UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 29, 2002

Commission file number 0-01097

THE STANDARD REGISTER COMPANY

(Exact name of Registrant as specified in its charter)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT

None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X     No    

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

The aggregate market value of all stock held by non-affiliates of the Registrant at March 10, 2003 was approximately $165,409,040, based on a closing sales price of $14.02 per share on March 10, 2003.

At March 10, 2003, the number of shares outstanding of the issuer's classes of common stock is as follows:

Part III incorporates information by reference from the Proxy Statement for Registrant's Annual Meeting of Shareholders to be held on April 16, 2003.

THE STANDARD REGISTER COMPANY

FORM 10-K

TABLE OF CONTENTS

Item                    Description

Page

Item  1.              Business

1

Item  2.              Properties

10

Item  3.              Legal Proceedings

11

Item  4.              Submission of Matters to a Vote of Security Holders

12

Item  5.              Market for Registrant’s Common Equity and Related

                                 Shareholder Matters

14

Item  6.              Selected Consolidated Financial Data

15

Item  7.              Management’s Discussion and Analysis of Financial Condition

                                and Results of Operations

16

Item  7a.            Qualitative and Quantitative Disclosures about Market Risk

49

Item  8.              Financial Statements and Supplementary Data

50

Item  9.              Changes In and Disagreements with Accountants on Accounting

                                and Financial Disclosure

97

Item 10.             Directors and Executive Officers of the Registrant

98

Item 11.             Executive Compensation

98

Item 12.             Security Ownership of Certain Beneficial Owners and Management

98

Item 13.             Certain Relationships and Related Transactions

99

Item 14.             Controls and Procedures

99

Item 15.             Exhibits, Financial Statement Schedules and Reports on Form 8-K

100

Signatures

101

Certifications

102-105

Index to Exhibits

106-107

Report of Independent Auditors

108

Schedule II – Valuation and Qualifying Accounts

109

PART I

Item 1. - BUSINESS

General Overview

The Standard Register Company (the “Company”), a publicly traded company (NYSE:SR), began operations in 1912 in Dayton, Ohio.  Throughout most of its history, the Company's core business has involved the design, production, management, and distribution of printed documents that have helped companies manage their business information and transact with their customers and suppliers. The Company is a leader in the financial services and healthcare markets, providing products and services to the 20 largest U.S. banks and approximately 100 of the top 150 integrated healthcare delivery networks.  The Company’s other markets include manufacturing, transportation, and business services.  The Company’s strategy is to provide a full spectrum of solutions – from print to digital – that help companies apply the appropriate technology to improve their business results.

In the first month of fiscal 1998, the Company acquired Uarco, Incorporated, a provider of document management services, increasing the size of the Company by 50%.  The Company paid $245 million in cash and financed the purchase by borrowing $230 million under a bank revolving credit agreement.  $60 million of goodwill was recognized.

On April 1, 1999, the Company sold its promotional direct mail printing operation, Communicolor, to R. R. Donnelley & Sons Company for $98 million, recording an after-tax gain of $16 million.  This gain, net of operating losses incurred by this division prior to the sale, increased the Company’s net income in 1999 by $15 million or $0.54 per diluted share.

On July 2, 2002, the Company acquired all of the outstanding stock of InSystems Technologies, Inc. (InSystems), (now known as InSystems Corporation) a privately owned company based in Toronto, Canada.   InSystems’ extended relationship management and document automation solutions are intended to complement the Company’s existing e-business, document management and fulfillment services offerings.  InSystems is a leading provider of e-business solutions for financial services organizations.  With InSystems’ strong position in insurance and the Company’s significant presence in banking, healthcare and other markets, the Company expects the acquisition to enhance its long-term growth while further positioning the Company as a leading information solutions provider.

The purchase price for the acquisition, net of cash received, totaled $89 million.  In conjunction with the acquisition of InSystems, the Company recorded approximately $47 million of goodwill, $17 million of purchased intangibles, and $21 million of capitalized software development costs.

On July 12, 2002, the Company acquired selected assets from PlanetPrint, a business services company headquartered in Minneapolis, Minnesota.  The Company paid $9 million for a digital print-on-demand operation in Dallas, Texas, and software development and consulting operations in Minneapolis, Minnesota.  In conjunction with the acquisition, the Company recorded approximately $7 million of goodwill and  $2 million of capitalized software development costs. Concurrently, the Company also acquired selected intellectual assets of PathForward for $1 million, which was recorded as an intangible asset.  This acquisition is included in the Document Management strategic business unit.

2000 Restructuring

In order to reduce excess production capacity and decrease cost, the Company eliminated 364 jobs and closed four manufacturing facilities during 2000, including its Dayton, Ohio equipment plant and printing plants in Toccoa, Georgia; Corning, Iowa; and Dayton, Ohio.  The Company also offered an early retirement plan to select employees in its Dayton, Ohio headquarters.  These actions produced pretax restructuring and impairment charges of $18 million and $7 million, respectively.

Renewal Plan

In July 2000, the Company began work on a restructuring and renewal plan (the “Renewal Plan”) designed to recover the market value of the Company and establish a solid platform for long-term earnings growth.  Late in that year, management concluded that as much as 20% of its customer accounts did not return sufficient margin to justify the levels of investment and overhead required to support them. The effect of this low margin business was to drive the Company’s overall return on capital to a level below its cost of capital.  

A second conclusion was that the Company was becoming increasingly over invested in markets with below-average growth prospects.  Further, this tendency was being reinforced by a functional organizational structure that did not nurture those elements of the business that had significant growth potential.  

Finally, it was apparent that the Company had many strong attributes, including leadership positions in the hospital and financial services markets, a track record of providing innovative document and work flow solutions valued by its customers, strong cash flow from a diversified base of renewable business, and a very strong financial condition.  

In the fourth quarter 2000, as a by-product of work done to develop the Renewal Plan, the Company recognized impairment of long-term assets totaling $74 million.  The asset impairment included $48 million of goodwill originated in the 1998 acquisition of Uarco, $18 million of idled production equipment, $6 million of software no longer utilized, and a $2 million write-down in an investment in which the Company owned an approximate 10% interest.  

