plan, as Amended and Restated (Incorporated by
                                        reference to Exhibit No. 10.8 forming part of Registrant's
                                        Report on Form 10-Q (File No. 0-28208) filed with the
                                        Securities and Exchange Commission under the Securities
                                        Exchange Act of 1934, as amended, for the quarterly period
                                        ended June 30, 1999).

                              10.8(a)   Amendment No. 1, dated as of May 8, 2000, to the Applied
                                        Graphics Technologies, Inc., Amended and Restated 1998
                                        Incentive Compensation Plan (Incorporated by reference to
                                        Exhibit No. 10.8(a) forming part of the Registrant's Report
                                        on Form 10-Q (File No. 0-28208) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended June 30,
                                        2000).
</TABLE>


                                                 24
<PAGE>
<TABLE>
<S>                                     <C>
                              10.9(a)   Amended and Restated Credit Agreement, dated as of March 10,
                                        1999, among Applied Graphics Technologies, Inc., Other
                                        Institutional Lenders as Initial Lenders, and Fleet Bank,
                                        N.A. (Incorporated by reference to Exhibit No. 99.2 of the
                                        Registrant's Report on Form 8-K (File No. 0-28208) filed
                                        with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, on March 22,
                                        1999).

                              10.9(b)   Amendment No. 1, dated as of June 2, 1999, to the Amended
                                        and Restated Credit Agreement among Applied Graphics
                                        Technologies, Inc., Other Institutional Lenders as Initial
                                        Lenders, and Fleet Bank, N.A. (Incorporated by reference to
                                        Exhibit No. 10.9(b) forming part of Registrant's Report on
                                        Form 10-Q (File No. 0-28208) filed with the Securities and
                                        Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended June 30,
                                        1999).

                              10.9(c)   Amendment No. 2, dated July 28, 1999, to the Amended and
                                        Restated Credit Agreement among Applied Graphics
                                        Technologies, Inc., Other Institutional Lenders as Initial
                                        Lenders, and Fleet Bank, N.A. (Incorporated by reference to
                                        Exhibit No. 10.9(c) forming part of Registrant's Report on
                                        Form 10-Q (File No. 0-28208) filed with the Securities and
                                        Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended September
                                        30, 1999).

                              10.9(d)   Amendment No. 3, dated as of July 21, 2000, to the Amended
                                        and Restated Credit Agreement among Applied Graphics
                                        Technologies, Inc., Other Institutional Lenders as Initial
                                        Lenders, and Fleet Bank, N.A. (Incorporated by reference to
                                        Exhibit No. 10.9(d) forming part of the Registrant's Report
                                        on Form 10-Q (File No. 0-28208) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended June 30,
                                        2000).

                              10.9(e)   Amendment No. 4, dated as of August 11, 2000, to the Amended
                                        and Restated Credit Agreement among Applied Graphics
                                        Technologies, Inc., Other Institutional Lenders as Initial
                                        Lenders, and Fleet Bank, N.A. (Incorporated by reference to
                                        Exhibit No. 10.9(e) forming part of the Registrant's Report
                                        on Form 10-Q (File No. 0-28208) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended June 30,
                                        2000).

                              10.9(f)   Fifth Amendment, dated as of July 27, 2001, to the Amended
                                        and Restated Credit Agreement by and among Applied Graphics
                                        Technologies, Inc., the lenders party thereto, and Fleet
                                        National Bank, as agent. (Incorporated by reference to
                                        Exhibit No. 10.9(f) forming part of the Registrant's Report
                                        on Form 10-Q (File No. 1-16431) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the quarterly period ended June 30,
                                        2001).
</TABLE>


                                                 25
<PAGE>
<TABLE>
<S>                                     <C>
                              10.9(g)   Sixth Amendment, dated March 21, 2002, to the Amended and
                                        Restated Credit Agreement by and among Applied Graphics
                                        Technologies, Inc., the lenders party thereto, and Fleet
                                        National Bank, as agent. (Incorporated by reference to
                                        Exhibit No. 10.9(g) forming part of the Registrant's Report
                                        on Form 10-K (File No. 1-16431) filed with the Securities
                                        and Exchange Commission under the Securities Exchange Act of
                                        1934, as amended, for the fiscal year ended December 31,
                                        2001).

                              10.10     Consulting Agreement, dated as of March 1, 2001, by and
                                        between the Company and Knollwood Associates, LLC.
                                        (Incorporated by reference to Exhibit No. 10.10 forming part
                                        of the Registrant's Report on Form 10-Q (File No. 1-16431)
                                        filed with the Securities and Exchange Commission under the
                                        Securities Exchange Act of 1934, as amended, for the
                                        quarterly period ended March 31, 2001).

                              99.1      Certification pursuant to 18 U.S.C. Section 1350, as adopted
                                        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                              99.2      Certification pursuant to 18 U.S.C. Section 1350, as adopted
                                        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>


----------
(b)   The Registrant filed the following reports on Form 8-K during the quarter
      ended September 30, 2002:


      Current report on Form 8-K filed on July 5, 2002, announcing a tender
      offer to purchase the Company's outstanding 10% subordinated notes due
      2005.

      Current report on Form 8-K filed on August 1, 2002, announcing an
      extension of the tender offer to purchase the Company's outstanding 10%
      subordinated notes and the failure of the Company to make the semi-annual
      interest payment on the subordinated notes on its due date.

      Current report on Form 8-K filed on August 30, 2002, announcing the lapse
      of the tender offer to purchase the Company's outstanding 10% subordinated
      notes and the payment of the semi-annual interest on the subordinated
      notes within the allowable grace period.



                                       26
<PAGE>
                                   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.

                                             APPLIED GRAPHICS TECHNOLOGIES, INC.
                                                                    (Registrant)


                          By:                                   /s/ Fred Drasner

Date: November 14, 2002       __________________________________________________
                                                                    Fred Drasner
                               Chairman of the Board and Chief Executive Officer
                                                   (Principal Executive Officer)





                                                         /s/ Kenneth G. Torosian

Date: November 14, 2002        _________________________________________________
                                                             Kenneth G. Torosian
                                                          Senior Vice President,
                                          Chief Financial Officer, and Treasurer
                                                   (Principal Financial Officer)





                                       27
<PAGE>
                                  CERTIFICATION

I, Fred Drasner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Applied Graphics
Technologies, Inc.;


2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

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

/s/ Fred Drasner
---------------------------------------------------------
    Fred Drasner
    Chairman of the Board and Chief Executive Officer
    November 14, 2002



                                       28
<PAGE>
                                  CERTIFICATION

I, Kenneth G. Torosian, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Applied Graphics
Technologies, Inc.;


2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

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

/s/ Kenneth G. Torosian
-------------------------------------------------------
    Kenneth G. Torosian
    Senior Vice President, Chief Financial Officer, and Treasurer
    November 14, 2002



                                       29