Comparison Of Results Of The Second Quarter Ended June 30, 2002 With The Second Quarter Ended June 30, 2001.

Sales

Sales increased by $1.0 million or 1.9% from 2001. Exchange rate devaluation resulted in net decreased revenues of approximately $3.1 million, resulting from devaluation decreases of $2.6 million attributable to Brazil and $1.6 million to Argentina, which was partly offset by appreciation increases of $1.0 million in Australia and $0.1 million in France. After giving effect to the above net devaluation, sales increased by $4.1 million in constant dollars as a result of higher sales in Brazil of $4.7 million, Argentina of $0.3 million, France of $0.1 million and the United States of $1.5 million, partly offset by lower sales in Australia of $2.5 million. The net increase in sales in constant dollars is discussed in detail by subsidiary below.

The increase of $1.5 million in sales in the United States was due to $2.4 million in increased sales from food coupons primarily related to the timing of orders placed within each year by the USDA and $0.7 million in higher revenue generated primarily from ABN's distribution and fulfillment program with the the USPS. These increases were partly offset by $0.1 million in lower stock and bond sales, $0.7 million in decreased sales of secure government print and $0.8 million in lower secure commercial sales. The continued trend toward next day settlement, the decreasing overall demand for secure paper-based documents of value that are used in the public and private sector and the continued implementation by the USDA to replace printed food coupons with electronic card-based food coupon benefits are expected to have a negative effect on the future mix of sales and gross margins at ABN.

Sales in Australia at LM were $2.5 million lower when compared to the prior year as sales in all three product lines experienced negative trends. SPS sales were $0.8 million lower mainly resulting from lower sales due to decreases in check usage and check prices received from banks. It is anticipated that the downward trend on checks will continue throughout the balance of the year. Sales of TCS products declined by approximately $1.4 million resulting from the loss of a phone card contract to a competitor and a reduction in export sales to China as a result of a change in Chinese banking regulations which curtailed the importation of cards. In addition, higher card sales were generated last year as a result of the merger of certain banks and the issuance of certain loyalty card programs which did not occur this year. PSDM sales were lower by $0.3 million due to competitive pricing pressures and a weak print market.

At Transtex, TCS sales increased by $0.3 million despite the severe and ongoing economic recession which continues to negatively impact Argentina. The increase was primarily due to an increase in orders placed on prepaid telephone cards and higher pricing received on bank debit and credit cards. In addition the favorable exchange rate has allowed Transtex to be more competitive with foreign suppliers. Despite this temporary improvement in sales in the second quarter, there is no guarantee that this trend will continue as credit markets in Argentina continue to remain highly volatile such that the overall trend in card usage remains uncertain.

In France, the increase of $0.1 million in TCS sales at CPS was principally due to stronger demand for phone cards.

Sales at ABNB in Brazil were $4.7 million higher than in 2001. The net increase is attributable to higher TCS and SPS sales of $1.8 million and $2.9 million, respectively. The $1.8 million increase in TCS sales is due to an increase in phone cards of $1.5 million of which the increase is evenly split between price and volume and an increase of $0.3 million resulting from higher volumes on credit and debit card issuances. The $2.9 million increase in SPS sales results primarily from an increase in driver's license revenues of $1.7 million due to incremental revenue generated from adding fingerprint identification on drivers licenses and an increase in checks and electronic print of $1.2 million due to new business received from telephone and banking customers.

Cost of Goods Sold

Cost of goods sold decreased $3.1 million or 7.7% as compared to 2001, with a corresponding increase in gross margins of $4.1 million. The impact of exchange rate devaluation accounts for decreased cost of goods sold and gross margins of approximately $2.0 million and $1.1 million, respectively. The net effect of devaluation by country on cost of goods sold and gross margins respectively was as follows: Brazil - $2.0 million and $0.6 million and Argentina - $0.8 million and $0.8 million. The devaluation in these countries was partly offset by an appreciation in Australia's currency which resulted in an increase in costs of goods sold and gross margins of $0.7 million and $0.3 million, respectively and in France as the effect of the Euro's appreciation resulted in an increase in cost of goods sold and gross margins of $0.1 million and nil respectively.

After giving effect to the above net devaluation, cost of goods sold in constant dollars decreased by $1.1 million, which resulted primarily from a reduction in costs and a favorable change in product mix. As a result, gross margins in constant dollars increased by approximately $5.2 million when compared to the prior year. The net decrease in cost of goods sold in constant dollars is discussed in detail by subsidiary below.

