RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

The following table shows net sales and income (loss) from continuing operations for each of the Company’s reportable segments:

Consolidated

Net sales for 2004 increased $2,973.8 million, or 71.1% to $7,156.4 million versus the prior year. The increase was primarily due to the Acquisition ($2,669.6 million), and increased volumes in the Integrated Print Communications and Publishing and Retail Services segments. Improved volumes in the Integrated Print Communications segment were attributable to the financial print business, which benefited from improved capital market transaction levels in the U.S. and international markets, and improved sales in the education book market. While management believes that internal cross-selling efforts will result in increased volume within current markets as the Company leverages its expanded product portfolio following the Acquisition, printing industry excess capacity, pricing pressures and electronic substitution will continue to adversely impact sales of certain products and services of the Company.

Cost of sales increased $2,184.0 million to $5,269.6 million for 2004 versus the prior year, primarily due to the Acquisition ($1,957.4 million). Acquisition and integration costs included in cost of sales related to a charge associated with fair value adjustments for inventory and backlog ($66.9 million) and $5.3 million primarily related to equipment transfers and facility reconfigurations. These increases were partially offset by benefits achieved through restructuring and cost reduction initiatives, incremental procurement savings, and higher by-product recoveries of $13.3 million, that are recognized as a reduction of cost of sales.

Selling, general and administrative expenses increased $413.2 million versus the prior year, to $934.7 million for 2004, primarily due to the Acquisition ($437.9 million). Selling, general and administrative expenses as a percentage of consolidated net sales increased to 13.1% in 2004 from 12.5% in 2003. This increase was primarily due to provisions of $27.3 million related to litigation, insurance, termination benefits and sales and use taxes, as well as a $31.3 million increase in certain employee incentive related costs for 2004 versus the prior year. The Company incurred $7.5 million in third party costs in 2004 associated with Sarbanes-Oxley Act compliance for auditor attestation and Company readiness. Also included in 2004 were $8.6 million of integration charges related to the Acquisition. In addition, the Company recognized $34.2 million of pension and postretirement expense in 2004 versus $4.2 million of expense in 2003 due to changes in actuarial benefit assumptions and the inclusion of benefit obligations acquired in the Acquisition. Pension and postretirement expense is expected to decrease in 2005 primarily as a result of plan amendments and increased plan assets. Management anticipates that savings from restructuring activities related to the Acquisition and other cost containment efforts will favorably impact the selling, general and administrative expense margin in 2005. These savings will likely be partially offset by future integration related expenses.

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During 2004, the Company recorded net restructuring and impairment charges of $107.4 million. These charges included $85.0 million for workforce reduction costs (approximately 2,174 positions) primarily related to the elimination of duplicative administrative functions resulting from the Acquisition and the reorganization of certain operating activities, as well as lease exit costs. For 2004, the Company recorded impairment charges of $22.4 million. The impairment charges primarily included $13.1 million for the abandonment of certain Publishing and Retail Services related enterprise software projects and other assets, $2.1 million for the write-down of a Publishing and Retail Services customer contract and $7.2 million related to software and other assets in the Forms and Labels and Integrated Print Communications segments. Additional restructuring charges are likely in 2005, as the Company eliminates duplicative functions, relocates the global headquarters within the Chicago area and continues to rationalize its manufacturing, sales and administrative platforms as a result of the Acquisition and other initiatives. During 2003, the Company recorded $12.5 million of net restructuring and impairment charges, primarily related to workforce reductions (approximately 279 positions), the relocation of employees and equipment from closed facilities and the curtailment of the Company’s postretirement benefit plan.

Depreciation and amortization increased $115.2 million to $385.5 million for 2004 compared to 2003, which was more than accounted for by the Acquisition. Acquisition related depreciation and amortization included $36.7 million of amortization of purchased intangibles related to customer relationships, patents and covenants not to compete.

Income from continuing operations for 2004 increased $166.5 million, or 56.9%, versus the prior year to $459.2 million. The increase was primarily due to the Acquisition and improved operating results in 2004, which more than offset a $66.9 million adjustment for the fair value of inventory and backlog from the Acquisition, $107.4 million of net restructuring and impairment charges ($12.5 million in 2003), higher pension and post retirement expenses and $13.9 million of total integration related charges in 2004.

Interest expense, net, increased by $34.5 million for 2004 versus 2003, primarily due to the $1.0 billion of debt assumed in conjunction with the Acquisition.

Investment and other income (expense), net, for 2004 was $16.5 million of expense versus $12.9 million of expense for 2003. The change was due to a higher write-down of affordable housing investments ($29.3 million in 2004 versus $23.3 million in 2003) that was partially offset by higher net gains on the disposals of investments in 2004 (which included a $14.3 million gain on an investment in Latin America). The write-downs of affordable housing investments in 2004 and 2003 reflected declines in the estimated fair market values of the Company’s affordable housing investments.

For 2004, the difference between the effective tax rate and the statutory tax rate primarily relates to the benefit associated with the reversal of tax contingencies upon the expiration of certain state statutory limitations ($30.5 million), the reversal of a non-U.S. valuation allowance ($7.1 million) and affordable housing credits ($8.8 million).

Net earnings from continuing operations for 2004 increased by $76.4 million versus the prior year to $264.9 million, or $1.30 per diluted share. For 2003, net earnings from continuing operations were $188.5 million, or $1.65 per diluted share. Net earnings per share in 2004 reflect the impact of the 102.1 million shares issued in conjunction with the Acquisition. Net earnings for 2004 also reflect the incremental results of the Acquisition and improved operating results, which more than offset the unfavorable impact of the fair value adjustment of inventory and backlog and net restructuring and impairment and integration charges.

Net loss from discontinued operations was $80.0 million for 2004 compared to a net loss of $12.0 million in 2003. The net loss for 2004 was primarily due to net restructuring and impairment charges of $109.1 million. During the first quarter of 2004, the Company recorded an impairment charge of $13.9 million for the goodwill, intangibles and fixed assets of MLI, as the carrying value of the assets exceeded the future cash flows expected to

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be generated by the assets. During the second quarter of 2004, the Company recorded an impairment charge of $89.1 million in conjunction with the then pending disposition of its package logistics business, as the fair value was less than the carrying amount of the net assets. Fair value was determined by using management’s best estimate of the amounts for which the net assets could be sold in the marketplace. The results of discontinued operations for 2004 reflected restructuring charges of $0.5 million recorded prior to the decision to dispose of the package logistics business and $4.7 million for the shutdown of MLI. These restructuring charges included workforce reduction (750 employees) and lease exit costs. Also included in the net loss from discontinued operations was a net loss of $10.1 million related to the Company’s Peak Technologies business, which included restructuring charges of $0.9 million for workforce reductions (57 employees).

For 2004, the Company recorded a cumulative effect of a change in accounting principle of $6.6 million, net of taxes of $4.3 million, reflecting the adoption of the Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities . The charge reflects the difference between the carrying amount of the Company’s investments in certain partnerships related to affordable housing and the underlying carrying values of the partnerships upon consolidating these entities into the Company’s financial statements. Management does not believe that the consolidation of these partnerships will have an ongoing material effect on the Company’s consolidated results of operations or financial position.

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Net sales for the Publishing and Retail Services segment for 2004 were $2,811.8 million, an increase of $203.0 million, or 7.8%, compared to 2003, primarily due to the Acquisition ($75.2 million) and volume increases across all businesses in the segment. Net sales in the magazine, catalog and retail business increased in 2004 versus the prior year due to volume increases related to major customers and increased paper prices that were partially offset by industry pricing pressures. Net sales in the directories business for 2004 increased versus the prior year due to volume improvements that more than offset pricing pressures. The net sales for the premedia business benefited from higher volumes from both existing Publishing and Retail Services and third-party customers. Net sales for the logistics business reflected increased print logistics and expedited service volumes due to growth in volume from existing Publishing and Retail Services and third-party customers.

Income from continuing operations for the Publishing and Retail Services segment for 2004 declined $4.7 million, or 1.5%, to $306.7 million compared to the prior year due to increased restructuring and impairment charges and increased employee related incentive costs. Net restructuring charges of $25.1 million and impairment charges of $15.2 million in 2004 compared to total restructuring and impairment charges of $2.8 million in 2003. The 2004 restructuring charges primarily related to employee terminations as the Company continued to focus on reducing its operating cost structure. The 2004 impairment charge primarily included $13.1 million for the abandonment of certain enterprise software projects and other assets and $2.1 million for the write-down of a customer contract. These charges were partially offset by the improved results of the logistics business, which benefited from the Acquisition ($19.3 million); and improved volumes, productivity, by-product recoveries, cost containment and incremental procurement savings. Operating results for 2005 are expected to further benefit from the restructuring actions and cost reduction initiatives implemented during 2004.

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Net sales for the Integrated Print Communications segment increased by $1,437.3 million to $2,878.3 million in 2004 compared to the prior year primarily due to the Acquisition ($1,273.4 million) and increased financial print sales resulting from improved global capital markets and stable customized communications solutions business activity. The international operations in the segment, which benefited from improved volumes and favorable currency variances also contributed to the sales increase. The book business benefited from improved sales in the educational book market in the second half of 2004 that are expected to continue to favorably impact results in 2005.

Because the Integrated Print Communications segment’s results only reflect the acquired operations of Moore Wallace subsequent to the Acquisition Date, management believes that the following comments related to the revenue trends affecting the acquired operations in the segment for 2004 versus the results for 2003 are relevant. Short-run commercial print results reflected the continued pressures from price erosion related to excess capacity in the industry. Increased volumes reflected increased cross-selling activities into the commercial print facilities. Growth in the outsourcing business was attributable to new customer volumes and increased activity across most industry sectors served. These increases more than offset pricing pressure and a slowdown in the mortgage refinancing market. Declines in the integrated direct mail businesses related to facility closures and pricing and volume pressures at existing customers that were partially offset by new customer and new program growth.

Income from continuing operations for the Integrated Print Communications segment for 2004 increased $206.2 million to $326.8 million versus 2003, due to the Acquisition ($131.9 million), volume increases, improved by-product recoveries and benefits achieved from prior year restructuring actions and other cost reduction efforts. Income from continuing operations for 2004 included $22.3 million of net restructuring and impairment charges across the book, financial print and direct mail businesses, $17.5 million of charges for the fair market value adjustment for inventory and backlog, $19.3 million of amortization of purchased intangibles and $3.6 million of integration costs related to the Acquisition. The 2003 income from continuing operations included $5.3 million of restructuring and impairment charges and a $2.0 million insurance recovery related to September 11, 2001. Operating results for 2005 are expected to benefit from the restructuring actions and cost reduction initiatives implemented during 2004.

Net sales for 2004 increased $1,333.5 million to $1,466.3 million primarily due to the Acquisition ($1,321.0 million). Because the Forms and Labels segment results primarily reflect the acquired operations of Moore Wallace subsequent to the Acquisition Date, management believes that the following comments in relation to the revenue trends affecting net sales in the Forms and Labels segment for 2004 versus 2003 are relevant. The forms and labels industry is in secular decline, but the pace of this decline remains difficult to predict. The business

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continued to be adversely affected by volume declines attributable to continuing industry-wide trends of electronic substitution for higher margin multi-part and other long-run forms products and price competition related to excess capacity in the industry. In response to these trends, the Company has continued to focus on lowering its manufacturing and selling costs, while exploring new market opportunities. Paper prices increased in 2004 and further increases are expected in 2005. Although the pricing environment is difficult, the Company is continuing its efforts to raise prices to cover a substantial portion of any increases, but there is no assurance that the Company will be successful.

Income from continuing operations for 2004 of $52.1 million included $49.4 million of charges for the fair market value adjustment for inventory and backlog, $17.4 million of amortization of purchased intangibles and $3.1 million of integration costs related to the Acquisition. In addition, the 2004 operating results included $25.1 million of net restructuring and impairment charges related to the reorganization of the segment subsequent to the Acquisition. In addition to $4.2 million of restructuring and impairment charges, the 2003 results include a provision for bad debts of $6.3 million. Management believes that due to continued volume declines, price and margin erosion at existing customers and excess capacity in the industry, future restructuring initiatives might continue to result in charges which might be significant and might unfavorably impact the financial results of the Forms and Labels segment in 2005.