In January 2001, the Company announced the Renewal Plan comprised of four components:  restructuring, reorganization, performance improvement, and early stage investments for future growth.  Management’s judgment was that all four of these elements were critical to renewing the Company’s value.  Most of the emphasis in 2001 was directed to restructuring and reorganization.  However, several key investments were also initiated in the year to lay the groundwork for operational improvement and growth in 2002 and beyond.

2001 Restructuring

During the latter part of 2000, the Company analyzed each of its product lines and every customer with over $5 million of annual revenue to determine the current level of profitability.  In the restructuring component, management decided to eliminate that portion of its business that likely could not be improved to provide an acceptable return, representing an estimated $225 to $250 million of the Company’s $1.3 billion in annual revenue.  The annual revenue base at the end of 2001 was approximately $1.1 billion.  

The restructuring program also included consolidation of sales region offices, manufacturing plants and warehouses.  In conjunction with these actions, the Company targeted a $125 million reduction in annualized costs, including manufacturing fixed costs, selling, general, and administrative expense, and depreciation.  The objective was for the annualized value of the cost reductions to exceed the annualized loss of contribution margin on the eliminated business.  

The Company slightly exceeded its goal of reducing annualized fixed costs by $125 million.  During the restructuring, 25 plants and print centers were closed.  Some production capacity was relocated to other locations, but overall capacity was reduced by about 30%, in line with the Renewal Plan.  In addition, 29 warehouses were closed and their operations were consolidated into other locations.  The savings resulted from the closings and consolidations and a corresponding decrease in employment of 2,330 persons, equivalent to 29% of the workforce.  

In the first quarter of 2001, the Company recorded expenses for restructuring and asset impairment of $70 million and $42 million, respectively.  Restructuring costs were primarily for severance and employer related costs, contract exit and termination costs, inventory and other asset write-downs, and other costs directly related to the restructuring effort.  The impairment charges resulted from facilities and equipment to be removed from operation.  In addition to this first quarter provision, the Company also recorded net restructuring expenses totaling $8 million for the second, third, and fourth quarters for items which could not be accrued at the time the restructuring was announced, such as the relocation of equipment and personnel during those subsequent periods.

2001 Reorganization

An important element of the Renewal Plan was the change from a single functional organizational structure to strategic business units (“SBUs”) with distinct profiles and missions primarily organized along product lines: Document Management, Fulfillment Services, Label Solutions, and SMARTworks, LLC.  In order to promote focus, accountability, and growth, each SBU was equipped with its own marketing, sales, manufacturing, and line support functions.  The Company recruited experienced executives to lead each SBU.

With the acquisition in 2002 of InSystems, the Company operated in five business segments that are aligned with the SBUs.  Information concerning the revenues, operating profit, identifiable assets, and capital expenditures of each business segment for years 2000 through 2002 appears under Note 19 “Segment Reporting” in the Notes to Consolidated Financial Statements included at Item 8 herein.

DOCUMENT MANAGEMENT

Document Management provides custom printed documents, integrated systems, consulting services, and distribution services that help customers manage their business information and transact with their customers and suppliers.   This segment accounted for approximately 76%, 78%, and 80% of the Company’s consolidated revenues in 2002, 2001, and 2000, respectively. It primarily serves large and middle-market companies in the healthcare, financial services, and manufacturing markets. The customer base includes the top 20 banks in the United States and approximately 100 of the largest 150 integrated healthcare delivery networks.  

Document Management provides a wide array of products, services, and integrated solutions, including the following:

•

Document design

•

Custom printed business documents

•

Secure documents (checks, licenses, titles, etc.)

•

Print-on-demand services

•

Commercial printing and binding

•

Document-handling systems

•

Distributed printers and software

•

Document security and workflow consulting services

•

Document warehousing and distribution services

Market Trends - Excess production capacity and stiff price competition are prevalent in this segment, as the industry demand for traditional custom printed business documents has recently been flat or in modest decline as a result of a relatively weak economy and inroads made by alternative technologies.  Notwithstanding these challenges, the Company has an opportunity to increase its market share through the effective execution of its sales strategies.  It also stands to gain share by providing an increasing array of application software and professional services that help its customers improve their business processes.  Market trends include:

•

Customers are increasingly viewing documents that touch customers as strategic to their business.

•

Customers are migrating to single source suppliers

•

Paper-based documents and workflow are increasingly being automated and migrated to digital form

•

Industry consolidation is creating larger printing companies

Competition – Principal competitors include Moore Corporation Limited, Wallace Computer Services, and Relizon, a privately held company spun off from Reynolds and Reynolds.  These companies offer a similar set of products and services.  In addition, the Company competes against local and regional brokers and distributors.  The Company believes it possesses several strategic competitive advantages including: recognized leadership in secure documents (particularly in the healthcare and financial services markets), knowledge and experience in document workflow management, national reputation and geographic coverage, and a complete document line.

Backlog – Document Management’s backlog of custom printing orders at February 21, 2003 was approximately $27.8 million compared to $38.3 million at February 24, 2002.  All orders are expected to be filled within the ensuing year.

FULFILLMENT SERVICES

Fulfillment Services helps its clients communicate effectively with their customers, providing information and marketing materials customized for each recipient.  This segment accounted for approximately 11%, 9%, and 7% of the Company’s consolidated revenues in 2002, 2001, and 2000, respectively.  It focuses on outsourcing services that primarily serve large and mid-market companies in the financial services, healthcare, and membership industries. The types of products and services offered include:

•

Billing and statement solutions

•

Electronic/Internet document presentment

•

One-to-one marketing communications (variable print-on-demand)

•

CD-ROM archiving

•

Customer information kits (cards, policies, statements, manuals, etc.)

•

Profile-based cross-selling programs

This segment provides customers with complete fulfillment services, including programming, design, printing, imaging and distribution of documents – in paper or electronic form.

