For the Fiscal Year Ended March 31, 2002

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

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

The aggregate market value of the 2,056,999 shares of voting stock held by non-affiliates of the Registrant as of June 21, 2002 was $12,753,393, based on the closing price of $6.20 on the Nasdaq National Market as of such date. Options for 1,051,213 shares of the Registrant's Common Stock are outstanding and have not yet been exercised. Shares to cover the options will not be issued until they are exercised.

The number of shares outstanding of the Registrant's $.01 Par Value Common Stock as of June 21, 2002 was 5,123,499.

Certain portions of Part III of this Form 10-K are incorporated herein by reference to portions of the Registrant's Proxy Statement for the Annual Meeting of Shareholders dated June 21, 2002.

2

CPAC was formed in 1969 as a New York Corporation under the name of Computerized Pollution Abatement Corporation. Its name was shortened to CPAC, Inc. in 1976.

The principal executive offices of the Company are located at 2364 Leicester Road, Leicester, New York, 14481, telephone number 585-382-3223. Additional information is available on the Company's web site at (http://www.cpac.com).

The Company's Fuller Brands Segment is comprised of three business units that are primarily focused on the development, manufacture, distribution, and marketing of approximately 2,700 branded and private-label products for Industrial and Consumer cleaning and personal care applications. These business units are The Fuller Brush Company, Great Bend, KS (acquired in 1994); Cleaning Technologies Group (CTG), Great Bend, KS (acquired in 1997); and Stanley Home Products, Agawam, MA (signed license agreement in 1994).

The Segment's products include home cleaning products (all-purpose cleaners, degreasers, deodorizers, stain removers, laundry products); and stick goods (brooms, brushes, mops) for industrial use; commercial floor care chemicals (finishes and waxes, strippers, sealers, maintainers); custom brush components for specialty applications; and personal care products (hair and skin care, fragrances, cosmetics, vitamins, nutritional supplements). The vast majority of Segment products are manufactured at its 600,000 sq. ft. facility in Great Bend, Kansas.

The Industrial business of the Fuller Brands Segment consists of products sold through The Fuller Brush Company and Cleaning Technologies Group. Industrial sales are broken out into the following three categories: Commercial Cleaning, Custom Products, and Export. The three key Industrial businesses address the needs of a wide array of industrial customers, from retail food store sanitation products to customer designed industrial brushes.

3

CTG products are marketed under the Franklin Cleaning Technology^®, Masury-Columbia^®, Fuller Brush^® Commercial and Brillo^® brand names. In all, CTG has of over 60 trademarks for general and specific commercial cleaning needs.

With the exception of marketing, all of CTG's support functions are located at the Company's Great Bend facility.

The Custom Products business of The Fuller Brush Company is involved in the design, manufacture, and sale of private label chemicals and stick goods made to customers' specifications. It principally manufactures industrial brush components; however, it also produces a variety of chemicals, metal handles, and plastic parts. The Custom Products division principally serves the footwear, aviation, durable goods, and agriculture industries.

The company's plant in Kansas features state-of-the-art hi-speed lines as well as unique equipment which is used to manufacture brushes and brush components designed for a specialty application.

The Fuller Brush Company services a number of commercial customer accounts in Canada, Mexico, and other countries. It distributes via intermodal transport to Puerto Rico. Primary products exported are floor care chemicals and home care products.

The Consumer component of the Fuller Brands Segment consists of products sold through The Fuller Brush Company and Stanley Home Products business units, which utilize the following channels: direct selling, catalogs, the Internet, retail outlet stores, and direct marketing partners.

The consumer product lines of these two business units include (i) Home Care products for kitchen, laundry, bath, and general household cleaning, as well as brushes, brooms, and mops and (ii) Personal Care products such as hair and skin care products, fragrances, cosmetics, vitamins and nutritional supplements. The Fuller Brush Company and Stanley Home Products each hold more than 100 registered trademarks for its products in the U.S. and elsewhere.

While most of the Consumer cleaning products for Fuller and Stanley are developed and manufactured in the Great Bend facility, a number of cosmetic and skin care products for Stanley are imported from France with exclusive rights to U.S. distribution.

Stanley Home Products and The Fuller Brush Company both have direct selling organizations comprised of independent representatives. Direct selling consists of the sale of a consumer product or service, person-to-person, away from a fixed retail location. The Company also utilizes the "party plan" sales method in which its sales representatives demonstrate products to groups rather than individuals, as well as the traditional "one-on-one" method.

Most of the independent representatives sell part-time, purchasing products from Fuller and Stanley in order to resell them to their customers. Representatives are encouraged to recruit others into the business, thus widening the sales network. Both Stanley and Fuller are proud of the loyalty and longevity of their network representatives.

Both Fuller and Stanley publish full-color catalogs and fliers as a means of marketing their product lines, as well as to promote the direct selling business opportunity. Customers who are not assisted by a direct selling representative can order directly from the company by mailing, phoning, e-mailing, or faxing their order directly to Customer Service. Additionally, both companies have e-commerce enabled web sites through which consumers can order products directly (www.fullerbrush.com and www.shponline.com).

4

Fuller-branded consumer products are marketed through national direct marketing partners such as catalog companies, sweepstakes marketers, direct mail firms, Internet marketers, and direct response television. They partner with Fuller Brush to directly promote the Fuller brand to their large audiences, and fulfill orders from their respective distribution centers.

This growing channel complements the direct selling efforts of Fuller representatives, and offers consumers an opportunity to purchase Fuller merchandise in a variety of ways.

Fuller Brands' Industrial business develops, manufactures, and markets commercial cleaning and maintenance chemicals, and stick goods. The Fuller Brands Segment competes with regional, national, and global companies in each of the three industrial channels in which it operates: Commercial Cleaning, Custom Products, and Export.

Cleaning Technologies Group (CTG), the Fuller Brands Segment's commercial cleaning business unit, markets branded and private label janitorial and maintenance products through a direct sales force as well as a national distributor network. CTG products are used primarily in offices, hotels, retail stores, hospitals, schools and other public buildings.

Commercial cleaning products is a fragmented industry, and although two companies are significantly larger than others (S.C. Johnson Wax and Ecolab), no single firm or group of firms dominates the industry as a whole. There are numerous small regional or local competitors who focus on limited geographies, product lines and/or customer segments. CTG seeks to fill specific product niches where it feels it can compete favorably, such as providing one-stop sanitation shopping for retail food stores.

CTG has established long-standing relationships with its major commercial cleaning customers based on the ability to "bundle" high quality chemicals and stick goods, and provide value-adds to customers such as lower cost structure, reduced labor, and assistance with training, safety, and environmental standards. Alliances with large national wholesalers, whose scope is national and whose extensive sales force is direct, augment CTG's own network.

This component of Fuller Brands' Industrial business is involved in the manufacture and sale of private label products made to customers' specifications. The primary products are brushes and brush components, although various chemicals, metal handles, and plastic parts are also produced on a contract basis.

Custom brush competitors tend to be smaller, specialized private companies such as Felton Brush and America Brush Company. These competitors manufacture numerous types of industrial brush finished goods. At present, Fuller Brands specializes in strip and coil type brushes for industrial customers, but intends to grow this category. To this end, Fuller recently obtained the capability to manufacture one-piece molded thermoplastic elastomer (TPE) brushes.

