UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2001

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

FOR THE TRANSITION PERIOD ~~FROM TO~~ FROM____________ TO___________

333-45235 ~~COMMISSION FILE NUMBER~~

COMMISSION FILE NUMBER

[GRAPHIC OMITTED]

PERRY JUDD’S HOLDINGS, INC. ~~(Exact name of registrant as specified in its charter)~~

DELAWARE	51-0365965
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)
575 WEST MADISON STREET, WATERLOO, WISCONSIN	53594
(Address of principal executive offices)	(Zip Code)

(Exact name of registrant as specified in its charter)

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

DELAWARE		51-0365965
(State or other jurisdiction of		(IRS Employer Identification Number)
incorporation or organization)

575 WEST MADISON STREET, WATERLOO, WISCONSIN		53594
(Address of principal executive offices)		(Zip Code)

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

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 in the past 90 days. YES ý No o

As of ~~August~~November 71, 2001 there were 901,317 shares of Registrant’s Common Stock outstanding, par value $.001 per share. There is no established public trading market for the Registrant’s Common Stock.

PERRY JUDD’S HOLDINGS, INC. ~~QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 INDEX~~

PART I. FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000
		Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2001 and June 30, 2000
		Condensed Consolidated Statements of Minority Interests, Preferred Stock and Stockholders’ Equity for the six months ended June 30, 2001
		Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2001 and June 30, 2000
		Notes to Condensed Consolidated Financial Statements
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
PART II. OTHER INFORMATION
	ITEM 6. Exhibits and Reports on Form 8-K

QUARTERLY REPORT ON FORM 10-Q

~~PERRY~~FOR ~~JUDD’S HOLDINGS, INC.~~ ~~ITEM~~THE ~~I. FINANCIAL~~QUARTERLY ~~STATEMENTS CONDENSED~~PERIOD ~~CONSOLIDATED~~ENDED ~~BALANCE SHEETS JUNE~~SEPTEMBER 30, 2001 ~~AND DECEMBER 31, 2000 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)~~

				June 30,					December 31,
ASSETS				2001					2000
				(Unaudited)					(Note)
Current Assets:
	Cash and cash equivalents			$		1,461			$	4,924
	Accounts receivable - net of allowance for doubtful accounts of $1,466 and $1,239, respectively			45,166					63,123
	Inventories			21,942					19,374
	Prepaid expenses			2,007					1,645
	Deferred income taxes			1,214					1,145
			Total current assets	71,790					90,211
	Property, plant and equipment, at cost			152,091					141,195
	Less accumulated depreciation and amortization			45,163					39,667
		Property, plant and equipment - net		106,928					101,528
	Goodwill - net			29,905					30,380
	Other assets - net			5,395					6,150
TOTAL				$		214,018			$	228,269
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable and accrued expenses			$	39,297				$	50,456
	Current maturities of long-term debt			6,042					6,018
			Total current liabilities	45,339					56,474
	Long-term debt (less current portion)			119,800					122,800
	Deferred income taxes			15,645					15,816
	Other noncurrent obligations			9,529					9,846
			Total liabilities	190,313					204,936
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			3,369					3,254
STOCKHOLDERS’ EQUITY:
	Preferred stock (Series A) - par value $0.001 per share, 775,000 shares authorized, 160,095 and 148,731 shares issued and outstanding, respectively			16,009					14,873
	Common stock - par value $0.001 per share, 1,000,000 shares authorized, 901,317 shares issued and outstanding			1					1
	Additional paid-in capital			22,200					22,148
	Accumulated deficit			(17,874				)	(16,943		)
			Total stockholders’ equity	20,336					20,079
TOTAL				$			214,018		$	228,269

INDEX

PART I.	FINANCIAL INFORMATION

	ITEM I.			Financial Statements

		Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000

		Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2001 and September 30, 2000

		Condensed Consolidated Statements of Minority Interests, Preferred Stock and Stockholders’ Equity for the Nine Months ended September 30, 2001

		Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2001 and September 30, 2000

		Notes to Condensed Consolidated Financial Statements as of September 30, 2001

	ITEM 2.			Management’s Discussion and Analysis of Financial Condition
			and Results of Operations

	ITEM 3.			Quantitative and Qualitative Disclosure About Market Risk

PART II.	OTHER INFORMATION

	ITEM 6.			Exhibits and Reports on Form 8-K

PERRY JUDD’S HOLDINGS, INC.