Fulfillment consists of a series of steps.  A document is designed and programming sets up the format and the data from the host location.  The document is printed and then put on an electronic web site, processed through finishing equipment, or kitted into a customized package and mailed to the end consumer.  The creation of packages requires special inserting equipment or manual labor to put together the information kits.  Most companies outsource this activity to have a firm with fulfillment as a core competency handle the technology, information security, labor, storage, and distribution for them.

Market Trends - The overall market for document outsourcing, which includes fulfillment services, is expected to increase as Companies increasingly seek outside help to reach their customers with very targeted and customized promotions.  The ability to print and distribute these communications on demand will also fuel growth in this area.  Statement production and kitting represents a large and rapidly growing market, with approximately a dozen companies with national coverage competing based on capabilities and price.  Market trends include:

•

Document outsourcing has typically involved many manual processes, but is utilizing more technology as it matures

•

Consumers and businesses increasingly want statements and billing on the Internet – electronic bill presentment and payment

Competition – Principal competitors include Moore Corporation Limited, Wallace Computer Services, ADP Investor Communications Services, Vestcom, Regulus, and Lason, Inc., among others. Some of these companies are much smaller or are regional.  Others are quite large and concentrate on specific market segments.

Backlog – Fulfillment Services’ backlog of orders at February 21, 2003 was approximately $1.9 million compared to $4.1 million at February 24, 2002.  All orders are expected to be filled within the ensuing year.

LABEL SOLUTIONS

Label Solutions offers identification solutions designed to improve customers’ operational performance by reducing cycle time, error rate, and processing costs.  Applications include inventory control, product identification, distribution, regulatory compliance, healthcare, and other applications that require accuracy and security.  This segment accounted for approximately 12%, 13%, and 13% of the Company’s consolidated revenues in 2002, 2001, and 2000, respectively.  One of the leading producers of custom pressure-sensitive labels in the United

States, Label Solutions produces flexographic, screen and offset printed labels, automatic identification and data collections systems (bar coding), compliance labels, and variable image products that use the latest laser and thermal transfer technology.  Applications are sold primarily in the healthcare, manufacturing, and distribution/logistics markets.  The types of products and services offered include:

•

Custom and stock label products

•

Form/label combinations

•

Automatic identification and data-collection systems

•

Software and system integration

•

Complete packaged solutions for distribution warehousing and manufacturing

Market Trends – Driven by an increase in both consumer and industrial end-use applications, the market for pressure sensitive labels in North America is projected to exhibit steady growth.  The need for operational efficiency is likely to drive consolidation in the industry and companies in the industry will increasingly incorporate technologies such as bar-code technology, Internet-based commerce, digital presses, and environmentally friendly adhesives and inks.  All of these factors will make the industry more efficient, allowing it to compete for new markets with alternative technologies such as shrink sleeve and in mold label technology. (Source: Tag and Labels Manufacturers Institute.)  Market trends include:

•

Increasing demands for Radio Frequency Identification, linerless, laser, thermal, and on-press adhesives

•

Media recommendations by printer manufacturers influencing designs

•

One-stop shopping – customers buying labels as part of a package with printers, software, and services

•

Increasing use of variable data by the customer

•

Growing use of  removable adhesive

•

Electronic commerce driving an increase in shipping-label demand as more businesses and consumers by goods on line

Competition – Principal competitors include Moore Corporation Limited, Wallace Computer Services, Brady Corporation, and Avery Dennison.  The Company also competes against regional and local manufacturers.

Backlog – Label Solutions’ backlog of custom printing orders at February 21, 2003 was approximately $7.9 million compared to $7.4 million at February 24, 2002.  All orders are expected to be filled within the ensuing year.

SMARTworks, LLC

SMARTworks, LLC (“SMARTworks”) was formed July 1, 2000, as a wholly owned subsidiary of the Company.  This segment’s Web-based applications enable organizations to reduce the time, complexity and costs of designing, customizing, procuring and delivering printed information.  This segment serves other business segments of the Company, principally Document Management and Fulfillment Services.  Currently, 80,000 users at approximately 1,000 companies use SMARTworks.  SMARTworks operates as an Application Service Provider (ASP) of its SMARTworks® Web application.  This segment offers:

•

Supplier-independent platform

•

Web-based, customized, collateral-design tools

•

Print management tools

•

E-procurement and e-catalog solutions

•

Usage/order tracking systems

•

Solution-integration services

•

Custom solution development

Companies typically establish and maintain relationships with many vendors to manage their purchases of printed products.  Without a tool to manage the process, businesses experience 20-40 percent inefficiency arising from waste, redundancy and non-contract purchases.  SMARTworks furnishes an integrated platform that manages print and ensures contract compliance.

Users select, order and customize materials via the SMARTworks Web interface – items such as personalized collateral, business cards and letterhead – all while working with a company’s preferred printers and suppliers.  SMARTworks’ open platform provides customers with maximum flexibility in adapting to or integrating with various other technologies and software.  In fact, many of SMARTworks customers also use the application to order office supplies, office equipment and temporary services.

With SMARTworks, authorized users can manage users and groups, inquire about product activity, enter production orders and generate reports on usage trends, dollar expenditures, order histories, inventory information and low stock notices.  Users can also rely on the application to manage daily work in process and to analyze documents for ongoing process improvement recommendations.

Market Trends –Market trends within the emerging Internet business include print or print brokers who use the Internet as their primary channel and bill the customer for product purchased and Internet services that automate or streamline processes between customers and suppliers for a fee.

Competition – SMARTworks competes with traditional print providers with Web applications, a small number of ASPs and software providers.  Operating as an ASP of the SMARTworks Web application, this segment offers customers a unique service.

INSYSTEMS CORPORATION (FORMERLY KNOWN AS INSYSTEMS TECHNOLOGIES, INC.)

Acquired by the Company in July 2002, InSystems is a leading provider of document automation solutions and insurance portal software.   This segment accounted for 1% of the Company’s consolidated revenues in 2002.   Headquartered in Toronto, Ontario, Canada, it primarily serves the North American insurance industry, including over 50 of the largest insurance companies in that market.   The types of products and solutions offered include:

•

Calligo

InSystems Calligo™ is an integrated document automation suite for organizations that need to create, manage and distribute highly personalized, error-free documents in a controlled and distributed environment.