Management believes Fuller Brands is able to compete successfully in the custom products arena based on its reputation for high-quality products, exceptional technical support, on-time delivery and an emphasis on superior customer service.

Fuller Brands' export business currently is limited to the selling of branded commercial and household products through a small network of commercial distributors outside of the continental U.S. (primarily in Puerto Rico and Canada).

5

Through its Global Imaging Group, CPAC has an extensive manufacturing and distribution base in key international markets. As in the U.S., export customers demand the best value -- high quality at a competitive price. Fuller Brands' products meet these criteria.

The Company currently has an insignificant share of the global market for cleaning and personal care products, and so management believes a great opportunity exists. Cleaning products are being evaluated for viability in small test markets in Asia.

Fuller Brands' Consumer business entails the development, manufacture, and marketing of home cleaning and personal care products that are sold to consumers through the following four channels:

Both Fuller Brush and Stanley Home Products' direct selling organizations are comprised of thousands of independent representatives in all 50 states who promote home cleaning and personal care products one-on-one and at home parties. The product lines of these two divisions are quite similar. In fact, before becoming part of CPAC, Inc., Fuller Brush and Stanley Home Products competed directly with one another in the marketplace. Now, Fuller representatives can sell both Fuller and Stanley products and vice versa, should they choose.

Direct selling companies compete both in terms of products, and in terms of attracting representatives and customers. Relative to their home cleaning and personal care product lines, Fuller and Stanley compete with direct selling companies such as Alticor^®, Avon^®, Mary Kay^®, and Tupperware^®. All U.S. direct selling companies compete with Fuller and Stanley for representatives and customers.

Product demonstrations are key to the success of both the Fuller and Stanley direct selling businesses, particularly with the home care lines. To attract a greater number of younger, more diverse representatives, Stanley has added an exclusive skin care line and an exclusive color cosmetics line. These products also lend themselves to personal demonstration and fit perfectly with Stanley's emphasis on strengthening the home party selling style it invented in the 1930's.

Although the Fuller Brush brand has historically been marketed door-to-door, the Company continues to expand its presence in other channels to reach consumers that are not as readily available to direct sellers. In April, 2002 Fuller began selling home care product sets via direct response television [also known as home shopping]. These live televised product demonstrations raise awareness of the Fuller brand, which supports the efforts of the direct selling organization.

Management believes that the personalized demonstrations and service offered by Fuller and Stanley representatives; the rich history of those brands; the high quality and efficacy of the products; and the Company's satisfaction guarantee are significant factors in maintaining a competitive position in direct selling. Based on the venerable Fuller Brush brand, the Company believes that other consumer channels hold opportunity and it will continue to explore them.

Both Fuller and Stanley maintain e-commerce enabled web sites, which allow consumers to request a catalog by mail and place orders directly with the company. This practice encourages new and repeat sales, creates a "lead" for a field sales representative to pursue, and allows the company to market the business opportunity to potential representatives.

The majority of direct selling companies publish catalogs and/or fliers for representatives to leave behind after a sales call or home party; several allow consumers to order directly. Most well known direct selling companies also have an Internet presence, but not all are e-commerce enabled. Of those that are, Avon^®, Reliv^®, and Jafra^® require on-line customers to select a representative to service them in the future, and who receives credit for the on-line transaction.

As direct selling companies go, Fuller and Stanley have been in business longer than most. For both organizations, a reputation for quality and service has created significant loyalty to the products and to the business opportunity. The Internet has become particularly useful as a recruiting tool, which builds the independent sales force. The Company believes there is still significant brand equity in both names.

Management believes that the Internet channel has enhanced sales, marketing, recruiting, and information-sharing opportunities for its customers and representatives. A significant cost reduction is achieved by communicating electronically with the field sales force. The Internet also allows current and prospective customers and representatives to self-educate about products.

6

The Fuller Brush Company uses merchandising and attractive product displays in its retail stores to compete with other mall tenants, such as Oneida^®, Maidenform^®, Buster Brown^®, and Jockey^®. The number of direct competitors that Fuller faces in the retail outlet channel is limited.

Fuller's brand equity is strong with certain groups of consumers who shop in outlet malls. The stores represent an opportunity for former customers to re-discover Fuller in a retail setting.

Management believes that its retail outlet stores in certain areas of the country are a viable channel for incremental sales and brand awareness. The Company will continue to support this channel as long as it is profitable for the Fuller Brands Segment.

Fuller-branded consumer products are purchased by national direct marketing partners such as catalog companies, direct mail firms, Internet marketers, and direct response television. These partners purchase Fuller products in quantity, then market and distribute them to their audiences and customer lists.

Fuller Brush competes for sales with similar products featured in catalogs, web sites, direct mailings, etc., such as Orange Glo^® and Oxiclean^®.

The Fuller brand has recently been reintroduced to consumers through appearances on direct response television. As previously stated, brand equity and high quality are the Company's competitive advantages. These hallmark traits make the Fuller brand attractive to direct marketing partners, and allow Fuller to effectively compete with the vast number of home care competitors.

Management views these direct marketing partner relationships as an effective means of broadening exposure for the Fuller Brush brand. This exposure adds value across every channel.

The Company's CPAC Global Imaging Group develops, manufactures, packages, distributes, and markets its extensive line of branded and private label chemicals and equipment for Color Photographic, Health Care, and Graphic Arts applications.

The classes of products for the Global Imaging Group include liquid chemicals for developing silver halide photographic film, photographic paper, radiographic and graphic arts film; chemical mixers for Health Care and Graphic Arts imaging; silver recovery and pollution control equipment and supplies; silver refining services; illuminators for viewing medical x-rays; dry-heat sterilizers used in dental practices; and dental evacuation (suction) units.

Seven of the Imaging Segment's eight business units manufacture products. Equipment is manufactured at the CPAC Equipment Division in Leicester, NY and chemicals are blended and packaged at six other plant locations. An eighth business unit, Profit Recovery Systems (PRS), is exclusively a sales and marketing organization. All products are marketed to businesses, such as photo processing labs, radiology and dental practices, and printing facilities in more than 100 countries worldwide. A superior level of customer and technical support is a distinguishing characteristic of the Segment.

The Imaging Segment manufactures virtually all of its products to better control costs, quality, and inventory levels. This arrangement minimizes the expenses associated with outside vendor overhead and carrying raw goods versus finished goods inventory. The raw materials necessary for manufacture of the Segment's products are readily available from numerous sources and the Imaging Segment is not dependent on any single supplier for any one item.

The refining of customers' recovered silver is conducted under an exclusive agreement with Pioneer Refining Services in Salt Lake City, UT, the largest independent U.S. refiner of photographic silver.

Business units in this Segment include CPAC Equipment Division (CED), Leicester NY (established in 1969); PRS, Inc., St. Louis, MO (established in 1981); Trebla Chemical Company (Trebla), St. Louis MO (acquired in 1984); Allied Diagnostic Imaging Resources, Inc. (Allied), Norcross, GA (acquired in 1988); CPAC Europe, Herentals, Belgium (established in 1989); CPAC Italia, Gorgonzola, Italy (acquired in 1992); CPAC Africa, Pretoria, South Africa (acquired in 1997); CPAC Asia Imaging Products Limited, Chachoengsao, Thailand (established in 1998).

