UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2003

	OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number

333-45235

Perry Judd’s Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		51-0365965
(State of Incorporation)		(IRS Employer Identification Number)

575 West Madison Street, Waterloo, Wisconsin		53594
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 920-478-3551

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý

As of March 19, 2004 there were 897,918 shares of Registrant’s Common Stock, par value $.001 per share outstanding. There is no established public trading market for the Registrant’s Common Stock. Therefore, an aggregate market value based on sales or bid and ask prices is not determinable.

Documents Incorporated by Reference

None

TABLE OF CONTENTS

Item

PART I

		1.	Business

		2.	Properties

		3.	Legal Proceedings

		4.	Submission of Matters to a Vote of Security Holders

PART II

		5.	Market for Registrant’s Common Equity and Related Stockholder Matters

		6.	Selected Financial Data

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

	7A.		Quantitative and Qualitative Disclosures About Market Risk

		8.	Financial Statements and Supplementary Data

		9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

	9A.		Controls and Procedures

PART III

		10.	Directors, Executive Officers and Key Management Employees of the Registrant

		11.	Executive Compensation

		12.	Security Ownership of Certain Beneficial Owners and Management

		13.	Certain Relationships and Related Party Transactions

		14.	Principal Accountant Fees and Services

PART IV

		15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K

			Exhibit Index

			Signatures

			Index of Financial Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, or “continue” or the negative thereof or variations thereon or similar terminology. Such forward-looking statements are based upon information currently available in which the Company’s management shares its knowledge and judgement about factors that they believe may materially affect the Company’s performance. The Company makes the forward-looking statements in good faith and believes them to have a reasonable basis. However, such statements are speculative, speak only as of the date made and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could vary materially from those anticipated, estimated or expected. Factors that might cause actual results to differ materially from those in such forward-looking statements include, but are not limited to, those discussed in Item 1. “Business—Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. All subsequent written and oral statements that the Company makes are qualified in their entirety by these Risk Factors.

Readers are urged to carefully review and consider disclosures made in this and other reports that the Company files with the Securities and Exchange Commission that discuss factors germane to the Company’s business.

PART I

Item 1. Business.

General

Unless the context otherwise provides, all references in this Annual Report to the “Company” includes Perry Judd’s Holdings, Inc., (“Perry Judd’s Holdings”) its wholly-owned subsidiary, Perry Judd’s Incorporated (“Perry Judd’s”), Judd’s Online, Inc., (“Judd’s Online”) a wholly-owned subsidiary of Perry Judd’s which was sold in October 2000, and Heartland Press, Inc. (“Heartland”) which was acquired by the Company in February, 1999. All references to Perry Judd’s shall include its former consolidated subsidiaries: Judd’s Incorporated (“Judd’s”), Judd & Detweiler, Inc., Mount Jackson Press, Inc., Shenandoah Valley Press, Inc. (“Shenandoah Valley”), and Port City Press, Inc. (“Port City”).

The Company is a leading multi-regional printer of magazines, catalogs, and other commercial products. Its printing facilities are strategically located in the Midwest and Mid-Atlantic regions, with each plant having state-of-the-art, integrated prepress, press, binding and distribution capabilities. The Company services regional and national customers through sales offices in 15 cities nationwide. Management believes the Company has established a reputation for high quality products and superior customer service, which have resulted in long-standing customer and supplier relationships. The Company manages the total prepress, print, and distribution process to provide value-added solutions that reduce customer costs or assist customers in increasing revenues.

Effective April 28, 1995, the Company acquired certain net assets of Perry Printing Corporation (“Perry Printing”). Prior to April 28, 1995, the Company had no operating activities.

On February 1, 1999, the Company completed the acquisition of Heartland which was a short-run printer servicing the magazine sector. The financial and other information of the Company included in this Annual Report includes the operations of Heartland since the date of the acquisition.

On October 19, 2000, the Company sold substantially all the net assets of its new media services subsidiary, Judd’s Online, to a subsidiary of Susquehanna Media Corporation.

The Company operates primarily in one business segment - printing services. The following table presents the percentage of net sales contributed by each market sector during the past three fiscal years.

	2003		2002		2001
Magazines	62	%	65	%	63	%
Catalogs	33	%	31	%	32	%
Other	5	%	4	%	5	%
TOTAL	100	%	100	%	100	%

Substantially all of the Company’s sales are based upon customer specifications. A significant amount of the Company’s sales are made pursuant to term contracts with its customers, with the remainder made on an order-by-order basis. One of the Company’s customers, Time, Inc., accounted for approximately 12%, 15%, and 14% of the Company’s consolidated net sales during 2003, 2002 and 2001, respectively. Time, Inc., did not renew its monthly printing contract at its expiration on July 31, 2003 and its weekly contract at its expiration on December 31, 2003. Due to this loss of business, the Company announced on November 20, 2003 that it will be closing its Waterloo, Wisconsin plant and expects to close the facility by the end of April 2004. This action will result in the Company incurring an after tax charge of approximately $10-$12 million associated with employee restructuring benefits, asset write-downs and other closure related expenses during 2003 and 2004. No other customer accounted for more than 10% of the Company’s consolidated net sales for 2003, 2002 and 2001.

Market Sectors

Magazines. The Company believes that it is one of the ten largest printers of magazines in the United States. The Company’s principal competitors in magazines consist of four diversified printing companies. The Company’s magazine customers include some of the largest and most established publishers in a diverse range of market categories. The Company believes that established publishers and their publications are most likely to have a continuing and improving market presence.

Substantially all of the Company’s magazine printing is performed under contracts, the majority of which have remaining terms ranging from one to four years. The Company’s strong relationships with its magazine customers have historically enabled it to extend most of its magazine contracts beyond their initial expiration dates. The Company’s relationships with its top ten magazine customers average more than twenty years.

Catalogs. The Company believes that it is the sixth largest printer of catalogs in the United States. The Company’s key competitors in the catalog market consist of four diversified commercial printers whose facilities enable them to compete in the national market and smaller local and regional printers who compete for regional business. In addition, the Company’s business-to-business catalog printing work spans a broad range of industries, including the education, home and office furniture, office products and industrial safety products industries. Consistent with industry practice, the Company performs most of its catalog printing under short-term (1 to 3 years) agreements with its customers.

Other Commercial Printing. The Company also produces a variety of specialty commercial products such as magazine inserts, calendars, and general advertising products. These commercial products enable the Company to optimize capacity utilization by supplementing its magazine and catalog business.

Prepress

The Company provides a full range of prepress services and equipment utilizing the latest technology, answering the demand for high quality, 24-hour preparatory services. The Company’s prepress services include conventional preparatory services, (such as color separation, digital page assembly, “preflighting” of digital files, computerized imposition, and laser platemaking) as well as state-of-the-art computer-to-plate technology. The Company has made significant investments in transforming its prepress operations from labor-intensive to equipment- and system-intensive processes, including the introduction of electronic prepress capabilities enabling the Company to receive, create and process pages electronically and to utilize automated platemaking equipment.

Press Room

The Company offers its customers state-of-the-art heatset web offset press capabilities at each of its printing facilities. The Company has invested in wide web press technology which represents a substantial capital commitment, which the Company believes is matched by only a small number of well-capitalized printers. Wide web presses generate a significant cost savings on longer press runs. Other specialized press capabilities include short cut-off and gapless presses, which reduce paper waste. The Company’s presses can print on lower-cost paper stocks and certain presses incorporate folders to produce tabloid- and digest-size products. The Company has both high-speed presses best suited for longer runs and other presses with shorter makeready times which are better suited for short runs. Management believes its printing operations have the consistent high quality reproduction, low paper waste, flexibility, and dependability that is required by the Company’s customers.

Binding and Finishing

The Company has invested significant capital to install high-speed, automated binding and finishing equipment. Printed products requiring finishing are either saddle bound (stapled) or perfect bound (square back with adhesive). The Company’s finishing services include blow-in-cards, polybagging, tipping, and tabbing.

The Company employs technological advances in ink-jet addressing and geo-demographic selective binding (on both a regional and specific carrier route basis). All of the Company’s magazine and catalog binding equipment has ink-jet capabilities and partial or fully selective systems. During the binding process, a product’s content can be modified to include or to exclude certain materials using technologies that enable a magazine publisher or catalog merchant to customize and personalize its market by sending the same basic magazine or catalog to all consumers while inserting different advertisements, messages, prices or product offerings, depending upon the geographic and demographic characteristics of the individual customer or subscriber.

Ink-jet personalization is increasingly being used by many publishers and catalogers. Ink-jet addressing eliminates the additional printing of paper labels and improves mailing addressing efficiency, and allows both the cover and the order form to be labeled and to contain customer coding information. Furthermore, as magazine and catalog publishers continue to look for methods to increase the level of personalization, the ink-jet process is being used more frequently to add personal messages, specific inserts to frequent buyers, or unique coding information for order entry.

Logistics

Logistics is a key element of the service offering needed to effectively manage distribution costs. The Company provides its customers with state-of-the-art distribution and mail list services. The distribution services provided by the Company include multiple entry point analysis, consolidation, pool shipping, drop shipping, load planning, over-the-road and rail services, mailing/distribution consultation, freight tracking, co-mailing analysis, mail tracking, ink-jet formatting and ink-jet tape processing.

The Company provides a number of mail list services which are designed to improve deliverability and minimize shipping costs. Many mail list services are integrated into the finishing operation, reducing the need for redundant handling. These services include merging multiple lists and purging duplication, formatting the tapes or optical disks which run the finishing controller, isolating undeliverable addresses due to faulty zip codes, correcting zip codes, creating postnet barcoding, and sorting files to support customers’ mailing strategies. Additionally, the mail list services can be used to select names to target a specific audience for a particular publication or catalog. The Company is also able to merge lists of names for the same customer or to co-mail catalogs and magazines of different customers to achieve increased postal presort discounts. Management believes smaller competitors either cannot offer these services or can only offer them in a more limited way.

By integrating the mail list services with its consolidation and distribution services, the Company maximizes postal discounts for its customers through achieving optimum presort savings and automation discounts, as well as ensuring on-time delivery. Due to its large shipping volume, the Company’s plants are designated postal distribution centers, each with full-time postal employees. The Company’s volume and strategic locations enable it to ship directly to U.S. Postal Service sectional center facilities, thus providing postal discounts and more timely delivery for its customers. The Company believes its distribution capabilities and favorable distribution locations provide a competitive advantage, especially as postal rates continue to rise.

Competition

The Company competes in each of its market segments on the basis of price, quality, range of services offered, distribution capabilities, ability to service the specialized needs of customers, availability of printing time on appropriate equipment and use of state-of-the-art technology.

The Company’s competitors in the magazine and catalog printing market consist of diversified printing companies who have facilities sufficient to compete in the national market, along with various local or regional printers with less extensive facilities who compete for local or regional business. The Company’s key competitors in these markets include Quebecor/World, R.R. Donnelley & Sons, Quad/Graphics, Banta Corporation and Brown Printing.

Raw Materials

Paper and ink are the primary direct materials used by the Company. Generally, direct material costs are passed on to the customer.

The primary raw material used by the Company in its operation is paper. In 2003, the Company’s customers supplied approximately two-thirds of the paper used in the printing process, and the Company supplied approximately one-third. The cost of paper is a principal factor in the Company’s manufacturing costs and pricing to certain customers, and consequently the cost of paper and the proportion of paper supplied by customers significantly affects the Company’s net sales and cost of sales. The Company is generally able to pass on increases in the cost of paper to its customers, while declines in paper costs generally result in lower prices to customers. Fluctuations in paper costs result in corresponding fluctuations in the Company’s net sales, but typical fluctuations generally have not affected production volumes or profits to any significant extent. However, sharp increases in paper prices and related reduction in print advertising programs are more likely to adversely affect volumes and profits. The Company believes that its relationships with its paper suppliers are strong, and that it has adequate allocations with its suppliers for its customers’ needs.

The Company supplies all of the ink used by its customers and has strong relationships with its suppliers. The Company believes that there are adequate sources of supply for ink and that its relationships with its suppliers help provide quality printing, competitive pricing and overall services to its customers.

Seasonality

The Company experiences seasonal fluctuations, with generally higher sales and working capital in the second half of the fiscal year. The revolving credit facility under the Company’s amended and restated credit agreement entered into in December, 2003 (the “Credit Agreement”) has an aggregate commitment of $40.0 million, of which $28.0 million was available for future working capital and other general corporate purposes as of December 31, 2003.

Regulatory Compliance

The Company is subject to regulation under various federal, state, and local laws relating to the environment and to employee health and safety. These environmental regulations relate to the generation, storage, transportation, handling, disposal, and emission into the environment of various substances. Permits are required for operation of the Company’s business and these permits are subject to renewal, modification and, in certain circumstances, revocation. The Company is also subject to regulation under various federal, state and local laws which allow regulatory authorities to compel (or seek reimbursement for) cleanup of environmental contamination, if any, at the Company’s own sites and at facilities where its waste is or has been disposed. The Company has internal controls and personnel dedicated to compliance with all applicable environmental and employee health and safety laws. The Company expects to incur ongoing capital and operating costs and administrative expenses to maintain compliance with applicable environmental laws. The Company cannot predict the environmental or employee health and safety legislation or regulations that may be enacted in the future or how existing or future laws or regulations will be administered or interpreted. Compliance with new laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws, may require additional expenditures by the Company, some or all of which may be material; however the Company is not currently aware of any environmental or employee health or safety matter which could have a material adverse effect upon the Company’s competitive position or consolidated financial statements.

Trade Names and Trademarks

The Company owns certain trade names and trademarks used in its business, none of which it believes are material.

