BIG FLOWER PRESS HOLDINGS INC, 424B4, 1997-06-11

BIG FLOWER PRESS HOLDINGS INC
424B4, 1997-06-11
COMMERCIAL PRINTING

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<PAGE>
Filed Pursuant to Rule 424 B/4
Registration No. 333-27375

5,958,524 SHARES

[LOGO]
BIG FLOWER PRESS HOLDINGS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

------------------------

All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. See "Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares offered hereby.

The last reported sale price of the Common Stock (which is listed under the
symbol "BGF") on the New York Stock Exchange, Inc. Composite Tape on June 10,
1997 was $21.875 per share. See "Price Range of Common Stock and Dividend
Policy".

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 11.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND

EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS

THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES

COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.

ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) STOCKHOLDERS (2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share....................................... $21.00 $1.05 $19.95
Total (3)....................................... $125,129,004 $6,256,450 $118,872,554
</TABLE>

- ------------------------

(1) Each of the Company and the Selling Stockholders has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $550,000 payable by the Company.

(3) A Selling Stockholder has granted to the Underwriters an option for 30 days
to purchase up to an additional 750,000 shares at the public offering price
per share, less the underwriting discount, solely to cover over-allotments.
If such option is exercised in full, the total initial public offering
price, underwriting discount, and proceeds to the Selling Stockholders will
be $140,879,004, $7,043,950 and $133,835,054 respectively. See
"Underwriting".

------------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery through the facilities of DTC in New
York, New York, on or about June 16, 1997, against payment therefore in
immediately available funds.

GOLDMAN, SACHS & CO.

BEAR, STEARNS & CO. INC.

ALEX. BROWN & SONS
INCORPORATED

CREDIT SUISSE FIRST BOSTON
----------------

The date of this Prospectus is June 10, 1997.
<PAGE>
[Big Flower Logo]

[Picture of Big Flower]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents (and the amendments thereto) filed by the Company
(File No. 1-4084) with the Commission pursuant to the Exchange Act are
incorporated herein by reference and are made a part hereof:

(i) The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996, filed with the Commission on March 26, 1997;

(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, filed with the Commission on May 12, 1997;

(iii) The Company's Proxy Statement, dated May 13, 1997, filed with the
Commission on May 13, 1997;

(iv) The Company's Registration Statement on Form 8-A, filed with the
Commission on November 14, 1995, describing the Common Stock; and

(v) The Company's Amendment on Form 8-A/A filed with the Commission on
November 29, 1995, describing the Company's Preferred Stock Purchase Rights.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering made hereby shall be deemed to be incorporated
herein by reference and to be a part hereof on and from the respective date of
filing of such documents.

Any statement contained herein or in a document incorporated, or deemed to
be incorporated, by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or incorporated herein by reference or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

As used herein, the terms "Prospectus" and "herein" means this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. Copies of all documents
incorporated by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents), will
be provided without charge to each person, including any beneficial owner, to
whom a copy of this Prospectus has been delivered upon the written or oral
request of such person. Requests for such copies should be directed to the
Company, 3 East 54th Street, New York, New York 10022, Attention: Irene B.
Fisher, Esq., telephone: (212) 521-1600.

3
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, is required to file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of the reports, proxy statements and other information can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549, at prescribed rates. In addition, all reports filed by the Company via
the Commission's Electronic Data Gathering and Retrieval System (EDGAR) can be
obtained from the Commission's Internet web site located at http:\\www.sec.gov.
The Common Stock of the Company is traded on The New York Stock Exchange, and
such reports, proxy statements and other information concerning the Company also
can be inspected at the offices of The New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.

The Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Common Stock. Any statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
principal office of the Commission in Washington, D.C., and copies of all or
part of it may be obtained from the Commission upon payment of the prescribed
fees.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933. DISCUSSIONS CONTAINING SUCH
FORWARD-LOOKING STATEMENTS MAY BE FOUND IN "SUMMARY," "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS,"
AS WELL AS WITHIN THIS PROSPECTUS GENERALLY. IN ADDITION, WHEN USED IN THIS
PROSPECTUS, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE
COULD DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF MANY FACTORS OUTSIDE THE CONTROL OF THE COMPANY, INCLUDING
FLUCTUATIONS IN THE COST OF PAPER AND OTHER RAW MATERIALS USED BY THE COMPANY,
CHANGES IN THE ADVERTISING AND PRINTING MARKETS, THE FINANCIAL CONDITION OF THE
COMPANY'S CUSTOMERS, THE GENERAL CONDITION OF THE UNITED STATES ECONOMY, AND THE
MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY. CONSEQUENTLY, SUCH
FORWARD-LOOKING STATEMENTS SHOULD BE REGARDED SOLELY AS THE COMPANY'S CURRENT
PLANS, ESTIMATES AND BELIEFS. THE COMPANY DOES NOT UNDERTAKE AND SPECIFICALLY
DECLINES ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES AFTER
THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS.

4
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS AND TO THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE
NOTES THERETO (THE "CONSOLIDATED FINANCIAL STATEMENTS") INCORPORATED HEREIN BY
REFERENCE. UNLESS OTHERWISE INDICATED OR THE CONTEXT CLEARLY IMPLIES OTHERWISE,
ALL REFERENCES IN THE PROSPECTUS TO THE "COMPANY" OR "BIG FLOWER" REFER TO BIG
FLOWER PRESS HOLDINGS, INC. AND ITS SUBSIDIARIES.

THE COMPANY

Big Flower is a leading advertising and marketing services company which
provides integrated advertising solutions through its three principal operating
units: Treasure Chest Advertising Company, Inc. ("TC Advertising"), Webcraft
Technologies, Inc. ("Webcraft") and Laser Tech Color, Inc. ("Laser Tech"). The
Company and its subsidiaries are currently focused on the advertising insert,
direct mail and premedia sectors of the industry.

- TC ADVERTISING is a leading producer of advertising insert programs for
retailers, and produces TV listing magazines, Sunday comics, Sunday
magazines and special supplements for many of the most widely circulated
U.S. newspapers. In 1996, the Company produced more than 22 billion
advertising inserts, 1.6 billion Sunday comics, 140 million locally edited
Sunday magazines and 620 million TV listing guides. As the only
advertising insert producer offering a national network of both heatset
and cold web offset production facilities and one of the largest U.S.
consumers of newsprint and ink, TC Advertising can address the diverse
needs of its customers and achieve significant cost and distribution
advantages. The Company believes that the advertising inserts industry
sector generates revenues of $8 to $9 billion per year, with approximately
50% of the dollars spent on the production of inserts and the balance on
distribution of the product.

- WEBCRAFT is a market leader in producing highly customized direct mail and
specialty advertising products such as commercial games and fragrance
samplers. Webcraft derives the majority of its revenues from the
integrated production of personalized advertising mailings, a marketing
medium that has exceeded the annual growth rate for overall advertising
spending for the period 1991-1996. The Company believes that in the
individualized industry sector in which Webcraft operates, customized
direct mail expenditures account for $20.8 billion per year, with
approximately 33% going to the production of direct mail and the remainder
to other services, including agency services, data analysis and
manipulation and creative development.

- LASER TECH is a leading provider of outsourced, digital premedia and
content management services to retailers, advertising agencies, and
consumer products companies. Services and technologies offered by Laser
Tech include digital photography studios, leading-edge desktop publishing
and client/server software and hardware, turnkey catalog and advertising
insert production, and digital image management systems for high speed
image retrieval. The Company believes that the premedia industry sector
exceeds $5.3 billion annually, and will continue to grow with the
emergence of new distribution technologies such as CD-ROM and the World
Wide Web that use digitized images.

Big Flower was incorporated in Delaware in 1993. Big Flower's principal
executive offices are located at 3 East 54th Street, New York, New York 10022
and its telephone number is (212) 521-1600.

BUSINESS STRATEGY

5
<PAGE>
subsidiaries to interact dynamically to create both new services for existing
customers and new customers for its traditional products.

Marketers aim to reach target customers with the most effective message and
the greatest possible impact. Technological advancements increasingly allow
marketers to understand customer preferences and to differentiate and
individualize advertising messages. Big Flower's strategy is to assist its
customers by providing a broad array of advertising and marketing services which
capitalize on these advancements. Key elements of this strategy include the
following:

PROVIDE INTEGRATED ADVERTISING SOLUTIONS FOR CUSTOMERS. The Company believes
that by combining the products and services of TC Advertising, Webcraft and
Laser Tech it can work with current and future customers to develop
cost-effective and comprehensive solutions to their particular advertising and
marketing needs. Big Flower has the expertise to work with customers from
inception of an advertising concept through layout design and production, to
targeting and distribution of the printed product, thereby helping customers
achieve their advertising goals in a cost-effective manner. For example, for a
recent store opening by a home improvement retailer, Big Flower presented the
customer with a five-piece plan that combined TC Advertising's and Webcraft's
capabilities. The campaign involved two "teaser" direct mail items, followed by
an individualized, highly-customized direct mail package that included a
pre-approved credit card for the customer. The fourth piece was a 72-page
advertising brochure distributed through the local newspaper, followed by a
large, glossy advertising insert. The Company believes that by integrating its
digital premedia services, advertising insert capabilities, geographic and
demographic insert targeting programs and highly customized direct mail and
specialty products, it offers its customers certain solutions not offered by the
Company's competitors.

DEVELOP TARGETED ADVERTISING PROGRAMS. The Company's customers are
increasingly targeting their advertising messages based on more detailed
knowledge of consumers and what they buy. Big Flower has responded to this trend
in all of its businesses:

- TC ADVERTISING'S Market Reach system enables the Company to attract new
categories of customers by providing them with tools to utilize the
targeted distribution capabilities of major market newspapers. Advertisers
can customize their advertising to match the demographic characteristics
and other targeting requirements of over 12,000 newspaper delivery zones
in the nation's top 150 designated market areas.

- WEBCRAFT'S highly individualized, multiple component direct mail campaigns
utilize information refined from customers' databases as well as
Webcraft's own expertise in direct mail personalization techniques.

- LASER TECH'S image management expertise allows customers' images to be
stored, archived, and retrieved to and from any remote location. Images
stored in Laser Tech's system can have multiple applications across a
variety of advertising media. For example, in addition to their use in
print media, images are readily accessible for use in Web sites and
inclusion in CD-ROMs. The Company's Digital Dimensions business unit also
provides consulting and development services to large clients, assisting
them in the development of high impact, commercially effective Web sites.

MAXIMIZE CROSS-SELLING OPPORTUNITIES. Currently, TC Advertising serves a
large customer base of regional and national retailers, while Webcraft's and
Laser Tech's customer base consists mainly of national manufacturers,
advertising agencies and marketing companies. Big Flower has established
employee incentive compensation programs to promote cross-selling of the entire
Big Flower products and services lines. For example, TC Advertising has begun
providing advertising insert programs to Webcraft's direct mail customers, while
Webcraft has begun to deliver targeted direct mail advertising on behalf of TC
Advertising's retail clients. TC Advertising also has begun to provide
Webcraft's commercial

6
<PAGE>
games products to its retail customers. In addition, certain premedia functions
previously performed by customers of TC Advertising and Webcraft are now
performed by Laser Tech under facilities management agreements.

CAPITALIZE ON NATIONAL DIGITAL WORKFLOW PLATFORM. The Company continues to
optimize its nationwide digital network capability that employs
telecommunications technologies to connect TC Advertising's and Laser Tech's
facilities, enabling the Company and its customers to conceive, manipulate,
transmit, produce and distribute their advertising concepts seamlessly on a
national scale. The platform development is based on open-standard digital
communications technologies and is continuously refined to meet a customer's
particular needs. It currently connects customers and the production centers at
all Laser Tech facilities and 14 of the TC Advertising production facilities.
Each TC Advertising production facility is equipped to meet the rapid output
requirements of highly-versioned insert advertising programs, using efficient
state of the art, digital page processing systems.

PURSUE STRATEGIC ACQUISITIONS. Big Flower continues to review opportunities
to extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Laser Tech business
units. In addition, Big Flower adds value to strategic acquisitions by
identifying operating synergies, effecting cost savings and improving
efficiency. Since its initial acquisitions of TC Advertising, Laser Tech and
Webcraft, Big Flower has expanded its products and services through a number of
strategic acquisitions that increased the span and scope of each of these
industry sectors, as summarized in the table below:

<TABLE>
<CAPTION>
BUSINESS UNIT BUSINESS ACQUIRED DATE STRATEGIC SIGNIFICANCE
- --------------- --------------------------- --------------- ----------------------------------------------------
<S> <C> <C> <C> <C>

TC Advertising KTB Associates, Inc., and April 1994 - Increased TC Advertising's capacity and broadened
Retail Graphics Holding its customer base in the advertising insert industry
Company sector

PrintCo., Inc. October 1996 - Added significant retail accounts and new production
capacity

Webcraft Scanforms, Inc. October 1996 - Expanded customer base among leading financial
services and publishing companies

- Added additional high-quality laser personalization
and short-run capabilities

Laser Tech Pacific Color October 1996 - Enhanced expertise in digital premedia services
Connection, Inc.
- Expanded presence in California

- Added internet production services

- Expanded product lines to include large format
advertising products

Designer Color December 1996 - Added capability to produce interactive multimedia
Systems, Ltd. systems for electronic catalogs and ordering systems

Digital Dimensions, Inc. December 1996 - Enhanced digital imaging services platform

- Added capability to provide Web site design and
execution
</TABLE>

7
<PAGE>
RECENT DEVELOPMENTS

On November 28, 1995, TC Advertising entered into a six year $350.0 million
revolving credit facility, which was amended on March 19, 1996 to add a $75.0
million term loan (as amended to date, the "Credit Agreement"). The Company
intends to (i) enter into a new credit facility (the "New Credit Facility") with
a group of lenders providing up to $475.0 million of revolving credit loans and
(ii) terminate its existing Credit Agreement and repay its loans thereunder. The
New Credit Facility will provide greater borrowing capacity on more favorable
terms, including lower interest rates, and covenant terms which the Company
believes provide greater financial flexibility. The Company has received
commitments from Bankers Trust Company and Credit Suisse First Boston regarding
the New Credit Facility; however, such commitments are subject to certain
conditions and therefore there can be no assurance that the Company will enter
into the New Credit Facility or when and on what terms such New Credit Facility
will become available. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation Liquidity and Capital Resources".

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered......................... 5,958,524 shares (1)

Common Stock to be outstanding after the
Offering................................... 18,499,162 shares (2)

Use of Proceeds.............................. All of the Common Stock offered hereby is
being sold by the Selling Stockholders. The
Company will not receive any proceeds from
the sale of the shares offered hereby. See
"Selling Stockholders."

New York Stock Exchange symbol............... BGF
</TABLE>

- ----------------

(1) Does not include shares of Common Stock which may be purchased from a
Selling Stockholder pursuant to the exercise of the Underwriters'
over-allotment option.

(2) Includes 1,738,692 shares to be issued upon conversion of shares of Class B
Common Stock, par value $0.01 per share (the "Class B Common Stock"), of Big
Flower held by BT Investment Partners, Inc. ("BTIP") and sold in the
Offering. See "Selling Stockholders." Does not include 2,506,353 shares of
Common Stock reserved for issuance under the Big Flower Press Holdings, Inc.
Restated 1993 Stock Award and Incentive Plan (the "Plan"), of which 617,625
stock options are presently exercisable or will become exercisable within 60
days from the date of this Prospectus. An additional 2,000,000 shares of
Common Stock will be reserved for issuance under the Plan if proposed
amendments to the Plan are approved by the Company's stockholders at its
1997 Stockholders Meeting currently scheduled for June 24, 1997.

RISK FACTORS

See "Risk Factors" commencing on page 11 hereof for a discussion of certain
risks that should be considered in connection with an investment in the Common
Stock.