•

Tracker

Using InSystems Tracker™, insurance organizations can eliminate product development bottlenecks in high volume, multi-user environments and significantly reduce the percentage of Department of Insurance (DOI) filing objections, enabling an increased number of filings per year.

•

eXterity

InSystems eXterity™ is insurance portal software combining a portal server with a suite of insurance application modules to create and extend insurance portals such as customer self-service and agent-broker portals.

•

Services

InSystems Professional Services Group provides a broad range of services to assist in implementation and deployment of its software solutions. Service categories include Product-specific Services, Integration Services and Internet Services.

Market Trends – InSystems focuses on the financial services industry.  Industry analysts predict increased information technology spending for financial services companies in general and specifically for insurance, bringing insurance spending alongside other financial services, with more than 8% of revenue being spent on information technology projects.  Market trends include:

•

The majority of insurers will soon offer agent and policy-holder web portals; this market for insurance portal software indicates significant opportunity for InSystems

•

Convergence of technologies around Enterprise Content Management (ECM) in a new approach for managing unstructured content; there exists an opportunity to add value to an ECM platform, with InSystems becoming a provider of best in class platform extensions, offering insurance-specific functionality

Competition – InSystems’ competitors include insurance company in-house development and other vendors of document automation/document management solutions, such as Docucorp and Document Sciences.

Backlog – InSystems’ backlog of professional services and software maintenance contracted for but not yet performed as of February 21, 2003 is approximately $12.5 million.  Of this, approximately $2.9 million is not expected to be realized within the ensuing year.

Marketing and Distribution

Document Management has direct sales teams that are assigned to larger customers.  Sales support is assigned to the team or is maintained in sales support centers, based on the size of the account.  Fulfillment Services and Label Solutions each have their own dedicated sales force.  

Their products and services can also be sold by Document Management’s sales force as part of a large account total solution.  

Documents are printed at 38 geographically disbursed locations in the U.S.  Documents are shipped directly to customers or are stored by the Company in warehouses for subsequent on-demand delivery.  The management of document inventories to provide just-in-time delivery is a major element of customer service.

During 2001, the Company launched Customer Relationship Management systems to improve sales productivity by automating repetitive and administrative tasks, reducing selling costs, and enhancing account management.  The Company plans to continue to invest in strategic marketing tools to help in its one-to-one marketing and e-business efforts.

Raw Materials

The Company purchases raw paper in a wide variety of weights, grades, and colors from various paper mills in the United States and Canada.  Carbonless paper, inks, and printing supplies are available nationally and are purchased from leading vendors.  Continuing efforts are made to assure adequate supplies to meet present and future sales objectives.  The Company fills its needs by ordering from suppliers of long-standing relationship.

Research and Development

During 2002, the Company had research and development expense of $17.9 million compared to $14.4 and $10.3 million for 2001 and 2000, respectively.  Research and development spending for 2002 primarily focused on two areas: the design and development of new products, services, software and technologies, and process improvement activities.  The design and development of new products and technologies also includes equipment design and development used in production as well as the integration of new technologies available in the marketplace.

Intellectual Property

The Company has many patents related to documents, equipment, labels, and security products that provide a competitive advantage or which generate license income.  None of these, individually, have a material effect upon the business.

Seasonal

No material portion of the Company's business could be considered seasonal.

Customers

The business of the Company taken as a whole, or by individual business segment, is not dependent upon any single customer or a few customers.  No single customer accounts for 10% or more of total consolidated revenue.

Governmental and Environmental Regulation

The Company has no significant exposure with regard to the renegotiation or termination of government contracts.  Expenditures made by the Company in order to comply with federal, state, or local provisions of environmental protection have not had a material effect upon the Company's capital expenditures, earnings, or competitive position.

Employees

At December 29, 2002, the Company had 5,681 employees compared to 5,692 and 8,022 at December 30, 2001 and December 31, 2000, respectively.

International Operations

No material portion of the Company's revenues or net income is derived from sales to foreign customers.  The Company does offer technical assistance to foreign business forms manufacturers and receives royalties for these services.  

Internet Access

The Company maintains an Internet website which can be found at www.standardregister.com.  The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports are available, without charge, on the Company’s website as soon as reasonably practicable after it files such reports with the SEC.

Item 2 – PROPERTIES  

The Company’s corporate offices are located in Dayton, Ohio.  SMARTworks, LLC occupies facilities located in Miamisburg, Ohio and InSystems occupies facilities located in Toronto, Ontario, Canada.  The following table summarizes the Company’s major production facilities:

Of these facilities, Sacramento, California; Tampa, Florida; and Tolland, Connecticut are leased.

In addition, the Company operates 22 smaller Stanfast Print Centers.  In most cases these facilities are located in major metropolitan locations in the U.S. and are leased.

The Company's current capacity, augmented by modest capital additions, is expected to be sufficient to meet production requirements for the foreseeable future.  Utilization by press varies significantly, averaging an estimated 55% overall. The Company believes its production facilities are suitable and adequate to meet future production needs.

Item 3 - LEGAL PROCEEDINGS

(a.)

No material claims or litigation are pending against the Company.

(b.)

The Company has been named as a potentially responsible party by the U.S. Environmental Protection Agency or has received a similar designation by state environmental authorities in several situations.  None of these matters have reached the stage where a significant liability has been assessed against the Company.  The Company has evaluated each of these matters and believes that none of them individually, nor all of them in the aggregate, would give rise to a material charge to earnings or a material amount of capital expenditures.  This assessment is notwithstanding the ability of the Company to recover on existing insurance policies or from other parties that the Company believes would be held as joint and several obligors under any such liabilities.  However, since these matters are in various stages of process by the relevant environmental authorities, future developments could alter these conclusions.  However, management does not now believe that there is a likelihood of a material adverse effect on the financial condition of the Company in these circumstances.

Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to shareholders during the fourth quarter of the fiscal year.

Executive Officers of the Registrant

There are no family relationships among any of the officers.  Officers are elected at the annual organizational meeting of the Board of Directors, which is held immediately after the annual meeting of shareholders, to serve at the pleasure of the Board.  

PART II

Item 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a.)

The common stock of the Registrant is traded on the New York Stock Exchange National Market under the symbol SR.  The range of high and low market prices and dividends paid per share for each quarterly period during the two most recent fiscal years are presented below.

(b.)

The number of shareholders of record of the Company's common stock, including restricted shares, as of March 10, 2003 was 2,951, excluding individual holders whose shares are held by nominees.  There are also 16 holders of Class A stock.

(c.)

Dividend policy - The Company expects to continue paying quarterly cash dividends in the future, however, the amounts paid will be dependent upon earnings and the future financial condition of the Company.  No events have occurred which would indicate a curtailment of the payment of dividends.

Information regarding the Company’s equity compensation plans appears in Item 12 of this Form 10-K and is incorporated by reference into this section of Item 5.

Item 6 - SELECTED FINANCIAL DATA

Item 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement  

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995.  Because such statements deal with future events, they are subject to various risks and uncertainties and actual results for fiscal year 2003 and beyond could differ materially from the Company’s current expectations.  Forward-looking statements are identified by words such as “anticipates,” “projects,” “expects,” “plans,” “intends,” “believes,” “estimates,” “targets,” and other similar expressions that indicate trends and future events.  Factors that could cause the Company’s results to differ materially from those expressed in forward-looking statements include, without limitation, variation in demand and acceptance of the Company’s products and services, the frequency, magnitude and timing of paper and other raw-material-price changes, general business and economic conditions beyond the Company’s control, timing of the completion and integration of acquisitions, the consequences of competitive factors in the marketplace, cost-containment strategies, and the Company’s success in attracting and retaining key personnel.  The Company undertakes no obligation to update forward-looking statements as a result of new information since these statements may no longer be accurate or timely.   

CRITICAL ACCOUNTING POLICIES

In preparing its financial statements and accounting for the underlying transactions and balances, the Company has applied the accounting policies as disclosed in the Notes to the Consolidated Financial Statements. Preparation of the Company’s financial statements requires Company management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

The Company considers the policies discussed below as critical to an understanding of its financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. The impact and any associated risks related to these policies on the Company’s business operations are discussed throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect reported and expected financial results. For a detailed discussion of the application of these and other accounting policies, see “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements.  Management has discussed the development and selection of the critical accounting policies and the related disclosure included herein with the Audit Committee of the Board of Directors.

Pension and Postretirement Healthcare Benefit Plan Assumptions

The Company has defined-benefit pension plans covering substantially all of its employees. The Company also has a postretirement benefit plan that provides certain healthcare benefits for eligible retired employees.  

The Company accounts for its pension and postretirement healthcare benefit plans according to Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than

Pensions.” These statements require the use of actuarial models that use an attribution approach that allocates the cost of an employee’s benefit to individual periods of service.  The accounting under SFAS No. 87 and SFAS No. 106 therefore requires the Company to recognize cost before the payment of benefits.  In order to satisfy these requirements, certain explicit assumptions must be made concerning future events that will determine the amount and timing of the benefit payments. Such assumptions include the discount rate, the expected long-term rate of return on plan assets, the rate of future compensation increases, and the healthcare cost trend rate.  In addition, the actuarial calculation includes subjective factors such as withdrawal and mortality rates to estimate the projected benefit obligation. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may result in a significant impact on the amount of pension or postretirement benefit expense recorded in future periods.

One of the principal components of calculating the projected benefit obligation, the accumulated benefit obligation (ABO), and certain components of pension and postretirement healthcare benefit expense is the assumed discount rate.  The discount rate is the assumed rate at which the pension and postretirement healthcare benefits could be effectively settled in the future.  The Company reviews the discount rate assumptions used to account for pension and postretirement healthcare benefit obligations each fiscal year-end.  In determining the rates to use, management evaluates available information about rates implicit in current prices of annuity contracts, as well as rates of return on high-quality fixed-income investments that could be used to effect settlement of the obligations.  

One of the principal components of the net periodic pension cost calculation is the expected long-term rate of return on plan assets.  The required use of an expected long-term rate of return on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year.  Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees.  The Company’s qualified defined benefit pension plan’s assets are invested in a broadly diversified portfolio consisting primarily of publicly traded common stocks and fixed-income securities. The Company uses long-term historical actual return experience with consideration to the expected investment mix of the plan’s assets, and future estimates of long-term investment returns to develop its expected rate of return assumption used in the net periodic pension cost calculation.  Differences between actual and expected returns are recognized in the net periodic pension cost calculation over five years using a five-year, market-related asset value method of amortization.

The Company’s non-qualified pension and postretirement healthcare benefit plans are unfunded plans and have no plan assets.  Therefore the expected long-term rate of return on plan assets is not a factor in accounting for these benefit plans.

The rate of future anticipated compensation increases is another significant assumption used in the actuarial model for pension accounting and is determined by the Company based upon its long-term plans for such increases.

For postretirement healthcare benefit accounting, the Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates used for the postretirement healthcare benefit obligation and expense.  A one percent increase in the assumed healthcare cost trend rate would result in a $0.3 million increase in the interest component of postretirement healthcare expense for 2002 and a $6 million increase in the postretirement healthcare benefit obligation at December 29, 2002. Similarly, a one percent decrease would result in a $0.3 million decrease in the interest component of 2002 postretirement healthcare expense and a $6 million decrease in the postretirement healthcare benefit obligation at December 29, 2002.

As a result of evaluating the information referred to above, the Company lowered the discount rate, expected return on plan assets, and salary increase assumptions and increased the healthcare cost trend rates that were used to calculate its pension and postretirement healthcare benefit obligations at December 29, 2002 to better reflect current U.S. economic conditions.  The decrease in the expected long-term rate of return takes into account recent market performance and the Company’s expectations about future long-term market returns.  The following table summarizes the rates used in 2002 and 2001 to calculate the pension and postretirement healthcare benefit obligation.