Research and Development

Suppliers of equipment and materials used by the Company perform most of the research and development related to the printing industry. Accordingly, the Company has not spent a material amount of resources for such purposes. The Company does, however, dedicate significant resources to improving its operating efficiencies and the services it provides to its customers. In an effort to realize increased efficiencies in its printing processes, the Company has made significant investments in state-of-the-art equipment, including new press and binding technology, computer-to-plate and digital processing technology, and real-time product quality monitoring systems.

Employees

As of December 31, 2003, the Company had approximately 2,200 employees, of which approximately 472 or 21% are represented by unions. All of the union employees are employed at the Company’s Waterloo, Wisconsin plant. On October 31, 2003 the Company announced that it would lay off 237 of its Waterloo, Wisconsin division employees by January 21, 2004 resulting from the loss of its major customer that represented a large percentage of the plant’s volume. On November 20, 2003, the Company announced that it would be closing the Waterloo plant over the first four months of 2004.

Risk Factors

In addition to other information in this Annual Report on Form 10-K, the following risk factors for the Company should be carefully considered. These risks may impair the Company’s results of operations and business prospects. The risks set forth below and elsewhere in this Annual Report could cause actual results to differ materially from those that the Company projects.

Loss of Key Customer

A significant portion of the Company’s net sales depended upon a single customer whose contracts expired in 2003. For the years ended December 31, 2003, 2002 and 2001, Time, Inc. comprised 12%, 15% and 14% of consolidated net sales, respectively. Time, Inc. did not renew its monthly printing contract that expired on July 31, 2003 and its weekly printing contract that expired on December 31, 2003. If this loss of business is not replaced, the Company’s financial condition and results of operations would be materially affected. The Company was not successful in replacing all of this loss of business. No other customer accounted for more than 10% of the business. On October 31, 2003, the Company announced that it would lay-off 237 of its Waterloo, Wisconsin division employees by January 21, 2004 resulting from the loss of this major customer that represented a large percentage of the plant’s volume.

Closure of Waterloo Plant

After careful analysis and consideration of all relevant factors, the Company determined it would close its Waterloo division and transfer the remaining work to its other printing plants in Baraboo, Wisconsin, Strasburg, Virginia and Spencer, Iowa. Approximately 600 people are currently employed at the Waterloo division. The Company expects to close the facility by the end of April 2004.

This action will result in the Company incurring an after tax charge of approximately $10 - $12 million associated with employee restructuring benefits, asset write-downs and other closure-related expenses.

High Level of Indebtedness

In connection with prior transactions, the Company has incurred a significant amount of indebtedness and is highly leveraged. In addition, subject to the restrictions in the Credit Agreement and the Indenture (the “Indenture”) related to the outstanding 10-5/8% Senior Subordinated Notes (the “Senior Notes”), the Company may incur additional senior indebtedness to finance acquisitions and capital expenditures for other general corporate purposes.

The level of the Company’s indebtedness could have important consequences to holders of the Senior Notes, including: (i) a substantial portion of the Company’s cash flow from operations must be dedicated to debt service and will not be available for other purposes; (ii) the Company’s future ability to obtain additional debt financing for working capital, capital expenditures or acquisitions may be limited; (iii) the Company’s level of indebtedness could limit its flexibility in reacting to changes in the printing industry and economic conditions generally, which could limit its ability to withstand competitive pressures or take advantage of business opportunities; (iv) the Company’s borrowing under the Credit Agreement will be at variable rates of interest, which could cause the Company to be vulnerable to increases in interest rates; and (v) all of the indebtedness incurred in connection with the Credit Agreement will become due prior to the time the principal payments on the Senior Notes will become due. Certain of the Company’s competitors currently operate on a less leveraged basis and are likely to have significantly greater operating and financing flexibility than the Company.

Ability to Service Debt

The Company’s ability to pay interest on the Senior Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond its control. The Company anticipates that its operating cash flow, together with available borrowings under the Credit Agreement, will be sufficient to meet its operating expenses, capital expenditure requirements and working capital needs and to service its debt requirements as they become due. However, if the Company is unable to service its indebtedness, it will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all, or that they would enable the Company to continue to meet its debt service obligations or that they would be permitted under the terms of the Credit Agreement or Indenture.

Subordination of the Senior Notes and Guarantees

The Senior Notes are fully and unconditionally guaranteed, on a senior subordinated basis, jointly and severally, by all subsidiaries of the Company (the “Subsidiary Guarantors”) pursuant to guarantees (the “Guarantees”). The Guarantees will be subordinated in right of payment to all senior indebtedness of the Company and the Subsidiary Guarantors. In the event of bankruptcy, liquidation or reorganization of the Company, the assets of the Company or the Subsidiary Guarantors will be available to pay obligations on the Senior Notes only after all senior indebtedness of the Company or the Subsidiary Guarantors, as the case may be, has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the Senior Notes then outstanding. Additional senior indebtedness may be incurred by the Company and the Subsidiary Guarantors from time to time, subject to certain restrictions. The Indenture generally provides that a Restricted Subsidiary (as defined in the Indenture) may incur indebtedness only if such Subsidiary agrees to guarantee the Senior Notes on a senior subordinated basis. The holders of the Senior Notes have no direct claim against the Subsidiary Guarantors other than claims created by the Guarantees, which may themselves be subject to legal challenge in the event of the bankruptcy or insolvency of a Subsidiary Guarantor. If such a challenge were upheld, the Guarantees would be invalidated and unenforceable. To the extent that the Guarantees are held to be unenforceable or have been released pursuant to the terms of the Indenture, the rights of holders of the Senior Notes to participate in any distribution of assets of any Subsidiary Guarantor upon liquidation, bankruptcy or reorganization may, as in the case with other unsecured creditors of the Company, be subject to prior claims against such Subsidiary Guarantor.

Holding Company Structure

Perry Judd’s Holdings is a holding company, the principal assets of which consist of equity interests in its subsidiaries. The Senior Notes are a direct obligation of Perry Judd’s Holdings, which derives all of its revenues from the operations of its subsidiaries. As a result, Perry Judd’s Holdings will be dependent on the earnings and cash flow of, and dividends and distributions or advances from, its subsidiaries to provide the funds necessary to meet its debt service obligations, including the payment of principal and interest on the Senior Notes. Accordingly, Perry Judd’s Holdings’ ability to pay interest on the Senior Notes and otherwise to meet its liquidity requirements may be limited as a result of its dependence upon the distribution of earnings and advances of funds by its subsidiaries. The payment of dividends from the subsidiaries to Perry Judd’s Holdings and the payment of any interest on or the repayment of any principal of any loans or advances made by Perry Judd’s Holdings to any of its subsidiaries may be subject to statutory restrictions under corporate law limiting the payment of dividends and are contingent upon the earnings of such subsidiaries. The Company’s subsidiaries are guarantors of the indebtedness incurred under the Credit Agreement. The Senior Notes are not secured by liens against any of the Company’s or its subsidiaries’ assets, while the indebtedness incurred under the Credit Agreement is secured by liens against substantially all the Company’s and its subsidiaries’ assets.

Restrictions Imposed by Terms of the Company’s Indebtedness

The Indenture restricts, among other things, the Company’s and its subsidiaries’ ability to incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur liens, incur indebtedness that is subordinate to Senior Indebtedness (as defined in the Indenture) but senior in right of payment to the Senior Notes, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Company and its subsidiaries, merge or consolidate with any other persons or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. In addition, the Credit Agreement contains other and more restrictive covenants and prohibits the Company and its subsidiaries from prepaying other indebtedness (including the Senior Notes) unless certain financial ratios are met. The Credit Agreement also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. The Company’s ability to meet those tests and ratios can be affected by events beyond its control, and there can be no assurance that it will meet those ratios and tests. A breach of any of these covenants could result in a default under the Credit Agreement and/or the Indenture. Upon the occurrence of an event of default under the Credit Agreement, the lender could elect to declare all amounts outstanding under the Credit Agreement, together with accrued interest, to be immediately due and payable. If the Company were unable to repay those amounts, the lender could proceed against the collateral granted to them to secure that indebtedness. If the Senior Indebtedness under the Credit Agreement were to be accelerated, there can be no assurances that the assets of the Company would be sufficient to repay in full that indebtedness and the other indebtedness of the Company, including the Senior Notes. The Company’s obligations under the Credit Agreement are secured by a security interest in all the assets of the Company and its subsidiaries, excluding all assets relating to property, plant and equipment.

Competition

The commercial printing industry in the U.S. is highly competitive in most product categories and geographic regions. Competition is largely based on price, quality, range of services offered, distribution capabilities, ability to service the specialized needs of customers, availability of printing time on appropriate equipment and use of state-of-the-art technology. The Company competes for commercial business not only with large international and national printers, but also with smaller regional printers. In certain circumstances, due primarily to factors such as freight rates and customer preference for local services, printers with better access to certain regions of the country may have a competitive advantage in such regions. In addition, many of the Company’s competitors have substantially greater financial, marketing, distribution, management and other resources than the Company, and as the industry experiences continued consolidation, the Company’s competitors may further enhance such resources. The Company also believes that excess capacity in the industry, especially during periods of economic downturn, would result in downward pricing pressure and intensified competition in the printing industry. Given these factors, there can be no assurance that the Company will be able to continue to compete successfully against existing or new competitors, and the failure to do so may have a material adverse effect on the Company’s financial condition and results of operations. See “Business—Competition”.

Technological Changes

Technology in the printing industry has evolved and continues to evolve. Since 1999, approximately $95 million of purchased and leased capital expenditures have been invested for printing facilities and production equipment. As technology continues to evolve and as its customers’ needs become more specialized and sophisticated in the future, the Company will likely be required to invest significant additional capital in new and improved technology in order to maintain and enhance the quality and competitiveness of, and to expand, its products and services. If the Company is unable to acquire new and improved technology, facilities and equipment or to develop and introduce enhanced or new products and services, the Company’s financial condition, results of operations and cash flows could be materially adversely affected.

Raw Materials - Paper

The cost of paper is a principal factor in the Company’s manufacturing costs and pricing to certain customers and, consequently, the cost of paper significantly affects the Company’s net sales. The Company is generally able to pass on increases in the cost of paper to its customers, while declines in paper costs generally result in lower prices to customers. Typical fluctuations in paper costs result in corresponding fluctuations in the Company’s net sales, but typical fluctuations generally have not affected production volumes or profits to any significant extent. However, sharp increases in paper prices and related reduction in print advertising programs are more likely to adversely affect volumes and profits. To the extent that there are future paper costs increases and the Company is not able to pass such increases to its customers or its customers reduce their demand for the Company’s products and services, the Company’s financial condition and results of operations could be materially adversely affected.

Capacity in the paper industry has remained relatively stable in recent years. Increases or decreases in demand for paper have led to corresponding pricing changes and, in periods of high demand, to limitations on the availability of certain grades of paper, including grades utilized by the Company. Any loss of the sources for paper supply or any disruption in such sources’ business or failure to meet the Company’s product needs on a timely basis could cause, at a minimum, temporary shortages in needed materials which could have a material adverse affect on the Company’s results of operations. Although the Company actively manages its paper supply and believes it has established strong relationships with its suppliers, there can be no assurance that the Company’s sources of supply for its paper will be adequate or, in the event that such sources are not adequate, that alternative sources can be developed in a timely manner. If the Company is unable to secure sufficient supplies of paper of appropriate quality, its financial condition, results of operations and cash flows could be materially adversely affected. See “Business—Raw Materials”.

Certain Customer Relationships

The Company currently provides products and services to certain customers without a written contractual arrangement. While the Company believes that its relationship with each of these customers is good, there can be no assurance that such customers will continue to do business with the Company at current levels, if at all.

Environmental and other Governmental Regulation

The Company is subject to regulation under various federal, state and local laws relating to the environment and to employee health and safety. These environmental regulations relate to the generation, storage, transportation, handling, disposal and emission into the environment of various substances. Permits are required for operation of the Company’s business, and these permits are subject to renewal, modification and, in certain circumstances, revocation. The Company is also subject to regulation under various federal, state and local laws which allow regulatory authority to compel (or seek reimbursement for) cleanup of environmental contamination at the Company’s own sites and at facilities where its waste is or has been disposed. The Company has internal controls and personnel dedicated to compliance with all applicable environmental and employee health and safety laws. The Company expects to incur ongoing capital and operating costs and administrative expenses to maintain compliance with applicable environmental laws. The Company cannot predict the environmental or employee health and safety legislation or regulations that may be enacted in the future or how existing or future laws or regulations will be administered or interpreted. Compliance with new laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws, may require additional expenditures by the Company, some or all of which may be material. See “Business—Regulatory Compliance”.

Reliance on Key Personnel

The Company’s success will continue to depend to a significant extent on its executive officers and other key management personnel. There can be no assurance that the Company will be able to retain its executive officers and key personnel or attract additional qualified management in the future. In addition, the success of any acquisition by the Company may depend, in part, on the Company’s ability to retain management personnel on the acquired companies. There can be no assurance that the Company will be able to retain such management personnel.

Control by Principal Stockholders

Robert E. Milhous and Paul B. Milhous, the Chairman and Vice Chairman, respectively, of the Company own together beneficially over 87% of the outstanding capital stock of the Company. Accordingly, these stockholders have the ability, acting together, to control fundamental corporate transactions requiring stockholder approval, including without limitation approval of merger transactions involving the Company and sales of all or substantially all of the Company’s assets. See Item 12 “Security Ownership of Certain Beneficial Owners and Management”.

Purchase of Notes Upon Change of Control

Upon a Change of Control (as defined in the Indenture) the Company will be required to offer to purchase all outstanding Senior Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the repurchase date. A Change of Control will likely trigger an event of default under the Credit Agreement which will permit the lenders thereunder to accelerate the debt under the Credit Agreement. However, there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of Senior Notes tendered, or that, if applicable, restrictions in the Credit Agreement will allow the Company to make such required repurchases.

