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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.