Exhibit 13

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Profile
We operate three business segments: Financial Services, Direct Checks and Business Services. Financial Services sells checks, related products and check merchandising services to financial institutions. Direct Checks sells checks and related products directly to consumers through direct mail and the Internet. Business Services sells checks, forms and related products to small businesses and home offices through financial institution referrals and via direct mail and the Internet. All three segments operate only in the United States.

        During 2000, we operated two business segments: Paper Payment Systems and eFunds. On December 29, 2000, we disposed of the eFunds segment via a spin-off transaction. As a result, in 2001 we reorganized our Paper Payment Systems segment into the three segments we operate today. The results of the eFunds segment are reflected as discontinued operations in our consolidated financial statements for the year ended December 31, 2000.

Results of Operations
The following table presents, for the periods indicated, the relative composition of selected statement of income data (dollars in thousands, except revenue per unit amounts):

Year Ended December 31, 2002 Compared
to the Year Ended December 31, 2001

Revenue
Revenue increased $5.6 million, or 0.4%, to $1,284.0 million for 2002 from $1,278.4 million for 2001. Revenue per unit increased 4.4% as compared to 2001 due to price increases in all three segments, the improved effectiveness of our selling techniques and continued strength in selling premium-priced licensed designs and services. Partially offsetting the increase in revenue per unit was a 3.7% decrease in unit volume. Over 40% of this decline was due to lower financial institution conversion activity during 2002, as bank mergers and acquisitions were down from 2001. Conversion activity is driven by the need to replace checks after one financial institution merges with or acquires another. Additionally, the Direct Checks segment was impacted by lower consumer response rates, and all three segments were impacted by a decline in check usage due to the slower economy and the increasing use of alternative payment methods.

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Gross profit
Gross profit increased $23.6 million, or 2.9%, to $848.2 million for 2002 from $824.6 million for 2001. Gross margin increased to 66.1% for 2002 from 64.5% for 2001. The increase in gross margin was due to the higher revenue per unit discussed earlier and continued focus on productivity improvements, including the conversion to lean and cellular manufacturing concepts in our Financial Services and Business Services check printing facilities, as well as other cost reductions and reduced spoilage. Postal rate increases partially offset these improvements.

Selling, general and administrative (SG&A) expense
SG&A expense decreased $11.4 million, or 2.2%, to $503.0 million for 2002 from $514.4 million for 2001. As a percentage of revenue, SG&A expense decreased to 39.2% for 2002 from 40.2% for 2001. The improvement was primarily due to our efforts to move customers to the lower-cost electronic and Internet order channels, lower depreciation and amortization expense as a result of reductions in capital purchases in recent years and ongoing cost management efforts. Partially offsetting these decreases was a $7.1 million increase in advertising expense within the Direct Checks segment. There has been an overall softening in direct mail industry response rates causing some of the cooperative mailers and other businesses we have relied upon to distribute direct mail advertisements to reduce their circulation. This has made it challenging, and more costly, to acquire suitable advertising media for Direct Checks traditional means of new customer acquisition.

Goodwill amortization expense
On January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, in its entirety. Under this new statement, goodwill and intangible assets with indefinite lives are no longer amortized, but are subject to impairment testing on at least an annual basis. Thus, we recorded no goodwill amortization expense during 2002, compared to $6.2 million for 2001.

Asset impairment and net disposition losses
The net loss of $0.3 million for 2002 consisted of the retirement of certain software assets, partially offset by the recognition of $0.9 million of the deferred gain resulting from a 1999 sale-leaseback transaction with an unaffiliated third party. The net loss of $2.1 million for 2001 consisted of write-offs resulting from a review of asset usage and physical inventories of assets, partially offset by the recognition of $1.7 million of the deferred gain from the 1999 sale-leaseback transaction.

Interest expense
Interest expense decreased $0.5 million to $5.1 million for 2002 from $5.6 million for 2001. The decrease was due to lower interest rates partially offset by higher debt levels. During 2002, we had weighted-average debt outstanding of $171.8 million at a weighted-average interest rate of 2.13%. During 2001, we had weighted-average debt outstanding of $104.5 million at a weighted-average interest rate of 3.99%. In February 2001, we paid off $100.0 million of unsecured and unsubordinated notes which carried interest at 8.55%.

Provision for income taxes
Our effective tax rate for 2002 was 37.1% compared to 37.5% for 2001. The decrease was due primarily to the reversal of $12.9 million of previously established income tax reserves. During the fourth quarter of 2002, the Internal Revenue Service (IRS) completed its review of our income tax returns for 1996 through 1998. Certain IRS rules were clarified in a manner favorable to us, and the related reserves were no longer required. Substantially offsetting these reversals was a $12.2 million charge for a valuation allowance relating to our deferred tax asset for capital loss carryforwards which expire at the end of 2003. By the fourth quarter of 2002, the predominance of negative evidence indicated that it was more likely than not that the tax benefits associated with a majority of the capital loss carryforwards would not be realized as certain tax planning strategies upon which we intended to rely were no longer considered to be prudent or feasible.

Income from continuing operations
Income from continuing operations increased $28.4 million, or 15.3%, to $214.3 million for 2002 from $185.9 million for 2001. The improvement was due to the increases in revenue and gross profit, the reduction in SG&A expense and the change in accounting for goodwill discussed earlier.

Diluted earnings per share from continuing operations
Diluted earnings per share from continuing operations increased $0.67, or 24.9%, to $3.36 for 2002 from $2.69 for 2001. In addition to the increase in income from continuing operations discussed earlier, average shares outstanding decreased from 2001 due to our share repurchase programs. In January 2001, our board of directors approved the repurchase of up to 14 million shares of our common stock and in August 2002, the board authorized the repurchase of an additional 12 million shares. As of December 31, 2002, 15.2 million shares had been repurchased under these programs. The change in average shares outstanding resulting from share repurchases, partially offset by the impact of shares issued under employee stock purchase and stock incentive plans, accounted for $0.26 of the increase in 2002 earnings per share as compared to 2001.

        As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, we continue to account for employee stock-based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, our results of operations do not include

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compensation expense for stock options issued under our stock incentive plan and for 2002 do not include compensation expense for shares issued under our amended and restated employee stock purchase plan. Had this expense been included in our results, diluted earnings per share would have been $0.04 lower for 2002 and $0.05 lower for 2001. This pro forma impact of stock-based compensation was calculated under a method consistent with that disclosed in the notes to our consolidated financial statements for the year ended December 31, 2002.