7

The Color Photographic Chemicals business includes the development, manufacture, packaging, distribution, marketing, and sales of branded and private label processing chemicals used to develop photographic paper and film. These activities are carried out at Trebla Chemical Company and the four international Imaging business units.

Equipment is manufactured exclusively at CPAC Equipment Division, and involves the design, patent, fabrication, installation, and service of branded and private label silver recovery and pollution control equipment, which helps photo processors achieve environmental compliance by collecting silver (a by-product of the traditional wet silver halide photographic process) for reclamation and subsequent refining.

Color Photographic products and services are marketed in more than 100 countries through a combination of wholesale distributors, manufacturers' sales representatives, and company sales personnel.

Products are manufactured under the Trebla^®, SilvPAC^®, and CPAC^® brands, as well as under private label agreements, and are sold wherever photographs are wet processed, primarily independent and chain photo labs; one-hour processing locations such as mass market retailers; photo labs at universities and law enforcement agencies; and photo processing wholesalers.

Products are marketed domestically and in South America by PRS, Inc., the exclusive sales and marketing organization for CPAC's Color Photographic products, to a national network of photographic distributors and directly to end-users. For each of the International business units, a sales force markets to distributors and end-users. The distributors buy CPAC's products and then market and sell them to photo processors, retaining the difference between the purchase and selling prices as profit. Each manufacturing business unit employs a team of technical support personnel to provide service to the distribution network and end-users. In addition, CPAC's Color Photographic businesses advertise their products in trade publications and exhibit at national and international industry trade shows.

Color Photographic currently accounts for 57% of CPAC Global Imaging Group sales. Since its practice is to ship goods upon receipt of customer orders, Color Photographic does not generally have a material backlog of orders for its products.

In January 2002, CPAC Inc. purchased a 19% minority equity interest in TURA AG, a German manufacturer and supplier of photographic paper and film emulsion products and wide-format inkjet printing consumables. Through this expansion of an existing relationship, each company's core products are now sold through each other's respective distribution channels.

There are three principal areas in which CPAC's Health Care business operates: Chemicals, Equipment, and Refining Services.

The Health Care Chemicals business is involved with the development, manufacture, packaging, distribution, marketing, and sales of branded and private label wet processing chemicals used to develop medical and dental x-ray film. Dental x-ray film will be introduced to the line in FY '03. These activities are carried out at Allied Diagnostic Imaging Resources, Inc., as well as two international manufacturing plants.

Health Care Equipment, both branded and private label, involves the design, patent, fabrication, installation, and service of silver recovery equipment and chemical automixers for medical, dental, chiropractic, veterinary, and podiatry practices; illuminators (light boxes) for viewing x-ray film; and dry-heat sterilizers and portable and stationary vacuum equipment (evacuators) for dental practices. This equipment is manufactured exclusively at CPAC Equipment Division.

Health Care products, sold under the Autex^®, RediChem^®, SilvPAC^®, and CPAC^® brands as well as under private label agreements, are marketed to radiology, dental, and niche health care markets, and are used wherever x-ray film is wet processed. This includes radiology practices including mammography clinics; dental practices and clinics; hospitals; and, to a lesser extent, veterinary, chiropractic, and podiatry practices.

A national sales force markets products to health care products distributors; to group purchasing organizations (GPO's); and directly to end-users. These distributors and GPO's buy CPAC's Health Care products and then market and sell these products to health care providers, retaining the difference between the purchase and selling prices. Each manufacturing business unit also employs a team of technical support personnel to provide service to the distribution network and end-users. In addition, CPAC Global Imaging exhibits its products at national and international industry trade shows.

8

Health Care Imaging currently accounts for 38% of CPAC Global Imaging Group sales. Since its practice is to ship goods upon receipt of customer orders, Health Care does not generally have a material backlog of orders for its products.

CPAC's Graphic Arts business operates in two principal areas: Chemicals and Equipment.

The Graphic Arts Chemicals business is involved with the development, manufacture, packaging, distribution, marketing, and sales of branded and private label wet processing chemicals used to develop prepress film and plates used in printing facilities. These activities are carried out at Allied Diagnostic Imaging Resources, Inc., as well as two international manufacturing plants.

Graphic Arts Equipment, both branded and private label, involves the design, patent, construction, installation, and service of silver recovery and pollution control equipment and chemical mixers for commercial and in-plant printers, and service bureaus. This equipment is manufactured exclusively at CPAC Equipment Division.

Graphic Arts products, sold under the Allied^®, SilvPAC^® and CPAC^® brands as well as under private label agreements, are marketed to commercial and in-plant printing markets and are used wherever film or plates are wet processed, primarily printers of newspapers, magazines, packaging, and labels, and service bureaus.

A national sales force of manufacturer's representatives markets products to Graphic Arts products distributors; to group purchasing organizations (GPO's); and directly to end-users. The distributors and GPO's buy and resell CPAC's Graphic Arts products, retaining the difference between the purchase and selling prices as profit. Each manufacturing business unit employs a team of technical support personnel to provide service to the distribution network and end-users. In addition, CPAC exhibits its products at national trade shows for the Graphic Arts industry.

Graphic Arts Imaging currently accounts for 5% of CPAC Global Imaging Group sales. Since its practice is to ship goods upon receipt of customer orders, Graphic Arts does not generally have a material backlog of orders for its products.

CPAC's Global Imaging Group Color Photographic business competes with regional, national and international Imaging companies. The Group develops, manufactures, packages, markets and distributes liquid chemicals for developing silver halide photographic film and paper; silver recovery and pollution control equipment and supplies; and provides silver refining services. Through its relationship with TURA AG, photographic film and paper are also part of the product line.

Color Photographic products are used wherever photographs are wet processed, primarily independent and chain photo labs; one-hour processing locations such as mass market retailers; photo labs at universities and law enforcement agencies; and photo processing wholesalers.

The domestic and international markets for the Company's branded products are highly competitive. Competitors range in size from large, highly diversified companies to small, specialized producers. Direct competitors for Color Photographic chemicals include large companies such as Eastman Kodak Company and Fuji-Hunt Photographic Chemicals, Inc., and smaller players such as Champion Photochemistry Ltd. Direct competitors for silver recovery, silver refining services, and pollution control equipment include Academy Corp. and Hallmark Refining Corp.

The Color Photographic industry continues to introduce new products and services, especially in digital imaging. Some digital conversion has occurred in photo processing labs, but primarily in developed countries. This has had some impact on CPAC's sales in the U.S., but management believes there is great potential for traditional silver halide processes in emerging overseas markets. CPAC, Inc.'s recent minority equity investment in TURA AG provides increased access to these customers.

In Color Photographic, the Company seeks to improve product performance and ease of use, increase processing efficiency, and improve the ability of its customers to stay in compliance with local environmental regulations. Management believes that technological innovation, convenience, high product performance, and quality and timeliness of technical support and service are its competitive advantages in Color Photographic markets worldwide.

9

Health Care Imaging products are used wherever x-ray film is wet processed or viewed, such as radiology labs and hospitals, and in dental practices where instrument sterilization and dental evacuation is required.