As a percentage of sales, cost of goods sold decreased to 70.0% in 2002 as compared to 77.3% in 2001. A comparison of the percentage of cost of goods sold by each of the Company's geographic locations to the prior year is as follows:

                                   Second Quarter Ended June 30,
                                   ------------------------------
                                 2002                    2001
                                 ----                    ----

       Brazil                    76.5%                   82.4%
       Australia                 72.1%                   76.8%
       United States             50.8%                   62.7%
       Argentina                 48.6%                   79.3%
       France                    70.6%                   73.2%

Cost of goods sold at ABNB in Brazil increased by $2.0 million from 2001, with a corresponding increase in gross margins of $2.7 million. Cost of goods sold as a percentage of sales decreased by 5.9% when compared to 2001. The increase in cost of goods sold in constant dollar terms was directly attributable to the increase in sales partly offset by a reduction in chemical and spoilage costs on phone cards.

Costs of goods sold at LM in Australia decreased by $2.4 million and resulted in a decrease in gross margins of $0.1 million when compared to the prior year. As a percentage of sales, cost of goods sold decreased by 4.7% when compared to the prior year. The decrease in cost of goods sold in constant dollar terms was primarily attributable to lower variable costs of $1.3 million directly related to the decrease in sales volume discussed above, and reductions in fixed overhead of $1.1 million resulting from the cost savings and profit improvement programs initiated both this year and last year.

Cost of goods sold at ABN in the United States decreased by $0.2 million and resulted in an increase in gross margins of $1.7 million when compared to the prior year. As a percentage of sales, cost of goods sold decreased by approximately 11.9% when compared to the prior year principally due to change in product mix resulting from additional incentive revenue received from the USPS distribution and fulfillment program and higher revenues from lower cost food coupon orders, partly offset by sales of other print services with lower margins and higher costs.

In Argentina, cost of goods sold at Transtex was approximately $0.5 million lower than in 2001, which resulted in an increase in gross margins of $0.8 million. As a result, cost of goods sold as a percentage of sales improved by 30.7% over the prior year. This improvement was primarily the result of reductions in personnel. In light of the severe ongoing economic crisis in Argentina, there is no guarantee that this improved trend will continue.

At CPS in France, cost of goods sold was approximately the same when compared to 2001 resulting in an increase in gross margins of $0.1 million. As a percentage of sales, cost of goods sold decreased by approximately 2.6% from 2001 primarily due to a change in product mix.

Selling and Administrative Expenses

Selling and administrative expenses increased by $0.2 million when compared to 2001. The impact of exchange rate devaluation accounts for an approximate $0.3 million decrease in expense, resulting from devaluation of $0.2 million and $0.3 million in Brazil and Argentina, respectively, offset by an appreciation in Australia of $0.2 million. The currency effect with respect to the Euro in France was nil. As a result, the net increase in selling and administrative expense from the prior year in constant dollars is $0.5 million. Most of the operating subsidiaries closely approximated the prior year with the exception of $0.5 million in increased professional fees in Australia in connection with work performed in connection with a potential acquisition. As a result of the above, selling and administrative expenses as a percentage of sales were higher at 15.0 % in 2002 as compared to 14.9% in 2001.

Restructuring

The restructuring charge of $0.3 million for the second quarter of 2002 represents termination payments to employees in connection with the LM Restructuring for the purpose of consolidating its manufacturing operations (See Note F to the Company's Consolidated Financial Statements provided herein for further information).

Goodwill and asset impairment

Goodwill and asset impairment occurring in 2001 represents the remaining write down of goodwill on the books of Transtex as a result of operating losses and the economic uncertainties in Argentina. (See Note H to the Company's Consolidated Financial Statements provided herein for further information).

Depreciation Expense

Depreciation and amortization expense was $0.4 million lower when compared to 2001. Exchange rate devaluation accounts for approximately $0.1 million of this decrease, resulting in a net decrease of $0.3 million in constant dollars. This decrease was primarily the result of the elimination of goodwill amortization in accordance with SFAS 142, "Goodwill and Other Intangible Assets", of approximately $0.5 million partly offset by an increase in depreciation expense of $0.2 million primarily attributable to capital expenditures in Brazil.

Interest Expense

Interest expense was approximately $0.2 million lower when compared to 2001. Exchange rate devaluation was not a factor in this decrease. This decrease resulted primarily from the interest rate reduction received of $0.4 million as a result of the amendment to LM's debt agreement which was executed in June 2001 partly offset by $0.2 million in additional accrued interest payable in kind on the Parent's U.S. Dollar denominated public debt to be restructured upon consummation of the Parent's plan of reorganization.

Other, Net

Other net for the second quarter of 2002 was approximately the same when compared to the first quarter of 2001. The majority of the net changes relate to a gain of $0.5 million from the proceeds received by ABN from a one-time private sale of certain printed materials partly offset by a $0.5 million loss resulting from the partial sale of certain net assets in connection with a start-up joint venture in Brazil.

Bankruptcy Costs

Bankruptcy costs increased by $0.5 million when compared to 2001 principally due to additional administrative costs associated with work done related to the Fourth Plan. Additional administrative expenses will be required to complete the confirmation and consummation of the Parent's plan of reorganization, the full effects of which cannot be readily determined. Moreover, if further amendments to the Fourth Plan are required, this will also result in additional administrative expenses in an amount which cannot be predicted.