Year Ended December 31, 2001 Compared
to the Year Ended December 31, 2000

Revenue
Revenue increased $15.7 million, or 1.2%, to $1,278.4 million for 2001 from $1,262.7 million for 2000. Revenue per unit increased 2.1% from 2000 due to price increases in all three segments and increased sales of premium-priced licensed designs, partially offset by continued competitive pricing pressure in the Financial Services segment. Unit volume decreased 0.9% due primarily to the loss of financial institution clients as a result of the competitive pricing pressure. Partially offsetting the volume decline in the Financial Services segment was the effectiveness of promotional spending in the Direct Checks and Business Services segments, the continued success of the financial institution referral program in the Business Services segment and the acquisition of Designer Checks in February 2000.

Gross profit
Gross profit increased $14.9 million, or 1.8%, to $824.6 million for 2001 from $809.7 million for 2000. Gross margin increased to 64.5% for 2001 from 64.1% for 2000. Price and volume increases within the Direct Checks and Business Services segments, as well as productivity improvements and cost management measures within all businesses, were partially offset by the effect of continued pricing pressure and decreased volume within the Financial Services segment.

Selling, general and administrative (SG&A) expense
SG&A expense decreased $3.8 million, or 0.7%, to $514.4 million for 2001 from $518.2 million for 2000. As a percentage of revenue, SG&A expense decreased to 40.2% for 2001 from 41.0% for 2000. The improvement was primarily due to on-going cost management efforts across all businesses, administrative cost reductions due to the eFunds spin-off on December 29, 2000, and costs incurred in 2000 related to PlaidMoon. During 2000, we introduced PlaidMoon.com, an Internet-based business concept that allowed consumers to design and purchase personalized items. In October 2000, we announced that we were scaling back and repositioning our PlaidMoon.com business concept into our other businesses. The expenses relating to the start-up of this project resulted in higher SG&A expense for 2000 as compared to 2001.

        Partially offsetting these decreased expenses were increased marketing costs related to new customer acquisition within the Direct Checks segment and net restructuring charges of $2.6 million in 2001, as compared to net restructuring charge reversals of $2.4 million in 2000. The net restructuring charges recorded in 2001 related to various workforce reductions across all segments. The reductions are expected to affect 270 employees and will be completed in early 2003. The net restructuring charge reversals recorded in 2000 primarily related to a previous initiative to reduce SG&A expense. The reversal resulted from higher than anticipated employee attrition and the reversal of accruals for early termination payments to a group of employees.

Asset impairment and net disposition losses
The net loss of $2.1 million for 2001 consisted of write-offs resulting from a review of asset usage and physical inventories of assets, partially offset by the recognition of $1.7 million of the deferred gain resulting from a 1999 sale-leaseback transaction with an unaffiliated third party. In 2000, we recorded $9.7 million of asset impairment losses related to the PlaidMoon project discussed earlier under SG&A expense. As a result of the decision to scale back and reposition this project into our other businesses, we completed an evaluation to determine to what extent the long-lived assets of this project could be utilized by our other businesses. The impaired assets consisted of internal-use software developed for use by the PlaidMoon.com website. The estimated fair value of the software was determined by calculating the present value of net cash flows expected to be generated by alternative uses of the assets. The impairment losses were partially offset by gains from capital asset sales and the recognition of $1.8 million of the deferred gain resulting from the 1999 sale-leaseback transaction.

Interest expense
Interest expense decreased $5.8 million to $5.6 million for 2001 as compared to $11.4 million for 2000. The decrease was due to lower interest rates and debt levels. During 2001, we had weighted-average debt outstanding of $104.5 million at a weighted-average interest rate of 3.99%. During 2000, we had weighted-average debt outstanding of $125.0 million at a weighted-average interest rate of 8.11%. In February 2001, we paid off $100.0 million of unsecured and unsubordinated notes which carried interest at 8.55%.

Provision for income taxes
Our effective tax rate for continuing operations was 37.5% for 2001 compared to 38.0% for 2000.

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Income from continuing operations
Income from continuing operations increased $16.4 million, or 9.7%, to $185.9 million for 2001 from $169.5 million for 2000. The improvement was due to the increases in revenue and gross profit and the decreases in SG&A expense, asset impairment losses and interest expense discussed earlier.

Diluted earnings per share from continuing operations
Diluted earnings per share from continuing operations increased $0.35, or 15.0%, to $2.69 for 2001 from $2.34 for 2000. In addition to the increase in income from continuing operations discussed earlier, average shares outstanding decreased from 2000 due to our share repurchase program. In January 2001, our board of directors approved the repurchase of up to 14 million shares of our common stock. Through December 31, 2001, we had repurchased 11.3 million of these shares. The change in average shares outstanding resulting from share repurchases, partially offset by the impact of shares issued under employee stock purchase and stock incentive plans, accounted for $0.12 of the increase in 2001 earnings per share as compared to 2000.

Discontinued operations
Loss from discontinued operations was $7.5 million for 2000. This represents the results of our eFunds segment, which was disposed of via a spin-off transaction on December 29, 2000, as well as the costs of the spin-off.

Diluted earnings per share
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, we continue to account for employee stock-based compensation in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, our results of operations do not include compensation expense for stock options issued under our stock incentive plan. Had this expense been included in our results, diluted earnings per share would have been $0.05 lower for 2001 and $0.06 lower for 2000. This pro forma impact of stock-based compensation was calculated under a method consistent with that disclosed in the notes to our consolidated financial statements for the year ended December 31, 2002.

Segment Disclosures

Financial Services
Financial Services provides checks, related products and check merchandising services to financial institutions. Additionally, we offer enhanced services to our clients, such as customized reporting, file management, expedited account conversion support and fraud prevention.

        The following table shows the results of this segment for the last three years (dollars in thousands):

        Financial Services revenue decreased $14.5 million, or 1.9%, to $754.0 million for 2002 from $768.5 million for 2001. The decrease was due to lower volume resulting from lower financial institution conversion activity during 2002, an overall decline in the number of checks being written due to the slower economy and the increasing use of alternative payment methods, as well as the timing of client gains and losses. The volume decline was partially offset by price increases and continued strength in selling premium-priced licensed designs and services. Operating income increased $13.3 million, or 7.9%, to $181.0 million for 2002 from $167.7 million for 2001. The improvement was due to continued focus on cost reductions and productivity improvements, including the transformation to lean and cellular manufacturing concepts, lower depreciation and amortization expense as a result of lower levels of capital purchases in recent years, increased efficiencies due to a shift from mail to electronic orders and reduced spoilage. Postal rate increases partially offset these improvements.