The markets for the Company's branded products are highly competitive. Direct competitors for Health Care chemicals include large companies such as Eastman Kodak and Agfa-Gevaert Group, and smaller companies such as White Mountain Imaging and H.R. Simon and Company. White Mountain and Eastman Kodak Company compete with CPAC for market share of chemical automixers. Direct competitors for silver recovery and pollution control equipment include USI International, Inc. and Metafix. For silver refining services, CPAC Health Care Imaging competes directly with Hallmark Refining Corp. and Academy Corp. Competitors in x-ray illuminators are MAXANT and Wolf X-Ray Corporation. CPAC competes with directly with Wayne and indirectly with Dentronix for dry heat sterilizers. DentalEZ, Inc. is a competitor in dental evacuation units.

There is continued consolidation among Health Care imaging providers to consolidate their buying power by working with or joining group purchasing organizations (GPO's). In this environment, CPAC's businesses must aggressively compete for GPO contracts that provide the most favorable conditions to the Company.

The Health Care Imaging industry continues to evolve, driven primarily by increased demand for digital products and services. Digital conversion is occurring in radiology and dental practices at a faster rate than in Color Photographic, but again, primarily in the U.S. This has impacted CPAC's sales in the U.S., but management believes there is still significant potential for traditional silver halide processes in the U.S. and in emerging markets.

In Health Care Imaging, the Company seeks to improve product performance, increase processing efficiency, broaden its product offering, and improve the ability of its customers to stay in compliance with local environmental regulations. Management believes that customer care, quality, ease-of-use, reliability, and technical support are its competitive advantages in Health Care Imaging markets worldwide.

CPAC's Global Imaging Group Graphic Arts business develops, manufactures, packages, markets and distributes liquid chemicals for developing graphic arts film and printing plates; chemical automixers; silver recovery and pollution control equipment and supplies; and provides silver refining services.

Graphic Arts Imaging products are used in facilities such as commercial printers, service bureaus, in-plant printers, newspapers, magazines, packaging printers, and the like.

The markets for the Company's branded products are highly competitive. Direct competitors for Graphic Arts chemicals include companies such as Kodak Polychrome Graphics and Agfa-Gevaert Group. Konica Graphic Imaging USA and Fuji compete with CPAC for market share of chemical automixers. Direct competitors for silver recovery and pollution control equipment include X-Rite, Inc. and USI International, Inc. Graphic Arts processes that do not use silver halide film (computer-to-plate processes) require a different treatment of effluent for environmental compliance. CPAC believes its private label equipment serves the majority of customers in this niche market. For silver refining services, CPAC Graphic Arts Imaging competes directly with Hallmark Refining Corp. and Academy Corp.

The Graphic Arts Imaging industry continues to evolve, driven primarily by increased demand for digital products and services. Digital conversion is occurring in printing facilities at a slower rate than in Color Photographic, but again, primarily in the U.S. This has not significantly impacted CPAC's sales in the U.S. Management believes it can provide enhanced products to serve this market and sees graphic arts as a growth area.

In Graphic Arts Imaging, the Company seeks to improve product performance, increase processing efficiency, broaden its product offering, and improve the ability of its customers to stay in compliance with local environmental regulations. Management believes that product innovation, high product quality, compatibility with all graphic arts films, competitive pricing, and superior technical support and service are its competitive advantages Graphic Arts Imaging markets worldwide.

10

Effective May 1, 1986, the Company established a Profit Sharing and Retirement Plan under Section 401(k) of the Internal Revenue Code. This plan covers all eligible employees of CPAC, Inc. and its domestic subsidiaries. Subject to certain qualifications (employees must be over 21 years of age and have completed one year of service), the plan has the following features:

Effective January 1, 2000 the Company adopted a non-qualified deferred compensation plan for certain key executives of the Company. Contributions to the plan consist of "excess" 401(k) deferrals and selected percentages of salaries and bonuses with a maximum individual deferral of $50,000 per year. No matching contribution by the Company is required. Compensation deferred will be invested by the Company in various investment grade "pooled accounts" on behalf of the participants.

CPAC, Inc. owns the land and building in Leicester, New York, where the offices and manufacturing operations of the Equipment Division and corporate staff are housed. This plant is located on 4.2 acres and consists of a number of buildings, comprising a total of 30,330 sq. ft.

The 40,000 sq. ft. Trebla plant, located at 8417 Chapin Industrial Drive in St. Louis, Missouri, was purchased on October 29, 1993. The Trebla offices, laboratories, and major chemical manufacturing operations are housed in a one-story, concrete-block building on three (3) acres of land. Trebla has direct access to both truck and rail transportation for shipping purposes.

Trebla negotiated a new lease agreement commencing in October 2001 and expiring in January 2012, for 20,480 sq. ft. of office and warehouse space in the same industrial complex as its existing facility, as well as 14,800 sq. ft. of additional warehouse space immediately adjacent to the current warehouse facility. The lease provides for an option to terminate, upon proper notification, five years after commencement.

CPAC Europe, N.V. owns approximately 5 acres of land in Industriepark Herentals (near Antwerp), Belgium. The building, which is 43,900 sq. ft., has a mortgage outstanding on the property.

Allied's main plant and headquarters, located in Norcross, Georgia, are approximately 84,000 sq. ft. The facilities are leased until August 31, 2004.

In October 2001, CPAC Italia signed a new lease agreement for office, warehousing, and industrial space in Gorgonzola, Italy. The company completed its move from its previously leased site in Milan, Italy, in March 2002. The lease on the new facility is for six years, with a six-year renewal option. The leased premises are 29,350 sq. ft.

The Fuller Brush Company, Inc.'s 495,000 sq. ft. facility is located in Great Bend, Kansas. The single story building contains manufacturing, distribution, office facilities, and retail outlet store, and has access to both truck and rail transportation for shipping purposes. The facility was financed through an Industrial Revenue Bond, which is outstanding until 2009. Fuller Brush constructed a 105,000 sq. ft. North America Distribution Center (warehouse facility) on its property in Great Bend, Kansas, to accommodate Fuller's last acquisition and to position Fuller Brush for future acquisitions and revenue growth. Fuller also leases seven third party retail outlet stores with two stores located in Missouri and one located in each of the following: Maine, Maryland, South Carolina, Tennessee, and Wisconsin. There is also an outlet store located at the Fuller Brush offices in Kansas.

CPAC Africa's 14,000 sq. ft. manufacturing facility is located in Pretoria, South Africa, and is leased under an arrangement expiring in December 2004.

11

CPAC Asia owns its 33,000 sq. ft. facility located in Chachoengsao, Thailand.

In management's estimation, all facilities are adequate to allow the Company to continue operations.

Item 3.     LEGAL PROCEEDINGS.

No material litigation is pending to which the Registrant and/or its subsidiary(ies) is a party or of which property of the Registrant and/or its subsidiary(ies) is the subject.

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

None.

Item 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The principal market on which the Registrant's Common Stock is being traded is the NASDAQ National Market System.

The source of such quotations is from the Nasdaq-Amex Online^SM service. Such online quotations reflect inter-dealer prices, without retail markup, markdown, or commission and may not necessarily represent actual transactions.