These assumption changes increased the pension and postretirement healthcare obligations recorded on the Company’s Consolidated Balance Sheet by $6 million and $7 million, respectively.  The assumption changes also increased 2002 pension and postretirement healthcare benefit cost by $3 million and $0.3 million, respectively.

SFAS No. 87 requires the recognition of a “minimum pension liability” if, as of a given measurement date, the fair value of a plan’s assets is less than its ABO.  The decline in recent years of the U.S. equity markets has significantly reduced the value of the Company’s qualified pension plan assets.  Based upon the Company’s year-end actuarial valuation, the fair value of the assets dropped below the ABO and accordingly the Company recorded a pension liability equal to the excess of the ABO over plan assets.  This adjustment, net of deferred income taxes, was a direct charge to shareholders’ equity of $115 million.

The long-term rate of return on plan assets that the Company expects to use to determine the fiscal 2003 net periodic pension cost is 9.0% which would increase expense by $2 million.  This, plus the amortization of past market losses and other probable changes in actuarial assumptions, is expected to increase 2003 pension cost by approximately $12 million over the 2002 amount.  The Company does not expect to have a minimum funding requirement in 2003, although it may elect to make a contribution.  The Company made a voluntary contribution of $17 million in the fourth quarter of 2002.

Restructuring

During 2000 and 2001, the Company was engaged in significant restructuring actions that required management to develop formalized plans related to the restructuring activities.  The development of these plans required the use of significant estimates related to future cash flows and estimated residual value of long-lived assets as well as the recoverability of certain inventories.  In addition, management was required to estimate amounts for severance and other employer related costs and lease cancellations and other contract exit and termination costs.  Given the significance and timing of the restructuring actions, the process was complex and involved periodic reassessments of the original estimates.  Revisions to previously recorded estimates are reported as restructuring actions are completed.

Impairment of Long-Lived Assets and Investments

The Company assesses the impairment of investments and long-lived assets, which includes intangible assets, goodwill, and plant and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  

Factors considered important which could trigger an impairment review include but are not limited to the following:

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Sustained underperformance relative to expected historical or projected future operating results

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Changes in the manner of use of the assets, their physical condition or the strategy for the Company’s overall business

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Negative industry or economic trends

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Declines in stock price of an investment for a sustained period

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The Company’s market capitalization relative to net book value

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A more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit, or a long-lived asset will be sold or otherwise disposed of, significantly before the end of its previously estimated useful life

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A significant decrease in the market price of a long-lived asset  

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A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator

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An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset  

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A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset  

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Unanticipated competition

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A loss of key personnel

Long-Lived Assets - The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of the asset to quoted market prices, if available, or undiscounted expected future cash flows to be generated by the assets.  If such assets are considered to be impaired, the impairment amount is calculated using a fair-value-based test that compares the fair value of the asset to its carrying value. Fair values are typically calculated using discounted expected future cash flows, using a risk-adjusted discount rate.  Assets held for sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.

In performing tests of impairment, the Company estimates future cash flows that are expected to result from the use of the asset and its eventual disposition.  These estimates of future cash flows, based on reasonable and supportable assumptions and projections, require significant management judgment.  The time periods for estimating future cash flows is often lengthy, which increases the sensitivity to the assumptions made.  Depending on the assumptions and estimates used, the estimated future cash flows used for impairment testing could vary considerably.  

The Company cannot predict the occurrence of future impairment triggering events nor the impact such events might have on its reported asset values.  Such events may include strategic decisions made in response to the economic conditions relative to operations and the impact of the economic environment on its customer base.

Investments - The Company classifies investments in marketable securities at the time of purchase and reevaluates such classification at each balance sheet date.  Securities are classified as trading when held for short-term periods in anticipation of market gains and are reported at fair market value, with unrealized gains and losses included in income.  Available-for-sale securities are recorded at fair market value, with unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity.  Investment securities are regularly reviewed for impairment based on the criteria that include the extent to which cost exceeds market value, the duration of the market decline, the financial condition and near-term prospects for the issuer.  If an impairment review indicates that an unrealized loss is other than temporary, the Company is required to recognize the loss in current earnings.  Realized gains and losses are accounted for on the specific identification method.  

Determining whether a decline in the fair value of an investment is other than temporary requires significant management judgment concerning the financial condition and near-term prospects for the issuer, as well as overall economic conditions.  Actual results could differ from assumptions made by management.  As discussed under “Results of Operations,” the Company recognized in current earnings a $4 million unrealized loss on a decline in the value of an investment in Printcafe Software Inc. (Printcafe) that the Company believed was other than temporary.  If the assumption made by management related to the potential sale of Printcafe does not occur, or if the tender offer is at a different price, it is possible that the unrealized loss recognized could be too low or too high.

Business Combinations

The Company is required to allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed, as well as in-process research and development, based on their estimated fair values.  The Company engaged an independent third-party to complete a valuation to assist in determining the fair value of assets acquired and liabilities assumed for its two acquisitions completed during 2002.  Such valuations require management to make significant estimates and assumptions, especially related to intangible assets.  The significant purchased intangible assets recorded by the Company for the 2002 acquisitions and the fair value assigned to them are discussed in detail under “Acquisitions.”

Critical estimates made in valuing certain intangible assets include but are not limited to: future expected cash flows from customer contracts; acquired developed technologies and patents; assumptions used in determining the useful life; and discount rates.  Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

RESTATEMENT  

In July 2001, the Company identified and reported a charge to 2001 results for accounting errors and other adjustments, primarily related to the installation of a new cost system.  A portion of this charge related to prior years’ activities.  The Company has now restated its 2001 and 2000 results to show the effect in each of those years.  The restatement reduces the net loss in 2001 by $6 million and increases the net loss in 2000 by $6 million.  A balance of $0.4 million relates to prior years.  The restatement, which is limited to the two-year period, does not impact reported year-end 2001 shareholders’ equity.  These errors and adjustments were previously disclosed in the Company’s Form 10-Q for the period ended July 1, 2001 and subsequent filings.

