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

FORM 10-K

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

VERTIS, INC.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (410) 528-9800
Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant of Section 12(g) of the Act: None

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

        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 the 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.    ý

        Indicate by check mark whether the registrant is an accelerated filer as defined in Exchange Act rule 12b-2.    Yes  ý    No  o

        The number of shares outstanding of Registrant's common stock as of March 24, 2003 was 1,000 shares.

        Documents Incorporated By Reference: None

Vertis, Inc.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

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CAUTIONARY STATEMENTS

        We have included in this Annual Report on Form 10-K, and from time to time our management may make, statements which may constitute "forward-looking statements" within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You may find discussions containing such forward-looking statements in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as within this Annual Report generally. In addition, when used in this Annual Report, the words "believes," "anticipates," "expects," "estimates," "plans," "projects," "intends" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include statements other than historical information or statements of current condition, but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. It is possible that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in our specific forward-looking statements include, but are not limited to, those discussed under "Certain Factors That May Effect Our Business," as well as:

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general economic and business conditions in the United States and other countries;



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changes in the advertising, marketing and information services markets;



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the financial condition of our customers;



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the possibility of future terrorist activities or the continuation or escalation of hostilities in the Middle East or elsewhere;



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our ability to execute key strategies;



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fluctuations in the cost of raw materials we use;



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the effects of supplier price fluctuations on our operations;



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downgrades in our credit ratings;



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changes in interest and foreign currency exchange rates; and



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other matters discussed in this Annual Report generally.

        Consequently, readers of this Annual Report should consider these forward-looking statements only as our current plans, estimates and beliefs. We do not undertake and specifically decline any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We undertake no obligation to update or revise any forward-looking statement in this Annual Report to reflect any new events or any change in conditions or circumstances. All of the forward-looking statements in this Annual Report are expressly qualified by these cautionary statements. Even if these plans, estimates or beliefs change because of future events or circumstances after the date of these statements, or because anticipated or unanticipated events occur, we disclaim any obligation to update these forward-looking statements.

PART I

ITEM 1    BUSINESS

Overview

        Vertis, Inc., formerly known as Big Flower Press Holdings, Inc., is a Delaware corporation incorporated in 1993. We are a leading provider of integrated advertising products and marketing services. We deliver a comprehensive range of solutions that simplify, improve, and maximize the

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effectiveness of multiple phases of our customers' marketing campaigns, from the inception of an advertising concept, through design, production, targeted distribution, and ultimately the measurement of advertising effectiveness. We believe that our ability to produce cost-effective and measurable results in a relatively short time-frame is critically important to our clients. Our clients include more than 3,000 grocery stores, drug stores and other retail chains, general merchandise producers and manufacturers, newspapers, and advertising agencies.

        In 2002, Vertis had net sales of approximately $1.7 billion and had approximately 8,700 employees worldwide. Our principal executive offices are located at 250 West Pratt Street, Baltimore, Maryland 21201. We offer the following extensive list of solutions across a broad spectrum of media designed to enable our clients to reach target customers with the most effective message. Customers may employ these services individually or on a combined basis to create an integrated end-to-end marketing solution.

Vertis Retail and Newspaper Services

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Targetable advertising insert programs for retailers and manufacturers



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Newspaper products (TV magazines, Sunday magazines, color comics and special supplements)



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Consumer research



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Creative services for advertising insert page layout and design



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Digital advertising workflow design and transmission



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Freight and logistics management

Vertis Direct Marketing Services

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Highly customized one-to-one marketing programs



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Automated digital fulfillment services



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Direct mail production with varying levels of personalization



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Data design, collection and management to identify target audiences



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Mailing management services



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Effectiveness measurement

Vertis Advertising Technology Services

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Digital content management



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Graphic design and animation



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Digital photography, compositing and retouching



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In-store displays, billboards and building wraps



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Consulting services



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Newspaper advertising development



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Media planning and placement and software solutions



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Response management, warehousing and fulfillment services



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Call center and telemarketing services

Vertis Europe

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Advertising production services for European customers



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Direct marketing services for European customers



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Response management, warehousing and fulfillment services



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Data cleansing

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        We believe that the breadth of our client base limits our reliance on any individual customer. Our top ten customers in 2002 accounted for 32.5% of our sales, and no customer accounted for more than 5.7% of our sales. The average length of our relationships with our ten largest customers is over 15 years.

        In this Annual Report, when we use the terms "Vertis," "we," "our," and the "Company," we mean Vertis, Inc., a Delaware corporation, and its consolidated subsidiaries. The words "Vertis Holdings" refer to Vertis Holdings, Inc., the parent company of Vertis and its sole stockholder.

        Financial information concerning our business segments and geographic regions for each of 2002, 2001 and 2000 is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the notes thereto included elsewhere herein.

        Our Internet address is www.vertisinc.com. We are subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and file annual, quarterly and special reports and other information with the Securities and Exchange Commission, or SEC. Our filings are available to the public at the SEC's website at www.sec.gov. You may read and copy any documents we file with the SEC at its public reference facility in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities.

Business Segments

        We operate in the business segments detailed below. Financial and other information relating to these segments can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Note 18 "Segment Information" to our consolidated financial statements included in this Annual Report.

Vertis Retail and Newspaper Services ("RNS")

        General.    RNS is a leading provider of advertising inserts and is the largest single producer of newspaper TV listing guides and Sunday comics in the United States. In 2002, we produced more than 30.3 billion advertising inserts. Advertising inserts are typically produced in color on better quality paper than the reproductions that appear in run-of-press newspaper advertisements. In addition, inserts allow marketers to vary layout, artwork, design, trim size, paper type, color and format. Variations may be targeted by newspaper zones and by specific customer demographics.

        We also provide 71 of the top 100 Sunday newspapers in the United States with circulation-building newspaper products and services through production of comics, TV listing guides, Sunday supplements and special sections. In 2002, we produced approximately 1.7 billion Sunday comics, and approximately 900 million TV listing guides.

        RNS enables advertisers to achieve targeted distribution to large and diverse audiences. These products and services are delivered by means of our nationwide network of digitally connected facilities.

        Sales and Customers.    In addition to leveraging our national and retail sales groups, RNS employs approximately 43 sales representatives devoted to this segment's specific products and services. RNS's sales force is organized into four key business groups to maximize the development of business for newspapers and local, regional and national retail customers. The Corporate Sales group focuses on selling solutions to national customers and is complemented by two regional geographic groups covering the eastern and western United States. The Newspaper Services Sales group focuses on selling marketing solutions to newspapers and publications.

        Our customers include grocery stores, drug stores, other retailers, newspapers and manufacturers. Our customers distribute advertising inserts in national newspapers and, depending on their target

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audience, through various forms of mail distribution and in-store circulation. RNS's ten largest customers accounted for approximately 50% of its 2002 net sales, and no single customer represented more than 5.7% of total net sales of Vertis. We have established and maintained long-standing customer relationships with our major customers.

Vertis Direct Marketing Services ("DMS")

        General.    DMS is one of the largest providers of highly customized direct mail, one-to-one market programs, mailing management services, automated digital fulfillment and specialty advertising products in the United States. We derive the majority of our revenues from the design, production, and execution of personalized advertising mailings rather than traditional, broadbase direct mailings. Personalized direct mail enables consumer goods and other marketers to communicate with their customers on an individual-by-individual basis, an approach that provides higher response rates than broad, non-personalized mailings.

        We use sophisticated, data-driven techniques to target prospects and deliver full color, individualized marketing messages. We can process and manipulate databases to enable our customers to target direct mail recipients based on many attributes, ranging from age, gender, and address to spending habits, type of car owned, whether the recipient is a pet owner, etc. These highly individualized marketing campaigns are designed to enhance customer response levels and improve client marketing efficiencies through on-demand workflow automation. The growth in customer data availability, the increasing sophistication of database marketing tools and the growing use of the Internet for integrated marketing campaigns have significantly increased demand for these services.

        Sales and Customers.    In addition to leveraging our national and retail sales groups, DMS employs approximately 41 sales representatives devoted to these specific products and services. While the majority of sales are made directly to clients, DMS also sells its products and services through advertising agencies and brokers. Principal customer groups include consumer goods manufacturers, financial institutions, not-for-profit organizations, retailers and government agencies. DMS's ten largest customers accounted for approximately 43% of its 2002 net sales. No single customer accounted for more than 1.2% of total net sales of Vertis.

Vertis Advertising Technology Services ("ATS")

        General.    ATS employs a broad range of technologies to assist clients with their advertising campaigns.

        ATS is a leading provider of digital media production and content management solutions to retailers, consumer and commercial products companies and advertising agencies. Our services and technologies enable clients to more efficiently create, produce and manage traditional print and advertising content. More importantly, these services and technologies also enable clients to benefit from the influences of emerging digital advertising media such as CD-ROM and the Internet. Our integrated offering enables advertisers to maintain consistency of appearance of their products and brand names throughout various media forms. Specific services and technologies offered by ATS include:

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digital content management;



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graphic design and animation;



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digital photography, compositing and retouching;



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in-store displays, billboards and building wraps;



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consulting services, including Internet marketing and development;

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•

newspaper advertising development;



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media planning and placement and software solutions;



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response management and fulfillment services; and



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call center and telemarketing services.

        Vertis Media and Marketing Services, an operating unit of ATS, offers the following three primary services designed to support our targeting capabilities and marketing efforts:

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Vertis Media Planning and Research System offers a software package that enables advertisers to customize their advertising to match demographic characteristics and other targeting requirements to reach more than 109,000 geographic zones and more than 5,800 newspapers and shared mailed products, covering the entire United States;



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Vertis Media and Marketing Services offers fully outsourced solutions for the planning and placement of newspaper advertising; and



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Response Management Services offers customers value-added response management and fulfillment services ranging from lead management and fulfillment in support of a high tech sales force to managing and fulfilling an ongoing prescription drug sampling program for a leading pharmaceutical manufacturer.

        In addition, we offer fully outsourced premedia solutions, allowing clients to leverage our infrastructure and to avoid the large capital expenditures associated with managing premedia functions in-house.