Available Information

We maintain a website with the address www.perryjudds.com. The information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. As a matter of practice, we do not post forms filed with the Securities and Exchange Commission (SEC) on our website; however, this information may be obtained through other sources, such as www.edgar-online.com.

Item 2. Properties

Each of the Company’s printing plants has a primary product expertise which allows it to maximize the efficiency and responsiveness of its operations. Information about the Company’s facilities are set forth below:

Location	Use	Owned/Leased	Square Feet

Corporate Headquarters
Waterloo, WI	Executive Offices and
	Corporate Support Functions	Leased	50,200

Preproduction Facilities
Madison, WI	Digital Prepress Production	Leased	7,100

Printing Plants
Waterloo, WI	Long- and medium-run magazines	Leased	298,800
Strasburg, VA	Medium- and short-run magazines	Leased	353,400
Baraboo, WI	Consumer and business catalogs	Leased	614,000
Spencer, IA	Short-run magazines	Owned	127,000

Warehouses
Waterloo, WI (3 sites)	Paper storage	Leased	112,800
Mt. Jackson, VA	Customer supplied inserts	Leased	61,700

In addition, the Company leases several sales offices located throughout the United States. The Company believes that none of its leases are material to its operations and that such leases were entered into on market terms.

On November 20, 2003, the Company announced that it would close its Waterloo division and transfer the remaining work to its other printing plants located in Baraboo, Wisconsin, Strasburg, Virginia and Spencer, Iowa. The Company expects to close the facility by the end of April 2004.

Item 3. Legal Proceedings

There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. Claims, suits, and complaints may arise in the ordinary course of the Company’s business. The Company believes that any such pending matters are adequately reserved for, are covered by insurance, or would not have a material adverse effect on the consolidated financial statements of the Company, taken as a whole, if determined adversely against the Company.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

There is no established public trading market for the Company’s common stock or other equity securities. As of December 31, 2003, there were 14 holders of the common stock.

Dividends

The Company has never paid and has no present intention of paying cash dividends on its common stock. Any determination in the future to pay dividends will depend on the Company’s financial condition, capital requirements, results of operations, contractual limitations and any other factors deemed relevant by the Company’s Board of Directors. In addition, the Indenture governing the Company’s Senior Notes due in 2007 imposes certain restrictions on the Company’s ability to make certain distributions and restricts the payment of dividends by the Company in certain circumstances.

Securities Authorized For Issuance Under Equity Compensation Plans

The following table summarizes the number of shares issuable under the Company’s equity compensation plans, the weighted-average exercise price and the number of shares available for issuance, as of December 31, 2003.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	None	None	33,693

Equity compensation plans not approved by security holders	None	None	None

Total	None	None	33,693

During 2000, all outstanding options were exercised.

Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data for each of the last five fiscal years. This information is qualified by reference to, and should be read together with, the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2003, 2002 and 2001 and the balance sheet data as of December 31, 2003 and 2002 are derived from the Consolidated Financial Statements of the Company included elsewhere in this Annual Report on Form 10-K. Information related to 2000 and 1999 is derived from financial statements not included herein.

	Perry Judd’s Holdings, Inc.
	(dollars in thousands)

	Year Ended December 31, 2003			Year Ended December 31, 2002 (1)			Year Ended December 31, 2001			Year Ended December 31, 2000 (2)			Year Ended December 31, 1999 (3)
Statement of Operations Data:

Net Sales	$	297,914		$	290,928		$	321,111		$	342,869		$	315,998

Operating Expenses (5)	295,716			269,031			300,612			321,408			305,679

Income from Operations (5)	2,198			21,897			20,499			21,461			10,319

Net Income (Loss) (5)	(5,242		)	5,620			2,792			60			(4,464		)

Balance Sheet Data (end of period):

Working Capital	$	14,554		$	20,251		$	36,386		$	33,737		$	31,085

Total Assets	168,130			189,705			212,526			228,269			234,251

Long Term Debt	70,010			86,010			115,000			122,800			128,818

Minority Interests (4)	4,006			3,738			3,488			3,254			9,340

Stockholders’ Equity	23,522			28,825			23,002			20,079			19,371

Statement of Cash Flows Data:

Net Cash Provided By (Used In) Operating Activities	$	18,231		$	39,924		$	15,327		$	20,869		$	8,355

Net Cash Provided By (Used In) Investing Activities	(3,989		)	(14,881		)	(10,110		)	(6,453		)	(38,583		)

Net Cash Provided By (Used In) Financing Activities	(14,246		)	(28,196		)	(6,018		)	(13,424		)	(8,284		)

Other Financial Data:

EBITDA (6)	$	25,857		$	39,053		$	35,396		$	32,215		$	23,920

(1) Effective January 1, 2002, the Company changed its method of accounting for goodwill. See Note 2 of Notes to Consolidated Financial Statements included elsewhere herein.

(2) On October 19, 2000, the Company sold substantially all of the net assets of its subsidiary Judd’s Online for $6.3 million.

(3) On February 1, 1999, the Company acquired all of the issued and outstanding capital stock of Heartland for $17.5 million.

(4) Includes unpaid dividends on preferred stock at December 31, 1999.

(5) The following 2003 amounts have been adjusted after giving effect to the restructuring charges resulting from the Company’s 2003 decision to close its Waterloo, Wisconsin plant:

	Year Ended December 31,
	2003		2002		2001		2000		1999
Operating Expenses	$	285,508	$	269,031	$	300,612	$	321,408	$	305,679

Income from Operations	12,406		21,897		20,499		21,461		10,319

Net Income (Loss)	1,088		5,620		2,792		60		(4,464		)

(6) “EBITDA” represents earnings before interest, income taxes, depreciation, amortization, noncash fixed asset impairment costs, noncash compensation related to common stock options, dividends and accretion on redeemable preferred stock, gains and losses on dispositions of assets and repurchases of senior subordinated notes. While EBITDA should not be construed as a substitute for operating income or loss or a better indicator of liquidity than cash flow from operating activities, which are determined in accordance with accounting principles generally accepted in the United States, it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. EBITDA is also a key variable used in several debt covenant ratios. EBITDA is not necessarily a measure of the Company’s ability to fund its cash needs, and items excluded from EBITDA (such as depreciation and amortization) are significant to an understanding of the Company’s financial results. In addition, EBITDA as presented by the Company may not be directly comparable to similarly-titled measures presented by other companies. See the Company’s Consolidated Statements of Cash Flows and the related notes thereto included in this Form 10-K.

The following table sets forth the components of EBITDA reflected in the consolidated financial statements (in thousands):

	Year Ended December 31,
	2003			2002			2001			2000			1999
Net income (loss)	$	(5,242	)	$	5,620		$	2,792		$	60		$	(4,464	)
Dividends and accretion on redeemable preferred stock	431			435			507			3,245			1,074
Provision (benefit) for income taxes	(2,931		)	1,858			2,909			3,320			(1,226		)
Interest expense	8,666			11,790			12,784			13,831			14,293
Interest income	(130		)	(147		)	(127		)	(621		)	(980		)
Depreciation	17,735			17,132			14,582			13,511			11,863
Amortization	535			1,597			2,451			2,641			3,224
(Gain) loss on disposals of business and equipment	(516		)	(27		)	(633		)	(4,420		)	136
Non cash compensation related to common stock options	44			203			131			648			—
Loss on repurchases of senior subordinated notes	868			592			—			—			—
Non-cash fixed asset impairment costs	6,397			—			—			—			—
EBITDA (as reported)	25,857			39,053			35,396			32,215			23,920
Other restructuring charges	3,811			—			—			—			—
EBITDA (as adjusted)	$	29,668		$	39,053		$	35,396		$	32,215		$	23,920

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to such financial statements included elsewhere in this Report beginning on page F-1. The following discussion contains forward-looking statements that involve risks and uncertainties. The statements are based on current expectations, and actual results could differ materially from those discussed herein. Factors that could cause or contribute to the differences are discussed in “Business – Risk Factors” and elsewhere in this Annual Report.

Results of Operations

Comparison of the year ended December 31, 2003 with the year ended December 31, 2002

Net sales increased $7.0 million or 2.4% to $297.9 million for the year ended December 31, 2003 from $290.9 million for the year ended December 31, 2002. The increase resulted primarily from additional production volume and a 12.9% increase in the amount of paper the Company furnished to its customers during 2003 compared to 2002.

Costs of production and distribution increased $18.0 million or 8.2% to $237.1 million for the year ended December 31, 2003 from $219.1 million for the year ended December 31, 2002, principally related to higher production levels and the amount of paper the company furnished its customers. Costs of production and distribution as a percentage of net sales were 79.6% for the year ended December 31, 2003, as compared to 75.3% for the year ended December 31, 2002 principally related to proportionately higher paper costs, increased group medical and energy costs and sales price declines stemming from overcapacity in the commercial print markets. Paper costs were 21.4% of net sales for the year ended December 31, 2003, as compared to 19.3% for the year ended December 31, 2002.

Selling, general and administrative expenses decreased $1.5 million or 4.6% to $31.0 million for the year ended December 31, 2003 as compared to $32.5 million for the year ended December 31, 2002. The decrease resulted from the incentive compensation targets not being achieved by the Company during 2003. Selling, general and administrative expenses decreased as a percent of net sales to 10.4% in the 2003 period, as compared to 11.2% in the 2002 period.

Depreciation expense increased $0.6 million or 3.5% to $17.7 million for the year ended December 31, 2003 from $17.1 million for the year ended December 31, 2002, due primarily from the full year effect of purchased assets placed in service from 2002 and 2003 additions.

During 2003, the Company incurred $10.2 million of restructuring charges associated with its decision to close the Waterloo, Wisconsin plant, consisting of severance and other employee related costs, non-cash fixed asset impairment charges, write-down of repair part inventories and other closure-related costs. See Note 12 to the consolidated financial statements.

Income from operations decreased $19.7 million or 90.0% to $2.2 million for the year ended December 31, 2003 from $21.9 million for the year ended December 31, 2002, due to the factors discussed in the preceding paragraphs of this section. Excluding restructuring charges, income from operations decreased $9.5 million or 43.4% to $12.4 million from $21.9 million for the year ended December 31, 2002.

EBITDA (as defined in Item 6. “Selected Financial Data” above) decreased $13.2 million or 33.8% to $25.9 million for the year ended December 31, 2003 from $39.1 million for the year ended December 31, 2002, principally due to the factors discussed in the second and fifth paragraphs of this section. EBITDA decreased as a percent of net sales to 8.7% in the 2003 period, as compared to 13.4% in the 2002 period. Excluding restructuring charges, EBITDA decreased $9.4 million or 24.0% to $29.7 from $39.1 million for the year ended December 31, 2002.

Interest expense decreased $3.1 million or 26.3% to $8.7 million for the year ended December 31, 2003 from $11.8 million for the year ended December 31, 2002, as a result of reduced debt levels and lower borrowing rates.

During 2003, the Company incurred a loss of $0.9 million resulting from the accelerated write-off of deferred financing costs and premiums paid in connection with repurchasing $16.0 million of its senior subordinated notes. During 2002, the Company incurred a loss of $0.6 million resulting from the accelerated write-off of deferred financing costs in connection with repurchasing $29.0 million of its senior subordinated notes.

Results of Operations

Comparison of the year ended December 31, 2002 with the year ended December 31, 2001

Net sales decreased $30.2 million or 9.4% to $290.9 million for the year ended December 31, 2002 from $321.1 million for the year ended December 31, 2001. The decrease resulted primarily from a reduction in the amount of paper the Company furnished to its customers, a 16.6% reduction in paper prices and a lower volume of production units from new and existing customers.

Costs of production and distribution decreased $34.0 million or 13.4% to $219.1 million for the year ended December 31, 2002 from $253.1 million for the year ended December 31, 2001, principally due to a reduction in paper costs, improved operating efficiencies and lower operating expenses resulting from reduced production levels. Costs of production and distribution as a percentage of net sales were 75.3% for the year ended December 31, 2002, as compared to 78.8% for the year ended December 31, 2001. Paper costs were 19.3% of net sales for the year ended December 31, 2002, as compared to 23.6% for the year ended December 31, 2001.

Selling, general and administrative expenses increased $0.2 million or 0.6% to $32.5 million for the year ended December 31, 2002 as compared to $32.3 million for the year ended December 31, 2001. Selling, general and administrative expenses increased as a percent of net sales to 11.2% in the 2002 period, as compared to 10.1% in the 2001 period, primarily as a result of reduced level of sales created by lower paper sales value.

Depreciation expense increased $2.5 million or 17.1% to $17.1 million for the year ended December 31, 2002 from $14.6 million for the year ended December 31, 2001, due primarily from the full year effect of purchased assets placed in service from 2001 and 2002 additions.

Income from operations increased $1.4 million or 6.8% to $21.9 million for the year ended December 31, 2002 from $20.5 million for the year ended December 31, 2001, due to the factors discussed in the preceding paragraphs of this section.

EBITDA (as defined in Item 6. “Selected Financial Data” above) increased $3.7 million or 10.5% to $39.1 million for the year ended December 31, 2002 from $35.4 million for the year ended December 31, 2001, principally due to the factors discussed in the second paragraph of this section. EBITDA increased as a percent of net sales to 13.4% in the 2002 period, as compared to 11.0% in the 2001 period.

Interest expense decreased $1.0 million or 7.8% to $11.8 million for the year ended December 31, 2002 from $12.8 million for the year ended December 31, 2001, as a result of reduced debt levels and lower borrowing rates.