The approximate number of holders of record of the Common Stock of the Registrant as of March 31, 2002 is 1,610. This number includes only holders of record and beneficial holders who have disclosed that they are recordholders.

Regularly, quarterly dividends in the amount of $0.07 a share have been paid since June 7, 2000.

The following table provides information as of March 31, 2002 concerning compensation plans previously approved by security holders and not previously approved by security holders.

12

Item 6.     SELECTED FINANCIAL DATA.

Item 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

For purposes of financial reporting, the Company operates in two industry segments: the Fuller Brands segment, which is involved in developing, manufacturing, distributing, and marketing branded industrial and consumer cleaning and personal care products in North America and internationally, and the CPAC Global Imaging Group (Imaging) segment, which includes the Company's color photographic, health care, and graphic arts imaging operations in the United States, Belgium, Italy, South Africa, and Thailand. The products of each segment are manufactured and marketed both in the U.S. and in other parts of the world. Sales between segments are not material.

The Company's net sales decreased 6.5% in 2002, as compared to 2001, and 6.8% in 2001, as compared to 2000.

For the Fuller Brands' segment, 2002 net sales decreased 5.7% over 2001. This was primarily due to the decrease in Cleaning Technologies Group sales of almost 15%, due to the effects of the September 11, 2001 terrorist attacks, and the reduction in K-Mart business. Stanley Home Products' slight sales decreases were offset by sales increases in the traditional Fuller Brush business. In 2001, the Fuller Brush segment sales were 8.1% lower than 2000, due to sales declines in all three operating divisions.

For the Imaging segment, sales in 2002 decreased 7.6% over 2001, caused by sales decreases in the segment's domestic photochemical, medical imaging, and equipment manufacturing operations, mitigated by combined sales increases in the segment's international operations. The Company's domestic operations continued to be impacted by the fierce competition in the North American market, as well as the business slowdown experienced, as a result of the U.S. recession, and September 11, 2001 terrorist attacks. Sales in 2001 decreased 4.9% over 2000. This was largely attributable to decreases in the Imaging segment's domestic medical imaging and photochemical sales, as well as the impact of currency translations on the foreign operation's reported revenues, which caused net sales to be reduced by approximately $1.5 million.

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Net income in 2002 decreased 36.1% over 2001, as both segment profits declined. In the Fuller Brands segment, Stanley Home Products and Cleaning Technologies Group operations had sharp declines in profits, due to sales shortfalls outlined above, as well as continued investments in sales and marketing programs intended to stimulate business once the U.S. economy rebounds. The traditional Fuller Brush business helped to mitigate this decline with strong earnings from their contract consumer and catalogue/Internet business. The Imaging segment's profits declined as all operations with the exception of the segment's Asian operations had profit declines, led by its North American photochemical operation.

Net income in 2001 decreased 18.2% from 2000, due to reductions in revenues from both segments that accelerated in the third and fourth quarters. In the Fuller Brands segment, lower sales volume coupled with fixed operating expenses and continuation of sales stimulation programs caused operating income to decline 28.4% as compared to 2000. In the Imaging segment, reductions in operating income of the domestic operations were partially offset by positive foreign operation's earnings, leading to a net decline in operating income of 11.1%. In addition, foreign currency negatively impacted Imaging results by approximately $170,000. Corporate overhead expense not allocated to the two segments declined in 2001 over 2000, due to a reduction in overall spending, resulting from the economic slowdown being experienced.

Combined net sales of the Company's foreign operations in Belgium, Italy, South Africa, and Thailand rose approximately $450,000 in 2002 over 2001. This was primarily due to CPAC Asia whose net sales increased $900,000 over 2001 levels. The sales increases at CPAC Asia were offset by sales declines at its Belgian, Italian, and South African operations where currency declines against the U.S. dollar impacted their translated results. Pretax profits for the four combined entities declined almost 14%, due to currency pressures in Italy and South Africa, as well as continued investment in sales and marketing initiatives to attempt to maintain or increase revenues.

Combined net sales of the Company's foreign operations in Belgium, Italy, South Africa, and Thailand rose 15% in 2001 over 2000. This was primarily attributable to CPAC Asia, which had a full year of sales and manufacturing in 2001, versus only three months of actual shipments in fiscal 2000. Combined net sales of the other three foreign operations rose less than .5%. Pretax profits for the combined grouped increased by approximately $676,000 to approximately $1,344,000. This was led by CPAC Asia which was profitable in 2001 versus a start-up loss in 2000, and CPAC Europe whose profits were up over $150,000. Both net sales and pretax income were impacted by the strong U.S. dollar and high currency translation rates. Management estimates that currency movements unfavorably impacted combined net sales and pretax profits by approximately $1,500,000 and $170,000, respectively.

The Company has exposure to currency fluctuations and occasionally has utilized hedging programs (primarily forward foreign currency exchange contracts) to help minimize the impact of these fluctuations on results of operations. At March 31, 2002 no forward foreign currency exchange contracts were outstanding. The Company does not hold or issue derivatives for trading purposes and is not a party to leveraged derivative transactions. On a consolidated basis, foreign currency exchange losses are included in income or expense as incurred and are not material to the results of operations.

Gross margins (net sales less cost of sales expressed as a percentage of net sales), were 44.7%, 43.7%, and 43.5% for the years ended March 31, 2002, 2001, and 2000, respectively.

Gross margins in the Fuller Brands segment increased in 2002 to 49.3%, as compared to 48.3% and 48.5% in 2001 and 2000, respectively. However, as a result of lower sales volumes, gross profit margins in the fourth quarter of 2002 declined to 48.9% and are expected to remain closer to that level for the early part of fiscal 2003, depending on product mix sold. In addition, the increase or decrease of the segment's manufacturing throughput in its Great Bend, Kansas, facility will also have a significant impact on blended gross margins.

Gross margins in the Imaging segment increased to 38.1% in 2002, versus 37.2% and 36.3% in 2001 and 2000, respectively. Strong margin improvement of several of the foreign operations helped increase the percentages in 2002. In an effort to gain additional market share, it is anticipated that margins may retreat slightly to the 37.0% to 37.5% range during early fiscal 2003.

This category amounted to 38.9%, 35.3%, and 34.4% of net sales in fiscal years 2002, 2001, and 2000, respectively.

In 2002, the Fuller Brands segment's selling, administration and engineering expenses were 43.7% of net sales, as compared to 40.2% in 2001 and 38.3% in 2000, respectively. A portion of the increase was a direct result of lower revenues, coupled with increased marketing and promotional expenses in the segment's Stanley Home Products to increase its direct selling business. It is anticipated that as the segment's revenues begin to increase to previous year's levels, that the individual business units will not have to substantially increase selling expenses, thus reducing selling, administrative expenses as a percentage of net sales from its 2002 levels.

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In 2002, the Imaging segment's selling, administration and engineering expenses as a percentage of sales were 32.9% versus 28.9% and 27.4% in 2001 and 2000, respectively. The increase was largely caused by the continued decline in sales through the third and fourth quarters, without a corresponding reduction in spending. Employment levels, selling, and marketing programs were not reduced during this time period in hope of gaining additional business, when the economic conditions improve. In addition, the segment's Asian operation increased expenditures in the Japanese market, as export opportunities in that country continued to expand. The segment is currently reviewing its domestic operating expenses to ensure they correlate with anticipated fiscal 2003 revenues.