        Sales and Customers.    In addition to leveraging our national and retail sales groups, ATS has more than 101 sales representatives devoted to this segment's specific products and services. The division serves five categories of customers: newspapers, advertising agencies, consumer packaging, commercial products manufacturers, and retail advertisers. ATS's ten largest customers accounted for approximately 21% of its net sales in 2002.

Vertis Europe

        General.    Vertis Europe offers our European customers most of the products and services we offer our American customers through DMS and ATS. The products, services and technology offered in Europe include:

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response fulfillment services



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extensive inline printing and finishing



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fully integrated direct marketing services



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direct mail printing and fulfillment



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laser imaging and lettershop capabilities



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transactional printing



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fragrance promotions



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phone and loyalty card production



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data processing



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consulting

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        We believe our European production facilities have unique production capabilities to meet demand for shorter run highly personalized mailing and for transactional and billing communications.

        Sales and Customers.    In addition to leveraging our national and retail sales groups, Vertis Europe has more than 42 sales representatives devoted to this segment's specific products and services. Vertis Europe serves advertising agencies and corporate marketers. The main categories of direct marketing clients serviced are financial services, agency, publishing, mail order, non-profit and retail. Vertis Europe's ten largest customers accounted for approximately 30% of its 2002 net sales.

Raw Materials

        In 2002, we spent approximately $600 million on raw materials. The primary raw materials required in our operations are paper and ink. We also use other raw materials, such as film, chemicals, computer supplies and proofing materials. We believe that there are adequate sources of supply for our primary raw materials and that our relationships with our suppliers yield improved quality, pricing and overall service to our customers; however, there can be no assurance that we will not be adversely affected by a tight market of our primary raw materials.

        Our results of operations depend to a large extent on the cost of paper and our ability to pass along to our customers any increases in these costs and remain competitive when there are decreases. In recent years, the number of suppliers of paper has declined, and we have formed stronger commercial relationships with selected suppliers. This has enabled us to reduce costs by increasing efficiency, negotiating favorable price discounts and achieving more assured sourcing of high quality paper that meets our specifications.

        We have entered into long-term ink supply agreements with four suppliers. We have committed to purchase a substantial portion of our annual ink requirements from these suppliers.

        We have an agreement expiring July 2006 with a supplier to purchase all of our requirements for mailing services (inserting, sorting, tying, bagging and applying postage to direct mail). The prices for the mailing services are negotiated annually. As part of this agreement, our mailing services receive priority over other customers of this supplier.

Competition

        We compete with multiple competitors in each of our business segments.

        We believe that, in addition to RNS, R.R. Donnelley & Sons Company, Quebecor World Inc. and American Color Graphics are the largest producers of advertising inserts distributed through local and national newspapers in the United States, with more than 120 regional and local producers accounting for the balance. Valassis Communications, Inc., Harte-Hanks, Inc. and News America Marketing are among the largest producers of free standing inserts and shopper publications, which are media that compete with advertising inserts and other advertising products. In addition, RNS competes with television, radio and other forms of print and electronic media. In the production of Sunday newspaper comics, we compete with American Color Graphics as well as those newspapers that print their own comics and others that could do so. Vertis' newspaper TV listing guides, Sunday magazine and newspaper supplement operations also face strong competition from printers and newspapers. Vertis' major competitors in these areas are R.R. Donnelley & Sons Company, Quebecor World Inc., and American Color Graphics. Although the advertising insert and newspaper products industry in the United States remains highly fragmented, recent technological developments and over-capacity in the industry have increased industry consolidation and competitive pressures.

        The principal methods of competition in these businesses are pricing, quality, customer targeting capabilities, timeliness of delivery, customer service and other value-added services. Pricing depends in large part on the prices of paper and ink, which are RNS's major raw materials. Pricing is also

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influenced by shipping costs, operating efficiencies and the ability to control costs. We believe that the introduction of new technologies and continued excess capacity in this industry sector, combined with the cost pressures facing customers resulting from other factors, including the cost of paper and postal rates, have resulted in margin pressures and increased competition in our core businesses.

        DMS competes with a number of different firms in each of our principal lines of direct mail business. In the personalized direct mail product category, DMS's major competitors are R.R. Donnelley Specialty Products, Moore Corporation Limited, ADVO, Inc. and Quebecor World Inc. In the database and response management business categories, we compete with companies such as Harte-Hanks, Inc., Acxiom Corporation and Experian. The primary competitive factors in DMS's specialty products are quality, flexibility, service, timeliness of delivery and price. DMS's major competitors in the non-specialty printing services sector include Cyril-Scott Company, Double Envelope Corp. (Convertagraphics) and R.R. Donnelley Specialty Products.

        The business sector in which ATS operates is highly fragmented and there has been recent consolidation. Softness in traditional brand advertising spending has depressed revenues and operating margins in this sector. ATS's principal competitors include Applied Graphics Technologies, Inc., Schawk, Inc., Southern Graphics, a division of Alcoa, independent color separators and converters, as well as the emerging competition from many advertising agencies and local premedia shops. The independent color separators and converters largely compete with us in regional, local and specific markets. The major competitive factors for both ATS and the premedia business are breadth of services, quality of finished products, distribution capabilities, ongoing customer service and availability of time on equipment that is appropriate in size and function for a given project. The consolidation of customers within some parts of these businesses has provided both greater competitive pricing pressures and opportunities for increased volume solicitation.

        Vertis Europe's major competitor in this sector is Seven Worldwide, a division of Applied Graphics Technologies, Inc. The U.K. market, while also fragmented, has certain key players, including Communisis, St. Ives, Polestar and Primecom, who collectively dominate the market. The European direct mail market has been growing steadily over the last ten years, but this growth has attracted new players. There appears to be a significant increase in printing capacity due in part to generalist printing companies converting to direct marketing printing. Continued demand for shorter runs and highly targeted mailing requires producers to be more flexible and responsive.

Trade Names, Trademarks and Patents

        We own certain trade names, trademarks and patents used in our business. The loss of any such trade name, trademark or patent would not have a material adverse effect on our consolidated financial condition or results of operations.

Governmental Regulations

        Our business is subject to a variety of federal, state and local laws, rules and regulations. Our production facilities are governed by laws and regulations relating to workplace safety and worker health, primarily the Occupational Safety and Health Act ("OSHA") and the regulations promulgated thereunder. Except as described herein, we are not aware of any pending legislation that in our view is likely to affect significantly the operations of our business. We believe that the operations of our subsidiaries comply substantially with all applicable governmental rules and regulations.

Environmental Matters

        Our operations are subject to a number of federal, state, local and foreign environmental laws and regulations including those regarding the discharge, emission, storage, treatment, handling and disposal of hazardous or toxic substances as well as remediation of contaminated soil and groundwater. These

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laws and regulations impose significant capital and operating costs on our business and there are significant penalties for violations.

        Certain environmental laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances. Because of our operations, the long history of industrial operations at some of our facilities, the operations of predecessor owners or operators of certain of our businesses, and the use, production and release of hazardous substances at these sites and at surrounding sites, we may be subject to liability under these environmental laws. Various facilities of ours have experienced some level of regulatory scrutiny in the past and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past practices.

        The Comprehensive Environmental Response, Compensation & Liability Act of 1980 as amended ("CERCLA"), provides for strict, and under certain circumstances, joint and several liability, for among other things, generators of hazardous substances disposed of at contaminated sites. We have received requests for information or notifications of potential liability from the Environmental Protection Agency under CERCLA for a few off-site locations. We have not incurred any significant costs relating to these matters and we do not believe that we will incur material costs in the future in responding to conditions at these sites.

        The nature of our operations exposes us to certain risks of liabilities and claims with respect to environmental matters. We believe our operations are currently in material compliance with applicable environmental laws and regulations. In many jurisdictions, environmental requirements may be expected to become more stringent in the future which could affect our ability to obtain or maintain necessary authorizations and approvals or result in increased environmental compliance costs.

        We do not believe that environmental compliance requirements are likely to have a material effect on us. We cannot predict what additional environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted, or the amount of future expenditures that may be required in order to comply with these laws. There can be no assurance that future environmental compliance obligations or discovery of new conditions will not arise in connection with our operations or facilities and that these would not have a material adverse effect on our business, financial condition or results of operations.

Employees

        As of December 31, 2002, we had approximately 8,700 employees. Most of the hourly employees at our North Brunswick and Newark, New Jersey facilities (approximately 155 employees) are represented by the Paper, Allied Industrial, Chemical and Energy Workers International Union. We also have 17 employees at our New York facility who are represented by the Amalgamated Lithographers of America Union Local 1L. In addition, approximately 20 employees of our Chicago facilities are represented by the Graphic Communications International Union or the Amalgamated Lithographers of America. We believe we have satisfactory employee and labor relations.

Certain Factors That May Affect Our Business

Our highly leveraged status may impair our financial condition and we may incur additional debt.

        We currently have a substantial amount of debt. As of December 31, 2002, our total consolidated debt is $1,093.1 million, excluding our accounts receivable securitization facility. Our substantial debt could have important consequences for our financial condition, including:

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making it more difficult for us to satisfy our obligations under the outstanding indebtedness;



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increasing our vulnerability to general adverse economic and industry conditions;

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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions and other general corporate requirements;



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requiring a substantial portion of our cash flow from operations for the payment of interest on our debt and reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions and general corporate requirements;



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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and



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placing us at a competitive disadvantage to other less-leveraged competitors.

        Subject to specified limitations set forth in the agreements regarding our indebtedness, we are permitted to incur additional debt. If new debt is added to our current debt levels, the related risks that we now face could intensify.

Covenant restrictions under our indebtedness may limit our ability to operate our business.

        Our senior credit facility and senior subordinated credit facility contain, and the indentures governing our senior and senior subordinated notes and certain of our other agreements regarding our indebtedness contain, among other things, covenants that may restrict our ability to finance future operations or capital needs or to engage in other business activities. Our senior credit facility, senior subordinated credit facility and the indentures restrict, among other things, our and the subsidiary guarantors' ability to:

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borrow money;



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pay dividends or make distributions;



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purchase or redeem stock;



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make investments and extend credit;



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engage in transactions with affiliates;



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engage in sale-leaseback transactions;



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consummate certain asset sales;



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effect a consolidation or merger or sell, transfer, lease or otherwise dispose of all or substantially all of our assets; and



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create liens on our assets.

        In addition, our senior credit facility requires us to maintain specified financial ratios and satisfy certain financial condition tests which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet those financial ratios and financial condition tests. We cannot assure you that we will meet those tests or that the lenders will waive any failure to meet those tests. A breach of any of these covenants would result in a default under our senior credit facility, senior subordinated credit facility and the indentures. If an event of default under our senior or senior subordinated credit facility occurs, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. In such an event, we cannot assure you that we would have sufficient assets to pay amounts due on our outstanding debt.

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The high level of competition in the advertising and marketing services industry could have a negative impact on our ability to service debt, particularly in a prolonged economic downturn.

        The advertising and marketing services industry is highly competitive in most product categories and geographic regions. Competition is largely based on price, quality and servicing the specialized needs of customers. Moreover, rapid changes in information technology may result in more intense competition, as existing and new entrants seek to take advantage of new products, services and technologies that could render our products, services and technologies less competitive or, in some instances, even obsolete. See "—Competition" above. During periods of economic downturn, there has been excess production capacity in the industry and more competitive pricing resulting in decreased profitability. The recent prolonged economic downturn and any future periods of economic downturn or stagnation could result in increased competition and possibly affect our sales and profitability. A decline in sales and profitability may decrease our cash flow, and make it more difficult for us to service our level of debt.

Demand for our services may decrease due to a decline in clients' or an industry's financial condition or due to an economic downturn.

        We cannot assure you that the demand for our services will continue at current levels. Our clients' demands for our services may change based on their needs and financial conditions. In addition, when economic downturns affect particular clients or industry groups, demand for advertising and marketing services provided to these clients or industry groups is often adversely affected. In 2001, the advertising industry experienced the first year-over-year decline in advertising spending since World War II. During 2002, improved economic conditions have led to modest increases in demand for advertising and marketing services generally and for our services specifically. A substantial portion of our revenue is generated from customers in various sectors of the retail industry, which has been particularly impacted by the recent prolonged economic downturn. However, under the current uncertain economic environment, including the effects of ongoing war and possible future terrorist attacks, there can be no assurance that economic conditions or the level of demand for our services will continue to improve or that they will not deteriorate, resulting in another period of economic downturn. If there is another period of economic downturn or stagnation, our business may be adversely affected.

Changes in the cost of paper could have a negative impact on our ability to service our indebtedness.

        An increase in the cost of paper, a key raw material in our operations, may reduce our production volume and profits. If (i) we are not able to pass paper cost increases to our customers, or (ii) our customers reduce the size of their print advertising programs, our results of operations relating to those customers, including sales and profitability, could be negatively affected. A decline in volume may decrease our cash flow, and make it difficult for us to meet our required debt service.

        Capacity in the paper industry has remained relatively stable in recent years. Increases or decreases in demand for paper have led to corresponding pricing changes and, in periods of high demand, to limitations on the availability of certain grades of paper, including grades used by us. A loss of the sources of paper supply or a disruption in those sources' business or failure by them to meet our product needs on a timely basis could cause temporary shortages in needed materials which could have a negative effect on our results of operations, including sales and profitability.

Regulations on direct marketing may impose restrictions on us.

        Federal and state legislatures have passed a variety of laws in recent years relating to direct marketing, including substantial restrictions on certain industries, such as tobacco and sweepstakes advertising. This legislation and similar future legislation might have a substantial impact on our business, as our customers in those industries and consumers in general adjust their behaviors in response to such legislation. While we have taken steps to reduce our exposure to these industries, there is no assurance that our performance would not be negatively affected in the future.

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ITEM 2    PROPERTIES

Executive Offices

        Our principal executive offices are located at 250 West Pratt Street, Baltimore, Maryland, and comprise approximately 58,000 square feet of leased space, pursuant to a lease agreement expiring on August 31, 2007.

Production Facilities

        As of December 31, 2002, we owned 14 and leased 46 production facilities, 54 of which are located in the United States with an aggregate area of approximately 3,600,000 square feet. The leased production facilities have lease terms expiring at various times from 2003 to 2014. We believe that our facilities are suitable and adequate for our business. We continually evaluate our facilities to ensure they are consistent with our operational needs and business strategy. A summary of production facilities is set forth in the table below:

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(1)

Comprised of two adjacent facilities.

Sales Offices and Other Facilities

        We maintain a large number of facilities for use as sales offices and other administrative purposes. All but two of the sales offices and other facilities are leased, with lease terms expiring at various times from 2003 to 2006.

ITEM 3    LEGAL PROCEEDINGS

        Certain claims, suits and complaints (including those involving environmental matters) which arise in the ordinary course of our business have been filed or are pending against us. We believe, based upon the currently available information, that all the results of such proceedings, individually, or in the aggregate would not have a material adverse effect on our consolidated financial condition or results of operations.

ITEM 4    SUBMISSION OF VOTE TO SECURITY HOLDERS

        There were no matters submitted to a vote of security holders during the fourth quarter of our fiscal year ended December 31, 2002.

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PART II

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

        Not applicable.

ITEM 6    SELECTED FINANCIAL DATA

        The following table sets forth selected historical consolidated financial data for Vertis and its subsidiaries as of and for the years ended December 31, 2002, 2001, 2000, 1999, and 1998. The historical data for the three-year period ended December 31, 2002 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report. The historical data for the two-year period ended December 31, 1999 has been derived from our audited consolidated financial statements not included herein. We sold our subsidiary, Columbine JDS Systems, Inc. ("Columbine"), in connection with the recapitalization of Vertis Holdings in 1999. This table presents the operating results of Columbine and its subsidiaries as discontinued operations in all applicable periods.

        You should read the following selected historical consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the related historical consolidated financial statements and related notes included elsewhere in this Annual Report.

⁽¹⁾

Includes $19.1 million of restructuring expenses.

⁽²⁾

Includes $42.2 million of restructuring expenses.

⁽³⁾

Includes $21.4 million of restructuring and asset impairment charges.

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⁽⁴⁾

Includes $11.9 million of compensation charges related to Vertis Holdings' recapitalization and a $3.3 million restructuring charge related to the decision to close a plant in 2000.

⁽⁵⁾

Includes $4.6 million of termination costs for executive positions eliminated.

⁽⁶⁾

Interest expense excludes amortization of deferred financing fees.

⁽⁷⁾

Includes a $4.2 million loss on the sale of a subsidiary and a $1.8 million gain on investment sales.

⁽⁸⁾

Includes foreign exchange losses of $1.2 million related to termination of U.K.-based borrowings.

⁽⁹⁾

Includes acquired technology writeoffs of $2.8 million and $0.2 million for the years ended December 31, 1999 and 1998, respectively. Results for the year ended December 31, 1999 also include $5.5 million of compensation related costs from the settlement of stock options and a foreign exchange loss of $0.2 million related to termination of U.K.-based borrowings.

⁽¹⁰⁾

Effective January 1, 2002, we adopted Statement of Financial Accounting Standard ("SFAS") No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). Under this statement, goodwill and intangible assets with indefinite lives are no longer amortized. Under the transitional provisions of SFAS 142, our goodwill was tested for impairment as of January 1, 2002. Each of our reporting units fair value was determined based on a valuation study performed by an independent third party using the discounted cash flow method and the guideline company method. As a result of our impairment test completed in the third quarter of 2002, we recorded an impairment loss of $86.6 million at ATS and $21.8 million at Vertis Europe to reduce the carrying value of goodwill to its implied fair value. Impairment in both cases was due to a combination of factors including operating performance and acquisition price. In accordance with SFAS 142, the impairment charge was reflected as a cumulative effect of accounting change in the accompanying 2002 consolidated statements of operations.

⁽¹¹⁾

In 1996, we entered into a six-year agreement to sell certain trade accounts receivable of certain subsidiaries. In December 2002, this agreement as amended expired and we entered into a new three-year agreement terminating in December 2005. The agreement allows for a maximum of $130.0 million of trade accounts receivable to be sold at any time based on the level of eligible receivables. We sell our trade accounts receivable through a bankruptcy-remote wholly-owned subsidiary, however, we maintain an interest in the receivables and are still responsible for the servicing and collection of those accounts receivable. The amount sold under these facilities, net of retained interest, was $125.9 million at December 31, 2002, $130.0 million as of December 31, 2001, 2000 and 1999 and $117.6 million as of December 31, 1998. These amounts are reflected as reductions of Accounts receivable, net on our consolidated balance sheet included in this Annual Report. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements."

⁽¹²⁾

Includes $36.2 million for new presses to accommodate the marketing needs of new RNS customers, $6.2 million for one-time implementation expenditures for software systems and $10.2 million of expenditures to buy out operating leases.

⁽¹³⁾

EBITDA is included in this Annual Report as it is the primary measure we use to evaluate our business segments. EBITDA represents the sum of operating income, depreciation and amortization of intangibles. We present EBITDA here to provide additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements and because it is the measure by which we gauge the profitability of our segments. EBITDA is not a measure of financial performance in accordance with accounting principles generally accepted in the United States of America. You should not consider it an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may be limited.

EBITDA as used by management is calculated as follows:

⁽¹⁴⁾

Earnings were inadequate to cover fixed charges by $14.3 million, $76.9 million and $33.7 million for the years ended December 31, 2002, 2001 and 2000, respectively. Net loss for the years ended December 31, 2002, 2001 and 2000, includes $89.2 million, $104.4 million and $97.5 million, respectively, of non-cash depreciation and amortization expense.

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ITEM 7    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This section provides a review of the financial condition and results of operation of Vertis during the three years ended December 31, 2002. The analysis is based on the consolidated financial statements and related notes that are included elsewhere in this Annual Report, prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

Introduction

        Vertis is a leading provider of integrated advertising products and marketing services. We deliver a comprehensive range of solutions that simplify, improve and maximize the effectiveness of multiple phases of our customers' marketing campaigns from the inception of an advertising concept, through design, production, targeted distribution, and ultimately to providing advertising effectiveness measurement.

        We operate through four principal business segments. Vertis Retail and Newspaper Services, Vertis Direct Marketing Services and Vertis Advertising Technology Services provide advertising solutions to clients on a functional basis in the U.S., while Vertis Europe provides both production and direct marketing services to clients overseas, predominantly in the U.K.

Corporate Consolidation and Restructuring

        In the first quarter of 2000, we began a multi-phase consolidation and restructuring plan intended to streamline operations, improve sales and reduce the cost of operating our business in order to better serve our customers while at the same time also improving our operating and financial performance. Our consolidation plan had three principal components:

•

eliminating our two-tier holding company structure and centralizing our domestic and European operations under one management team that has successfully managed our largest business segment since 1994, while integrating advertising and marketing production services;



•

reorganizing our sales force to correspond more directly to our clients' evolving needs for broad-based, integrated marketing solutions; and



•

consolidating back office operations and eliminating duplicative overhead.

        As part of this plan, we also consolidated our sales organization to create an integrated product offering and sales effort. We have established national and retail sales groups to target large accounts that can employ multiple service lines to augment sales units focused on selling the products and services of each business unit. We believe that this structure, which we call Vertis Integrated Selling, will maximize multi-solution sales opportunities while continuing to drive the sales of our products and services through our individual business units. Finally, this consolidation has allowed us to realize substantial cost savings through the elimination of duplicative positions as well as much of the corporate overhead previously incurred by our parent, Vertis Holdings.

        In order to further reduce duplicative overhead, on January 1, 2001, we transferred 13 management and support personnel employed at our parent, Vertis Holdings, to Chancery Lane Capital ("CLC"), an affiliate of the former chairman of Vertis Holdings, in exchange for a $14.0 million one-time payment by us to CLC. This cost was recorded in restructuring expense in 2001. Concurrently, Thomas H. Lee Partners acquired an additional $40 million of our equity from an affiliate of CLC in exchange for $40 million of Vertis Holdings' mezzanine debt.

        During 2001, we continued the restructuring program initiated in 2000. Certain production and sales administration facilities were combined in strategic areas resulting in the closure of 14 facilities, abandonment of assets in those locations and reduction in work force.

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        In 2002, we planned and implemented three restructuring programs. In the first quarter of 2002, two Vertis Europe facilities were combined and ten employees were terminated with severance of $0.7 million and facility closure costs of approximately $1.6 million. In addition, the Company continued to streamline operations at ATS. The 2002 restructuring plan terminated approximately 400 employees, which resulted in a severance charge of $4.6 million and closed five facilities, which resulted in a charge of $6.0 million. In the fourth quarter of 2002, we consolidated production capabilities within DMS, terminating 133 employees with severance of $0.6 million. Offsetting these amounts is an adjustment of $1.3 million to the estimate of 2001 restructuring made in 2002. To date, the total of all planned restructuring activities has eliminated approximately 1,500 positions and closed 26 facilities since January 1, 2000.

        In connection with these actions, we recorded $19.1 million, $42.2 million and $21.4 million of restructuring expense in the years ended December 31, 2002, 2001 and 2000, respectively. For more information about our restructuring expense, see Note 2 of our consolidated financial statements included in this Annual Report.

Results Of Continuing Operations

        The following table presents major components from our consolidated statements of operations and consolidated statements of cash flows.

        EBITDA is included in this Annual Report as it is the primary performance measure we use to evaluate our business segments. EBITDA represents the sum of operating income, depreciation and amortization of intangibles. We present EBITDA here to provide additional information regarding our ability to meet our future debt service, capital expenditures and working capital requirements and because it is the measure by which we gauge the profitability of our segments. EBITDA is not a measure of financial performance in accordance with GAAP. You should not consider it an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of EBITDA may be different than the calculation used by other companies and therefore comparability may be limited.

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        EBITDA as used by management is calculated as follows:

General

        Several factors can affect the comparability of our results from one period to another. Primary among these factors are the cost of paper, changes in business mix, the timing of restructuring expense and the realization of the associated benefits.

        The cost of paper is a principal factor in our pricing to certain customers since a substantial portion of net sales includes the pass-through cost of paper. Therefore, the cost of paper significantly affects our net sales at RNS and DMS, as does the proportion of paper provided by customers. We are generally able to pass on increases in the cost of paper to our customers, while decreases in paper costs generally result in lower prices to customers. The impact of changes in the cost of paper is most significant for RNS. As such, when discussing results for RNS, we discuss both net sales and "value-added revenue." We define "value-added revenue" as net sales less the cost of paper and ink.

        Variances in expense category ratios, as percentages of net sales, may reflect business mix and are influenced by the change in revenue directly resulting from changes in paper prices. As our business mix changes, the nature of products sold in a period can lead to offsetting increases and decreases in different expense categories.

        You should consider all of these factors in reviewing the discussion of our operating results.

Results of Operations—2002 compared to 2001

        Net sales declined $175.9 million, or 9.5%, from $1,851.1 million in 2001 to $1,675.2 million in 2002 largely as a result of a $114.2 million downward impact on revenue caused by declines in the cost of paper. As of December 31, 2002, the average cost per ton of newsprint paper in the U.S. has decreased 4.1% versus 2001. The remainder of the decline in net sales, excluding the effect of paper, is largely a result of sales shortfall at our ATS segment. The impact of the declining cost of paper had the greatest impact at our RNS segment, which posted revenue below 2001 by $98.1 million, or 8.4%.

        More than 100%, $110.8 million, of the net sales decline at RNS was attributable to declining paper prices. After adjusting for the impact of the decline in the cost of paper, RNS net sales increased $12.7 million, or 1.1% for the twelve months ended December 31, 2002. Value-added revenue at RNS increased in the twelve month period ended December 31, 2002 by $22.1 million, or 3.9%. The increase in net sales, after eliminating the impact of paper prices, and value-added revenue at RNS reflects increased volume.

        Net sales at DMS declined $25.4 million, or 7.9%, in 2002 of which $3.4 million was due to the decline in the cost of paper. Excluding the impact of the cost of paper, net sales decreased $22.0 million, or 6.8% during the year. Volume gains were more than offset by lower pricing, the result of a shift by our customers to less complex products and competitive price pressures. Additionally, net sales at DMS were negatively affected by the impact of the postal rate increase at the beginning of the third quarter of 2002 and market-driven delays in traditional direct mail campaigns by certain end-users.

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        ATS was negatively impacted by the soft advertising environment, especially the advertising agency business, resulting in a decline in net sales of $49.3 million, or 20.2% during 2002.

        Net sales at Vertis Europe were below 2001 by $2.5 million, or 1.8%. Excluding the impact of the change in the exchange rate of the British pound sterling to the U.S. dollar, the decline in net sales would have been $8.5 million, or 6.0%. This decline is due to sluggish market conditions and the sale of a subsidiary of Vertis Europe, effective May 2001, which generated net sales of $1.5 million in 2001.

        Costs of production decreased $176.1 million, or 12.3%, from $1,431.7 million in 2001 to $1,255.6 million in 2002. The cost of paper and ink consumed represents $139.0 million of the decline in costs of production for the year. The balance of the decline in costs of production was the result of strong cost management of variable and fixed costs and our ongoing efforts to improve operating efficiencies.

        Selling, general and administrative expenses amounted to $187.8 million versus $202.2 million in 2001. The decline of $14.4 million, or 7.1%, reflects the benefits realized from our restructuring programs and other cost control measures. After adjusting net sales for the impact of the decline in paper costs, selling, general and administrative costs amounted to 10.5% of net sales in 2002 versus 10.9% in 2001.

        Restructuring and asset impairment charges in 2002 totaling $19.1 million are comprised of $8.7 million in severance costs, $5.1 million in losses on the disposition of assets at closed facilities, $3.7 million in closed facility costs, and $1.6 million of other charges which are primarily legal fees and the cost of leased equipment no longer needed due to the restructurings. Compared to 2001, restructuring and asset impairment charges declined $23.1 million, or 54.8%.

        Amortization expense decreased by $14.3 million from 2001. The adoption of SFAS 142 caused $13.3 million of this decline Under this standard, goodwill and intangibles assets with indefinite useful lives are no longer amortized. Accordingly, we stopped amortizing our existing goodwill on January 1, 2002. For further discussion, see "—New Accounting Pronouncements" below.

        Operating income amounted to $123.5 million in 2002, an improvement of 74.9% over operating income of $70.6 million in 2001. Our cost management initiatives and continued focus on operating efficiencies contributed to the increase in operating income as a percentage of net sales to 7.4% in 2002 (6.9% excluding the impact of declining paper costs) versus 3.8% in 2001. The decrease in restructuring and asset impairment charges and the adoption of SFAS 142 provided $23.1 million and $13.3 million of the increase in operating income, respectively. Consolidated EBITDA was $212.7 million in 2002, an increase of $37.7 million, or 21.6%, compared to the full-year 2001. Excluding the effect on amortization expense of our adoption of SFAS 142, operating income at our RNS, DMS and Vertis Europe segments followed the changes in EBITDA described below. At ATS, operating income, adjusted for the adoption of SFAS 142 declined $2.3 million less than EBITDA due to lower depreciation expense as a result of the contraction in the segment and the number of locations operated pursuant to our restructuring efforts.

        A reconciliation of EBITDA to Operating income by segment for the year ended December 31, 2002 is as follows:

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        At RNS, EBITDA amounted to $168.8 million in 2002, an increase of $24.8 million, or 17.2%, reflecting increased volume, cost management, and a decline in restructuring and asset impairment charges totaling $4.1 million.

        The net sales volume declines at DMS in 2002 had minimal impact on EBITDA, which is flat compared to 2001, due to cost management and utilization of our most efficient assets, which more than offset the decline in net sales. Restructuring and asset impairment charges declined $1.0 million as compared to 2001.

        ATS EBITDA declined $2.2 million to a loss of $3.5 million due to the poor advertising environment. Costs were managed tightly and restructuring and asset impairment charges were $1.6 million less than 2001, both of which mitigated a significant portion of the decline in net sales.

        At Vertis Europe, EBITDA declined $3.8 million, or 22.5% in 2002. Of the decline, $2.0 million resulted from an increase in restructuring and asset impairment charges as we streamlined certain portions of our European business. The remainder of the decline reflects the decline in net sales.

        Net loss in 2002 was $120.1 million, an increase in loss of $65.3 million over 2001. Included in the 2002 net loss is a $108.4 million charge for the cumulative effect of accounting change resulting from our adoption of SFAS 142 discussed in "—New Accounting Pronouncements." Loss before cumulative effect of accounting change improved $43.1 million over 2001. Interest expense in the year ended 2002 decreased $7.4 million, or 6.2% as compared to 2001 due to a decrease in market interest rates. The decrease in amortization of deferred financing fees of $2.8 million in 2002 versus 2001 was primarily a result of the full amortization of extension fees related to our senior subordinated credit facility financing, which were amortized over the six-month extension period from January 2001 to June 2001. In 2001, we recorded a $5.9 million impairment loss to reflect a permanent decline in the value of investments and we sold the remaining portion of an equity investment resulting in a $2.0 million loss. An $11.5 million write off of deferred financing fees was recorded in 2002 in connection with our recent debt offerings and related debt pay down.

Results of Operations—2001 compared to 2000

        Net sales declined $135.3 million, or 6.8%, from $1,986.4 million in 2000 to $1,851.1 million in 2001 largely as a result of the overall decline in industry-wide advertising spending in 2001.

        At RNS, net sales declined $94.1 million, or 7.5%, due to a 9.9% decline in production volume, indicative of the soft advertising and retail environment, partially offset by improved pricing. Offsetting the volume decline and pricing improvement was the impact of the 2.9% overall U.S. paper price increase in 2001. Adjusting for the cost of paper and ink, value-added revenue at RNS decreased $31.1 million, or 5.2% in 2001. This decrease reflects the decline in volume offset by an improvement in the mix of sales towards higher priced work.

        At DMS, net sales decreased $4.4 million, or 1.3%, resulting from increased net sales at our digital production services facility of $11.7 million, or 112.3%, reflecting the continued growth within this unit. The increase in net sales at our digital production services facility was more than offset by lower revenue per impression at our direct marketing facilities, which includes the impact of changes in product mix. To combat the decline in revenue per impression, work was shifted among plants so production efficiencies could be leveraged.

        Our ATS net sales have been negatively impacted by softness in several key markets, especially advertising agencies, the fall off of the dot-com advertising industry and weak demand for web development services. ATS net sales declined $24.6 million, or 9.1%, with agency revenue below 2000 by $23.5 million, or 27%, partially offset by a $5.7 million or 5.4% increase in net sales to the retail sector. The remainder of the decline in net sales revenue reflects declines in fulfillment net sales and other net sales.

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        At Vertis Europe, net sales declined $14.5 million, or 9.3%. The decline includes the effect of the sale of a subsidiary of Vertis Europe effective May 2001, which generated $6.5 million in net sales in 2000 versus $1.5 million in 2001. The decline in net sales was also the result of the unfavorable exchange rate from the British pound sterling to the US dollar, the effect of which equates to approximately $4.5 million, or a 3.1% decrease. Excluding the effects of the sale of the subsidiary of Vertis Europe and exchange rate fluctuations, net sales expressed in local currency decreased by $3.5 million or 3.5% due to a decrease in demand in the direct marketing services business.

        Costs of production decreased $93.9 million, 6.2%, from $1,525.6 million in 2000 to $1,431.7 million in 2001, while increasing as a percentage of sales by 0.5%. The dollar decrease in costs of production reflects the decrease in net sales. The modest increase in costs of production as a percentage of net sales reflects higher variable overhead costs, including utilities and maintenance. Paper costs as a percentage of net sales remained relatively constant in 2001 as compared to 2000.

        Selling, general and administrative expenses amounted to $202.2 million in 2001 versus $218.6 million in 2000. The decline of $16.4 million, or 7.5% reflects the benefits realized from our restructuring programs and other cost control measures we took in an effort to mitigate the effects of the economic downturn. Selling, general and administrative expenses were essentially flat on a percentage of net sales basis.

        Results for 2001 include $42.2 million of restructuring charges, an increase of $20.8 million, or 97.2% versus similar charges incurred in 2000. Included in these costs in 2001, is a $14.0 million payment to CLC (see "—Corporate Consolidation"), $5.9 million in losses on the disposition of assets at closed facilities, $9.4 million in closed facility costs, $11.7 million in severance costs, and $1.2 million of other charges.

        Operating income amounted to $70.6 million in 2001, a decline of $52.7 million, or 42.7% versus operating income of $123.3 million in 2000. In addition to the fluctuations discussed above, the increase in depreciation expense in 2001 over 2000 also contributed to the decline in operating income, particularly at our RNS segment. This increase was attributable to the $142.7 million of capital expenditures in 2000 and the full year of depreciation expense for those assets in 2001. Consolidated EBITDA amounted to $175.0 million in 2001, a decrease of $45.9 million, or 20.8%, compared to the full-year 2000.

        A reconciliation of EBITDA to Operating income by segment for the year ended December 31, 2001 is as follows:

        At RNS, 2001 EBITDA amounted to $144.0 million, a decrease of $24.8 million, or 14.7% from 2000, reflecting the decline in value-added revenue. Also contributing to the decline in EBITDA was an increase in variable costs per production unit of 6.7% due to higher gas costs, freight expenses, and lower earnings from scrap sales.

        At DMS, EBITDA increased $10.9 million, or 38.4%, to $39.2 million in 2001 versus $28.3 million in 2000. This increase reflects the increase in sales volume at the digital production services facility, and the cost savings at the direct marketing services facilities, including the benefits derived by shifting production between facilities to maximize efficiency. The increase in EBITDA also reflects the benefit of restructuring actions, which started in 2000.

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        ATS EBITDA declined $28.3 million, or 104.6% from 2000 to a loss of $1.2 million, which was primarily due to the decline in net sales and the increase in costs as a percentage of net sales.

        At Vertis Europe, the modest decline in EBITDA was the result of the effects of exchange rate fluctuations.

        Net loss increased $29.7 million in 2001 compared to 2000. Interest expense in 2001 decreased from 2000 due to a decrease in interest rates offset by an increase in debt. The higher debt levels related to an increase in the revolving credit facility balance to make payments on the term loans and to pay restructuring costs. Decreases in London Inter Bank Offered Rate ("LIBOR") and Prime interest rates from December 2000 to December 2001 were 4.52 percentage points and 4.75 percentage points, respectively, which lowered our average interest rate from 11.58% in 2000 to 9.78% in 2001. The decrease in amortization of deferred financing costs in 2001 from 2000 was a result of the full amortization in 2000 of fees related to the bridge financing. These fees were amortized over the one-year bridge financing period. The bridge financing was converted to a term financing in December 2000. In 2001, we recorded a $5.9 million impairment loss to reflect a permanent decline in the value of investments and we sold the remaining portion of an equity investment resulting in a $2.0 million loss compared to a $1.8 million gain on sale of investment in 2000.

Liquidity and Capital Resources

Sources of Funds

        We fund our operations, acquisitions and investments with internally generated funds, revolving credit facility borrowings, sales of accounts receivable, and issuances of debt.

        We believe that the facilities in place, as well as our cash flows, will be sufficient to meet operational needs (including capital expenditures and restructuring costs) for the next twelve months. At December 31, 2002, we had approximately $90.2 million available to borrow under our revolving credit facility.

        We also believe that the facilities in place, as well as our cash flows, will be sufficient to meet operating needs (including capital expenditures and restructuring costs) for several years. There can be no assurance, however, that our operations will generate sufficient cash flows or that we will always be able to refinance our current debt or obtain additional financing to refinance debt we assume in acquisition transactions. In the event we are unable to obtain sufficient financing, we would pursue other sources of funding such as debt offerings by Vertis Holdings, equity offerings by us and/or Vertis Holdings or asset sales.

        Items that could impact liquidity are described below.

Contractual Obligations

        The following table discloses aggregate information about our contractual obligations as of December 31, 2002 and the periods in which payments are due:

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Foreign Currency

        Fluctuation in foreign currency would affect approximately $107.0 million of the British pound sterling based debt as of December 31, 2002.

Off-Balance Sheet Arrangements

        In 1996, we entered into a six-year agreement to sell certain trade accounts receivable of certain subsidiaries (as amended, the "1996 Facility") through the issuance of $130.0 million of variable rate trade receivable backed certificates. In April 2002, the revolving period for these certificates was extended and the certificates were refinanced. In December 2002, the 1996 Facility expired and we entered into a new three-year agreement terminating in December 2005 (the "A/R Facility") through the issuance of $130.0 million variable rate trade receivable backed notes. The proceeds from the A/R Facility were used to retire the certificates issued under the 1996 facility.

        The A/R Facility allows for a maximum of $130.0 million of trade accounts receivable to be sold at any time based on the level of eligible receivables. Under the 1996 Facility and the A/R Facility, we sell our trade accounts receivable through a bankruptcy-remote wholly-owned subsidiary. However, we maintain an interest in the receivables and have been contracted to service the accounts receivable. We received cash proceeds for servicing of $3.3 million and $3.6 million in 2002 and 2001, respectively.

        At December 31, 2002 and 2001, accounts receivable of $125.9 million and $130.0 million, respectively, had been sold under the facilities. At December 31, 2002 and 2001, we retained an interest in the pool of receivables in the form of overcollateralization and cash reserve accounts of $46.3 million and $71.9 million, respectively which is included in Accounts receivable, net at allocated cost, which approximates fair value. The proceeds from collections reinvested in securitizations amounted to $1,545.5 million and $1,646.2 million in 2002 and 2001, respectively.

        Fees for the program under the facilities vary based on the amount of interests sold and the LIBOR plus an average margin of 37 basis points in 2002 and 34 basis points in both 2001 and 2000. In 2003, the A/R Facility is priced at LIBOR plus a margin of 90 basis points. These fees, which totaled $2.8 million in 2002, $6.0 million in 2001 and $8.3 million in 2000, are included in Other, net.

        We have no other off-balance sheet arrangements that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.

Debt

        In 2002, we issued $350.0 million of 10⁷/8% senior unsecured notes with a maturity date of June 15, 2009. After deducting the initial purchasers' discounts and transaction expenses, the net proceeds received by us from the sale of such notes were approximately $338.0 million. We used such net proceeds to repay $181.5 million of the term loans outstanding under our senior credit facility and $156.5 million of debt outstanding under our senior subordinated credit facility. The net proceeds applied to the term loans were paid such that there are substantially no principal repayment required until the first quarter of 2004.

        Our senior credit facility, senior subordinated credit facility, the outstanding 10⁷/8% notes due June 15, 2009 and the outstanding 13¹/2% senior subordinated notes due December 7, 2009 contain certain customary covenants limiting our ability to engage in certain activities including, among other things, restrictions on capital expenditures, dividends, investments, indebtedness and maintenance of specified levels of interest coverage and leverage. All of our assets are pledged as collateral for the outstanding debt under our senior credit facility. At December 31, 2002, we are in compliance with our debt covenants, however, there can be no assurance that future violations of these debt covenants may

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not occur. For further information on our long-term debt, see Note 10 to the consolidated financial statements included elsewhere in this Annual Report.

Working Capital

        Our current liabilities exceeded current assets by $18.5 million at December 31, 2002 and by $34.9 million at December 31, 2001. This represents an increase in working capital of $16.4 million for the year ended December 31, 2002. The working capital amounts exclude accounts receivable sold under the A/R Facility, the proceeds of which serve to reduce long-term borrowings under our revolving credit facility. Excluding the effect of the A/R Facility (i.e., adding back receivables and reflecting the offsetting increase in long-term debt as if the A/R Facility was not in place), working capital at December 31, 2002 and December 31, 2001 would have been $107.3 million and $95.1 million, respectively. The ratio of current assets to current liabilities as of December 31, 2002 was 0.92 to 1 (1.46 to 1, excluding the A/R Facility effect) compared to 0.88 to 1 as of December 31, 2001 (1.32 to 1, excluding the A/R Facility effect).

        The increase in working capital was due primarily to a decrease in the current portion of long-term debt in addition to fluctuations in operating assets and liabilities.

Summary of Cash Flows

Cash Flows from Operating Activities

        Net cash provided by operating activities in 2002 decreased by $33.7 million from the 2001 level. Adjusted for the increase (decrease) in outstanding checks drawn on controlled disbursement accounts, which are classified as a financing activity, net cash provided by operating activities increased $56.6 million in 2002. This is a result of improved results of operations before the cumulative effect of accounting change and the decrease in restructuring expense in 2002 offset by the timing of payments and collection of receivables.

        Net cash provided by operating activities in 2001 increased by $60.9 million from the 2000 level. However, net cash provided by operating activities adjusted for the increase (decrease) in outstanding checks drawn on controlled disbursment accounts, which are classified as a financing activity, decreased $60.8 million. This decrease was a result of an increased net loss and the timing of payments and collections.

Cash Flows from Investing Activities

        Net cash used for investing activities in 2002 declined from the 2001 level due to a $27.3 million decrease in capital expenditures.

        Net cash used in investing activities in 2001 decreased from the 2000 level due to a $71.6 million decrease in capital expenditures. The higher capital expenditures in 2000 included $36.2 million for new presses installed in response to business opportunities with major customers of RNS.

Cash Flows from Financing Activities

        The amounts of cash used in financing activities in each period reflect the relative levels of capital expenditures and investments in those years. In 2002, we issued $350.0 million of senior unsecured notes, which, after debt discount and fees, netted proceeds of approximately $338.0 million. The proceeds of these issuances were used to repay existing debt and this transaction is reflected in cash flows from financing activities. There were no dividends to our parent, Vertis Holdings, in 2002. From August 2001 to June 24, 2002, the entire 12% interest on Vertis Holdings' mezzanine debt was payable in-kind. Previously, 10% of that interest was payable in cash. Effective June 25, 2002, the interest rate was changed to 13% payable in-kind through December 31, 2005.

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        Cash used in financing activities decreased from 2000 to 2001, due to a $67.0 million non-recurring contribution from Vertis Holdings from investment sale proceeds and the decrease in outstanding checks in 2001.

Seasonality and Other Factors

        While our advertising insert business is generally seasonal in nature, the expansion of other product lines and the expansion of advertising insert business to year-round customers have reduced the overall seasonality of our revenues. Of our full year 2002 net sales, 24.0% were generated in the first quarter, 24.4% in the second, 24.4% in the third and 27.2% in the fourth. Profitability, however, continues to follow a more seasonal pattern due to the higher margins and efficiencies gained from running at full capacity during the year-end holiday production season. On the other hand, lower margins in the first quarter do not fully leverage fixed depreciation, amortization and interest costs that are incurred evenly throughout the year. Based on our historical experience and projected operations, we expect our operating results in the near future to be strongest in the fourth quarter and softest in the first.

        We have approximately $248.5 million of federal net operating losses available to carry forward as of December 31, 2002. These carryforwards expire beginning in 2005 through 2023. We expect that these carryforwards will be used to offset taxable income in future years, thereby lowering our cash tax obligations for several years. For further information on these net operating losses, see Note 12 to the consolidated financial statements included elsewhere in this Annual Report.

New Accounting Pronouncements

        Effective January 1, 2002, we adopted SFAS 142. Under this statement, goodwill and intangible assets with indefinite lives are no longer amortized. Under the transitional provisions of SFAS 142, our goodwill was tested for impairment as of January 1, 2002. Each of our reporting units was tested for impairment by comparing the fair value of the reporting unit with the carrying value of that unit. Fair value was determined based on a valuation study performed by an independent third party using the discounted cash flow method and the guideline company method. As a result of our impairment test completed in the third quarter of 2002, we recorded an impairment loss of $86.6 million at ATS and $21.8 million at Vertis Europe to reduce the carrying value of goodwill to its implied fair value. Impairment in both cases was due to a combination of factors including operating performance and acquisition price. In accordance with SFAS 142, the impairment charge was reflected as a cumulative effect of accounting change in the accompanying 2002 consolidated statements of operations. We will test goodwill for impairment again in the first quarter of 2003.

        In accordance with SFAS 142, we stopped amortizing our existing goodwill on January 1, 2002. A reconciliation of reported net loss to net loss adjusted to reflect the impact of the discontinuance of the amortization of goodwill for the years ended December 31, 2002, 2001 and 2000 is as follows:

        In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Among other things, this statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishments of Debt," which required all gains and losses from extinguishments of debt to be aggregated and, if material, classified as an extraordinary item, net of

25

related income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," will now be used to classify those gains and losses. We have adopted the provisions of this statement which did not have an impact on our consolidated financial statements included in this Annual Report.

        In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement requires recording costs associated with exit or disposal activities at their fair value when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. Adoption of this statement is required with the beginning of fiscal year 2003.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantors Accounting and Disclosure Requirements for Guarantees." The disclosure requirements are effective for financial statements issued after December 15, 2002, and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. We believe that the adoption of this interpretation will not have a material impact on our consolidated financial position or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." This statement amends SFAS No. 123, "Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of this standard are effective for fiscal years ending after December 15, 2002 and have been incorporated into our financial statements and accompanying notes included elsewhere in this Annual Report.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" to provide new guidance with respect to the consolidation of all previously unconsolidated entities, including special-purpose entities. We believe that the adoption of this interpretation, required in 2003, will not have a material impact on our consolidated financial position or results of operations.

Application of Critical Accounting Policies

        Our significant accounting policies are described in Note 3 to our consolidated financial statements. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We base our estimates and judgments on historical experience, terms of existing contracts, observance of trends in the industry, information provided by customers and outside sources and various other assumptions that we believe to be reasonable under the circumstances. Significant accounting policies which we believe involve the application of significant judgment and discretion by management include:

Allowance for Doubtful Accounts

        We maintain allowances for doubtful accounts for estimated losses resulting from the failure of our customers to make payments. If actual customer payments differ from our estimates, we would need to increase the allowance for doubtful accounts, which could affect our results of operations.

26

Long-lived Assets

        We evaluate the recoverability of our long-lived assets, including property, plant and equipment and intangible assets, periodically or when there are changes in economic circumstances or business objectives that indicate the carrying value may not be recoverable. Our evaluations include estimated future cash flows, profitability and estimated future operating results and other factors determining fair value. As these assumptions and estimates may change over time, it may or may not be necessary to record impairment charges.

        Effective January 1, 2002, we adopted SFAS 142, "Goodwill and Other Intangible Assets" in its entirety. Under this standard, goodwill and other intangibles with indefinite useful lives are no longer amortized (see "—New Accounting Pronouncements").

Income Taxes

        We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We have considered future taxable income in assessing the need for the valuation allowance. In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.

Defined Benefit Pension Plans

        Accounting for defined benefit pension plans requires various assumptions, including, but not limited to discount rates, expected rates of return on plan assets and future compensation rates. We evaluate these assumptions at least once each year and make changes as conditions warrant. Changes to these assumptions will increase or decrease our reported income, which will result in changes to the recorded benefit plan assets and liabilities.

Outlook

        In the first quarter of 2003, fragile economic conditions and geopolitical uncertainties are having a significant adverse effect on our results of operations. This economic climate continues to produce a weak demand for printing, a difficult pricing environment and escalating costs. Because this economic environment reflects substantial uncertainty, it is very difficult to estimate how it will affect our results for the year. We currently expect our results for the first half of 2003 to be below 2002 results. If the current downturn continues, this impact may extend to our second half results as well.

ITEM 7A    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative Information

        Our primary exposure to market risks relates to interest rate fluctuations on variable rate debt. Generally, our exposure to foreign currency exchange rate fluctuations is immaterial as foreign operations are a small proportion of the total company and foreign currency borrowings act as a natural hedge against fluctuations in net asset values.

        The objective of our risk management program is to seek a reduction in the potential negative earnings effects from changes in interest and foreign exchange rates. To meet this objective, consistent with past practices, we intend to vary the proportions of fixed-rate and variable-rate debt based on our perception of interest rate trends and the marketplace for various debt instruments. To reduce our exposure to future increases in variable interest rates, we entered into an interest rate swap agreement

27

that converts a portion of variable rate debt to a fixed rate basis. Except for those used to meet hedging requirements in our credit facility, we generally do not use derivative financial instruments in our risk management program. This practice may change in the future as market conditions change. We do not use any derivatives for trading purposes.

Quantitative Information

        At December 31, 2002, 41.4% of our long-term debt held a variable interest rate (including off-balance sheet debt related to the accounts receivable securitization facility, the fees on which are variable).

        If interest rates increased 10%, the expected effect related to variable-rate debt would be to increase net loss for the twelve months ended December 31, 2002 by approximately $2.5 million.

        For the purpose of sensitivity analysis, we assumed the same percentage change for all variable-rate debt and held all factors constant. The sensitivity analysis is limited in that it is based on balances outstanding at December 31, 2002 and does not provide for changes in borrowings that may occur in the future.

ITEM 8    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Reference is made to the Index to the consolidated financial statements and schedule on Page F-1 for our consolidated financial statements and notes thereto and supplementary schedule.

ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

        None.

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PART III

ITEM 10    DIRECTORS AND EXECUTIVE OFFICERS OF VERTIS

        The following table sets forth certain information regarding the directors and executive officers of Vertis.

        Donald E. Roland has been President and Chief Executive Officer of Vertis and a Director of Vertis since June 2000 and has been Chairman since April 2, 2001. Prior to June 2000, Mr. Roland was the President since October 1994 and, in addition since June 1995, Chief Executive Officer of Treasure Chest Advertising Company, Inc. ("TC Advertising"), the predecessor of our RNS segment. Mr. Roland joined TC Advertising in 1983 as Senior Vice President of Operations and became Executive Vice President in 1993. Prior to joining TC Advertising, he was at Times Mirror Press, the commercial printing division of the Los Angeles Times. In his 17 years at Times Mirror Press, Mr. Roland held numerous management positions including Director of Computer Graphics and Vice President of Operations. Mr. Roland is on the Board of Directors of the University of Maryland, Baltimore Foundation, and the Board of Directors of Baltimore Reads. He is also on the Advisory Board of the School of Education, Center for Graphic Communications & Technology at New York University.

        Dean D. Durbin has been Chief Financial Officer of Vertis since March 2000, and has been Senior Vice President and Chief Financial Officer of TC Advertising since September 1997. Prior to joining TC Advertising, Mr. Durbin served as Vice President and Chief Financial Officer at Thomson Professional Publishing, and served for more than 13 years with the McGraw-Hill Companies, beginning as Accounting Supervisor in 1974 and completing his tenure at McGraw-Hill as Vice President and Group Controller, Construction Information Group. He is on the Board of Directors of the Baltimore Museum of Industry.

        Herbert W. Moloney III was named Chief Operating Officer—Vertis North America in June 2000. Formerly, Mr. Moloney was Executive Vice President, Marketing and Sales of TC Advertising. Prior to joining TC Advertising in 1994, he held numerous positions from 1973 to 1994 with Knight Ridder, Inc., including Senior Vice President of Advertising for The Philadelphia Inquirer / Daily News,

29

Sales Manager for WPRI-TV in Providence, Rhode Island and Retail Advertising Manager for The Miami Herald. Mr. Moloney is also on the Board of Directors of Lee Enterprises Incorporated.

        Adriaan Roosen has been Managing Director—Vertis Europe in London since November 2000. Prior to joining Vertis, Mr. Roosen served as a Senior Vice President and Managing Director Europe at Modus Media International, Inc., providing fulfillment and supply chain management solutions to computer hardware and software companies. From 1995 through 1999, Mr. Roosen was the Director of European Operations at Denver-based Quark, Inc. Prior to that, he was the Managing Director of R.R. Donnelley Netherlands, BV and held a number of sales and marketing positions at the Netherlands Foreign Investment Agency while based in New York and San Francisco. Mr. Roosen is a Dutch national and a lawyer by training.

        John V. Howard, Jr. was named Senior Vice President—General Counsel of Vertis in July 2000. Previously, Mr. Howard was Executive Vice President and General Counsel for Columbine JDS Systems, Inc. and Executive Vice President and General Counsel for Laser Tech Color, Inc. Prior to joining Columbine JDS Systems, Inc. and Laser Tech Color, Inc., Mr. Howard was Counsel and Chief Intellectual Property Counsel for Andersen Worldwide, S.C. in Chicago, the parent entity of Arthur Andersen and Andersen Consulting, in charge of all worldwide intellectual property matters for the Andersen organization. Before leaving for Andersen he was Chief Counsel for Quark, Inc., in Denver, developer of Quark XPress, in charge of all worldwide legal matters. Mr. Howard is also a Trustee on the Board of Trustees of the Hammond-Harwood House.

        Catherine S. Leggett was named Senior Vice President—Human Resources of Vertis in June 2000. She joined TC Advertising as Senior Vice President—Human Resources in April 2000. Prior to joining us, Ms. Leggett was Senior Vice President of Human Resources at PG&E Generating Company, a subsidiary of Pacific Gas & Electric, Vice President of Human Resources for Federal Home Loan Mortgage Corporation in McLean, Virginia, and Senior Vice President of Human Resources for Hechinger Company in Landover, Maryland. She is a professor at the Johns Hopkins University Graduate School and is a member of the Bars for the District of Columbia and Iowa, as well as the U.S. District Court for the District of Columbia.

        Roger C. Altman has been a director of Vertis since May 2001 and Vertis Holdings since December 1999. Mr. Altman is Chairman of Evercore, which he co-founded in 1996. He spent 14 years at Lehman Brothers, where he was Managing Director, Co-Head of Investment Banking, Member of the Management Committee and Member of the Board of Directors. From 1987 through 1992, Mr. Altman was Vice Chairman of The Blackstone Group. He has also served two tours of duty in the U.S. Treasury Department, most recently as Deputy Treasury Secretary.

        Austin M. Beutner has been a director of Vertis since May 2001 and Vertis Holdings since December 1999. Mr. Beutner is President of Evercore, which he co-founded in 1996, Chairman of Evercore Capital Partners and Chairman and CEO of Evercore Ventures. Mr. Beutner serves on the Board of Directors of American Media, Inc., Business.com, Causeway Capital Management LLC, Continental Energy Services, Inc., eCompanies LLC, Earthlink, Encoda Systems, Energy Partners, Ltd. and Telenet Holding N.V. He also serves as a Trustee of the California Institute of the Arts and is a member of the Council on Foreign Relations.

        Anthony J. DiNovi has been a director of Vertis since March 2001 and Vertis Holdings since December 1999. Mr. DiNovi has been employed by Thomas H. Lee Partners, L.P. and its predecessor Thomas H. Lee Company since 1988 and currently serves as Managing Director. Mr. DiNovi is currently a Director of Endurance Specialty Holdings Ltd., Eye Care Centers of America, Inc., Fisher Scientific International, Inc., FairPoint Communications, Inc., National Waterworks, Inc., US LEC Corporation, as well as several private companies.

30

        Thomas H. Lee has been a director of Vertis since May 2001 and Vertis Holdings since December 1999. Mr. Lee founded Thomas H. Lee Partners L.P. (formerly the Thomas H. Lee Company) in 1974 and since that time has served as its President. Mr. Lee serves or has served as a Director of numerous public and private companies in which the Lee Company and its affiliates have invested, including Finlay Enterprises, Inc., General Nutrition Companies, Metris Companies, Inc., Playtex Products, Inc., Snapple Beverage Corp., and Wyndham International, Inc. In addition, Mr. Lee is a Member of the J.P. Morgan Chase & Co. National Advisory Board.

        Soren L. Oberg has been a director of Vertis and Vertis Holdings since May 2001. Mr. Oberg has been employed by Thomas H. Lee Partners, L.P., and its predecessor Thomas H. Lee Company since 1993. From 1992 to 1993, Mr. Oberg worked at Morgan Stanley & Co., Inc. in the Merchant Banking Division. Mr. Oberg also serves on the board of National Waterworks, Inc. as well as several private companies.

        Scott M. Sperling has been a director of Vertis since May 2001 and Vertis Holdings since December 1999. Mr. Sperling has been employed by Thomas H. Lee Partners, L.P. and its predecessor Thomas H. Lee Company since 1994 and currently serves as Managing Director. Mr. Sperling is currently a Director of Houghton Mifflin Company, Fisher Scientific International, Inc., GenTek Inc., Wyndham International, as well as several private companies.

        The term of office of each executive officer is until the organizational meeting of our board of directors following the next annual meeting of our stockholders and until a successor is elected and qualified, or until that officer's prior death, resignation, retirement, disqualification or removal.

        Each of our directors was elected to hold office until his successor is elected and qualified and subject to his prior death, resignation, retirement, disqualification or removal.

31

ITEM 11    EXECUTIVE COMPENSATION

        The following table sets forth the compensation paid in respect of the years ended December 31, 2002, 2001 and 2000 to Donald E. Roland, Chairman, President and Chief Executive Officer of Vertis, and to each of the five other most highly paid executive officers of Vertis (collectively, the "Named Executive Officers").

Summary Compensation Table

(1)

All stock option grants were made pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the "Plan") and are described below under "Options Granted in Fiscal 2002" and "Employment Arrangements with Executive Officers."

(2)

Represents amounts contributed to 401(k) plan for the Named Executive Officer.

(3)

Perquisites and other personal benefits did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported under the headings of "Salary" and "Bonus."

(4)

Represents amounts contributed by Vertis to a pension plan on behalf of Adriaan Roosen.

(5)

In connection with the Management Loans, hereinafter defined, interest of $66,785, $36,103, $54,908 and $41,187 was forgiven for Messrs. Durbin, Roosen and Howard and Ms. Leggett respectively.

(6)

Mr. Roosen received additional healthcare coverage and an accommodation allowance in connection with his expatriate assignment.

32

        The following table sets forth certain information with respect to options to purchase shares of Vertis Holdings' common stock granted to the Named Executive Officers during 2002. Vertis did not grant any stock appreciation rights to any of the Named Executive Officers during 2002.

Options Granted In Fiscal 2002

(1)

These values were calculated using a Black-Scholes option pricing model. The actual value, if any, that an executive may realize will depend on the excess, if any, of the stock price over the exercise price on the date the options are exercised, and no assurance exists that the value realized by an executive will be at or near the value estimated by the Black-Scholes model. The following assumptions were used in the calculations:

(a)

assumed option term of 10 years;

(b)

stock price volatility factor of 0.3820;

(c)

4.00% risk-free rate of return; and

(d)

no dividend payment

(2)

These options were granted on September 15, 2002 and vest in installments of 33% in 2003; 33% in 2004 and 34% in 2005.

33

Option Values at End of Fiscal 2002

        The following table sets forth certain information concerning the number and the value at the end of 2002 of unexercised in-the-money options to purchase Vertis Holdings' common stock granted to the Named Executive Officers as of the end of 2002. No stock appreciation rights have been granted to any of the Named Executive Officers.

Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values

(1)

Based on the assumed price of $31.50 for Vertis Holdings' common stock on December 31, 2002, less the exercise price payable for such shares.

Supplemental Executive Retirement Plan

        The following table sets forth annual amounts payable to Messrs. Roland, Durbin, Moloney and Howard and Ms. Leggett upon their retirement under Vertis Holdings and Subsidiaries Supplemental Executive Retirement Plan (the "SERP").

Pension Plan Table

        The compensation covered by the SERP includes each of the participants entire annual base salary. Messrs. Roland, Durbin, Moloney and Howard and Ms. Leggett, currently have 19, 5, 8, 4 and 2 years of service, respectively. See "Employment Arrangements with Executive Officers" below. Benefits under the SERP are computed by multiplying the participant's average salary for the last five years prior to retirement by a percentage equal to one percent for each year of service up to a maximum of 30 years. Benefits under the SERP are not subject to a deduction for Social Security or other offset amounts.

34

Compensation of Directors

        Donald E. Roland, the only director of Vertis who is also an executive officer of Vertis, does not receive any additional compensation for service as a member of the Board of Directors of Vertis (the "Board"). For information relating to compensation of Mr. Roland, see "Employment Arrangements with Executive Officers" below.

        All other directors of Vertis (each a "non-employee director") are affiliated with either Thomas H. Lee Partners ("THL") or Evercore Capital Partners ("ECP"), two significant shareholders of Vertis Holdings. None of the non-employee directors individually receive any compensation from Vertis for serving on the Board. Vertis, however, entered into consulting agreements with Thomas H. Lee Capital, LLC (an affiliate of THL), THL Equity Advisors IV, LLC (an affiliate of THL) and Evercore Advisor Inc. (an affiliate of ECP), pursuant to which Vertis pays annual fees to these parties in amounts of approximately $414,000, $586,000 and $250,000. See "Certain Relationships and Related Transactions."

Employment Arrangements with Executive Officers

        Roland Employment Agreement.    The Company has entered into an employment agreement with Donald E. Roland, effective September 12, 1983 (as amended to date, the "Roland Agreement"), pursuant to which Mr. Roland currently serves as Chairman, President and Chief Executive Officer. The Roland Agreement may be terminated by either Mr. Roland or the Company at any time for any reason. Under the Roland Agreement, Mr. Roland received a base salary of $608,577 in 2002. The Roland Agreement also provides that Mr. Roland receive an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the Company's Executive Incentive Plan (the "EIP") are met) and which can rise to 200% of the target incentive if the Company exceeds its goals, and certain fringe benefits, including participation in the SERP. In addition, Mr. Roland was granted:

•

an option to purchase 165,726 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on June 1 of 2001, 2002, 2003 and 2004,

•

an option to purchase 5,287 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

•

an option to purchase 12,508 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Durbin Employment Agreement.    The Company has entered into a letter agreement with Dean D. Durbin, effective August 11, 1997 (as amended to date, the "Durbin Agreement"), pursuant to which Mr. Durbin currently serves as Chief Financial Officer. The Durbin Agreement may be terminated by either Mr. Durbin or the Company at any time for any reason. Under the Durbin Agreement, Mr. Durbin received a base salary of $372,423 in 2002. The Durbin Agreement also provides that Mr. Durbin receive an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the EIP are met) and which can rise to 200% of the target incentive if the Company exceeds its goals, and certain fringe benefits, including participation in the SERP. In addition, Mr. Durbin was granted:

•

an option to purchase 25,597 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on June 1 of 2001, 2002, 2003 and 2004;

•

an option to purchase 4,274 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

35

•

an option to purchase 9,828 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Moloney Employment Agreement.    The Company has entered into a letter agreement with Herbert W. Moloney III, effective August 10, 1994 (as amended to date, the "Moloney Agreement"), pursuant to which Mr. Moloney currently serves as Chief Operating Officer. The Moloney Agreement may be terminated by either Mr. Moloney or the Company at any time for any reason. Under the Moloney Agreement, Mr. Moloney received a base salary of $446,379 in 2002. The Moloney Agreement also provides that Mr. Moloney receive an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the EIP are met) and which can rise to 200% of the target incentive if the Company exceeds its goals, and certain fringe benefits, including participation in the SERP. In addition, Mr. Moloney was granted:

•

an option to purchase 41,095 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on June 1 of 2001, 2002, 2003 and 2004;

•

an option to purchase 4,337 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

36

•

an option to purchase 9,828 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Roosen Employment Agreement.    Big Flower Digital Services Limited, a United Kingdom company and the subsidiary of the Company ("BFDSL"), has entered into an executive service agreement with Adriaan Roosen, effective October 1, 2000 (as amended to date, the "Roosen Agreement"), pursuant to which Mr. Roosen currently serves as the Chief Operating Officer of the Company's European operations and the director of BFDSL. The Roosen Agreement may be terminated by either Mr. Roosen or BFDSL with not less than 12 months prior written notice, or as otherwise provided in the Roosen Agreement. BFDSL, however, may at its sole and absolute discretion terminate the Roosen Agreement at any time and with immediate effect by making Mr. Roosen a payment in lieu of the required 12-month notice period (or, the remainder of such notice period) equal to Mr. Roosen's salary as of the date of termination and the cost to BFDSL of providing Mr. Roosen with the contractual benefits for the applicable notice period. After the termination of his service at BFDSL and the Company, Mr. Roosen will be subject to certain non-competition restrictions as provided in the Roosen Agreement. Under the Roosen Agreement, Mr. Roosen received a base salary of $278,097 in 2002, as well as certain benefits including rental accommodation and car allowance. The Roosen Agreement also provides that Mr. Roosen is eligible to participate in the EIP, pursuant to which he received a bonus of $152,069 in 2002. In addition, Mr. Roosen was granted:

•

an option to purchase 17,778 shares of common stock of Vertis Holdings:



•

with a 10-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on September 20 of 2001, 2002, 2003 and 2004;

•

an option to purchase 633 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

•

an option to purchase 3,574 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Howard Employment Agreement.    The Company has entered into a letter agreement with John Howard, effective June 24, 2000 (as amended to date, the "Howard Agreement"), pursuant to which Mr. Howard currently serves as Senior Vice President, General Counsel and Secretary. The Howard Agreement may be terminated by either Mr. Howard or the Company at any time for any reason. Under the Howard Agreement, Mr. Howard received a base salary of $258,259 in 2002. The Howard Agreement also provides that Mr. Howard receive an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the EIP are met) and which can rise to 200% of the target incentive if the Company exceeds its goals, and certain fringe benefits, including participation in the SERP. In addition, Mr. Howard was granted

•

an option to purchase 20,160 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on June 1 of 2001, 2002, 2003 and 2004:

•

an option to purchase 2,704 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

37

•

an option to purchase 3,574 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Leggett Employment Agreement.    The Company has entered into a letter agreement with Catherine S. Leggett, effective March 1, 2000 (as amended to date, the "Leggett Agreement"), pursuant to which Ms. Leggett currently serves as Senior Vice President—Human Services. The Leggett Agreement may be terminated by either Ms. Leggett or the Company at any time for any reason. Under the Leggett Agreement, Ms. Leggett received a base salary of $258,259 in 2002. The Leggett Agreement also provides that Ms. Leggett receive an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the EIP are met) and which can rise to 200% of the target incentive if the Company exceeds its goals, and certain fringe benefits, including participation in the SERP. In addition, Ms. Leggett was granted:

•

an option to purchase 20,160 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on June 1 of 2001, 2002, 2003 and 2004; and

•

an option to purchase 2,345 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 25% on February 7 of 2002, 2003, 2004 and 2005; and

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•

an option to purchase 3,574 shares of common stock of Vertis Holdings:



•

with a ten-year term,



•

at an exercise price equal to $31.50 per share, and



•

vesting in installments of 33% on September 1 of 2003 and 2004 and 34% on September 1, 2005.

        Severance Agreements with Executive Officers.    In addition to the employment agreements of the Named Executive Officers described above, the Company has entered into an Executive Change in Control Severance Agreement, effective April 10, 2000 (the "Severance Agreement"), with each of the Ms. Leggett and Messrs. Roland, Durbin, Moloney and Howard (collectively, the "Severance Officers"), which provides that if a Severance Officer's employment is terminated by the Company without "cause" or by the Named Executive Officer for "good reason" (as defined in the Severance Agreement) following a "change in control" of the Company, the Severance Officer will receive a lump sum amount equal to three times the sum of (x) the greater of the Severance Officer's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Severance Officer's termination is based and the Named Executive Officer's annual base salary in effect immediately prior to the "change in control" and (y) the greater of the target bonus for the Severance Officer under the EIP in the year immediately preceding that in which the termination occurs and the average such bonus for the three years immediately preceding the "change in control." In addition, (i) the Severance Officer will receive a lump sum payment equal to the sum of any awarded but unpaid compensation under the EIP and a pro rata portion to the date of the Severance Officer's termination of the aggregate value of all contingent incentive compensation awards to the Severance Officer for all uncompleted periods under the EIP calculated by assuming all annual incentive targets have been met, (ii) all outstanding stock incentive awards (including stock options) will immediately vest and remain exercisable until at least 90 days following the "change in control"; and (iii) the Severance Officer will be entitled to two years of continued medical and other insurance benefits. The total amount of benefits payable to the Severance Officer would be limited to the extent necessary to preserve the Company's deduction pursuant to Section 280G of the Internal Revenue Code of 1986, as amended.

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ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        Vertis is a wholly-owned subsidiary of Vertis Holdings.

        The following table sets forth certain information regarding the beneficial ownership of Vertis Holdings' common stock as of February 28, 2003 for (i) each stockholder who is known by us to beneficially own more than 5% of Vertis Holdings common stock, (ii) each director and executive officer of Vertis and Vertis Holdings, and (iii) all of the directors and executive officers of Vertis and Vertis Holdings as a group.