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L I L L I A N V E R N O N
Effects of Inflation and Foreign Exchange
The Company is generally able to reflect cost increases and decreases resulting from the effects
of inflation and foreign currency fluctuations in its selling prices. In addition, most foreign
purchase orders are denominated in U.S. dollars. Accordingly, the results of operations for the
periods discussed have not been significantly affected by these factors.
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board issued FAS No. 141, "Business
Combinations" and FAS No. 142, "Goodwill and Other Intangible Assets". FAS No. 141 addresses
accounting for business combinations, including the elimination of pooling of interests, the
recognition of intangible assets, and modifications to certain disclosure requirements. FAS No.
142 primarily addresses the accounting that must be applied to goodwill and intangible assets
subsequent to acquisition. In addition, the Company will be required to conduct an annual
review of goodwill for potential impairment. The adoption of FAS Nos. 141 and 142 for fiscal
2003 will not have a material impact on the Company's financial statements since goodwill
amortization for fiscal 2002 totaled $120,400.
Forward Looking Statements
Except for the historical information contained herein, statements included in this Form 10-K
may constitute forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements relate to the Company's future performance, including,
without limitation, statements with respect to the Company's anticipated results of operations,
revenues, cash flows and/or level of business. Such statements represent the Company's current
expectations only and are subject to certain risks, assumptions and uncertainties. Should one or
more of these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated or projected. Among the
factors that could cause actual results to materially differ include the overall strength of the
economy, the level of consumer confidence and spending, customer preferences, circulation
changes and other initiatives, increased competition in the direct mail industry and from the
growing Internet market, changes in government regulations, risks associated with the social,
political, economic and other conditions affecting foreign sourcing, including possible
disruptions caused by the current global situation, and possible future increases in operating
costs including postage and paper costs.
Critical Accounting Policies and Estimates
In addition to the forward-looking estimates and assumptions mentioned in the paragraph
above, the accounting policies listed on the following page represent the Company's most
critical accounting policies with respect to the financial results reported.