Research and development expenses, as a percentage of sales, have remained at approximately .6% of net sales for 2002 and 2001 and .7% for 2000, respectively. The Company's emphasis has traditionally been focused on improving existing products or developing complimentary products, based on customer needs. In the Fuller Brands segment, it is anticipated that during 2003, an increased emphasis will be placed on the development of new products in the personal care and home care area, to help stimulate increases in the consumer part of the business via Internet, direct selling, television shopping outlets, catalogs, and other distribution outlets. R&D efforts in the Imaging segment in 2003 will continue to be focused on improving the existing chemical products being sold domestically and internationally. Total research and development expense, as a percentage of net sales, is not expected to change dramatically in 2003 from current levels.

The decline in net interest expense in 2002 versus 2001 was caused by a combination of lower interest rates and debt reduction in 2002. While interest income declined slightly in 2002, a strong cash position maintained through the first nine months of 2002 helped to offset lower investment rates for most of the year. The increase in net interest expense in 2001 versus 2000, is primarily a reflection of higher interest incurred on borrowings related to CPAC Asia Imaging Products Limited.

The provision for income taxes, as a percentage of pretax income, was 34.7% in 2002, as compared to 37.2% and 36.3% in 2001 and 2000, respectively. In 2002 and 2001, the effective tax rate reflected the benefit of the seven-year tax holiday existing for the Company's Asian subsidiary, as well as lower domestic state taxes. Since the Company continues to receive the tax holiday through 2006, it is anticipated that the Company's effective rate will continue to range from 35% to 37% during 2003.

The Company has historically financed its operations and acquisitions with internally generated cash flows, supplemented with outside borrowings. The following table summarizes CPAC, Inc.'s consolidated cash flow information (in thousands):

Consolidated net cash used in investing activities increased in 2002 over 2001, primarily due to the Company's $1,891,000 investment in TURA AG. Consolidated net cash used in investing activities decreased in 2001 over 2000, due primarily to a reduction in capital expenditures.

Consolidated net cash used in financing activities decreased in 2002 over 2001. Although the Company's repurchase of its common stock increased approximately $215,000 in 2002 over 2001, its net paydown of long-term borrowings decreased approximately $235,000 and dividends paid out decreased approximately $104,000, due to less shares outstanding.

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Consolidated net cash used in financing activities decreased in 2001 over 2000, primarily due to the significant reduction in stock repurchases over the 2000-year levels.

The following tables represent various ratios the Company uses to measure liquidity.

Working capital is the excess of current assets over current liabilities. The working capital ratio is calculated by dividing current assets by current liabilities.

During fiscal 2002, despite the shortfall in sales and profits, the Company's Fuller Brands segment continued to provide positive cash flow, allowing the consolidated Company to continue its stock repurchase programs, acquire capital assets where needed, and fund the Imaging segment's investment in TURA AG.

During fiscal 2001, reductions in capital spending ($1.7 million) and reductions in stock repurchases ($4.2 million), helped to offset lower earnings ($1 million) and contributed to increased working capital and an improvement in the working capital ratio.

During fiscal 2000, lower revenues and operating earnings contributed to the decrease in the Company's working capital levels. Increased net borrowings ($1.1 million), primarily to support the construction and start-up activities of CPAC Asia, as well as cash utilized for the stock buy-back program ($5.8 million) and capital additions ($3.1 million), also lowered working capital levels. However, cash generated from operations ($14.1 million) was extremely strong, due to reduction in inventory levels, improvement in accounts receivable collection efforts, and other operating efficiencies experienced.

During June 2002, the Company renewed its existing line of credit agreement (Agreement), with a new two-year agreement, maturing on October 31, 2004. The Agreement continues the maximum borrowing capability of $20,000,000, with interest at LIBOR plus 1.25% to 2%, based on funded debt to EBITA parameters. It also requires meeting various financial covenants, with which the Company was in compliance at March 31, 2002. The Agreement also contains a $6.2 million letter of credit facility, which the Company uses to collateralize the Fuller Brands' Industrial Revenue Bonds.

The Company's majority-owned subsidiary CPAC Asia Imaging Products Limited has a line of credit with an international bank of 20,000,000 million baht (approximately $453,000 based on the year-end conversion rate in Thailand). Interest is payable at prime (prime rate in Thailand was 8.75% at March 31, 2002), with the line collateralized by a standby letter of credit (LOC) guaranteed by CPAC, Inc. CPAC Asia Imaging Products Limited had borrowings against the line of credit of $278,257 at March 31, 2002.

Management believes that its existing available lines of credit and cash flows from operations should be adequate to meet normal working capital needs, based on operations as of March 31, 2002. It is expected that additional financing may be necessary to allow the Company to pursue additional acquisitions.

Receivable days outstanding remained fairly consistent in 2002, as compared to 2001, despite the decline in sales. Receivable days outstanding improved in 2001, as compared to 2000, due primarily to continued improvement in Fuller Brands' collection efforts, as well as a reduction of credit promotional programs associated with the Stanley direct selling operation.

Inventory turns decreased slightly in 2002, as compared to 2001 and 2000, due to an increase in inventory levels over the last three to six months of fiscal 2002, when sales did not increase as expected.

Operating return on net sales is the result of dividing operating income by net sales. Net income on net sales is calculated by dividing net income by net sales. Net income to net worth is calculated by dividing net income by the amount of ending shareholders' equity.

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The decrease in operating return on net sales, net income on net sales, and net income to net worth in 2002, as compared to 2001, is a result of the reduction in sales and earnings in both the Fuller Brands and Imaging segments. In addition, despite the significant impact of the September 11, 2001 terrorist attacks and the increasing effect of the continued U.S. recession, the Company made a deliberate effort to maintain selling and marketing efforts, so as to poise itself for eventual sales increases, once these factors mitigate, expected in late fiscal 2003. The decrease in net income to net worth in 2002 was partially offset by the continuation of dividend payouts at historical levels, as well as continuation of the Company's stock buy-back initiatives.

The decrease in operating return on net sales, net income on net sales, and net income to net worth in 2001, as compared to 2000, is a result of the revenue and earnings shortfall experienced in the third and fourth quarter, due to the economic slowdown experienced by the Company's domestic operations.

Debt to debt-plus-equity is calculated by dividing all liabilities by the sum of all liabilities plus shareholders' equity. Total debt to equity is calculated by dividing all liabilities by the amount of shareholders' equity.

These ratios measure the extent to which the Company has been financed by debt and are an important measure to our lending institutions.

The ratios remained relatively consistent in 2002 as compared to 2001, with continued debt paydown improving the debt-to-equity ratio. The decrease in both ratios in 2001, as compared to 2000, reflects continued paydown of debt obligations, supplemented by decreased stock repurchases, as compared to 2000.

The following tables summarizes information about the Company's consolidated contractual cash obligations and other commercial commitments (in thousands), as of March 31, 2002, and the effect such obligations are expected to have on its consolidated liquidity and cash flow in future periods:

The Company believes that these liabilities have no material impact on CPAC, Inc.'s liquidity and capital resources. As of the date of the report, CPAC, Inc. had no other commercial commitments, which may impact its capital resources and liquidity.

In the absence of unforeseen developments, CPAC, Inc. believes that it has sufficient liquidity to fund its operating expenses and other operational requirements at least for the 12 months following the date of this report.

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-- The impairment of goodwill and other intangible assets, and

-- Accounts receivable and inventory reserve determinations and net realizability estimates.

In each situation, management is required to make estimates about the effects of matters, or future events that are inherently uncertain. Specifically, in its assessment of impairment of goodwill and other intangible assets, management made estimates of the fair values based upon forecasted revenues and operations. An assessment of accounts receivable and inventory realizability requires management to forecast sales and future market conditions and technological developments.

The Company used what it believes are reasonable assumptions and where applicable, established valuation techniques in making its estimates.

Due to continued competitive sales pressures in both of the Company's segments, the Company has generally not been able to pass on all inflation related cost increases in its Imaging segment or in its Fuller Brands commercial cleaning operation. The Company is hoping to minimize the impact of inflationary pressures through increased productivity and cost reduction efforts with its various vendors.

Remediation efforts that related to the fiscal 1995 acquisition of the Fuller Brush Company, Inc. operations have been substantially completed and now consist of minimal "monitoring" efforts. The Company is awaiting final acceptance of the work from the Department of Health and Environment of the State of Kansas. Management does not believe that further remediation work, if any, would have a material impact on the results of operations.

On January 1, 1999, the Euro became the common currency of eleven of the fifteen member states of the European Union. After the introduction of the Euro, the national currencies will remain legal tender in the participating countries until mid-calendar-year 2002. During the dual currency phase, businesses must be capable of conducting commercial transactions in either the Euro or the national currency. After the dual currency phase, all businesses in participating countries must conduct all transactions in the Euro and must convert their financial records and reports to be Euro-based. The Company expects that all its facilities will be capable of complying with the Euro conversion timetable and with customer requirements for quoting and billing in Euro dollars. The Company's information technology systems are currently meeting the dual currency phase requirements, and it is anticipated that the final phase of the Euro conversion will not have a negative effect on the Compa ny.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Under No. 141, future acquisitions will be accounted for using the purchase method of accounting, as the pooling of interests method has been prohibited. In addition, upon adoption of No. 142, the Company will no longer amortize goodwill, but rather test for impairment on an annual basis. SFAS No. 141 is effective currently for any future acquisitions; and SFAS No. 142 will be effective April 1, 2002.

At March 31, 2002, included in goodwill and intangible assets, was goodwill, net of amortization amounting to approximately $10,675,000. It is expected that the adoption of SFAS in the first quarter of fiscal 2003 will result in a one-time, noncash charge, net of tax, of approximately $5.5 to $6.5 million. Such a charge is nonoperational in nature and will be reflected as a cumulative effect of an accounting change in the consolidated statement of operations. The adoption of No. 142 will increase net income and diluted earnings per share by approximately $209,000 ($.04).

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This standard addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company is required to implement SFAS No. 143 on April 1, 2003, although adoption will have no impact on its consolidated financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This standard supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The standard retains the previously existing accounting requirements related to the recognition and measurement of the impairment of long-lived assets to be held and used while expanding the measurement requirements of

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long-lived assets to be disposed of by sale to include discontinued operations. It also expands on the previously existing reporting requirements for discontinued operations to include a component of an entity that either has been disposed of or is classified as held for sale. The Company is required to implement SFAS No. 144 on April 1, 2002. The Company does not expect this standard to have a material impact on its consolidated financial position or results of operations.

The Emerging Issues Task Force (EITF) has issued EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." The EITF provides guidance with respect to the statement of earnings classification of and the accounting for recognition and measurement of consideration given by a vendor to a customer, which includes sales incentive offers labeled as discounts, coupons, rebates and free product or services, as well as arrangements labeled as slotting fees, cooperative advertising and buydowns. The EITF's guidance is effective for annual and interim periods beginning after December 15, 2001 and will not have a material impact on the Company's consolidated financial position or results of operations.

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

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

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

Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company's exposure to changes in interest rates results from investing and borrowing activities. At March 31, 2002, the Company has no interest rate swap agreements in place, which would limit its exposure to upward movements in interest rates. In the event interest rates were to increase or decrease by 1%, the effect on interest expense would not be material compared to that which would result if rates remained constant and at rates which existed at March 31, 2002.

Approximately 86% of the Company's sales are denominated in U.S. dollars. The remainder of the Company's sales are denominated in Belgian francs, African Rand, Italian lira, and Thai baht. A 10% change in the value of these currencies would impact the Company's revenues by approximately 1%. The Company monitors the relationship between the U.S. and its foreign currencies on a continuous basis and adjusts sales prices for products and services sold in those currencies as appropriate safeguards to the profitability of sales recorded in those currencies.

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Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

To the Board of Directors and Shareholders of
CPAC, Inc.

In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 36 present fairly, in all material respects, the financial position of CPAC, Inc. and its subsidiaries at March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 36 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our aud its of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Rochester, New York
May 28, 2002

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The consolidated financial statements of the Company include the accounts of the Company, its wholly-owned subsidiaries, its 98% owned subsidiary (CPAC Europe, N.V.), and its 80% owned subsidiaries (CPAC Africa (Pty) LTD and CPAC Asia Imaging Products Limited). The Company's foreign subsidiaries are included in the consolidated financial statements utilizing a December 31 fiscal year to facilitate prompt reporting of financial results. All significant intercompany accounts and transactions have been eliminated. The cost method of accounting is used for investments in which the Company has less than a 20% ownership interest, and the Company does not have the ability to exercise significant influence. These investments are carried at cost and are adjusted only for other than temporary declines in fair values. Profits or losses of the investee are not recognized in the consolidated financial statements of the Company. The carrying value of these investments is reported in other long- term assets.

The minority interests in the earnings (losses) of the consolidated foreign subsidiaries for the years ended March 31, 2002, 2001, and 2000 were $127,160, $137,544, and ($8,617), respectively, and are included in selling, general, and engineering expenses. Minority interest included in the Consolidated Balance Sheets at March 31, 2002 and 2001 was $459,868 and $332,708, respectively.

Inventory is stated at the lower of cost, on a first-in, first-out basis, or market.

Property, plant and equipment are stated at cost and are depreciated over their estimated useful lives on the straight-line and accelerated methods (buildings and improvements 15 to 39 years; machinery and equipment 3 to 12 years; leasehold improvements 15 to 39 years; furniture and fixtures 5 to 12 years). Leasehold improvements are amortized over the shorter of the lease period or the expected useful lives of the improvements using the straight-line method. At the time of retirement or other disposition of property, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in income.

The Company reviews the carrying value of long-lived assets and intangibles whenever events or changes in circumstances indicate that the carrying value of such items may not be recoverable from undiscounted net cash flows of the related business or asset.

The Company recognizes revenue when it is realized or realizable and has been earned. Product revenue is recognized when the product has been delivered and legal title and all risks of ownership have been transferred, sales price is fixed and determinable, and collectibility is reasonably assured. Appropriate accruals for discounts, volume rebates, and other allowances are recorded as reduction in sales.