        Financial Services revenue decreased $26.1 million, or 3.3%, to $768.5 million for 2001 from $794.6 million for 2000. The decrease was due to continued competitive pricing pressure, as well as the resulting volume decline due to the loss of financial institution clients. We were able to partially offset these declines through a price increase, increased shipping and handling revenue and increased sales of premium-priced products. Operating income decreased $6.6 million, or 3.8%, to $167.7 million for 2001 from $174.3 million for 2000. The revenue decrease was partially offset by productivity improvements and cost management measures.

Direct Checks
Direct Checks sells checks and related products directly to consumers through direct mail and the Internet. We use a variety of direct marketing techniques to acquire new customers in the direct-to-consumer market, including freestanding inserts in newspapers, in-package advertising, statement stuffers and co-op advertising. We also use e-commerce strategies to direct traffic to our websites. Direct Checks sells under the Checks Unlimited® and Designer® Checks brand names.

        The following table shows the results of this segment for the last three years (dollars in thousands):

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        Direct Checks revenue increased $5.3 million, or 1.7%, to $310.9 million for 2002 from $305.6 million for 2001. The increase was due to higher revenue per unit as a result of price increases, the improved effectiveness of our selling techniques and continued strength in selling premium-priced licensed designs, partially offset by a decrease in volume as direct mail response rates were down. Operating income increased $17.0 million, or 22.6%, to $92.4 million for 2002 from $75.4 million for 2001. The change in accounting for goodwill required under SFAS No. 142, Goodwill and Other Intangible Assets, accounted for $6.2 million of the increase. Under this statement, goodwill and intangible assets with indefinite lives are no longer amortized but are subject to impairment testing on at least an annual basis. In addition, the improvement was due to the revenue increase, the continued migration of orders to the lower-cost Internet channel, continued cost management efforts and productivity improvements within the manufacturing function. Partially offsetting these improvements were increased advertising costs as a result of fewer new customer acquisition media sources. There has been an overall softening in direct mail industry response rates causing some of the cooperative mailers and other businesses we have relied upon to distribute direct mail advertisements to reduce their circulation. This has made it challenging, and more costly, to acquire suitable advertising media for our traditional means of new customer acquisition.

        Direct Checks revenue increased $27.3 million, or 9.8%, to $305.6 million for 2001 from $278.3 million for 2000. The increase was due to higher revenue per unit resulting from a price increase and increased sales of Disney® and other premium-priced licensed designs. Additionally, unit volume increased from 2000 due to new customer acquisitions, increased units per order and the acquisition of Designer Checks in February 2000. Operating income increased $10.4 million, or 16.0%, to $75.4 million for 2001 from $65.0 million for 2000. The revenue increase and cost management efforts were partially offset by increased advertising expense related to new customer acquisition and an increase in goodwill amortization expense of $1.0 million due to the acquisition of Designer Checks.

Business Services
Business Services sells checks, forms and related products to small businesses and home offices through financial institution referrals and via direct mail and the Internet. Through our business referral program, our financial institution clients refer new small business customers by calling us directly at the time of new account opening. We also use a variety of direct marketing techniques to acquire and retain customers.

        The following table shows the results of this segment for the last three years (dollars in thousands):

        Business Services revenue increased $14.9 million, or 7.3%, to $219.1 million for 2002 from $204.2 million for 2001. The increase was due to increased volume from financial institution referrals and improved selling techniques, as well as higher revenue per unit due to price increases. Partially offsetting these increases was lower financial institution conversion activity during 2002 and a decline in check usage due to the slower economy and the increasing use of alternative payment methods. Operating income increased $12.6 million, or 21.5%, to $71.5 million for 2002 from $58.9 million for 2001. The improvement was due to the revenue increase, reduced materials costs and continued cost management efforts.

        Business Services revenue increased $14.5 million, or 7.6%, to $204.2 million for 2001 from $189.7 million for 2000. The increase was due to price increases and increased volume as this business continued to benefit from financial institution referrals and effective promotional spending. Operating income increased $8.5 million, or 16.9%, to $58.9 million for 2001 from $50.4 million for 2000. The revenue increase and cost management efforts were partially offset by increased commissions relating to our financial institution referral program.

Liquidity, Capital Resources and
Financial Condition

As of December 31, 2002, we had cash and cash equivalents of $124.9 million. The following table shows our cash flow activity for the last three years and should be read in conjunction with the consolidated statements of cash flows (dollars in thousands):

        Net cash provided by operating activities decreased $13.5 million to $257.1 million for 2002 from $270.6 million for 2001. The increase in earnings in 2002 was offset by higher employee profit sharing and pension contributions, income tax payments and voluntary employee beneficiary association (VEBA) trust contributions.

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        During 2002, net cash provided by operating activities of $257.1 million was primarily generated by earnings before interest, taxes, depreciation and amortization of intangibles and goodwill (EBITDA⁽¹⁾) of $403.3 million. Operating income during the same period was $344.9 million. These cash inflows were utilized to fund income tax payments of $116.5 million, contract acquisition payments to financial institution clients of $34.9 million, employee profit sharing and pension contributions of $28.4 million and VEBA trust contributions of $25.5 million. Net cash provided by operating activities during 2002, the net issuance of long-term debt of $295.7 million, cash receipts of $30.9 million from shares issued under employee plans and cash on hand at December 31, 2001 enabled us to spend $172.8 million on share repurchases, to pay short-term debt of $150.0 million, to pay dividends of $92.9 million and to purchase capital assets of $40.7 million.

        Net cash provided by operating activities increased $17.0 million to $270.6 million for 2001 from $253.6 million for 2000. The increase in earnings and accounts payable was partially offset by higher contract acquisition payments to financial institution clients. Beginning in 2001, competitive pressures in the industry increased the importance of these up-front payments to clients in order to retain and increase our client base.

        During 2001, net cash provided by operating activities of $270.6 million was primarily generated by EBITDA of $374.7 million, increases in accounts payable and miscellaneous operating expense accruals and a reduction in trade accounts receivable. Operating income during the same period was $301.9 million. These operating cash inflows were utilized primarily to fund income tax payments of $107.0 million and contract acquisition payments to financial institution clients of $34.0 million. Net cash provided by operating activities during 2001, the net issuance of $150.0 million of commercial paper, cash on hand at December 31, 2000 and cash receipts of $68.7 million from shares issued under employee plans enabled us to spend $345.4 million on share repurchases, to pay dividends of $101.8 million, to make payments on long-term debt of $101.6 million and to purchase capital assets of $28.8 million.

        We believe that important measures of our financial strength are the ratios of earnings before interest and taxes (EBIT⁽²⁾) to interest expense and free cash flow⁽³⁾ to debt. EBIT to interest expense was 68.0 times for 2002, 53.9 times for 2001 and 24.5 times for 2000. Our committed lines of credit contain covenants requiring a minimum EBIT to interest expense ratio of 2.5 times. The increase in 2002, as compared to 2001, was primarily due to the improvements in operating results discussed earlier under Results of Operations and lower interest expense in 2002 due to lower interest rates. The increase in 2001, as compared to 2000, was primarily due to lower interest expense in 2001 resulting from lower interest rates and debt levels throughout the year. The comparable ratio of operating income to interest expense was 67.9 times for 2002, 54.1 times for 2001 and 24.4 times for 2000. Free cash flow to debt was 40.1% for 2002, 86.8% for 2001 and 88.3% for 2000. The decrease in 2002, as compared to 2001, was due to the higher debt level as of December 31, 2002 resulting from borrowings to implement our financial strategy. This impact was partially offset by increased earnings and the lower amount of dividends paid in 2002 based on fewer shares outstanding. The decrease in 2001, as compared to 2000, was due to the higher level of debt as of December 31, 2001 due to cash expenditures made for our 2001 share repurchase program. Partially offsetting the higher debt level was a $42.2 million increase in free cash flow resulting from the lower level of capital asset purchases during 2001, as well as the improvements in operating results discussed earlier under Results of Operations. The comparable ratio of net cash provided by operating activities to debt was 83.4% for 2002, 167.6% for 2001 and 228.7% for 2000.

        We currently have a $300.0 million commercial paper program in place. Our commercial paper program carries a credit

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rating of A1/P1. If for any reason we were unable to access the commercial paper markets, we would rely on our committed lines of credit for liquidity. The average amount of commercial paper outstanding during 2002 was $152.9 million at a weighted-average interest rate of 1.77%. As of December 31, 2002, no commercial paper was outstanding. The average amount of commercial paper outstanding during 2001 was $90.9 million at a weighted-average interest rate of 3.37%. As of December 31, 2001, $150.0 million was outstanding at a weighted-average interest rate of 1.85%.

        We have $350.0 million available under two committed lines of credit. These lines are available for borrowing and as support for our commercial paper program. We have a $175.0 million line of credit which expires in August 2003 and carries a commitment fee of six basis points (.06%). We also have a $175.0 million line of credit which expires in August 2007 and carries a commitment fee of eight basis points (.08%). The credit agreements, which govern these lines of credit, contain customary covenants regarding EBIT to interest expense coverage and levels of subsidiary indebtedness. We believe the risk of violating our financial covenants is low. No amounts were drawn on these lines during 2002 and no amounts were outstanding as of December 31, 2002. Our previous committed line of credit expired in August 2002. No amounts were drawn on that line during 2002 or 2001, and no amounts were outstanding as of December 31, 2001.

        We also have an uncommitted bank line of credit for $50.0 million available at variable interest rates. No amounts were drawn on this line during 2002. The average amount drawn on this line of credit during 2001 was $1.3 million at a weighted-average interest rate of 4.26%. As of December 31, 2002 and 2001, no amounts were outstanding under this line of credit.

        In August 2002, our board of directors approved a financial strategy intended to reduce our cost of capital and as a result, increase leverage. This strategy would allow us to increase our debt level up to a maximum of $700 million. The additional debt is expected to be a combination of both long-term and short-term borrowings and would be utilized in part to repurchase shares under a 12 million share repurchase program also approved by our board of directors in August as part of the financial strategy. As a result of this announcement, our long-term credit rating was downgraded to ‘A’ from ‘A+’ by one rating agency and was downgraded to ‘A2’ from ‘A1’ by another rating agency. We still maintain a strong investment-grade credit rating and expect no impact on our ability to borrow. Our credit facilities do not have covenants or events of default tied to maintaining an investment-grade credit rating.

        In connection with this financial strategy, in December 2002, we issued $300.0 million of senior, unsecured notes (the Notes) maturing on December 15, 2012. The Notes were issued under our shelf registration statement covering up to $300.0 million in medium-term notes, thereby exhausting that registration statement. The proceeds from the Notes were used to retire our commercial paper borrowings and will be used for general corporate purposes, including funding share repurchases, capital asset purchases, working capital or financing for possible acquisitions. Interest payments are due each June and December at an annual interest rate of 5.0%. Principal redemptions may be made at our election prior to their stated maturity. The Notes include covenants that place restrictions on the issuance of additional debt that would be senior to the Notes and the execution of certain sale-leaseback arrangements. Proceeds from the offering, net of offering costs, were $295.7 million. In conjunction with the planned issuance of the Notes, we executed derivative instruments (the Lock Agreements) to effectively hedge, or lock-in, the annual interest rate on $150.0 million of the Notes. Upon issuance of the Notes, the Lock Agreements were terminated, yielding a deferred pre-tax loss of $4.0 million, which is reflected in accumulated other comprehensive loss in our consolidated balance sheet and will be reclassified ratably to our statements of income as an increase to interest expense over the ten-year term of the Notes.

Contractual Obligations

As of December 31, 2002, our contractual obligations were as follows (dollars in thousands):

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Long-term debt consists of senior, unsecured notes issued in December 2002. These notes mature on December 15, 2012 and carry interest at a rate of 5.0%. The amount presented above represents their face value.

        We currently have commitments under both operating and capital leases. Our capital lease obligations bear interest at rates of 5.5% to 10.4% and are due through 2009. We have also entered into operating leases on certain facilities and equipment.

        Purchase obligations include amounts due under contracts with third party service providers. These contracts are primarily for information technology services, including software development and support services, and personal computer, telecommunications, network server and help desk services. Additionally, purchase obligations include amounts due under royalty agreements and Direct Checks direct mail advertising agreements. Certain of the contracts with third party service providers allow for early termination upon the payment of specified penalties. If we were to terminate these agreements, we would incur penalties of $54.8 million as of December 31, 2002.

        Other long-term liabilities consist primarily of amounts due for workers’compensation, deferred officers’ compensation and environmental liabilities. During 2002, we purchased an environmental insurance policy which covers the costs of remediation activities at the identified sites and remains in effect for 30 years. As a result, we will receive reimbursements from the insurance company for environmental remediation costs we incur. As of December 31, 2002, we had recorded liabilities of $7.5 million for environmental matters. The related receivables from the insurance company are reflected in other current assets and other non-current assets in our consolidated balance sheet in amounts equal to our environmental liabilities.

        Of the $28.8 million reported as long-term liabilities in our consolidated balance sheet as of December 31, 2002, $8.7 million is excluded from the payments shown above for other long-term liabilities. This amount includes a portion of the liability for our deferred compensation plan. Under our plan, employees begin receiving payments upon the termination of employment or disability and we cannot predict when these events will occur. Additionally, this amount includes items which will not be paid in cash, such as a deferred gain resulting from a 1999 sale-leaseback transaction with an unaffiliated third party.

Contingent Commitments/Off-balance Sheet
Arrangements

In conjunction with the spin-off of eFunds Corporation (eFunds) on December 29, 2000, we agreed to indemnify eFunds for future losses arising from any litigation based on the conduct of eFunds’ electronic benefits transfer and medical eligibility verification business prior to eFunds’ initial public offering in June 2000, and from certain future losses on identified loss contracts in excess of eFunds’ accrual for contract losses as of April 30, 2000. The maximum contractual amount of litigation and contract losses for which we will indemnify eFunds is $14.6 million. This agreement remains in effect until one year after the termination of the identified loss contracts or until all disputes have been settled. All identified loss contracts are scheduled to expire by 2006. Through December 31, 2002, no amounts have been paid or claimed under this agreement. This obligation is not reflected in the consolidated balance sheets, as it is not probable that any payment will occur.

Related Party Transactions

Other than contracts we entered into in conjunction with the spin-off of eFunds on December 29, 2000, we have entered into no related party transactions during the past three years. The contracts with eFunds account for 19% of the total purchase obligations discussed earlier under Contractual Obligations. These contracts were valued at going market rates and were reviewed by an independent committee of outside directors formed to ensure the arms-length negotiation of the contracts.

        We are not engaged in any transactions, arrangements or other relationships with unconsolidated entities or other third parties that are reasonably likely to have a material effect on our liquidity, or on our access to, or requirements for capital resources. In addition, we have not established any special purpose entities.

Critical Accounting Policies

        Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to long-lived assets, contract acquisition costs, deferred advertising costs, post-retirement benefits and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the result of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. During 2002, we made no significant changes to our accounting policies, nor did we adopt any new accounting policies, other than those required by newly issued accounting standards, which would materially impact our 2002 results of

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operations or their presentation in the accompanying consolidated financial statements. The estimates and judgments utilized are reviewed by management on an ongoing basis, and by the audit committee of our board of directors at the end of each quarter prior to the public release of our financial results. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Application of Critical Accounting Policies

Long-lived assets
As of December 31, 2002, we had property, plant and equipment of $140.0 million and intangible assets of $106.0 million. In addition to the original cost of these assets, their recorded value is impacted by a number of policy elections and other considerations, including estimated useful lives, depreciation and amortization methods, salvage values and impairment losses. Buildings have been assigned 40-year lives and machinery and equipment have been assigned lives ranging from three to 11 years, with a weighted-average life of nine years as of December 31, 2002. These assets are generally depreciated using accelerated methods. Leasehold and building improvements are depreciated on the straight-line basis over the estimated useful life of the property or the life of the lease, whichever is shorter. Intangible assets consist primarily of internal-use software and are generally amortized on the straight-line basis over periods ranging from two to ten years, with a weighted-average life of six years as of December 31, 2002.

        Our business segments allocate depreciation and amortization expense to cost of goods sold or SG&A expense based on how the assets are used. The depreciation and amortization methods and lives applied to our long-lived assets are intended to allocate the cost of these assets over their estimated useful lives and in proportion to the benefits received from their use. We continually evaluate the useful lives and depreciation and amortization methods used. As circumstances change or the manner in which we utilize a particular asset changes, adjustments to these estimates may be necessary. Any change in estimate is reflected on a prospective basis and thus, does not impact the results of operations for periods prior to the change. During 2001, we revised the estimated useful lives for certain of our e-commerce intangible assets. These changes in estimate resulted in increased amortization expense of $2.9 million in 2001. No significant changes in depreciation or amortization estimates were made during 2002 or 2000.

        We must evaluate the recoverability of property, plant, equipment and identifiable intangibles not held for sale whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used or in its physical condition, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset. We measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows.

        The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed or estimated amounts. We recorded asset impairment losses of $9.7 million in 2000. These charges related to investments in an e-commerce initiative which was discontinued during 2000. No significant impairment losses were recorded during 2002 or 2001.

Contract acquisition costs
As of December 31, 2002, we had net capitalized contract acquisition costs of $55.3 million. We capitalize certain contract acquisition costs related to signing or renewing contracts with our financial institution clients. These costs, which primarily consist of cash payments made to financial institution clients by our Financial Services segment, are generally recorded as reductions of revenue on the straight-line basis over the related contract term. Currently, these amounts are being amortized over periods ranging from two to seven years, with a weighted-average life of four years as of December 31, 2002. Whenever events or changes occur that impact the related contract, including significant declines in the anticipated profitability, we evaluate the carrying value of the contract acquisition costs to determine if an impairment has occurred.

        As of December 31, 2002 and 2001, contract acquisition costs consisted of balances relating to numerous financial institutions. Should a financial institution cancel a contract prior to the agreement’s termination date, or should the volume of orders realized through a financial institution fall below contractually-specified minimums, we generally have a contractual right to a refund of the remaining unamortized contract acquisition costs.

Deferred advertising costs
As of December 31, 2002, we had deferred advertising costs of $17.3 million. These costs include materials, printing, separations and postage costs related primarily to direct response advertising programs of our Direct Checks segment. These costs

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are amortized as SG&A expense over periods (averaging 18 months) that correspond to the estimated revenue streams of the individual advertisements. The actual revenue streams are analyzed at least annually to monitor the propriety of the amortization periods. Judgment is required in estimating the future revenue streams, as check re-orders can span an extended period of time. Significant changes in the actual revenue streams would require the amortization periods to be modified, thus impacting the results of operations during the period in which the change occurred and in subsequent periods. During 2002, 2001 and 2000, no material revisions were made to the amortization of deferred advertising costs. We are currently in the process of reviewing our various marketing programs and the related revenues generated from these programs. We anticipate that this review will be complete by the end of the first quarter of 2003 and will result in a slight positive adjustment to our deferred advertising amortization. We cannot yet quantify this amount with certainty, however, as our review is still in progress.