Taxes on Income

Taxes on income are calculated using the effective tax rate for each tax jurisdiction and various assumptions such as state and local taxes and the utilization of foreign taxes in the U.S. The effective tax rate is further adjusted for any permanent differences between the book basis and tax basis of assets and liabilities. In addition, the Company has provided a valuation allowance against its U.S. net operating losses and other U.S. deferred tax assets due to the uncertainty as to the realization of U.S. taxable income in the future.

Minority Interest

Minority interest represents the 22.5% minority interest in ABNB held by Banco Bradesco.

Liquidity and Capital Resources

Summary of Cash Flows. Cash flow decreased by $0.3 million in the first six months of 2002 compared to a decrease of $1.4 million in the comparable period of 2001. This $1.1 million positive variance resulted principally from the following:

Short-Term Borrowings. At June 30, 2002, the Company's subsidiaries had outstanding approximately $4.2 million under their respective short-term credit facilities. The Company's domestic subsidiary, ABN, had a three-year asset based revolving credit facility, which matured on July 7, 2002, for general working capital and letters of credit purposes. At June 30, 2002, ABN had approximately $0.8 million of availability under its credit facility of which $0.4 million was used for general working capital purposes and $0.3 million was used for outstanding letters of credit, leaving approximately $0.1 million available for borrowing. Although ABN's existing credit facility matured on July 7, 2002, in March 2002 ABN executed a new one-year $2 million asset based working capital facility with a local bank in Tennessee which became effective on July 8, 2002 upon expiration of the prior facility. Under the terms of the new facility, ABN has the right to renew the facility for two additional years. The Company's Brazilian subsidiary, ABNB, had $0.9 million of short-term borrowings at June 30, 2002 in connection with various equipment purchases. The Company's French subsidiary, CPS, had available approximately $1.1 million undrawn under its working capital revolving credit facility at June 30, 2002, with approximately $0.1 million in borrowings against the facility since that date. In addition, the Company's Australian subsidiary, LM, has a working capital and letter of credit facility of approximately $3.1 million with a local bank collateralized by LM's banking syndicate. At June 30, 2002, LM had used approximately $2.9 million for general working capital purposes and termination payments in connection with the LM Restructuring, and $0.3 million for outstanding letters of credit under the line, leaving no further availability under the line. Availability under the LM line fluctuates within any particular month based on the timing of receipts and payments. Management believes that based upon its current restructuring program, LM should generate sufficient cash flows from operations to meet its operating needs. Only if actual operating results fall significantly short of projections will LM experience severe liquidity problems. The Company's Argentine subsidiary, Transtex had no borrowings outstanding at June 30, 2002 and as a result of overall credit tightening by the banks in Argentina, no further credit terms are available.

Long-Term Debt. The Parent's long-term debt subject to compromise (excluding accrued interest) consists of $56.5 million on its 10 3/8% Senior Notes due June 1, 2002 (the "10 3/8% Senior Secured Notes"), $95.0 million on its 11 ¼% Senior Subordinated Notes due December 1, 2007, $8.0 million on its 11 5/8% Senior Unsecured Notes due August 1, 2002 (the "11 5/8% Senior Unsecured Notes"), and $3.7 million on its Zero Coupon Convertible Subordinated Notes due August 2, 2002 and November 25, 2002. Long-term debt of subsidiaries includes $45.1 million of LM's senior and subordinated non-recourse debt (the "LM debt") and $0.8 million of mortgage and other indebtedness.

On June 26, 2001, the LM debt was amended, extending the maturity date of the loan for three years, along with an interest rate reduction equal to approximately 50% of its original interest rate on the borrowings. The amended agreement requires LM to make a $1.1 million principal repayment on the second anniversary of the amendment with the balance of the loan maturing on June 24, 2004. In exchange for these amendments and the return of a 5% equity interest granted to the banking syndicate in 2000, the banking syndicate will receive approximately ten percent (10%) of LM's equity which will vest over a period of time. As of June 30, 2002, approximately 8.5% of this equity vested to the banking syndicate. As a condition to the amendment, the Parent made a capital contribution of $1.2 million to LM in June 2001.

Major Customer

The Company's major customer, Banco Bradesco which is also a 22.5% minority shareholder in ABNB, has agreed to extend its supply agreement with ABNB which was scheduled to expire in June 2002 for an additional twelve months.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q, under the captions, "Business," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in certain documents incorporated by reference herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve unknown and uncertain risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Forward-looking statements are identified by the use of forward looking words or phrases such as "anticipates," "intends," "expects," "Plan of Reorganization," "believes," "estimates," or words or phrases of similar import. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and the statements looking forward beyond 2002 are subject to greater uncertainty because of the increased likelihood of changes in underlying factors and assumptions. Actual results could differ materially from those anticipated by the forward-looking statements. Such factors are more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, which should be considered in connection with a review of this report.