ITEM I. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2001 AND DECEMBER 31, 2000

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

	September 30,			December 31,
ASSETS	2001			2000
	(Unaudited)			(Note)
CURRENT ASSETS:

Cash and cash equivalents	$	2,424		$	4,924
Accounts receivable - net of allowance for doubtful accounts of $1,546 and $1,239, respectively	56,076			63,123
Inventories	18,584			19,374
Prepaid expenses	1,883			1,645
Deferred income taxes	1,271			1,145

Total current assets	80,238			90,211

Property, plant and equipment, at cost	152,741			141,195
Less accumulated depreciation and amortization	48,785			39,667
Property, plant and equipment - net	103,956			101,528
Goodwill - net	29,668			30,380
Other assets - net	5,018			6,150

TOTAL ASSETS	$	218,880		$	228,269

LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	41,381		$	50,456
Current maturities of long-term debt	8,330			6,018

Total current liabilities	49,711			56,474

Long-term debt (less current portion)	118,300			122,800
Deferred income taxes	15,773			15,816
Other noncurrent obligations	9,591			9,846
Total liabilities	193,375			204,936

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	3,428			3,254

STOCKHOLDERS’ EQUITY:

Preferred stock (Series A) - par value $0.001 per share, 775,000 shares authorized, 166,100 and 148,731 shares issued and outstanding, respectively	16,610			14,873
Common stock - par value $0.001 per share, 1,000,000 shares authorized, 901,317 shares issued and outstanding, respectively	1			1
Additional paid-in capital	22,240			22,148
Accumulated deficit	(16,774		)	(16,943		)
Total stockholders’ equity	22,077			20,079
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	218,880		$	228,269

Note: Derived from audited financial statements. See notes to condensed consolidated financial statements.

PERRY JUDD’S HOLDINGS, INC. ~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000 (DOLLARS IN THOUSANDS)~~

		THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
		2001			2000			2001			2000
NET SALES		$	76,110		$	79,765		$	156,370		$	159,379
OPERATING EXPENSES:
	Costs of production and distribution	60,056			63,132			124,470			128,537
	Selling, general and administrative	7,856			8,637			15,827			16,758
	Depreciation	3,604			3,369			7,268			6,748
	Amortization of intangibles	313			348			626			808
	Gain on disposals of equipment	(321		)	(43		)	(381		)	(103		)
		71,508			75,443			147,810			152,748
INCOME FROM OPERATIONS		4,602			4,322			8,560			6,631
OTHER (INCOME) EXPENSES:
	Interest expense	3,276			3,451			6,641			6,933
	Interest income	(38		)	(193		)	(92		)	(353		)
	Amortization of deferred financing costs	300			300			600			600
	Other financial expenses	112			93			219			194
		3,650			3,651			7,368			7,374
INCOME (LOSS) BEFORE INCOME TAXES		952			671			1,192			(743		)
PROVISION (BENEFIT) FOR INCOME TAXES		503			136			715			(272		)
INCOME (LOSS) BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK		449			535			477			(471		)
DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK		130			274			272			546
NET INCOME (LOSS)		$	319		$	261		$	205		$	(1,017	)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

(DOLLARS IN THOUSANDS)

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2001			2000			2001			2000

NET SALES	$	86,975		$	93,620		$	243,345		$	252,999

OPERATING EXPENSES:
Costs of production and distribution	68,436			75,045			192,906			203,582
Selling, general and administrative	7,816			8,533			23,643			25,291
Depreciation	3,622			3,373			10,890			10,121
Amortization of intangibles	312			318			938			1,126
Gain on disposals of equipment	(58		)	(48		)	(439		)	(151		)
	80,128			87,221			227,938			239,969

INCOME FROM OPERATIONS	6,847			6,399			15,407			13,030

OTHER (INCOME) EXPENSES:
Interest expense	3,281			3,472			9,922			10,405
Interest income	(15		)	(147		)	(107		)	(500		)
Amortization of deferred financing costs	300			300			900			900
Other financial expenses	106			92			325			286

	3,672			3,717			11,040			11,091

INCOME BEFORE INCOME TAXES	3,175			2,682			4,367			1,939

PROVISION FOR INCOME TAXES	1,351			1,442			2,066			1,170

INCOME BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK	1,824			1,240			2,301			769

DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK	123			2,549			395			3,095

NET INCOME (LOSS)	$	1,701		$	(1,309	)	$	1,906		$	(2,326	)

See notes to condensed consolidated financial statements.

PERRY JUDD’S HOLDINGS, INC. ~~CONSOLIDATED STATEMENTS OF MINORITY INTERESTS, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2001 (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	—	—		—	—		—	—		205
Stock dividends	—	—		11,364	1,136		—	—		(1,136		)
Accretion on Series A redeemable preferred stock	—	115		—	—		—	—		—
Provision for non-cash compensation related to common stock options	—	—		—	—		—	52		—
June 30, 2001	43,941	$	3,369	160,095	$	16,009	901,317	$	22,201	$	(17,874	)

CONSOLIDATED STATEMENTS OF MINORITY INTERESTS, PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2001

(DOLLARS IN THOUSANDS)

							Common Stock
							and Additional
	Minority Interests			Preferred Stock			Paid-in Capital

		Carrying			Carrying			Carrying		Accumulated
	Shares	Value		Shares	Value		Shares	Value			Deficit

December 31, 2000	43,941	$	3,254	148,731	$	14,873	901,317	$	22,149		$	(16,943	)

Net income	--	--		--	--		--	--			1,906

Stock dividends	--	--		17,369	1,737		--	--			(1,737		)

Accretion on Series A redeemable preferred stock	--	174		--	--		--	--			--

Provision for non-cash compensation related to common stock options	--	--		--	--		--	92			--

September 30, 2001	43,941	$	3,428	166,100	$	16,610	901,317	$	22,241		$	(16,774	)

See notes to condensed consolidated financial statements.

PERRY JUDD’S HOLDINGS, INC. ~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000 (DOLLARS IN THOUSANDS)~~

					SIX MONTHS ENDED JUNE 30,
					2001			2000
OPERATING ACTIVITIES:
	Net income (loss)				$	205		$	(1,017	)
	Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
	Depreciation and amortization				8,494			8,156
	Accretion on redeemable preferred stock				115			—
	Compensation related to common stock options				52			—
	Deferred income tax provision				(240		)	254
	Gain on disposals of equipment				(381		)	(103		)
	Changes in assets and liabilities:
		Receivables			17,957			17,493
		Inventories			(2,568		)	(3,211		)
		Accounts payable and accrued expenses			(11,159		)	(7,795		)
		Other assets and liabilities - net			(559		)	(93		)
			Net cash provided by operating activities		11,916			13,684
INVESTING ACTIVITIES:
	Proceeds from disposals of equipment				637			29
	Additions to property, plant and equipment - net				(13,040		)	(4,795		)
			Net cash used by investing activities		(12,403		)	(4,766		)
FINANCING ACTIVITIES:
	Increase in revolving debt				42			—
	Debt repayments				(3,018		)	(3,042		)
				Net cash used by financing activities	(2,976		)	(3,042		)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(3,463		)	5,876
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					4,924			3,932
CASH AND CASH EQUIVALENTS, END OF PERIOD					$	1,461		$	9,808
SUPPLEMENTAL CASH FLOW INFORMATION:
	Cash paid for interest				$	6,536		$	6,710
	Cash paid for income taxes				125			823
NON-CASH TRANSACTIONS:
	Stock dividends on preferred stock				$	1,136		$	980
	Stock dividends on redeemable preferred stock				—			81

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

(DOLLARS IN THOUSANDS)

	NINE MONTHS ENDED
	SEPTEMBER 30,
	2001			2000

OPERATING ACTIVITIES:

Net income (loss)	$	1,906		$	(2,326	)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization	12,728			12,148
Accretion on redeemable preferred stock	174			1,001
Compensation related to common stock options	92			--
Deferred income tax provision	(169		)	108
Gain on disposals of equipment	(439		)	(151		)
Changes in assets and liabilities:
Receivables	7,047			11,024
Inventories	790			(1,005		)
Accounts payable and accrued expenses	(9,075		)	(7,551		)
Other assets and liabilities - net	(312		)	(1		)

Net cash provided by operating activities	12,742			13,247

INVESTING ACTIVITIES:
Proceeds from disposal of equipment	637			29
Additions to property, plant and equipment - net	(13,691		)	(6,995		)

Net cash used in investing activities	(13,054		)	(6,966		)

FINANCING ACTIVITIES:
Increase in revolving debt	2,330			4,983
Debt repayments	(4,518		)	(4,565		)
Redemption of Redeemable Series B and D Preferred Stock	--			(7,341		)


Net cash used in financing activities	(2,188		)	(6,923		)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(2,500		)	(642		)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,924			3,932


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,424		$	3,290

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	6,791		$	7,101
Cash paid for income taxes	193			818

NON-CASH TRANSACTIONS:
Stock dividends on preferred stock	$	1,737		$	1,499
Stock dividends on redeemable preferred stock	--			81

See notes to condensed consolidated financial statements.

