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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

For the year ended December 31, 2003

OR

For the transition period from              to             

Commission file number: 001-14171

C2, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (414) 291-9000

Securities registered pursuant to Section 12(b) of the Act:

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  x    No  ¨

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.  x

The aggregate market value of voting stock held by nonaffiliates of the registrant at June 30, 2003: $23,111,356

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

Number of Shares of Common Stock Outstanding at March 8, 2004: 5,300,864

The Index to Exhibits is located on page 50.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2004 Annual Meeting of Shareholders (to be filed with the Commission under Regulation 14A within 120 days after the end of the registrant’s year and, upon such filing, to be incorporated by reference into Part III.)

PART I

Item 1. Business

C2, Inc.

C2, Inc. (“C2” or the “Company”), a Wisconsin Corporation, was formed in 1997 to acquire 66.7% of Total Logistic Control, LLC (“TLC” or “Total Logistic Control”) from Christiana Companies, Inc. (“Christiana”) as part of the merger transaction between Christiana and Weatherford International, Inc. (“Weatherford”), which was completed on February 8, 1999.

We completed our initial public offering on March 4, 1999, resulting in the sale of 5,202,664 shares of common stock, par value $.01 per share (“Common Stock”), at $4.00 per share and raising $20,410,000 of initial equity capital, net of offering costs. On September 30, 2000, we acquired the remaining 33.3 percent of TLC from Weatherford in a cash purchase in the amount of $8,284,000.

Our growth strategy anticipated that a part of future growth would come from acquiring, either directly or through TLC, other businesses, which may or may not be related to TLC’s current business. In line with that strategy, on March 12, 1999, we announced the purchase of Zero Zone, Inc. (“Zero Zone”), a Wisconsin-based manufacturer of refrigerated and freezer display cases. We invested $4,500,000 in equity and capital notes for 70.6 percent of the outstanding common stock of Zero Zone. On December 31, 2002, we acquired the remaining 29.4 percent of Zero Zone. The consideration paid was 190,000 shares of Common Stock at a value of approximately $2,561,000.

We own 100 percent of our two operating subsidiaries, Total Logistic Control and Zero Zone, which together operate our principal business activities.

Logistic Services

We provide a full range of integrated third-party logistic services through TLC. TLC was formed in 1997 through a combination of the operations of two wholly-owned subsidiaries of Christiana: Wiscold, Inc. (“Wiscold”) and TLC. On September 1, 1992, Christiana acquired the assets of Wiscold, a company formed in 1915, which engaged in providing public refrigerated warehousing services, vegetable processing and individual quick freeze (“IQF”) services, automated poly bag and bulk packaging services. On January 4, 1994, Christiana acquired TLC, a Zeeland, Michigan-based firm that is a successor company to one founded in 1902.

Logistic Services include full service public and contract warehousing; dedicated third-party facility and operations management; transportation management and fleet operations; supply chain management; logistics consulting; food distribution; bottling, packaging and repackaging; and fulfillment services all provided in the full range of frozen, refrigerated and ambient temperatures. Integrated logistic services generally combine transportation, warehousing, and information services to manage the supply chain for a customer’s products from the point of manufacture to the point of consumption. Transportation operations include full service truckload, less-than-truckload, and pooled consolidation in both temperature-controlled and dry freight equipment, dedicated fleet services and specialized store-door delivery formats. Transportation and logistic management services are provided utilizing equipment we operate, as well as through carrier management and logistic management services utilizing third party common and contract carriers.

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Logistic Services is organized into two primary service lines: Supply Chain Services and Facility Management Services.

Supply Chain Services

Supply Chain Services offers customers a full range of transportation services, logistic management services, logistics consulting, and supply chain management solutions utilizing optimization software to design and operate integrated distribution programs. Logistic management services typically utilize third-party warehouse and transportation companies to provide the most cost effective service programs for our customers. TLC’s transportation fleet at December 31, 2003 consisted of 415 tractors, 418 refrigerated trailers and 305 dry trailers providing transportation services nationally. We also operate three transportation equipment maintenance facilities in Kalamazoo, Michigan (10,000 square feet), Erie, Pennsylvania (18,500 square feet) and Murfreesboro, Tennessee (5,000 square feet). Given these strategic locations, substantially all maintenance on our fleet of trucks is performed in-house.

Facility Management Services

Through Facility Management Services, we provide dedicated facility management services including contract manufacturing, distribution and packaging services and refrigerated and dry warehousing.

Dedicated Facility Management Services

These services include staffing and managing the operations of manufacturing, distribution, or packaging facilities. Our contracts are generally priced on a cost plus management fee basis and involve multi-year agreements. Currently under each contract, we do not own or have any capital exposure related to the facilities. A portion of our fee may be at risk if agreed upon key performance standards are not met. All contracts are cancelable subject to certain penalties. These dedicated facility management services are provided to large food or beverage companies and, in one instance, a professional journal fulfillment company. During 2003, we restructured one of our facility management contracts which resulted in the elimination of a long term commitment and lowered the annual fee we receive. In exchange, we received certain compensatory payments and a facility management contract without a term commitment. We continue to operate this facility and are responding to increased volume expectations. See “Managements Discussion and Analysis of Financial Condition and Results of Operations” To date, we have completed the following contracts to operate nine dedicated facility management projects:

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Refrigerated Warehousing

All of our refrigerated facilities are modern and efficient single story buildings at dock height elevation and are fully insulated. Our refrigerated logistic centers are as follows:

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Dry Warehousing

We operate a network of owned and leased dry (non-refrigerated) distribution centers comprising over 1,000,000 square feet of storage capacity. Dry distribution centers are located in Zeeland (2) and Kalamazoo, Michigan; Munster, Indiana and Dayton, New Jersey. Our lease on the Dayton, New Jersey facility expired in February 2004 and was not renewed. Additionally, we have contracts with approximately 22 dry warehouse facilities to provide warehousing and order fulfillment services on behalf of our clients under long-term logistic management services contracts.

Customers

Our customers consist of local, regional, national, and international firms engaged in food and beverage manufacturing, consumer and industrial product manufacturing, wholesale distribution and retailing. During 2003, our top 5 customers accounted for approximately 39 percent of total consolidated revenues. One of our customers, Diageo PLC, accounted for approximately 20 percent of total consolidated revenues in 2003 and 15 percent of total consolidated accounts receivable at December 31, 2003. We currently service approximately 1,100 customers.

Competition

Competition in integrated logistic services exists on a local, regional, national, and international basis, but generally has a predominant emphasis on transportation services. At present, we are not aware of any direct competitors providing the full scope of warehousing, transportation, logistic management and facility management services across the full range of temperatures as we provide. However, each of our individual business lines is highly fragmented with many local, regional, national and international competitors, especially in the transportation, dry and refrigerated warehousing industries. We believe we have a competitive edge in our ability to provide fully integrated logistic services designed to our customers’ distribution needs, which may, but would not necessarily, include utilizing our network of strategically located refrigerated and dry distribution centers, transportation equipment, and logistic management

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services. Our revenues and earnings can be affected by: changes in competitive pricing in both transportation and warehousing operations, particularly at the local level; poor achievement of performance standards established under contractual service agreements; harvest yields of certain vegetable and fruit crops grown in the Upper Midwest; changes in customers distribution patterns or channels; industry consolidation of our customers and/or competitors; vacancies in warehousing facilities: changes in short-term interest rates; general economic conditions; and energy costs, particularly diesel fuel and electric power. See “Managements Discussion And Analysis of Financial Conditions and Results of Operations” – “Cautionary Statements”.

Trademarks

TLC holds a trademark on its name and logo. No other trademarks, patents, licenses, franchises or concessions are considered material to its business.

Research and Development and Environmental Regulations

Expenditures for research and development and compliance with environmental regulations have not been, and are not anticipated to be, significant. See “Financial Statements and Supplementary Data” – “Note A”

Product Sales

Product Sales include the manufacture and sale of frozen and refrigerated glass door reach-in display cases used by grocery, convenience, general merchandise and drug store chains for merchandising of food, beverage and floral products through Zero Zone and operations in food distribution related to supplying municipal school districts with commodity and non-commodity food products. We also design and manufacture refrigeration and power distribution control systems for use by retail grocery chains, general merchandising, convenience and drugstore chains, industrial applications and ice rinks.

Zero Zone, headquartered in North Prairie, Wisconsin currently owns and operates three manufacturing facilities and leases one warehouse for offsite storage of finished products.

Our Product Sales office and manufacturing facility was built in 1995. With a 1999 addition plus a small, adjacent building purchased in 2000, this facility has a total of 119,000 square feet under roof. Our operations at this plant consist of light manufacturing, primarily heat exchange equipment assembly, panel forming and case assembly operations. A full line of reach-in cases produced at this facility is marketed under our Maximizer^® label. The different configurations include 1, 2, 3, 4, and 5 glass-door line-ups, back-to-back, and wrap-around XL, Floral and Pre-Cut refrigerated display cases.

The second manufacturing facility is located four miles east of North Prairie in Genesee, Wisconsin. This 34,000 square foot facility is primarily utilized for production of display casements with self-contained refrigeration equipment including the Open Merchandiser Cooler (“OMC”) Line. We renovated the Genesee location in 2000 to accommodate the OMC product line. This product line maintains safe product temperatures of 41ºF or lower, as required by food regulatory authorities.

Our third facility houses Zero Zone Refrigeration (“ZZR”) in Ramsey, Minnesota, which was acquired in February 2002. ZZR manufactures mechanical houses and refrigeration racks, electrical distribution panels, and stand-by power for supermarkets, general merchandise, convenience and drug store chains, industrial applications and ice rinks. The addition of refrigeration systems to Zero Zone’s product offering allows us to provide an integrated package of display cases and refrigeration systems to our customers.

We also currently lease a warehouse in Waukesha, Wisconsin used for storage of finished refrigerated display case products. The current lease of 79,000 square feet of space expires August 31, 2005.

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Customers and Competition

Competition in commercial refrigeration equipment manufacturing varies depending on the market segment being served. We are primarily a supplier to retailers engaged in grocery, general merchandising, drug, and convenience stores. We also sell to refrigeration contractors, dealers, and food wholesalers. In 2003, our top 5 customers accounted for approximately 15 percent of total consolidated revenues. One customer, Wal-Mart represented approximately 11 percent of our total consolidated revenues in 2003. Our active Product Sales customer list includes approximately 600 customers. Our backlog of Product Sales at December 31, 2003 and 2002 totaled approximately $16.5 million and $8.3 million, respectively.