Post-retirement benefits
Our net post-retirement benefit expense was $5.6 million in 2002, $1.1 million in 2001 and $0.1 million in 2000. Our business segments allocate post-retirement benefit expense to cost of goods sold or SG&A expense, based on the composition of their workforces. Our post-retirement benefit expense and liability are calculated utilizing various actuarial assumptions and methodologies. These assumptions include, but are not limited to, the discount rate, the expected long-term rate of return on plan assets and the expected health care cost trend rate. The discount rate assumption is based on the rates of return on high-quality, fixed-income instruments currently available whose cash flows match the timing and amount of expected benefit payments. The expected long-term rate of return on plan assets and the health care cost trend rate are based upon an evaluation of our historical trends and experience, taking into account current and expected market conditions. The long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested or to be invested to provide for expected benefit payments. The health care cost trend rate represents the expected annual rate of change in the cost of health care benefits currently provided due to factors other than changes in the demographics of plan participants. If the assumptions utilized in determining our post-retirement benefit expense and liability differ from actual events, our results of operations for future periods could be impacted.

        In measuring the accumulated post-retirement benefit obligation as of December 31, 2002, we assumed a discount rate of 6.75% and an expected long-term rate of return on plan assets of 8.75%. A 0.25 point change in the discount rate would increase or decrease our annual post-retirement benefit expense by $0.3 million. A 0.25 point change in the expected long-term rate of return on plan assets would increase or decrease our annual post-retirement benefit expense by $0.1 million. As of December 31, 2002, the fair market value of plan assets was $51.3 million. We made no contributions to plan assets during 2002, 2001 or 2000.

        In measuring the accumulated post-retirement benefit obligation as of December 31, 2002, our initial health care inflation rate for 2003 was assumed to be 10.25% and our ultimate health care inflation rate for 2008 and beyond was assumed to be 5.0%. A one percentage point increase in the health care inflation rate for each year would increase the accumulated post-retirement benefit obligation by $17.7 million and the service and interest cost components of our annual post-retirement benefit expense by $1.2 million. A one percentage point decrease in the health care inflation rate for each year would decrease the accumulated post-retirement benefit obligation by $15.4 million and the service and interest cost components of our annual post-retirement benefit expense by $1.3 million.

        When actual events differ from our assumptions or when we change the assumptions used, an unrecognized actuarial gain or loss results. Unrecognized gains and losses are reflected in post-retirement benefit expense over the average remaining service life of employees expected to receive benefits under the plan, which is currently 16 years. As of December 31, 2002, our unrecognized net actuarial loss was $76.5 million. Of this amount, $35.2 million resulted from differences between our expected long-term rate of return on plan assets and the actual return on plan assets. Since this assumption takes a long-term view of investment returns, there may be differences between the expected rate of return and the actual rate of return on plan assets in the short-term. Additionally, $15.3 million of the unrecognized net actuarial loss resulted from changes in our assumed health care inflation rate. During both 2002 and 2001, we increased our heath care inflation rate assumption to reflect the current trend of increasing medical costs. The remainder of the net actuarial loss amount primarily related to changes in the discount rate assumption, differences between our assumed medical costs and actual experience and changes in the employee population.

Income taxes
When preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as capital assets, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance

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recorded against our net deferred tax assets. Additionally, in accordance with SFAS No. 5, Accounting for Contingencies, we have established reserves for income tax contingencies. These reserves relate to various tax years subject to audit by tax authorities. We believe that our current income tax reserves are adequate. However, the ultimate outcome may differ from our estimates and assumptions and could impact the provision for income taxes reflected in our consolidated statements of income.

        During 2002, we reversed $12.9 million of previously established income tax reserves. During the fourth quarter of 2002, the IRS completed its review of our income tax returns for 1996 through 1998. Certain IRS rules were clarified in a manner favorable to us, and the related reserves were no longer required. Substantially offsetting these reversals was a $12.2 million charge for a valuation allowance relating to our deferred tax asset for capital loss carryforwards which expire at the end of 2003. By the fourth quarter of 2002, the predominance of negative evidence indicated that it was more likely than not that the tax benefits associated with a majority of the capital loss carryforwards would not be realized as certain tax planning strategies upon which we intended to rely were no longer considered to be prudent or feasible.

Other Matters

On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, in its entirety. This statement addresses accounting and financial reporting for goodwill and intangible assets. Under the new statement, goodwill and intangible assets with indefinite lives are no longer amortized, but are subject to impairment testing on at least an annual basis. Other than goodwill, we have no intangible assets with indefinite lives. Adoption of this statement resulted in no goodwill impairment losses and had no impact on our financial position as of January 1, 2002. In addition, the remaining useful lives of amortizable intangible assets were reviewed and deemed appropriate.

        The following information reflects our results of operations as they would have appeared had we not recorded goodwill amortization expense and its related tax effects during 2001 and 2000 (dollars in thousands, except per share amounts):

        As of June 30, 2002, we completed the 14 million share repurchase program approved by our board of directors in January 2001. The total cost to purchase the 14 million shares was $463.8 million. In August 2002, our board of directors approved the repurchase of up to 12 million additional shares. Through December 31, 2002, 1.2 million of these additional shares had been repurchased at a cost of $54.4 million. Primarily as a result of the required accounting treatment for these share repurchases, shareholders’ equity decreased from $262.8 million as of December 31, 2000 to $64.3 million as of December 31, 2002.

        In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses the financial accounting and reporting for costs associated with exit or disposal activities and applies only to those activities initiated on or after the date of adoption. We adopted SFAS No. 146 on October 1, 2002 and thus, applied the requirements of this statement when reporting our results of operations for the fourth quarter of 2002.

        In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. We adopted the disclosure requirements of this interpretation on December 31, 2002. The recognition provisions of the interpretation are applicable only to guarantees issued or modified after December 31, 2002. The only agreement subject to the requirements of this interpretation was the eFunds indemnification agreement discussed earlier under Contingent Commitments/Off-balance Sheet Arrangements. As of December 31, 2002, we had no other guarantees which fell within the scope of this interpretation.

        On December 2, 2002, eFunds restated its results of operations for the years ended December 31, 2000 and 2001 and for the nine months ended September 30, 2002. eFunds also announced that the Securities and Exchange Commission is conducting an inquiry of eFunds and has requested information relating to various transactions that occurred in 2000 and 2001, including data license and software sales. We completed the spin-off of eFunds on December 29, 2000. As such, eFunds’ results of operations are reflected as discontinued operations in our consolidated financial statements for the year ended December 31, 2000. eFunds’ results of operations are not included in our consolidated financial statements for any period subsequent to December 31, 2000. Thus, these restatements have no impact on our financial position (i.e., balance sheet) as of December 31, 2000 or on our financial position or results of operations for any period subsequent to December 31, 2000.

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After reviewing the nature and scope of the transactions that occurred in 2000, as described in eFunds’ amended annual report for the year ended December 31, 2001 on Form 10-K/A, we believe that the adjustments made by eFunds have a de minimis impact on our net income for the year ended December 31, 2000. Additionally, the adjustments have no affect on the results reported for our continuing operations. Accordingly, we have not revised our financial results for the year ended December 31, 2000. Furthermore, eFunds’ historical results of operations have no bearing on our current or future results of operations, our business strategy or on our ability to generate cash for current or future uses.

        In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This statement provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation, as outlined in SFAS No. 123, Accounting for Stock-Based Compensation. This statement also amends the financial statement disclosure requirements relating to stock-based compensation. We currently have no plans to adopt the fair value method of accounting for stock-based compensation.

        In December 2002, we issued $300.0 million of senior, unsecured notes (the Notes) maturing on December 15, 2012. The Notes were issued under our shelf registration statement covering up to $300.0 million in medium-term notes, thereby exhausting that registration statement. The proceeds from the Notes were used to retire our commercial paper borrowings and will be used for general corporate purposes, including funding share repurchases, capital asset purchases, working capital or financing for possible acquisitions. Interest payments are due each June and December at an annual interest rate of 5.0%. Principal redemptions may be made at our election prior to their stated maturity. The Notes include covenants that place restrictions on the issuance of additional debt that would be senior to the Notes and the execution of certain sale-leaseback arrangements. Proceeds from the offering, net of offering costs, were $295.7 million. In conjunction with the planned issuance of the Notes, we executed derivative instruments (the Lock Agreements) to effectively hedge, or lock-in, the annual interest rate on $150.0 million of the Notes. Upon issuance of the Notes, the Lock Agreements were terminated, yielding a deferred pre-tax loss of $4.0 million, which is included in accumulated other comprehensive loss in our consolidated balance sheet and will be reclassified ratably to our statements of income as an increase to interest expense over the ten-year term of the Notes.

Outlook

We believe current economic, business and geo-political conditions are having an impact on our results of operations. We have observed a decline in check usage as economic uncertainty and low consumer confidence translates into fewer checks written and as the use of electronic payments increases. In addition, we continue to operate in a highly competitive industry. While we cannot predict what impact these or other factors will have on our results of operations, our plan is to continue to manage expenses, invest in our business and purchase capital assets when they will reduce operating expenses, increase productivity or profitably increase revenue.

        We anticipate additional financial institution business in the second half of 2003 as we expect clients to continue to recognize the value added by our high quality products and world-class call centers. Additionally, we expect Business Services to benefit from the recently announced alliance with Microsoft® Money and Microsoft Business Solutions. This alliance makes Business Services the exclusive supplier of checks and forms for these Microsoft products. We anticipate that these increases will be offset by a decline in check usage, the competitive pricing pressure faced by our Financial Services business and a decline in response rates in the Direct Checks segment. Our Direct Checks segment relies upon other businesses and cooperative mailers to distribute its promotional materials. This is the traditional means of new customer acquisition for this business. The consumer response rates to these direct mail advertisements have declined, and we are exploring new opportunities such as the Internet and other partners to replace traditional media sources.

        Cost management and productivity improvements, primarily from the transformation to lean and cellular manufacturing concepts and an increasing mix of orders coming through the lower-cost electronic and Internet channels, are expected to continue. We expect these improvements to be offset by increased postage and advertising expenses. The increased advertising expenses are a result of the softening in direct mail response rates discussed earlier. Additionally, interest expense will be higher in 2003 due to the $300.0 million of senior, unsecured notes issued in December 2002. These notes mature in December 2012 and carry interest at a rate of 5.0%. We also expect expense for our post-retirement health care plan to increase approximately $5.0 million in 2003, compared to 2002. This is due primarily to increasing medical costs and continued weakness in the United States stock market. Our post-retirement plan is funded, to a large degree, by a trust invested in debt and equity securities. The expected return on these assets reduces our annual post-retirement benefit expense. Because the fair market value of these assets decreased in both 2002 and 2001, the expected return on these assets for 2003 is expected to be lower than in previous years.

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        As we continue with the 12 million share repurchase program announced in August 2002, our shareholders’ equity could move to a negative position as a result of the required accounting treatment for share repurchases. Should this occur, given the strength of our financial position as reflected in our cash flow and coverage ratios such as EBIT to interest expense and free cash flow to debt, we do not expect any concern from rating agencies, investment bankers or institutional investors. At this time we anticipate no changes to our current dividend payout level.

        We continue to implement initiatives throughout the company that are directly related to our growth strategy. Our growth strategy is to leverage our core competencies of personalization, direct marketing and e-commerce. We intend to add services and expand product offerings, as well as use selling strategies that maximize revenue and profit contribution per customer. We will invest in technology and processes that will lower our cost structure and enhance our revenue opportunities. We also continue to consider acquisitions which would leverage our core competencies and be accretive to earnings and cash flow per share.

        We have a number of new initiatives which are in line with this strategy. For example, our Financial Services segment recently launched a comprehensive new program — DeluxeSelect^SM — for its financial institution clients. DeluxeSelect provides financial institution customers more information regarding checks and check-related products as they interact directly with our professional sales associates, our voice response system or order their checks via the Internet. We can actively promote product upgrades during both the new account opening and check re-ordering processes by engaging customers through our call centers, advanced Internet ordering capabilities and point-of-sale marketing support at financial institution branch offices. In 2002, we presented this new program to 225 financial institution clients. As of December 31, 2002, a large majority of these clients had elected to participate in DeluxeSelect. The impact of DeluxeSelect on revenue will depend to a large extent upon the speed at which our clients can integrate the program with their technology.

        As mentioned above, in 2002 our Business Services segment was chosen to be the new exclusive supplier of checks and forms for Microsoft Money and Microsoft Business Solutions. This alliance gives small and mid-sized business customers that use these Microsoft products access to various products offered by Business Services, including software compatible laser checks and forms, manual business checks and forms, business cards, stationery and accessories. Another Business Services initiative, the business referral program, continues to produce excellent results. This program focuses on acquiring and retaining business customers by compensating financial institutions for referrals and on-going retained business.

        In addition to investments in revenue-generating programs, we continue to invest in areas of the business where we can reduce costs and increase productivity. Our conversion to a cellular manufacturing environment in our check printing facilities is one example. Within the cellular manufacturing environment, a group of employees works together to produce products, rather than those same employees working on individual tasks in a linear fashion. Because employees assume more ownership of the end product, we have seen an improvement in quality and service levels and a reduction in cost per unit. Our conversion to cellular manufacturing began in 2000, and the process is expected to be completed in our Financial Services check printing facilities in early 2004.

        We expect to spend approximately $45.0 million on purchases of capital assets during 2003. Approximately half is expected to be devoted to maintenance of our business, with the remainder targeted for strategic initiatives to drive revenue growth or reduce costs. Additionally, beginning in 2001 we saw a new trend in the area of financial institution contract structure. Many financial institutions, primarily the larger regional and mega banks, began receiving product discounts in the form of cash incentives payable at the beginning of their contracts. These up-front cash payments impact our cash flows in the short-term. We saw this trend continue in 2002 and we expect to see it continue in the future.

        As discussed above under Liquidity, Capital Resources and Financial Condition, in August 2002 our board of directors approved a financial strategy intended to reduce our cost of capital and as a result, increase leverage. This strategy would allow us to increase our debt level up to a maximum of $700 million. It also authorized a 12 million share repurchase program. These steps are intended to enhance shareholder value by allowing us to: (1) reduce our cost of capital; (2) acquire shares from time to time, at prices we believe to be opportunistic; and (3) minimize dilution resulting from shares issued through our employee stock purchase and stock incentive plans. In December 2002, we issued $300.0 million of ten-year senior, unsecured notes. We intend to utilize the debt proceeds, along with cash generated by operations, for general corporate purposes, including funding share repurchases, capital asset purchases, working capital or financing for possible acquisitions.

Cautionary Statement Regarding Forward-looking Statements

The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides companies with a "safe harbor" when making forward-looking statements as a way of encouraging them to furnish their shareholders with information regarding expected trends in their operating results, anticipated business

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developments and other prospective information. Statements made in this report concerning our intentions, expectations or predictions about future results or events are "forward-looking statements" within the meaning of the Reform Act. These statements reflect our current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, and these variations could be material and adverse. Given that circumstances may change, and new risks to the business may emerge from time to time, having the potential to negatively impact our business in ways we could not anticipate at the time of making a forward-looking statement, you are cautioned not to place undue reliance on these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

        Some of the factors that could cause actual results or events to vary from stated expectations include, but are not limited to, the following: developments in the demand for our products or services, such as the rate at which the use of checks may decline as consumers’ preferred method of non-cash payment; the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond our control; the terms under which we do business with our major financial institution clients, customers and suppliers; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; the impact of governmental laws and regulations, particularly in the area of consumer privacy; and competitive forces. Additional information concerning these and other factors that could cause actual results or events to differ materially from our current expectations are contained in Exhibit 99.3 to our Annual Report on Form 10-K for the year ended December 31, 2002, which has been filed with the Securities and Exchange Commission.

Quantitative and Qualitative Disclosures
About Market Risk

We are exposed to changes in interest rates primarily as a result of the borrowing and investing activities used to maintain liquidity and fund business operations. We do not enter into financial instruments for speculative or trading purposes. Throughout most of 2002, we continued to utilize commercial paper to fund working capital requirements and share repurchases. In December 2002, we issued $300.0 million of senior, unsecured notes maturing on December 15, 2012 and carrying interest at a rate of 5.0%. A portion of the proceeds from these notes was used to retire our commercial paper obligations. We also have various lines of credit available and capital lease obligations. As of December 31, 2002, we had no variable rate obligations and the fair market value of our $300.0 million notes was $302.9 million, based on quoted market prices. The nature and amount of debt outstanding can be expected to vary as a result of future business requirements, market conditions and other factors.

        In conjunction with the planned issuance of the $300.0 million of senior, unsecured notes issued in December 2002, we executed derivative instruments to effectively hedge, or lock-in, the annual interest rate on $150.0 million of these notes. We realized a deferred pre-tax loss of $4.0 million on these agreements, which is reflected in accumulated other comprehensive loss in our consolidated balance sheet. Additionally, the notes were issued at a discount of $1.9 million from par value, and we incurred debt issuance costs of $2.4 million. All of these amounts will be reclassified ratably to our statements of income as an increase to interest expense over the ten-year term of the notes, resulting in an effective annual interest rate of 5.3%.

        Based on the outstanding variable rate debt in our portfolio over the past three years, a one percentage point increase in interest rates would have resulted in additional interest expense of $1.5 million in 2002, $0.9 million in 2001 and $0.3 million in 2000.

        As of December 31, 2002, we had no fixed income securities in our investment portfolio.

Controls and Procedures

Disclosure controls and procedures
Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14 of the Securities and Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the evaluation date, our disclosure controls and procedures are effective at alerting them on a timely basis of material information required to be included in our periodic filings with the Securities and Exchange Commission.

Internal controls
There were no significant changes in our internal controls or, to our knowledge, in other factors which could significantly affect these controls subsequent to the date of their evaluation.

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Management’s Responsibility for Financial Reporting

The accompanying consolidated financial statements and related information are the responsibility of management. They have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts that are based on our best estimates and judgments under existing circumstances. The financial information contained elsewhere in this annual report is consistent with that in the consolidated financial statements.

        We maintain internal accounting control systems that are adequate to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and that our financial records provide a reliable basis for the preparation of our consolidated financial statements. We believe our systems are effective, and the costs of the systems do not exceed the benefits obtained. These systems of control are supported by the selection of qualified personnel, by organizational assignments that provide appropriate division of responsibilities and by the dissemination of written finance policies. This control structure is further supported by a program of internal audits.

        The audit committee of the board of directors has reviewed the financial data included in this report. The audit committee, comprised entirely of independent directors, assists the board of directors in monitoring the integrity of our financial statements, the effectiveness of our internal audit function and independent accountants, and our compliance systems. In carrying out these responsibilities, the audit committee meets regularly with management to consider the adequacy of our internal controls and the objectivity of our financial reporting. The audit committee also discusses these matters with our independent accountants, with appropriate personnel from our finance organization and with our internal auditors, and meets privately on a regular basis with the independent accountants and internal auditors, each of whom reports and has unrestricted access to the audit committee.

        The role of the independent accountants is to render an independent, professional opinion on management’s consolidated financial statements to the extent required by auditing standards generally accepted in the United States of America. Their report expresses an independent opinion on the fairness of presentation of our consolidated financial statements.

        We recognize the responsibility to conduct our affairs according to the highest standards of personal and corporate conduct. This responsibility is reflected in our compliance policy and in our code of ethics and business conduct, which are distributed to all employees, and in our compliance training program.

Lawrence J. Mosner
Chief Executive Officer

Douglas J. Treff
Senior Vice President
and Chief Financial Officer

Katherine L. Miller
Vice President, Controller
and Chief Accounting Officer

January 28, 2003

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Five-Year Summary

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See Notes to Consolidated Financial Statements

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See Notes to Consolidated Financial Statements

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See Notes to Consolidated Financial Statements

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