In accordance with EITF 00-10, "Accounting for Shipping and Handling Fees and Costs," beginning with fiscal 2001, the Company classifies shipping and handling costs billed to customers as revenue. Shipping and handling costs for the Fuller Brands' segment amounting to $6,275,000, $6,463,000, and $6,546,000 in 2002, 2001, and 2000, respectively, are included in selling, administrative and engineering expenses. Similar costs for the Imaging segment amounting to $2,878,000, $2,866,000, and $3,164,000 in 2002, 2001, and 2000, respectively, are included in cost of sales. Revenues; cost of sales; and selling, administrative and engineering expenses for 2000 have been reclassified for comparability.

The Company charges research and development expenditures to income as incurred.

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All assets and liabilities of the Company's wholly-owned and majority-owned foreign subsidiaries are translated from their functional currency to U.S. dollars at year end exchange rates. Revenues and expenses are translated from functional currencies to U.S. dollars using an average exchange rate for the year. Translation gains and losses are not included in determining net income, but are accumulated as a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in the determination of net income. Included in consolidated net income are net foreign currency transaction losses of ($210,000), ($275,000), and ($22,000), realized during fiscal 2002, 2001, and 2000, respectively.

The Company has occasionally utilized hedging programs (primarily forward foreign currency exchange contracts) to minimize the impact of currency fluctuations on the result of operations. At March 31, 2002 and 2001, no forward foreign currency exchange contracts were outstanding. The Company does not hold or issue derivatives for trading purposes and is not a party to leveraged derivative transactions.

Basic EPS is computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation including stock options.

The table below summarizes the amounts used to calculate basic and dilutive earnings per share:

Unexercised stock options to purchase 592,686, 712,811, and 694,629 shares of the Company's common stock as of March 31, 2002, 2001, and 2000, respectively, were not included in the computations of diluted EPS because the options' exercise prices were greater than the average market price of the Company's common stock during the respective periods. These options, issued at various dates from 1995 through August 13, 1999, are still outstanding at the end of the year.

For purposes of the statements of cash flows, the Company considers marketable securities with a maturity of three months or less at the time of purchase to be cash equivalents. The Company paid interest of $777,000, $1,011,000, and $929,000, in fiscal 2002, 2001, and 2000, respectively. In addition, the Company paid income taxes of $1,643,000, $2,604,000, and $2,785,000, in fiscal 2002, 2001, and 2000, respectively.

Goodwill and intangible assets are amortized on the straight-line method over periods as shown above. Cost and related amortization are written off when fully amortized.

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The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents, receivables, and accounts payable approximates their carrying values due to the short-term maturity of the instruments. The fair value of short-term and long-term debt approximates their carrying value based on their effective interest rates compared to current market rates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at year end and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income tax expense is based on reported income before income tax expense. Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable in future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities.

Other comprehensive income includes foreign currency translation adjustments. Because cumulative translation adjustments are considered a component of permanently invested, unremitted earnings of subsidiaries outside the United States, no taxes are provided on such amounts.

The Company has two operating segments. The basis for determining the Company's operating segments is the manner in which the Company in its operations uses financial information. Management operates and organizes itself according to business units, which comprise unique products and services across geographic locations.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Under No. 141, future acquisitions will be accounted for using the purchase method of accounting, as the pooling of interests method has been prohibited. In addition, upon adoption of No. 142, the Company will no longer amortize goodwill, but rather test for impairment on an annual basis. SFAS No. 141 is effective currently for any future acquisitions; and SFAS No. 142 will be effective April 1, 2002.

At March 31, 2002, included in goodwill and intangible assets, was goodwill, net of amortization amounting to approximately $10,675,000. It is expected that the adoption of SFAS in the first quarter of fiscal 2003 will result in a one-time, noncash charge, net of tax, of approximately $5.5 to $6.5 million. Such a charge is nonoperational in nature and will be reflected as a cumulative effect of an accounting change in the consolidated statement of operations. The adoption of No. 142 will increase net income and diluted earnings per share by approximately $209,000 ($.04).

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This standard addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company is required to implement SFAS No. 143 on April 1, 2003, although adoption will have no impact on its consolidated financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This standard supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The standard retains the previously existing accounting requirements related to the recognition and measurement of the impairment of long-lived assets to be held and used while expanding the measurement requirements of

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long-lived assets to be disposed of by sale to include discontinued operations. It also expands on the previously existing reporting requirements for discontinued operations to include a component of an entity that either has been disposed of or is classified as held for sale. The Company is required to implement SFAS No. 144 on April 1, 2002. The Company does not expect this standard to have a material impact on its consolidated financial position or results of operations.

The Emerging Issues Task Force (EITF) has issued EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." The EITF provides guidance with respect to the statement of earnings classification of and the accounting for recognition and measurement of consideration given by a vendor to a customer, which includes sales incentive offers labeled as discounts, coupons, rebates and free product or services, as well as arrangements labeled as slotting fees, cooperative advertising and buydowns. The EITF's guidance is effective for annual and interim periods beginning after December 15, 2001 and will not have a material impact on the Company's consolidated financial position or results of operations.

Certain 2001 and 2000 financial statement and related footnote amounts have been reclassified to conform to the 2002 presentation.

On January 4, 2002, the Company expanded its distribution agreements with TURA AG of Düren, West Germany, by purchasing a 19% ownership interest in TURA AG for approximately $1,891,000. TURA AG is a manufacturer and supplier of photographic paper and film emulsion products to the worldwide silver halide photographic market, as well as a manufacturer of wide format inkjet printing consumables. The Company's investment has been accounted for under the cost method.

Inventory as of March 31, 2002 and 2001 is summarized as follows:

Property, plant and equipment are comprised of the following at March 31:

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The Company's revolving credit agreement contains customary covenants, including maintenance of specified working capital, capital expenditures, debt to equity, and net worth ratios, of which the Company was in compliance at March 31, 2002.

The Company's majority-owned subsidiary, CPAC Asia Imaging Products Limited, has a line of credit with an international bank amounting to 20 million baht (approximately $453,000 based on the year-end conversion rate in Thailand). Interest on the line is at prime (Thailand prime was 8.75% at March 31, 2002) and is collateralized by a standby letter of credit (LOC) provided by CPAC, Inc. CPAC Asia Imaging Products Limited had borrowings against the line at March 31, 2002 of $278,257.

Annual maturities of debt for the next five fiscal years are as follows: 2003:$1,061,175; 2004:$361,705; 2005:$322,631; 2006:$302,597; and 2007:$68,734.

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The Company also maintains a Non-Employee Directors Stock Option Plan. At the inception of the Plan, each non-employee director was granted an option to purchase 10,000 shares of the Company's common stock, on a one-time basis for past service rendered to the Board of Directors, at the fair market value at the date of the grant. Directors elected subsequent to the Plan inception were granted options to purchase 15,000 shares. The term of the option grants is for ten years. In addition, the Directors Plan calls for an annual automatic grant for the purchase of 3,000 shares, per director, of the Company's common stock, on the first Friday after the annual meeting of Shareholders, at a price equal to the fair market value at that date. The term of these grants is also ten years. During fiscal 2002, 2001, and 2000, options of 9,000 were granted each year pursuant to the Directors Plan.

As of March 31, 2002, total options outstanding are summarized as follows: