<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 31, 1996 1-6528
- ---------------------------------- --------------------------
For the quarterly period ended Commission file number
WALLACE COMPUTER SERVICES, INC.
----------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2515832
- ---------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2275 Cabot Drive Lisle, Illinois 60532
---------------------------------------- ------------
(Address of Principal Executive Offices) (ZIP CODE)
(630) 588-5000 42,869,938
- ------------------------------- ---------------------------------------
(Registrant's Telephone Number, (Number of Common Shares Outstanding
Including Area Code) as of November 30, 1996)
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.
X Yes No
----- -----
<PAGE>
Wallace Computer Services, Inc. Page 2
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Part I Financial Information
----------------------------
ITEM 1. FINANCIAL STATEMENTS
The information furnished herein reflects all adjustments which are, in the
opinion of the management, necessary to a fair statement of the results of
operations and financial position for the three months ended October 31,
1996, subject to year-end audit by independent public accountants. These
adjustments are of a normal, recurring nature.
Wallace Computer Services, Inc. and Subsidiary
Consolidated Income Statement (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
October 31
---------------------------------------------------
% %
1996 Sales 1995 Sales
----------------------- -----------------------
<S> <C> <C> <C> <C>
Net Sales $220,793,000 100.0 $214,438,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 132,787,000 60.1 136,331,000 63.6
Selling and administrative expenses 41,229,000 18.7 36,977,000 17.2
Provision for depreciation and
amortization 11,919,000 5.4 10,555,000 4.9
Hostile takeover expenses 0 0.0 4,032,000 1.9
----------- ---- ----------- ----
Total costs and expenses $185,935,000 84.2 $187,895,000 87.6
----------- ---- ----------- ----
Operating Income 34,858,000 15.8 26,543,000 12.4
----------- ---- ----------- ----
Interest income (625,000) (0.3) (852,000) (0.4)
Interest expense 474,000 0.2 334,000 0.2
----------- ---- ----------- ----
Income before Income Taxes 35,009,000 15.9 27,061,000 12.6
Provision for Income Taxes (Note 4) 13,829,000 6.3 10,283,000 4.8
----------- ---- ----------- ----
Net Income $21,180,000 9.6 $16,778,000 7.8
=========== ==== =========== ====
Net Income per Share $0.48 $0.37
===== =====
Average Common Shares Outstanding 44,179,000 45,411,000
=========== ===========
Dividends Declared Per Share $0.1400 $0.1075
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 3
Consolidated Balance Sheet
<TABLE>
<CAPTION>
October 31, 1996 July 31, 1996
(Unaudited) (Audited)
Assets ---------------- -------------
- ------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $16,323,000 $23,618,000
Short-term Investments 2,886,000 39,025,000
Accounts Receivable 159,075,000 152,133,000
Less-Allowance for Doubtful Accounts 3,311,000 3,215,000
------------- -------------
Net Receivables 155,764,000 148,918,000
Inventories (Note 1) 72,249,000 71,332,000
Prepaid Taxes 6,491,000 15,138,000
Advances and Prepaid Expenses 6,469,000 6,077,000
------------- -------------
Total Current Assets 260,182,000 304,108,000
------------- -------------
Property, Plant and Equipment, at Cost 574,565,000 557,069,000
Less-Reserves for Depreciation and Amortization 278,415,000 268,197,000
------------- -------------
Net Property, Plant and Equipment 296,150,000 288,872,000
------------- -------------
Intangible Assets Arising from Acquisitions 43,778,000 43,180,000
Cash Surrender Value of Life Insurance 32,550,000 32,244,000
Systems Development Costs 22,396,000 21,499,000
Other Assets 5,775,000 5,947,000
------------- -------------
Total Assets $660,831,000 $695,850,000
============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts Payable $48,757,000 $46,044,000
Accrued Salaries, Wages, Profit Sharing and Other 62,445,000 51,826,000
------------- -------------
Total Current Liabilities 111,202,000 97,870,000
------------- -------------
Long-Term Debt 30,600,000 30,600,000
Deferred Income Taxes 32,300,000 32,187,000
Deferred Compensation and Retirement Benefits 26,341,000 24,750,000
Stockholders' Equity
Common Stock (Note 2)- Issued shares of
45,764,054 at October 31, 1996 and July 31, 1996 45,764,000 45,764,000
Treasury Stock (at Cost)- 2,443,165 shares at
October 31, 1996 and 177,216 shares at
July 31, 1996 (68,591,000) (5,176,000)
Additional Capital 32,616,000 32,616,000
Retained Earnings 450,827,000 437,459,000
Unrealized Loss on Securities (228,000) (220,000)
------------- -------------
Total Stockholders' Equity 460,388,000 510,443,000
------------- -------------
Total Liabilities and Stockholders' Equity $660,831,000 $695,850,000
============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 4
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
October 31
-----------------------------------
1996 1995
Cash Flows from Operating Activities: --------------- -------------
<S> <C> <C>
Net income from operations $21,180,000 $16,778,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,919,000 10,555,000
Deferred taxes 113,000 1,119,000
(Gain)/loss on disposal of property 3,000 8,000
Changes in assets and liabilities
Accounts receivable (5,619,000) (17,324,000)
Inventories (644,000) (7,439,000)
Advances and prepaid expenses 8,281,000 1,403,000
Other assets (2,247,000) (3,674,000)
Accounts payable and other liabilities 6,847,000 1,069,000
Accrued income taxes 4,637,000 8,219,000
Deferred compensation and retirement benefits 1,591,000 852,000
------------- -------------
Net cash provided by operating activities 46,061,000 11,566,000
------------- -------------
Cash Flows from Investing Activities:
Capital expenditures (12,778,000) (16,131,000)
Short-term investments 36,139,000 15,130,000
Proceeds from disposal of property 27,000 10,000
Unrealized loss on securities (8,000) (29,000)
Purchase of Post Printing (6,642,000) 0
------------- -------------
Net cash used in investing activities 16,738,000 (1,020,000)
------------- -------------
Cash Flows from Financing Activities:
Treasury stock transactions (65,277,000) 454,000
Cash dividends paid (4,785,000) (4,201,000)
Proceeds from construction funds held by trustee (32,000) 1,932,000
------------- -------------
Net cash used in financing activities (70,094,000) (1,815,000)
------------- -------------
Net changes in cash and cash equivalents (7,295,000) 8,731,000
Cash and cash equivalents at beginning of year 23,618,000 10,815,000
------------- -------------
Cash and cash equivalents at October 31 $16,323,000 $19,546,000
============= =============
Supplemental Disclosure:
Interest paid (net of interest capitalized) $ (52,000) $ (41,000)
Income taxes paid (net of refunds received) 625,000 952,000
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 5
Notes to Consolidated Financial Statements
October 31, 1996
(Unaudited)
Note 1 - Inventories
Inventories at October 31, 1996, and July 31, 1996, were as follows:
October 31, 1996 July 31, 1996
---------------- -------------
Raw materials $19,787,000 $20,470,000
Work in process 1,733,000 1,771,000
Finished products 50,729,000 49,091,000
---------------- -------------
$72,249,000 $71,332,000
================ =============
Certain inventories are stated on the last-in, first-out (LIFO) basis for
their labor and material content, and other inventories are stated on the
first-in, first-out (FIFO) basis.
Because the inventory determination under the LIFO method can only be made
at the end of each fiscal year based on the inventory levels and costs at
that time, interim period LIFO determinations must necessarily be based
upon management's estimates of expected year-end inventory levels and
costs.
Note 2 - Stock Options
As of October 31, 1996, options to purchase 1,059,230 shares of common
stock were outstanding and 1,045,650 shares of common stock were available
for future grants under the Company's Stock Option and Employee Stock
Purchase Plans. The number of option shares outstanding and available have
been adjusted for the two-for-one stock split in July 1996.
The Company has authorized 50,000,000 shares of common stock and has issued
45,764,054 as of October 31, 1996. Of these shares, 2,443,165 are held
in treasury as of October 31, 1996. The number of shares held in treasury
at July 31, 1996 was 177,216.
Note 3 - Changes in Accounting
The Financial Accounting Standards Boards ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 121 on accounting for the
impairment and/or disposal of long-lived assets, certain identifiable
intangibles and goodwill related to assets to be held and used. As
required, the Company will adopt SFAS No. 121 for the fiscal year ended
July 31, 1997. At this time, it is the opinion of management that the
adoption of this statement will not have any impact on the results of
operations or the consolidated financial position of the Company.
The FASB issued a new standard, SFAS No. 123 on accounting for stock-based
compensation that the Company will adopt for the fiscal year ended July 31,
1997. As permitted, the Company will continue its current method of
accounting for stock-based compensation and will comply with the new
disclosure requirements of this standard.
Note 4 - Income Taxes
Effective August 1, 1996, the Company increased its effective tax rate from
38.5% to 39.5%. The income tax rate in the first quarter of fiscal 1996
was 38%. The increase in the tax rate for fiscal 1997 is due to the
reduction of tax-exempt investment income as a result of diminished cash
due to the stock repurchase program.
<PAGE>
Wallace Computer Services, Inc. Page 6
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
There have been no material changes in financial condition since the
preceding fiscal year which ended July 31, 1996.
For the three month period ended October 31 1996, net sales increased 3.0%
to $220,793,000. Net income for the first quarter increased 26.2% to
$21,180,000 or 48 cents per share, from $16,778,000 or 37 cents per share
in fiscal 1996. Pretax income for the quarter was up by $7,948,000 or
29.4%.
Cost of goods sold represented 60.1% of sales versus 63.6% in the first
quarter of fiscal 1996. The first quarter of fiscal 1997 includes a LIFO
credit of $232,000 or .3 cents per share. The LIFO provision for the first
quarter of 1996 was $235,000 or .3 cents per share. The decrease in cost
of goods sold for the first quarter of fiscal 1997 is attributable to
improved gross margins in our Direct Response Group, the addition of new
customers in the Office Products Group and improved unit growth in our
Label Group.
Selling and administrative expenses were 18.7% of sales versus 17.2% in the
first quarter last year. Included in the first quarter of fiscal 1997 is
$340,000 of expenses related to the proxy contest over the Wyser-Pratte
proposals to amend our bylaws. (See Part II - Other Information Item 1 -
Legal Proceedings.) The second quarter is expected to include an
additional $150,000 for these expenses. Sales costs increased in the
first quarter of fiscal 1997 due to the hiring of 150 sales representatives
in the fourth quarter of fiscal 1996 which increased wage and travel
expenses over the first quarter of fiscal 1996.
The provision for depreciation and amortization is up 12.9% in the first
quarter from fiscal 1996. This increase is the result of the Company's
continued reinvestment in capital resources and system development.
Interest income for the first quarter decreased by $227,000 or 26.6% from
the same period one year ago. The reduction is due to the decrease in cash
and short-term investments attributable to reinvestment in the Company
through capital expenditures, acquisitions and the $100 million stock
repurchase program approved by the Board of Directors in June of 1996. As
of October 31, 1996, $76,088,000 of stock has been repurchased under this
program. Interest expense, which is shown net of capitalized interest,
increased $140,000 or 41.9% between years. The increase of interest
expense is mainly attributable to a $5,000,000 increase in debt related to
the FEC acquisition in fiscal 1996.
Operating income for the quarter was up $8,315,000 or 31.3%. For fiscal
1997 this represents 15.8% to sales versus 12.4% for fiscal 1996.
<PAGE>
Wallace Computer Services, Inc. Page 7
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $57,258,000 from July 31, 1996, primarily due
to the $100 million stock repurchase program, with a current ratio of 2.3
at October 31, 1996. Long-term debt includes $23,500,000 of industrial
revenue bonds at rates ranging from 3.6% to 3.7%, as well as $7,100,000
related to acquisitions made in prior fiscal years. Long-term debt
currently represents 6.2% of total capitalization.
Capital expenditures for the first quarter were $12,778,000. For the full
fiscal year, capital expenditures are expected to be $40.0 million, which
are expected to be financed through internally generated funds and by
borrowing against our short-term lines of bank credit.
Stockholders' equity decreased 9.8% to $460,388,000 at October 31, 1996.
The decrease is attributable to our stock repurchase program.
Cash balances were adequate to fund operations in the first quarter.
During the first quarter, the Company opened a $50 million revolving credit
agreement with two local banking institutions. The Company has borrowed
$10.0 million under this revolving credit facility during the second
quarter due to the stock repurchase program. It is anticipated that cash
balances will be adequate to fund operations moving forward into our fiscal
year.
Current inventory levels are believed to be in-line with the inventory
levels necessary to satisfy customer demand. The company anticipates
having adequate sources of supply of raw materials to meet future business
requirements.
COMMON STOCK
On September 4, 1996, the Board of Directors increased the annualized
dividend rate to $.56 per share, a 30.2% increase from fiscal 1996.
OTHER
On October 22, 1996, the Company completed the acquisition of Post Printing.
The acquisition was a cash transaction and will be accounted for using the
purchase method. Though the acquisition is anticipated to be additive to
fiscal 1997 earnings, it is not expected to have a material impact.
<PAGE>
Wallace Computer Services, Inc. Page 8
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Part II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
On September 20, 1996, Mr. Guy Wyser-Pratte filed a complaint against the
Company in the United States District Court for the Northern District of
Illinois, Case No. 96 C 6087 (the "Wyser-Pratte Litigation"). In that
complaint, Mr. Wyser-Pratte alleged that a preliminary version of the
Company's proxy statement for the 1996 Annual Meeting of Stockholders,
which was filed with the Securities and Exchange Commission but not
distributed by the Company to its stockholders, was misleading because (i)
it did not properly disclose the issues with respect to the legality under
Delaware law and the Company's Certificate of Incorporation of Mr. Wyser-
Pratte's proposal to amend the Company's Bylaws to require the Company's
Board to terminate defensive actions following a cash tender offer for all
of the outstanding capital stock of the Company unless approved by a
stockholder vote (the "Tender Offer Proposal"), and (ii) it did not indicate
that the proxy statement issued by Moore Corporation Limited ("Moore") in
connection with the 1995 Annual Meeting of Stockholders of the Company
contained the following statement: "The Moore Nominees are committed,
SUBJECT TO THE FULFILLMENT OF THE FIDUCIARY DUTIES THEY WOULD HAVE AS
DIRECTORS OF WALLACE, to giving each Wallace stockholder the opportunity to
receive not less than $60 per share for all of their shares and to take such
steps as are necessary to permit the [Moore] Offer and [Moore's proposed
merger] to proceed." (emphasis added) Mr. Wyser-Pratte further alleged
that such preliminary version of the proxy statement was misleading because
it did not state the reasons why Messrs. Hessler, Isenman and Rittereiser
(the three Wallace directors nominated by Moore), in fulfilling their
fiduciary duties as directors of the Company, joined with the other
directors of the Company in unanimously recommending that the stockholders
of the Company vote in favor of the Board's nominees and against Mr. Wyser-
Pratte's proposals. The complaint also sought a declaration that the
purported Bylaw amendment reflected in Mr. Wyser-Pratte's Tender Offer
Proposal is lawful under Delaware law. On October 10, 1996, the Company
filed a motion to dismiss Mr. Wyser-Pratte's complaint in its entirety, or
in the alternative, if the request for a declaration of the legality of the
purported Bylaw amendment reflected in Mr. Wyser-Pratte's Tender Offer
Proposal is not dismissed, to certify to the Delaware Supreme court in the
issue of whether the purported Bylaw amendment reflected in Mr. Wyser-
Pratte's Tender Offer Proposal is lawful under Delaware law. On November 8,
1996, Mr. Wyser-Pratte voluntarily dismissed the Wyser-Pratte Litigation.
The Company and certain of its directors have been named as defendants in
three purported class actions filed between July 31, 1995 and August 3,
1995 on behalf of the public stockholders of the Company in the Court of
Chancery of the State of Delaware in and for New Castle County. These
actions are entitled: BERNARD KOFF V. THEODORE DIMITRIOU, FRED CANNING,
WILLIAM N. LANE, NEELE E. STEARNS, JR., ROBERT J. CRONIN, DARRELL R. EWERS,
RICHARD F. DOYLE, WILLIAM E. OLSEN, AND WALLACE COMPUTER SERVICES, INC.;
KITTY LAPERRIERE V. WALLACE COMPUTER SERVICES, INC., THEODORE DIMITRIOU AND
ROBERT J. CRONIN; and ROBIN K. PITTMAN V. THEODORE DIMITRIOU, FRED F.
CANNING, WILLIAM N. LANE, III, NEELE E. STEARNS, JR., ROBERT J. CRONIN,
DARRELL R. EWERS, RICHARD F. DOYLE, WILLIAM E. OLSEN, AND WALLACE COMPUTER
SERVICES, INC. (collectively, the "Stockholder Actions"). The complaints
in the Stockholder Actions contain substantially similar allegations, and
allege breach of fiduciary duty claims arising out of the proposal by
<PAGE>
Wallace Computer Services, Inc. Page 9
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Item 1 LEGAL PROCEEDINGS (CONTINUED)
FRDK to acquire the Company. The complaints in the Stockholder Actions
also seek substantially similar relief, including declaratory and
injunctive relief barring defendants from breaching their fiduciary duties
to plaintiffs and the putative class members and taking steps to impede any
offer to acquire the Company, as well as damages in an unspecified amount.
The plaintiffs filed a second amended complaint on November 21, 1995, and
stipulated that the defendants need not answer or otherwise plead until
some unspecified future date. There has been no activity in this matter
since February 8, 1996. The Company intends to vigorously defend the
Stockholders Actions if the plaintiffs seek to revive them.
Items 2 THRU 3 None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on November 6, 1996.
The annual meeting was adjourned and reconvened on November 20, 1996. At
the reconvened annual meeting the Inspectors of Election submitted the
final results of the meeting. The results are as follows:
1) Election of three directors for the class of directors whose terms are
expiring at the 1996 Annual Meeting.
For Withheld
------ ---------
Robert J. Cronin 30,866,865 1,099,390
Richard F. Doyle 30,826,619 1,139,636
Neele E. Stearns, Jr. 30,867,669 1,098,586
Guy P. Wyser-Pratte 6,697,023 139,058
William M. Frazier 6,697,023 139,058
W. Michael Frazier 6,696,842 139,239
2) Ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year 1997.
For Against Abstain
---------- ------- -------
38,524,994 175,189 102,153
3) Mr. Wyser-Pratte's proposal to amend the Company's Bylaws to elect out
of Section 203 of Delaware General Corporation Law.
For Against Abstain
---------- ---------- -------
12,312,133 26,081,886 408,315
<PAGE>
Wallace Computer Services, Inc. Page 10
FORM 10-Q
For Quarterly Period Ended October 31, 1996
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
4) Mr. Wyser-Pratte's proposal to amend the Company's Bylaws regarding
tender offers.
For Against Abstain
---------- ---------- ---------
16,589,071 17,778,362 4,434,901
At the reconvened annual meeting, Robert J. Cronin, Richard F. Doyle, and
Neele E. Stearns, Jr. were elected directors of the Company. They joined
Theodore Dimitriou, Curtis A. Hessler, Albert W. Isenman III, William N.
Lane III, John C. Pope, and Robert P. Rittereiser on the Board of
Directors. Proposal 2 obtained the affirmative vote of stockholders
holding a majority of the shares entitled to vote and consequently was
adopted. Proposal 3 failed to obtain the affirmative vote of stockholders
holding a majority of the shares entitled to vote and consequently was not
adopted. Proposal 4 failed to obtain the affirmative vote of stockholders
holding a majority of shares voted and consequently was not adopted.
Item 6 EXHIBITS
(a) Exhibits
10.1 Amendment No. 1 to the 1989 Stock Option Plan
10.2 Amendment No. 5 to the Executive Incentive Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
quarter ended October 31, 1996.
<PAGE>
Page 11
Wallace Computer Services, Inc.
FORM 10-Q
For Quarterly Period Ended October 31, 1996
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WALLACE COMPUTER SERVICES, INC.
December 13, 1996 /s/ Robert J. Cronin
--------------------------- -----------------------------------------
Date Robert J. Cronin
President and Chief Executive Officer
December 13, 1996 /s/ Michael J. Halloran
--------------------------- -----------------------------------------
Date Michael J. Halloran
Vice President, Chief Financial Officer,
and Assistant Secretary
(Principal Accounting Officer)
<PAGE>
Exhibit 10.1
AMENDMENT NO.1
1989 STOCK OPTION PLAN
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a stock option plan for the
benefit of certain of its employees designated the "Wallace Computer Services,
Inc. 1989 Stock Option Plan" (the "Plan")
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 5
of the Plan, Section 3 of the Plan is amended to delete the fourth and fifth
sentences thereof, and to substitute therefor a new sentence to read as follows:
The Committee shall consist of not fewer than two members of the Board of
Directors of Wallace, each of whom shall be a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officers this 6th day of November, 1996.
WALLACE COMPUTER SERVICES, INC.
BY: /s/ Robert J. Cronin
-------------------------
By: Robert J. Cronin
President
ATTEST:
BY: /s/ Michael T. Laudizio
---------------------------
By: Michael T. Laudizio
Secretary
<PAGE>
Exhibit 10.2
EXECUTIVE INCENTIVE PLAN
AMENDMENT NO. 5
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a bonus plan for the benefit of
certain of its employees designated the "Wallace Computer Services, Inc.
Executive Incentive Plan" (the "Plan");
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, pursuant to the power of amendment contained in
Section 7(a) of the Plan, Section 2(a) of the Plan is amended in its entirety
to read as follows:
(a) The term "Committee" shall mean the Compensation Committee of
the Company's Board of Directors, which shall consist of not fewer than two
members of the Company's Board of Directors, each of whom shall be a "Non-
Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers this 6th day of November, 1996.
WALLACE COMPUTER SERVICES, INC.
BY: /s/ Robert J. Cronin
-------------------------
By: Robert J. Cronin
President
ATTEST:
BY: /s/ Michael T. Laudizio
---------------------------
By: Michael T. Laudizio
Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 16,323
<SECURITIES> 2,886
<RECEIVABLES> 159,075
<ALLOWANCES> (3,311)
<INVENTORY> 72,249
<CURRENT-ASSETS> 260,182
<PP&E> 574,565
<DEPRECIATION> (278,415)
<TOTAL-ASSETS> 660,831
<CURRENT-LIABILITIES> 111,202
<BONDS> 30,600
0
0
<COMMON> 45,764
<OTHER-SE> 414,624
<TOTAL-LIABILITY-AND-EQUITY> 660,831
<SALES> 220,793
<TOTAL-REVENUES> 220,793
<CGS> 132,787
<TOTAL-COSTS> 185,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 316
<INTEREST-EXPENSE> 474
<INCOME-PRETAX> 35,009
<INCOME-TAX> 13,829
<INCOME-CONTINUING> 21,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,180
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