8
<PAGE>
SUMMARY FINANCIAL DATA

The following table sets forth selected financial data of predecessor TC
Advertising prior to its acquisition by Big Flower ("Predecessor TC
Advertising") and of Big Flower and its subsidiaries (including TC Advertising)
following Big Flower's acquisition of TC Advertising. On March 21, 1996, Big
Flower's Board of Directors elected to change the Company's fiscal year from a
12-month period ending June 30th to a calendar year, effective with the period
ended December 31, 1995. The selected financial data as of and for each of the
two fiscal years in the periods ended June 30, 1993 and for the 42 days ended
August 11, 1993 were derived from the audited consolidated financial statements
of Predecessor TC Advertising. The selected financial data of Big Flower as of
and for the 323 day period ended June 30, 1994, the fiscal year ended June 30,
1995, the six months ended December 31, 1995 and the year ended December 31,
1996 were derived from the audited financial statements of Big Flower, restated
for the merger with Scanforms. The selected financial data for the three-month
periods ended March 31, 1996 and 1997 were derived from the Company's unaudited
condensed consolidated interim financial statements for such periods. On October
4, 1996, Big Flower consummated the acquisition of Scanforms, Inc. ("Scanforms")
in a transaction accounted for as a pooling of interests. Accordingly, the Big
Flower financial information has been restated for prior periods to include the
results of Scanforms for all periods presented. For additional information, see
the Consolidated Financial Statements and the notes thereto. The selected
historical financial data should also be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
BIG FLOWER
PREDECESSOR TC ADVERTISING ------------------------------------------------------------------------------
--------------------------------- SIX MONTH
TRANSITION
YEAR ENDED 42 DAYS 323 DAYS YEAR PERIOD YEAR THREE MONTHS ENDED
JUNE 30, ENDED ENDED ENDED ENDED ENDED MARCH 31,
-------------------- AUGUST 11, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------
1992 1993 1993 1994 1995 1995 1996 1996 1997
--------- --------- ----------- --------- --------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales........ $ 536,113 $ 555,013 $ 59,584 $ 587,630 $ 920,149 $ 546,840 $ 1,201,860 $ 229,128 $ 297,501
Operating
income......... 23,475 22,436 665 25,488 50,712 39,739 69,343 5,018 15,576
Interest expense
(a)............ 9,249 6,792 578 19,735 37,452 19,072 36,165 7,587 9,710
Income (loss)
before income
taxes.......... 7,696 10,204 (228) (549) 5,268 12,694 4,998 (9,046) 3,296
Income (loss)
before
extraordinary
item........... 4,196 4,685 (139) (3,277) (1,612) 6,491 (3,285) (4,423) 1,681
Extraordinary
item, Net
(b)............ -- -- -- -- -- (19,248) (2,078) (1,892) --
Net income
(loss)......... 4,196 4,685 (139) (3,277) (1,612) (12,757) (5,363) (6,315) 1,681
Average shares
outstanding.... -- -- -- 11,294 12,458 13,919 18,315 18,065 19,327
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
BIG FLOWER
PREDECESSOR TC ADVERTISING ------------------------------------------------------------------------------
--------------------------------- SIX MONTH
TRANSITION
YEAR ENDED 42 DAYS 323 DAYS YEAR PERIOD YEAR THREE MONTHS ENDED
JUNE 30, ENDED ENDED ENDED ENDED ENDED MARCH 31,
-------------------- AUGUST 11, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------
1992 1993 1993 1994 1995 1995 1996 1996 1997
--------- --------- ----------- --------- --------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(c)........ $ 37,232 $ 34,560 $ 1,901 $ 54,238 $ 93,699 $ 58,372 $ 122,588 $ 15,068 $ 31,106
Capital
Expenditures... 7,354 6,967 1,280 6,133 8,496 16,812 55,391 9,468 15,343
Cash flows
provided by
(used in)
operating
activities(d)(e).. 19,017 21,823 (6,363) 31,514 47,597 27,881 135,936 90,082 18,683
Cash flows
provided by
(used in)
investing
activities(d)... (2,183) 10,708 (1,280) (270,223) (7,013) (19,050) (170,849) (87,209) (15,739)
Cash flows
provided by
(used in)
financing
activities
(d)............ (16,336) (31,453) 6,209 241,975 (39,789) (4,326) 29,941 2,682 (2,504)

BALANCE SHEET
DATA (AT PERIOD
END):
Working
capital........ $ 4,567 ($ 3,597) -- $ 25,198 $ 34,173 $ 29,797 ($30,821)(e) ($ 42,107)(e) ($ 12,905)(e)
Net property,
plant and
equipment...... 84,238 62,850 -- 152,306 137,081 145,323 296,426 239,643 297,343
Total assets..... 185,710 160,356 -- 521,461 502,939 573,393 749,742 684,040 735,096
Long-term debt,
net of current
portion........ 73,183 34,485 -- 331,940 301,935 274,161 430,766 390,744 450,390
Redeemable
preferred stock
of a
subsidiary..... -- -- -- 16,913 19,357 -- -- -- --
Common stock-
holders'
equity......... 27,595 32,663 -- 19,449 16,593 84,476 96,350 82,688 95,792
</TABLE>

- ------------------------

(a) Interest expense excludes amortization of deferred financing fees for all
periods. Interest expense for the year ended December 31, 1996 includes the
amortization of interest rate swap fees of $1,200,000.

(b) Big Flower's net loss for the six months ended December 31, 1995 includes an
extraordinary loss, net of tax, of $19,248,000 on early extinguishment of
debt and termination of a swap agreement. Big Flower's net loss for the
quarter ended March 31, 1996 includes an extraordinary loss, net of tax, of
$1,892,000 on early extinguishment of debt and Big Flower's net loss for the
year ended December 31, 1996 includes an extraordinary loss, net of tax, of
$2,078,000 on early extinguishment of debt.

(c) "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles and merger costs. EBITDA is presented here to provide
additional information about the Company's ability to meet its future debt
service, capital expenditure and working capital requirements and should not
be construed as a better indicator of operating performance than income from
operations as determined in accordance with generally accepted accounting
principles ("GAAP"), or a better indicator of liquidity than cash flow from
operating activities as determined in accordance with GAAP.

(d) Cash flows from operating, investing and financing activities are
significantly affected by the acquisition of TC Advertising, KTB Associates,
Inc. ("KTB"), Retail Graphics Holding Company ("Retail Graphics"), Laser
Tech, Webcraft and the other acquisitions which occurred in 1996. See the
consolidated statements of cash flows of Big Flower and the notes thereto
incorporated by reference herein and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

(e) On October 4, 1996, the Company entered into the A/R Securitization
(hereinafter defined). Between March 19, 1996 and October 4, 1996, the
Company operated under a bridge facility with similar terms and conditions
as the A/R Securitization and, accordingly, results for periods subsequent
to March 19, 1996 reflect the effects of those facilities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".

10
<PAGE>
RISK FACTORS

PROSPECTIVE PURCHASERS OF THE COMMON STOCK SHOULD CAREFULLY CONSIDER THE
RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION APPEARING IN THIS
PROSPECTUS, BEFORE MAKING AN INVESTMENT IN THE COMMON STOCK.

COMPETITION

The advertising and marketing services industry in the United States is
highly competitive in most product categories and geographic regions.
Competition is largely based on price, quality and servicing the specialized
needs of customers. During recent periods of economic downturn, excess
production capacity in the Company's business sectors has resulted in more
competitive pricing in such sectors.

RAW MATERIALS--PAPER

The cost of paper is a principal factor in the Company's pricing to certain
customers and consequently the cost of paper significantly affects the Company's
net sales. The Company is generally able to pass increases in the cost of paper
to its customers, while declines in paper costs generally result in lower prices
to customers. Volatility in paper costs results in a corresponding volatility in
the Company's net sales, but generally has not affected volume or profits to any
significant extent. However, sharp increases in paper prices and related
reduction in print advertising programs are more likely to adversely affect
volumes and profits. To the extent that there are future paper cost increases
and the Company is not able to pass such increases to its customers or its
customers reduce the size of their print advertising programs, the Company's
results of operations (primarily those of TC Advertising) could be materially
adversely affected.

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 utilized by the
Company. Any loss of the sources for paper supply or any disruption in such
sources' business or failure by them to meet the Company's product needs on a
timely basis could cause, at a minimum, temporary shortages in needed materials
which could have a material adverse effect on the Company's results of
operations. Although the Company actively manages its paper supply and has
established strong relationships with its suppliers, which include many of the
leading paper companies in North America, there can be no assurance that the
Company's sources of supply for its paper will be adequate or, in the event that
such sources are not adequate, that alternative sources can be developed in a
timely manner.

MANAGEMENT OF GROWTH

The Company's primary objective is to be the leading provider of marketing
and advertising services for retailers, national manufacturers and advertising
agencies, among others. One of the key elements of the Company's strategy
includes strategic acquisitions to expand and diversify the Company's products
and services in the advertising and marketing services industry. Over the past
four years, the Company has completed 11 acquisitions to increase its market
position. The Company continues to seek similar or complementary businesses and
intends to continue its acquisition program in the future. This program may
require significant management time and capital resources. Such acquisitions are
likely to require the incurrence and/or assumption of indebtedness and other
obligations, the issuance of equity securities or some combination thereof.
While the Company anticipates that its acquisitions will be beneficial, the
Company cannot predict if any such transactions will be consummated, the terms
or forms of consideration required in any such transactions, nor whether the
acquired businesses will be successfully integrated into the Company's
operations. Accordingly, no assurance can be made that such acquisitions will
not have a material adverse effect on the Company's performance.

11
<PAGE>
LEVEL OF INDEBTEDNESS

At March 31, 1997, the Company had, on a consolidated basis, approximately
$451.8 million of indebtedness, including capitalized lease obligations. The
Company intends to (i) enter into the New Credit Facility with a group of
lenders providing for up to $475.0 million of revolving credit loans and (ii)
terminate its existing Credit Agreement and repay its loans thereunder. The
Company has received commitments from Bankers Trust Company and Credit Suisse
First Boston regarding the New Credit Facility; however, such commitments are
subject to certain conditions and therefore there can be no assurance that the
Company will enter into the New Credit Facility or when and on what terms such
New Credit Facility will become available. See "Summary--Recent Developments".
On a pro forma basis as of March 31, 1997, the Company would have been able to
borrow an additional amount of approximately $150 million under the New Credit
Facility. As of such date, the Company had available for borrowing an additional
amount of up to $102.9 million under the Credit Agreement. Subject to the
restrictions in the Credit Agreement, the Company may incur additional
indebtedness from time to time to finance acquisitions or capital expenditures
or for other purposes. At March 31, 1997, the Company also had significant
commitments under operating leases and approximately $89.3 million was
outstanding under the A/R Securitization (as hereinafter defined). See Notes 5
and 10 in the Notes to the Consolidated Financial Statements.

The level of the Company's indebtedness could have important consequences to
stockholders, including: (i) a significant portion of the Company's cash flow
from operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional debt financing
in the future for working capital, capital expenditures or acquisitions may be
limited; (iii) the Company's level of indebtedness could limit its flexibility
in reacting to changes in its industry and economic conditions generally; and
(iv) the Company is subject to restrictions on its ability to pay dividends.
Certain of the Company's competitors currently operate on a less leveraged
basis, and have significantly greater operating and financial flexibility than
the Company.

CERTAIN FINANCIAL AND OPERATING RESTRICTIONS

The Credit Agreement, the New Credit Facility as currently proposed and the
Company's other outstanding debt instruments impose certain operating and
financial restrictions on the Company, affecting, and in certain cases limiting,
among other activities, the ability of the Company to incur additional
indebtedness or create liens on its assets, pay dividends, sell assets, engage
in mergers or acquisitions or make investments. Failure to comply with any such
restrictions could limit the availability of borrowings or result in a default
under the terms of any such indebtedness, and there can be no assurance that the
Company will be able to comply with such restrictions. Moreover, these
restrictions could limit the Company's ability to engage in certain business
transactions which the Company may desire to consummate. The Company's inability
to consummate any such transaction could have an adverse effect on the Company's
operations and the ability of the Company and its subsidiaries to make principal
and interest payments on their outstanding debt, or to pay dividends, if any, on
the Company's Common Stock.

ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS

The Company is subject to federal, state and local environmental laws,
regulations and ordinances relating to protection of the environment and human
health and safety, including those concerning the discharge, storage, handling
and disposal of hazardous or toxic waste and materials. Such laws, regulations
and ordinances provide for the imposition of significant fines and penalties and
may impose liability for the costs of cleaning up sites of past spills,
disposals or other releases of hazardous substances. From time to time,
operations of the Company have resulted or may result in noncompliance with or
liability for cleanup pursuant to such laws, regulations and ordinances. In
addition, TC Advertising and Webcraft have been identified as potentially
responsible parties under the federal

12
<PAGE>
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, and under certain analogous state laws, for several sites to which
TC Advertising or Webcraft, among others, sent waste in the past. While the
Company believes that any such noncompliance or liability under current
environmental laws will not have a material adverse effect on its results of
operations and financial condition, there can be no assurances that such matters
will not ultimately have such an effect and nor can management predict what
environmental laws will be enacted in the future, how existing or future laws or
regulations will be enforced, administered or interpreted, or the amount of
future expenditures which may be required in order to comply with such laws. See
"Business--Additional Company Information--Governmental Regulations" and
"Business--Additional Company Information--Environmental Matters."

RELIANCE ON KEY PERSONNEL

The efforts of a relatively small number of key management and operating
personnel will largely determine the Company's success. The loss of any of such
personnel could adversely affect the Company. The Company's success also depends
in part upon its ability to hire and retain highly skilled and qualified
operating, marketing, financial and technical personnel. There can be no
assurance that the Company will be able to hire or retain necessary personnel.
See "Management."

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE, BYLAWS AND RIGHTS PLAN

Certain provisions of Big Flower's Restated Certificate of Incorporation (as
amended to date, the "Certificate") and Bylaws (as amended to date, the
"Bylaws") may be deemed to have anti-takeover effects and may delay, deter or
prevent a takeover attempt that a stockholder might consider in such
stockholder's best interest. These provisions, among other things (i) classify
the Company's Board of Directors into three classes, each of which will serve
for staggered three-year periods, (ii) provide for removal of directors from
office only for cause and only by an 85% supermajority vote of holders of Common
Stock, (iii) provide that only the Board of Directors or certain members thereof
or officers of the Company may call special meetings of the stockholders, (iv)
eliminate the ability of the stockholders to take any action without a meeting,
and (v) provide for an 85% supermajority vote of holders of Common Stock to
amend such provisions or the Bylaws. In addition, the Bylaws establish certain
advance notice procedures for nomination of candidates for election as directors
and for stockholder proposals to be considered at stockholders' meetings. The
Company has also adopted a stockholder rights plan. Upon completion of the
Offering, Theodore Ammon and Apollo Big Flower Partners, L.P. ("Apollo") will
beneficially own approximately 12.5% and 4.1%, respectively, of the outstanding
Common Stock (assuming the Underwriter's over-allotment option is not
exercised). As a result of such ownership, Mr. Ammon and Apollo could block any
proposals requiring satisfaction of such supermajority requirements. See
"Description of Capital Stock -- Anti-takeover Effects of Provisions of the
Company's Certificate and Bylaws" and "Description of Capital Stock -- Rights
Plan".

SHARES SUBJECT TO REGISTRATION RIGHTS

Upon completion of the Offering, a substantial number of shares of Common
Stock, including 750,000 shares beneficially owned by Apollo (assuming the
Underwriters' over-allotment option is not exercised) and 2,317,144 shares
beneficially owned by Mr. Ammon, will be subject to registration rights. See
"Shares Subject to Registration Rights -- Registration Rights". The Company and
certain stockholders have agreed (subject to certain exceptions) not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 90 days
after the date of this Prospectus without the prior written consent of Goldman,
Sachs & Co. Actual sales of shares of Common Stock under a registration
statement, pursuant to Rule 144 or otherwise in the future, or the prospect of
such sales, may depress the price of the Common Stock.

13
<PAGE>
USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the Common Stock
being offered hereby. See "Selling Stockholders."

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is traded on The New York Stock Exchange, Inc. under the
symbol "BGF". Each share of Common Stock is traded together with a right
entitling the holder to purchase one one-hundredth of a share of Series A Junior
Preferred Stock under the terms of the Company's Rights Plan. There is no
established public trading market for the Class B Common Stock.

The Common Stock first traded on the New York Stock Exchange on November 22,
1995. Prior to November 22, 1995, there was no established trading market for
the Common Stock. Set forth below are the high and low closing prices for the
Common Stock for the period indicated, as reported on the New York Stock
Exchange Composite Tape (the "NYSE Composite Tape").

FISCAL YEAR ENDED:

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
DECEMBER 1997

First Quarter ended March 31................................................ $ 20 7/8 $ 17 7/8
Second Quarter through June 10.............................................. 21 7/8 18 1/8

DECEMBER 1996

First Quarter ended March 31................................................ 19 1/8 10 7/8
Second Quarter ended June 30................................................ 14 5/8 11 7/8
Third Quarter ended September 30............................................ 14 12 1/2
Fourth Quarter ended December 31............................................ 18 3/4 12 1/4

TRANSITION PERIOD 1995

November 22, 1995 to December 31, 1995...................................... 15 3/4 15
</TABLE>

The last reported sale price of the Common Stock on the NYSE Composite Tape
on June 10, 1997 was $21 7/8 per share.

As of May 9, 1997, there were approximately 224 holders of record of the
Common Stock and one holder of record of the Class B Common Stock.

DIVIDENDS

Big Flower has not paid cash dividends on its Common Stock and intends to
continue this policy for the foreseeable future and retain earnings for
repayment of indebtedness and investment in its business and acquisitions. The
Credit Agreement restricts the ability of TC Advertising, Webcraft and Laser
Tech to pay dividends to the Company and the Company's ability to pay dividends
to its stockholders, but allows cash dividends to the Company for operating
expenses in the ordinary course of business up to an initial amount of $10.0
million for fiscal 1996, increasing by 10% for each year thereafter.
Additionally, the Credit Agreement permits certain additional dividends from Big
Flower's subsidiaries, including up to 25% of cumulative consolidated net income
from March 19, 1996. The New Credit Facility will contain similar restrictions
on the payment of dividends. In addition, the indenture governing the 10 3/4%
Notes imposes certain restrictions on Big Flower's ability to pay dividends on
its Common Stock.

14
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1997. This table should be read in conjunction with the Summary Financial
Data included herein and the Consolidated Financial Statements. The Company
intends to enter into the New Credit Facility. See "Summary-- Recent
Developments". The Company will not receive any proceeds from the sale of the
Common Stock offered hereby.

<TABLE>
<CAPTION>
MARCH 31, 1997
---------------
<S> <C>
(IN THOUSANDS)
Short-term debt:
Current portion of long-term debt.......................................... $ 1,396
---------------
---------------

Long-term debt:
Credit Agreement........................................................... $ 320,565
10 3/4 Notes, net of discount.............................................. 125,208
Other long-term debt....................................................... 4,617
---------------
Total long-term debt....................................................... 450,390
Total stockholders' equity................................................... 95,792
---------------
Total capitalization....................................................... $ 546,182
---------------
---------------
</TABLE>

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The discussion below relates to the consolidated financial condition and
results of operations of Big Flower for the six months ended December 31, 1994
and 1995, the year ended December 31, 1995 and 1996 and the three months ended
March 31, 1996 and 1997. All periods prior to October 1, 1996 have been restated
for the merger with Scanforms.

OPERATING DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
-------------------------------- -------------------------------- ---------------------------
1994 1995 1995 1996 1996 1997
---------------- -------------- -------------- ---------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ 468,943 $ 546,840 $ 998,046 $ 1,201,860 $ 229,128 $ 297,501
Operating expenses:
Costs of production... 396,893 459,788 837,928 971,789 196,786 235,245
Selling, general and
administrative...... 23,481 28,680 56,616 107,483 17,274 31,150
Depreciation.......... 10,576 10,533 20,826 34,756 6,053 11,429
Amortization of
intangibles......... 11,125 8,100 19,093 17,003 3,997 4,101
Merger costs.......... -- -- -- 1,486 -- --
---------------- -------------- -------------- ---------------- ---------------- ---------
442,075 507,101 934,463 1,132,517 224,110 281,925
---------------- -------------- -------------- ---------------- ---------------- ---------
Operating income........ 26,868 39,739 63,583 69,343 5,018 15,576
---------------- -------------- -------------- ---------------- ---------------- ---------
Other expenses (income):
Interest expense...... 18,314 19,072 38,209 34,965 7,587 9,710
Amortization of
deferred financing
costs............... 1,699 1,598 3,333 3,002 710 555
Interest income....... (43) (442) (678) (712) (196) (120)
Loss on sale of
Webcraft Games,
Inc................. -- -- -- 14,277 -- --
Other, net............ 345 5,749 7,795 12,813 5,963 2,135
Preferred dividends of
a subsidiary........ 1,166 1,068 2,346 -- -- --
---------------- -------------- -------------- ---------------- ---------------- ---------
21,481 27,045 51,005 64,345 14,064 12,280
Income (loss) before
income taxes.......... 5,387 12,694 12,578 4,998 (9,046) 3,296
Income tax expense
(benefit)............. 3,333 6,203 9,750 8,283 (4,623) 1,615
---------------- -------------- -------------- ---------------- ---------------- ---------
Income (loss) before
extraordinary item.... 2,054 6,491 2,828 (3,285) (4,423) 1,681
Extraordinary item,
net................... -- (19,248) (19,248) (2,078) (1,892) --
---------------- -------------- -------------- ---------------- ---------------- ---------
Net income (loss)....... $ 2,054 ($ 12,757) ($ 16,420) ($ 5,363) ($ 6,315) $ 1,681
---------------- -------------- -------------- ---------------- ---------------- ---------
---------------- -------------- -------------- ---------------- ---------------- ---------
</TABLE>
GENERAL

The cost of paper is a principal factor in the Company's pricing to certain
customers and consequently the cost of paper significantly affects net sales.
The Company is generally able to pass increases in the cost of paper to its
customers, while declines in paper costs generally result in lower prices to
customers. Volatility in paper costs results in a corresponding volatility in
the Company's net sales, but generally has not affected volume or profits to any
significant extent.

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 utilized by the

16
<PAGE>
Company. The Company believes that its strong relationships with major North
American paper suppliers should enable the Company to satisfy its paper
requirements on competitive terms even in periods of high demand.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 WITH THE THREE MONTHS ENDED
MARCH 31, 1996

Net sales increased to $297.5 million for the three months ended March 31,
1997 from $229.1 million for the three months ended March 31, 1996, an increase
of $68.4 million or 29.8%. The increase resulted from the addition of the
operations of Webcraft, PrintCo., Inc. ("PrintCo"), Pacific Color Connection,
Inc. ("Pacific Color"), Designer Color Systems, Ltd. ("DCS") and Digital
Dimensions, Inc. ("DDI") (collectively the "1996 Acquisitions") for the three
months ended March 31, 1997 which was offset in part by a decrease in TC
Advertising's (excluding PrintCo) net sales as a result of lower paper costs in
1997. Paper costs were 35.9% of the Company's net sales for the three months
ended March 31, 1997 as opposed to 49.4% of net sales for the three months ended
March 31, 1996. Volume of production for TC Advertising, which increased
approximately 8% for the first quarter of 1997 from the first quarter of 1996,
offset the decline in paper costs.

Operating income for the three months ended March 31, 1997 was $15.6 million
compared to $5.0 million for the three months ended March 31, 1996, an increase
of $10.6 million or 210.4%. $8.8 million of the increase resulted from the
inclusion of the operations of the 1996 Acquisitions. Costs of production as a
percent of sales decreased to 79.1% for the three months ended March 31, 1997
from 85.9% for the three months ended March 31, 1996, principally attributable
to the decrease in the cost of paper and the inclusion of the operations of the
1996 Acquisitions where paper is less of a component of costs. Selling, general
and administrative expenses increased to $31.2 million in the three months ended
March 31, 1997 from $17.3 million for the three months ended March 31, 1996, an
increase of $13.9 million or 80.3% which is principally due to the 1996
Acquisitions. Depreciation was $11.4 million for the three months ended March
31, 1997 compared to $6.1 million for the three months ended March 31, 1996, an
increase of $5.4 million or 88.8%. The increase in depreciation was attributable
to the 1996 Acquisitions and increased capital expenditures throughout 1996 at
TC Advertising.

Net interest expense, including the amortization of deferred financing fees,
for the three months ended March 31, 1997 was $10.1 million compared to $8.1
million for the three months ended March 31, 1996. Interest expense increased
due to higher average debt levels in the first quarter of 1997 as a result of
the 1996 Acquisitions, primarily the $75.0 million term loan which was obtained
in March 1996. See "--Liquidity and Capital Resources."

Other, net, was $2.1 million in the three months ended March 31, 1997
compared to $6.0 million in the comparable period in 1996, which prior period
included $5.0 million in non-recurring financing costs related to the
acquisition of Webcraft. For the three months ended March 31, 1997, other, net
includes charges of $1.5 million related to the A/R Securitization compared to
$0.2 million of recurring costs for the three months ended March 31, 1996.

The extraordinary item, net of tax, of $1.9 million in the first quarter of
1996 was due to early extinguishment of debt subsequent to the acquisition of
Webcraft.

The effective income tax rate for the three months ended March 31, 1997 and
1996 exceeded the federal statutory tax rate due primarily to amortization of
certain goodwill (which is not deductible for income tax purposes) and state
income taxes.

The Company will adopt Statement of Financial Accounting Standard No. 128.,
"Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required.
The standard specifies the computation, presentation and disclosure requirements
for earnings per share.

17
<PAGE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER 31,
1995

Net sales increased 20.4% or $203.8 million. The addition of the operations
of Laser Tech, Webcraft and their acquisitions for the year ended December 31,
1996 generated an increase of approximately $302.5 million. This increase was
offset by a net decrease in TC Advertising's net sales after the effect of the
fourth quarter 1996 acquisition of PrintCo which generated approximately $28.2
million in sales. Due to a soft retail advertising environment, TC Advertising's
volume was slightly below the prior year. In addition, paper costs, which
significantly affect net sales, were 42.2% of the Company's net sales for the
year ended December 31, 1996 compared to 49.8% of the Company's net sales for
the year ended December 31, 1995. The decrease in paper costs as a percent of
sales is attributable to lower paper prices and acquisitions where paper is less
of a component of costs.

Operating income increased to $69.3 million in the year ended December 31,
1996 from $63.6 million in the year ended December 31, 1995, an increase of $5.8
million or 9.1%. Costs of production as a percent of sales decreased from 84.0%
to 80.9%, principally attributable to the inclusion in 1996 of the operations of
Laser Tech, Webcraft and their acquisitions. In addition, the cost of paper had
an effect on cost of production as a percent of sales for TC Advertising.
Selling, general and administrative costs increased approximately $50.9 million
to $107.5 million for the year ended December 31, 1996 compared to $56.6 million
for the year ended December 31, 1995. The addition of Laser Tech, Webcraft and
their acquisitions increased selling, general and administrative costs by $53.5
million. Amortization of intangibles decreased by $2.1 million from $19.1
million for the year ended December 31, 1995 to $17.0 million for the year ended
December 31, 1996. Certain intangibles related to the acquisition of KTB and
Retail Graphics became fully amortized during the year ended December 31, 1995
offset by the amortization of the goodwill associated with the 1996
acquisitions. Costs of $1.5 million incurred in connection with the merger with
Scanforms also affected operating income in the year ended December 31, 1996.

Net interest expense for the year ended December 31, 1996 was $37.3 million
compared to $40.9 million for the year ended December 31, 1995. Amortization of
deferred financing costs decreased $1.5 million from $3.3 million for the year
ended December 31, 1995 to $1.8 million for the year ended December 31, 1996. In
connection with the initial public offering of Big Flower (the "Equity
Offering") in November of 1995, the Company repurchased the remainder of its
13 1/2% senior discount notes due 2004 (the "13 1/2% Notes"), 11% debentures due
2005 ("11% Debentures") and a portion of the 10 3/4% Senior Subordinated Notes
due 2003 (the "10 3/4% Notes"). Additional borrowings in 1996 under the
Company's revolving credit facility have been at lower interest rates.

Other, net increased $5.0 million from $7.8 million for the year ended
December 31, 1995 to $12.8 million for the year ended December 31, 1996. The
increase principally reflects $5.2 million in non-recurring charges related to
the acquisition of Webcraft in March of 1996.

During the fourth quarter of 1996, the Company recorded a $14.3 million loss
on the disposition of its lottery production division, Webcraft Games, Inc.
Management believes that the disposition will enable the Company to focus on
Webcraft's growth-oriented products such as customized direct mail.

The extraordinary item, net of tax, of $2.1 million was due to early
extinguishment of debt subsequent to the acquisitions of Webcraft and PrintCo.

The effective income tax rate for the year ended December 31, 1996 and 1995
exceeded the federal statutory tax rate due primarily to amortization of
goodwill (which is not deductible for income tax purposes), preferred dividends
of a subsidiary, state income taxes and, in 1996, the loss on the sale of
Webcraft Games, Inc.

Net income for the year ended December 31, 1996, adjusted for non-recurring
charges of (i) approximately $2.7 million of compensation expenses related to
the acquisition of DCS and DDI, (ii) $1.5 million of merger expenses associated
with the acquisition of Scanforms, (iii) a $14.3 million loss related to the
sale of Webcraft Games, Inc., (iv) $5.2 million of financing costs related to
the acquisition of

18
<PAGE>
Webcraft, and (v) a $2.1 million loss on debt extinguishment subsequent to the
acquisitions of Webcraft and PrintCo, would have been $14.4 million, or $0.78
cents per share.

COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1995 WITH THE SIX MONTHS ENDED
DECEMBER 31, 1994

Net sales increased to $546.8 million for the six months ended December 31,
1995 from $468.9 million for the six months ended December 31, 1994, an increase
of $77.9 million or 16.6%. Volume increased approximately 1%. Paper costs, which
significantly affect net sales, were 51.9% of net sales for the six months ended
December 31, 1995, compared to 45.3% of net sales for the six months ended
December 31, 1994.

Operating income for the six months ended December 31, 1995 increased to
$39.7 million compared to $26.9 million for the six months ended December 31,
1994, an increase of $12.9 million or 47.9%. Despite higher paper costs, costs
of production as a percent of net sales decreased to 84.1% for the six months
ended December 31, 1995 from 84.6% for the six months ended December 31, 1994.
Variable costs (excluding paper and ink costs) were 6% lower for the six months
ended December 31, 1995 compared to the prior comparable period. These reduced
variable costs were the result of higher volume, efficiency improvements and
cost controls. The increase in operating income for the six months ended
December 31, 1995 was also favorably impacted by the addition of Laser Tech in
late November and improved operating performance at the facilities acquired with
KTB and Retail Graphics in April 1994. Amortization of intangibles for the six
months ended December 31, 1995 was $8.1 million compared to $11.1 million for
the six months ended December 31, 1994. Amortization of certain intangible
assets associated with the acquisitions of TC Advertising, KTB and Retail
Graphics was $3.4 million lower in the six months ended December 31, 1995
compared to the prior comparable period as several of these assets became fully
amortized. Offsetting the lower amortization of intangible assets in the six
months ended December 31, 1995 was an increase in the provision for doubtful
accounts of $1.6 million reflecting the higher volume and conditions in certain
sectors of the retail market and $2.7 million due to higher personnel and
related costs and the addition of Laser Tech operations since late November
1995.

Net interest expense for the six months ended December 31, 1995 was $20.2
million compared to $20.0 million for the six months ended December 31, 1994.
Amortization of deferred financing costs were $1.6 million for the six months
ended December 31, 1995 and $1.7 million for the six months ended December 31,
1994. Interest expense for the six months ended December 31, 1995 included $12.9
million in net interest on the 10 3/4% Notes and the 13 1/2% Notes, and $6.0
million in net interest on other debt, primarily under the credit agreement
entered into by TC Advertising in April 1994 (the "1994 TCA Credit Agreement").

Other, net for the six months ended December 31, 1995 was $5.7 million
compared to $0.3 million for the six months ended December 31, 1994. The other,
net, for the six months ended December 31, 1995 included $1.6 million for the
consolidation of two operating locations, and $3.7 million to complete the
relocation of TC Advertising's corporate office to Baltimore, Maryland from
Glendora, California.

The extraordinary item, net of tax, of $19.2 million was due to early
extinguishment of debt as discussed in "--Liquidity and Capital Resources"
below.

The effective income tax rate for the six months ended December 31, 1995 and
1994 exceeded the federal statutory tax rate due primarily to amortization of
goodwill (which is not deductible for income tax purposes), preferred dividends
of a subsidiary and state income taxes.

Net income for the six months ended December 31, 1995 and December 31, 1994
on a pro forma basis, reflecting the impact of the Equity Offering of shares of
the Company's Common Stock and related transactions, would have been $10.1
million, or $0.56 cents per share, and $6.9 million, or $0.38

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<PAGE>
cents per share, respectively. Excluding the effects of the second quarter
charges for the consolidation of two operating locations and to complete the
relocation of TC Advertising's corporate office, net income for the six months
ended December 31, 1995 would have been $13.3 million, or $0.74 cents per share.

LIQUIDITY AND CAPITAL RESOURCES

The operations of the Company historically have been funded with internally
generated funds, term loans and borrowings under a revolving credit facility.
The Company believes that internally-generated funds from operations, the Credit
Agreement (or the proposed replacement thereof) and the A/R Securitization will
be sufficient to meet its operating requirements for the near future.

The Company's current liabilities exceeded current assets by $12.9 million
at March 31, 1997 compared with $30.8 million at December 31, 1996, an increase
in working capital of $17.9 million. Excluding the effects of the A/R
Securitization, working capital at March 31, 1997 and December 31, 1996 would
have been $76.4 million and $49.0 million, respectively. The ratio of current
assets to current liabilities as of March 31, 1997 was 0.92 to 1 (1.49 to 1
excluding the A/R Securitization), and as of December 31, 1996 was 0.84 to 1
(1.25 to 1 excluding the A/R Securitization).

Net cash provided by operating activities for the three months ended March
31, 1997 was $18.7 million, an increase of $20.2 million from the prior
comparable period in 1996 (excluding the proceeds from the sale of accounts
receivable). Net cash used in investing activities were financed primarily
through borrowings under the Credit Agreement and the A/R Securitization.

On November 28, 1995, TC Advertising entered into the Credit Agreement. The
Credit Agreement was amended and restated on March 19, 1996 to add a $75.0
million term loan. The revolving facility will be reduced by $33.3 million on
the last day of 1998, 1999 and 2000 and will mature on the last day of 2001.
Principal payments on the term loan of $0.75 million are due on the last day of
1996 through 2001 and will mature on the last day of 2002. Interest on revolving
loans will be payable at TC Advertising's option (a) at a base rate plus a
margin which ranges from 0.00% to 1.25% or (b) at a Eurodollar-based rate plus a
margin which ranges from 0.50% to 2.25%. Interest on the term loan will be
payable at TC Advertising's option (a) at a base rate plus a margin of 1.50% or
(b) at a Eurodollar-based rate plus a margin of 2.50%. The Credit Agreement also
contains covenant requirements and certain dividend restrictions which are
customary for such financings.

On October 4, 1996 the Company entered into a six-year agreement (the "A/R
Securitization") pursuant to which it may sell fractional undivided beneficial
interests in a designated pool of certain eligible accounts receivable. The
maximum allowable amount of receivables to be sold is $150.0 million. The amount
outstanding at any measurement date varies based upon the level of eligible
receivables. Under the terms of the agreement, the Company has retained
substantially the same risk of credit loss as if the receivables had not been
sold and, accordingly, the full amount of the allowance for doubtful accounts
has been retained. At March 31, 1997, an $89.3 million interest had been sold
under the A/R Securitization and is reflected as a reduction of accounts
receivables. Fees of this program vary based on a Eurodollar rate plus an
average margin of 3/8% per annum on the amount of interest sold. This rate is
lower than the rate under the Company's existing Credit Agreement.

The Company intends to (i) enter into the New Credit Facility with a group
of lenders providing for up to $475.0 million of revolving credit loans and (ii)
terminate its existing Credit Agreement and repay its loans thereunder. The New
Credit Facility will provide greater borrowing capacity on more favorable terms,
including lower interest rates, and covenant terms which the Company believes
provide greater financial flexibility. The Company has received commitments from
Bankers Trust Company and Credit Suisse First Boston regarding the New Credit
Facility; however, such commitments are subject to certain conditions and
therefore there can be no assurance that the Company will enter into the New
Credit Facility or when and on what terms such New Credit Facility will become
available.

20
<PAGE>
The Company has grown through acquisitions and continues to seek similar or
complementary businesses. Such acquisitions are likely to require the incurrence
and/or assumption of indebtedness and other obligations, the issuance of equity
securities or some combination thereof. In addition, the Company may from time
to time determine to sell or otherwise dispose of certain of its existing
businesses. However, the Company cannot predict if any transactions will be
consummated, nor the terms or forms of consideration required in such
transactions. The Company's recent acquisitions are discussed in Note 2 to the
Consolidated Financial Statements.

SEASONALITY

TC Advertising's advertising insert business is seasonal in nature, with
activity increasing prior to the following advertising periods: Easter (March
15-April 15); Memorial Day (April 15-May 15); Back to School (July 15-August
15); and Thanksgiving/Christmas (October 1-December 15). Sunday comics,
newspaper TV listing guides, other newspaper products and other publications are
not seasonal in nature. Net sales percentages for the Company by quarter for the
twelve months ended December 31, 1996 were 19%, 25%, 26% and 30% of total net
sales for the quarters ended March 31, June 30, September 30 and December 31,
respectively. Based on its historical experience and projected operations, the
Company expects its operating results to be highest in the quarter ended
December 31 and weakest in the quarter ended March 31.

21
<PAGE>
BUSINESS

ORGANIZATIONAL STRUCTURE

The following chart sets forth the current organizational structure of Big
Flower. Big Flower directly or indirectly owns 100% of all of its subsidiaries.
Any reference to TC Advertising, Webcraft or Laser Tech includes their
respective subsidiaries unless the context clearly dictates otherwise.

[DIAGRAM]

<TABLE>
<S> <C> <C> <C>
PRODUCTS Advertising Inserts Personalized Direct Mail Digital Photography
AND TV Listing Magazines Fragrance Samplers Electronic Retouching
SERVICES: Sunday Comics Commercial Games Digital Image Scanning
Sunday Magazines Promotional Stamps Facilities Management
Special Supplements Non-Speciality Digital Asset Management
Premedia Services Commercial Printing Page Assembly
Electronic Image Output
Proofing
Packaging
</TABLE>

INTRODUCTION

The Company is a leading advertising and marketing services company which
provides integrated advertising solutions through its three principal operating
units: TC Advertising, Webcraft and Laser Tech. TC Advertising is a leading
producer of advertising insert programs for retailers, and produces TV listing
magazines, Sunday comics, Sunday magazines and special supplements for many of
the most widely circulated U.S. newspapers. Webcraft is a market leader in
producing highly customized direct mail and specialty advertising products such
as commercial games and fragrance samplers. Laser Tech is a leading provider of
outsourced, digital premedia and content management services to retailers,

22
<PAGE>
advertising agencies, and consumer product companies. The Company and its
subsidiaries are currently focused on the advertising insert, direct mail and
premedia sectors of the industry.

INDUSTRY SECTORS

MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED FROM INDUSTRY
PUBLICATIONS AND INTERNAL COMPANY ESTIMATES. WHILE THE COMPANY BELIEVES SUCH
INFORMATION IS RELIABLE, THE ACCURACY OF SUCH INFORMATION HAS NOT BEEN
INDEPENDENTLY VERIFIED AND CANNOT BE GUARANTEED.

ADVERTISING INSERTS. The Company believes that the advertising inserts
industry sector generates revenues of $8 to $9 billion per year, with
approximately 50% of the dollars for the production of inserts and the balance
for distribution of the product. The Company believes this industry sector will
continue to grow as non-traditional insert users have begun including inserts in
their media plans and traditional users such as retailers are spending more of
their advertising dollars in this medium.

The Company further believes advertising insert usage will expand as
advertisers require more versions of their inserts and targeted distribution
services for their messages. According to the Newspaper Association of America,
local retail advertising has changed to a greater reliance on inserts as
advertisers demand more targeting of their message, a distribution method that
run of press ("ROP") advertising is not capable of providing.

DIRECT MAIL. The Company believes that in the individualized industry
sector in which Big Flower operates, customized direct mail expenditures account
for $20.8 billion per year, with approximately 33% going to the production of
direct mail and the remainder to other services, including agency services, data
analysis and manipulation and creative development.

According to the 1996 VERONIS, SUHLER AND ASSOCIATES COMMUNICATIONS INDUSTRY
FORECAST, "More than three-quarters of U.S. companies use direct mail, and most
find it a powerful tool in meeting their marketing objectives. In addition to
generating sales directly, direct mail has proven to be effective in explaining
complex issues to consumers and business decision makers and in introducing a
new product or service."

PREMEDIA. The Company believes that the premedia industry sector exceeds
$5.3 billion annually, and will continue to grow with the emergence of new
distribution technologies such as CD-ROM and the World Wide Web that use
digitized images. The business, which includes the traditional preparation of
materials for print such as promotional items and advertising inserts, has
recently expanded to include the capture, storage and manipulation of image
management and the management of facilities which house these services. The
Company believes that as its customers require more versions of their
advertising inserts and other advertising and marketing messages, the demand for
easy retrieval and manipulation of images will grow. In addition, there is a
growing pattern of outsourcing of facilities management of premedia services
from which the Company has been benefitting and expects to continue to benefit.

BUSINESS STRATEGY

The Company's strategic objective is to become an integrated provider of a
diverse range of advertising and marketing services across a broad spectrum of
media. Through internal growth and acquisitions, Big Flower aims to broaden its
technology and services in a manner that allows its subsidiaries to interact
dynamically to create both new services for existing customers and new customers
for its traditional products.

Marketers aim to reach target customers with the most effective message and
the greatest possible impact. Technological advancements increasingly allow
marketers to understand customer preferences

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<PAGE>
and to differentiate and individualize advertising messages. Big Flower's
strategy is to assist its customers by providing a broad array of advertising
and marketing services which capitalize on these advancements. Key elements of
this strategy include the following:

CAPITALIZE ON NATIONAL DIGITAL WORKFLOW PLATFORM. The Company continues to
optimize its nationwide digital network capability that employs
telecommunications technologies to connect TC

24
<PAGE>
Advertising's and Laser Tech's facilities, enabling the Company and its
customers to conceive, manipulate, transmit, produce and distribute their
advertising concepts seamlessly on a national scale. The platform development is
based on open-standard digital communications technologies and is continuously
refined to meet a customer's particular needs. It currently connects customers
and the production centers at all Laser Tech facilities and 14 of the TC
Advertising production facilities. Each TC Advertising production facility is
equipped to meet the rapid output requirements of highly-versioned insert
advertising programs, using efficient state of the art, digital page processing
systems.

PURSUE STRATEGIC ACQUISITIONS. Big Flower continues to review opportunities
to extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Laser Tech business
units. In addition, Big Flower adds value to strategic acquisitions by
indentifying operating synergies, effective cost savings and improving
efficiency. Since its initial acquisitions of TC Advertising, Laser Tech and
Webcraft, Big Flower has expanded its products and services through a number of
strategic acquisitions that increased the span and scope of each of these
industry sectors.

- In April 1994, the Company acquired KTB and Retail Graphics, increasing TC
Advertising's capacity and broadening its customer base in the advertising
insert industry sector. In October 1996, the Company completed the
acquisition of PrintCo, a Michigan-based company specializing in
advertising insert programs and TV listing guides. This acquisition added
significant retail accounts to the Company's customer base and PrintCo's
new production lines brought needed capacity to TC Advertising's central
group. These additional production facilities will also enhance the
Company's ability to improve turnaround time and reduce delivery costs.

- In October 1996, the Company acquired Scanforms, a full-service direct
mail advertising company based in Bristol, Pennsylvania. With the
acquisition of Scanforms, the Company expanded its customer base among
leading financial service and publishing companies as well as added
additional high quality laser personalization and short-run to its line of
products and services. The addition of Scanforms enables the Company to
offer its customers fast-turnaround products ranging from specialty
applications in regional markets to longer-run direct mail for nationwide
targeted, customized mailings.

- In October 1996, the Company acquired Pacific Color, thereby enhancing its
expertise in digital premedia services as well as expanding its presence
in California. In the first half of 1996, Pacific Color launched two new
businesses, Innerlogic, specializing in internet production services, and
Big Color, a large format advertising products group that services the
outdoor advertising industry. In addition, Pacific Color's Pacific Display
division produces large format direct digital printing for banners, trade
show displays and billboards up to 16.6' x 96'. Furthermore, in December
1996, the Company acquired DCS and DDI, increasing its premedia presence
in the Midwest and enhancing its on-line digital imaging services. DDI's
software, which allows the Company's customers to store, browse, and
retrieve data and images from a centralized database and repository, will
enhance the Company's digital imaging services platform and support the
imaging needs of its customers. With the addition of DCS, the Company has
the capacity to design and produce interactive multimedia systems for
electronic catalogs and ordering systems as well as provide internet Web
Site design and execution. Furthermore, DCS's significant retail
advertising insert and catalog production expertise will enhance the
Company's ability to service its retail customer base.

ADVERTISING INSERT PROGRAMS AND NEWSPAPER PRODUCTS

The Company produces advertising insert programs for leading retailers and
produces Sunday magazines, TV listing guides and special supplements for some of
the most widely circulated U.S. newspapers. For the 1996 fiscal year, the
Company produced more than 22 billion advertising inserts, 1.6 billion Sunday
comics, 140 million locally edited Sunday magazines and 620 million TV listing
guides. The Company estimates that this represents 19%, 49%, 18% and 20%,
respectively, of the total

25
<PAGE>
advertising inserts, Sunday comics, Sunday magazines and TV listing guides
produced in the U.S. in 1996. The Company believes it is the largest producer of
advertising insert programs in the United States. TC Advertising, the Company's
operating unit in this industry sector, is headquartered in Baltimore, Maryland
and operates a national network of 18 production facilities.

PRODUCTS AND SERVICES

BACKGROUND. The Company believes the advertising insert programs industry
sector in the U.S. has grown at a faster rate in recent years than overall
newspaper advertising expenditures and exceeded $8 billion in 1996. Industry
research indicates that more than 75% of consumers read advertising inserts
appearing in their Sunday newspaper. In addition, between 40% and 50% of adult
readers use advertising inserts for making their purchasing decisions in key
retail categories.

ADVERTISING INSERT PROGRAMS. Advertising inserts are stand-alone
advertisements, generally in color, and display a broad range of products sold
by a single retailer or manufacturer. The primary users of advertising insert
programs are general merchandisers, specialty retailers, grocery stores, home
improvement centers and drug stores. Advertising inserts are placed in
newspapers, mailed to consumers or distributed in stores. Advertising inserts
can be produced in color on better quality paper than the reproductions that
typically appear in ROP newspapers. Advertising insert programs also allow users
to vary layout, artwork, design, trim size, paper types, color and formats. TC
Advertising's mix of printing capabilities, which include both heatset and cold
web offset presses, enables it to provide a variety of formats and designs to
meet the diverse needs of its retailing customer base. TC Advertising produces
advertising insert programs for leading U.S. retailers such as American Drug
Stores; Circuit City; The Home Depot; J.C. Penney; Kmart; Lowe's Companies,
Inc.; Montgomery Ward; Safeway; Sears; Walgreens and Wal-Mart.

OTHER NEWSPAPER PRODUCTS AND OTHER PUBLICATIONS. The Company produces TV
listing magazines, Sunday comics, Sunday magazines and special supplements for
over 300 newspapers, including approximately two-thirds of the 50 most widely
circulated newspapers in the United States.

TC Advertising is the largest single producer of newspaper TV listing guides
in the United States. As of December 31, 1996, TC Advertising produced newspaper
TV listing guides for 26 newspapers including The Baltimore Sun, The Boston
Globe, The Los Angeles Times, The Newark Star-Ledger, Newsday, The New York
Times, The Philadelphia Inquirer and The San Francisco Chronicle.

TC Advertising is the largest producer of Sunday comics nationwide. As of
December 31, 1996, TC Advertising produced Sunday comics for approximately 275
newspapers, including The Atlanta Journal, The Baltimore Sun, The Denver Post,
The Los Angeles Times, The Miami Herald, The Newark Star-Ledger and The
Philadelphia Inquirer.

PREMEDIA SERVICES. In connection with its advertising insert programs and
other newspaper publications, the Company offers a number of premedia services
including creative and composition, digital photography, image management, film
output, digital file transfer and facilities management.

ADVERTISING INSERT SECTOR BUSINESS STRATEGY

The Company's business strategy for this industry sector is to maximize the
effectiveness of the advertising insert medium for its customers. Successful
application of this strategy will enable TC Advertising's customers to deliver
their advertising and marketing messages on a cost efficient basis, and will
drive profitability for the Company in its core business of producing
advertising insert programs and newspaper publications. The cornerstone of this
strategy is the continued development of an organization that focuses on
assisting customers in maximizing the effectiveness of their advertising
dollars. Key elements of this strategy include:

NATIONWIDE VERSIONING CAPABILITY. As the only advertising insert producer
offering a national network of both heatset and cold web offset production
facilities, TC Advertising is able to meet the

26
<PAGE>
diverse needs of its customers and achieve significant cost and distribution
advantages. TC Advertising simultaneously produces major national advertising
insert programs and other products in multiple locations, thereby accelerating
turnaround time and reducing shipping costs to the customers' locations.
Furthermore, this nationwide network allows TC Advertising's customers to use a
single advertising insert producer to target specific distribution areas or
distribute different versions of an insert program in different targeted parts
of the United States. As the Company develops its national digital work-flow
platform, TC Advertising expects to improve efficiencies for insert versioning,
improve the timeliness of advertising inserts by reducing the production and
distribution cycle time and enhance the cost effectiveness of advertising
inserts versus other advertising media.

TARGETED DISTRIBUTION PROGRAM. TC Advertising has developed a database
information system which enables advertisers to use insert programs to target
messages specifically to potential customers meeting the advertisers' desired
geographic, demographic and purchase pattern profiles, resulting in more
cost-effective advertising.

MEASURED MEDIA APPROACH. TC Advertising is marketing advertising insert
programs as a specific category of measured media, like radio or television. TC
Advertising believes that if insert programs are considered a specific measured
media category, TC Advertising may be in a better position to compete for
advertising budgets. To establish advertising insert programs as a specific
measured media category, TC Advertising has developed proprietary research that
positions the power of advertising inserts against other types of measured
media.

COMPETITIVE COST POSITION. TC Advertising maintains stringent cost controls
and has implemented programs to enhance efficiency and improve profitability in
recent years. These programs have resulted in increased press speeds, reduced
paper waste and improved capacity utilization. As one of the largest consumers
of newsprint and ink in the United States, TC Advertising believes it is able to
achieve significant purchasing economies under most market conditions.

PRODUCTION LOAD-LEVELING. TC Advertising has implemented programs which
target the newspaper, grocery and other industry groups whose production needs
are weekly in frequency. Printing services for these industry groups create a
more balanced, load-leveling production environment, allowing TC Advertising to
improve planning and utilization of its production capacity. In addition, TC
Advertising is constantly refining its pressline configurations to optimize
equipment utilization, to improve operating efficiencies, and to improve service
and flexibility to meet the changing needs of its customers.

SALES AND CUSTOMERS

The Company's sales force in this industry sector is organized into
geographic business groups. Its four regional geographic groups in this industry
sector cover the eastern, central and western United States and with the
acquisition of PrintCo, TC Advertising has added coverage of the upper Midwest
U.S. These sales professionals draw upon their industry expertise, knowledge of
retailing and the Company's production capabilities to help customers achieve
their advertising objectives on a cost-effective basis. The Company's top ten
customers in this industry sector, which accounted for 39% of the Company's
sales in this industry sector in 1996, were American Drug Stores; Circuit City;
The Home Depot; Kmart; Lowe's Companies, Inc.; Montgomery Ward; Sears;
Walgreens; Wal-Mart and Western Colorprint. No single customer represented more
than 6.3% of such sales in 1996. As of December 31, 1996, the average length of
the Company's relationship with such top ten customers was approximately 12
years. Consistent with industry practice, TC Advertising generally does not have
long-term contracts with its customers requiring them to use its products or
services. The Company does not believe that the loss of any single customer of
TC Advertising would have a material adverse effect on the Company's
consolidated financial condition or results of operations.

27
<PAGE>
The following table presents the sales by type of customer as a percentage
of total TC Advertising sales:

<TABLE>
<CAPTION>
PERCENTAGE OF
TC ADVERTISING
CUSTOMER TYPE SALES IN 1996
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
General merchandisers............................................................................ 23.6%
Grocery stores................................................................................... 15.8
Specialty retail and furniture................................................................... 15.3
Home improvement centers......................................................................... 14.7
Drug stores...................................................................................... 11.2
Non-retail products.............................................................................. 3.6
-----
Total advertising inserts...................................................................... 84.2
Sunday comics.................................................................................... 6.0
Newspaper TV listing guides...................................................................... 5.9
Other newspaper products and other publications.................................................. 3.9
-----
Total.......................................................................................... 100.0%
-----
-----
</TABLE>

COMPETITION

This industry sector is highly fragmented, and TC Advertising competes with
numerous regional and local companies for the production of advertising insert
programs. TC Advertising also competes for national accounts with several large
producers, some of which have greater resources than the Company. TC Advertising
believes that it and four other companies account for approximately 50% of the
advertising insert market in the United States, with more than 140 regional and
local producers accounting for the balance. In addition, TC Advertising's
products compete with television, radio and other forms of print media. TC
Advertising's main independent competitor in the production of Sunday newspaper
comics is Sullivan Graphics, a division of Sullivan Communications, Inc.,
although some newspapers print their own comics and others could do so. TC
Advertising's newspaper TV listing guides, Sunday magazine and newspaper
supplement operations also face strong competition both from other printers and
newspapers. TC Advertising's major competitors in these areas are R.R. Donnelley
& Sons Company, Quebecor, Inc. and Sullivan Communications, Inc. Although
commercial printing in the United States remains highly fragmented, recent
technological developments and over-capacity in the printing industry have
increased industry consolidation and competitive pressures. The principal
methods of competition in these businesses are pricing, quality, timeliness of
delivery and customer service. Pricing is dependent in large part upon the
prices of paper and ink, which are the major components of TC Advertising's
products. Pricing is also influenced by shipping costs, operating efficiencies
and the ability to control costs. TC Advertising believes that the introduction
of new technologies and continued excess capacity in this industry sector,
combined with the cost pressures facing its customers resulting from among other
things, the cost of paper and postal rates, have resulted in downward pricing
pressures and increased competition in its core businesses. See "--Additional
Company Information--Raw Materials."

DIRECT MAIL AND OTHER ADVERTISING SERVICES

The Company produces highly-customized direct mail, fragrance samplers,
promotional stamps and commercial games. In addition, the Company produces
non-specialty products such as enhanced envelopes and government forms. The
Company's operating unit in this industry sector, Webcraft, is headquartered in
Horsham, Pennsylvania and has production facilities in Bristol and Chalfont,
Pennsylvania, Newark and North Brunswick, New Jersey and Salisbury, Maryland.

28
<PAGE>
PRODUCTS AND SERVICES

BACKGROUND

The Company believes that in the individualized direct mail industry sector
in which Webcraft operates, customized direct mail expenditures account for
$20.8 billion per year, with approximately 33% going to the production of direct
mail and the remainder to other services, including agency services, data
analysis and manipulation, and creative development. Media expenditures for
direct mail advertising grew at an average annual rate of 7.1% for the period
1991-1996, compared to an average annual growth rate for overall advertising
spending of 6.5% for the period 1991-1996 according to the 1996 DMA/WEFA GROUP
STUDY -- "ECONOMIC IMPACT: U.S. DIRECT MARKETING TODAY." The Company believes
more advertisers will use personalized direct mail techniques as mailing list
databases grow in both volume of information stored and sophistication.

SPECIALTY PRODUCTION

PERSONALIZED DIRECT MAIL. The majority of the Company's revenues in this
industry sector are derived from the in-line production of personalized
advertising mailings which are produced by ink-jet, laser and electropress
systems, integrated with an advanced data processing capability. Personalized
direct mail enables consumer goods and other marketers to communicate with their
customers on an individual-by-individual basis rather than relying on the broad
non-personalized mailings which typically generate lower response rates. The
Company can process and manipulate databases to enable its customers to target
direct mail recipients based on a combination of more than a dozen attributes,
including the recipient's age, gender, address, spending habits, such as type of
car owned, or whether the recipient is a pet owner. Personalized direct mail is
frequently used in conjunction with larger print, radio or television
promotional campaigns.

The primary users of the Company's personalized direct mail products are
consumer goods and financial services companies and non-profit institutions.
Major customers include Chrysler Corp.; Dean Witter; Publishers Clearing House;
Reader's Digest Association, Inc.; RJR Nabisco Holdings Corp. and U.S. Sales.

FRAGRANCE SAMPLERS. Fragrance samplers are product samples, typically of
perfume, which are distributed to potential purchasers of the fragrance through
magazine inserts or as billing statement stuffers for major department stores.
Webcraft is a leading producer of highly specialized fragrance samplers because
of its ability to produce an accurate rendition of the perfume being marketed
and its technological expertise in the microencapsulation of the fragrance.
Webcraft recently patented technology that allows for multiple uses of a single
magazine scent strip. Webcraft's customers in fragrance samplers include Calvin
Klein, Inc.; Elizabeth Arden, Co. and Estee Lauder, Inc.

COMMERCIAL GAMES. Commercial games are typically used to increase traffic
to retail establishments by offering customers an opportunity to win various
prizes. For example, fast food restaurants give customers scratch-off tickets
which offer prizes ranging from a soft drink to cash. There are no significant
recurring customers in this area of Webcraft's business since commercial games
are used in specific promotional campaigns.

STAMPS. Webcraft's stamp products include booklets and sheets of gummed,
round-hole perforated stamps. Webcraft produces stamps using special in-line
grinders that create the same quality of perforation found in U.S. postage
stamps. Webcraft believes that certain technologies it employs in producing
stamps, such as the ability to generate letters with attached stamp sheets, give
Webcraft a special advantage. Significant customers include The American Lung
Association; National Wildlife Federation; Publishers Clearing House and
Reader's Digest Association, Inc.

29
<PAGE>
NON-SPECIALTY PRODUCTION

OTHER PRODUCTS AND SERVICES. A significant portion of Webcraft's
non-specialty production involves the production of enhanced envelopes, which
are essentially simple printed products involving the formation of an envelope
such as catalog order forms, film mailers and airline ticket jackets. Webcraft
also produces specialty chemicals, adhesives and coatings. The Company believes
that in 1997, approximately 87% of these products will be sold to industry
customers and the remainder will be used internally.

DIRECT MAIL SECTOR BUSINESS STRATEGY

The Company's business strategy in this industry sector is to increase
revenues and maximize profitability in its core business of direct mail products
and customized advertising products. The cornerstone of this strategy is to
improve the effectiveness of its customers' advertising products by developing
customized formats and offering complex personalization capabilities designed to
increase response rates. The key elements of this strategy include:

TECHNOLOGICAL EXPERTISE. Webcraft believes that the continued development
of its production processes enables it to consistently provide high quality
products and services at competitive prices. Webcraft's technological focus is
on its in-line finishing process that combines the personalizing, folding,
cutting and collecting of several multi-color pieces into a formed envelope in
one step, shortening the time needed to produce complex finished products.
Additionally, its unique combination of format design, multi-stage
personalization and outer wrap (envelope) configurations often provides
customers with superior response rates to their direct marketing programs. These
same processes also enable Webcraft to provide its products more rapidly than
many of its competitors. Webcraft believes that these capabilities are becoming
increasingly important as lead time becomes more compressed and customers demand
faster turn around times to respond to time-sensitive market opportunities. In
addition, with the acquisition of Scanforms, Webcraft's ink-jet technology is
now complemented by Scanforms' laser imaging process. Furthermore, the
conversion of new customers from the more traditional method of laser imaging of
Scanforms to Webcraft's in-line method is made easier because Webcraft will
initially be able to provide services to these new customers in the laser
process they are familiar with before they are converted to Webcraft's in-line
method.

NEW PRODUCTS. Webcraft will continue to work with its customers to develop
new products to meet their advertising needs. Webcraft's in-line process,
coupled with advanced design and personalization capabilities, give Webcraft an
advantage versus its competitors in improving the effectiveness of its
customers' direct mail products. In addition, with the acquisition of Scanforms,
Webcraft now offers short-run direct mail capabilities.

ENTER NEW MARKETS. Webcraft will also continue to develop new customers and
will work with Laser Tech and TC Advertising to target the retail industry.

LEVERAGE DATABASE EXPERTISE. Webcraft intends to use its expertise in
managing database information to work with its customers to design more
cost-effective campaigns.

COST CONTROL AND PRODUCTIVITY IMPROVEMENTS. Webcraft has developed a cost
control program which focuses on minimizing waste, reducing labor-intensive
processes and making its selling effort more efficient. In addition, management
has implemented several programs to improve profitability, including
reorganizing its management information systems and business acquisitions
systems, which allow Webcraft to utilize press time more effectively. Webcraft
has implemented a new order confirmation system that strengthens its
relationships with its customers, by providing accurate and detailed job
specifications and electronic templates for ease of customer formatting.
Webcraft has also instituted a new make-ready program, resulting in significant
reduction of make-ready time. This has resulted in lowering set-up costs and
increasing total production capacity of the installed base of equipment.

30
<PAGE>
Furthermore, the recent acquisition of Scanforms strengthens Webcraft's position
in the financial services market because it greatly expands capacity for
magnetic ink readable code checks products.

SALES AND CUSTOMERS

The Company employs 46 sales representatives in this industry sector. They
are based in 14 U.S. sales offices in 11 states and the District of Columbia.
While the majority of these sales are made directly to end users, the Company
also sells its direct mail products and services through advertising agencies,
brokers and other agents. The Company's principal customer groups include
consumer goods manufacturers, mail order and catalog publishers, fragrance
marketers, financial institutions, non-profit organizations and other government
agencies. The Company's ten largest customers in this industry sector (including
Calvin Klein, Inc.; Publishers Clearing House; RJR Nabisco Holdings Corp. and
U.S. Sales), accounted for approximately 32% of its sales in this industry
sector in 1996. On average, these customers had over a nine year relationship
with the Company.

Webcraft has a contract with the United States Postal Service to supply
Express Mail labels through September 1997. This contract provides for a pass
through of paper cost changes over the length of the contract through a formula
provided in the contract.

The balance of Webcraft's sales are typically covered by purchase orders
from the client and signed sales confirmations from Webcraft. These documents
detail the terms and conditions of sale. Prices typically vary from project to
project because each job is unique with its own variables, including run
quantity, dimensions of the printed piece, personalization, special materials
such as scratch off, die cuts and a number of other criteria. The Company does
not believe that the loss of any single customer of Webcraft would have a
material adverse effect on the Company's consolidated financial condition or
results of operations.

COMPETITION

In this industry sector, the Company competes with a number of different
firms in each of its principal lines of direct mail business. The primary
competitive factors in its specialty markets are quality, flexibility, service,
timeliness of delivery and price. However, in certain non-specialty markets,
such as the enhanced envelope and government printing markets, price is often
the dominant factor. In the personalized direct mail product category, the
Company's major competitors are Banta Direct Marketing Group, a division of
Banta Corporation; Moore Response Marketing Services, a division of Moore
Business Forms, Inc.; Communicolor, a division of Standard Register Company; and
World Color Press, Inc. In the fragrance sampler line of business, the Company
believes that its major competitor is Arcade, Inc. The Company's primary
competitor in commercial games products and services is Dittler Brothers, Inc.
In the production of stamps, the Company's major competitors are Fleming-Potter
Co., Connecticut Color, Inc. and Cyril-Scott Company. In the non-specialty
category, the products produced do not have the same complexity as products
produced in Webcraft's specialty printing services. Because of this lack of
complexity, there are a number of printers capable of competing with the Company
in this area. Major competitors in the non-specialty market include Cyril-Scott
Company and Double Envelope Corp. (Convertagraphics). Increases in printing
press capacity in this segment have led to over-capacity in recent years, with
resulting pricing pressures. Webcraft's management has responded to these
pressures by lowering its cost structure for producing non-specialty products.

SALE OF LOTTERY BUSINESS

In December 1996, Webcraft sold the stock of Webcraft Games, Inc., its
lottery production subsidiary. This sale will enable Webcraft's management to
better focus on its core businesses. In addition, the sale has provided
expansion capability for direct mail production at Webcraft's North Brunswick
facility, a portion of which was previously used for lottery production. See
"Management's Discussion and

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Analysis of Financial Condition and Results of Operations" and Note 4 to the
Consolidated Financial Statements.

PREMEDIA SERVICES

The Company provides a full line of digital premedia services for the
advertising, retail catalog and packaging industries. Services and technology
include digital photography studios, leading-edge desktop publishing and
client/server software and hardware, turnkey catalog and advertising insert
production, electronic retouching systems, large film output, Cyrel photopolymer
platemaking, and digital image management systems for high speed image
retrieval. The Company's operating unit in the premedia sector, Laser Tech, is
headquartered in Irving, Texas and has eleven production facilities in the U.S.
and manages four facilities at client locations.