Corporate

Corporate operating expenses for 2004 increased $108.8 million to $226.4 million versus the same period in 2003. The increase is primarily due to the Acquisition, restructuring charges of $19.7 million primarily for workforce reductions, integration charges of $6.8 million, provisions for litigation, insurance, termination benefits and sales and use taxes of $27.3 million and lower benefit plan earnings. In addition, 2004 included increased employee related incentive costs ($20.1 million) and incremental third party costs associated with Sarbanes-Oxley Act compliance ($7.5 million). These increases were partially offset by benefits achieved through restructuring actions and cost containment initiatives taken during the year. Management expects to incur future restructuring charges as the Company continues to eliminate duplicative functions and to consolidate its corporate administrative facilities, including the relocation of the global headquarters within the Chicago area, pursuant to the Acquisition. These charges might be significant and might unfavorably impact the financial results during the next several quarters while the Company continues to lower its underlying administrative cost structure.

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Consolidated

Consolidated net sales decreased $64.6 million, or 1.5%, to $4,182.6 million in 2003, primarily due to a $58.2 million decline in net sales in the Publishing and Retail Services segment. Additional declines in both the book and direct mail businesses in the Integrated Print Communications segment were offset by significant sales increases in the European and Asian operations, which benefited from volume growth and favorable foreign currency exchange rate variances.

Cost of sales decreased $45.5 million to $3,085.6 million for 2003 versus the prior year, which was primarily due to lower Publishing and Retail Services sales. In 2003, the Company recognized a reduction in cost of materials of $47.8 million from by-product recoveries, compared with a reduction of $46.1 million in 2002. Cost of sales as a percentage of net sales was 73.8% in 2003, compared with 73.7% in 2002. The Publishing and Retail Services segment’s cost of sales was negatively impacted in 2003 primarily by unfavorable work mix, partially offset by higher volume and the impact of restructuring savings and productivity initiatives.

Selling and administrative expenses increased $24.5 million to $521.5 million in 2003. Compared with 2002, a higher provision for doubtful accounts ($7.7 million, of which $5.2 million related to Latin America), increased costs to support sales growth in Europe ($7.3 million), lower benefit plan earnings ($3.5 million), and higher volume-based sales incentives (commissions) were partially offset by lower management incentive compensation ($1.0 million) and restructuring-related savings and cost reduction initiatives. Selling and administrative expenses as a percentage of net sales was 12.5% in 2003, compared with 11.7% in 2002.

During 2003, the Company recorded net restructuring and impairment charges of $12.5 million, which compared to $87.4 million in 2002. Restructuring charges of $8.8 million included workforce reduction costs (approximately 279 positions) and other charges, related to exit activities. Impairment charges of $3.7 million primarily related to the closure of a directory plant in Chile within the Forms and Labels segment.

Depreciation and amortization decreased $16.2 million to $270.3 million for 2003 compared to the prior year due primarily to prior year asset impairments and lower capital expenditures.

Income from continuing operations for 2003 increased $47.5 million versus the prior year to $292.7 million. The increase was primarily due to the lower net restructuring and impairment charges and benefits achieved from the prior year restructuring actions that offset price deterioration and unfavorable work mix.

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Interest expense, net, decreased by $11.3 million in 2003, primarily due to lower effective interest rates and lower average borrowings as compared with the prior year.

Investment and other income (expense), net, for 2003 was $12.9 million of expense, which compared to $15.1 million of expense in 2002. The primary components of investment and other income (expense), net, in 2003 were affordable housing write-downs ($23.3 million), partially offset by gain on sale of businesses and investments ($5.5 million) and other miscellaneous income ($4.9 million). The primary components of investment and other income (expense), net, in 2002 were as follows: affordable housing write-downs ($26.0 million), partially offset by gains on sales of businesses and investments ($6.4 million) and other miscellaneous income ($4.5 million).

The lower 2003 effective tax rate in 2003 reflected a tax benefit of $45.8 million, including a non-cash benefit of $39.9 million due to favorable resolution of IRS audits for 1996 through 1999. In addition, the Company recorded a $5.9 million receivable for refundable income taxes in Latin America due to the utilization of tax loss carrybacks. The 2002 effective tax rate included a $30.0 million tax benefit related to our settlement with the IRS surrounding our COLI program.

Net earnings from continuing operations for 2003 increased by $51.7 million versus the same period in the prior year to $188.5 million, or $1.65 per diluted share. For 2002, net earnings from continuing operations were $136.8 million, or $1.19 per diluted share.

Net loss from discontinued operations was $12.0 million in 2003, compared to income from discontinued operations of $5.4 million in 2002. The net loss from discontinued operations in 2003 included restructuring and impairment charges of $4.2 million.

Net sales for 2003 for the Publishing and Retail Services segment decreased $58.2 million, or 2.2%, to $2,608.8 million. Decreased net sales for the magazine, catalog and retail business primarily reflected price deterioration and a mix shift to work with a lower price per unit, partially offset by higher volume and improved print logistics sales. The economic slowdown that began in 2000 generated excess industry capacity from reduced demand levels and higher customer bankruptcies resulting in increased competition and pricing pressures. Lower contract prices on renewals continued to cycle through the 2003 results. The net sales decline in the premedia business was driven by these same factors. Net sales for the directories business decreased primarily due to an increase in customer-furnished paper and lower average prices, partially offset by higher volume. The net sales increase in the logistics business was driven by higher volumes from both print related operations in the segment and from third parties for which the Company does not provide printing services.

Income from continuing operations for 2003 for the Publishing and Retail Services segment increased $39.2 million, or 14.4%, from 2002, due primarily to reduced net restructuring and impairment charges for 2003 of $2.8 million, compared to $53.3 million in 2002. The negative impact on earnings due to price

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deterioration and a mix shift to lower margin work as noted above was only partially offset by higher volumes in 2003 and the impact of productivity initiatives and savings related to restructuring actions.

Integrated Print Communications

The following table summarizes net sales, income from continuing operations and significant items affecting comparability within the Integrated Print Communications segment:

Net sales for 2003 in the Integrated Print Communications segment increased $3.2 million, or 0.2%, compared to the prior year due to stronger results in the European and Asian operations that offset declines in the book and direct mail businesses. International net sales in the segment were up $69.4 million, or 39.8%, from the prior year, driven by increases in Europe due to volume growth and favorable foreign currency exchange rates, as well as volume growth in Asia. Net sales of the book business were down due to lower volumes including fewer reprint orders, lower average prices and a less favorable mix of more soft-cover books with a lower price per unit and fewer case-bound books. The 2003 net sales for direct mail were down significantly from the prior year, due to lower volume. The 2003 net sales for the financial print businesses were flat due to a decrease in customized communications solutions results that was mostly offset by an increase in capital markets net sales. The 2003 decline in net sales from customized communication solutions was primarily due to lower net sales from investor communications (e.g., prospectuses, annual and semi-annual mutual funds statements), which reflected contraction in the mutual fund market and one large non-recurring deal in 2002. The increase in capital markets net sales between years was driven by a rebound within the domestic capital markets in the second half of 2003 following a period of economic slowdown, and higher fourth quarter 2003 international net sales. Domestic capital markets net sales in 2003 were essentially flat, which reflected higher compliance filings (e.g., SEC periodic reports and annual meeting proxy statements), mostly offset by lower transactional activity in the first half of the year (e.g., S-filings, including initial public offerings, secondary offerings and mergers and acquisitions).

Income from continuing operations for 2003 in the Integrated Print Communications segment increased $6.4 million, or 5.6%, compared to the prior year due to lower restructuring and impairment charges and improved results in the European and financial businesses that more than offset declines in Asia and the book business. Included in 2003 income from continuing operations were net restructuring and impairment charges of $5.3 million, compared to $14.5 million in 2002. Income from continuing operations for the financial print business in 2003 increased significantly from a loss in 2002 that included restructuring actions related to the closure of several print facilities and service centers, and related workforce reductions. Income from continuing operations in the financial print business benefited from these restructuring actions and other cost reduction initiatives that included savings from the outsourcing of certain composition-related services offshore. In 2003, the financial print business’ operating margins also reflected a favorable mix change between years due to increased capital markets activity in 2003, which carries higher operating margins than customized communications solutions. The European operations benefited from higher volumes and favorable foreign currency exchange rates. The loss from the Asian operations was higher than the prior year primarily due to additional start-up costs of a plant in Shanghai, China. The loss from operations for direct mail in 2003 was higher than the prior year, primarily due to lower volume, partially offset by savings from restructuring actions.