Our Product Sales competition consists primarily of larger companies that supply a complete line of refrigerated equipment while our specialty is glass door, reach-in display cases, and refrigeration systems. Our direct competitors include divisions of large companies such as the Hussmann International division of Ingersoll Rand Company Limited; the Tyler division of United Technologies Corporation; the Hill-Phoenix division, of Dover Corp. and the Kysor division of Enodis plc. We believe we have a competitive advantage in our product quality, performance, and service, along with a flexible manufacturing process that allows for shorter lead times and quick response to our customers’ construction and refurbishment schedules.

Our revenues and earnings can be affected by the loss of a significant customer, industry consolidation among customers and/or competitors, loss of material vendors, changes in competitive pricing, raw material cost changes, changes in distribution channels, the activity level of new construction and refurbishment of grocery, general merchandising and chain store retailers, availability of skilled labor, interest rates, and general economic conditions. See “Managements Discussion And Analysis of Financial Conditions and Results of Operations” – “Cautionary Statements”.

EMPLOYEES

The following table shows the number of full-time employees at the dates indicated. We believe our relationship with our employees is good.

No employees, except for approximately 80 employees associated with the Logistic Services Ontario, California facility that we operate, are covered by a collective bargaining arrangement. This agreement expires in March 2006 and we expect that upon expiration of the collective bargaining arrangement we will be able to enter into compensation arrangements similar to those in place today.

EXECUTIVE OFFICERS OF THE COMPANY

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Mr. Donovan has served as President and Chief Executive Officer of the Company since July 2000. Mr. Donovan also served as Chief Financial Officer of the Company from December 1997 to December 2003 and as Chairman of the Company from December 1997 to July 2000. He served in the capacity of President, Chief Financial Officer and Executive Vice President as an executive officer of Christiana for more than five years prior to his employment with the Company. He was a principal of Lubar & Co. (private equity investment) for more than five years. Mr. Donovan is a director of Grey Wolf, Inc.

Sheldon B. Lubar has served as a director of the Company since December 1997 and Chairman since October 2003. Mr. Lubar is the Chairman and a principal of Lubar & Co. and also serves as a director of Weatherford International, Inc., Grant Prideco, Inc., Crosstex Energy LP, Crosstex Energy, Inc. and MGIC Investment Corporation.

David J. Lubar has served as a director of the Company since December 1997. He served as President of the Company from December 1997 to July 2000, and Chairman of the Company from July 2000 until October 2003. Mr. Lubar has been a principal of Lubar & Co. since 1983 and is the son of Sheldon B. Lubar.

Øyvind Solvang has been Vice President of the Company since December 1997. Mr. Solvang has resigned his position with the Company, effective March 31, 2004. Mr. Solvang has served as President of Cleary Gull Reiland & McDevitt, Inc., an investment banking firm, located in Milwaukee, Wisconsin from January 1996 to October 1996 and Chief Operating Officer from October 1995 to January 1996.

John Buono has been the Chief Financial Officer of the Company since December 2003. From April 2003 until December 2003 he served as the Chief Financial Officer of Geomarketing, Inc. Prior to that he was the Director- Accounting and Assistant Treasurer of Sybron International, Inc.

Industry Segments

We operate in two business segments: Logistic Services and Product Sales. Financial information concerning our industry segments is included in Note H to the Consolidated Financial Statements contained in Item 8 – “Financial Statements and Supplementary Data” – “Note H”.

Available Information

We maintain a website with the address www.c2-inc.com. We make available free of charge (other than an investor’s own Internet access charges) through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as soon as practicable after we electronically file such materials with, or furnish such material to, the Securities and Exchange Commission. We are not including information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.

Item 2. Properties

Logistic Services

At December 31, 2003, the Logistics Services segment directly owned or leased twelve warehouse facilities in five states. Of this total, seven are public refrigerated with the balance being non-refrigerated facilities. For a description of refrigerated facilities see “Business” – “Logistic Services” – “Facility Management Services” – “Refrigerated Warehouses”. Logistic Services’ refrigerated facilities are large single-story

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buildings constructed at dock height with full insulation and vapor barrier protection. Refrigeration is provided by screw-type compressors all of which employ ammonia-based cooling systems. The facilities are strategically located and well served by rail and truck.

At December 31, 2003, we directly operated five public non-refrigerated or dry warehouse distribution facilities located in Michigan (3), Indiana and New Jersey. In February 2004, the lease on the New Jersey facility expired and we discontinued operating that facility. Zeeland Distribution Center II, located in Zeeland, Michigan, is a Company-owned facility. The other dry facilities we operate are held under leases and generally serve the distribution requirements of customers on a month-to-month basis. These facilities are single story block or metal construction buildings. All dry facilities are constructed at dock height and are approved as food grade storage facilities as described on the following table:

Logistic Services owns one and leases two maintenance facilities. See “Business” – “Logistic Services” – “Supply Chain Services”. These facilities provide maintenance services and bases for operations for the Logistic Services’ fleet of tractors and trailers, and are located in Kalamazoo, Michigan (owned), Erie, Pennsylvania (leased) and Murfreesboro, Tennessee (leased).

Product Sales

The Product Sales segment currently owns and operates three manufacturing facilities and a display center and leases its warehouse for offsite storage of finished products as described in the following table:

We consider all of our facilities to be well maintained and suitable for their purposes. We have, from time to time, expanded and will continue to expand our facilities as the need arises. We expect to fund such expansions with internally generated funds or borrowings under the various credit facilities described in Item 8 “Financial Statements and Supplementary Data” – “Note C”.

Item 3. Legal Proceedings.

In the normal course of business, we are involved in litigation incidental to the conduct of our businesses. We do not believe that the ultimate disposition of currently pending claims, individually or in the aggregate, would have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

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

No matters were submitted to a vote of shareholders during the quarter ended December 31, 2003.

PART II

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

Our common stock was originally listed on the Nasdaq Small Cap Market effective March 5, 1999. On June 4, 1999, our common stock was listed on the Nasdaq National Market. The table below sets forth the reported high and low sales prices as reported by Nasdaq for the quarters ended March 31, 2002 through March 8, 2004.

At March 8, 2004, there were approximately 114 shareholders of record and over 400 round lot holders. There have been no dividends paid, and based on our strategic business plan of reinvesting cash flows, we do not anticipate paying any dividends in the near future.

Equity Compensation Plan Information.

See Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

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Item 6. Selected Financial Data.

FIVE YEAR FINANCIAL INFORMATION

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

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

General

Our strategy to build equity value is primarily focused on the development of two business segments, Logistic Services and Product Sales. Both have historically demonstrated high growth, in revenues and earnings. Our objective is to build long term sustainable business value by expanding these businesses, growing their earnings and strengthening our capital structure.

We have now completed the fifth year of operations since our inception in February 1999. Our businesses achieved important objectives and gained strength throughout 2003. Logistic Services revenues increased 5.3 percent in 2003 as we continued to execute our business plan, meeting planned performance goals and significantly increasing our profile as a leading provider of integrated logistic services. In the Product Sales segment, the economic environment in 2003 was a difficult one, particularly in the retail grocery, convenience and drug store industries. Product Sales declined 1.6 percent, attributable to lower sales of food products due to the loss of certain Michigan school districts school lunch programs during the year and continued low spending levels on retail store infrastructure that has characterized our Product Sales market over the past two years. We believe our Product Sales segment effectively strengthened its market position in its refrigerated and frozen casement sales and experienced increased commitments and order levels each quarter throughout 2003. Product Sales also made important progress integrating and driving synergies in its refrigeration systems and controls business and delivered improved operating results in each quarter throughout the year.

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A number of factors contribute to our ability to perform successfully. In Logistic Services success depends largely on our ability to design and execute complex logistics programs, the number of facilities and the level of capacity utilization in which we operate, the number of projects we add, efficient operations within our transportation activities and our ability to leverage our existing knowledge of the logistics business into productive operations that provide mutually beneficial relationships to ourselves and our customers. In Product Sales, we rely on orders based on past and new customer relationships, a healthy backlog of orders, timely deliveries and our ability to control costs while providing quality products and a high level of service at a competitive price.

In addition, the interest rate environment and our ability to effectively apply cash flow from operations to outstanding debt have continued to weigh favorably on our performance. Since 1999, our financial condition has strengthened each year, driven by the strong cash generating capability of our operating segments. At the end of 2003, our ratio of funded debt to equity was 1.29x, a significant improvement over 2002’s year end ratio of 1.82x and considerably less then our high of 2.93x at March 31, 1999. In addition, our funded debt to total capitalization at December 31, 2003 was 56.4 percent, down from 64.5 percent at the end of 2002 and the high point of 74.5 percent at the end of March 1999. In 2003, we generated $12.6 million in operating cash flow, reduced our debt by $11.6 million and made $3.5 million of capital expenditures to support business growth initiatives. Because of our increase in earnings from operations and lower debt levels within our Logistics Services, we have achieved reductions in the borrowing rate or spread we pay over LIBOR which has improved our earnings. We believe improved financial strength and lower leverage will enable us to grow more soundly, as well as to make future acquisitions, utilizing debt financing which currently carries a low after tax cost.

Revenues

Consolidated revenues increased 3.4 percent to $276.4 million in 2003 compared to 2002. Consolidated revenue in 2003 included Logistic Services revenues of $206.1 million, reflecting year-to-year growth of 5.3 percent and Product Sales revenue of $70.3 million, which decreased 1.6 percent from the prior year.

The increase in revenues from Logistic Services of approximately $10.3 million in 2003 was attributable to new and full year effects of dedicated facility projects (approximately $18.5 million), and volume growth in transportation operations (approximately $6.0 million). Those increases were partially offset by lower revenue in logistic management services (approximately $12.2 million) and refrigerated and dry warehousing (approximately $2.0 million).

Decreased Product Sales revenues in 2003 of approximately $1.2 million were primarily attributable to lower sales of food products due to the loss of certain Michigan school districts school lunch programs during the year (approximately $4.8 million) partially offset by increased sales of refrigerated casements and refrigeration system sales (approximately $3.6 million). Casement sales were soft in the first part of 2003 reflecting the generally depressed level of capital spending in retail grocery, convenience and drug store chains, but improved considerably in the second half of 2003, reversing a trend of soft sales experienced over the prior six quarters.

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Earnings From Operations

Earnings from operations attributable to Logistic Services in 2003 were $9.1 million or 4.4 percent of revenues, an increase of $1.0 million from $8.1 million and 4.1 percent of revenues in 2002. Increased earnings from operations were primarily from increased gross profit in facility management projects (approximately $3.1 million), and reduced depreciation and amortization (approximately $0.3 million), partially offset by reduced gross profit in transportation, warehousing and logistics (approximately $1.8 million) and increased selling, general and administrative expenses (approximately $0.6 million). Increases in dedicated facility projects resulted from the addition of incremental fee income attributable to six additional facility management projects commenced during 2002 and 2003. Depreciation and amortization decreased due to reduced capital expenditures and the full year effect of the sale of a refrigerated warehouse facility in May 2002. Selling general and administrative expenses increased as a result of business growth.

Earnings from operations attributable to Product Sales in 2003 were $2.4 million and 3.4 percent of revenues, down approximately $0.7 million from last year’s level of $3.0 million and 4.2 percent of revenues. Decreases in earnings from operations in the Product Sales segment were primarily from decreased gross profit in refrigerated casement and system sales (approximately $0.9 million) and food services (approximately $0.4 million), partially offset by a decrease in selling general and administrative expenses (approximately $0.5 million) and reduced depreciation and amortization expense (approximately $0.2 million). The decrease in gross profit was primarily due to intense price competition experienced in new sales of casements and refrigeration systems, and higher expenses associated with field work of certain products. The decrease in selling, general and administrative expenses reflect cost management initiatives and depreciation and amortization reduction resulted primarily from lower levels of capital spending in 2003.

Interest Expense

Consolidated net interest expense in 2003 was approximately $2.9 million compared to approximately $4.0 million reported for 2002, reflecting a 27.5 percent decline. The decrease in interest expense in 2003 was primarily attributable to improvements in the borrowing rate or the spread over LIBOR (the “LIBOR Margin”) we paid on outstanding loans in the Logistic Services segment. The LIBOR Margin declined from a high of 300 basis points in the first quarter of 2002 to 175 basis points in the fourth quarter of 2003. The LIBOR Margin is based on incentive pricing levels related to leverage which improved primarily from the previously discussed $11.6 million debt reduction in 2003, from internally generated funds and the increase in earnings from operations. In the first quarter of 2004, the LIBOR Margin decreased by an additional 25 basis points to 150 basis points.

Income Taxes

The effective tax rate was 43 percent in both 2003 and 2002. In 2004, the Company has introduced measures to mitigate taxes in certain jurisdictions and anticipates providing for taxes in 2004 at approximately 40 percent.

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Net Earnings

Because of the preceding, in 2003, consolidated net earnings totaled approximately $4.2 million or $0.75 per diluted share, representing an increase of 35.6 percent compared to net earnings in 2002 of $3.1 million or $0.58 per diluted share.

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

Revenues

Our consolidated revenues increased 25.8 percent to $267.2 million in 2002 compared to 2001. Our consolidated revenues in 2002 included $195.8 million of Logistic Services, reflecting year-to-year growth of 32.6 percent and Product Sales of $71.5 million, which increased 10.3 percent.

The increase in revenues from Logistic Services in 2002 was attributable to strong growth in dedicated facility projects (approximately $26.2 million), transportation operations (approximately $15.4 million) and logistic management services (approximately $9.4 million), partially offset by a reduction in dry warehousing operations (approximately $1.4 million) and international operations (approximately $1.6 million). Growth in the Logistic Services segment were largely due to the four new dedicated facility projects begun in 2001 and 2002. Logistic Services exited from performing services in its international operations at the end of 2001.

Increased Product Sales in 2002 were primarily attributable to the acquisition of Zero Zone Refrigeration (approximately $8.5 million), partially offset by lower sales of food products due to the loss of certain Michigan school districts during the year (approximately $1.9 million). We continue to market our services in non-commodity food products to school systems in regions of Michigan, Indiana, and Illinois, and we were awarded a five-year contract to provide certain food products to regions in the state of Michigan for additional volume commencing August 2003, which is expected to improve capacity utilization in one of our warehouse facilities in Michigan as well as our transportation fleet. Sales of refrigerated casements in 2002 were up slightly over those recorded in 2001, reflecting the generally depressed level of capital spending in retail grocery, convenience and drug store chains, which continued throughout 2002. Lower levels of volume throughout the retail chain industry resulted in aggressive price discounting for new sales programs, which required us to respond accordingly.

Earnings From Operations

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Earnings from operations attributable to Logistic Services in 2002 were $8.1 million, or 4.1% of sales, up from $4.5 million and 3.0% of sales in 2001. Increases came from growth in the gross profit of dedicated facility projects (approximately $3.3 million), logistic management services (approximately $0.7 million) and transportation operations (approximately $0.2 million) and reduced depreciation and amortization (approximately $0.4 million), partially offset by increased selling general and administrative expenses (approximately $1.1 million). Growth in these areas is consistent with our strategy of emphasizing growth in non-asset based services, which leverage our existing infrastructure, technology and personnel without requiring additional capital investment. Included in our facility management services activities are long-term contractual management services to staff and operate facilities, which are cost plus fee arrangements. During 2002, we started up four large new facility management projects under multi-year term service contracts. Our reduction in depreciation and amortization was largely due to the adoption of a new accounting standard that eliminated amortization of goodwill and indefinite-lived intangible assets. Selling general and administrative expense increased with the business, however, aggressive cost management initiatives enabled these expenses to be a lower percentage of total revenues in 2002 than in 2001.

Earnings from operations attributable to the Product Sales segment in 2002 were $3.0 million or 4.2% of sales, down from $4.0 million and 6.2% of sales in 2001, reflecting an increase in selling general and administrative expenses (approximately $1.7 million) and lower gross profits in sales of existing products (approximately $0.9 million), partially offset by sales of products from the newly acquired Zero Zone Refrigeration (approximately $1.4 million) and a reduction of depreciation and amortization (approximately $0.2 million). Existing product gross profit reduction was largely due to the loss of food distribution to certain Michigan school districts during the year. The decrease in operating margin is due in part to the acquisition of Zero Zone Refrigeration, which generated lower direct margin as volume was lower than anticipated, lower volume of food product sales to school districts and competitive price pressure for sales of refrigerated casements to new account relationships.

Interest Expense

Consolidated net interest expense in 2002 was $4.0 million compared to $5.1 million reported for 2001, reflecting a 21.3 percent decline in this expense. The decrease in interest expense in 2002 was primarily attributable to the decline in short-term interest rates, the sale of a refrigerated warehouse for $9.8 million, which reduced our revolving credit outstandings by a like amount and an additional $6.1 million of debt reduction in Logistic Services from internally generated cash flow, offset by an increase in debt of approximately $3.4 million associated with the acquisition and working capital requirements of Zero Zone Refrigeration. To reduce our exposure to higher interest rates in the future, we entered into a series of interest rate swap transactions beginning on September 28, 2001 and continuing through January 8, 2002.

Income Taxes

The effective tax rate in 2002 was 43 percent, compared to 42 percent in 2001. The increase was the result of higher state taxes, partially offset by the reduction in nondeductible goodwill.

Net Earnings

In 2002, consolidated net earnings totaled approximately $3.1 million, or $0.58 per diluted share, representing an increase of 277.0 percent compared to net earnings in 2001 of approximately $0.8 million, or $0.16 per diluted share. The increase in net earnings is attributable to the significant growth in revenues and operating profitability in Logistic Services in 2002, which was a meaningful improvement over the prior year’s results. Lower interest expense and the elimination of goodwill amortization were also contributing factors to the improvement in net earnings.

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Financial Condition, Liquidity and Capital Resources

Cash and cash equivalents at December 31, 2003 totaled approximately $2.2 million compared to approximately $4.5 million at December 31, 2002. The Company’s working capital at December 31, 2003 was approximately $2.9 million compared to approximately $4.0 million at December 31, 2002. Working capital declined in 2003 due to an increase in accrued liabilities attributable primarily to deferred revenues (approximately $2.6 million), taxes payable (approximately $0.8 million) and payroll and employee benefits (approximately $0.7 million), a decrease in cash (approximately $2.3 million) and a reduction of inventories in the Product Sales segment (approximately $1.2 million), partially offset by an increase in accounts receivable (approximately $4.4 million) and a decrease in short term debt (approximately $2.3 million).

Operating activities in 2003 provided cash of approximately $12.6 million compared to approximately $12.3 million provided in 2002. In 2003, cash provided by operating activities was derived primarily from net earnings of approximately $4.2 million, depreciation and amortization expense of approximately $7.0 million and a net decrease in working capital accounts discussed above of approximately $1.1 million.

Net cash used in investing activities in 2003 totaled approximately $3.2 million, which compares to a use of cash in 2002 in investing activities of approximately $5.0 million. The major component in the use of cash was capital expenditures made in 2003 of approximately $3.5 million, partially offset by the sale of certain assets of approximately $0.5 million. Capital expenditures in 2003 were principally comprised of $2.1 for machinery and equipment, $1.1 million related to buildings and improvements and $0.4 million for land. In 2003, we had more dedicated facility management projects’ which generally require little or no capital investment.

Cash flows used in financing activities totaled approximately $11.6 million in 2003 compared to $5.4 million used in 2002. The major components of cash flows used in financing activities in 2003 were the repayments of long-term debt.

Our current sources of capital include: cash generated from operations, existing cash resources, which at year-end totaled $2.2 million and unused availability under our existing credit facilities totaling approximately $38.7 million. We believe these resources are sufficient to fund projected cash requirements related to current operations. We expect capital expenditures in 2004 to approximate $5.0 million.

See “Item 8 – Financial Statements and Supplementary Data” – “Note C” to the financial statements.

We continue to evaluate new acquisitions in line with our strategic development plan. Future acquisitions may be funded through cash balances; cash flows from operations; existing credit facilities; potential new credit facilities; and/or the issuance of equity securities through an underwritten offering, a rights offering to shareholders or otherwise. We consider our existing credit facilities and internally generated cash flow to be adequate to fund our operations in the foreseeable future. See Item 8 – “Financial Statements and Supplementary Data” – “Note C” to the financial statements.

On February 13, 2004 we agreed to acquire the Athens Re-packaging business and assets from a subsidiary of Kellogg Company. We expect our investment in the business together with the need to fund a one month lag between our funding and the receipt of reimbursements for payroll and payments of the monthly lease associated with this business to be approximately $1.2 million.

Critical Accounting Policies

Consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This requires management to make estimates

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and judgments that affect reported amounts and related disclosures. Actual results could differ from those estimates. Policies that we consider to be the most critical in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our financial condition and results of operations and cash flows include:

Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. Under SFAS 142, which we adopted in 2002, goodwill and indefinite lived intangible assets are no longer amortized: however we do periodically review these assets for impairment. Any impairment review is highly judgmental as estimates of future sales, earnings, cash flows and an applicable discount rate are utilized to determine impairment. There was no impairment of goodwill upon the adoption of SFAS No. 142, nor upon any of our subsequent testing.

Emerging Issues Task Force Issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent” (“EITF 99-19”). Under EITF 99-19 we determine whether it is appropriate to record the gross amount of logistic sales and related costs or the net amount earned as management fees. Generally, when we are the primary obligor in a transaction, we are subject to inventory and/or credit risk, have latitude in establishing prices and selecting suppliers, or have several, but not all of these indicators, revenue is recorded gross. If we are not the primary obligor and amounts earned have little or no credit risk, we generally record the net amounts as management fees earned. The determination of recording transaction gross verses net have been particular to our dedicated facility management projects. In all but one project we have determined that the project should be recorded gross. The determination of whether to record transaction as gross verses net can have a significant impact on our revenues, cost of sales and related margins, but has no impact on our net earnings or cash flows.

See “Item 8 – Financial Statements and Supplementary Data” – “Note A” to the financial statements.

New Accounting Policies

In January 2003, the Financial Accounting Standards Board released Interpretation No. 46 “Consolidation of Variable Interest Entities”. See “Item 8 – Financial Statements and Supplementary Data” – “Note A” to the financial statements.

Off Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments

Following is a summary of our contractual obligations and payments due by period following December 31, 2003 (in thousands):

Forward Looking Information

Certain matters discussed in this Report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-

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looking statements can generally be identified as such because the context of the statement includes phrases such as we ‘believe,” “expect” or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements, including, among other, discussions of growth in the market and demand for services in third-party logistics, the outlook for growth in the market for new construction or refurbishment of grocery, drug and convenience stores, and thus demand for Product Sales. Such forward-looking statements are subject to certain risks and uncertainties, which could cause actual results or outcomes to differ materially from those currently anticipated. Although we believe our expectations are based on reasonable assumptions, we can give no assurance that our goals will be achieved. Important factors that could affect actual results or outcomes include, without limitation:

Cautionary Factors

We rely heavily on sales to key customers and could lose revenues if they stopped doing business with us.

Approximately 54.2 percent of our sales were to 10 customers and 19.6 percent and 10.8 percent were to single customers. In addition, 14.8 percent of our receivables were from a single customer. We have contractual relationships with several of our customers, including these customers. The loss of a key customer could significantly affect our operating performance.

We have many competitors and we are subject to competitive pricing pressure.

We are subject to competitive pricing pressures in both Logistic Services and Product Sales. Although we believe Logistic Services has a broad line of service covering a wide range of logistic solutions, we often compete at a local level and are subject to pricing pressure. Product Sales competition, especially in casement and refrigeration controls and systems sales, are subject to pricing pressure and competition from companies that may have substantially greater resources then ours.

Our warehousing business relies upon both short and long term contracts which expire from time to time and may not be able to be renewed.

We are subject to revenue and earnings volatility due to the nature of the warehousing business. Our warehousing contracts have both short and long term commitments and may result in vacancies as contracts expire and may not be renewed on a timely basis or at all.

Consolidation within the food industry or grocery, drug or convenience retailers could negatively impact our financial condition.

A significant amount of our Product Sales are to the grocery, drug and convenience retailers. Over the past several years, particularly in the grocery and drug areas, retailers have been consolidating or have experienced weakened financial condition and bankruptcy. This trend could continue to reduce the number of potential customers in these areas.

Our profitability may be adversely affected by performance, which does not meet standards established in contractual agreements relating to transportation operations, logistics management, dedicated facility operations and product warranty.

Logistic Services are sensitive to our ability to hire qualified employees especially in the areas of dedicated facility management and warehousing. The number of qualified employees available may restrict our ability to service existing or begin new projects in these areas. Most of our dedicated facility management contracts we have agree to certain key performance measures, the non-achievement of which could reduce our fee or be the basis of a contract termination. Additionally, we provide certain performance assurances in Product Sales, the non-achievement of which could have significant costs associated with field service or product replacement.

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Our profitability may be adversely affected by increases in interest rates due to our capital structure.

We have historically financed our operations through debt instruments, most of which are based on variable interest rates. We have mitigated this risk through matched derivative instruments that effectively swap our variable rate debt for fixed rates. While we have lower leverage then we have had in past years, we had approximately $42.8 million of variable rate debt of which $15.4 million is exposed to changes in interest rates at December 31, 2003. This could increase or decrease based on our future hedging strategy and cash needs.

Our Product Sales have largely relied on a limited number of suppliers of glass refrigerator doors.

Currently, casement sales, the largest part of our Product Sales segment, have relied on a single supplier of its glass refrigerator doors. We have available to us a limited number of other manufacturers of glass refrigerator doors. The abrupt loss of our principal supplier would have a significant negative impact on our operations.

Our Product Sales are sensitive to metal prices

Casement products and refrigeration systems, within the Product Sales segment are largely constructed from various metals, primarily steel and copper. To the extent, that price increases can not be passed along to customers, they could have an affect on our earnings.

The demand for or the profitability of our Logistic Services may be adversely affected by increased diesel fuel and energy prices.

Our Logistic Services rely heavily on the production, storage and transportation of products. Because a significant portion of our revenue is earned from providing transportation and fleet operations, an increase in fuel prices (to the extent that it is not recovered from the customer) could adversely affect our earnings. In addition, higher energy prices may contribute to higher operating costs primarily within our refrigerated warehouse facilities which are significant consumers of electric power.

The demand for our Logistic Services may be adversely affected by weather conditions.

Weather can affect us across a broad line of Logistic Services. Adverse road conditions may affect our ability to transport goods. Poor weather conditions in farming regions in the Upper Midwest could decrease production yield and consequently the need for transporting product and providing warehouse space. Unusually warm or cold weather could significantly increase or decease our heating or air-conditioning expenses in temperature controlled environments.

Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included are made only as of the date of this report. We are not obligated to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Risk Management

We are exposed to market risk from changes in interest rates. To reduce our risk from interest rate fluctuations, we occasionally enter into various hedging transactions. We do not anticipate material changes to our primary market risks other than fluctuations from floating rate debt levels. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives.

From time to time, we use interest rate swaps to reduce our exposure to interest rate movements. Our net exposure to interest rate risk consists of floating rate credit lines whose interest rates are determined by the prime rate as publicly announced from time to time by U.S. Bank or the Eurodollar Rate (equal to the interbank offered rate divided by (1 – the eurodollar reserve percentage))(“LIBOR”) and variable rate bonds whose rate is based upon the seven day variable interest rate based upon prevailing market conditions that would permit the sale of similar securities at par plus accrued interest (the “Variable Bond Rate”). The swap agreement rates and durations as of December 31, 2003 are as follows:

The model below quantifies our sensitivity to interest rate movements as determined by LIBOR, the Variable Bond Rate and the effect of the interest rate swaps described above. The model assumes a) a base LIBOR Rate of 1.15 % (the “LIBOR Base Rate”) which approximates the December 31, 2003 three month LIBOR Rate, b) our floating rate debt is equal to our December 31, 2003 balance of $42.8 million, c) we pay interest on floating rate debt at TLC equal to LIBOR plus 175 basis points, d) We pay interest on floating LIBOR based debt at Zero Zone equal to prime rate minus 125 basis points, e) We pay Variable Bond Rate debt at Zero Zone at 1.25 percent (the “Variable Bond Base Rate”), f) We have swaps equal to $27.42 million (equal to the Company’s notional amount of interest rate swaps at December 31, 2003 and g) the LIBOR Rate and Variable Bond Rate vary by 10% of the LIBOR Base Rate and the Variable Bond Base Rate.

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Item 8. Financial Statement and Supplementary Data.

See Index to Financial Information on page 25.

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

None.

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the date of this annual report on Form 10-K, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the date of this Annual Report on Form 10-K to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-K was prepared.

Changes in internal controls. There were not any significant changes in the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART III

Item 10. Directors and Executive Officers of Registrant.

The information required by this Item is included under the captions “Election of Directors”, “Board of Directors – Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance”, respectively, in the Company’s definitive Proxy Statement for its 2004 Annual Meeting of Shareholders (“Proxy Statement”) and when the Proxy Statement is filed with the Securities and Exchange Commission, will be incorporated herein by reference. Information with respect to the executive officers of the Company appears in Part I, page 7 of this Annual Report on Form 10-K.

The Company has adopted a Code of Ethics that applies to all employees and directors of the Company. The Company has posted a copy of the Code of Ethics on its website at www.c2-inc.com. The Company intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by posting such information on its website referred to above.

Item 11. Executive Compensation.

The information required by this Item is included under the captions “Board of Directors – Directors Compensation” and “Executive Compensation” in the Proxy Statement and when the Proxy Statement is filed with the Securities and Exchange Commission, will be incorporated herein by reference; provided, however, that the subsection entitled “Executive Compensation – Report on Executive Compensation” shall not be deemed to be incorporated herein by reference.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is included under the caption “Principal Shareholders” in the Proxy Statement and when the Proxy Statement is filed with the Securities and Exchange Commission, will be incorporated herein by reference.

The following table provides information about our equity compensation plan as of December 31, 2003:

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is included under the caption “Certain Transactions” in the Proxy Statement and when the Proxy Statement is filed with the Securities and Exchange Commission, will be incorporated herein by reference.

PART IV

Item 14. Auditor Fees and Services.

The information required by this Item is included under the caption “Independent Auditors Fees” in the Proxy Statement and, when the Proxy Statement is filed, will be incorporated herein by reference.

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

A report on Form 8-K was filed on October 21, 2003, furnishing under Item 12 the Company’s press release announcing results of operations for the three months ended September 30, 2003.

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SIGNATURES

Pursuant to the requirement of Section 13 of 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.

Pursuant to the requirements of the Securities Exchange Act of 1934 this 10-K report has been signed below on March 9, 2004 the following persons on behalf of the Registrant and in the capacity indicated.

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C2, INC.

FINANCIAL INFORMATION

FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2003

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C2, INC.

INDEX TO FINANCIAL INFORMATION

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders of C2, Inc.

We have audited the accompanying consolidated balance sheets of C2, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The Company’s financial statements for the year ended December 31, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements, in their report dated February 8, 2002.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such 2003 and 2002 financial statements present fairly, in all material respects, the financial position of C2, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As described in Note A to the consolidated financial statements, on January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets.”

Deloitte & Touche LLP

Milwaukee, Wisconsin

February 13, 2004

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The following report is a copy of a report previously issued by Arthur Andersen LLP in connection with their audit of the Company’s financial statements as of and for the year ended December 31, 2001. The opinion has not been reissued by Arthur Andersen LLP.

Report of Independent Public Accountants

To the Shareholders of C2, Inc.:

We have audited the accompanying consolidated balance sheets of C2, Inc. and subsidiaries (a Wisconsin Corporation) as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements 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 financial position of C2, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin

February 8, 2002

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C2, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2003 AND 2002

(In thousands except share and per share data)

See notes to consolidated financial statements.

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C2, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(Dollars in thousands except per share data)

See notes to consolidated financial statements.

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C2, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(In thousands)