PERRY JUDD’S HOLDINGS, INC. ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS)~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2001

(DOLLARS IN THOUSANDS)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared by Perry Judd’s Holdings, Inc. (collectively with its subsidiaries, the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission and reflect normal and recurring adjustments, which are, in the opinion of the Company, considered necessary to present fairly the consolidated financial position of the Company as of ~~June~~September 30, 2001 and ~~December 31, 2000 and~~ its related results of operations and cash flows for the three and ~~six~~nine month periods ended ~~June~~September 30, 2001 and ~~June~~September 30, 2000. As permitted by these regulations, these condensed consolidated financial statements do not include all information required by accounting principles generally accepted in the United States ~~of America~~ to be included in an annual set of ~~financial~~ financial statements; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The Company’s ~~condensed~~ condensed consolidated balance sheet as of December 31, 2000 was derived from ~~the~~ the Company’s latest audited consolidated financial statements. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the latest audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

2. INVENTORIES

Inventories are summarized as follows:

	June 30,			December 31,
		September 30,			December 31,
	~~2001~~	2001		~~2000~~	2000
Raw materials	$	~~10,299~~$	8,977	$	~~9,544~~$	9,544
Work-in-process	~~8,009~~	6,006		~~6,238~~	6,238
Production supplies and maintenance parts	~~3,634~~	3,601		~~3,592~~	3,592
Total	$	~~21,942~~$	18,584	$	~~19,374~~$	19,374

3. RECLASSIFICATIONS

In May 2000, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 00-10, “Accounting for Shipping and Handling Fees and Costs.” EITF 00-10 provides guidance on the financial reporting of shipping and handling fees and costs in the consolidated statements of operations. During the year ended December 31, 2000, the Company adopted EITF 00-10 and, as a result, amounts billed to a customer in a sale transaction related to shipping costs are reported as net sales and the related costs incurred for shipping are reported as costs of production and distribution. The Company previously reported shipping costs as a reduction of net sales. Prior year condensed consolidated financial statements have been reclassified to conform to the new requirements.

4. ~~NEW ACCOUNTING~~ RETIREMENT ~~PRONOUNCEMENT~~PLAN TERMINATION

Effective December 31, 1997, benefits payable under a defined benefit pension plan existing at the time of the Company’s December 16, 1997 acquisition of Judd’s Incorporated were frozen. On December 14, 2000, the Company’s Board of Directors approved a resolution to terminate the plan. In June 2001, the Company received a favorable advance termination letter from the Internal Revenue Service and has substantially completed the termination of the plan through lump sum payments and the purchase of annuity contracts. During the nine months ended September 30, 2001, the Company recorded a gain on the termination of the pension plan of approximately $1,233,000. Additional net excess plan assets could revert to the Company by December 31, 2001.

5. NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 is effective for the Company beginning January 1, 2002, and applies to goodwill and other intangible assets recognized in the Company’s consolidated balance sheet at that date, regardless of when those assets were initially recognized. The Company is continuing to assess the impact of SFAS No. 142 on its consolidated financial statements.

ITEM ~~2. MANAGEMENT’S~~ ~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~2

~~Recent~~MANAGEMENT'S DISCUSSION ~~Developments~~AND ANALYSIS OF FINANCIAL CONDITION

~~In June~~AND ~~2001,~~RESULTS aOF major customer, Time, Inc., notified the Company that it would not renew its printing contract for the production of three weekly publications at its expiration on December 31, 2003. The production that is the subject of this contract amounted to approximately 7.5% of the Company’s consolidated net sales for 2000. Time, Inc. accounted for approximately 15% of the Company’s consolidated net sales in 2000.OPERATIONS

If this loss of business is not replaced, the Company would experience a material adverse effect on its financial condition and results of operations. However, the Company believes that this lost business will be replaced and, therefore, the Company does not expect a material adverse effect on its financial condition and results of operations.

Results of operations

~~Six~~ Nine Months ended ~~June~~September 30, 2001 versus ~~Six~~Nine Months ended ~~June~~ September 30, 2000.

Net sales decreased $39.07 million or 13.98% to $~~156~~243.43 million for the ~~six~~nine months ~~ended~~ ~~June~~ ended September 30, 2001 from $~~159~~253.40 million for the ~~six~~nine months ended September ~~June~~ 30, 2000. The decrease resulted primarily from the sale of Judd’s Online on October 19, 2000 whose net sales of $24.82 million are included in the 2000 results and from lower volume of production units from new and existing customers.

Costs of production and distribution decreased $410.07 million or 35.13% to $~~124~~192.~~5 million~~9 million for the ~~six~~nine months ended ~~June~~September 30, 2001 from $~~128~~203.56 million for the ~~six~~nine months ended ~~June~~September 30, 2000, principally due to the sale of Judd’s Online, ~~and certain~~ lower operating expenses resulting from lower production levels and the termination of a defined benefit pension plan. Costs of production as a percent of net sales were 79.63% for the ~~six~~nine months ended ~~June~~ September 30, 2001 as compared to 80.65% experienced in the ~~six~~nine months ended ~~June~~September 30, 2000. Paper costs were 2423.39% of net sales for the ~~six~~nine months ended ~~June~~September 30, 2001 versus 2223.83% for the ~~six~~nine months ended ~~June~~September 30, 2000.

Selling, general and administrative expenses decreased $1.07 million or 6.07% to $1523.86 million for the ~~six~~nine months ended ~~June~~September 30, 2001 compared to $1625.83 million ~~for~~ for the ~~six~~nine months ended ~~June~~September 30, 2000, principally related to the sale of Judd’s Online. Selling, general and administrative expenses decreased as a percent of net sales to 109.17% in the 2001 period compared to 10.50% in the 2000 period.

Depreciation expense increased $0.68 million or 97.09% to $710.39 million for the ~~six~~nine months ~~ended~~ ~~June~~ ended September 30, 2001 from $610.71 million for the ~~six~~nine months ended ~~June~~ September 30, 2000 as a result of new assets placed in service within the past twelve months.

Income from operations increased $2.04 million or 3018.35% to $815.64 million for the ~~six~~nine months ended ~~June~~September 30, 2001 from $613.60 million for the ~~six~~nine months ended September ~~June~~ 30, 2000, due to the factors discussed in the preceding paragraphs.

Interest expense decreased $0.35 million or 4.38% to $69.69 million for the ~~six~~nine months ~~ended~~ ~~June~~ ended September 30, 2001 from $610.94 million for the ~~six~~nine months ended ~~June~~ September 30, 2000 asdue ~~a result~~to of reduced debt levels ~~during~~and ~~the~~lower ~~2001~~borrowing ~~period compared to the 2000 period~~rates.

Three Months ended ~~June~~September 30, 2001 versus Three Months ended ~~June~~ September 30, 2000.

Net sales decreased $36.76 million or 47.61% to $7687.10 million for the three months ended ~~June~~September 30, 2001 from $7993.86 million for the three months ended September ~~June~~ 30, 2000. The decrease resulted from substantially lower ~~production~~ ~~volumes~~volume ~~during the second quarter~~ of ~~2001~~production ~~versus~~units ~~the~~from ~~second~~new ~~quarter of 2000~~ and ~~the sale of Judd’s Online on October 19, 2000 whose net sales of~~ ~~$1.5~~ existing ~~million are included in the 2000 results~~customers.

Costs of production and distribution decreased $36.06 million or 48.8% to $6068.14 million for the three months ended ~~June~~September 30, 2001 from $6375.10 million for the three months ended ~~June~~September 30, 2000, principally ~~due~~from to the ~~factors~~overall ~~mentioned~~decreased involume of production and the ~~preceding~~ ~~paragraph~~termination of a defined benefit pension plan. Costs of production as a percent of net sales were 7978.06% for the three months ended ~~June~~ September 30, 2001 as compared to 79 80.1% experienced in the three months ended ~~June~~September 30, 2000. Paper costs were 2423.02% of net sales for the three months ended ~~June~~September 30, 2001 versus 23 24.01% for the three months ended ~~June~~September 30, 2000.

Selling, general and administrative expenses decreased $0.7 million or 8.12% to $7.98 million for the three months ended ~~June~~September 30, 2001 compared to $8.65 million ~~for~~ for the three months ended ~~June~~September 30, 2000, ~~primarily~~principally related to the sale of Judd’s Online. Selling, general and administrative expenses decreased as a percent of net sales to 109.40% in the 2001 period compared to 109.81% in the 2000 period.

Depreciation expense increased $0.2 million or 5.9% to $3.6 million for the three months ended ~~June~~September 30, 2001 from $3.4 million for the three months ended ~~June~~ September 30, 2000 as a result of new assets placed in service within the past twelve months.

Income from operations increased $0.34 million or 76.03% to $4.6.8 million for the three months ended ~~June~~September 30, 2001 from $46.34 million for the three months ended ~~June~~ September 30, 2000, due to the factors discussed in the preceding paragraphs.

Interest expense decreased $0.2 million or 5.7% to $3.3 million for the three months ended ~~June~~September 30, 2001 from $3.5 million for the three months ended ~~June~~ September 30, 2000 as a result of reduced debt levels ~~during~~and ~~the~~lower ~~2001~~borrowing ~~period~~rates ~~compared to~~ during the ~~2000~~ period.

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, non-cash compensation related to common stock options and gains and losses on disposition of assets (“EBITDA”) was $1526.96 million for the ~~six~~nine months ended ~~June~~September 30, 2001 and $1323.9 8 million for the ~~six~~nine months ended ~~June~~September 30, 2000.

Working capital was $2630.5 million and $33.7 million at ~~June~~September 30, 2001 and December 31, 2000, respectively.

Since the inception of operations on April 28, 1995, the ~~company~~Company has funded the majority of its needs for production equipment through operating leases and borrowings under its Amended and Restated Credit Agreement (the “Credit Agreement”), which expires on December 15, 2002. The Credit Agreement is comprised of a $45 million revolving credit facility based upon a borrowing base of eligible accounts receivable and inventory amounts and a term loan facility with an outstanding balance of $109.83 million at ~~June~~September 30, 2001. The ~~Credit~~ Credit Agreement provides for monthly reductions in its term loan facility and borrowings bear interest at rates that fluctuate with the prime rate and the Eurodollar rate. As of ~~June~~September 30, 2001, the Company had $~~42,000~~2.3 million outstanding under its revolving credit facility.

During the ~~six~~nine months ended ~~June~~September 30, 2001, approximately $9.53 million was expended on capital projects that will be converted to operating leases in the near future.

Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s diverse operations and large customer base. As of ~~June~~September 30, 2001, the Company had no significant concentrations of credit risk.

The Company believes that its liquidity, capital resources and cash flows are sufficient to fund planned capital expenditures, working capital requirements and interest and principal payments for the foreseeable future.

Seasonality

Results of operations for this interim period are not necessarily indicative of results for the full year. The Company’s operations are seasonal. Historically, approximately two-thirds of its income from operations has been generated in the second half of the fiscal year, primarily due to the higher number of magazine pages, new product launches and back-to-school and holiday catalog promotions.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The information called for under this item is contained in Notes 2 and 4 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. The Company has not experienced any material changes in its market risk exposures since December 31, 2000.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The quarterly report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “will,” “estimate,” “plans,” “expects,” “intends,” and similar words and expressions are intended to identify forward-looking statements. Although we believe that such forward-looking statements are reasonable, we cannot assure that such ~~expectations~~ expectations will prove to be correct. Important language regarding factors which could cause actual results to differ materially from such expectations are disclosed in this Report, ~~and in~~ our Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission on March 30, 2001, and other reports filed with the Securities and Exchange Commission. All forward-looking statements attributable to the Company are expressly qualified in their entirety by such language. The Company does not undertake any obligation to update any forward-looking statements.

PERRY JUDD’S HOLDINGS, INC.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibits required in accordance with Item 601 of Regulation S-K are incorporated by reference herein as filed with registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, ~~dated~~filed with the Securities and Exchange Commission on March 30, 2001.

(b) Reports on Form 8-K

The following report on Form 8-K was filed during the quarterly period ended ~~June~~ September 30, 2001:

~~None~~On August 27, 2001, the Company filed a Report on Form 8-K that reported information under “Item 4. Changes in Registrant’s Certifying Accountants.”

PERRY JUDD’S HOLDINGS, INC.

SIGNATURES

Pursuant to the requirements 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.

		PERRY JUDD’S HOLDINGS, INC.
Date: August 7, 2001		/s/ Verne F. Schmidt
Date:	November 1, 2001	/s/ Verne F. Schmidt
		Verne F. Schmidt
		Senior Vice President and
		Chief Financial Officer

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