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The net sales for 2003 in the Forms and Labels segment decreased $9.6 million, or 6.7% compared to the prior year primarily due to lower volumes. The loss from the Latin American operations in 2003 of $21.7 million was $12.5 million greater than the prior year loss and related primarily to lower volume and an incremental $5.2 million provision for doubtful accounts.

Corporate

Corporate operating expenses decreased $14.4 million, or 10.9%, to $117.6 million in 2003. The decrease is primarily due to lower restructuring and impairment charges ($16.0 million); lower provision for litigation ($16.0 million); lower management incentive compensation ($9.1 million); partially offset by lower benefit plan earnings (excluding service costs allocated to the segments) ($17.5 million); a higher LIFO provision ($5.6 million); and higher miscellaneous expenses ($3.6 million).

Restructuring, Acquisition and Other Charges

Throughout 2004, management approved and initiated various plans to restructure the operations of the Company predominantly in connection with the Acquisition. These included plans to eliminate certain duplicative functions and vacate redundant facilities in order to reduce the Company’s combined cost structure. As a result, the Company recorded $85.0 million of net restructuring charges that are included in the 2004 results of operations. Additionally, for 2004, the Company recorded $24.7 million of restructuring costs to exit certain operations and activities of Moore Wallace, which were contemplated at the time of the Acquisition and therefore the related restructuring costs were capitalized as a cost of the Acquisition.

For 2004, the Company recorded impairment charges of $22.4 million. The impairment charges included $13.1 million for the abandonment of certain Publishing and Retail Services related enterprise software projects and other assets and $2.1 million for the write-down of a Publishing and Retail Services customer contract. Additional impairment charges related to software and other assets in the Forms and Labels ($4.4 million) and Integrated Print Communications ($2.8 million) segments.

During 2003, the Company recorded net restructuring and impairment charges of $12.5 million. The 2003 charges included costs associated with workforce reductions, as well as period costs associated with defined exit activities from previously announced restructuring plans. Included were impairment charges of $3.7 million primarily related to the closure of a directory plant in Chile ($3.2 million).

During 2002, the Company recorded net restructuring and impairment charges of $87.4 million. The 2002 charge included $15.4 million related to the shutdown of a Berea, Ohio plant which produced short-run specialty magazines and was included within the Publishing and Retail Services segment. The total 2002 charge was comprised of the following: employee termination benefits related to additional workforce reductions ($36.1 million); a curtailment loss related to postretirement benefit plans ($8.4 million); exit costs related to closed facilities ($5.2 million); relocation costs for defined exit activities which were expensed as incurred ($22.3 million) and asset impairments to reduce the carrying values of assets held for disposal to fair value ($15.4 million).

Acquisition and integration costs of $80.8 million were recorded in 2004. The acquisition and integration costs recorded in cost of sales of $72.2 million related to fair value adjustments for inventory and backlog ($66.9

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million) as well as to equipment transfers from vacated facilities, facility reconfiguration due to consolidations, training and travel, in the Forms and Labels ($1.6 million), Integrated Print Communications ($3.5 million), and Publishing and Retail Services ($0.2 million) segments. Selling, general and administrative expenses included acquisition and integration costs of $8.6 million for consulting expenses associated with system integration and facility reconfiguration expenses due to office consolidations, in the Forms and Labels ($1.5 million), Integrated Print Communications ($0.1 million), Publishing and Retail Services ($0.2 million) and Corporate ($6.8 million) segments.

In 2005, the Company expects to realize the cost savings associated with the aforementioned restructuring plans primarily through reduced employee and facility costs. The Company anticipates that payments associated with employee terminations ($35.1 million) related to its various restructuring programs will be substantially complete by the second quarter of 2005. The Company anticipates that payments associated with lease exit costs ($11.6 million) will be substantially complete by 2011. Market conditions and the Company’s ability to sublease these properties could affect the ultimate charge and cash payments related to these lease obligations.