During 2002, the Company incurred a loss of $0.6 million resulting from the accelerated write-off of deferred financing costs in connection with repurchasing $29.0 million of its senior subordinated notes.

Liquidity and Capital Resources

Historically, the Company has funded its capital and operating requirements with a combination of cash flow from operations, borrowings, and external operating leases. Earnings before interest, income taxes, depreciation, amortization, noncash fixed asset impairment costs, noncash compensation related to common stock options, dividends and accretion on redeemable preferred stock, gains and losses on dispositions of assets and repurchases of senior subordinated notes was $25.9 million, $39.1 million and $35.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Working capital was $14.6 million, $20.3 million and $36.4 million at December 31, 2003, 2002 and 2001, respectively. The decrease in working capital at December 31, 2003 as compared to December 31, 2002 was attributable to an increase in accrued expenses of $3.3 million relating primarily to restructuring charges and an increase in revolving debt of $2.5 million. The decrease in working capital at December 31, 2002, as compared to December 31, 2001 was primarily attributable to the repurchase of $29.0 million senior subordinated notes during 2002 offset by the increase in revolving debt of approximately $8.7 million.

Capital expenditures for purchased assets and asset acquisitions funded under operating leases were as follows for the periods indicated (dollars in millions):

	Year Ended December 31, 2003		Year Ended December 31, 2002		Year Ended December 31, 2001

Purchased	$	4.3	$	14.8	$	11.0
Funded under operating leases	4.8		7.6		15.5
Total	$	9.1	$	22.4	$	26.5

These capital expenditures reflect the purchase and lease of additional prepress, press and bindery equipment. The purchased capital investments have been funded by internally generated funds and by borrowings under the Credit Agreement. Generally, these capital expenditures have increased or will increase the Company’s production capacity and are part of the Company’s objective to maintain modern, efficient plants and technologically advanced equipment. At December 31, 2003, the Company had commitments to purchase or lease approximately $2.1 million of operating assets.

During 1997 and 1998, the Company entered into sale and leaseback transactions for the majority of its real property located in Wisconsin and Virginia. Each of the sale and leaseback transactions has a 20-year term. The following table summarizes the initial annual lease expense and future escalations resulting from the sale and leaseback transactions.

	Current Annual Lease Expense		Escalations Commencing at the Start of Year
	Current Annual Lease Expense		2008		2013
Wisconsin	$	2.1 million	10.0	%	10.0	%
Virginia	$	1.5 million	14.5	%	14.5	%

In December 2003, the Company entered into a new five year agreement (the “Credit Agreement”) which expires on December 31, 2008. The Credit Agreement is comprised of a $40 million revolving credit facility based upon a borrowing base of eligible accounts receivable and inventory. Borrowings under the Credit Agreement bear interest at rates that fluctuate with the prime rate and the Eurodollar rate. As of December 31, 2003, the Company had borrowings of $11.2 million under the Credit Agreement.

Rents and operating lease expense were $17.1 million, $15.8 million and $17.2 million for the years ended December 31, 2003, 2002 and 2001, respectively.

At December 31, 2003, the Company had $0.8 million of state tax credits which expire in the years 2010 through 2017 and may be applied against regular tax in the future.

The Company believes that cash generated from operations and available borrowings under the Credit Agreement will be sufficient to fund planned capital expenditures, working capital requirements, operating leases and interest and principal payments for the foreseeable future. The Credit Agreement has an aggregate commitment of $40.0 million, of which $28.0 million was available for future working capital and other general corporate purposes as of December 31, 2003.

Disclosures about Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations and commercial commitments as of December 31, 2003. See Notes 4 and 7 of the Notes to Consolidated Financial Statements for further information.

In thousands	Total		Less than 1 year		1 – 3 years		4 years		5 years and thereafter
Senior subordinated notes	$	70,010	$	—	$	70,010	$	—	$	—
Revolving credit facility	11,206		11,206		—		—		—
Operating leases	103,861		16,675		34,995		7,388		44,803
Total	$	185,077	$	27,881	$	105,005	$	7,388	$	44,803

On October 31, 2003, the Company announced that it will be laying off 237 of its Waterloo, Wisconsin division employees by January 21, 2004 resulting from the loss of its major customer that represented a large percentage of the plant’s volume. Due to the inability to replace the work quickly and the discouraging economic, marketplace and competitive environments that persist, the Company began discussions immediately following this announcement with the Waterloo division’s employees and union representatives about these circumstances and their effect on the future of the plant.

After careful analysis and consideration of all relevant factors, the Company has determined to close its Waterloo division and transfer the remaining work to its other printing plants located in Baraboo, Wisconsin, Strasburg, Virginia and Spencer, Iowa. Approximately 600 people were employed in the Waterloo division as of December 31, 2003. The Company expects to close the facility by the end of April 2004.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon the Company’s consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States. These principles require management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes thereto. Actual results may differ from these estimates, and such differences may be material to the consolidated financial statements. Management believes that the following significant accounting policies involve a higher degree of judgment or complexity.

Allowance for doubtful accounts. Management must make estimates of the uncollectability of the Company’s accounts receivable. Management establishes a reserve for uncollectible trade accounts based on a range of percentages applied against accounts receivable aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, management’s estimates of the recoverability of amounts due to the Company could change by a material amount.

Property, plant and equipment. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets. The useful lives of the assets are based upon management’s expectations for the period of time that the asset will be used for the generation of revenue. Management periodically reviews the assets for changes in circumstances that may impact their useful lives.

Impairment of long-lived assets. Management periodically reviews property, plant and equipment for impairment using historical cash flows as well as current estimates of future cash flows. This assessment process requires the use of estimates and assumptions that are subject to a high degree of judgment. In addition, management periodically assesses the recoverability of goodwill and other intangible assets which requires assumptions regarding the future cash flows and other factors to determine the fair value of the assets. If these assumptions change in the future, management may be required to record impairment charges for these assets.

Income taxes. Deferred income taxes are determined utilizing an asset and liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities. This method gives immediate effect to changes in income tax laws upon enactment.

Other estimates. Management is required to make judgments and or estimates in the determination of several of the accruals that are reflected in the consolidated financial statements. Management believes that the following accruals are subject to a higher degree of judgment.

Management uses estimates in the determination of the required accruals for general liability, workers’ compensation and health insurance. These estimates are based upon a detailed examination of historical and industry claims experience. The claim experience may change in the future and may require management to revise these accruals.

The Company is periodically involved in various legal actions arising in the normal course of business. Management is required to assess the probability of any adverse judgments as well as the potential ranges of any losses. Management determines the required accruals after a careful review of the facts of each legal action. The accruals may change in the future due to new developments in these matters.

Management continually reassesses its assumptions and judgments and makes adjustments when significant facts and circumstances dictate. Historically, actual results have not been materially different than the estimates that are described above.

For an understanding of the significant factors that influenced the Company’s performance during the past three fiscal years, the foregoing discussion should be read in conjunction with the consolidated financial statements appearing elsewhere in this Annual Report.

Recently Issued Accounting Standards

During 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections as of April 2002,” and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” A provision of SFAS No. 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement. This provision of SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, but was adopted early by the Company resulting in the loss on repurchases of senior subordinated notes being classified as other expense in the consolidated statements of operations. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company complied with the requirements of this statement in its accounting for the restructuring charges described in Note 12 to the Consolidated Financial Statements.

Impact of Inflation

Management does not believe that inflation has had a material effect on the Company’s operation during the past several years. Increases in labor, materials, and other operating costs could adversely affect the Company’s operations. In the past, however, the Company generally has been able to modify its operating procedures to substantially offset increases in its operating costs.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company generally does not enter into any material futures, forwards, swaps, options or other derivative financial instruments for trading or other purposes. The primary exposure to market risk relates to fluctuations in interest rates and the effects those changes may have on operating results due to long-term financing arrangements. The Company manages its exposure to this market risk by monitoring interest rates and possible alternative means of financing. Operating results may be affected by changes in short-term interest rates under the revolving credit facility, pursuant to which borrowings bear interest at a variable rate. Based on the Company’s debt outstanding under the Credit Agreement as of December 31, 2003, an increase of 1.0% in interest rates would increase interest expense and decrease income before income taxes by approximately $112,000. See Note 4 of the Notes to Consolidated Financial Statements.

Item 8. Financial Statements and Supplementary Data

The financial statements and schedules listed in the accompanying Index to consolidated financial statements and schedules on page F-1 are filed as a part of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Based on their evaluation, as of the end of the period covered by this annual report, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) are effective based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

Item 10. Directors, Executive Officers and Key Management Employees

The table below sets forth certain information regarding the directors, senior executive officers, and certain other executive officers and key management employees of the Company and its subsidiaries as of March 1, 2004. All of the persons listed below are U.S. citizens.

Directors and Senior Executive Officers

Name	Age	Position

Robert E. Milhous	67	Chairman of the Board of Directors
Paul B. Milhous	65	Vice-Chairman of the Board of Directors
Craig A. Hutchison	51	Director, President and Chief Executive Officer
David E. Glick	57	Director and Executive Vice President, Operations
Verne F. Schmidt	63	Director, Secretary, Senior Vice President and Chief Financial Officer
Joseph E. Hansell	58	Senior Vice President, Human Resources

Executive Officers and Key Management Employees

Name	Age	Position

Timothy M. Smith	46	Vice President, Publication Sales
Stephen M. Sanfelippo	46	Vice President, Commercial and Catalog Sales
William K. Haynes	44	Vice President, Publications (Mid-Atlantic)
James F. Monti	42	Vice President, Publications (East Coast)
Bradley J. Hoffman	42	Vice President, Corporate Controller
Walter A. Edwards	53	Vice President, Division Manager - Strasburg Plant
Larry C. Cole	60	Vice President, Division Manager - Waterloo Plant
Daniel L. Leever	55	Vice President, Division Manager - Heartland Plant
Steven G. Timlin	45	Vice President, Division Manager - Baraboo Plant

Robert E. Milhous has been Chairman of the Board of Directors of Perry Judd’s Holdings and Perry Judd’s since December 1994. Mr. Milhous was Chairman of the Board of Directors of Treasure Chest Advertising (“Treasure Chest”) and its predecessor corporation from 1967 until the sale of Treasure Chest in 1993. Mr. Milhous is also the Chairman of the Board of Directors of Novamil Corporation (“Novamil”), which manages various companies owned by affiliates controlled by himself and Paul B. Milhous. Robert E. Milhous is the brother of Paul B. Milhous.

Paul B. Milhous has been Vice Chairman of the Board of Directors of Perry Judd’s Holdings and Perry Judd’s since December 1994. Mr. Milhous was Vice Chairman of the Board of Directors of Treasure Chest and its predecessor corporation from 1967 until the sale of Treasure Chest in 1993. Mr. Milhous is also the Vice-Chairman of the Board of Directors of Novamil, which manages various companies owned by affiliates controlled by himself and Robert E. Milhous. Paul B. Milhous is the brother of Robert E. Milhous.

Craig A. Hutchison has been the President and CEO of Perry Judd’s since April 1995. Prior to that, Mr. Hutchison was President and CEO of Perry Printing Corporation (“Perry Printing”), the predecessor of Perry Judd’s, since 1990. Mr. Hutchison has been a member of the Board of Directors of Perry Judd’s Holdings and Perry Judd’s since April 1995.

David E. Glick joined Perry Judd’s as Executive Vice President of Operations in February 1998 and has been a member of the Board of Directors of Perry Judd’s Holdings and Perry Judd’s since that time. From 1993 to January 1998, Mr. Glick served in various capacities at Treasure Chest Advertising, a subsidiary of Big Flower Press Holdings, Inc., including Senior Vice President of Operations, Senior Vice President and General Manager of Operations and Sales, and Senior Vice President of Operations and Technology.

Verne F. Schmidt has been Senior Vice President and Chief Financial Officer since he joined Perry Judd’s in January 1997 and was elected to the Board of Directors of Perry Judd’s Holdings and Perry Judd’s in February 1998. In July 2001, Mr. Schmidt was appointed as Secretary of the Company. From 1974 through 1996, Mr. Schmidt held various financial and accounting positions including Senior Vice President and Chief Financial Officer of Ringier America and its predecessor companies.

Joseph E. Hansell has been Senior Vice President, Human Resources since he joined Perry Judd’s in August 2003. From March 2000 until September 2000, Mr. Hansell was Senior Vice President, Human Resources for Pratt Industries. From September 2000 until he joined Perry Judd’s, Mr. Hansell managed his own Human Resources Consulting Firm. From July 1989 until March 2000, Mr. Hansell served as Vice President, Human Resources for the Milhous Group.

Timothy M. Smith has been Vice President of Publication Sales of Perry Judd’s since January 1997. Prior to assuming his current responsibilities, Mr. Smith was Vice President of National Accounts from 1994 to 1997. Mr. Smith served as Vice President of Eastern Sales from May 1993 to 1994 and, before that, he was Director of Sales from 1990 to 1993.

Stephen M. Sanfelippo has been Vice President, Commercial and Catalog Sales since January 2000. Prior to assuming his current responsibilities, Mr. Sanfelippo served as Vice President Central Region Commercial Sales of Perry Judd’s since October 1997. Prior to that, he was Director of Central Region Sales from 1994 to October 1997.

William K. Haynes has been Vice President, Publication Sales (Mid-Atlantic) since he joined Perry Judd’s Incorporated in September 2002. From December 2001 until May 2002 Mr. Haynes served as Executive Vice President for Sunbelt Sportswear. Mr. Haynes was Executive Vice President of Sales for Xyan from March 2000 until March 2001 and President from March 2001 until October 2001. From June 1983 until February 2000, Mr. Haynes held various sales positions with R. R. Donnelley & Sons.