PRODUCTS AND SERVICES

BACKGROUND. The Company believes that premedia products and services exceed
$5.3 billion annually, with compound annual growth rates approaching 5% over the
past three years. Laser Tech believes that the digital premedia sector will
continue to grow with the emergence of new distribution technologies such as
CD-ROM and the World Wide Web that use digitized images. Furthermore, the
acceleration of digital technologies used in premedia services has necessitated
greater data processing expertise and comparatively greater capital expenditure,
leading many businesses to outsource their premedia requirements.

ELECTRONIC PREMEDIA ("EPM") OPERATIONS. EPM involves the electronic capture
of black and white or full color pictures and image retouching combined with
text and graphics into a page layout suitable for distribution in a print or new
media format such as CD-ROM or the World Wide Web. The Company's comprehensive
line of EPM services include the following:

DIGITAL PHOTOGRAPHY. The Company operates eight fully equipped digital
photography studios capable of capturing images greater than 100 megabytes
for an output print size of up to 20" x 30".

ELECTRONIC RETOUCHING. The Company offers its customers high-end
facilities for electronic creation or retouching of visual images. The
resulting digital image can be output as color transparency or offset film
or distributed for Internet or CD-ROM publication.

DIGITAL IMAGE SCANNING. The Company scans and color corrects
transparencies, photo prints or illustrations, then outputs the digital
image file to a variety of media for print or electronic distribution.

PAGE ASSEMBLY. The Company places digital image files into customer page
layouts to form finished printable advertising materials. These same digital
files can be re-formatted for output to digital media such as Internet or
multi-media. The Company utilizes MacIntosh-TM- and Windows NT-TM- desktop
publishing technologies as well as UNIX-based-TM- client/server technologies
from Silicon Graphics, Inc., Sun Microsystems, Inc., Digital Equipment
Corporation, Inc. and others.

ELECTRONIC OUTPUT. The Company outputs completed digital image files to
a variety of output media, including regular and oversize lithographic
films, color transparency, digital printing plate, digital new media such as
the internet or CD-ROM as well as direct digital color display graphics.

PROOFING. For each digital image file produced, the Company offers a
variety of color proofing methods from direct digital methods in which the
digital file is output to a color proof prior to final media output, to
conventional analog proofs in which lithographic films are exposed onto
color proofing materials. The Company operates low cost remote digital
proofing facilities at many customer locations to provide the customer
virtually instantaneous access to final digital files.

32
<PAGE>
PACKAGING. The Company offers full service specialized services to
packaging customers in image capture, art production, page assembly,
proofing and photopolymer platemaking tailored for both lithographic and
flexographic packaging products. Packaging products require different skill
sets and capabilities than advertising materials due to the varied
manufacturing technologies peculiar to consumer packaging reproduction.

FACILITIES MANAGEMENT. Laser Tech's Facilities Management division
specializes in providing on-site digital premedia services to agencies,
corporate advertisers or printers. Services may include only one or all of
Laser Tech's service offerings. Facilities Management sites typically
involve long-term contracts and minimum annual revenue commitments.

DIGITAL ASSET MANAGEMENT. The digital files that produce printed
advertising materials or digital new media materials must be organized,
stored and made available for re-use. The "file rooms" of yesterday are
giving way to electronic digital asset libraries for storage, retrieval and
reuse of digital files. Laser Tech has developed MAXCESS-TM- (Media Access)
application software to provide a turnkey technology solution to advertisers
who desire to manage their digital assets for re-use or re-sale to third
parties. Laser Tech's Image Technology Group is developing additional
enhancements to MAXCESS-TM- to add advertising production capabilities to
the original storage and retrieval platform. The acquisition of DDI brought
Vision Bank to the Laser Tech asset management offering. Vision Bank is a
low entry cost, scaleable enterprise software solution for digital asset
management.

PREMEDIA SECTOR BUSINESS STRATEGY

The Company's objective in this industry sector is to become the leading
provider of outsourced, digital premedia and content management services to
retailers, advertising agencies, and consumer product companies. Key elements of
this strategy include:

DEVELOP DIGITAL IMAGE MANAGEMENT NETWORKS. Laser Tech continues to develop
systems to provide its customers with greater access to and control over their
advertising images. Accordingly, it has formed the Image Technology Group to
develop an interactive image management system which links advertisers and
graphic designers with a database of images. The database enables them to avoid
re-creation costs and streamline production flows by creating, storing,
retrieving, and editing their advertisements through on-line connections from
their offices. Laser Tech continues to work with TC Advertising to integrate its
digital premedia communications network with TC Advertising's production
facilities.

ENTER NEW MEDIA MARKETS. Laser Tech is leveraging its electronic premedia
services into the emerging technology markets of electronic distribution of
information via the World Wide Web, CD-ROM and other electronic delivery
methods. Laser Tech's traditional customer base is actively seeking to exploit
these emerging media distribution channels. Laser Tech believes that these new
distribution methods, combined with an increasing need for digital archiving and
retrieval of digital images, present significant growth opportunities for Laser
Tech.

EXPAND OUTSOURCING FACILITIES. Laser Tech maintains multiple facilities in
major markets across the country as well as "outsourced services" sites on
customers' premises and at various TC Advertising production sites. Electronic
imaging hubs are being developed to service Laser Tech's regional and national
customer base. These hubs will provide first-line and overflow imaging
manufacturing support for regional and national sales efforts.

LEVERAGE EXISTING MARKETS. In conjunction with TC Advertising, Laser Tech
is focusing on providing services to the substantial retail customer base of TC
Advertising, including electronic premedia services, image storage and retrieval
services, and customized application software for increased production
efficiency for both print and new media distribution channels. Furthermore, the
acquisition of DCS enhanced Laser Tech's ability to service its retail customer
base with DCS's significant retail advertising insert and catalog production
expertise.

33
<PAGE>
SALES AND CUSTOMERS

The Company's premedia sales force is organized into four market categories
with 55 sales representatives in 13 offices. The Company's principal customer
groups in the premedia sector include magazine, retail catalog and advertising
insert producers, consumer product packaging manufacturers, advertising
agencies, and consumer goods manufacturers and retailers. The largest of these
customers include DDB Needham Worldwide; Kmart; Office Depot; RJR Nabisco
Holdings Corp.; Tyson Foods, Inc. and Wal-Mart. The Company does not believe
that the loss of any single customer of Laser Tech would have a material adverse
effect on the Company's consolidated financial condition or results of
operations.

COMPETITION

The premedia industry sector is highly fragmented and undergoing a period of
consolidation. The Company's major competitors in this sector are Applied
Graphics Technologies, Inc., Wace USA and Schawk, Inc. The major competitive
factors in the premedia business are price, quality of finished products,
distribution capabilities, ongoing customer service and availability of time on
equipment which is appropriate in size and function for a given project. The
consolidation of customers within certain of the Company's premedia businesses
provides both greater competitive pricing pressures and opportunities for
increased volume solicitation.

ADDITIONAL COMPANY INFORMATION

RAW MATERIALS

In 1996, Big Flower spent approximately $610 million on raw materials. The
primary raw materials required in the Company's printing operation are paper,
ink, plates and adhesives and in its premedia operations are film, chemicals,
computer supplies and proofing materials. The Company believes that there are
adequate sources of supply for its primary raw materials and that its
relationships with its suppliers yield improved quality, pricing and overall
service to its customers. Although there can be no assurance that the Company's
sources of supply for its paper will be adequate in all circumstances, in the
event that such sources are not adequate, the Company believes that alternative
sources can be developed in a timely manner.

The Company's results of operations depend to a large extent on the cost of
paper and the ability of the Company to pass along to its customers any
increases in these costs and remain competitive when there are decreases. In
recent years, the Company has substantially reduced the number of its suppliers
of paper and has formed stronger commercial relationships with such suppliers,
resulting in its ability to negotiate favorable price discounts and achieve more
assured sourcing of high quality paper that meets the Company's specifications.

In connection with its acquisition by Big Flower, TC Advertising entered
into a long-term ink supply agreement with a single supplier, effective July 31,
1993, pursuant to which it is obligated to purchase from such supplier a
substantial portion of its annual requirements for ink. The terms of this
agreement are confidential.

Webcraft also has an ink supply agreement with a supplier pursuant to which
Webcraft is obligated until August 1998 to purchase from such supplier not less
than 80% of Webcraft's annual requirements for ink for heatset and flexographic
inks at all plants operated by Webcraft. Price is determined on a price per
pound basis that is subject to adjustments based on competitive pricing. In
addition, Webcraft enjoys an incentive program based on annual purchase levels.

The Company internally produces most of the adhesives needed for its
printing operations, through its adhesives and coatings subsidiary, Webcraft
Chemicals, Inc. ("Webcraft Chemicals"), but believes that there are other ready
sources for these products. This subsidiary also supplies a variety of specialty

34
<PAGE>
chemicals for unusual format applications. Webcraft Chemicals is currently
working with other Big Flower companies to increase sales of adhesives, coatings
and other specialty chemicals to these potential customers.

TRADE NAMES, TRADEMARKS AND PATENTS

The Company owns certain trade names, trademarks and patents used in its
business. The loss of any such trade name, trademark or patent would not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.

SEASONALITY

GOVERNMENTAL REGULATIONS

The Company's business is subject to a variety of federal, state and local
laws, rules and regulations. The Company's 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, the Company is not aware of any pending
legislation that in its view is likely to affect significantly the operations of
the Company's business. The Company believes that the operations of its
subsidiaries comply substantially with all applicable governmental rules and
regulations.

ENVIRONMENTAL MATTERS

Certain of the Company's operations are subject to federal, state and local
environmental laws and regulations concerning the discharge, storage, handling
and disposal of hazardous or toxic substances. Such laws and regulations provide
for significant fines, penalties and liabilities, in certain cases without
regard to whether the owner or operator of the property knew of, or was
responsible for, the release or presence of such hazardous or toxic substances.
In addition, third parties may make claims against owners or operators of
properties for personal injuries and property damage associated with releases of
hazardous or toxic substances. The Company cannot predict what environmental
legislation or regulations will be enacted in the future or how existing or
future laws or regulations will be administered or interpreted. The Company
therefore cannot predict the amount of future expenditures which may be required
in order to comply with any environmental laws or regulations or to satisfy any
such claims. Based on currently available information, the Company believes that
its operations comply substantially with all applicable environmental laws and
regulations.

The Company's acquisition of Webcraft resulted in certain obligations under
the New Jersey Industrial Site Recovery Act, formerly known as the Environmental
Cleanup Responsibility Act (together, "ISRA"), which is triggered by the
transfer of industrial property. For the four New Jersey sites, the New Jersey
Department of Environmental Protection ("NJDEP") approved the transfer of
Webcraft's facilities without requiring any further investigatory or cleanup
work under ISRA. At two sites, Webcraft and the NJDEP agreed that Webcraft would
continue to maintain financial guarantees that were previously

35
<PAGE>
established pursuant to ISRA (in the amounts of $30,000 and $1,000,000),
continue site investigations that were already underway, and institute
remediation measures as appropriate, based on its investigations. At the third
site, Webcraft established a nominal financial guarantee which the Company
believes will be sufficient to cover the costs of investigating and remediating
contamination discovered there. At the fourth site, no financial guarantee was
required by the NJDEP, which has subsequently issued a letter confirming that
the ISRA matter is complete. The Company has obtained an indemnification from
the selling shareholders of Webcraft for certain costs resulting from
pre-existing conditions pertaining to Webcraft, including but not limited to
environmental matters. This indemnification is subject to certain limitations,
including threshold requirements and a maximum liability cap of $4.8 million.
With respect to Webcraft's ISRA obligations, the Company believes, based on the
indemnification agreement, as well as potential contribution from a third party
for contamination at one such site, and existing cost estimates for all such
sites, that its liability for such matters will not have a material adverse
effect on the Company's consolidated financial position or results of
operations. However, there can be no assurance that such matters will not
ultimately have such an effect.

TC Advertising and Webcraft have been identified as potentially responsible
parties ("PRPs") for the cleanup of contamination resulting from disposals of
hazardous waste pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA" or "Superfund")
and analogous state laws. Courts have interpreted CERCLA to impose strict, joint
and several liability upon all persons liable for response costs at a cleanup
site if the harm at the site is indivisible. This generally means that each
responsible party could be held liable for the entire costs of the necessary
response actions at a Superfund site. As a practical matter, however, at sites
where there are multiple PRPs for a cleanup, the costs of cleanup typically are
allocated, according to a volumetric or other standard, among the parties.
CERCLA also provides that responsible parties generally may seek contribution
for the costs of cleaning up a site from other responsible parties. Thus, if one
party is required to clean up an entire site, that party can seek reimbursement
or recovery of such costs from other responsible parties.

TC Advertising has been identified as a PRP at two sites pursuant to CERCLA,
and one additional site pursuant to analogous state environmental laws and
regulations, to which sites TC Advertising, among others, sent waste in the
past. TC Advertising believes that, with respect to one site, its liability will
not be material, and the Company has established a nominal reserve to cover any
such liability. With respect to the other two sites, TC Advertising believes
that it is, or may be responsible for a very minor portion, if any, of the total
cleanup costs at each such site. As a result, based on a review of the data
available to the Company regarding each such site, including the number and
viability of other PRPs, the minor volumes of waste which TC Advertising is
alleged to have contributed, the range of likely cleanup costs, and a comparison
of TC Advertising's alleged liability at each such site to settlements
previously reached by TC Advertising in similar cases, the Company believes that
such matters will not result in liabilities or expenditures that will have a
material adverse effect on the Company's consolidated financial position or
results of operations. Nonetheless, because neither the final total cleanup
costs at each of the remaining sites have been ascertained nor TC Advertising's
final proportionate share determined, there can be no assurance that such
matters, or any similar liabilities that arise in the future, will not
ultimately have such an effect.

Webcraft has been identified as a PRP at two sites pursuant to CERCLA and/or
analogous state law, to which site Webcraft, among others, sent waste in the
past. Based on the minor volumes of waste which Webcraft is alleged to have
contributed, the range of likely cleanup costs, and the indemnification
agreement between the Company and the selling shareholders of Webcraft, the
Company believes that this matter will not result in liabilities or expenditures
that will have a material adverse effect on the Company's consolidated financial
position or results of operations. However, because neither the final total
cleanup costs at these sites have been ascertained nor Webcraft's final
proportionate share

36
<PAGE>
determined, there can be no assurance that such matters, or any similar
liabilities that arise in the future, will not ultimately have such an effect.

In addition, in 1990, the United States Environmental Protection Agency
("EPA") identified Webcraft, among others, as a PRP pursuant to CERCLA for
regional groundwater contamination in the vicinity of Webcraft's Chalfont,
Pennsylvania facility. Webcraft responded to the EPA notice disclaiming any
responsibility for such contamination. As of the present time, Webcraft has
heard nothing further from the EPA regarding this matter. Based on an
indemnification agreement with the prior site owner, as well as the
indemnification agreement with the selling shareholders of Webcraft, the Company
believes that its liability, if any, at this site will not have a material
adverse effect on the Company's consolidated financial position or results of
operations. However, because the nature of the claim has not been ascertained,
there can be no assurance that such matter will not ultimately have such an
effect.

EMPLOYEES

As of May 1, 1997, the Company had approximately 6,419 employees, of which
approximately 1,233 were salaried and 5,186 were hourly. Most of Webcraft's
hourly employees at its North Brunswick and Newark, New Jersey facilities are
represented by the United Paper Workers International Union, AFL-CIO. Webcraft
entered into a new three-year contract with this union on February 1, 1995.
Under this agreement, represented employees will receive an hourly base rate
increase of 3% in 1997. The Company believes it has satisfactory employee and
labor relations.

PROPERTIES

The Company maintains a large number of diverse properties. Management
believes that these properties, taken as a whole, are generally well maintained
and are adequate for current and foreseeable business needs. The majority of
these properties are leased. Substantially all of the Company's materially
important physical properties are being fully utilized. The Company's properties
are covered by all-risk and liability insurance which the Company believes is
customary for the industry.

EXECUTIVE OFFICES

Big Flower, TC Advertising, Webcraft and Laser Tech each lease their
executive offices in New York City, New York; Baltimore, Maryland; Horsham,
Pennsylvania and Irving, Texas, respectively. The lease terms for Big Flower's,
Webcraft's and Laser Tech's facilities expire in November 2006, February 1998
and September 1999, respectively. TC Advertising occupies its executive offices
pursuant to two leases that expire in December 2000 and December 2005,
respectively.

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<PAGE>
PRODUCTION FACILITIES

As of May 1, 1997, the Company owned 11 and leased 23 production facilities,
with lease terms expiring from September 30, 1997 to May 30, 2006, as set forth
below:
<TABLE>
<CAPTION>
APPROXIMATE LAND TITLE; IF LEASED,
TC ADVERTISING LOCATIONS SQUARE FOOTAGE LEASE TERM EXPIRATION
- -------------------------------------------------------------------- ---------------- --------------------------
<S> <C> <C>
Atlanta, GA(1)...................................................... 100,057 Fee Ownership
Charlotte, NC....................................................... 105,400 December 31, 2002
City of Industry, CA................................................ 103,000 September 30, 2001
Columbus, OH........................................................ 141,185 December 31, 2004
Dallas, TX.......................................................... 90,000 September 30, 2002
East Longmeadow, MA................................................. 159,241 February 3, 2006
Elk Grove Village, IL............................................... 80,665 August 31, 2002
Greenville, MI...................................................... 130,000 Fee Ownership
Lenexa, KS.......................................................... 90,000 Fee Ownership
Manassas, VA........................................................ 108,120 February 28, 2003
Niles, MI........................................................... 90,000 Fee Ownership
Pomona, CA.......................................................... 144,542 May 31, 2006
Portland, OR........................................................ 125,250 October 31, 2002
Sacramento, CA...................................................... 57,483 Fee Ownership
Saugerties, NY(1)................................................... 209,000 Fee Ownership
Salt Lake City, UT.................................................. 55,000 October 31, 1997
San Antonio, TX..................................................... 67,900 Fee Ownership
Tampa, FL........................................................... 72,418 October 31, 1999

WEBCRAFT LOCATIONS
- --------------------------------------------------------------------
<S> <C> <C>
Bristol, PA......................................................... 132,000 Fee Ownership
Chalfont, PA........................................................ 320,000 Fee Ownership
Newark, NJ.......................................................... 23,000 Fee Ownership
Newark, NJ.......................................................... 22,692 June 30, 1998
North Brunswick, NJ................................................. 296,000 Fee Ownership
Salisbury, MD....................................................... 66,000 July 7, 1999

LASER TECH LOCATIONS
- --------------------------------------------------------------------
Atlanta, GA......................................................... 15,588 February, 2001
Carlsbad, CA........................................................ 8,500 December 1, 1998
Dallas, TX.......................................................... 15,000 September 30, 1997
Delray Beach, FL.................................................... 2,500 February 28, 1998
Irvine, CA.......................................................... 13,000 October 9, 1998
Irving, TX.......................................................... 62,687 September 1, 1999
Mobile, AL.......................................................... 4,200 June 30, 2000
Salt Lake City, UT(2)............................................... 840 --
San Antonio, TX..................................................... 7,927 October 31, 1997
San Francisco, CA................................................... 5,260 May 31, 2000
St. Louis, MO(1).................................................... 38,000 May 30, 2006
</TABLE>

- ------------------------

(1) Comprised of two adjacent facilities.

(2) Located within TC Advertising's Salt Lake City facility.

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<PAGE>
SALES OFFICES AND OTHER FACILITIES

As of May 1, 1997, the Company had 42 sales offices and five other
facilities. All of the sales offices and other facilities are leased, with lease
terms expiring from July 31, 1997 to June 30, 2006, with the exception of one
office which is owned.

LEGAL PROCEEDINGS

Certain claims, suits and complaints which arise in the ordinary course of
the Company's business have been filed or are pending against the Company. The
Company believes that all such matters either are adequately reserved for, are
covered by insurance, or would not, after taking into account the reserves
established and/or insurance in place, have a material adverse effect on the
Company's consolidated financial condition or results of operations, if
adversely determined against the Company.

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<PAGE>
MANAGEMENT

The following table sets forth certain information regarding the directors
and executive officers of the Company, all of whom are U.S. citizens.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
R. Theodore Ammon................... 47 Class III Director; Chairman of the Board
Leon D. Black....................... 45 Class III Director
Peter G. Diamandis.................. 65 Class II Director
Robert M. Kimmitt................... 49 Class I Director
Joan D. Manley...................... 64 Class II Director
Newton N. Minow..................... 71 Class I Director
Edward T. Reilly.................... 50 Class III Director; President and Chief Executive Officer
Edward M. Yorke..................... 38 Class I Director
Mark A. Angelson.................... 46 Executive Vice President and General Counsel and Secretary of the
Board of Directors
Richard L. Ritchie.................. 50 Executive Vice President and Chief Financial Officer
</TABLE>

Certain information regarding each person listed above, including such
person's principal occupation during the past five years and current
directorships, is set forth below. Unless indicated otherwise, all directors and
executive officers have had the indicated principal occupations for the past
five years.

R. THEODORE AMMON has been the Chairman of the Board of Big Flower since its
inception and was Chief Executive Officer from that date until April 1997. Mr.
Ammon was a General Partner of Kohlberg Kravis Roberts & Co. (a New York and San
Francisco-based investment firm) from 1990 to 1992, and an executive of such
firm prior to 1990. Mr. Ammon is also a member of the Board of Directors of Host
Marriott Corporation, Culligan Water Technologies, Inc. and Samsonite
Corporation. In addition, Mr. Ammon serves on the Board of Directors of the New
York YMCA, Jazz @ Lincoln Center and the Institute of International Education,
and on the Board of Trustees of Bucknell University.

LEON D. BLACK has been a Director of Big Flower since 1993. Mr. Black is one
of the founding principals of Apollo Advisors, L.P., which, together with its
affiliate, serves as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities investment
funds, and of Lion Advisors, L.P., which acts as a financial advisor to and
representative for certain institutional investors with respect to securities
investments. Mr. Black is a director of Converse, Inc., Culligan Water
Technologies, Inc., Furniture Brands International, Inc., Samsonite Corporation,
Telemundo Group, Inc. and Vail Resorts, Inc.

PETER G. DIAMANDIS has been a Director of Big Flower since September 1994.
Mr. Diamandis was Vice Chairman of Donnelley Marketing, Inc., a marketing
company, from 1991 through 1996. He has also been the Chairman of TVSM, Inc., a
magazine publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served
as President and Chief Executive Officer of Hachette Publications, which
purchased Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr.
Diamandis served as Chairman, President and Chief Executive Officer of Diamandis
Communications Inc., a publisher of special interest magazines. In 1982, Mr.
Diamandis joined CBS Magazines ("CBS") as Vice President, Group Publisher,
Women's Day, and served as President of CBS from September 1983 to 1987. Mr.
Diamandis is a former Chairman of Magazine Publishers of America. Mr. Diamandis
serves on the Board of Trustees of Bucknell University.

ROBERT M. KIMMITT has been a Director of Big Flower since November 1996.
Since May 1997, he has been a partner in the law firm of Wilmer, Cutler &
Pickering. From 1993 to May 1997, Mr. Kimmitt was a managing director of Lehman
Brothers and head of its Washington office. Prior to joining Lehman Brothers,
Mr. Kimmitt served from 1991 to 1993 as American Ambassador to Germany, and from
1989 to 1991 as Under Secretary of State for Political Affairs. He was a partner
in the Washington office of Sidley

40
<PAGE>
& Austin from 1987 to 1989. Mr. Kimmitt served as a member of the National
Security Council staff at the White House from 1978 to 1985 and General Counsel
of the Department of the Treasury from 1985 to 1987. Mr. Kimmitt serves on the
board of Mannesmann Corporation of Duesseldorf, Germany, a global industrial,
automotive, and telecommunications company, and on the U.S. Group Council of BMW
Corporation of Munich, Germany. He is also on the Board of the German Marshall
Fund.

JOAN D. MANLEY has been a Director of Big Flower since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Aon Corporation, Sara Lee Corporation and Viking Office Products,
Inc. and is a Trustee of the Keystone Center.

NEWTON N. MINOW has been a Director of Big Flower since September 1996.
Since 1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of Sara
Lee Corporation, Aon Corporation, Manpower, Inc. and True North Communications,
Inc. Mr. Minow is former Chairman of the Carnegie Corporation of New York, a
Trustee and former Chairman of the Board of Trustees of The RAND Corporation,
and former Chairman of the Board of Governors of the Public Broadcasting
Service. Mr. Minow is also a Life Trustee of the University of Notre Dame and a
Life Trustee of Northwestern University.

EDWARD T. REILLY has been Chief Executive Officer of the Company since April
1997, President of Big Flower since March 1996 and a Director of the Company
since June 1996. He was also the Chief Operating Officer of Big Flower from
March 1996 until April 1997. He is also a director of TC Advertising, Laser Tech
and Webcraft. Prior to joining Big Flower, Mr. Reilly held a variety of
executive positions with McGraw-Hill, Inc., a publishing and communications
company, in their Broadcast and Publication groups from 1968 to 1996, and served
as President of McGraw-Hill Broadcasting from 1987 to 1996. Mr. Reilly has been
active in television industry affairs, having served as the Chairman of the
Television Bureau of Advertising, a member of the Board of Directors of the Ad
Council and a member of the Board of Directors of the National Association of
Broadcasters. Mr. Reilly is also a Trustee of Lynchburg College.

EDWARD M. YORKE has been a Director of Big Flower since 1993. He has been an
officer since 1992 of Apollo Advisors, L.P., which, together with its affiliate,
serves as managing general partner of Apollo Investment Fund, L.P., AIF II, L.P.
and Apollo Investment Fund III, L.P., private securities investment funds, and
of Lion Advisors, L.P., which acts as financial advisor to and representative
for certain institutional investors with respect to securities investments. From
1990 to 1992, Mr. Yorke was a vice president in the high yield capital markets
group of BT Securities Corp. Mr. Yorke is a director of Aris Industries, Inc.,
Salant Corporation and Telemundo Group, Inc.

MARK A. ANGELSON has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of Big Flower since March 1996. He is also a
director of TC Advertising, Laser Tech and Webcraft. Prior to joining Big
Flower, Mr. Angelson was a partner of the law firm Sidley & Austin from 1982 to
1996. Mr. Angelson was Co-Chair of Sidley's international operations, founder of
the firm's English law practice and manager of the firm's offices in Singapore,
New York and London. Mr. Angelson is admitted to practice law in the State of
New York, and as a solicitor in England and Wales. He is also a Trustee of
American School in London Foundation, Inc., a Fellow of Royal Society of Arts
and a member of the Advisory Board of Jobs for the Future, Inc.

RICHARD L. RITCHIE has been Executive Vice President and Chief Financial
Officer of Big Flower since January 1997. Prior to joining Big Flower, Mr.
Ritchie served as Senior Vice President and Chief Financial Officer of
Harte-Hanks Communications, Inc. from 1986 to 1996.

41
<PAGE>
The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Kimmitt, Minow and
Yorke; the Class II directors are Mr. Diamandis and Ms. Manley; and the Class
III directors are Messrs. Ammon, Black and Reilly. The Class I directors were
initially elected, in the case of Mr. Kimmitt, and reelected, in the case of
Messrs. Minow and Yorke, at the 1996 Annual Meeting of Stockholders to hold
office until the date of the 1999 Annual Meeting of Stockholders; the initial
Class II directors were elected to hold office until the date of the 1997 Annual
Meeting of Stockholders (which is currently scheduled for June 24, 1997); and
the initial Class III directors were elected to hold office until the date of
the 1998 Annual Meeting of Stockholders and, in each case, until his or her
successor is elected and qualified and subject to his or her prior death,
resignation, retirement, disqualification or removal. At each annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. The term
of office of each executive officer is until the organizational meeting of the
Board of Directors of the Company following the next annual meeting of the
Company's stockholders and until his successor is elected and qualified or until
his prior death, resignation, retirement, disqualification or removal.

42
<PAGE>
SELLING STOCKHOLDERS

All of the shares of Common Stock being offered hereunder are being sold by
certain stockholders as indicated below (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the shares of Common Stock
being sold. The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the date hereof and as adjusted
after giving effect to the Offering hereunder, by each Selling Stockholder.

<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY COMMON STOCK TO BE
OWNED PRIOR TO THE BENEFICIALLY OWNED AFTER
OFFERING(A) THE OFFERING(A)
-------------------------- NUMBER OF --------------------------
NUMBER OF PERCENTAGE SHARES BEING NUMBER PERCENTAGE
NAME AND ADDRESS OF SELLING STOCKHOLDER SHARES OF CLASS OFFERED(A) OF SHARES OF CLASS
- --------------------------------------------------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Apollo Big Flower Partners, L.P.(b)................ 4,470,922 26.7% 3,720,922 750,000 4.1%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
BT Investment Partners, Inc. (c)................... 1,738,692 9.4 1,738,692 -- --
280 Park Avenue
New York, New York 10017
Sebastian Carcioppollo(d).......................... 229,838 1.4 229,838 -- --
6331 Grand Cypress Circle
Lake Worth, FL 33467
Robert A. Samans................................... 445,070 2.7 100,000 345,070 1.9
c/o Scanforms, Inc.
181 Rittenhouse Circle
Bristol, PA 19007-0602
John G. Bugnitz.................................... 197,848 1.2 169,072 28,776 *
Revocable Living Trust
17275 Portland Cove Lane
Glencoe, MO 63038
All Selling Stockholders as a group................ 7,082,370 38.3% 5,958,524 1,123,846 6.1%
</TABLE>

- ------------------------

* Less than one percent.

(a) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days after the date of this Prospectus. For
purposes of computing the percentage of outstanding shares of Common Stock
held by such person or group of persons named above, any security which such
person or persons has or have the right to acquire within 60 days after the
date of this Prospectus is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person. For purposes of this table, the number of shares of Common
Stock is stated assuming that the Underwriters' over-allotment options are
not exercised. Except as otherwise indicated, each person and entity has
sole voting and dispositive power with respect to the shares set forth in
the table.

(b) If the Underwriters' over-allotment option is exercised in full, Apollo will
sell an additional 750,000 shares in the Offering and thereafter will not
own any shares of Common Stock.

(c) Represents shares of Class B Common Stock of the Company, which are not
voting but are convertible into shares of Common Stock under certain
circumstances.

(d) In connection with the Offering, the Company advanced approximately $542,000
to Mr. Carcioppollo, which will be repaid out of the proceeds to him from
the Offering.

43
<PAGE>
REGISTRATION RIGHTS AGREEMENT

Pursuant to an agreement dated as of August 12, 1993, as amended to date
(the "Registration Rights Agreement"), the Company has agreed to provide Apollo,
BTIP, Mr. Ammon, Berenson Minella & Company ("Berenson") and certain management
investors (each of Apollo, BTIP, Mr. Ammon, Berenson and such management
investors, a "Rightholder") with certain registration rights for shares of
Common Stock held by them and their transferees. Under the Registration Rights
Agreement, Apollo, BTIP, Mr. Ammon and their respective transferees have the
right to require the Company to register shares of Common Stock under the
Securities Act for sale in an underwritten offering. The party or parties making
a demand must own and include at least 5% of the then issued and outstanding
Common Stock in any such demand registration. Neither Apollo, BTIP and their
respective transferees, nor Mr. Ammon and his transferees, may make, in the
aggregate, more than three such demands, and no more than two such demands may
be made in any six-month period. The Company can, subject to a customary
underwriter's reduction, include certain other securities in any such demand
registration, including shares of Common Stock held for the account of the
Company and shares held for the account of Rightholders. In the event of an
underwriter's reduction, shares held for the account of the Company will first
be reduced in a specified proportion and then, if further reduction is
necessary, shares held for the account of Rightholders will be reduced in a
specified proportion. In addition, if the Company proposes to file a
registration statement covering shares held for its own account or for the
account of its shareholders (other than in certain cases, including a demand
registration as described above), the Rightholders will have the right, subject
to a pro rata underwriter's reduction, to include shares held by them in such
registration. The Company has agreed to indemnify each Rightholder in respect of
certain liabilities, including civil liabilities under the Securities Act, and
to pay certain expenses relating to such registrations. The Company is required
to use its best efforts to effect such registrations, subject to certain
conditions and limitations. All management investors have waived whatever rights
they may have under the Registration Rights Agreement in connection with this
Offering. See "Shares Subject to Registration Rights".

OTHER MATERIAL RELATIONSHIPS OF SELLING STOCKHOLDERS WITH THE COMPANY

During Fiscal 1996, the Company paid approximately (x) $830,000 in fees to
BT Securities Corporation, an affiliate of BTIP, for advice and underwriting
services in connection with certain of the Company's debt and (y) $2,240,000 to
Bankers Trust Company, an affiliate of BTIP, in connection with its role as
agent and lender under the Credit Agreement. If the New Credit Facility is
entered into, Bankers Trust Company will also receive fees in connection with
its services thereunder. The amount of such fees has not yet been determined.

44
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

At the consummation of the Offering, the capital stock of Big Flower will
consist of 50,000,000 authorized shares of Common Stock, of which 18,499,162
shares will be issued and outstanding and 2,506,353 shares of Common Stock will
be reserved for issuance under the Plan (with an additional 2,000,000 shares of
Common Stock being reserved if the proposed amendments to the Plan are adopted
by the Company's stockholders at the Company's 1997 Stockholders Meeting
currently scheduled to be held on June 24, 1997); and 10,000,000 authorized
shares of preferred stock, of which no shares will be issued and outstanding.
250,000 shares of preferred stock are designated as Series A Junior Preferred
Stock ("Series A Preferred Stock"), and reserved for issuance pursuant to the
Company's Rights Plan (as described below).

COMMON STOCK

The holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board may from time to time determine. The shares of Common Stock
are neither redeemable nor convertible, and the holders thereof have no
preemptive or subscription rights to purchase any securities of Big Flower. Upon
liquidation, dissolution or winding up of Big Flower, the holders of Common
Stock are entitled to receive, pro rata with the holder of the Class B Common
Stock, the assets of Big Flower which are legally available for distribution,
after payment of all debts, other liabilities and any liquidation preference of
outstanding preferred stock. Each outstanding share of Common Stock is entitled
to one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting.

CLASS B COMMON STOCK

BTIP is the only holder of the Class B Common Stock, which is not entitled
to vote except as required by law. BTIP, an affiliate of a bank holding company,
is subject to certain banking laws and regulations ("Banking Laws") which limit
its ability to hold voting capital stock. Except with respect to the potential
issuance of stock dividends as described below, the Company does not intend to
issue any additional shares of Class B Common Stock. The Class B Common Stock
has rights identical to the Common Stock with respect to dividends and
distributions, provided that if dividends are declared which are payable in
Common Stock, Big Flower will make available to each holder of Class B Common
Stock, at such holder's request, dividends consisting of Class B Common Stock.
The Class B Common Stock is convertible into Common Stock on a share-for-share
basis in certain circumstances, subject to Banking Laws. The Class B Common
Stock held by BTIP will be converted into Common Stock and sold in the Offering
and upon such conversion Class B Common Stock will no longer be authorized under
the Company's certificate of incorporation.

PREFERRED STOCK

The Board is authorized to issue preferred stock in classes or series and to
fix the designations, preferences, qualifications, limitations, or restrictions
of any class or series with respect to the rate and nature of dividends, the
price and terms and conditions on which shares may be redeemed, the amount
payable in the event of voluntary or involuntary liquidation, the terms and
conditions for conversion or exchange into any other class or series of the
stock, voting rights, if any, and other terms. 250,000 shares of Series A
Preferred Stock are reserved for issuance pursuant to the Company's Rights Plan.

45
<PAGE>
ANTI-TAKEOVER EFFECT OF PROVISIONS OF THE COMPANY'S CERTIFICATE AND BYLAWS

The Certificate and Bylaws contain certain provisions that may be deemed to
have an anti-takeover effect and may delay, deter or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.

Pursuant to the Certificate, the Board is divided into three classes serving
staggered three-year terms. See "Management." Directors can be removed from
office only for cause and only by the affirmative vote of the holders of 85% of
the Common Stock. Vacancies and newly created directorships on the Board may be
filled only by a majority of the remaining directors, by a sole remaining
director or by the affirmative vote of the holders of 85% of the Common Stock.

The Certificate also provides that any action required or permitted to be
taken by the holders of Common Stock may be taken only at an annual or special
meeting of such holders, and prohibits stockholder action by written consent in
lieu of a meeting. The Bylaws provide that special meetings of holders of Common
Stock may be called only by the Chairman or the President of the Company and
must be called by Chairman, President or the Secretary of the Company at the
request in writing of a majority of the Board. Holders of Common Stock are not
permitted to call a special meeting or to require that the Board call a special
meeting of stockholders.

The Bylaws may be amended or changed or new Bylaws may be adopted only by
the Board or the affirmative vote of 85% of the outstanding shares of Common
Stock.

The Bylaws establish an advance notice procedure for the nomination, other
than by or at the direction of the Board, of candidates for election as
directors as well as for other stockholder proposals to be considered at annual
meetings of stockholders. In general, notice of intent to nominate a director or
raise business at such meetings must be received by the Company not less than 60
nor more than 90 days prior to the date of the annual meeting, and must contain
certain specified information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal.

Article FIFTH of the Company's Certificate provides for, among other things,
(i) classification of the Company's Board, (ii) removal of the Company's
directors from office only for cause, (iii) amendment of the Bylaws by
stockholders of the Company to require an affirmative vote of the holders of 85%
of the outstanding shares of the Company's Common Stock, (iv) prohibition of
action by written consent of the stockholders of the Company, (v) elimination of
the Company director liability to the maximum extent permitted by the Delaware
General Corporation Law and (vi) amendment of the Rights Agreement to require
action by a majority of Continuing Directors.

A Continuing Director is defined as a person serving as a member of the
Company's Board on November 28, 1995 and any person who subsequently becomes a
member of the Board if such person was elected by, or such person's nomination
for election was recommended or approved by, a majority of the Continuing
Directors then in office. The Company's Certificate also provided that the
provisions of Article FIFTH of the Company's Certificate may only be altered,
amended or replaced by either the affirmative vote of the holders of 85% of the
outstanding shares of the Company's Common Stock or by a majority of Continuing
Directors.

RIGHTS PLAN

In 1995 the Board declared a dividend distribution of one right (a "Right")
for each outstanding share of Common Stock payable to stockholders of record at
the close of business on the business day immediately following the date of
consummation of the initial public offering of the Company's Common Stock (the
"Record Date"). Each Right entitles the registered holder to purchase from the
Company a

46
<PAGE>
unit consisting of one one-hundredth of a share of Series A Preferred Stock at
an exercise price of $55 per unit. The terms of the Rights are set forth in a
Rights Agreement between the Company and a Rights Agent (the "Rights
Agreement"). The following summary outlines certain provisions of the Rights
Agreement and is qualified by reference to the full text of the form of Rights
Agreement.

Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate rights certificates (the
"Rights Certificates") will be distributed. The Rights will separate from the
Common Stock, separate Rights Certificates will be issued and a distribution
date (the "Distribution Date") will occur upon the earlier to occur of (i) ten
days following the date of a public announcement that there is an Acquiring
Person (as defined below) (such date, the "Stock Acquisition Date"), or (ii) ten
days following commencement of a tender or exchange offer that would result in
the offeror beneficially owning 15% or more of the then outstanding shares of
Common Stock.

The term "Acquiring Person" means, any person who, together with affiliates
and associates either (a) acquires (after the Record Date) beneficial ownership
of shares of Common Stock representing 15% or more of the Common Stock or (b) is
the beneficial owner of 30% or more of the Common Stock and the Class B Common
Stock. However, shares of Common Stock and options to purchase Common Stock
issued or granted by the Company to a director, officer or employee pursuant to,
or upon exercise of options or rights granted pursuant to, any benefit plan of
the Company shall not be deemed to be beneficially owned by such person for
purposes of determining such person's percentage beneficial ownership of Common
Stock.

In the event that a person becomes an Acquiring Person (except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair to and otherwise in the best interests of the
Company and its stockholders), each holder of a Right will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a calculated value
equal to two times the exercise price of the Right. Notwithstanding the
foregoing, following the occurrence of such event, all Rights that are, or
(under certain circumstances specified in the Rights Amendment) were,
beneficially owned by an Acquiring Person and certain related persons and
transferees will be null and void. However, Rights are not exercisable following
the occurrence of such event until such time as the Rights are no longer
redeemable as set forth below.

The Rights are not exercisable until the Distribution Date and will expire
on the tenth anniversary of their issuance, unless redeemed earlier by the
Board.

At any time prior to the tenth day following the Stock Acquisition Date, the
Company may redeem the Rights, in whole, but not in part, at a price of $0.01
per Right, upon approval of a majority of Continuing Directors.

In general, the Rights Agreement may be amended upon approval of a majority
of the Continuing Directors (i) prior to the Distribution Date in any manner,
and (ii) on or after the Distribution Date in certain respects including (a) to
shorten or lengthen any time period and (b) in a manner not adverse to the
interests of Rights holder. However, amendments extending the redemption period
must be made while the Rights are still redeemable.

The Rights have certain anti-takeover effects and will cause substantial
dilution to a person or group that attempts to acquire the Company on terms not
approved by the Continuing Directors. The Rights should not interfere with any
merger or other business combination approved by a majority of the Continuing
Directors since the Continuing Directors may redeem the Rights as provided
above.

47
<PAGE>
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW

Big Flower is subject to the "business combination" statute of the Delaware
General Corporation Law (Section 203). In general, such statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with any "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder", unless
(i) such transaction is approved by the board of directors of such corporation
prior to the date the interested stockholder obtains such status, (ii) upon
consummation of such transaction, the "interested stockholder" beneficially
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned by (a) persons who are directors and
also officers of such corporation and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) the "business combination" is approved by the board of directors of such
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock of such
corporation which is not owned by the "interested stockholder". A "business
combination" includes mergers, asset sales and other transactions resulting in
financial benefit to the "interested stockholder". An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years, did own) beneficially 15% or more of a corporation's voting stock. The
statute could prohibit or delay mergers or other takeover or change in control
attempts with respect to Big Flower and, accordingly, may discourage attempts to
acquire Big Flower.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Under Big Flower's Certificate, upon consummation of the Offering there will
be 28,994,485 shares of Common Stock authorized but unissued (and not reserved
for issuance upon exercise of options), and 9,750,000 shares of preferred stock
authorized but unissued (and not reserved for issuance of the Series A Preferred
Stock), for future issuance without additional stockholder approval. These
additional shares may be utilized for a variety of corporate purposes, including
future offerings to raise additional capital or to facilitate corporate
acquisitions.

The issuance of preferred stock could have the effect of delaying or
preventing a change in control of Big Flower. The issuance of preferred stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock.

One of the effects of the existence of unissued and unreserved Common Stock
or preferred stock may be to enable the Board to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control of Big Flower by means of a merger, tender offer,
proxy contest or otherwise, and thereby protect the continuity of management.
Such additional shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company.

Big Flower does not currently have any plans to issue additional shares of
Common Stock or preferred stock other than shares of Common Stock which may be
issued upon the exercise of options which have been granted or which may be
granted in the future to directors, officers and employees of the Company.
250,000 shares of Series A Preferred Stock are reserved for issuance pursuant to
the Company's Rights Plan. See "--Rights Plan."

48
<PAGE>
LIMITATION OF DIRECTORS' LIABILITY

The Company's Certificate contains a provision that limits the liability of
the Company's directors for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by the Delaware General Corporation
Law. Such limitation does not, however, affect the liability of a director (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or purchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of this provision is to eliminate the rights of the Company
and its stockholders (through stockholder's derivatives suits on behalf of the
Company) to recover monetary damages against a director of the Company for
breach of the fiduciary duty of care as a director (including breaches resulting
from negligent or grossly negligent behavior) except in the situations described
in clauses (i) through (iv) above. This provision does not limit or eliminate
the rights of the Company or any stockholder to seek non-monetary relief such as
an injunction or rescission in the event of a breach of a director's duty of
care. In addition, the directors and officers of the Company have directors' and
officers' liability insurance.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for the Company's Common Stock is the Bank
of New York.

SHARES SUBJECT TO REGISTRATION RIGHTS

Sales of substantial amounts of Common Stock in the public market could
adversely affect market prices of the Common Stock following the Offerings.

Upon completion of the Offering, a substantial number of shares of Common
Stock, including 750,000 shares beneficially owned by Apollo (assuming the
Underwriters' over-allotment option is not exercised) and 2,317,144 shares
beneficially owned by Mr. Ammon, will be subject to registration rights. The
Company and certain stockholders have agreed (subject to certain exceptions) not
to offer, sell or otherwise dispose of any shares of Common Stock for a period
of 90 days after the date of this Prospectus without the prior written consent
of Goldman, Sachs & Co. Actual sales of shares of Common Stock under a
registration statement, pursuant to Rule 144 or otherwise in the future, or the
prospect of such sales, may depress the price of Common Stock.

REGISTRATION RIGHTS

Under a certain registration rights agreement and subject to certain
limitations, if at any time Big Flower proposes to file a registration statement
under the Securities Act with respect to an offering by Big Flower for its own
account or for the account of any of its representative securityholders of any
class of debt or equity security (other than (a) a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the Commission),
or (b) a registration statement filed in connection with an exchange offer or
offering of securities solely to the Company's existing securityholders), then
certain Rightholders with respect to all shares of Common Stock owned
collectively by them, can cause the Company to register such number of shares of
Common Stock as such holder may request.

Under a certain registration rights agreement and subject to certain
limitations, at any time and from time to time on or after the consummation of
the Offerings, Mr. Ammon and Apollo and their respective transferees, may make
written requests for registration by the Company of the Common Stock under the
Act (a "Demand Registration") with respect to all shares of Common Stock owned
collectively by them. Certain officers, members of management and key employees
may have rights, subject to certain limitations, to register shares in a Demand
Registration.

49
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Selling Stockholders have severally agreed to sell to each of the Underwriters
named below, and each of such Underwriters has severally agreed to purchase from
the Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- -------------------------------------------------------------------------- ------------------
<S> <C>
Goldman, Sachs & Co....................................................... 1,489,631
Bear, Stearns & Co. Inc................................................... 1,489,631
Alex. Brown & Sons Incorporated........................................... 1,489,631
Credit Suisse First Boston Corporation.................................... 1,489,631
----------
Total............................................................... 5,958,524
----------
----------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares of Common Stock
offered hereby, if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $0.63 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $0.10 per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the Underwriters.

Apollo has granted the Underwriters an option exercisable for 30 days after
the date of this Prospectus for the purchase of up to an aggregate of 750,000
additional shares of Common Stock, solely to cover over-allotments, if any. If
the Underwriters exercise such over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the total number of shares of
Common Stock offered hereby.

The Company and certain stockholders have agreed (subject to certain
exceptions) not to offer, sell, contract to sell, or otherwise dispose of any
Common Stock or other securities of Big Flower that are substantially similar to
the Common Stock (or any securities convertible into or exchangeable for, or any
options or other rights to acquire, any Common Stock or other securities of Big
Flower that are substantially similar to the Common Stock) for a period of 90
days after the date of this Prospectus without the prior written consent of
Goldman, Sachs & Co.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market in accordance with Regulation M under the
Exchange Act. These transactions may include over-allotment and stabilizing
transactions and purchases to cover short positions created by the Underwriters
in connection with the Offering. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Common Stock; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of shares
of Common Stock than they are required to purchase from the Selling Stockholders
in the Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the securities sold in the
Offering may be reclaimed by the Underwriters if such securities are repurchased
by the Underwriters in stabilizing or covering transactions. These activities
may stabilize, maintain or otherwise affect the market price of the Common
Stock, which may

50
<PAGE>
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the New York Stock Exchange in the
over-the-counter market or otherwise.

VALIDITY OF COMMON STOCK

The validity of the Common Stock offered hereby will be passed upon for the
Company by Sullivan & Cromwell, New York, New York and for the Underwriters by
Davis Polk & Wardwell, New York, New York.

EXPERTS

The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for the year ended December 31, 1996, the six months ended December
31, 1995, the year ended June 30, 1995 and the 323 days ended June 30, 1994
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated by reference, and have been incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

51
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Certain Documents by
Reference..................................... 3
Available Information........................... 4
Special Note Regarding Forward Looking
Statements.................................... 4
Summary......................................... 5
Risk Factors.................................... 11
Use of Proceeds................................. 14
Price Range of Common Stock and Dividend
Policy........................................ 14
Capitalization.................................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business........................................ 22
Management...................................... 40
Selling Stockholders............................ 43
Description of Capital Stock.................... 45
Shares Subject to Registration Rights........... 49
Underwriting.................................... 50
Validity of Common Stock........................ 51
Experts......................................... 51
</TABLE>

5,958,524 SHARES

BIG FLOWER PRESS
HOLDINGS, INC.

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

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[LOGO]

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GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
ALEX. BROWN & SONS
INCORPORATED

CREDIT SUISSE FIRST BOSTON

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