A cutoff error at the end of fiscal 2000 resulted in a $9 million understatement of revenue for 2000 that was originally recorded in 2001.  

The finished goods inventory was reduced by a total of $30 million in fiscal 2001 as a result of the accumulation of many individually small transactional errors that were traced as far back as January 1998 when a new cost system was installed.  Of this amount, $8 million was originally accrued as part of the first quarter 2001 restructuring and the remaining $22 million was recorded in the 2001 second quarter. The inventory adjustments were $3 million and $19 million for years 2001 and 2000, respectively; the balance related to prior years.

In 2001, the Company changed an accounting procedure prospectively to provide for the proper matching of cost to revenue for warehousing services that increased inventory by $8 million in 2001. Previously, cost was reported up front, as incurred, instead of being matched to revenue as the stored product was shipped from the warehouse and invoiced.  The prospectively recognized adjustment related to years prior to 2000 and accordingly, an adjustment was made to increase beginning fiscal 2000 retained earnings.  

The Company also adjusted previously reported amounts for certain reclassifications between restructuring charges and asset impairments to conform to the current-year presentation and to reclassify inventory write-offs from restructuring expense to cost of sales.

The following tables summarize the effects of the restatement and reclassifications on the Company’s Consolidated Statement of Income for fiscal years 2001 and 2000 (in millions, except for per share amounts).

The Company has also revised its previously announced 2002 financial results included in its earnings release dated February 7, 2003.  As described more fully in Note 3, the Company acquired InSystems Technologies, Inc. in July 2002.  As part of the purchase price allocation, the Company recorded $17 million of purchased intangibles of which $16 million was assigned to service relationships that the Company originally determined had an indefinite life and were not subject to amortization.  After discussions with the Securities and Exchange Commission, it was subsequently determined that the service relationships should be amortized over a twelve-year life.  Accordingly, the Company increased amortization expense for 2002 by $0.7 million, before taxes.  The effect of this change is a reduction to previously announced net income of $0.4 million, or $0.02 per share, on a rounded basis.

SPECIAL ITEMS

Year 2000 Restructuring Costs

During 2000, in order to reduce excess production capacity and decrease cost, the Company announced the closure of four production facilities and the elimination of 364 jobs.  Except for eight associates that were terminated in 2001, all positions were eliminated in 2000.

Restructuring expense totaled $18 million for the year, including severance and employer related costs, exit and termination costs, and inventory write-downs, of which $4 million was recorded in cost of sales.  In 2001 the Company reversed $2 million of exit and termination costs primarily related to equipment removal costs that were lower than estimated. At December 30, 2001, this program was substantially completed and the remaining liability was for a non-cancelable lease obligation through 2003. The table below presents the components of expense and a summary of the 2000 restructuring accrual activity through 2002 year-end.

Year 2000 Asset Impairment

In conjunction with the closure of the production facilities, the Company recorded asset impairment charges of $2 million and $5 million for the write-down of buildings and production equipment, respectively.  As of December 29, 2002, the Company had disposed of the buildings and production equipment included in these charges.  Also, in the fourth quarter of 2000, the Company completed a review of its balance sheet and determined that the carrying values of certain assets were not recoverable.  As a result of this review, the Company recorded asset impairment charges totaling $74 million, including a $48 million write-off of goodwill, a $6 million write-off of unamortized software development costs, a $18 million write-down of machinery and equipment, and a $2 million write-down of an investment.

The write-off of goodwill was based on the market value method of assessing enterprise level goodwill for impairment. The impairment of goodwill resulted from the continued decline during 1999 and 2000 of the market price of the Company’s stock. The software cost write-off related to license fees and other costs incurred for projects that were subsequently abandoned. The machinery and equipment write-downs related to idle manufacturing assets that had no future value and were subsequently disposed.

The Company reviews investments for impairment based on criteria that include the extent to which cost exceeds market value, the financial condition, and near-term prospects for the issuer.  The $2 million investment write-down related to an other-than-temporary decline in the value of an investment in a non-publicly traded company that was accounted for under the cost method in which the Company had a 10% interest.  The investee was being actively marketed and was in negotiations with a third party.  The offer was expected to be in the range of three times revenue, or $36 million.  Based on the Company’s ownership position, the fair value of the Company’s investment would be $4 million, resulting in an unrealized loss of $2 million.  Based on events relating to the potential sale of the investee, the Company determined that the decline in fair value was other-than-temporary.

The Renewal Plan

In July 2000, the Company began work on a restructuring and renewal plan (Renewal Plan) designed to recover the market value of the Company and establish a solid platform for long-term earnings growth.  Late in that year, management concluded that as much as 20% of its customer accounts did not return sufficient margin to justify the levels of investment and overhead required to support them.  The effect of this low-margin business was to drive the Company’s overall return on capital to a level below its cost of capital.  

A second conclusion was that the Company was becoming increasingly over invested in markets with below-average growth prospects.  Further, this tendency was being reinforced by a functional organizational structure that did not nurture those elements of the business that had significant growth potential.  

Finally, it was apparent that the Company had many strong attributes, including leadership positions in the hospital and financial services markets, a track record of providing innovative document and work flow solutions valued by its customers, strong cash flow from a diversified base of renewable business, and a very strong financial condition.  

In January 2001, the Company announced the Renewal Plan, comprised of four components: restructuring, reorganization, performance improvement, and early stage investments for future growth.  Management’s judgment was that all four of these elements were critical to renewing the Company’s value.  Most of the emphasis in 2001 was directed to restructuring and reorganization.  However, several key investments were also initiated in the year to lay the groundwork for operational improvement and growth in 2002 and beyond.

In the restructuring component, management decided to eliminate that portion of its business that likely could not be improved to provide an acceptable return, representing an estimated $225 to $250 million of the Company’s $1.3 billion in annual revenue.  In conjunction with these actions, the Company targeted a $125 million reduction in annualized costs, including manufacturing fixed costs, selling, general, and administrative (SG&A) expense, and depreciation.  The cost reductions would result primarily from the reduction of an estimated 2,400 jobs, and a 30% reduction in production capacity.  The objective was for the annualized value of the cost reductions to exceed the annualized loss of contribution margin on the eliminated business.

These restructuring actions were to take place over the first three quarters of 2001.  Since the cost reductions could not proceed until after the business was eliminated, profitability in each of the first three quarters of the year was expected to be well below previous period results.  In addition, the significant amount of production equipment relocated from closed facilities created high training and conversion costs at receiving plants, further reducing profitability during this nine-month restructuring period.

The Company announced the following financial goals for the restructuring:

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Complete the elimination of low-margin business within the first three quarters of 2001 while maintaining good customer service.  

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Reduce annualized fixed operating costs by $125 million.

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Achieve Net Income of $0.45 per diluted share before restructuring expenses in the fourth quarter 2001.  This would represent a 7% increase over the $0.42 per share result before impairment and restructuring costs for the fourth quarter 2000.

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Finance the cash restructuring costs from internally generated funds and maintain a strong financial condition.

Year 2001 Restructuring Costs

The Company incurred $76 million in net restructuring expense during 2001 as outlined in the table below:

The Company recorded an initial restructuring charge of $70 million in the first quarter of 2001.  An additional $28 million was charged to restructuring expense as the plan proceeded, including $15 million for the relocation of equipment and personnel from closed facilities that could not be included in the original accrual.    

The restructuring resulted in the closing of 25 production facilities.  In addition, 149 sales offices, and 29 warehouses were consolidated into other locations.  Overall production capacity was reduced by approximately 30%.

Severance and employer related costs were $24 million for 2001 related to the elimination of 2,400 positions Company wide.  

The employment reduction primarily affected employees in manufacturing, sales, warehousing, and administrative positions.  Ultimately, 2,330 positions were eliminated during 2001, but as a result of voluntary resignations the Company paid severance to only 1,985 persons.  Outplacement and stay bonuses were likewise less than originally expected. Also, the Company incurred lower than expected payments for compliance with the Worker Adjustment and Retraining Act.  These changes resulted in reversals to the accrual established for severance and employer related costs of $8 million in 2001 and $2 million in 2002.  At year-end 2001, 70 positions remained that were later eliminated during 2002.

Contract exit and termination costs related to the 2001 restructuring totaled $27 million for the year. Liabilities originally recorded for contract exit and termination costs aggregated $21 million and included $13 million for various contractual commitments on leased facilities and $5 million for contractual commitments for taxes, utilities, and maintenance costs primarily related to the closed leased facilities.  Also included was $1 million for travel to implement the restructuring and $2 million of other exit costs, primarily related to the removal of equipment.  In addition to the original charge, the Company incurred $6 million of contract exit and termination costs that were in excess of the originally estimated charges and charged directly to restructuring expense as incurred.  The remaining liability balance for contract exit and termination costs relates to long-term lease obligations through 2006 that the Company is attempting to sublease or cancel.

Inventory and other asset write-downs were $12 million in 2001, of which $11 million was classified in cost of sales.  Substantially all of this write-down related to excess supplies inventory at closed facilities and finished inventory related to eliminated low-margin accounts.  The $12 million reversal shown in the table resulted from $4 million related to excess supplies inventory and inventory for a business line that was discontinued in conjunction with the restructuring, but was later sold to a buyer, and $8 million was related to the restatement previously discussed.  As a result of restating the consolidated financial statements for 2001 and 2000, the inventory write-downs related to terminated customers, that were part of the transactional errors discussed in the restatement, were restated to expense in 2000 and prior years.  

At year-end 2002, all actions related to the restructuring are complete.  A summary of the 2001 restructuring accrual activity is as follows:

Year 2001 Asset Impairment

In conjunction with the Renewal Plan, management performed a review of its existing property and equipment and determined that certain long-lived assets were impaired.  These assets were either written off or written down to estimated fair market value if the asset was to be sold.  A total of $42 million was charged to impairment, including machinery and equipment of $33 million and buildings of $9 million.

At the end of years 2002 and 2001, assets held-for-sale included buildings with net book values of $2 million and $7 million, respectively.  The segment breakdown appears below:

Investment Write-Down

In June 2002 the Company purchased 500,000 shares of common stock in Printcafe, a publicly traded provider of enterprise software, for $5 million.  The Company did not have intentions of selling the shares in the near term and therefore classified them as available-for-sale securities.  The investment was reported at fair value, with unrealized losses reported in accumulated other comprehensive income (loss) in shareholders’ equity.  The price of the stock was $1.24 at December 29, 2002, resulting in a $0.6 million asset on the Company’s Consolidated Balance Sheet.

The Company reviews marketable securities for impairment based on criteria that includes the extent to which cost exceeds market value, the duration of the market decline, and the financial condition and near-term prospects for the issuer.  Based on this review, the Company determined that the decline in fair value was other-than-temporary due to events subsequent to December 29, 2002.

On January 23, 2003, an unsolicited offer was made for all of the shares of Printcafe.  The Board of Directors of Printcafe subsequently formed a special committee to evaluate all potential offers to purchase Printcafe.  The Company believes that this sequence of events will likely lead to a sale of Printcafe. Therefore, the Company believes that an other-than-temporary decline has occurred and has recognized a portion of the unrealized loss based on the offer price.  The resulting $4 million unrealized loss on investment is included in Investment and Other Income (Expense) in the Consolidated Statements of Income. An additional unrealized loss of $0.7 million is recorded as a component of other comprehensive income (loss).

RESULTS OF OPERATIONS

The tables below present, in analytical format, the results of operations for each of the years 2002, 2001, and 2000.  In the first table, the figures correspond to or are aggregated directly from those reported in the Statement of Operations on a generally accepted accounting principles (GAAP) basis.  The second table segregates the special items described previously; the discussion that follows references the results of operations excluding these special items.