James F. Monti has been Vice President, Publications (East Coast) since March 26, 2003. From July 8, 2002 until March 26, 2003, Mr. Monti was New England Catalog Sales Manager for Commercial/Catalogs for Perry Judd’s Incorporated. From March 2001 until July 1, 2002, Mr. Monti served as Vice President, Sales for Flower City Printing. From May 1998 until March 2001, Mr. Monti was Vice President of Sales and Marketing for The Dingley Press. From July 1985 until May 1998, Mr. Monti held various sales and customer service positions.

Bradley J. Hoffman has been Vice President, Corporate Controller of Perry Judd’s since May 1998 and previously was Vice President, Finance of Perry Printing from July 1994. From December 1992 to July 1994, Mr. Hoffman served as Controller Web Division/Waterloo Plant. From September 1989 to December 1992, Mr. Hoffman was Chief Financial Officer and Director of Operations at Putman Publishing Company.

Walter A. Edwards has been Vice President, Division Manager of the Strasburg Plant since April 2003. From January 1996 to April 2003, Mr. Edwards was Vice President, Division Manager of the Baraboo Division. From 1991 to 1995, Mr. Edwards was employed by World Color Press as Vice President and Regional Manager. From 1974 to 1991, Mr. Edwards held a variety of positions at R.R. Donnelley & Sons/Meredith-Burda, including Vice President, Manufacturing and Group Manufacturing Manager.

Larry C. Cole has been Vice President, Division Manager of the Waterloo Plant since March 1991. From January 1990 to March 1991, Mr. Cole served as Vice President of Operations of Perry Printing. Mr. Cole joined Perry Printing in 1988 as Director of Material Management.

Daniel L. Leever has been Vice President, Division Manager of the Heartland Plant since February 1999. From January 1998 until February 1999 he was Manufacturing Manager of the Strasburg Division. Prior to that he was Plant Manager at Wilcox Press from 1996 to 1998.

Steven G. Timlin has been Vice President, Division Manager of the Baraboo Plant since April 2003. From 1987 until April 2003, Mr. Timlin held various manufacturing positions including General Manager positions from 1997 to April 2003 at Banta Corporation’s Catalog Group St. Paul, Minnesota plant.

The Company’s board of directors has determined that the board of directors does not have a “financial expert” as that term is defined in Item 401(h) of Regulation S-K adopted pursuant to the Exchange Act because the Company’s board of directors did not believe that any of the directors met the qualifications of a “financial expert.”

The Company continues to evaluate the adoption of a code of ethics for its principal executive officer and principal financial officer, but has not yet adopted such a code.

Item 11. Executive Compensation

Director Compensation

Non-employee directors are reimbursed for their out-of-pocket expenses incurred in attending meetings of the Board of Directors of the Company. In addition, Robert E. Milhous and Paul B. Milhous currently receive $33,275 each in annual compensation for their services as Chairman and Vice Chairman, respectively, of the Board of Directors of the Company.

Executive Compensation

The following Summary Compensation Table sets forth certain information with respect to the compensation paid or accrued by the Company for services rendered during the years ended December 31, 2003, 2002 and 2001 by the Company’s Chief Executive Officer and each of the four other most highly compensated executive officers whose annual salary and bonus exceeded $100,000 (collectively, the “Named Executive Officers”):

Summary Compensation Table

	Annual Compensation (1)						Long-Term Compensation (2)
Name and Principal Position	Year	Salary		Bonus		Other Annual Compensation	Securities Underlying Options (# of Shares)	All Other Compensation (1)
Craig A. Hutchison,	2003	$	365,762	—		—	—	—
President and CEO	2002	$	327,604	$	214,908	—	—	—
	2001	$	325,805	$	156,386	—	—	—

David E. Glick,	2003	$	320,931	—		—	—	—
Executive Vice President,	2002	$	296,399	$	170,133	—	—	—
Operations	2001	$	294,946	$	123,877	—	—	—

Verne F. Schmidt,	2003	$	272,236	—		—	—	—
Senior Vice President and	2002	$	255,652	$	146,744	—	—	—
Chief Financial Officer	2001	$	254,818	$	107,024	—	—	—

Walter A. Edwards	2003	$	219,431	—		—	—	$	54,459	(3)
Vice President and Division	2002	$	205,216	$	87,176	—	—	—
Manager, Strasburg Plant	2001	$	204,948	$	75,749	—	—	—

Stephen M. Sanfelippo	2003	$	223,258	—		—	—	—
Vice President, Commercial	2002	$	207,252	$	72,372	—	—	—
And Catalog Sales	2001	$	193,404	$	55,314	—	—	—

(1)The compensation described in this table does not include medical, group life insurance or other benefits received by the Named Executive Officers which are available generally to all salaried employees of the Company and certain perquisites and other personal benefits, securities or property received by the Named Executive Officers which do not exceed the lesser of $50,000 or 10% of any such officer’s salary and bonus disclosed in this table.

(2)The Company did not grant any restricted stock awards or stock appreciation rights or make any long-term incentive plan payouts to the Named Executive Officers during 2003.

(3)Consists of relocation costs paid by the Company.

Option Grants

No stock options were granted to the Named Executive Officers during 2003.

Year-End Option Table

All stock options held by Named Executive Officers were exercised in 2000.

Employment Agreement

On April 28, 2003, Craig Hutchison entered into a restated and amended employment agreement with Perry Judd’s (the “Employment Agreement”) to serve as President and Chief Executive Officer of Perry Judd’s for one year. The Employment Agreement provides for successive one-year extensions commencing April 2004 unless terminated by written notice of either party. The Employment Agreement provides for a base salary subject to adjustment upward at the discretion of the Board of Directors. Mr. Hutchison’s current annual base salary is $376,000. Under the Employment Agreement, Mr. Hutchison is entitled to participate in the Incentive Compensation Plan (as defined below), the Stock Option Plan (as defined below) and in all other benefit programs made available by the Company to the senior executive officers of the Company. The Employment Agreement provides for severance pay in case of termination by Mr. Hutchison for good cause, or for termination other than for cause, death or permanent disability. The severance pay shall equal the aggregate salary which would be payable to Mr. Hutchison during the period commencing on the effective date of termination and ending one year thereafter.

Change in Control Severance Program

Under the severance arrangement with Mr. Hutchison entered into in April 2003, (i) if there is a change in control, (ii) if the aggregate value of stock and stock options held by Mr. Hutchison (“equity value”) is less than $2,000,000, and (iii) if (a) Mr. Hutchison’s employment is terminated as a result of the change of control, (b) Mr. Hutchison is asked to accept lesser responsibility but instead elects to leave the Company, or (c) Mr. Hutchison is asked to relocate and instead leaves the Company, Mr. Hutchison’s salary will be continued at a rate of $333,000 per year for up to three years or until new employment is commenced, whichever occurs first. Furthermore, upon death or if there is a change in control, and the equity value realized by Mr. Hutchison is less than $1,000,000, the Company will be obligated to pay Mr. Hutchison the amount of such difference.

The Company entered into severance arrangements with two of its executive officers, Verne F. Schmidt and David E. Glick in December 1996 and January 1998, respectively, under which each officer is entitled to certain benefits in the event of a change in control of the Company.

Under the severance arrangement with Verne F. Schmidt, (i) if there is a change in control and (ii) if (a) Mr. Schmidt’s employment is terminated or (b) Mr. Schmidt does not have the opportunity to accept a comparable position with a successor entity after a change of control, Mr. Schmidt will receive his current salary and benefits for up to one year or until he accepts another position, whichever occurs first. Additionally, Mr. Schmidt is entitled to receive a fixed dollar per share on the shares of company stock he owns should he continue his employment with the Company through December 31, 2005. In the event a change in control event occurs before this date, Mr. Schmidt will receive the greater of the selling price per share or the fixed price per share.

Under the severance arrangement with David E. Glick, (i) if there is a change in control, (ii) if the aggregate value of stock and stock options held by Mr. Glick (“equity value”) is less than $2,000,000, and (iii) if (a) Mr. Glick’s employment is terminated as a result of the change of control, (b) Mr. Glick is asked to accept lesser responsibility but instead elects to leave the Company, or (c) Mr. Glick is asked to relocate and instead leaves the Company, Mr. Glick’s salary will be continued at a rate of $333,000 per year for up to three years or until new employment is commenced, whichever occurs first. Furthermore, upon death or if there is a change in control, and the equity value realized by Mr. Glick is less than $1,000,000, the Company will be obligated to pay Mr. Glick the amount of such difference.

Stockholder Agreements

Certain agreements among the stockholders of the Company, to which the Company is also a party, provide majority stockholders proposing to sell shares in a change of control transaction with the right to require the other stockholders to include their shares in such sale. Conversely, minority stockholders have the right to sell shares on a sale by majority stockholders on a pro rata basis. In addition, the agreements provide the Company with rights of first refusal on proposed transfers of shares by certain other stockholders.

At December 31, 2003, 81,273 shares of common stock were subject to put and call arrangements at fair value similar to the shares purchased under the Stock Option Plan (see below) at the employee’s termination, retirement after attaining age 62, permanent disability or death.

Management Incentive Compensation Plan

The Company’s management employees, including the Named Executive Officers, are eligible to participate in the Company’s Management Incentive Compensation Program (the “Management Incentive Program”). Under the Management Incentive Program, management employees are eligible to receive an annual cash bonus based on the Company’s achievement of financial performance targets that are based on the Company’s annual budget as approved by the Board of Directors. During 2002, the Company achieved certain financial performance targets and bonus payments of approximately $1.8 million were accrued under the Management Incentive Program and paid in 2003.

1995 Stock Option Plan

On May 6, 1995, the Board of Directors adopted and the stockholders approved the 1995 Stock Option Plan (the “Stock Option Plan”), which provides for the grant of non-statutory stock options (“Options”) for the purchase of common stock of the Company to officers and employees of the Company. The Stock Option Plan was subsequently amended by the Board of Directors in 1995 and 2000. The maximum number of shares of common stock issuable under the Stock Option Plan is 75,000, of which 41,307 have been granted and exercised. The Stock Option Plan is currently administered by the Board of Directors of the Company, but can be delegated to an authorized committee thereof.

Options granted under the Stock Option Plan are “hybrid” performance options. Options are immediately exercisable, but option shares issuable are subject to repurchase by the Company on termination of employment at the $0.01 original exercise price until vested. Options vest as follows: 10% on December 31 of each of the first five calendar years of service commencing with December 31 of the calendar year of the option grant; 15% on December 31 of the next two calendar years; and the remaining 20% on December 31 of the eighth calendar year from the issuance date. Accelerated vesting of Options can occur during the first five calendar years after issuance upon the Company’s attainment of performance milestones, determined annually by the Board of Directors. For each year in which performance milestones are attained, 10% of the shares under the Options shall vest on an accelerated basis, with the installments that would vest latest under the Options being accelerated first. Outstanding Options also accelerate upon the occurrence of a change of control of the Company. The exercise price of Options under the Stock Option Plan is set at $0.01 per share, and each Option has an 18-year term. During 2000, all outstanding options were exercised.

In addition to the right to repurchase unvested option shares described above, under the Stock Option Plan, vested option shares are subject to a call by the Company and a put by the employee in the event the option shareholder retires after attaining age 62, becomes permanently disabled or dies. The put and call options are at fair value. Upon termination of service for reasons other than retirement, disability or death, vested option shares are subject to a call by the Company, at fair value. In addition, the Company has a right to call and the option shareholder has a right to put any vested option shares issued or issuable under outstanding Options at the end of their 18-year term at fair value. The Stock Option Plan also provides that the Company has a right of first refusal on any proposed disposition of shares acquired under an Option by sale, transfer or in connection with a marital dissolution, which right shall lapse upon the initial public offering of the Company’s common stock.

401(k) Plan

The Company’s operating subsidiary, Perry Judd’s, implemented a 401(k) Retirement Savings Plan effective April 28, 1995 (the “401(k) Plan”). All employees 21 years of age or older employed by Perry Judd’s and any affiliated company who adopts the plan are or will be eligible to participate in the 401(k) Plan. Participants in the 401(k) Plan may not contribute more than certain specified amounts depending upon the employee’s level of compensation. Each company participating in the 401(k) Plan makes contributions to the 401(k) Plan equal to 3% of eligible earnings of all qualified participating employees, as determined under the 401(k) Plan. Participating employees are 100% vested in all contributions.

Compensation Committee Interlocks and Insider Participation

The Company does not have a compensation committee. The following officers and employees participated in deliberations concerning executive compensation: Robert E. Milhous, Paul B. Milhous, Craig A. Hutchison and Joseph E. Hansell. Mr. Hutchison is an executive officer of Perry Judd’s and a member of the Board of Directors of Perry Judd’s Holdings.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of March 1, 2004 (i) by each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) by each director and Named Executive Officer and (iii) by all directors and executive officers of the Company as a group. Except as otherwise listed below, the address of each person listed is c/o Perry Judd’s Incorporated, 575 West Madison Street, Waterloo, Wisconsin 53594.

	Shares Beneficially Owned at March 1, 2004
Name	Number	Percent

Ropamil Limited Partnership (1) 791 Park of Commerce Drive Boca Raton, Florida 33487	782,775	87.2

Craig A. Hutchison	27,193	3.0

David E. Glick	20,392	2.3

Verne F. Schmidt	5,718		*

Walter A. Edwards	4,630		*

Stephen M. Sanfelippo	972		*

All directors and executive officers as a group (11 persons)	857,870	95.5

* Less than 1%

(1) Robert E. Milhous, a director, and the Chairman of the Board of Directors of the Company and Paul B. Milhous, a director and the Vice-Chairman of the Board of Directors of the Company and certain affiliated entities beneficially own all of the partnership interests in this partnership.

Item 13. Certain Relationships and Related Party Transactions.

Perry Judd’s and Novamil Corporation (“Novamil”), a California corporation owned beneficially by Robert E. Milhous, Chairman of the Company and Paul B. Milhous, Vice Chairman of the Company, were parties to a Management Agreement dated as of April 28, 1995 which was subsequently assigned by Perry Judd’s to Perry Judd’s Holdings and amended by Perry Judd’s and Novamil as of December 16, 1997 (the “Amended Management Agreement”). Pursuant to the Amended Management Agreement, Novamil provides Perry Judd’s Holdings certain management services by agents and employees of Novamil other than Robert E. Milhous and Paul B. Milhous in connection with business strategy, operations and finance. Under the Amended Management Agreement, as amended, Perry Judd’s Holdings pays to Novamil an annual management fee payable in equal monthly installments and is subject to an annual adjustment for increases in costs of living. During 2003, approximately $840,000 was paid under this agreement. The Amended Management Agreement has a term of five years from December 16, 1997, subject to one-year extensions thereafter, unless earlier terminated upon the liquidation or dissolution of Perry Judd’s Holdings, or ten days after a party has received written notice of a material breach where such breach remains uncured after such ten-day period.

Pursuant to a consulting agreement dated April 28, 1995 (the “Consulting Agreement”), Robert E. Milhous and Paul B. Milhous provide consulting services to Perry Judd’s as principals of New House Capital Management Corp., a Delaware corporation (“New House”), for which Perry Judd’s pays an annual consulting fee (subject to annual increases not to exceed 10%), payable in equal monthly installments. During 2003, approximately $725,000 was paid under this agreement. The Consulting Agreement has an initial term of five years, subject to one-year extensions thereafter, unless earlier terminated upon the liquidation or dissolution of the Company or ten days after a party has received written notice of a material breach where such breach remains uncured after such ten-day period. On December 16, 1997, the Consulting Agreement was assigned by Perry Judd’s to Perry Judd’s Holdings. During 2003, 2002 and 2001, the Company approved additional bonuses of $600,000, $600,000 and $500,000 payable to New House which were accrued as of December 31, 2003, 2002 and 2001, respectively.

Item 14. Principal Accountant Fees and Services

Audit Fees. Fees for audit services were approximately $137,000 and $122,000 for the years ended December 31, 2003 and 2002, respectively, which included fees associated with the annual audit and reviews of the Company’s quarterly reports on Form 10-Q.

Audit-Related Fees. Fees for audit-related services were approximately $14,000 and $11,000 for the years ended December 31, 2003 and 2002, respectively, and related to the audit of the Company’s 401(k) plan.

Tax Fees. Fees for tax compliance and advisory services were approximately $49,000 and $267,000 for the years ended December 31, 2003 and 2002, respectively. Advisory services were used for state and local tax issues and research related to various tax planning strategies.

There were no other fees incurred by the Company during the years ended December 31, 2003 and 2002. The Company’s Board of Directors appoints the independent auditors and approves the fee arrangements with respect to the annual audit, quarterly reviews of the Company’s Form 10-Q filings, audit of the Company’s 401(k) plan and tax compliance services and other services as required. The Company’s Board of Directors approved all the above audit and non-audit services provided by the independent auditors.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) The following documents are included in this report at the page numbers indicated.

	Financial Statements:
	Report of Ernst & Young LLP, Independent Auditors

	Consolidated Balance Sheets as of December 31, 2003 and 2002

	Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001

	Consolidated Statements of Minority Interests, Preferred Stock and Stockholders’ Equity for the years ended December 31, 2003, 2002 and 2001

	Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001

	Notes to Consolidated Financial Statements

	Schedule:

	Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2003, 2002 and 2001

(b) Reports on Form 8-K

Current report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2003.

Included at the end of this Annual Report on Form 10-K.

EXHIBIT INDEX

The following exhibits are filed as a part of this report or incorporated by reference and will be furnished to any security holder upon request for such exhibit and payment of any reasonable expenses incurred by the Company. Send any such request to the Company at 575 West Madison Street, Waterloo, WI 53594.

Exhibit Number		Description
2.2		Stock Purchase Agreement dated as of July 31, 1998 by and among Mack Printing Company, Port City Press, Inc. and Perry Judd’s Incorporated. Incorporated by reference to Exhibit 2.2 to the 8-K dated as of September 17, 1998.
3.1		Amended and Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to the 10-K dated as of March 29, 2002.
3.2		Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 No. 333-45235 declared effective on June 12, 1998 (the “Registration Statement”).
4.1		Indenture dated as of December 16, 1997 between the Company and U.S. Trust Company of California, N.A., as Trustee, including forms of Senior Notes. Incorporated by reference to Exhibit 4.1 to the Registration Statement.
4.1(a)		First Supplemental Indenture dated as of June 10, 1998 among the Company, the Subsidiary Guarantors named therein, the Additional Subsidiary Guarantor named therein and U.S. Trust Company of California N.A. as Trustee. Incorporated by reference to Exhibit 4.1(a) to the Registration Statement.
4.2		Registration Rights Agreement dated as of December 16, 1997 between the Company and BT Alex. Brown as Initial Purchaser. Incorporated by reference to Perry Judd’s Incorporated by reference to Exhibit 4.2 to the Registration Statement.
10.3		1995 Stock Option Plan, as amended. Incorporated by reference to Exhibit 10.3 to the Registration Statement.
10.4 † *		Restated and Amended Employment Agreement by and between the Company and Craig A. Hutchison dated April 28, 2003.
10.4(a) †		Employment Offer Letter from the Company to David E. Glick dated January 16, 1998. Incorporated by reference to Exhibit 10.4(a) to the 10-K dated as of March 31, 1999.
10.4(b) †		Employment Offer Letter from the Company to Verne F. Schmidt dated December 26, 1996. Incorporated by reference to Exhibit 10.4(b) to the 10-K dated as of March 31, 1999.
10.4(c) †		Severance Agreement Letter from the Company to Howard D. Sullivan dated March 24, 2000. Incorporated by reference to Exhibit 10.4(c) to the 10-K dated as of April 2, 2001.
10.5		Stockholders Agreement by and among the stockholders of the Company named therein dated as of July 1, 1996. Incorporated by reference to Exhibit 10.5 to the Registration Statement.
10.6		Amended and Restated Co-Sale Agreement by and among the stockholders of the Company named therein dated as of December 30, 1996. Incorporated by reference to Exhibit 10.6 to the Registration Statement.
10.7 *		Amendment to Stock Restriction and Repurchase Agreement and Stock Purchase Agreement dated May 30, 2003 by and between the Company and Verne F. Schmidt.
10.8 *		Supplemental Agreement dated August 14, 2003 by and between the Company and Craig A. Hutchison.
10.9		Loan and Security Agreement dated August 19, 2002 between LaSalle Business Credit, Inc., as Lender and Perry Judd’s Incorporated, as Borrower.
11.0*		First Amendment to the Loan and Security Agreement dated December 10, 2003 between LaSalle Business Credit, Inc., as Lender and Perry Judd’s Incorporated, as Borrower.
21.0 *		Subsidiary Listing
31.1 *		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

† Indicates a management contract or compensatory arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 19^th day of March, 2004.

	PERRY JUDD’S HOLDINGS, INC.


	By:		/s/ Craig A. Hutchison
			Craig A. Hutchison
			President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and appoint Craig A. Hutchison and Verne F. Schmidt, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE

/s/ Craig A. Hutchison	President, Chief Executive Officer, and Director (Principal Executive Officer)	March 19, 2004
Craig A. Hutchison

/s/ David E. Glick	Executive Vice President, Operations, and Director	March 19, 2004
David E. Glick	Executive Vice President, Operations, and Director

/s/ Verne F. Schmidt	Senior Vice President, Chief Financial Officer, Secretary and Director (Principal Financial and Accounting Officer)	March 19, 2004
Verne F. Schmidt


/s/ Robert E. Milhous	Chairman and Director	March 19, 2004
Robert E. Milhous

/s/ Paul B. Milhous	Vice Chairman and Director	March 19, 2004
Paul B. Milhous

PERRY JUDD’S HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Financial Statements:

Report of Ernst & Young LLP, Independent Auditors

Consolidated Balance Sheets as of December 31, 2003 and 2002

Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Minority Interests, Preferred Stock and Stockholders’ Equity for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001

Notes to Consolidated Financial Statements

Schedule:

For the years ended December 31, 2003, 2002 and 2001:

II Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

F-1

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders

Perry Judd’s Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Perry Judd’s Holdings, Inc. (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of operations, minority interests, preferred stock and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002 the Company changed its method of accounting for goodwill.

ERNST & YOUNG LLP

Milwaukee, Wisconsin

February 20, 2004

F-2

PERRY JUDD’S HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share)

ASSETS

	December 31,
	2003		2002

CURRENT ASSETS:
Cash and cash equivalents	$	966	$	970
Accounts receivable, net	43,197		43,689
Inventories	12,813		14,750
Prepaid expenses	2,150		1,401
Deferred income taxes	2,668		1,904
Total current assets	61,794		62,714

PROPERTY, PLANT AND EQUIPMENT:
Machinery and equipment	136,323		132,403
Office furniture, equipment and vehicles	11,784		11,409
Buildings and improvements	3,194		3,191
Leasehold improvements	5,149		4,743
Land and land improvements	638		618
Projects in progress	3,027		3,885
	160,115		156,249
Less accumulated depreciation and amortization	84,958		61,232
Property, plant and equipment, net	75,157		95,017

INTANGIBLE ASSETS:
Goodwill	29,431		29,431
Deferred financing costs, net	1,202		1,878
Other intangible assets, net	546		665
Intangible assets, net	31,179		31,974
TOTAL	$	168,130	$	189,705

See notes to consolidated financial statements.

F-3

PERRY JUDD’S HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share)

LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY

	December 31,
	2003			2002
CURRENT LIABILITIES:
Accounts payable	$	14,271		$	15,018
Accrued expenses	21,297			18,043
Accrued interest	388			464
Income taxes payable	78			232
Revolving credit facility	11,206			8,706
Total current liabilities	47,240			42,463

LONG-TERM DEBT	70,010			86,010

DEFERRED INCOME TAXES	14,807			19,374

OTHER NONCURRENT OBLIGATIONS	8,545			9,295

MINORITY INTERESTS, Series A redeemable preferred stock, 43,941 shares outstanding with a stated redemption value of $100 per share, aggregate liquidation value of $4,394	4,006			3,738

COMMITMENTS AND CONTINGENCIES (Notes 7 and 11)	—			—

STOCKHOLDERS’ EQUITY:
Preferred stock (Series A)-par value $0.001 per share, 775,000 shares authorized, 231,345 and 199,668 shares issued and outstanding, respectively	23,135			19,967
Common stock-par value $0.001 per share, 1,000,000 shares authorized, 897,918 and 901,317 shares issued and outstanding, respectively	1			1
Additional paid-in capital	22,421			22,482
Accumulated deficit	(22,035		)	(13,625		)
Total stockholders’ equity	23,522			28,825
TOTAL	$	168,130		$	189,705

See notes to consolidated financial statements.

F-4

PERRY JUDD’S HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

	Year Ended December 31,
	2003			2002			2001

NET SALES	$	297,914		$	290,928		$	321,111

OPERATING EXPENSES:
Costs of production and distribution	237,145			219,117			253,074
Selling, general and administrative	31,025			32,507			32,338
Depreciation	17,735			17,132			14,582
Amortization of intangibles	119			302			1,251
Gain on disposals of equipment	(516		)	(27		)	(633		)
Restructuring charges	10,208			—			—
	295,716			269,031			300,612

INCOME FROM OPERATIONS	2,198			21,897			20,499

OTHER (INCOME) EXPENSES:
Interest expense	8,666			11,790			12,784
Interest income	(130		)	(147		)	(127		)
Amortization of deferred financing costs	416			1,295			1,200
Loss on repurchases of senior subordinated notes	868			592			—
Other expenses	120			454			434
	9,940			13,984			14,291

INCOME (LOSS) BEFORE INCOME TAXES	(7,742		)	7,913			6,208

PROVISION (BENEFIT) FOR INCOME TAXES	(2,931		)	1,858			2,909

INCOME (LOSS) BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK	(4,811		)	6,055			3,299

DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK	431			435			507

NET INCOME (LOSS)	$	(5,242	)	$	5,620		$	2,792

See notes to consolidated financial statements.

F-5

PERRY JUDD’S HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF MINORITY INTERESTS,

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Dollars in thousands)

	Minority Interests			Preferred Stock			Common Stock and Additional Paid-In Capital
	Shares	Carrying Value		Shares	Carrying Value		Shares		Carrying Value			Accumulated Deficit
December 31, 2000	43,941	$	3,254	148,731	$	14,873	901,317		$	22,149		$	(16,943	)

Net income	—	—		—	—		—		—			2,792

Stock dividends	—	—		23,597	2,360		—		—			(2,360		)

Accretion on Series A redeemable preferred stock	—	234		—	—		—		—			—

Provision for noncash compensation related to common stock options	—	—		—	—		—		131			—

December 31, 2001	43,941	3,488		172,328	17,233		901,317		22,280			(16,511		)

Net income	—	—		—	—		—		—			5,620

Stock dividends	—	—		27,340	2,734		—		—			(2,734		)

Accretion on Series A redeemable preferred stock	—	250		—	—		—		—			—

Provision for noncash compensation related to common stock options	—	—		—	—		—		203			—

December 31, 2002	43,941	3,738		199,668	19,967		901,317		22,483			(13,625		)

Net loss	—	—		—	—		—		—			(5,242		)

Stock dividends	—	—		31,677	3,168		—		—			(3,168		)

Accretion on Series A redeemable preferred stock	—	268		—	—		—		—			—

Repurchase of common stock	—	—		—	—		(3,399	)	(105		)	—

Provision for noncash compensation related to common stock options	—	—		—	—		—		44			—

December 31, 2003	43,941	$	4,006	231,345	$	23,135	897,918		$	22,422		$	(22,035	)

See notes to consolidated financial statements.

F-6

PERRY JUDD’S HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Year Ended December 31,
	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(5,242	)	$	5,620		$	2,792

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	17,854			17,434			15,833
Amortization of deferred financing costs	416			1,295			1,200
Accretion on redeemable preferred stock	268			250			234
Compensation related to common stock options	44			203			131
Deferred income taxes	(5,446		)	(222		)	1,176
Gain on disposals of equipment	(516		)	(27		)	(633		)
Loss on repurchases of senior subordinated notes	868			592			—
Non-cash fixed asset impairment costs	6,397			—			—
Changes in assets and liabilities excluding effect of businesses acquired or disposed:
Receivables	492			15,664			3,770
Inventories	1,937			(126		)	4,750
Prepaid expenses	(749		)	400			(156		)
Accounts payable	(747		)	(3,305		)	(4,432		)
Accrued expenses	3,254			541			(9,439		)
Accrued interest	(76		)	(199		)	14
Income taxes, net	(38		)	1,683			283
Other liabilities	(485		)	121			(196		)
Net cash provided by operating activities	18,231			39,924			15,327

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment	(9,088		)	(22,415		)	(26,531		)
Capital projects converted to operating leases	4,778			7,584			15,533
Proceeds from sale of property, plant and equipment, net of disposition costs	321			(50		)	888
Net cash used in investing activities	(3,989		)	(14,881		)	(10,110		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term debt	—			(7,800		)	(6,018		)
Repurchases of senior subordinated notes	(16,573		)	(28,990		)	—
Increase in revolving debt	2,500			8,706			—
Financing costs incurred	(68		)	(112		)	—
Repurchase of common stock	(105		)	—			—
Net cash used in financing activities	(14,246		)	(28,196		)	(6,018		)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(4		)	(3,153		)	(801		)
BALANCE AT BEGINNING OF YEAR	970			4,123			4,924
BALANCE AT END OF YEAR	$	966		$	970		$	4,123

(CONTINUED)

F-7

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year (in thousands):

	Year Ended December 31,
	2003		2002		2001

Interest	$	8,742	$	11,989	$	12,769

Income taxes	$	2,549	$	463	$	1,450

NON-CASH TRANSACTIONS:

On December 16, 1997, the Company issued 95,000 shares of Series A preferred stock to the majority stockholders in exchange for a note payable plus accrued and unpaid interest. Stock dividends issued on this stock approximated $3,168,000, $2,734,000 and $2,360,000 for the years ended December 31, 2003, 2002 and 2001, respectively. See Note 6.

See notes to consolidated financial statements.

F-8

PERRY JUDD’S HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Nature of Business - The Company is a full service heatset web offset printer of magazines, catalogs, and other commercial products. The Company serves a national domestic market in the printing of weekly and monthly consumer, special interest and trade magazines, business-to-business and consumer catalogs, and a variety of other direct advertising products. The Company operates principally in one business segment, printing services.

Principles of Consolidation - The consolidated financial statements include the accounts of Perry Judd’s Holdings, Inc., and its wholly-owned subsidiary, Perry Judd’s Incorporated, (Perry Judd’s) (collectively hereafter referred to as the “Company”). All significant intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents - The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Credit Risk Considerations - The Company had one customer which consisted of six publication titles comprising approximately 12%, 15% and 14% of total net sales for the years ended December 31, 2003, 2002 and 2001, respectively. The various titles for this customer were under contracts that expired on July 31, 2003 and December 31, 2003. See Note 12.

The Company has recorded an allowance for doubtful accounts to estimate the difference between recorded receivables and ultimate collections. The allowance and provision for bad debts are adjusted periodically based upon the Company’s evaluation of historical collection experience, industry trends and other relevant factors. The allowance for doubtful accounts was $1,200,000 at December 31, 2003 and 2002, respectively.

Inventory Valuation - Inventories are stated at the lower of cost (first-in, first-out method) or market and are summarized as follows (in thousands):

	December 31,
	2003		2002

Raw materials	$	6,022	$	6,036
Work in process	4,529		4,940
Production supplies	815		863
Repair and maintenance parts	1,447		2,911
	$	12,813	$	14,750

F-9

Property, Plant and Equipment - Property, plant and equipment are stated at cost. Assets are depreciated on the straight-line basis over estimated useful lives which range from three to forty years.

		Estimated useful life
		(In years)
Machinery and equipment		3-15
Office furniture, equipment and vehicles		3-10
Buildings and improvements		7-40
Land improvements		25-40
Leasehold improvements		Lesser of estimated useful life or remaining lease term

Capitalized interest on borrowed funds during construction was $235,000 and $310,000 for the years ended December 31, 2002 and 2001, respectively. There was no capitalized interest in 2003.

Long-lived Assets - In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company adopted the provisions of SFAS No. 144 as of January 1, 2001, establishing procedures for review of recoverability, and measurement of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 also requires that long-lived assets to be disposed of other than by sale (for example, abandonments, exchanges for similar productive assets or in a distribution to owners in a spinoff) shall continue to be classified as held and used until disposal. Further, SFAS No. 144 specifies the criteria for classifying long-lived assets as “held for sale” and requires that long-lived assets to be disposed of by sale be reported at the lower of carrying amount or fair value less estimated selling costs. As of December 31, 2003, management believes that there has not been any impairment of the Company’s long-lived assets, except as outlined in Note 12.

Goodwill and Other Intangible Assets – Through December 31, 2001, goodwill was amortized on a straight-line basis over 35 years. The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, effective January 1, 2002. Under SFAS No. 142, goodwill and certain other intangible assets are no longer amortized but are reviewed for impairment. In connection with the adoption of SFAS No. 142, the Company completed the transitional goodwill impairment test, which required the Company to compare its fair value to the carrying value of its net assets as of January 1, 2002. Based on this analysis, the Company concluded that no impairment existed at the time of adoption, and, accordingly, the Company did not recognize any transitional impairment loss. Additionally, the Company concluded that no impairment existed at the time of the annual impairment test which was performed in the fourth quarter of 2002 and 2003.

As required by SFAS No. 142, the results of operations for periods prior to its adoption have not been restated. The following table summarizes the pro forma income before income taxes and net income for the year ended December 31, 2001 had SFAS No. 142 been adopted at January 1, 2001 (in thousands):

Income before income taxes		$	7,157
Net income		$	3,741

Deferred financing costs are being amortized over the lives of the applicable debt agreements. Accumulated amortization on these costs was $7,119,000 and $7,023,000 at December 31, 2003 and 2002, respectively. Other intangible assets identified in connection with certain acquisitions are being amortized over the estimated useful lives of the assets which range from five to fifteen years. Accumulated amortization on these costs was $3,643,000 and $3,523,000 at December 31, 2003 and 2002, respectively.

F-10

Future amortization expense for deferred financing costs and other intangible assets are estimated as follows (in thousands):

Year Ending December 31,	Deferred Financing Costs		Other Intangible Assets
2004	$	297	$	119
2005	297		97
2006	297		73
2007	297		73
2008	14		73
Thereafter	—		111
Total	$	1,202	$	546

Revenue Recognition - Revenue is recognized when complete orders are shipped.

Shipping and Handling - Amounts billed to a customer in a sale transaction related to shipping and handling are reported as net sales, and the related costs incurred for shipping and handling are reported as costs of production and distribution.

Income Taxes - Deferred income taxes are determined utilizing an asset and liability approach. This method gives consideration to the future tax consequences associated with differences between financial accounting and tax bases of assets and liabilities. This method gives immediate effect to changes in income tax laws upon enactment.

Estimates - - The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Values - The Company believes that the carrying amount of its cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and borrowings under its revolving credit facility approximate fair value due to the short maturity of these instruments. The estimated fair value of the Company’s publicly traded debt (senior subordinated notes), based on quoted market prices, was approximately $66.5 million and $87.9 million as of December 31, 2003 and 2002, respectively.

New Accounting Pronouncements - During 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections as of April 2002,” and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” A provision of SFAS No. 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement. This provision of SFAS No. 145 was effective for fiscal years beginning after May 15, 2002, but was adopted early by the Company resulting in the loss on repurchases of senior subordinated notes in 2002 being classified as other expense in the consolidated statements of operations. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The Company complied with the requirements of this statement in its accounting for the restructuring charges described in Note 12.

F-11

3. BALANCE SHEET INFORMATION

Accounts receivable, net, consists of the following (in thousands):

	December 31,
	2003			2002
Trade receivables	$	41,986		$	42,794
Other receivables	2,411			2,095
Allowance for doubtful accounts	(1,200		)	(1,200		)
	$	43,197		$	43,689

Accrued expenses consist of the following (in thousands):

	December 31,
	2003		2002
Employee related expenses	$	11,791	$	10,630
Accrued paper costs	3,486		2,617
Taxes other than income	532		359
Other accrued expenses	5,488		4,437
	$	21,297	$	18,043

4. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	December 31,
	2003			2002
Revolving credit facility	$	11,206		$	8,706
Senior subordinated notes	70,010			86,010
Total debt	81,216			94,716
Less current portion	(11,206		)	(8,706		)
Long-term debt	$	70,010		$	86,010

Revolving Credit Facility - - In December 2003, the Company entered into a five year credit agreement (the “Credit Agreement”) which expires on December 31, 2008, unless otherwise extended based upon mutual agreement of the Company and the lender. The Credit Agreement is comprised of a $40.0 million revolving credit facility based upon a borrowing base of eligible accounts receivable and inventory. At December 31, 2003, the available borrowing base was $39.2 million. The Company’s obligations under the Credit Agreement are secured by a security interest in all the assets of the Company and its subsidiaries, excluding all assets relating to property, plant and equipment. Borrowings under the Credit Agreement bear interest at rates that fluctuate with the prime rate and the Eurodollar rate and applicable margin rates as defined by the Credit Agreement which fluctuate based on the Company’s leverage ratio. The Credit Agreement requires the Company to maintain and meet certain minimum operating ratios. Additionally, the Credit Agreement restricts payments of dividends on the Company’s common stock. At December 31, 2003, the Company was in compliance with these requirements. Borrowings against the line are either at a Eurodollar rate plus 2.25%, (2.66% with $5,000,000 outstanding at December 31, 2003) fixed for periods up to 180 days, or at the prime rate (4.0% with $6,206,000 outstanding at December 31, 2003). At December 31, 2003, $28.0 million of the revolving credit facility was available for future working capital and other general corporate purposes.

F-12

Senior Subordinated Notes - The Company issued its 10 5/8% senior subordinated notes due December 15, 2007 in connection with a 1997 acquisition. Interest on the notes is payable semi-annually in arrears on June 15 and December 15 of each year. The notes are redeemable, in whole or in part, at the option of the Company at specified redemption prices plus accrued interest to the date of redemption. The notes impose certain restrictions on the Company’s ability to make certain distributions and restricts the payments of dividends by the Company in certain circumstances. The following table summarizes the Company’s repurchases of its senior subordinated notes and the loss recognized on the repurchases after giving effect to the write-off of related deferred financing costs (in thousands):

	Year Ended December 31
	2003		2002
Repurchases of senior subordinated notes (principal)	$	16,000	$	28,990
Loss on repurchases	$	868	$	592

On January 15, 2004, the Company repurchased an additional $4,015,000 of its senior subordinated notes and recognized a gain on the transaction of approximately $136,000 after giving effect to the write-off of related deferred financing costs.

5. MINORITY INTERESTS

In connection with a 1995 acquisition of certain net assets, a subsidiary of the company (Perry Judd’s) issued the following redeemable preferred stock:

Series A Redeemable Preferred Stock - At April 28, 1995, Series A redeemable preferred stock issued in the amount of $5.0 million reflected an original issue discount of $2.5 million which was the difference between the fair value at the time of issuance and the April 28, 2005 redemption value. The difference is being accreted by charging operations until redemption. Each share of redeemable Series A, $0.001 par value, $100 redemption value, nonconvertible, non-voting preferred stock entitles its holder to receive an annual cash dividend equivalent to the redemption value times 90% of the prime interest rate. At December 31, 1995, 50,000 shares were authorized and 47,350 shares were issued and outstanding. During 1996, the carrying value of the Series A redeemable preferred stock was written down to zero to offset certain purchase accounting adjustments and no accretion was recorded. During the third quarter ended September 30, 2000, the Company reached a settlement with the former owner of Perry Printing resulting in a partial reinstatement of Series A redeemable preferred stock. Pursuant to the settlement agreement dated August 31, 2000, effective June 30, 2000, 43,940.68 shares of Series A redeemable preferred stock were reinstated at an accreted value of $3,143,000 and $1,452,000 of accumulated dividends were paid. Dividends of $163,000, $185,000 and $273,000 were paid during the years ended December 31, 2003, 2002 and 2001, respectively.

F-13

6. STOCKHOLDERS’ EQUITY AND STOCK OPTION PLAN

Preferred Stock (Series A) – Holders of the non-voting preferred stock are entitled to a 15% stock dividend, payable in preferred shares on a quarterly basis. A California corporation owned beneficially by the Company’s majority common stockholders owns the majority of the preferred stock. The preferred stock has a liquidation preference above the common stock.

Common Stock – Under the terms of the Company’s stock option plan (the “Stock Option Plan”), options may be granted to officers and key employees. Options have terms of eighteen years and an exercise price of $.01 per share. Options are immediately exercisable, but option shares issuable are subject to repurchase by the Company on termination of employment at the original exercise price until vested. Option shares vest in gradual increments over an eight year period. As of December 31, 2003, 225 option shares were unvested. The vested option shares are subject to a call by the Company and a put by the employee in the event the option shareholder retires after attaining age 62, becomes permanently disabled or dies. Upon termination of service for reasons other than retirement, disability or death, vested option shares are subject to a call by the Company. The put and call options are at fair value.

As of December 31, 2003, the Stock Option Plan had 33,693 options available for grant.

The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for the Stock Option Plan. Accordingly, compensation expense has been recorded for the difference between the estimated fair value of the common stock and the exercise price of the option at the date of grant as the shares vest. Compensation expense of $44,000, $203,000 and $131,000 was recognized during the years ended December 31, 2003, 2002 and 2001, respectively. The pro forma effect on reported net income (loss) for the years ended December 31, 2003, 2002 and 2001 of using the fair value method under SFAS No. 123, “Accounting for Stock-Based Compensation,” is not significant.

Stockholder Agreements – At December 31, 2003, 81,273 shares of common stock were subject to put and call arrangements at fair value, similar to the shares purchased under the Stock Option Plan, at the employee’s termination, retirement after attaining age 62, permanent disability or death. In addition, the Company has guaranteed a minimum fixed dollar per share upon exercise of one executive with 5,718 shares.

F-14

7. OPERATING LEASES

The Company leases certain equipment and office space under non-cancelable operating lease agreements. Lease expense under such agreements was $17.1 million, $15.8 million and $17.2 million for the years ended December 31, 2003, 2002 and 2001 respectively.

In 1997, the Company entered into a sale and leaseback transaction whereby the Wisconsin printing plants and warehouse facilities, and the Company’s corporate headquarters were sold to a third party for the aggregate purchase price (exclusive of fees and costs) of $18.25 million and immediately leased back to the Company. The sale and leaseback of the real property resulted in a deferred gain of $2.8 million, net of taxes, and is being amortized over the initial term of the lease. The lease has an initial term of 20 years, with an economic abandonment buyout for one property selected by the Company after five years, and may be extended for three additional five-year terms at the Company’s option. Annual rent under the lease is currently $2.1 million payable quarterly in advance with 10% escalations scheduled in 2008 and 2013 (and a corresponding 10% increase at the beginning of any option term). Through 2007, the Company has a right of first refusal on any proposed sale of all of the leased properties by the lessor to a third party, exercisable within 30 days of receipt of the proposed sale contract.

The Company entered into a 20 year sale and leaseback transaction for the majority of its real property located in Virginia in 1998. Annual rent under the lease is currently $1.5 million with 14.5% escalations scheduled in 2008 and 2013.

Future minimum annual lease payments required under the operating lease agreements are as follows (in thousands):

Year Ending December 31,
2004	$	16,675
2005	14,899
2006	12,163
2007	7,933
2008	7,388
Thereafter	44,803
Total minimum lease payments	$	103,861

F-15

8. INCOME TAXES

The provision (benefit) for income taxes consists of the following components (in thousands):

	Year Ended December 31,
	2003			2002			2001
Current
Federal	$	2,418		$	1,875		$	1,612
State	97			205			121
	2,515			2,080			1,733
Deferred
Federal		(4,951	)	(202		)	848
State	(495		)	(20		)	328
	(5,446		)	(222		)	1,176
Provision (benefit) for income taxes	$	(2,931	)	$	1,858		$	2,909

Following is a reconciliation of the U.S. statutory federal income tax rate to the effective rate (in thousands):

	Year Ended December 31,
	2003			2002			2001

Federal statutory rate	34		%	34		%	35		%
Tax provision (benefit) at federal statutory rate	$	(2,632	)	$	2,690		$	2,173
State income taxes net of federal income tax benefit	(384		)	249			291
Goodwill amortization	—			—			332
Other permanent differences	85			123			113
Impact of rate change	—			(1,204		)	—
Provision (benefit) for income taxes	$	(2,931	)	$	1,858		$	2,909

In 2002, the Company reduced its effective tax rate, including the rate used for recording the net deferred tax liability, from 40.0% in prior years to 37.4%. The reduction in the net deferred tax liability from this rate change generated a deferred income tax benefit of approximately $1.2 million in 2002. The effective rate was reduced to reflect a reduction in the anticipated applicable federal tax rate for future years from 35% to 34%, reflective of lower taxable income generated in recent and projected years. In addition, prior corporate restructurings and changes in business operations, including levels of profitability by state, have reduced the Company’s overall effective state tax rate.

Significant components of deferred tax assets and deferred tax liabilities are as follows (in thousands):

	December 31,
	2003			2002
Deferred Tax Assets:
Accounts receivable items	$	449		$	449
Inventory items	823			200
Employee benefit accruals	1,736			1,333
Other accrued expenses	399			601
Sale and leaseback	2,262			2,373
Tax credit carryforwards	723			627
Other items	626			725
	7,018			6,308
Deferred Tax Liabilities:
Prepaid items	(400		)	(306		)
Property, plant and equipment	(17,335		)	(22,102		)
Other	(1,422		)	(1,370		)
	(19,157		)	(23,778		)

Net deferred income taxes	$	(12,139	)	$	(17,470	)

F-16

The net deferred income tax liability is classified in the balance sheets as follows (in thousands):

	December 31,
	2003			2002
Current deferred income taxes	$	2,668		$	1,904
Non-current deferred income taxes	(14,807		)	(19,374		)
Net deferred income taxes	$	(12,139	)	$	(17,470	)

At December 31, 2003, the Company has state tax credits of approximately $800,000 which expire in the years 2010 through 2017 and can be used to offset future regular tax.

9. RELATED PARTY TRANSACTIONS

In 1995, the Company entered into management agreements (the “Agreements”) with two companies owned beneficially by the majority stockholders of the Company. The Agreements, as well as subsequent revisions, provide for certain management and consulting services in connection with business strategy, operations and finance. The Agreements have initial terms of five years, subject to one-year extensions thereafter and require the Company to currently pay annual management fees totaling $1,565,000 per year plus reimbursement of certain expenses. During 2001 the Company approved a bonus of $500,000 which was accrued at December 31, 2001 and paid during 2002. During 2002 and 2003, the Company approved bonus payments of $600,000 which were accrued during the years ended December 31, 2002 and 2003, respectively. Management fees paid and reimbursements expensed in conjunction with the Agreements and bonuses accrued totaled $2,253,000, $2,294,000 and $2,316,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

10. RETIREMENT PLANS

The Company has a defined contribution plan referred to as the Perry Judd’s Incorporated Retirement Savings Plan (the “Plan”). The Plan covers substantially all employees who have attained 21 years of age and are credited with twelve months of service on their enrollment date. The Company contributed approximately $1,987,000, $1,857,000 and $1,662,000 for the years ended December 31, 2003, 2002 and 2001, respectively, to the Plan representing 3% of eligible employee wages.

Effective December 31, 1997, benefits payable under a defined benefit pension plan existing at the time of a December 16, 1997 acquisition were frozen. In June 2001, the Company received a favorable advance termination letter from the Internal Revenue Service and completed the termination of the plan through lump sum payments and the purchase of annuity contracts. During the year ended December 31, 2001, the Company recorded a gain on the termination of the pension plan of approximately $1,633,000.

F-17

11. COMMITMENTS AND CONTINGENCIES

Purchase Commitments - At December 31, 2003, the Company had commitments to purchase or lease approximately $2.1 million of operating assets.

Other Contingencies - The Company is involved in various claims and litigation incidental to its operations. In the opinion of management, the ultimate resolution of these actions will not have a material effect on the Company’s consolidated financial statements.

12. RESTRUCTURING CHARGES AND ASSET IMPAIRMENT COSTS

Effective January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires, among other things, that a liability for costs associated with an exit or disposal activity initiated after December 31, 2002 be recognized at fair value when the liability is incurred rather than at the commitment date of the exit or disposal plan.

On November 20, 2003, the Company announced the closure of its Waterloo, Wisconsin plant following the loss of this plant’s key customer. The Company expects to close the facility by the end of April 2004.

A reconciliation of the beginning and ending restructuring account balances as of December 31, 2003 are summarized as follows (in thousands):

	Balance at December 31, 2002		Charges/ Additions		Payments/ Reductions		Balance at December 31, 2003
Severance and other employee related costs	$	—	$	2,022	$	—	$	2,022
Non-cash fixed asset impairment costs	—		6,397		6,397		—
Write down of repair parts inventories	—		1,642		1,642		—
Other closure costs	—		147		128		19
	$	—	$	10,208	$	8,167	$	2,041

Severance and other employee related costs represent 1) the Company’s liability pursuant to a Plant Closing Agreement executed on November 24, 2003 between the Company and the Joint Union Bargaining committee representing all union employees and 2) similar liabilities for salaried personnel affected by the closure of the Waterloo plant. Severance and other employee related costs accrued during 2003 were calculated using a pro rata number of days between the notice date and estimated termination date.

The non-cash fixed asset impairment costs and write down of repair part inventories represent the reduction in the asset carrying values of the equipment and repair parts at the Waterloo plant to management’s estimate of net realizable value following its decision to close the plant. Net realizable value has been determined based on the Company’s experience of selling similar assets.

The Company estimates that additional restructuring charges of $6,970,000 will be incurred during 2004 related to the following items (in thousands):

Severance and other employee related costs	$	2,648
Contractual lease obligations	3,812
Other closure costs	510
	$	6,970

The severance and other employee related costs are estimated to be fully incurred by December 31, 2004.

Contractual lease obligations represent 1) remaining lease payments on certain assets that the Company estimates will not be used after April 2004 and 2) remaining lease payments for the Waterloo, Wisconsin real estate subject to the sale and lease back transaction described in Note 7 which expires in 2017, offset by an estimate of sub lease rental income discounted at 8%.

The other closure costs relate primarily to costs associated with moving employees to the Company’s other sites and legal costs associated with the closure related activities.

F-18

PERRY JUDD’S HOLDINGS, INC.

Schedule II

Valuation and Qualifying Accounts

(In Thousands)

ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE	Balance Beginning Of Year		Additions Charged to Costs and Expenses		Deductions - Describe			Balance End of Year

Year Ended December 31,
2003	$	1,200	$	381	$	381	(1)	$	1,200

2002	$	1,236	$	477	$	513	(1)	$	1,200

2001	$	1,239	$	1,089	$	1,092	(1)	$	1,236

(1) Write-offs of receivables, net of recoveries.

F-19

EXHIBIT INDEX

Exhibit Number		Description
2.2		Stock Purchase Agreement dated as of July 31, 1998 by and among Mack Printing Company, Port City Press, Inc. and Perry Judd’s Incorporated. Incorporated by reference to Exhibit 2.2 to the 8-K dated as of September 17, 1998.
3.1		Amended and Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to the 10-K dated as of March 29, 2002.
3.2		Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 No. 333-45235 declared effective on June 12, 1998 (the “Registration Statement”).
4.1		Indenture dated as of December 16, 1997 between the Company and U.S. Trust Company of California, N.A., as Trustee, including forms of Senior Notes. Incorporated by reference to Exhibit 4.1 to the Registration Statement.
4.1(a)		First Supplemental Indenture dated as of June 10, 1998 among the Company, the Subsidiary Guarantors named therein, the Additional Subsidiary Guarantor named therein and U.S. Trust Company of California N.A. as Trustee. Incorporated by reference to Exhibit 4.1(a) to the Registration Statement.
4.2		Registration Rights Agreement dated as of December 16, 1997 between the Company and BT Alex. Brown as Initial Purchaser. Incorporated by reference to Perry Judd’s Incorporated by reference to Exhibit 4.2 to the Registration Statement.
10.3		1995 Stock Option Plan, as amended. Incorporated by reference to Exhibit 10.3 to the Registration Statement.
10.4 † *		Restated and Amended Employment Agreement by and between the Company and Craig A. Hutchison dated April 28, 2003.
10.4(a) †		Employment Offer Letter from the Company to David E. Glick dated January 16, 1998. Incorporated by reference to Exhibit 10.4(a) to the 10-K dated as of March 31, 1999.
10.4(b) †		Employment Offer Letter from the Company to Verne F. Schmidt dated December 26, 1996. Incorporated by reference to Exhibit 10.4(b) to the 10-K dated as of March 31, 1999.
10.4(c) †		Severance Agreement Letter from the Company to Howard D. Sullivan dated March 24, 2000. Incorporated by reference to Exhibit 10.4(c) to the 10-K dated as of April 2, 2001.
10.5		Stockholders Agreement by and among the stockholders of the Company named therein dated as of July 1, 1996. Incorporated by reference to Exhibit 10.5 to the Registration Statement.
10.6		Amended and Restated Co-Sale Agreement by and among the stockholders of the Company named therein dated as of December 30, 1996. Incorporated by reference to Exhibit 10.6 to the Registration Statement.
10.7 *		Amendment to Stock Restriction and Repurchase Agreement and Stock Purchase Agreement dated May 30, 2003 by and between the Company and Verne F. Schmidt.
10.8 *		Supplemental Agreement dated August 14, 2003 by and between the Company and Craig A. Hutchison.
10.9		Loan and Security Agreement dated August 19, 2002 between LaSalle Business Credit, Inc., as Lender and Perry Judd’s Incorporated, as Borrower.
11.0*		First Amendment to the Loan and Security Agreement dated December 10, 2003 between LaSalle Business Credit, Inc., as Lender and Perry Judd’s Incorporated, as Borrower.
21.0 *		Subsidiary Listing
31.1 *		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

† Indicates a management contract or compensatory arrangement.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Item 1. Business.

Market Information

POWER OF ATTORNEY

ERNST & YOUNG LLP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION