September 28, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street N.W.
Washington, DC 20549-1004
Attn: Filing Desk
Stop 1-4
Re: Jostens, Inc
File No. 1-5064
On behalf of Jostens, Inc (the "Company") attached is the
EDGAR filing of the Company's Annual Report on Form 10-K.
Please be advised that the financial statements of the
Company which are included in the Company's 1994 annual
report to shareholders reflects a change from the preceding
fiscal year due to revised accounting treatment of several
items to more fully conform its accounting policies and
practices to generally accepted accounting principals. See
Restatement note in the Company's 1994 annual report for
further discussion.
A wire transfer was executed on September 28, 1994 in the
amount of $250 for payment of the applicable filing fee.
Very truly yours,
\s\Trudy A. Rautio
Vice President and Controller
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended June 30, 1994.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-5064
JOSTENS, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-0343440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Norman Center Drive, Minneapolis, Minnesota 55437
(Address of principal executive offices) (Zip Code)
(612) 830-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Shares, $.33 1/3 par value New York Stock Exchange, Inc. Common Share
Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes 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.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant on September 7, 1994 was $809,620,383. The number of shares
outstanding of Registrant's only class of common stock on September 7, 1994
was 45,490,306.
DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K
Annual Report to Shareholders for Parts II and IV
The Year Ended June 30, 1994.
Proxy Statement for Annual Meeting of Parts I and III
Shareholders to be held October 27, 1994.
PART I
Item 1. BUSINESS
(a) The Company is a Minnesota corporation, incorporated in 1906. The
Company provides products and services to help people achieve, and to
measure and recognize their achievements, throughout their lives.
Products and services include: yearbooks, class rings, graduation
products, student photography packages, technology-based educational
software, customized business performance and service awards, sports awards
and customized affinity products.
In the fourth quarter of fiscal 1994, the Company recorded a
restructuring charge of $69.4 million ($45.3 million after tax, $1 per
share), including charges of $60.9 million for Jostens Learning and $8.5
million for reduced headcount in the Company's general and
administrative functions. The restructuring charge relating to
Jostens Learning includes $39.1 million to focus its product development.
This involves abandoning certain capitalized software and proprietary
management systems. The remaining restructuring charge relating to Jostens
Learning includes $7.3 million to exit both direct and indirect
investments in three ancillary lines of business, $4.1 million to exit the
hardware sales and service business, and $10.4 million for work force
reduction.
In the third quarter of fiscal 1994, the U.S. Photography business closed
leased facilities in Clinton, Mississippi and Lake Forest, California and
transferred production to owned facilities in Webster, New York;
Jackson, Mississippi and Winnipeg, Manitoba in fiscal 1995.
In January 1994, Jostens sold its Sportswear business to a subsidiary of
Fruit of the Loom for $46.7 million in cash. Jostens recognized an $18.5
million gain ($11 million after tax) on the sale, primarily because the
Sportswear business had been written down by $15 million to its estimated
net realizable value in the fiscal 1993 restructuring.
In the fourth quarter of fiscal 1993, the Company recorded a $50.6
million ($33.6 million after tax, 74 cents per share) restructuring
charge for continuing operations. The charge included $26.7 million
for restructuring the U.S. Photography business, of which $7.9 million
related to goodwill write-offs ($5.6 million relating to the Portrait World
acquisition in 1989 and $2.3 million in various smaller photography
intangibles), $12.8 million related to plant shutdowns and $6 million
related primarily to write-offs of abandoned receivables from independent
sales representatives and dealers. The remaining $23.9 million of
restructuring charges included $10.2 million primarily for headcount
reductions and relocation expenses; $5 million for the write-off of
certain software development costs at Jostens Learning; and $8.7 million
primarily for sales force restructuring and policy changes, including write-
offs of abandoned receivables from terminated independent sales
representatives. The accounts receivable balances, which would have
ordinarily been collectible in the absence of the changes in the sales
force, were abandoned as part of the territory consolidations and
sales force terminations resulting from the sales force restructuring.
Prior to reclassification, the 1993 restructuring also included $15
million to write down the carrying value of the Sportswear business to
its net realizable value. The $15 million related to the sale of Sportswear
in 1994 was reclassified as part of a discontinued operation.
In August 1992, the Company acquired Wicat Systems, Inc., a provider of
technology-based learning systems for the educational and aviation markets.
This business has been combined with Jostens Learning Corporation, a
Jostens subsidiary.
In June 1992, the Company closed its Santa Barbara, California class
ring manufacturing plant with those operations consolidated at its
facilities in Denton, Texas and Attleboro, Massachusetts. The photo
processing plant in Anaheim, California was also closed in June, 1992
with that volume, as well as volume from an existing facility in Jackson,
Mississippi, transferred to a larger plant in Clinton, Mississippi.
There have been no material changes during this period in the mode in which
the Company has conducted its business.
(b) The Company's operations are classified into three business segments:
school-based recognition products and services (School Products),
technology-based educational products and services (Jostens Learning), and
corporate recognition and performance incentive products and services
(Recognition). Business segment financial information is in the
financial statement footnote "Business Segment Information" on pages 39
and 40 of the 1994 Annual Report to Shareholders.
(c) The Company's three business segments sell their products in
elementary schools, high schools, colleges and businesses in the fifty
states of the United States and some foreign countries through a sales
force of over 1,200 independent representatives and 100 direct sales
employees (Jostens Learning). In fiscal 1994, the Company had a
discontinued operation (Sportswear), which manufactured and marketed
decorated sportswear to retail and military outlets.
SCHOOL PRODUCTS SEGMENT
School Products recognizes individual and group achievement and
affiliation in the academic market. School Products comprises five
businesses: Printing & Publishing, Jewelry, Graduation Products, U.S.
Photography and Jostens Canada, which is the market leader in school
photography, yearbooks and class rings for Canadian schools. The School
Products segment sales of $546.2 million in 1994 included these five
lines of business and $10.4 million in other sales.
Printing & Publishing: Jostens manufactures and sells student-created
yearbooks in high schools and colleges. This product contributed
approximately 35% of sales volume to this segment in fiscal 1994 and 1993
and 34% in fiscal 1992. Independent sales representatives work closely
with each school's yearbook staff (both students and a faculty advisor),
assisting with the planning, editing, layout and printing scheduling
until the book is completed. Jostens' sales representatives work with the
faculty advisors to renew yearbook contracts each year. This business also
provides commercial printing which includes printing annual reports,
brochures and promotional materials.
Jewelry: Jostens manufactures and sells rings representing a graduating
class primarily to high school and college students. This product
contributed approximately 27% of the sales volume of this segment in
fiscal 1994, 1993 and 1992. Most schools permit only one supplier to have
access to its students each year. Rings may be sold through
bookstores, other campus stores, retail jewelry stores as well as within the
school through temporary order-taking booths. Jostens, through its
independent sales representatives, manages the entire process of
interaction with the student through ring design, promotion, ordering and
presentation to relieve the school officials of any administrative burden
connected with students purchasing this symbol of achievement.
Graduation Products: Jostens manufactures and sells graduation
announcements, diplomas and caps and gowns to both students and
administrators in high schools and colleges. This product group
contributed approximately 23%, 22% and 20% of sales to this segment in
fiscal years 1994, 1993 and 1992, respectively. Jostens independent
sales representatives make calls on schools and sales are taken through
temporary order-taking booths.
Photography: Jostens U.S. provides student pictures and senior
portraits to elementary and high school students through its sales force and
dealer network who arrange the sittings/shootings at individual schools
or in their own studios. This business contributed approximately
5% of sales to this segment in fiscal 1994 and 1993 and 6% in fiscal 1992.
Jostens provides processing of the photos at the Company's plants in the
U.S. and Canada.
Jostens Canada: Jostens is the leader in school photography in Canada. It
also manufactures yearbook and class rings for Canadian schools. This
product group contributed approximately 8% of sales to this segment in fiscal
1994 and 9% in fiscal 1993 and 1992.
Markets: School Products serves elementary schools, middle schools, high
schools, colleges and alumni associations in the United States and Canada
through 1,100 independent sales representatives. Jostens also maintains
an international sales force in about 50 countries for American
schools and military installations.
Products: School Products include elementary through college yearbooks,
commercial printing, desktop publishing curriculum kits, class rings,
graduation caps and gowns, graduation announcements and accessories,
diplomas, trophies, plaques and other awards, individual and group
school pictures, group photographs for youth camps and organizations, and
senior graduation portraits.
Sales Force: The School Products segment markets its products primarily
through independent sales representatives. Approximately 400 persons are
dedicated to selling class rings and graduation products, 350 to yearbooks
and 350 to photography.
Seasonality: This product segment experiences a strong seasonality
concurrent with the school year with 40-45% of full-year sales occurring in
the fourth quarter. In addition, the business requires short-term
financing during the course of the fiscal year.
Competition: The business of the School Products segment is highly
competitive, primarily in the pricing, product development and marketing
areas.
In the Class Ring business, the Company has two primary national
competitors: Town & Country (Balfour) and Herff Jones, both with
distribution methods similar to the Company's. The Class Ring business is
also served through retail jewelry stores which is dominated by two
companies: Commitment Jewelry Company with two lines (ArtCarved and R.
Johns), and Town & Country with one line (Gold Lance).
In the Graduation Products business, there are several national and
numerous local and regional competitors who offer products similar to
those of the Company.
Printing & Publishing competition is primarily made up of two national
firms (Herff Jones and Taylor Publishing) and two smaller regional firms
(Walsworth Publishing and Delmar Corporation). All compete on price,
print quality, product offerings and service. Technological offerings in
the way of computer based curriculums is becoming a more significant market
advantage.
In the Photography area, the Company competes with Olan Mills in the
U.S., and Lifetouch and a variety of regional and locally owned and
operated photographers who process the product in small batches in both
Canada and the U.S.
The Company's strategy for competing with these companies is based on its
service and quality capabilities. On the basis of available
information, the Company believes that it has the largest U.S. market
share in the following product areas: class rings, yearbooks, diplomas,
graduation announcements and caps and gowns, and the largest market
share of photography business in Canada.
JOSTENS LEARNING SEGMENT
Jostens Learning (JLC) helps teachers teach and children learn with
educational software for kindergarten through grade 12. As the nation's
largest provider of curriculum software, Jostens Learning currently
serves more than 4 million students in 10,000 schools nationwide.
Computerized lessons use color, animation and sound to engage students in
individualized, self-paced learning on industry-standard microcomputers.
Markets: Market segments target integrated learning systems, modular
products, stand-alone products and staff development services.
Products: Jostens Learning offers more than 7,000 hours of
software-based curriculum in reading, mathematics, language arts,
science programs and early childhood instruction, as well as programs for
at-risk learning and home learning. Customers may purchase programs to meet
specific instructional needs, add products in a modular approach or choose to
implement a comprehensive schoolwide solution.
Through its Wicat Systems division, it is a provider of computer-based
training systems and coursework for commercial and industrial markets,
focused primarily in the aviation and military industries.
Sales Force: JLC sells its products through an employee direct sales
force of approximately 100 people. Many of its sales personnel are
former educators or others with ties to the instructional market.
Service: Continuing service and updating of the systems sold is
required and is an additional source of revenue for JLC. JLC maintains a
force of approximately 600 educational consultants and service
technicians which assist JLC customers on an ongoing basis.
Seasonality: The business of Jostens Learning Corporation is highly
seasonal, reflecting the purchasing cycles of school systems. As a
result, a significant portion of this business's revenues are recognized in
the last quarter of the fiscal year. In addition, the business requires
short-term financing during the course of the fiscal year.
Research and Development: JLC has approximately 200 employees involved in
the development of new software products and modifying existing products
for new applications and delivery. JLC capitalizes certain software
development expenditures. Amounts capitalized were $19.4 million, $27.5
million and $22.1 million in fiscal years 1994, 1993 and 1992, respectively.
Research and development expenses charged to operations was $12.9
million, $17.6 million and $13.2 million in 1994, 1993 and 1992,
respectively.
Competition: JLC's primary competitors in the education market are
Computer Curriculum Corporation (CCC), and IBM EduQuest. The Company
believes that its product offerings are of higher quality than those of its
competition.
RECOGNITION SEGMENT
Jostens Recognition helps companies promote and recognize achievement in
people's careers. It designs, communicates and administers programs to help
customers improve performance. Jostens provides products and services
that reflect achievements in service, sales, quality, productivity,
attendance, safety and retirements. It also produces awards for
championship team accomplishments and affinity products for associations.
This business manufactures and markets a wide variety of products that are
sold primarily to corporations and businesses in the United States and
Canada. The products manufactured by Recognition include customized and
personalized jewelry, rings, watches and engraved certificates. In
addition, this business also remarkets items manufactured by others for
incorporation into programs sold by the sales force to Recognition
customers. These products include items supplied by Lenox, Hartmann,
Waterman, Kirk Stieff and Oneida.
Markets: Recognition serves customers from mid-size companies to global
corporations, professional and amateur sports teams and special interest
associations.
Products: Recognition offers a wide assortment of products and services
tailored to the needs of the organization it is serving. For global
companies, Jostens customizes programs to meet specific customer needs.
Generic programs, such as New Generation and Reflections, provide small and
mid-size companies the same product and service features without complex
customization. Recognition enjoys exclusive product and
personalization distributor arrangements with such companies as LenoxTM
china and HartmannTM luggage for the service award marketplace.
Sales Force: Recognition sells its products through approximately 100
independent sales representatives who develop programs incorporating
Recognition products.
Competition: The Recognition business competes primarily with O.C.
Tanner and the Robbins Company on a national basis as well as several
regional recognition companies. Recognition focuses on service and
product offerings in competing with these companies.
DISCONTINUED OPERATIONS - SPORTSWEAR
Jostens Sportswear manufactured and marketed decorated sportswear which was
sold primarily to retail stores and military outlets. This business had
licenses from all of the major professional sports leagues as well as many
popular characters from The Walt Disney Company, Warner Bros. and others.
Jostens Sportswear manufactured many of the garments it sold as well as
applying the graphics to these garments.
Sales Force: Jostens Sportswear sold its products through approximately 65
independent sales representatives as well as direct sales to large retail
chains.
Competition: The sportswear business competed with several national
competitors, the most similar being Starter, Nutmeg, Salem and
Chalkline, as well as many local and regional competitors. The
sportswear business operated under two labels: Jostens for the
traditional distribution channels and Artex for the mass discount
market.
JOSTENS, INC. -- INFORMATION REGARDING ALL BUSINESSES
Backorders: Because of the nature of the Company's business, generally all
orders are filled within a few months of the time of placement. However,
the School Products Segment obtains student yearbook contracts in one
fiscal year for a significant portion of the yearbooks to be delivered in
the next fiscal year. Often the prices of the yearbooks are not
established at the time of the order because the content of the books may
not have been finalized. Subject to the foregoing
qualifications, the Company estimates that as of June 30, 1994, the
backlog of orders was approximately $244 million compared with $252
million a year earlier. The Company expects most of the backlog orders to
be confirmed and filled within the current fiscal year.
Environmental: The Company does not believe that compliance with
federal, state, and local provisions protecting the environment will have
a material effect upon its capital expenditures, earnings, or
competitive position.
Raw Materials: All of the raw materials used by the Company are
available from several sources. Gold is an important raw material and
accounted for approximately 7%, 6%, and 7%, respectively, of the
Company's cost of products sold in the fiscal years ended June 30, 1994, 1993
and 1992.
Intellectual Property: The Company has no patents, licenses, franchises or
concessions which are material to the Company as a whole, but does have a
number of proprietary trade secrets, trademarks and copyrights which it
considers important. In addition, licenses are an important part of
certain aspects of the Company's businesses; however, the loss of any
license would not have a material affect on the Company's operations.
Significant Customers: No material part of any business of the Company is
dependent upon a single customer or very few customers.
Federal Government Contracts: No material portion of the Company's
business is subject to renegotiation of profits or the termination of
contracts or subcontracts at the election of the United States
Government.
Employees: At June 30, 1994, the total number of employees of the
Company was more than 8,000 (not including independent sales
representatives). Because of seasonal fluctuations and the nature of the
business, the number of employees tends to vary.
(d) The Company's foreign sales are derived
primarily from operations in Canada and the United
Kingdom. The accounts and operations of the
Company's foreign businesses are not material.
Local taxation, import duties, fluctuation in
currency exchange rates and restrictions on
exportation of currencies are among risks attendant to
foreign operations, but these risks are not considered
material with respect to the Company's
business. The profit margin on foreign sales is
approximately the same as the profit margin on
domestic sales.
Item 2. PROPERTIES
The principal plants, which are owned by the Company
unless otherwise noted, are as follows:
Approximate
Area in
Location Principal Products Square Feet
SCHOOL PRODUCTS GROUP
Attleboro, Massachusetts Class Rings 52,000
Denton, Texas Class Rings 57,000
Laurens,South Carolina Caps and Gowns 98,000
Laurens, South Carolina** Caps and Gowns 88,000
Porterville, California Graduation Products 92,000
Red Wing, Minnesota Graduation Products 132,000
Shelbyville, Tennessee Graduation Products 87,000
Burnsville, Minnesota** Division Support 42,000
Owatonna, Minnesota*** Division Support 151,000
Clarksville, Tennessee* Yearbooks 105,000
State College, PA Yearbooks 62,000
Topeka, Kansas Yearbooks 236,000
Visalia, California Yearbooks 96,000
Winston-Salem,NC* Yearbooks/Commercial Printing 132,000
Jackson, Mississippi** Photography Products 78,000
Webster, New York Photography Products 60,000
Eden Prairie, Minnesota** Customized Products 18,000
JOSTENS LEARNING CORPORATION
Atlanta, Georgia** Regional Office and Field Support 28,000
Lansing, Michigan** Educational Software 17,000
Orem, Utah** Wicat General Offices 42,000
Irving, Texas** Regional Office and Field Support 18,000
Phoenix, Arizona** Field Support and General Offices 44,000
San Diego,California** Product Develop. and Gen.Offices 105,000
Springfield, Illinois** Educational Hardware and Software 106,000
RECOGNITION
Memphis, Tennessee Award Products 67,000
Memphis, Tennessee** Sales and General Office 14,000
Princeton, Illinois Jewelry 65,000
Sherbrooke, Quebec Award Products 15,000
CANADA
Montreal, Quebec** Photography Products 7,000
Mississauga, Ontario** Sales and General Offices 3,000
Winnipeg, Manitoba Photography and Yearbook Products 69,000
Winnipeg, Manitoba** Class Rings 11,000
Executive offices are located in a general offices building owned by the
Company, which has approximately 116,000 square feet and is located in a
Minneapolis, Minnesota suburb. A portion of this facility has been
financed through the issuance of revenue bonds.
* Clarksville and Winston-Salem are leased under the terms of
Industrial Revenue Bond issues maturing in 1994-1996 (see Long-Term
Debt and Other Borrowings note in the Company's annual report to
shareholders for the year ended June 30, 1994). These lease
obligations have been capitalized and reported as long-term debt in
the financial statements.
** Represents leased properties with the following expiration dates.
The Company expects to renew those leases expiring in fiscal 1995.
Winnipeg--1995 Burnsville--1997
Atlanta--1997 Lansing--1998
Irving--1997 Eden Prairie--1995
Laurens--1995 Memphis--1995
Montreal--1996 Orem--1995
Phoenix--1998 San Diego--2001
Mississauga--1995 Springfield--1997
Clinton--1997 (Still under lease, but plant closed)
Princeton--1995 (Still under lease, but plant closed)
*** Several locations.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings involving the Company or any
subsidiary as a defendant are pending or threatened.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 4A. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the caption "Election of Directors" contained
on pages 2 through 6 of the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held on October 27, 1994, as filed
with the Securities and Exchange Commission is hereby
incorporated herein by reference. Executive officers of the
Registrant are as follows:
Years of
Service With
Name the Company Age Title and Business Experience
Robert C. Buhrmaster 2 47 President and Chief Executive Officer
Mr. Buhrmaster joined the Company in
December 1992 as Executive Vice President
and Chief Staff Officer. He was named President
and Chief Operating Officer in June 1993 and
was named to his current position in March
1994. Prior to joining Jostens, Mr.
Buhrmaster had been with Corning, Inc. for
18 years serving in various capacities,
most recently as Senior Vice President of
Strategy and Business Development.
Orville E. Fisher, Jr. 19 50 Corporate Senior Vice President,
General Counsel and Secretary
Mr. Fisher joined the Company in 1975 as
General Counsel, was named Vice President
and General Counsel, and Assistant Secretary
in 1977. He assumed his present position in
1988.
John L. Jones 3 57 Corporate Senior Vice President-
Human Resources
Mr. Jones joined the Company in
January, 1992. Prior to joining Jostens he
was Director of Human Resources, Americas
Operations of Xerox Corporation, and had
held various human resource positions with
Xerox since 1971.
Charles W. Schmid 1 52 Corporate Senior Vice President and
Chief Marketing Officer
Mr. Schmid joined the Company in April
1994. Prior to joining the Company he was
President and Chief Operating Officer for
Carlson Companies, Inc. From 1979 through
1991, Mr. Schmid served in various executive
capacities for Philip Morris Companies,
Inc., from 1988 through 1991 as Senior Vice
President of Marketing for its Miller Brewing
Company.
Ellis F. Bullock, Jr. 16 49 Corporate Vice President - Community
Relations
Mr. Bullock joined Jostens in 1978
as Director of Community Affairs and
Executive Director of The Jostens
Foundation. He was named Director of Public
Affairs in 1980, Vice President of Public
Affairs in 1983 and to his current position
in September 1993.
Greg S. Lea 1 42 Corporate Vice President - Total Quality
Management
Mr. Lea joined the Company in November
1993. Prior to joining the Company, Mr. Lea
spent 19 years with International Business
Machines Corp. in various financial,
operations and quality positions, most
recently as Director of Market Driven
Quality for IBM's AS/400 Division.
Rick Prather 25 52 President - Recognition Division
Mr. Prather joined the Company in 1969 as a
sales representative in the College Division.
After serving in various management
positions throughout the Company, Mr.
Prather became Vice President of Sales for the
Recognition Division in 1990. From August
1991 through October 1993 he served as
Senior Vice President in the Custom
Recognition Division and was Assistant General
Manager of Jostens Sportswear. He assumed his
current position in October 1993.
Robb L. Prince 22 53 Corporate Vice President and Treasurer
Mr. Prince joined the Company in January 1973
as Director of Planning. He was named
Assistant Treasurer in August 1973, was
appointed Treasurer in 1976 and assumed his
present res ponsibilities in October 1978.
Trudy A. Rautio 1 41 Corporate Vice President and Controller
Ms. Rautio joined the Company in June
1993 as Vice President-Finance and
Administration of the School Products Group.
She was appointed to her current position
in August 1993. Prior to joining Jostens,
she worked for the Pillsbury Company
for twelve years; most recently as Vice
President, Finance International and
Strategic Brand Development and earlier as
Vice President, Finance for Green Giant.
Antonio E. W. Sago 9 48 Corporate Vice President and General
Manager - Jostens Canada and U.S.
Photography
Mr. Sago joined the Company in 1985 as Vice
President of Finance for Jostens Canada Ltd.
and became President of Jostens Canada Ltd.
in May 1989. He was elected a Vice
President of Jostens in October 1990. He was
also appointed a Senior Vice President of
the School Products Group in October 1992.
He assumed his current position in April 1993.
Stanley Sanderson 1 59 President and Chief Executive Officer
Jostens Learning Corporation
Mr. Sanderson joined the Company in March
1994. He has been President of RAP
International, a consulting firm, since he
founded it in 1988.
G. Nichols Simonds 1 55 Corporate Vice President and Chief
Information Officer
Mr. Simonds joined the Company in September
1993. Prior to joining the Company he was
Vice President, Information Systems for
Honeywell, Inc. From 1987 through 1990,
Mr. Simonds was Director of Management
Information Systems at Chrysler
Corporation.
Jack Thornton 16 41 Vice President and General Manager
Printing and Publishing
Mr. Thornton has held several management
positions with Jostens since starting as a
personnel manager in 1978. He was promoted to
Operations Manager of the Printing and
Publishing Division in 1989 and Vice
President of Operations-School Products Group
one year later. He was named a Vice
President for Jostens in February 1991. He
was appointed a Senior Vice President of
the School Products Group in October 1992.
He assumed his current position in April 1993.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The information under the captions "Unaudited
Quarterly Financial Data", contained on pages 41 and
42 and "Shareholder Inquiries" and "Stock Exchange
Listing" contained on page 45 in the Company's
annual report to shareholders for the year ended
June 30, 1994, is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information under the caption "Five-Year
Financial Summary" contained on page 43 in the
Company's annual report to shareholders for the
year ended June 30, 1994, is incorporated herein
by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information under the caption "Management's
Discussion and Analysis" contained on pages 14
through 21 of the Company's annual report to
shareholders for the year ended June 30, 1994, is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of Jostens, Inc. as
of June 30, 1994 and 1993, and the related
statements of consolidated operations, changes in
shareholder's investment and cash flows for each of
the years in the three-year period ended June 30,
1994, together with the related notes and the report
of Ernst & Young LLP, independent auditors, all
contained on pages 22 through 40 of the Company's
annual report to shareholders for the year ended
June 30, 1994, is incorporated herein by
reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
In addition to certain information as to executive
officers of the Company included in Part I of
this Form 10-K, the information contained on
pages 2 through 6 of the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held
October 27, 1994, with respect to directors and
executive officers of the Company, is incorporated
herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the caption "Executive
Compensation" contained on pages 11 through 16 the
Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 27, 1994, as filed
with the Securities and Exchange Commission
is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information under the caption "Shares Held by
Directors and Officers" on page 6 of the Company's
Proxy Statement for the Annual Meeting of
Shareholders to be held October 27, 1994, is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements:
The following financial statements of the
Company appearing on the indicated pages
of the Annual Report to Shareholders for the
year ended June 30, 1994, are incorporated
herein by reference.
Pages in
Annual Report
Consolidated Balance Sheets -
June 30, 1994 and 1993 24 and 25
Statements of Consolidated
Operations for the Years Ended
June 30, 1994, 1993, and 1992 23
Statements of Consolidated Changes
in Shareholders' Investment for
the Years Ended June 30,
1994, 1993, and 1992 27
Statements of Consolidated Cash Flows
for the Years Ended June 30, 1994,
1993, and 1992 26
Notes to Consolidated Financial
Statements 28 through 40
2. Financial Statement Schedules
Page in 10-K
Schedule I - Marketable Securities -
Other Investments S-1
Schedule VIII - Valuation and
Qualifying Accounts S-2
Additional schedules are omitted as they
are not required, are not applicable, or
the information is shown in the financial
statements or notes thereto. Certain
columns have been omitted because the
information is not applicable.
Separate parent company financial
statements have been omitted since the
parent is primarily an operating company
and all subsidiaries included in the
consolidated financial statements are wholly
owned. All other schedules for which
provision is made in the applicable
accounting regulations of the Securities
and Exchange Commission have been omitted as
not required or not applicable or the
information required to be shown thereon is
included in the financial statements and
related notes.
3. Executive Agreements
The following agreements are exhibits to
this Annual Report on Form 10-K:
Agreement with H. William Lurton.
Separation agreement with Fred D. Bjork.
(b) Reports on Form 8-K: A report on Form 8-K,
dated April 28, 1994 was filed during the
fourth quarter of the year ended June 30,
1994. The report was a voluntary filing
under Item 5 of Form 8-K, describing the
Company's restatement of past financials. No
financial statements were required to be
filed with the report.
(c) Exhibits
3. a. Articles of Incorporation and Bylaws
(Incorporated by reference to Exhibit 3(a),
contained in the Annual Report on Form 10-K
for the year ended June 30, 1993).
4. a. Rights Agreement dated August 9, 1988
between the Company and Norwest Bank
Minnesota, N.A. (incorporated by reference to
the company's Form 8-A dated August 17, 1988,
File No. 1-5064).
b. Form of Indenture, dated as of May
1, 1991, between Jostens, Inc. and Norwest
Bank Minnesota, N.A., as Trustee
(incorporated by reference to Exhibit 4.1
contained in the Company's Form S-3, File No.
33-40233).
10. a. Company's 1980 Stock Option Plan
(incorporated by reference to the Company's
Registration Statement on Form S-8, File No.
2-69666).
b. Company's 1984 Stock Option Plan
(incorporated by reference to the Company's
Registration Statement on Form S-8, File No.
2-95076).
c. Company's 1987 Stock Option Plan
(incorporated by reference to the Company's
Registration Statement on Form S-8, File No.
33-19308).
d. Company's 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10(d)
contained in the Annual Report on Form 10-K
for the year ended June 30, 1992).
e. Jostens Learning Corporation 1986 Supplemental Stock
Option Plan(incorporated by reference to the Company's
Registration Statement on Form S-8, File No. 33-30396).
f. Jostens Learning Corporation 1984 Incentive Stock
Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-8, File No. 33-
30397).
g. Jostens Learning Corporation 1989 Stock Option Plan, as
amended (incorporated by reference to Exhibit 10(g) contained
in the Annual Report on Form 10-K for the year ended June 30,
1992).
h. The Company's 1981 Performance Award Plan
(incorporated by reference to the Company's Form 8 dated May
2, 1991).
i. Form of Contract entered into with respect to
Executive Supplemental Retirement Plan (incorporated by
reference to the Company's Form 8 dated May 2, 1991).
j. Written description of the Company's Retired
Director Consulting Plan (incorporated by reference to
the Company's Form 8 dated May 2, 1991).
k. Agreement with H. William Lurton (Exhibit I
filed herewith).
l. Separation agreement with Fred D. Bjork (Exhibit
II filed herewith).
11. Computation of earnings per share.
13. Annual Report to Shareholders for the year ended
June 30, 1994.
21. List of Company's subsidiaries.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JOSTENS, INC.
Date: September 27, 1994
By
\s\Robert C. Buhrmaster
President and Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrants in the capacities and on the dates indicated.
September 27, 1994
\s\Robert C. Buhrmaster (Principal Executive and Financial Officer)
President and Chief Executive Officer and Director
September 27, 1994
\s\Trudy A. Rautio (Principal Accounting Officer)
Vice President and Controller
September 27, 1994
\s\Robert P. Jensen
Chairman of the Board and Director
September 27, 1994
\s\Lilyan H. Affinito
Director
September 27, 1994
\s\William A. Andres
Director
September 27, 1994
\s\Fred D. Bjork
Director
September 27, 1994
\s\Mannie L. Jackson
Director
September 27, 1994
\s\John W. Stodder
Director
JOSTENS, INC. AND SUBSIDIARIES
SCHEDULE I--MARKETABLE SECURITIES OTHER INVESTMENTS
June 30, 1994
(In Thousands)
Amount at
Number of which carried
shares or Market in balance
Description principal amount Cost Value sheet
Other corporate debt
(securities) (1) $ 99,786 $ 99,198 $ 99,453 $ 99,198
(1) Securities of any one individual issuer do not exceed 2 percent of total
assets of the registrant.
S-1
JOSTENS, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts Deductions End of
Description of Period Expenses Describe Describe Period
Reserves and allowances deducted from asset accounts:
Allowances for uncollectible accounts:
Year ended June 30, 1994 $ 6,869 $10,576 (4) $ - $ 3,696 (2) $13,749
Year ended June 30, 1993 $ 5,681 $ 2,871 $ - $ 1,683 (2) $ 6,869
Year ended June 30, 1992 (1) $ 4,646 $ 2,676 $ - $ 1 641 (2) $ 5,681
Allowances for sales returns:
Year ended June 30, 1994 $ 8,733 $10,843 $ - $12,857 (5) $ 6,719
Year ended June 30, 1993 $ 7,813 $13,209 $ - $12,289 (5) $ 8,733
Year ended June 30, 1992 $ 6,920 $11,522 $ - $10,629 (5) $ 7,813
SFAS No. 109 valuation allowance:
Year ended June 30, 1994 $ 3,547 $ 95 $ - $ - $ 3,642
Year ended June 30, 1993 $ 3,547 $ - $ - $ - $ 3,547
Year ended June 30, 1992 $ 3,547 $ - $ - $ - $ 3,547
Overdraft reserves:
Year ended June 30, 1994 $ 3,243 $ 4,553 (4) $ - $ - $ 7,796
Year ended June 30, 1993 $ 1,787 $ 1,456 $ - $ - $ 3,243
Year ended June 30, 1992 $ 1,923 $ - $ - $ 136 $ 1,787
Reserves and allowances added to liability accounts:
Restructuring charges:
Year ended June 30, 1994 $38,203 $28,668 $ - $27,050(6) $39,821
Year ended June 30, 1993 $ - $40,292 $ - $ 2,089(3) $38,203
Year ended June 30, 1992 $ - $ - $ - $ - $ -
Note (1) -- Year ended June 30, 1992 restated to reflect pooling of interest with Wicat Systems, Inc.
Note (2) -- Uncollectible amounts written off-net of recoveries.
Note (3) -- Amounts paid.
Note (4) -- Includes changes in estimates.
Note (5) -- Returns processed against reserve.
Note (6) -- Payments ($12,050) and disposition of Sportswear business ($15,000).
S-2
JOSTENS, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT TERM BORROWINGS
(In Thousands)
COL. A COL. B COL. C COL. D COL. E COL. F
Balance Weighted Maximum Amount Average Amount Weighted Average
Category of Aggregate at End Average Outstanding During OutstandingDuring Interest Rate
Short-Term Borrowings of Period Interest Rate the Period the Period During the Period
June 30, 1994:
See relative information in the "Management Discussion and Analysis" section on page
16 of the 1994 Annual Report to Shareholders.
S-3
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 1--AGREEMENT WITH H. WILLIAM LURTON
November 1, 1993
Mr. H. William Lurton
Jostens, Inc.
5501 Norman Center Drive
Minneapolis, MN 55437
Dear Bill:
This letter will set forth the terms and conditions under which you will
provide services to Jostens, Inc. following your ceasing to be a fulltime
employee of Jostens. You will continue as an employee and receive your
current salary, benefits and perquisites through December 31, 1993.
Commencing January 1, 1994 you will begin receiving the pension and other
retirement benefits for which you are eligible. In accordance with the
plans under which they were issued, all outstanding stock options held by
you will continue to vest through January 1, 1997 and remain exercisable
in accordance with their terms. In addition, all employee benefits and
perquisites which you now receive will continue in accordance with the
respective plans through September 18, 1994.
From January 1, 1994 on a month-to-month basis through September 18, 1994
you will agree to advise and assist Jostens by consulting with the Board
of Directors and senior managers of Jostens as they may reasonably
request. As compensation for such consulting services, Jostens shall pay
you at the rate of $10,000 per month to be paid on the 1st of each month.
You will receive no additional compensation for the services you perform
for Jostens as a member of the Board of Directors until September 18,
1994. Jostens will reimburse you for reasonable expenses incurred by you
pursuant to your duties under this agreement. Jostens will make available
to you reasonable office space and secretarial services at a location
other than at its executive offices through September 18, 1994. If such
office space and secretarial services cannot be provided at a Jostens site
other than Norman Center, then Jostens will reimburse you for such
reasonable expenses actually incurred by you.
As of January 1, 1994 you shall be retained by Jostens as an independent
consultant and shall be responsible for all required contributions and/or
taxes under federal or state laws with respect to the payments made by
Jostens to you under this agreement. You agree that in consideration for
the payments you will receive under this agreement, you shall not during
its terms or for three years thereafter undertake any work for an entity
which competes directly or indirectly with Jostens in any of the
businesses in which it currently operates or which you are aware that it
might operate during this period.
Please acknowledge your acceptance below.
Sincerely,
/s/ Robert P. Jensen
Robert P. Jensen
AGREED AND ACCEPTED:
/s/ H. William Lurton
H. William Lurton
Dated: 11/1/93
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 2--AGREEMENT WITH FRED D. BJORK
March 31, 1994
BUSINESS RESTRICTED
PERSONAL AND CONFIDENTIAL
Mr. Fred D. Bjork
5855 Long Brake Trail
Edina, MN 55439
RE: Separation Agreement
Dear Fred:
This letter when signed by you confirms the mutual Separation Agreement
("Agreement") we have reached regarding your termination of employment
with and retirement from Jostens, Inc. ("Jostens").
The terms of the Agreement are as follows:
1. You will resign effective as of April 1, 1994 as the Executive Vice
President of Jostens. We understand that you intend to remain as a
member of the Board of Directors of Jostens. Your current term expires
in October, 1994.
2. From April 1, 1994 through May 31, 1994, you will continue your
employment with Jostens as a consultant by making yourself available on
an as-needed basis to the company as from time to time reasonably
requested by me. This understanding is based upon your dedicated,
loyal and enthusiastic commitment to fulfilling the responsibilities
assigned to you which we feel would be appropriate during this period.
During this period you will receive all of your current benefits,
perquisites and base salary.
3. You will continue to be eligible for your full potential bonus
under your existing Executive Annual Bonus Plan for the full fiscal year
1994 (if any is earned). You will not be eligible for any annual bonus
plans beyond FY'94.
4. Commencing June 1, 1994, you will receive separation payments based
on your current base salary at an annual rate of $297,330 but payable
semi-monthly over the next seven (7) month period.
5. All of your regular executive perquisites and employee benefits,
except for the short and long-term disability and travel accident
insurance coverage which you are currently receiving, will continue in
the same manner as that of a full-time, active employee through December
31, 1994. This includes the following employee benefits and years of
service credit as if you were still a full-time active employee of
Jostens: health and dental coverage, life insurance, continued
eligibility and participation in the Jostens, Inc. Pension Plan "D",
Jostens Supplemental Pension Program, Jostens Savings/Profit Sharing
Retirement Plan and the Executive Supplemental Retirement Agreement on
the same terms and conditions as apply to other top executive senior
officers of Jostens. You and your dependents will be eligible for
retiree medical benefits on the same terms and conditions as apply to
other top executive senior officers of Jostens.
6. At the present time you have in effect two separate Long-Term Perfor-
mance Award Agreements with Jostens, making you eligible for possible award
payments relating to FY 1994 and FY 1995, respectively. You will be
eligible to receive payment (if any) pursuant to the terms of each of these
agreements on a pro rata basis, based upon the time you are a fulltime
employee of Jostens which for this purpose terminates on December 31, 1994.
7. Effective April 1, 1994, you will convert to the Company's
current executive car allowance program. You will be eligible to
receive fourteen (14) months of this allowance benefit payable over the
nine month period ending in December, 1994.
8. For purposes of your Executive Supplemental Retirement Agreement,
Jostens' Pension Plan "D", Jostens' Supplemental Pension Program,
Jostens Savings/Profit Sharing Retirement Plan, and Jostens-provided
life, health and dental coverages, we will consider your retirement date
from Jostens to be effective as of December 31, 1994. Any benefits
under this item 8 (or under item 5) which cannot be paid under the terms
of the applicable plan shall instead be paid directly by Jostens.
Attached hereto as Exhibit A is a schedule setting out the agreed upon
retirement benefit amount calculated under the plans designated thereon.
9. To assist you in obtaining possible alternative employment, Jostens
will pay you up to Twelve Thousand Dollars ($12,000) for employment
assistance services. This payment will be made directly to you to pay
to organizations providing re-employment assistance, outplacement
services, search firms, employment agencies or firms which might be
providing services for you in seeking other employment.
10. You will be eligible to continue your financial planning benefit on
the same basis as it has been provided to you in the past through
December 31, 1994.
11. Until April 1, 1994, you will continue to be considered an
executive officer of Jostens for federal securities rules reporting
purposes and, therefore, you will continue to be subject to the same
reporting requirements as you have been obligated to follow in the past.
12. For purposes of your vesting and exercise rights for the stock
option grants you have been awarded in Jostens stock, you will be
considered a full-time active employee of Jostens through December 31,
1994, which date will be considered your effective retirement date.
13. In consideration for what Jostens has agreed to provide you as
identified above, you agree:
a. That you will not, subsequent to your employment with Jostens,
divulge, furnish, or make accessible to anyone any confidential
proprietary information of Jostens or any of its subsidiary or affiliated
companies.
b. That you will not solicit or entice current Jostens employees or sales
representatives to accept employment with you or any new employer with whom
you may become associated.
c. That, until June 1, 1996, you will not directly or indirectly,
become employed by, act as an agent for, or establish your own business
in competition with any products or services of Jostens or any of its
subsidiaries. Should you breach this paragraph, Jostens shall be
entitled to terminate any unpaid monies that may be due you under item 4 of
this Agreement and shall have the right to recover any payments made to you
under item 4 of this Agreement during
such breach. The only other competition restrictions that will apply to
you are the provisions of Section 11 of the Executive Supplemental
Retirement Agreement, which shall apply only to payments under that
agreement.
d. You agree to release and forever discharge Jostens, its officers,
directors, agents and employees from and to waive all causes of action,
damages, liability and claims of whatever nature relating to or arising
out of your employment with Jostens and the cessation
of that employment including, but not limited to, claims under federal,
state, or local discrimination laws, and the Age Discrimination in
Employment Act, provided however, that
nothing herein shall release or discharge Jostens or you from obligations
under this Agreement or which arise after the date you sign this Agreement.
e. To return all company property not otherwise provided for herein,
including keys, credit cards, and cash advances before May 31, 1994.
14. You will use your best efforts to defend your interests and Jostens
in any pending litigation, including, but not limited
to Ross Larson v. Jostens, Inc., et al., and will
cooperate with Jostens and its attorneys to that
end. At Jostens' request, you also will cooperate
with Jostens in any future claims or lawsuits
involving Jostens where you have knowledge of the
underlying facts. Jostens agrees to indemnify and
hold you harmless from any and all claims or
actions brought against you based upon your
service as an officer or employee of Jostens, to
the full extent permitted by and in the manner
permissible under Minnesota law. Specifically,
Jostens will continue to defend and indemnify you in
the matter of Ross Larson v. Jostens, et al.
15. Jostens will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of Jostens to
expressly assume and agree to perform this
Agreement in the same manner and to the same
extent that Jostens would be required to perform if
no such succession had taken place.
This Agreement shall inure to the benefit of and
be enforceable by your personal or legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If you should die while any amounts would still be
payable hereunder as if you had continued to
live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with
the terms of this Agreement to your wife or,
if there be no such wife, to your estate.
16. This Agreement contains the entire agreement
and understanding of the parties and no
representations have been made or relied upon by
either party other than those that are expressly set forth
herein. This Agreement may not be altered, modified or amended
unless done in writing and signed by you and an officer of Jostens.
You acknowledge that you have been given up to twenty-one (21)
days to consider this Agreement and have been advised and
have had the opportunity to consult legal counsel of your own
choosing concerning this Agreement and that you
have entered into it of your own free will and
without compulsion.
You have the right to rescind that portion of
this waiver and release which deals with charges
or claims brought pursuant to the Minnesota Human
Rights Act or the Age Discrimination in
Employment Act within fifteen (15) days from
the date you sign this Agreement. To be
effective, this recision must be in writing and
hand delivered or mailed to Jostens, Inc. to the
attention of Orville E. Fisher, Jr. within the 15
day period. If mailed, the recision must be post
marked within the 15 day period, and be properly
addressed to Jostens, Inc., 5501 Norman Center
Drive, Minneapolis, Minnesota 55437, Attention:
Orville E. Fisher, Jr. and sent by certified
return receipt requested. Recision of the
release will result in cessation of all
payments and benefits provided by Jostens pursuant
hereto.
If this Agreement and the conditions contained
herein are agreeable to you, please sign and
return this letter to me within twenty-one (21)
days or as soon as possible, thereby noting your
knowing and voluntary agreement.
Sincerely,
/s/ Robert C. Burhmaster
Robert C. Buhrmaster
RCB/jo
Attachment
AGREED AND APPROVED:
/s/ Fred D. Bjork
Dated: 4/19/94 Fred D. Bjork
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Data)
Year Ended June 30,
1994 1993 1992
Net Income (Loss) $(16,169) $(12,672) $59,169
Primary:
Average shares outstanding 45,455 45,328 44,918
Net effect of dilutive
stock options--based on
the treasury stock method
using average market price N/A N/A 651
45,455 45,328 45,569
Per Share Amount:
Net Income (Loss) $ (.36) $ (.28) $ 1.30
Per Share Amount as reported
based on average shares
outstanding:
Net Income (Loss) $ (.36) $ (.28) $ 1.32
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE (continued)
(In Thousands, Except Per Share Data)
Year Ended June 30,
1994 1993 1992
Fully diluted:
Average shares out-
standing 45,455 45,328 44,918
Net effect of dilutive
stock options--based
on the treasury stock
method using the year-
end market price if higher
than average market price N/A N/A 651
45,455 45,328 45,569
Per Share Amount:
Net Income (Loss) $ (.36) $ (.28) $ 1.30
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Jostens Annual Report 1994
Thinking, focusing, considering, progressing, believing, creating,
energizing, achieving, implementing, learning, providing, repositioning,
evolving, recognizing, directing, analyzing, resuming, restoring, anticipating,
strategizing, understanding, teaching, constructing,
working, operating, training, helping, leading, changing.
Financial Highlights
Statement of Operations (Dollars in millions, except per-share data)
Years ended June 30
1994 1993
(Restated)
Net Sales $827.3 $836.4
Restructuring Charges (69.4) (50.6)
Loss from Continuing Operations (26.3) (.6)
Change in Accounting Principle, Net of Taxes - (4.2)
Net Loss (16.2) (12.7)
Balance Sheet Data
Working Capital $172.7 $185.3
Current Ratio 1.8 1.9
Total Assets 569.8 613.5
Long-Term Debt 54.3 54.8
Shareholders' Investment 256.6 315.7
Common Share Data
Loss Per Share $ (.36) $ (.28)
Cash Dividends .88 .88
Book Value 5.64 6.95
Stock Price High 20 7/8 31 1/4
Low 15 1/8 16 1/2
Jostens provides products and services to help people achieve, and to measure
and recognize their achievements, throughout their lives. Products and
services include: yearbooks, class rings, graduation products, student
photography packages, technology-based educational software, customized
business performance and service awards, sports awards and customized affinity
products. The company, founded in 1897, is based in Minneapolis and has
facilities throughout the United States and Canada. Customers are served by
more than 8,000 employees and 1,200 independent sales representatives.
Letter to Shareholders 2
Foundation for Growth 4
School Products 6
Recognition 9
Jostens Learning 10
Jostens at a Glance 12
Management's Discussion & Analysis 14
Report of Management 22
Report of Independent Auditors 22
Statement of Operations 23
Balance Sheet 24
Cash-Flow Statement 26
Statement of Shareholders'
Investment 27
Notes to Financial Statements 28
Quarterly Financial Data 41
Five-Year Financial Summary 43
Board of Directors 44
Corporate Management 44
Shareholder Information 45
Facilities 45
Jostens, a leading provider of performance awards and services for the youth,
education, sports and corporate recognition markets, is dedicated to
promoting and recognizing achievement throughout a lifetime.
To Our Investors:
Fiscal 1994 was a year of rapid change and transition for Jostens. Action on
several strategic fronts helped set the foundation for a return to a period of
sustainable, profitable growth. However, the substantial progress we made
preparing for the future was not reflected in the company's fiscal 1994
financial performance. In the year ended June 30, Jostens reported a net loss
of $16.2 million, or 36 cents per share. The loss included several items that
reduced after-tax earnings by $45.2 million, or $1 per share. Among those
items were restructuring charges to address critical issues at Jostens
Learning, our curriculum software subsidiary, and to remove management layers
from our corporate organization.
Despite our 1994 financial performance, we are encouraged by the signifi cant
steps we took throughout the year to identify and resolve the problems that
led to the company's poor results over the last two years. Those steps, which
are discussed in more detail on following pages, enabled us to enter fiscal
1995 with our major issues confined to one business, Jostens Learning. The
rest of the company is performing well, and we believe Jostens is turning the
corner.
Business Review. The company's most significant problem in fiscal 1994 was
Jostens Learning, which continued to underperform expectations in sales and
profitability. However, management has worked aggressively to identify the
issues and determine a solution. In March, we completed an in-depth analysis
of Jostens Learning and the educational technology marketplace. From that
review, management developed a restructuring plan. Implementation of the plan
began as the fiscal year closed. In essence, we will pare the Jostens Learning
organization and refocus it on the kindergarten through grade 12 curriculum
software market with products that meet various customer demands. This
repositioning will be completed over the next few years.
The more traditional businesses of Jostens performed well in fiscal 1994. The
Recognition segment had strong improvements in sales and profitability. The
business landed several new large accounts and increased sales to current
customers. Profitability also improved in the School Products segment. In
Jewelry, we introduced four new ring designs, and Graduation Products moved
forward with steps to improve efficiency through technology. In Printing &
Publishing, cycle-time improvements enabled Jostens to deliver yearbooks on
time, even as severe weather led our competitors to miss delivery deadlines.
We built on that success by winning hundreds of new accounts for 1995. The
U.S. Photography business consolidated its manufacturing facilities and
brought forward a plan for a profitable future. In Canada sales and profits
were stable despite a difficult economy, but declined when translated into
U.S. dollars.
Portfolio Moves. We divested a number of businesses that no longer fit our
core expertise and strategic focus on school and corporate markets. The
largest transaction was the January sale of our Sportswear business to Fruit
of the Loom for $46.7 million. In early fiscal 1995 we completed the sale of
two business interests that no longer fit Jostens Learning's strategy. Our
portfolio will include only businesses that fall within our core expertise and
that can provide both growth and superior returns. We will manage our
portfolio to those measurements.
Cultural Change. Fiscal 1994 marked the beginning of major cultural changes at
Jostens, changes that reflect the fierce competitiveness required to succeed
in business today. As an organization, we're working to become more agile and
dynamic, to make decisions based on hard research, to better understand the
needs and tastes of our consumers, and to seize opportunities to improve and
expand.
We are also reengineering our business processes by streamlining the
organization, eliminating tasks that don't add value and utilizing technology
to help make us more efficient and effective. Leading all of these changes is
a new management team built in the last two years. In fiscal 1994, Robert P.
Jensen was elected to succeed H. William Lurton as chairman of Jostens.
Following a national candidate search, the board in March promoted Robert C.
Buhrmaster to president and CEO. We have added senior executives in areas
critical to fueling growth and shareholder value - such as information
systems, marketing and quality and we installed new leadership in several
business units. Although the team has been together a relatively short time,
it is driving the improvements needed to position Jostens for the future.
Responding to new leadership, the people of Jostens embraced change and
performed admirably in 1994, and we thank them.
In early fiscal 1995 we welcomed a new member to the Board of Directors.
Mannie L. Jackson is senior vice president-corporate marketing and
administration for Honeywell Inc. and chairman and CEO of Harlem Globetrotters
International.
The Future. Jostens will continue changing in 1995, as initiatives begun in
1994 take hold. The Jostens Learning repositioning will move forward. We will
carry reengineering through our work processes in corporate functions and
businesses. And, as we complete the repair of our foundation, we will devote
more attention and resources to developing new products that appeal to our
customers' changing tastes.
Jostens enters fiscal 1995 in much better shape than a year ago. Our
businesses are leaders in their markets.The traditional businesses are
functioning well, and we are implementing a plan to return Jostens Learning to
profitability. In 1994, our company stepped up to tough but necessary
decisions to prepare Jostens for the future. We believe shareholders will see
some tangible results of those efforts in fiscal 1995.
/s/Robert C. Buhrmaster
President and Chief Executive Officer
/s/Robert P. Jensen
Chairman of the Board
FOUNDATION FOR GROWTH
Fiscal 1994 was a rebuilding year for Jostens. The company undertook a series
of actions to repair its foundation in order to support renewed sales and
earnings growth in the future. Management's approach is to: (1) fix problem
areas, (2) restructure businesses to capture efficiencies and create
competitiveness and (3) rejuvenate each area through new products and new
market or business opportunities. The fix phase is nearing completion and many
areas are well along with the restructuring phase, while the rejuvenation
challenge is primarily ahead. Fiscal 1994 financial results reflect the cost
of implementing seven major initiatives to restore the company's foundation.
While many were painful in the short term, each initiative represents a key
building block needed to support sustainable, profitable growth in the future.
Jostens Learning Repositioning. The company's most pressing issue in 1994 was
Jostens Learning, which provides curriculum software to schools. Declines at
Jostens Learning have been primarily responsible for the overall profitability
declines at Jostens in the last two years. Following a comprehensive review of
Jostens Learning and the education marketplace, management created a
repositioning plan for the business. With this plan, detailed later in this
report, the company anticipates Jostens Learning will return to profitability
in fiscal 1996.
Sportswear Sale. In January, Jostens completed the sale of its Sportswear
business to Fruit of the Loom. Sportswear products, once sold through college
bookstores, were increasingly moving to market through retail outlets. The
move off campus meant Sportswear no longer fit the company's strategic focus
on schools and corporations.
U.S. Photography Restructuring. Jostens implemented a plan to restructure the
U.S. Photography business, reduce costs and provide sound footing for a
profitable future. In March, photo processing facilities were consolidated to
improve efficiency. The business plans to improve market position and
competitiveness by developing new products and employing digital imaging
technology, some of which was tested with customers in fiscal 1994. As a
result of the restructuring, U.S. Photography improved its performance
dramatically in 1994 and is well positioned for a return to profitability in
1995.
Process Reengineering. The company began reengineering its business pro cesses
in fiscal 1994. The objectives are to improve service, increase efficiency,
improve quality, shorten cycle times and reduce costs. Initial reengineering
efforts identified savings opportunities of between $8 million and $10 million
in overhead functions alone - nearly halfway toward the company's target of
cutting overhead expenses by $20 million to $25 million in the next three
years. Reengineering is also under way in manufacturing areas.
Organization Streamlining. The School Products Group (SPG) structure was
eliminated and former SPG overhead functions - such as finance, human
resources and information systems - were combined with corporate functions.
The integration, completed in July 1994, cut three layers from the
organization and increased by 50 percent the average number of people
reporting to each manager. It also eliminated about 150 positions.
Accounting Revisions. The company thoroughly reviewed its accounting policies
and practices in 1994 and made revisions in a number of areas to ensure a
realistic but conservative approach, based on changing business conditions, to
accounting policies and practices across all units of the organization.
New Management Team. In fiscal 1994, the Board of Directors elected Robert P.
Jensen, an outside director, to chairman and elected Robert C. Buhrmaster
president and chief executive officer. Buhrmaster, who joined Jostens in late
1992 as chief staff officer and was promoted to president and chief operating
officer in June 1993, has led the creation of a new leadership team. The new
team is a blend of executives new to Jostens and those with years of
experience with the company.
New appointments during the year were: Charles W. Schmid, senior vice
president and chief marketing officer; G. Nichols Simonds, vice president and
chief information officer; Greg S. Lea, vice president-total quality
management; R. Rick Prather, president of the Recognition segment; Trudy A.
Rautio, vice president and controller; and Stanley E. Sanderson Jr., president
and chief executive officer of the Jostens Learning segment. The new team is
making the structural, process and cultural changes required to generate and
support renewed growth.
The Future. The future will bring additional management focus on growth
opportunities in areas of Jostens' core expertise - helping people achieve,
and recognizing and rewarding their achievements in schools and businesses.
Management believes the company's businesses have significant top- and bottom
line growth potential that can be realized through a combination of factors:
utilizing technology to be more competitive; relying on fact-based market
research; gaining a better understanding of customer tastes, wants and
requirements; and generating new products that excite the marketplace.
Fundamental Strengths. Underlying management's actions are the company's
fundamental strengths, which provide a solid base for the future.
Financial: Jostens remains financially strong. Debt-to-total capitalization
at year end was a healthy 18 percent - virtually unchanged over the last
several years. In 1994, two major credit rating agencies,
Moody's and Standard & Poor's, reaffirmed their A2 and A+ ratings of Jostens'
long-term debt. In addition, Jostens generated strong cash flow and
significantly improved working capital management last year.
Market leadership: Jostens is first or second in market share in virtually all
its businesses - and in several cases has a 40 percent or greater share of the
market. Management sees opportunities to further strengthen share and to use
that market strength to introduce new products and pursue new markets.
Jostens name: The Jostens name is widely recognized in schools and
corporations throughout the United States and Canada as a symbol of quality,
service and value.
Sales force: A network of about 1,300 sales representatives enables Jostens to
become a partner with customers and decision makers - whether they are
business executives, students, parents or school administrators. These
relationships provide opportunities for Jostens to understand specific
customer needs and create customized, value-added solutions, products and
services.
Custom manufacturing: The company specializes in crafting programs, prod ucts
and services to meet the needs of each customer, adding value above and beyond
the product alone.
Commitment to education: In addition to
education-oriented products, the company offers the Jostens Renaissance
program to engage administrators, teachers, students and the business
community in a process of promoting and recognizing academic achievement. More
than 4,500 schools in the United States use Jostens Renaissance methods, which
have resulted in better test scores, higher attendance and fewer disciplinary
problems. The company also provides grants and other programs to support
education.
The transition of Jostens will continue in 1995. As the company's businesses
move from the fix and restructure phases to rejuvenation, specific growth
strategies are being developed. All areas of the company will benefit from
actions taken in fiscal 1994 and will be supported by a restored foundation
based on fundamental strengths.
School Products
Jostens' School Products businesses - Printing & Publishing, U.S. Photography,
Jostens Canada, Jewelry and Graduation Products - are leaders in providing
products and services to schools throughout the United States and Canada. The
1994 performance of School Products, which represents 66 percent of the
corporation's sales, reflects its strength; Jostens is the marketshare leader
in virtually all School Products businesses. School Products segment sales of
$546.2 million in 1994 included the five lines of business and $10.4 million
in other sales.
Future top- and bottom-line growth in School Products is tied to a combination
of improved efficiency and new product and market opportunities. In the
efficiency area, the company is investing in technology and remaking business
processes. For example, in fiscal 1995, bar-code scanning technology will be
used to process product orders for graduation caps, gowns and announcements.
Later in the year, class ring order scanning will begin. The new system will
help improve customer service by cutting processing time and improving order
accuracy. In the product development area, 1995 will be a year of identifying
opportunities for new products and markets that appeal to the tastes of
today's young adults and that fit Jostens' expertise in manufacturing
and craftsmanship. The company anticipates that opportunities identified in
1995 will result in products for sale in 1996 and beyond.
Printing & Publishing. Printing & Publishing, which produces high school and
college yearbooks and provides commercial printing services, improved its
manufacturing efficiency and utilization in 1994 by focusing particular types
of printing jobs in specific plants, a realignment that contributed to
profitability improvement. Improvements in cycle times enabled the business to
deliver spring yearbooks on time, despite inclement weather that caused
problems for competitors. Then, based on market research and a targeted
program with the sales force, Printing & Publishing won from competitors the
accounts of more than 500 schools for fiscal 1995.
Fiscal 1994 sales were $191.7 million, up 1 percent from 1993. Printing &
Publishing is pursuing growth opportunities in high schools, middle schools
and elementary schools with products and services that meet the particular
needs of each group. In 1994, the new Memory ExpressTM yearbook was
successfully test-marketed in elementary schools and will be expanded in 1995.
A new product is scheduled for introduction to the middle school market late
in fiscal 1995, and growth in the high school market will be based on market
research to better identify changing customer needs. Printing & Publishing is
also approaching publishers to establish a presence in book printing, a market
segment that will further utilize printing capacity.
U.S. Photography. A repositioning program implemented in 1994 substantially
improved operational capabilities and profitability in the U.S. Photography
business. Developed under the leadership of the Jostens Canada team, the
repositioning included a consolidation of photo processing facilities to
improve plant utilization and better serve the North America photo processing
market. It also included a planned reduction in sales through realignment of
the dealer base. The consolidation will result in improvements in customer
response, quality and cycle times, as well as substantial cost improvements.
Fiscal 1994 sales of $27.7 million were 9 percent less than 1993, reflecting a
planned sales decline related to the repositioning program. U.S. Photography's
focus in 1995 is to continue the improvements begun in 1994, test new digital
imaging products and return the business to profitability.
Jostens Canada. Jostens Canada - the undisputed leader in school photography,
yearbooks and class rings - successfully tested new products, including some
based on digital-imaging technology, in a limited number of schools in 1994.
In addition to the traditional film method, all Jostens photo plants now have
the capability to capture, store and manipulate images in electronic form.
This capability enables processing plants to improve cycle times and develop
such products as an electronic student identification system that allows
schools to electronically record student photos and records.
A new line of class rings introduced in Canada in 1994 took advantage of a
new, exclusive computerized engraving system that enables new design styles.
The Expressions line, which was tested in Canada's Atlantic region, outsold
other more traditional styles by 10 percent. In addition, a new sports ring
program, also utilizing computerized engraving technology, is generating
volume growth. Successes included the selection of Jostens Canada to provide
rings for the Canadian Football League champion Edmonton Eskimos. Jostens
Canada is using other technology-based offerings, such as the YeartechTM
desktop publishing program, to attract new accounts and renew higher
percentages of existing accounts. Fiscal 1994 sales declined 10 percent to
$42.3 million. Canada performed solidly in 1994 in Canadian dollars, but a
weak exchange rate translated into a decrease in U.S. dollars.
Jewelry. In the Jewelry business, which provides rings and accessories for
high schools and colleges, sales were $149.1 million in 1994, up 4
percent from 1993. The number of ring designs was pared to 80 from 200 last
year, simplifying customer decisions, and the business introduced four new
ring designs - which accounted for nearly 10 percent of ring sales. In
operations, Jewelry established a team-based environment to improve
productivity and flatten its manufacturing organization.
In fiscal 1995, Jewelry expects to test with consumer panels several ideas
for new products and product extensions. The business will also continue
building a database of market research to provide the basis for new product
development. Jewelry will carry forward efforts to improve service and reduce
costs by centralizing customer service and introducing an automated system
enabling customers and sales representatives to determine the status of their
orders and accounts instantly.
Graduation Products. Graduation Products - which provides caps, gowns,
announcements and diplomas for high school and college students - had sales of
$125 million in 1994, up 7 percent from 1993. The business benefited from a
number of new programs, including the introduction of family nights to display
products for students and parents, combining various products and quantities
into package offerings, and introducing a rush-order program that allows
students to purchase graduation necessities at the last minute. Also
introduced in 1994 was Senior SalutesTM, weeklong events to provide college
students with one-stop information on caps and gowns, graduation
announcements, class rings, diploma plaques, alumni association membership,
career counseling, hotel information for families and the graduation ceremony
itself. Senior Salutes will be expanded to more schools in 1995. In 1995,
Graduation Products will automate its order-entry process, which will improve
accuracy and reduce processing time.
Recognition
The Recognition segment in 1994 took advantage of the growing need for
companies to recognize employee and business achievements amid turbulent times
for North American businesses. As a result, sales and profits in creased at
double-digit rates for Recognition, which provides service and performance
awards to companies and specialized products to professional and amateur
sports teams.During the year, Recognition began providing service under a
multi-year contract with AT&T. The business also signed
several new accounts, including PaineWebber, Avon, Miles and PPG. Sales to
current customers increased as well in 1994.Improved results reflect success
at improving operating efficiencies. Over the last three years, Recognition
operations have reduced standard manufacturing schedules by more than 50
percent. The business also cut the number of organizational levels to five
from nine and significantly increased the number of people reporting to each
supervisor.
The business is also employing technology to improve customer service. In
fiscal 1994, Jostens became the first service awards company to use
interactive voice response (IVR) systems to handle the employee service award
selection process. IVR enables a person scheduled to receive a service award
to obtain information and select the appropriate gift through a toll-free
phone call. The IVR system automatically instructs the caller how to select a
gift, then follows up with a fax message to the recipient confirming the
selection and delivery date. To ensure the event is formally recognized when
the award is delivered, the employee's supervisor is also notified at the time
of ordering. The use of IVR is being expanded in 1995, providing Jostens a
competitive advantage.
To capitalize on the growing need of companies to emphasize - and meaningfully
reward - measurable performance improvement, the Recognition segment is
broadening its market of opportunity. Through customized programs, Jostens
helps organizations use the concept of recognition as a management tool to
drive change, motivate people, and measure and reward accomplishments.
Jostens Learning
At Jostens Learning, the company's wholly owned educational software
subsidiary, management took steps in 1994 to identify and begin resolving the
issues leading to Jostens Learning's recent performance. A comprehensive study
of Jostens Learning and the entire educational technology marketplace
concluded that Jostens Learning should focus on its strength _ providing
educational software for children in kindergarten through grade 12. From that
review, management developed and began implementing a plan to reposition the
business. Under the plan, Jostens Learning will offer a complete line of
products to meet the various needs of different customers and refocus on
providing K-12 educational software that runs on industry-standard hardware.
Jostens Learning, which currently offers more than 7,000 hours of curriculum
instruction in language arts and mathematics, is implementing a product-line
approach to pursue opportunities in five market areas:
Integrated Learning Systems. Fully integrated learning systems (ILS)
essentially provide computerized learning stations either throughout a school
or in a learning lab classroom. Individual learning stations are linked over a
network to a management system that extends the ability of teachers to
instruct each student and accurately monitor and assess student progress.
Jostens Learning remains a leader in the ILS market segment, with a market
share of about 50 percent.
In 1995, Jostens Learning plans to introduce Learning FirstTM-New Edition, a
revitalized release of its major ILS product, Learning First. Learning First
New Edition will include curriculum updates, as well as major enhancements in
graphics, sound, color and animation. The business is also developing a new
monitoring and assessment system for teachers. Sales of Learning First-New
Edition began in early fiscal 1995, with initial product deliveries scheduled
for late in the year.
Modular Products. This market segment, also referred to as mini-ILS prod ucts,
comprises schools and districts that require more focused solutions or that
can't afford the up-front investment in a full ILS. Modular products range
from free-standing products to smaller networks of learning stations. The
modular products market, although smaller than the ILS market in terms of
dollars of sales, is the fastest growing segment of the educational software
marketplace. Many school districts are moving to site-based funding, which
means schools must carefully manage their share of the district's investment
dollars. By investing in Jostens Learning's modular products, schools can over
time build fully integrated learning systems. In 1994, Jostens Learning
expanded its modular offerings with Action MathTM, a multi-media offering used
in teacher-led classroom discussions of math concepts. Jostens Learning also
offers TeachNetTM, a triad of language learning products.
Stand-Alone Products. Jostens Learning will target opportunities to build a
bridge from school to home with home-use products that complement classroom
curriculum. In fiscal 1995, Jostens Learning will test some concepts and
develop plans to profitably participate in this growing market.
Teacher Training. A new teacher training program, Training PLUS, is being
introduced to help teachers help students get the maximum benefit of Jostens
Learning curriculum. Training PLUS, which offers a core program package as
well as additional training and in-service options, is designed as a cost
effective and time-efficient approach to staff development.
Enhancements & Renewals. This market area is concerned with keeping the
installed base of Jostens Learning customers current by updating and expanding
products and by providing continuing training and support. Currently, more
than 4 million students use Jostens Learning products in 10,000 schools across
the United States.
Jostens at a Glance
School Products - Business. Jostens recognizes individual and group
achievement and affiliation in the academic market. School Products com prises
five businesses: Printing & Publishing, Jewelry, Graduation Prod ucts, U.S.
Photography and Jostens Canada, which is the market leader in school
photography, yearbooks and class rings for Canadian schools. In the United
States, Jostens is the industry leader in yearbooks, class rings and
graduation products and is among the leaders in school photography.
Markets. School Products serves elementary schools, middle schools, high
schools, colleges and alumni associations in the United States and Canada
through 1,100 independent sales representatives. Jostens also maintains an
international sales force in about 50 countries for American schools and
military installations.
Products. School Products include elementary through college yearbooks,
commercial printing, desktop publishing curriculum kits, class rings,
graduation caps and gowns, graduation announcements and accessories, diplomas,
trophies, plaques and other awards, individual and group school pictures,
group photographs for youth camps and organizations, and senior graduation
portraits.
Operating Highlights. Printing & Publishing won more than 500 new accounts for
1995. Jewelry successfully introduced four new ring designs and landed the
U.S. Military Academy, U.S. Naval Academy and Virginia Tech class ring
accounts. U.S. Photography improved performance by consolidating its North
American photo operations from six to four facilities. Jostens Canada
successfully tested new products using digital imaging technology.
Recognition - Business. Jostens helps companies promote and recognize
achievement in people's careers. It designs, communicates and administers
programs to help customers improve performance. Jostens provides products and
services that reflect achievements in service, sales, quality, productivity,
attendance, safety and retirements. It also produces awards for championship
team accomplishments and affinity products for associations.
Markets. Recognition serves customers from mid-size companies to global
corporations, professional and amateur sports teams and special interest
associations, through an independent sales force of about 100.
Products. Recognition offers a wide assortment of products and services
tailored to the needs of the organization it is serving. For global companies
like AT&T, PaineWebber and Georgia Pacific, Jostens customizes programs to
meet specific customer needs. Generic programs, such as New Generation and
Reflections, provide small- and mid-size companies the same product and
service features without complex customization. Recognition enjoys exclusive
product and personalization distributor arrangements with such companies as
LenoxTM china and HartmannTM luggage for the
service award marketplace.
Operating Highlights. Recognition had record sales, topping $100 million for
the first time; significantly reduced cycle time; and sourced and implemented
a new personalization process called Opticrest that allows corporate symbolism
to be integrated into awards.
Jostens Learning - Business. Jostens Learning helps teachers teach and
children learn with educational software for kindergarten through grade 12. As
the nation's largest provider of curriculum software, Jostens Learning
currently serves more than 4 million students in 10,000 schools nationwide.
Computerized lessons use color, animation and sound to engage students in
individualized, self-paced learning on industry-standard microcomputers.
Markets. Jostens Learning focuses on the K-12 market with an employee sales
force of about 100. Market segments target integrated learning systems,
modular products, stand-alone products and staff development services.
Products. Jostens Learning offers more than 7,000 hours of software-based
curriculum in reading, mathematics, language arts, science programs and early
childhood instruction, as well as programs for at-risk learning and home
learning. Customers may purchase programs to meet specific instructional
needs, add products in a modular approach or choose to implement a
comprehensive schoolwide solution. Products include Learning First-New
Edition, ActionMath K-3 and Training PLUS.
Operating Highlights. Jostens Learning introduced Training PLUS, a customized
staff development program that helps schools meet new federal requirements for
comprehensive teacher development. The introduction of Learning First-New
Edition, ActionMath and a single new management system represent the next
generation of interactive curriculum from Jostens Learning.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction
This discussion summarizes the significant factors affecting the consoli dated
operating results, financial condition and liquidity/cash flow of Jostens Inc.
during the three years ended June 30, 1994.
A number of items had an impact on the company's earnings, including: (1)
restructurings recorded in the fourth quarters of fiscal 1993 and 1994; (2)
discontinued operations; (3) changes in certain accounting estimates in the
fourth quarter of fiscal 1993 and the third quarter of fiscal 1994; and (4)
restatement of past financial statements. Each is detailed below, following
discussion of Results of Operations, Financial Position, Capital Expenditures
and Product Development, and Dividends.
Results of Operations
Overall. For fiscal 1994, net sales from continuing operations decreased 1
percent to $827.3 million, compared with $836.4 million in fiscal 1993. Sales
in 1993 declined 3 percent from 1992 sales of $858.5 million. The company's
lower sales and earnings in fiscal 1994 resulted from a substantial shortfall
in Jostens Learning revenue. Sales price increases averaged approximately 3
percent in 1994, 2 percent in 1993 and 3 percent in 1992. Gross margins for
the company in fiscal 1994 were 48.5 percent, down from 49.2 percent in 1993
and 50.2 percent in fiscal 1992. This reflects lower margins reported in 1994
by Jostens Learning. The traditional business segments, School Products and
Recognition, improved margins through strong cost management. Lower margins
also reflect the impact of an inventory change in estimate of $3.2 million in
fiscal 1994 (see Changes in Estimates).
Selling and administrative expenses were $360.3 million in 1994, $351.6
million in 1993 and $323.6 million in 1992. These expenses, as a percentage of
sales, were 43.5 percent, 42 percent and 37.7 percent, respectively. The 1994
increase is primarily due to changes in accounting estimates of $7.7 million
for receivables and $6 million for overdrafts (see Changes in Estimates), and
a shortfall in sales at Jostens Learning. The benefits of the restructuring at
Jostens Learning and at corporate are expected to occur in fiscal 1995.
During fiscal 1994, the company sold several small parcels of land for a $1.1
million gain, and approximately broke even on disposal of its plaque facility.
Interest expense and income in fiscal 1994 compared with fiscal 1993 reflects
lower average debt levels due to the proceeds from the sale of Sportswear and
improved cash flow from operations. Interest expense and income in 1993 were
favorably affected by a reduction in outstanding debt, cash received from the
Wicat acquisition and lower short-term borrowing rates, compared with the
previous year.
Net loss for fiscal 1994 was $16.2 million, compared with a loss of $12.7
million in 1993 and net income of $59.2 million in 1992. Included in the 1994
and 1993 net losses are after-tax restructuring charges of $45.3 million and
$33.6 million, respectively; a fiscal 1993 after-tax charge of $4.2 million
associated with the early adoption of Statement of Financial Accounting
Standards (SFAS) No. 106 for postretirement benefits; a net after-tax gain of
$10.2 million from discontinued operations in 1994; and losses of $8 million
and $1.2 million from discontinued operations in 1993 and 1992, respectively.
The 1994 loss per share was 36 cents, compared with a loss per share of 28
cents in 1993 and earnings per share of $1.32 in 1992. Earnings per share from
continuing operations prior to the change in accounting principle,
discontinued operations and restructuring charges were 42 cents in fiscal
1994, compared with 73 cents in 1993 and $1.34 in 1992.
School Products Segment. Overall School Products sales increased 1 percent to
$546.2 million from $540.7 in fiscal 1993. Fiscal 1993 sales declined 1
percent from fiscal 1992. The Printing & Publishing, Jewelry and Graduation
Products businesses within this segment all posted sales gains in fiscal 1994.
Dollar sales of high school class rings increased, although the number of
units sold was essentially stable compared with fiscal 1993. College class
ring units sold declined from fiscal 1993. The Graduation Products sales
increase stemmed from increases in the buy rates among students as well as an
increase in the average amount purchased by each student. Both the Jostens
Canada and U.S. Photography businesses within this segment reported sales
declines. In Jostens Canada the unit volume was essentially flat, while
currency exchange rate fluctuations accounted for most of the decline. The
decline in U.S. Photography sales reflected a planned realignment of the
dealer base to focus on more profitable business and more closely match the
manufacturing capabilities of this business.
School Products showed operating profit improvements in fiscal 1994 due to a
combination of cost improvements and modest price increases. Overall School
Products operating profit was $73.5 million in fiscal 1994, up 83.8 percent
from $40 million in fiscal 1993, which included restructuring costs of $36.5
million. Fiscal 1993 operating profit decreased 52.9 percent from 1992.
Printing & Publishing reduced costs by improving its manufacturing efficiency
through realigning particular printing jobs in specific plants. Jewelry
improved materials and inventory management, as well as reduced the number of
ring designs. This business also changed its manufacturing organization to a
team-based environment, flattening the organization and improving
productivity. U.S. Photography took major steps to maximize plant capacity
utilization and effectiveness by closing leased facilities in Clinton, Miss.,
and Lake Forest, Calif., and transferring production to owned facilities in
Webster, N.Y., Jackson, Miss., and Winnipeg, Manitoba, effective in fiscal
1995.
The School Products segment incurred $36.5 million of restructuring charges in
fiscal 1993 (see Restructurings, Fiscal 1993). The School Products segment
also increased its reserves in inventory, accounts
receivable and overdrafts by $16.4 million in fiscal 1994 and $7.5 million in
fiscal 1993 (see Changes in Estimates).
Jostens Learning Segment. For the year, Jostens Learning sales were $177.5
million, a decrease of 12 percent from the fiscal 1993 level of $201.6
million. Fiscal 1993 sales declined 8 percent from 1992. The decline in sales
of software, hardware and service in fiscal 1994 stemmed from increased
competition for school technology funds.
Jostens Learning posted an operating loss of $84.2 million in fiscal 1994,
compared with an operating loss of $15.3 million in 1993 and operating profit
of $23.4 million in 1992. The 1994 results stemmed from the $60.9 million
restructuring charge as well as sales declines in software and service areas,
and a shift in product sales from software to hardware, which has lower
margins than software. As part of this restructuring, it is estimated the
discontinuation of product lines will decrease future annual revenues by $55
million to $70 million. Revenue from the discontinued product lines was $68
million in 1994 and $76 million in 1993. Jostens Learning also incurred $10.4
million in restructuring charges in fiscal 1993 (see Restructurings, Fiscal
1994 and Fiscal 1993).
Recognition Segment. Recognition sales were up 10 percent from fiscal 1993 to
$103.7 million. Fiscal 1993 sales declined 1 percent from 1992. Several new
accounts were added in fiscal 1994, including AT&T, and sales to current
customers also increased.
Recognition operating profit increased 10.5 percent to $9.5 million in fiscal
1994. Fiscal 1993 operating profit of $8.6 million was a 13.3 percent increase
from fiscal 1992. Improvements in fiscal 1994 came from reducing costs as well
as improving efficiency. The segment also realigned its sales force and
reduced the number of organizational levels from nine to five.
FINANCIAL POSITION
Net working capital was $172.7 million at June 30, 1994, reflecting a current
ratio of 1.8 to 1. Cash and short-term investments were
$107.8 million, up from $13.6 million the previous year, due to the sale of
the Sportswear business and improved cash flow from operations.
Accounts receivable decreased to $149.2 million from $201.2 million in 1993,
due to the sale of the Sportswear business, lower sales at Jostens Learning,
improved collections and change in estimate charges of $7.7 million (see
Changes in Estimates).
Inventories decreased to $82.6 million in 1994 from $131.2 million in 1993,
due to the sale of the Sportswear business, restructuring write-offs at
Jostens Learning, reduced computer hardware inventory levels at Jostens
Learning and change in estimate charges of $3.2 million (see Changes in
Estimates).
Prepaid expenses decreased to $6.1 million in 1994 from $10.7 million in 1993,
due to reduced royalties and commissions at Jostens Learning.
Other receivables decreased to $10.3 million in 1994 from $21.5 million in
1993 as a result of a reduction in the number of sales representatives under
contract, change in estimate charges of $6 million taken in the third quarter
of fiscal 1994 (see Changes in Estimates), and restructuring write-offs. The
reduction is also due to a tax receivable of $3.7 million included in the
fiscal 1993 balance. Fiscal 1994 current taxes are in a liability position.
Intangibles increased to $47.7 million in 1994 from $47 million in 1993. The
increase was primarily due to the establishment of intangible assets
related to additional minimum pension liability requirements of $5.5 million,
offset by amortization of $2.3 million and write-offs of $3.2 million.
Net software development costs decreased to $29.4 million in 1994 from $52.7
million in 1993. The decrease was due to amortization of $15.5 million, write
offs of $1.9 million due to the company's
application of a net realizable value analysis and $25.3 million in writeoffs
due to the restructuring, offset in part by the addition of $19.4 million of
continuing software development costs.
Net property and equipment decreased to $75.8 million in 1994 from $88.9
million in 1993, primarily due to the sales of the Sportswear busi ness, the
plaque facility and several parcels of land.
Accounts payable decreased to $33.2 million in 1994 from $54.2 million in 1993,
due to reduced hardware purchases at Jostens Learning and the sale of the
Sportswear business.
Salaries, wages and commissions increased to $68.4 million in 1994 from $62.6
million in fiscal 1993, primarily due to fiscal 1994 restructuring reserves in
excess of fiscal 1993 restructuring reserves.
Accrued pension costs increased to $19.3 million in 1994 from $8.9 million in
1993, due to a lower than expected return on pension plan assets and a
reduction in the discount rate to reflect current prevailing interest rates.
Generally, the company's cash requirements have been met with internally
generated funds and through short-term borrowings. The seasonality of the
businesses requires the interim financing of inventories and receivables.
These short-term borrowings averaged $28.6 million in fiscal 1994 and reached
a high of $87 million during the year. This compares with average short-term
borrowings of $42.6 million and $38 million in fiscal 1993 and 1992,
respectively, with highs of $83.3 million for fiscal 1993 and $93.9 million
for fiscal 1992. The average interest rate paid on these borrowings was
approximately 3.25 percent for fiscal 1994, compared with 4 percent for fiscal
1993 and 5.6 percent for fiscal 1992. Seasonal financing needs for 1995 will
be covered under comparable credit arrangements.
Shareholders' investment declined 19 percent to $256.6 million, down from
$315.7 million in 1993. This reduction is primarily attributable to dividends
and the fiscal 1994 restructuring charges. Book value at June 30, 1994, was
$5.64 per share versus $6.95 for the prior year.
Long-term debt, as a percentage of total capitalization, was 18 percent on
June 30, 1994.
CAPITAL EXPENDITURES AND PRODUCT DEVELOPMENT
Capital expenditures were $15.2 million in fiscal 1994, compared with $20.9
million in 1993. The School Products segment accounted for $6.2 million,
including computer system upgrades of $2.8 million and various other capital
improvement projects. Jostens Learning, Recognition and corporate expended $4
million, $1.1 million and $3.9 million, respectively. About $21 million in
capital additions are planned for fiscal 1995, including business systems
upgrades involving new hardware and software platforms for the School Products
segment.
Fiscal 1994 gross product development costs were approximately $32.3 million,
compared with $46.9 million in the prior year. Fiscal 1995 product development
costs are expected to be approximately $18 million. The decrease is due to the
refocusing of Jostens Learning products on
the K-12 marketplace and the conversion to one management system strategy. All
development costs will be internally funded.
DIVIDENDS
Cash dividends paid to shareholders in 1994 totaled $40 million.The annual
dividend was 88 cents per share in fiscal 1994 and 1993, up 5 percent from
the 84cents paid in fiscal 1992.
RESTRUCTURINGS
Fiscal 1994
In the fourth quarter of fiscal 1994, Jostens recorded a total restructuring
charge of $69.4 million ($45.3 million after tax, $1 per share), consisting of
two components: Jostens Learning for $60.9 million and corporate for $8.5
million.
Jostens Learning: A change in management at Jostens Learning occurred in
September 1993, when John Kernan, its chairman and chief executive officer,
left the company.
In October 1993, Jostens engaged the management consulting firm of Bain &
Company, Inc. (Bain) to thoroughly analyze the markets in which
Jostens Learning competes, as well as Jostens Learning's position within those
markets. Bain periodically discussed its progress with management and the
Board of Directors, and presented the final results of its study to Jostens
management in March 1994. The Bain study recommended a substantial
restructuring of Jostens Learning to accomplish the objectives defined during
the evaluation process.
In March 1994, Jostens Learning hired Stanley Sanderson as its new chief
executive officer. Sanderson worked with Bain in developing a restructuring
plan intended to address the issues raised in the Bain study. Sanderson has
set a new direction for Jostens Learning that is consistent with the Bain
study, and he reviewed this direction with the company's Board of Directors in
April 1994. Management proposed and the board approved a restructuring plan
for Jostens Learning, which was recorded in the fourth quarter of fiscal 1994.
Under the plan, Jostens Learning will focus on the K-12 market and offer
complete integrated learning systems as well as modular and stand-alone
products. Specifically, Jostens Learning will: (1) develop educational
software that runs on industry-standard systems and discontinue investments
and development in proprietary systems; (2) sell its minority investments in
education and technology companies; (3) exit the hardware business and rely on
third-party vendors to provide hardware and services; and (4) establish a new
model for providing customer training and service.
Jostens recognized a total restructuring charge related to Jostens Learning of
$60.9 million. This charge was in the following areas: product development,
$39.1 million; exit ancillary businesses, $7.3 mil lion; exit hardware sales
and services, $4.1 million; and work-
force reduction, $10.4 million.
1. Product Development: In recent years, Jostens Learning has invested heavily
in new technologies. Jostens Learning's new strategy will return it to its
successful core: developing software curriculum with a dedication to
improving the delivery of instruction to children (K-12) through the
teacher. Future products will focus on a narrower range of product offerings
and operate from a single uniform management system, aiding the development
process and streamlining the support and service required after the sale.
This will result in the abandonment of certain capitalized software and a
proprietary management system.
2. Exit Ancillary Businesses: Jostens Learning will exit ancillary lines of
business in order to focus on its core business - the K-12 delivery of
instruction. This involves selling both passive investments in other
companies as well as operations that do not support this business strategy.
3. Exit Hardware Sales and Services: Jostens Learning has been in the hardware
sales and servicing business to provide customers with "one-stop shopping."
In order to focus its strengths on curriculum development, Jostens Learning
has decided to stop providing hardware and maintenance and to select vendors
to provide this for Jostens Learning. Jostens Learning does not expect to be
able to fully recover the costs of its hardware inventory, and a reserve has
been established for the estimated nonrecoverable amounts.
4. Work-Force Reduction: Jostens Learning is reducing complexity, as described
above, by eliminating diverse businesses, adopting a single management
system and supporting a simplified product offering. In addition, it is
redesigning the in-field service provided to customers, and reducing the
amount of product being developed, therefore, requiring less personnel. This
will result in severance and relocation costs.
The formal plan covering all areas of restructuring will result in termination
of approximately 500 employees, identified by job classification and location.
Affected employees were notified of the general terms of the plan in early
July 1994. Approximately one-half of the individuals affected were notified
and terminated immediately, and all affected employees are expected to be
terminated by the end of April 1995.
The company is currently implementing the Jostens Learning restructuring plan.
With respect to product development, Jostens Learning has ceased all
development work on its proprietary InterActive Media system. In addition, it
has adopted a single management system strategy and has begun converting
customers to a single system.
Shortly after the end of fiscal 1994, Jostens Learning sold its adult division
to Centec Corp. and sold its minority investment in Optical Data Corp. to Cox
Communications. Jostens Learning's efforts to exit the hardware sales and
service business and reduce the work force are progressing.
Approximately $16.5 million ($9.9 million net of tax) of the charge to
earnings related to the Jostens Learning restructuring plan reflects cash to
be expended; the remainder represents asset write-offs and accruals for
business dispositions. Of the cash expenses, net of tax, the
company expects approximately $8.7 million to occur in fiscal 1995 and $1.2
million in fiscal 1996, all of which will be internally funded. The Jostens
Learning restructuring is expected to reduce annual revenues and operating
costs, with a net benefit of between $10 million and $15 million pre-tax after
full implementation, primarily from reductions in amortization and headcount.
The company expects Jostens Learning to improve from last year, but still
operate at a loss in fiscal 1995 and return to profitability in fiscal 1996.
The company has lease commitments on facilities that will be abandoned in 1995
due to the headcount reductions at Jostens Learning.
The company estimates that the net cost of the commitment for these leases is
between $4 million and $6 million after subletting, and will be accrued for
when the facilities are vacated. The leases have lives varying from over one
year to seven years. (See note on Commitments and Contingencies.)
Corporate: In fiscal 1994, Jostens hired Deloitte & Touche to conduct a study
of the company's corporate overhead costs. Deloitte & Touche was requested to
recommend how to reengineer the corporate staff functions to improve
efficiency and effectiveness. The study, completed in the third quarter of
fiscal 1994, recommended changing the management organization. To achieve the
goals identified in the study, the company determined that approximately 150
positions needed to be eliminated. A formal plan identifying the number of
people, functions and locations was developed and approved by the Board of
Directors in the fourth quarter of 1994. Jostens initiated a work-force
reduction effort consisting of a voluntary program followed by an involuntary
reduction in force. The voluntary program concluded in the fourth quarter of
fiscal 1994, with most of the terminations taking place by June 30, 1994. The
success of the voluntary program resulted in a majority of the targeted
reductions occurring in fiscal 1994 and some involuntary terminations in the
first quarter of fiscal 1995.
Jostens recognized a restructuring charge of $8.5 million in the fourth
quarter of fiscal 1994 to account for this event. Most of the $5.1 million
(net of tax) cash outlay for this restructuring will occur in fiscal 1995 and
will be funded internally. This restructuring is expected to reduce annual
operating costs by $4 million to $6 million.
Fiscal 1993
The restructuring charge taken in 1993 for continuing operations totaled $50.6
million ($33.6 million after tax, 74 cents per share). It included $26.7
million for restructuring the U.S. Photography business, of which $7.9 million
relates to goodwill write-offs ($5.6 million relating to the Portrait World
acquisition in 1989 and $2.3 million relating to various smaller photography
intangibles), $12.8 million relates to plant shutdowns, and $6 million relates
primarily to write-offs of abandoned receivables from independent sales
representatives and dealers. The remaining $23.9 million of restructuring
charges includes $10.2 million primarily for headcount reductions and
relocation expenses; $5 million to write off certain software development
costs at Jostens Learning; and $8.7 million primarily for sales force
restructuring and policy changes, including write-offs of abandoned
receivables from terminated independent sales representatives. The accounts
receivable balances, which would have ordinarily been collectible in the
absence of the changes in the sales force, were abandoned as part of the
territory consolidations and sales force terminations included in the sales
force restructuring.
The restructuring accrual for fiscal 1993 decreased by $26.5 million from June
30, 1993, to June 30, 1994, due to the third-quarter disposition of the
Sportswear business (see Discontinued Operations) and to payments totaling
$11.5 million made in fiscal 1994. Two photography plants that were part of
the 1993 restructuring were closed in April and June of 1994. The remaining
restructuring accrual at June 30, 1994, is $11.6 million. The net-of-tax
outlay is estimated to be paid for with internally generated funds in
subsequent periods as follows: fiscal 1995, $4.8 million; fiscal 1996, $1.7
million; fiscal 1997 and beyond, $500,000.
It is estimated that the 1993 restructuring reduced annual operating costs by
$3 million to $6 million.
DISCONTINUED OPERATIONS
In January 1994, Jostens sold its Sportswear business to a subsidiary of Fruit
of the Loom for $46.7 million in cash. Jostens recognized an $18.5 million
gain ($11 million after tax) on the sale, primarily because the Sportswear
business had been written down by $15 million to its estimated net realizable
value in the fiscal 1993 restructuring. The
sale's future impact on continuing operations and cash flow is expected to be
immaterial.
CHANGES IN ESTIMATES
In fiscal 1993, Jostens undertook a major restructuring primarily directed at
its School Products businesses. For the first time, a significant reduction
(20 percent) of its independent sales force in the Jewelry and Graduation
Products businesses, along with a major realignment of the sales territories,
occurred. This restructuring marked a substantial change in business
conditions. It was no longer possible to grow by adding more sales
representatives without also redefining and realigning territories. Increasing
school consolidations caused overlaps between sales representatives, thus
increasing the costs of managing territories, and more time was required in
the sales process for each school by the sales representatives. As a result of
these changes in its business conditions, the company recorded additional
provisions in the fourth quarter of fiscal 1993 for obsolete inventory,
accounts receivable and independent sales force overdrafts of $1 million, $1
million and $5.5 million, respectively. The revised estimates reduced pre-tax
income for fiscal 1993 by $7.5 million (4.6 million after tax,10 cents per
share).
In light of the ongoing ramifications of the fiscal 1993 restructuring, the
separate fiscal 1994 review of Jostens Learning and changes in management and
business practices, the company conducted an intensive review of its accounts
and accounting practices. As a result of the review, which concluded at the
end of the third quarter of fiscal 1994, Jostens increased reserves for
inventories by $3.2 million, receivables by $7.7 million and overdrafts by $6
million to reflect amounts estimated not to be recoverable, based upon current
facts and circumstances. The revised estimates reduced pre-tax income for
fiscal 1994 by $16.9 million ($10.1 million after tax, 22 cents per share).
The changes in estimates are described more fully below:
Inventory: The company has historically monitored inventory and written off
obsolete inventory as identified, at least annually. Business volume growth
remained below original plan in fiscal 1994, causing a build-up of dated
and/or excessive inventories. Accordingly, the company conducted a business-by
-business and individual product line review of its inventory. The company re-
evaluated the adequacy of its reserves for obsolete inventories and, employing
a more systematic methodology based on recent experience, determined that an
additional charge for specifically identified obsolete
inventory should be recorded, and a reserve should be established to reflect
current business conditions. The charge to earnings in the third quarter for
this was $3.2 million.
Accounts Receivable: Similar to inventory, management has revised its
estimates for uncollectible accounts receivable based upon its intensive
review. In particular, one account for which reserves had been increased
substantially in 1993 continued to deteriorate and resulted in a contract
termination and a new contract in late 1994 to facilitate cash collections
on accounts receivable. Specific reserves for the estimated uncollectability
of this account receivable were increased $3.3 million. The company also
increased specific reserves for other accounts deemed to be not fully
recoverable. As a result of the review, an additional charge of $4.4 million
was recorded.
Overdrafts: The company provides its independent sales representatives with
cash draws throughout the year which are netted against their annual earned
commissions. It is not unusual for new sales representa tives or those in
new territories to earn less commissions than the established draws for a
period of several years, creating an "overdraft" situation. Such overdrafts
are then reduced in subsequent years through earned commissions.
At the end of fiscal 1993, a restructuring of the sales force occurred which
realigned territories and eliminated about 20 percent of the sales force.
Overdrafts of $3.2 million applicable to this group thus became
uncollectible and were accordingly classified with the fourth-quarter 1993
restructuring. Also, at the end of fiscal 1993, all cash advances to
continuing sales representatives were examined for collectability, taking
into consideration the newly realigned territories and the sales costs
experienced by sales representatives. The company recorded in the fourth
quarter of 1993 an additional charge of $5.5 million.
In the third quarter of fiscal 1994, based upon the continuing assessment
of the results of the restructuring in light of the new business
environment, the company determined that a change in estimate was
appropriate to reflect both specifically identified additional over drafts
that are estimated to be unrecoverable as well as the establish ment of
general reserves to reflect recent experience. An additional charge of $6
million was recorded.
RESTATEMENT
After its fiscal 1993 restructuring, Jostens began centralizing and stan
dardizing business practices, and management reviewed the company's ac
counting policies and procedures to (1) ensure that they appropriately
reflected the way the company was conducting its business in the wake of the
fiscal 1993 restructuring, and (2) to determine whether previously identified
audit differences, which were immaterial individually and in the aggregate in
prior periods, cumulatively had become more significant given the changes in
shareholders' investment.
During the first three quarters of fiscal 1994, Jostens conducted this review
and consulted with Ernst & Young, its independent auditors. The company
determined that the impact on shareholders' investment of the 1993 and 1994
restructurings, as well as the changes in business practices (combined with
the company's desire to conform its basic policies to generally accepted
accounting principles regardless of the immateriality of these previously
identified differences), necessitated the restatement. (See note on
Restatement.)
REPORT OF MANAGEMENT
The management of Jostens is responsible for the integrity and objectivity of
the financial information presented in this report. The financial statements
have been prepared in accordance with generally accepted accounting principles
and include certain amounts based on management's best estimates and judgment.
Management is also responsible for establishing and maintaining the company's
accounting systems and related internal controls, which are designed to
provide reasonable assurance that assets are safeguarded and transactions are
properly recorded. These systems and controls are reviewed by the internal
auditors. In addition, the company's code of conduct states that its affairs
are to be conducted under the highest
ethical standards.
The independent auditors provide an independent review of the financial
statements and the fairness of the information presented therein.
The Audit Committee of the Board of Directors, comprised solely of outside
directors, meets regularly with management, the company's internal auditors
and its independent auditors to review audit activities, internal controls and
other accounting, reporting and financial matters. Both the independent
auditors and internal auditors have unrestricted access to the Audit
Committee.
/s/Trudy A. Rautio
Vice President and Controller
/s/Robert C. Buhrmaster
President and Chief Executive Officer
Minneapolis, Minnesota
August 5, 1994
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Jostens Inc.:
We have audited the accompanying consolidated balance sheets of Jostens Inc.
and subsidiaries as of June 30, 1994 and 1993, and the related consolidated
statements of operations, changes in shareholders' investment and cash flows
for each of the three years in the period ended June 30, 1994. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jostens Inc. and
subsidiaries at June 30, 1994 and 1993, and the consolidated results of their
operations and cash flows for each of the three years in the period ended June
30, 1994, in conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, prior years' financial
statements have been restated, and in 1993 the company changed its method of
accounting for income taxes and postretirement benefits other than pensions.
Ernst & Young LLP
Minneapolis, Minnesota
August 5, 1994
STATEMENTS OF CONSOLIDATED OPERATIONS
Jostens Inc. and Subsidiaries (Dollars
in thousands, except per-share data)
Years ended June 30
1994 1993 1992
(Restated)(Restated)
NET SALES $827,338 $836,421 $858,530
Cost of products sold 426,482 424,543 427,825
400,856 411,878 430,705
Selling and administrative expenses 360,295 351,574 323,599
Restructuring charges 69,359 50,581 -
OPERATING INCOME (LOSS) (28,798) 9,723 107,106
Interest income 1,823 2,094 1,415
Interest expense (6,803) (7,746) (9,864)
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (33,778) 4,071 98,657
Income taxes (7,432) 4,623 38,319
INCOME (LOSS) FROM CONTINUING OPERATIONS (26,346) (552) 60,338
DISCONTINUED OPERATIONS:
Loss from operations, net of tax (810) (7,970) (1,169)
Gain on sale, net of tax 10,987 - -
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX - (4,150) -
NET INCOME (LOSS) $(16,169)$(12,672) $ 59,169
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ (.58)$ (.01) $ 1.34
Loss from discontinued operations (.02) (.18) (.02)
Gain on sale of discontinued operations .24 - -
Cumulative effect of change in accounting
principle - (.09) -
Net Income(Loss) $ (.36)$ (.28) $ 1.32
See notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
Jostens Inc. and Subsidiaries
(Dollars in thousands)
June 30
1994 1993
(Restated)
ASSETS
CURRENT ASSETS
Cash and short-term investments $107,827 $ 13,564
Accounts receivable, net of allowance
of $13,749 and $6,869, respectively 149,206 201,202
Inventories
Finished products 28,026 41,773
Work-in-process 23,879 46,580
Materials and supplies 30,733 42,833
82,638 131,186
Deferred income taxes 39,985 23,449
Prepaid expenses 6,123 10,700
Other receivables 10,338 21,485
Total Current Assets 396,117 401,586
OTHER ASSETS
Intangibles 47,737 47,005
Software development costs 29,356 52,724
Other 20,850 23,247
Total Other Assets 97,943 122,976
PROPERTY AND EQUIPMENT
Land 5,277 7,032
Buildings 38,131 44,288
Machinery and equipment 164,233 167,571
207,641 218,891
Accumulated depreciation (131,870) (130,003)
Total Property and Equipment 75,771 88,888
$569,831 $613,450
See notes to consolidated financial statements
June 30
1994 1993
(Restated)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 33,192 $ 54,230
Salaries, wages and commissions 68,394 62,619
Customer deposits 36,080 34,621
Other accrued liabilities 48,749 45,541
Dividends payable 10,001 9,993
Deferred revenue 11,820 8,814
Income taxes 14,663 -
Current maturities on long-term debt 495 494
Total Current Liabilities 223,394 216,312
LONG-TERM DEBT - LESS CURRENT MATURITIES 54,267 54,843
DEFERRED INCOME TAXES 5,943 10,661
ACCRUED PENSION COSTS 19,291 8,901
OTHER NON-CURRENT LIABILITIES 10,355 7,015
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' INVESTMENT
Preferred shares, $1.00 par value:
Authorized 4,000 shares
None issued - -
Common shares, $ .33 1/3 par value:
Authorized 100,000 shares
Issued 1994 - 45,482; 1993 - 45,425 15,160 15,142
Capital surplus 152,996 152,312
Retained earnings 92,855 151,013
Foreign currency translation adjustment (4,430) (2,749)
Total Shareholders' Investment 256,581 315,718
$569,831 $613,450
STATEMENTS OF CONSOLIDATED CASH FLOWS
Jostens Inc. and Subsidiaries
(Dollars in thousands) Years ended June 30
1994 1993 1992
(Restated)(Restated)
OPERATING ACTIVITIES
Net income (loss) $(16,169) $(12,672) $ 59,169
Depreciation and amortization 38,927 34,896 29,300
Non-cash restructuring charges 27,333 10,624 -
Deferred income taxes (21,254) (14,427) 8,585
Gain on sale of discontinued operations (10,987) - -
Changes in assets and liabilities, net of
effects from sale of discontinued operations:
Accounts receivable 37,000 15,470 (8,099)
Inventories 26,333 (13,325) 532
Prepaid expenses 4,577 (3,562) (1,383)
Accounts payable (19,396) 5,596 18,987
Other 58,747 41,796 (9,205)
125,111 64,396 97,886
INVESTING ACTIVITIES
Capital expenditures (15,202) (20,900) (20,428)
Software development costs (19,437) (27,515) (22,145)
Minority investments (144) (1,824) (2,031)
Net proceeds from sale of
discontinued operations 43,808 - -
Sale of Broderbund investment - - 19,522
9,025 (50,239) (25,082)
FINANCING ACTIVITIES
Cash dividends (39,999) (40,798) (34,539)
Exercise of stock options 702 5,721 4,159
Reduction in long-term debt (576) (24,126) (24,444)
Issuance of medium-term notes - - 50,000
Short-term borrowing - - (35,231)
(39,873) (59,203) (40,055)
CHANGE IN CASH AND SHORT-TERM INVESTMENTS 94,263 (45,046) 32,749
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF YEAR 13,564 58,610 25,861
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $107,827 $ 13,564 $ 58,610
See notes to consolidated financial statements
STATEMENTS OF CONSOLIDATED CHANGES IN SHAREHOLDERS' INVESTMENT
Jostens Inc. and Subsidiaries
Cumulative
(Dollars in thousands, except Common Shares Capital Retained Translation
per share data) Number Amount Surplus Earnings Adjustment
Balance-June 30, 1991
Previously reported 44,733 $14,911 $130,482 $186,272 $(1,170)
Effect of restatement 9,520 (6,419)
Balance-June 30, 1991 (Restated) 44,733 14,911 140,002 179,853 (1,170)
Net employee stock options
exercised 270 90 3,697
Transactions of pooled company 30 9 363
Net income 59,169
Cash dividends of $0.84 per share (34,539)
Tax benefit of stock options 2,008
Change in cumulative translation adjustment 332
Balance-June 30, 1992 (Restated) 45,033 15,010 146,070 204,483 (838)
Net employee stock options
exercised 194 65 3,217
Transactions of pooled company 198 67 2,372
Net loss (12,672)
Cash dividends of $0.88 per share (40,798)
Tax benefit of stock options 653
Change in cumulative translation adjustment (1,911)
Balance-June 30, 1993 (Restated) 45,425 15,142 152,312 151,013 (2,749)
Net employee stock options
exercised 57 18 1,203
Net loss (16,169)
Cash dividends of $0.88 per share (39,999)
Change in cumulative translation adjustment (1,681)
Restricted stock grants (519)
Adjustment in minimum pension liability (1,990)
Balance-June 30, 1994 45,482 $15,160 $152,996 $ 92,855 $(4,430)
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Jostens Inc. and Subsidiaries
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of the company and its subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Cash Equivalents and Cash Flows. For purposes of reporting cash flows, cash and
short-term investments include cash on hand, time deposits and commercial
paper. Short-term investments have an original maturity of three months or
less. Total cash payments for income taxes and interest were $8.9 million,
$24.2 million, and $33.4 million, and $5.9 million, $7.5 million, and $8.5
million respectively, for 1994, 1993 and 1992.
SFAS No.115, Accounting for Certain Investments in Debt and Equity
Securities, must be adopted no later than fiscal 1995. The implementation of
this statement is not expected to have a material impact on the results of
operations. Marketable securities, which consist of commercial paper, are
recorded at cost that approximates market.
Inventories. Gold and certain other inventories aggregating $4.1 million at
June 30, 1994, and $2.2 million at June 30, 1993, are stated at the lower of
last-in, first-out (LIFO) cost or market, and are $13.8 million and $13.1
million lower in the respective years than such inventories deter mined under
the lower of first-in, first-out (FIFO) cost or market. All other inventories
are stated at the lower of FIFO cost or market.
Inventory Obsolescence. The company's policy is to employ a systematic
methodology that includes quarterly evaluations of inventory, based upon
business trends, to specifically identify obsolete, slow-moving and
nonsalable inventory. Inventory reserves are evaluated quarterly to ensure
they continually reflect current business environment and trends.
Intangibles. Intangibles primarily represent the excess of the purchase price
over the fair value of the net tangible assets of acquired businesses.
Intangibles are being amortized over various periods of up to 40 years. The
company recognized an intangible asset relating to additional minimum pension
liability of $5.5 million in 1994. Accumulated amortization at June 30, 1994
and 1993, was $23.2 million and $21.7 million, respectively. The carrying
value of intangible assets is assessed annually and/or when factors
indicating an impairment are present. The company employs an undiscounted
cash flow method of assessment for these assets.
Software Development Costs. Jostens Learning capitalizes software development
costs when the project reaches technological feasibility and ceases
capitalization when the product is ready for release. Research and
development costs related to software
development that has not reached technological feasibility are expensed as
incurred. Software development costs are amortized on the straight-line
method over a maximum of five years or the expected life of the product,
whichever is less. Amortization of capitalized software costs for June 30,
1994, 1993 and 1992, was $15.5 million, $10.9 million and $6 million,
respectively. Accumulated amortization at June 30, 1994 and 1993, was $35
million and $30.9 million, respectively. Research and development expense
charged to operations was $12.9 million, $17.6 million and $13.2 million in
1994, 1993 and 1992, respectively. The company performs a net realizability
evaluation of its software products. The company recognized a $1.9 million
write-off of software in 1994 as a result of the evaluation, in addition to
$25.3 million and $5 million written off in the restructurings of fiscal 1994
and 1993, respectively. No write-offs were recognized in 1993 or 1992 due to
impairment of net realizable value.
Depreciation. Depreciation on buildings, machinery and
equipment is provided principally on the straight-line method for financial
reporting purposes over their estimated useful lives: buildings, 15 to 40
years; machinery and equipment, three to 10 years. Depreciation expense
charged to operations was $19.2 million, $20.4 million and $20.2 million in
1994, 1993 and 1992, respectively.
Income Taxes. Effective in fiscal 1993, the company adopted SFAS No.109,
Accounting for Income Taxes, by restating prior years. This statement
requires a change from the deferred method of accounting for income taxes to
the asset and liability method of accounting for income taxes. Under this
approach, deferred taxes are recognized for the estimated taxes ultimately
payable or recoverable based on enacted tax law. Changes in enacted tax rates
are reflected in the tax provision as they occur.
Revenue Recognition. Jostens Learning recognizes revenue for hardware and
software upon shipment of the product, provided that no significant vendor or
post-contractor obligations remain outstanding and collection of the
resulting receivable is deemed probable. Revenue generated from service
contracts and post-contract customer support on software is recognized
ratably over the period of the contract. The revenue recognition for
instruction and user training is part of the service contract recognized
ratably over the life of the contract. For insignificant vendor and post
contract obligations remaining at the time of shipment, the company's policy
is to accrue all such obligations. Deferred revenue comprises payments
received in advance of revenue recognized on contracts. For all other Jostens
businesses, revenue is recognized upon shipment of the product.
Sales Returns and Warranty Costs. Provisions for sales returns and warranty
costs are recorded at the time of sale based on historical information
adjusted for current trends.
Translation of Foreign Currencies. Assets and liabilities are translated at
the current exchange rate as of the balance sheet date. Translation
adjustments are recorded as a separate component of equity.
Earnings Per Common Share. Earnings per share have been computed by dividing
net income by the average number of common shares outstanding. The impact of
any additional shares issuable upon the exercise of dilutive stock options is
not material.
Postemployment Benefits. SFAS No.112, Employers' Accounting for
Postemployment Benefits, must be adopted no later than fiscal 1995. Adopting
this statement is expected to result in a $1.1 million charge to operations
in the first quarter of fiscal 1995.
Reclassification. Certain 1993 and 1992 balances have been reclassified to
conform to the 1994 presentation.
RESTRUCTURING CHARGES
Fiscal 1994
The company recorded a restructuring charge of $69.4 million ($45.3 million
after tax, $1 per share) in the fourth quarter of fiscal 1994, including
charges of $60.9 million for Jostens Learning and $8.5 million for reduced
headcount in the company's general and administrative functions.
The restructuring charge relating to Jostens Learning includes $39.1 million
to focus its product development. This involves abandoning certain
capitalized software and proprietary management systems. The remaining
restructuring charge relating to Jostens Learning includes $7.3 million to
exit both direct and indirect investments in three ancillary lines of
business, $4.1 million to exit the hardware sales and
service business, and $10.4 million for work force reduction.
Total fiscal 1994 restructuring charges included $40.7 million of asset write-
offs and $28.7 million of accruals, of which $28.2 million remain at June 30,
1994. The accruals are classified as follows: $13.7 million classified in
other liabilities, including $3.7 million relating to
business dispositions, $200,000 in accounts payable and $14.3 million in
salaries, wages and commissions.
Fiscal 1993
In the fourth quarter of fiscal 1993, the company recorded a $50.6 million
($33.6 million after tax, 74 cents per share) restructuring charge for
continuing operations. The charge included $26.7 million for restructuring
the U.S. Photography business, of which $7.9 million related to goodwill
write-offs ($5.6 million relating to the Portrait World acquisition in 1989
and $2.3 million in various smaller photography intangibles), $12.8 million
related to plant shutdowns and $6 million related primarily to write-offs of
abandoned receivables from independent sales representatives and dealers. The
remaining $23.9 million of restructuring charges included $10.2 million
primarily for headcount reductions and relocation expenses; $5 million for
the write-off of certain software development costs at Jostens Learning; and
$8.7 million primarily for sales force restructuring and policy changes,
including write-offs of abandoned receivables from terminated independent
sales representatives. The accounts receivable balances, which would have
ordinarily been collectible in the absence of the changes in the sales force,
were abandoned as part of the territory consolidations and sales force
terminations resulting from the sales force restructuring.
Prior to reclassification, the 1993 restructuring also included $15 million
to write down the carrying value of the Sportswear business to its net
realizable value. The $15 million related to the sale of Sportswear in 1994
was reclassified as part of a discontinued operation. (See note on
Discontinued Operations.)
The restructuring charges taken in fiscal 1993 have a remaining accrual of
$11.6 million as of June 30, 1994, relating to plant shutdown costs and long-
term leases. Cash payments made on the accruals in fiscal 1994 were
approximately $11.5 million.
DISCONTINUED OPERATIONS
In January 1994, Jostens sold its Sportswear business to a subsidiary of
Fruit of the Loom for $46.7 million in cash. Jostens recognized an $18.5
million gain ($11 million after
tax) on the sale, primarily because the Sportswear business had been written
down by $15 million to its estimated net realizable value in the fiscal 1993
restructuring. Revenues and income tax benefits related to the Sportswear
business were $52.1 million, $82.8 million and $68.5 million, and $500,000,
$4.9 million and $800,000, respectively, for 1994, 1993 and 1992. Prior-year
amounts have been reclassified to present Sportswear as a discontinued
operation.
CHANGES IN ACCOUNTING ESTIMATES
As a result of a review that concluded at the end of the third quarter of
fiscal 1994, the company increased reserves for inventories, receivables and
overdrafts from independent sales representatives to reflect amounts
estimated not to be recoverable, based upon current facts and circumstances.
The revised estimates reduced pre-tax income for fiscal 1994 by $16.9 million
($10.1 million after tax, 22 cents per share).
RESTATEMENT
The financial statements for the last five fiscal years have been restated
because the company has revised the accounting treatment of several items to
more fully conform its accounting policies and practices to generally
accepted accounting principles. The restatement increased shareholders'
investment at June 30, 1993, by $2.4 million. Income from continuing
operations after income taxes and net income were reduced by $600,000 (1 cent
per share) and $2.8 million (6 cents per share) for the years ended June 30,
1993 and 1992, respectively. Amounts reflected in the restated June 30, 1993,
balance sheet include: (1) establishing reserves for vacation pay, sales
returns and allowances, and a supplemental executive retirement plan
aggregating $20.7 million; (2) reducing the fiscal 1993 restructuring charge
by $5 million to reinstate goodwill that was incorrectly deemed to be
impaired; (3) increasing capital surplus by $2.4 million for stock
appreciation rights canceled in prior years, previously classified as a
liability; (4) increasing capital surplus by $10.7 million for tax benefits
from prior years' disqualifying disposition of stock options, previously
recorded as a tax liability (including $7.5 million that had been
reclassified in fiscal 1993 from tax liability to reserves for overdrafts,
receivables and inventories); and (5) recording $2.7 million in additional
tax benefits from operating loss carryforwards. The company had not
previously made these accounting adjustments because they were immaterial
individually and in the aggregate to its financial position and results of
operations in the previous years to which they relate.
ACQUISITIONS
In August 1992, Jostens acquired Wicat Systems Inc., a provider of technology-
based learning systems for the education and aviation markets. The
transaction was effected through the exchange of approximately 4.1 million
common shares of the company for all of the issued and outstanding shares of
Wicat. The merger has been accounted for as a pooling of interests;
accordingly, all financial data for periods prior to the merger have been
restated to include the results of Wicat.
Net sales, net income and earnings per share for the 1992
fiscal year preceding the merger were as follows:
(Dollars in thousands, except per-share data)
Net Net Earnings
Sales Income Per Share
Jostens $810,758 $58,608 $1.44
Wicat 47,772 561
Combined $858,530 $59,169 $1.32
LONG-TERM DEBT AND OTHER BORROWINGS
Long-term debt consists of the following:
June 30
(Dollars in thousands) 1994 1993
Medium-term notes, due in August 1996,
plus interest at 8.02% $ 50,000 $ 50,000
6.75% revenue bonds, covering
general offices, due in January 2004 3,600 3,600
Other 1,162 1,737
54,762 55,337
Less current maturities 495 494
$ 54,267 $ 54,843
Annual maturities on long-term debt are $400,000 in 1996,
$50 million in 1997, zero in 1998, zero in 1999 and $3.9
million thereafter.
During fiscal 1994, Jostens had unsecured lines of credit with four banks
totaling $110 million, under which the company could either borrow on a
short-term basis or use the bank's credit to support the issuance of short-term
commercial paper. In addition, the company had unsecured demand facilities with
two banks totalling $55 million. Such credit arrangements are renegotiated
periodically based on the anticipated seasonal needs for short-term financing.
In compensation for its credit arrangements, the company incurred certain
commitment fees, which were not significant.
INCOME TAXES
Income (loss) from continuing operations before taxes, discontinued operations
and change in accounting principle was as follows:
(Dollars in thousands) 1994 1993 1992
(Restated)(Restated)
Domestic $(40,177) $ (4,547) $ 94,023
Foreign 6,399 8,618 4,634
$(33,778) $ 4,071 $ 98,657
The components of the provision for income taxes attributable to earnings from
continuing operations were as follows:
(Dollars in thousands) 1994 1993 1992
(Restated) (Restated)
Federal $ 10,857 $ 8,187 $ 22,081
State 3,742 1,755 4,406
Foreign 2,603 3,688 3,285
17,202 13,630 29,772
Deferred (24,634) (9,007) 8,547
$ (7,432) $ 4,623 $ 38,319
The following summarizes the differences between income taxes computed at the
U.S. statutory rate and income tax expense from continuing operations for
financial reporting purposes:
(Dollars in thousands) 1994 1993 1992
(Restated)(Restated)
Tax at U.S. statutory rate $(11,822) $ 1,384 $ 33,543
State income taxes, net of federal
income tax benefit 474 252 3,961
Nondeductible restructuring charges 1,960 1,354 -
All other, net 1,956 1,633 815
$ (7,432) $ 4,623 $ 38,319
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the deferred income tax liabilities and assets as of June 30,
1994 and 1993, were as follows:
(Dollars in thousands) 1994 1993
(Restated)
Deferred Tax Liabilities
Capitalized software development costs $ 11,596 $ 19,068
Tax over book depreciation 3,869 4,404
Other, net 5,549 11,058
Net Deferred Tax Liability 21,014 34,530
Deferred Tax Assets
Restructuring charges 18,689 16,586
Net operating loss and tax credit
carryforwards of acquired companies 10,356 12,455
Allowance for doubtful accounts 7,063 2,876
Sales representatives' overdraft reserve 3,657 2,118
Sales returns and allowances 3,401 3,362
Postretirement benefits 2,933 2,598
Pension plans 4,994 3,314
Other, net 7,605 7,556
58,698 50,865
Valuation Allowance (3,642) (3,547)
Net Deferred Tax Assets 55,056 47,318
Net Deferred Tax Asset $ (34,042) $ (12,788)
At June 30, 1994, the company has net operating loss carryforwards from
business acquisitions of $25.2 million for federal income tax purposes that
expire in the years 1998 through 2004. The company also has investment tax
credit and research and experimentation tax credit carryforwards of $1.5
million that expire in the years 1998 through 2004.
BENEFIT PLANS
The company's noncontributory pension plans cover substantially all
employees. The defined benefits provided under the plans are based on years
of service and/or compensation levels. Annually, the company funds the
actuarially determined costs of these plans, including the amortization of
prior service costs over 30 years.
Service cost represents the present value of the increase in future benefits
resulting from the current year's service. The projected benefit obligation
is the present value of benefits, assuming future compensation levels, for
services rendered to date.
During 1994, the company recorded an adjustment of $8.8 million to recognize
the minimum pension liability required by the SFAS No.87, Employers'
Accounting for Pensions. The adjustment, which had no effect on 1994 income,
was offset by recording an intangible asset in the amount of $5.5 million and
a reduction in shareholders' investment of $2 million after tax, as required
by SFAS No.87.
In 1986, the company established a supplemental executive retirement plan
funded by life insurance on the plan participants. While the plan is designed
to be self-funding, based upon the life insurance proceeds purchased on
behalf of the plan participants, this plan meets the guidelines of SFAS
No.87, resulting in a liability of $8.4 million and $8 million as of June 30,
1994 and 1993, respectively.
The components of pension cost and the funded status were as follows:
(Dollars in thousands) 1994 1993 1992
Service cost $ 3,254 $ 3,209 $ 3,551
Interest on projected benefit obligation 6,925 6,083 5,797
Return on assets - actual loss (gain) 326 (6,164) (6,964)
- deferred (6,978) 93 1,273
Amortization (359) (527) (6)
Pension Cost $ 3,168 $ 2,694 $ 3,651
June 30, 1994
Plans whose Plans whose
assets exceed accrued benefits
accrued benefits exceed assets
Vested benefit obligation $ 34,743 $ 52,664
Accumulated benefit obligation 37,795 54,467
Projected benefit obligation 45,736 55,839
Fair value of plan assets 49,304 36,069
Plan assets in excess of (less than)
projected benefit obligation $ 3,568 $(19,770)
Unrecognized net (gain) loss (6,951) 7,075
Unrecognized prior service cost 8,094 5,680
Unrecognized net (asset) at transition (5,679) (2,523)
Adjustment required to recognize
minimum liability - (8,785)
Net Pension Asset (Liability) in
Consolidated Balance Sheets $ (968) $(18,323)
June 30, 1993
Plans whose Plans whose
assets exceed accrued benefits
accrued benefits exceed assets
Vested benefit obligation $ 64,710 $ 11,586
Accumulated benefit obligation 68,500 12,251
Projected benefit obligation 77,548 13,458
Fair value of plan assets 86,725 -
Plan assets in excess of (less than)
projected benefit obligation $ 9,177 $(13,458)
Unrecognized net (gain) (11,052) (397)
Unrecognized prior service cost 13,899 2,027
Unrecognized net (asset) liability
at transition (9,259) 162
Net Pension Asset (Liability) in
Consolidated Balance Sheets $ 2,765 $(11,666)
Plan assets consist primarily of corporate and U.S.government debt,
real estate and corporate equity, including $3.6 million of the company's
common stock.
The assumptions used in determining the components of pension
cost and the funded status were as follows:
1994 1993 1992
Weighted average discount rates 7.5% 8.0% 8.0%
Rates of increase in compensation 5.0% 6.0% 6.0%
Expected rate of return on assets 8.0% 8.0% 8.0%
In conjunction with the divestiture of Sportswear, accrued benefits under
the applicable defined-benefit pension plans were frozen and active
participants became fully vested. The plans' trustee will continue to
maintain and invest plan assets and will administer benefit payments. In
accordance with SFAS No.88, Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans, a loss of $700,000 was
included in the gain on disposal of Sportswear.
The company's retirement savings plan, which covers substantially all
nonunion employees, provides for a matching contribution by the company on
amounts, limited to 6 percent of compensation, contributed by employees. The
company's contribution for the years ended June 30, 1994, 1993 and 1992, was
$2.4 million, $1.8 million and $1.4 million, respectively, representing 50
percent of eligible employee contributions in 1994, 33.3 percent in 1993 and
25 percent in 1992.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Jostens provides medical insurance benefits for substantially all retirees.
Employees who retired prior to June 30, 1992, pay medical contributions at an
amount either frozen at retirement or at a fixed percentage of the plan costs
prior to age 65. Employees retiring after that date receive only a fixed
dollar contribution toward coverage prior to age 65. The fixed dollar
contribution is based on vested service at retirement and is not projected to
increase in the future.
In fiscal 1993, Jostens adopted SFAS No.106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. This statement requires the
accrual of postretirement benefit costs during the years an employee provides
services. The unfunded obligation of $6.7 million ($4.2 million after tax)
was charged against earnings, effective as of the beginning of the year. The
cost of these benefits in fiscal 1992 was $600,000, which was recognized as a
charge to income in the year the benefits were paid. The costs of these
benefits under SFAS No.106 were as follows:
(Dollars in thousands) 1994 1993
Postretirement Benefit Cost
Service cost of benefits earned $ 77 $ 92
Interest cost of benefit obligation 466 523
Amortization of unrecognized prior service cost (7) -
$ 536 $ 615
The actuarial present value of postretirement benefit
obligations and the amount reported in the consolidated balance sheets as of
June 30, 1994 and 1993, were as follows:
(Dollars in thousands) 1994 1993
Accumulated Postretirement Benefit Obligations
Retirees $5,594 $5,177
Fully eligible active participants 97 139
Other active participants 1,140 1,432
6,831 6,748
Unrecognized prior service cost 92 -
Unrecognized net gain 503 267
$7,426 $7,015
The assumptions used in determining the benefit obligation
in fiscal 1994 included a medical plan cost trend rate of 14.5 percent,
declining to 7.9 percent in the year 2000, and a weighted average discount
rate of 7.5 percent. Fiscal 1993 assumptions included a medical plan cost trend
rate of 15 percent, declining to 6 percent in the year 2002, and a weighted
average discount rate of 8 percent. A one-percentage-point increase in the
assumed health care cost trend rates for each future year increases the
accumulated postretirement benefit obligation for health care benefits by
approximately $500,000 with minimal impact on interest cost and no impact on
service cost, since benefits for future retirees are defined dollar benefits
unrelated to health care benefits.
COMMITMENTS AND CONTINGENCIES
The company's noncancelable minimum rental commitments for facilities and
equipment are $9.6 million in fiscal 1995, $7.1 million in 1996, $ 6.1 million
in 1997, $3.1 million in 1998, $2.4 million in 1999 and $6.6 million thereafter.
Operating lease rental expenses were $11.7 million in 1994, $10.7 million in
1993 and $10 million in 1992.
Jostens has forward contracts of $25.7 million for commitments to purchase
65,000 ounces of gold that mature at various times in fiscal 1995 with prices
ranging from $368 to $402 per ounce.
Jostens is a party to litigation arising in the normal course of business.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
Management believes that the effect on the company's results of operations and
financial position, if any, for the disposition of these matters will not be
material.
STOCK OPTIONS AND RESTRICTED STOCK
Under stock option plans, Jostens has granted options to key employees to
purchase common shares of the company at 100 percent of the market price on the
dates the options are granted. The following summarizes the changes in stock
options outstanding:
Options Outstanding
(In thousands) 1994 1993 1992
Beginning of year 2,446 2,181 2,138
Granted 463 521 427
Exercised (26) (200) (339)
Canceled (483) (56) (45)
End of Year 2,400 2,446 2,181
At June 30, 1994, the exercise price on outstanding options ranged from $1.21 to
$34.19 per share, and approximately 1.1 million common shares were reserved for
future grants under the stock option plans. As of June 30, 1994, 1.4 million
options were exercisable under stock option plans.
Jostens Learning, under its stock option plan, may grant options to key
employees to purchase common shares of Jostens Learning at the fair market value
on the date the options are granted. Options to purchase up to 21.2 million
shares, or approximately 15 percent of the total outstanding shares, may be
granted under the plan. Options vest at 20 percent per year commencing one year
from the date of grant. The shares acquired upon exercise of the options may be
put to or called by Jostens Learning at the then-current fair market value,
after a specified holding period. Option shares may first be put or called in
1995. The company may elect to purchase the Jostens Learning shares for cash or
Jostens common shares. As of June 30, 1994, options for 9.7 million shares were
outstanding at exercise prices ranging from $1.15 to $3.21 per share, of which
3.2 million shares were exercisable. The fair value of the stock at June 30,
1994, was below the lowest exercise price.
Jostens maintains a stock incentive plan, which includes the grant of
restricted stock awards. The plan was approved by shareholders Oct. 22, 1992.
Shares of restricted stock issued under the plan are subject to transfer
restrictions based on the continuous employment of the employee, other than
retirement, and/or performance criteria. Participants have voting, liquidation
and other rights with respect to shares of common stock issued to the
participant as a restricted stock award. Restricted stock awards based solely on
continuous employment of the employee granted and outstanding as of June 30,
1994, totaled 4,500 shares. Holders of these restricted stock awards receive
dividends paid on the common stock. Restricted stock awards based on the
achievement of established goals granted and outstanding as of June 30, 1994,
totaled 30,000 shares. Holders of these restricted stock awards do not receive
dividends paid on the common stock.
SHAREHOLDER RIGHTS PLAN
In August 1988, the Board of Directors declared a distribution to shareholders
of one common share purchase right for each outstanding common share. Each right
entitles the holder to purchase one common share at an exercise price of $60.
The rights become exercisable if a person acquires 20 percent or more, or
announces a tender offer for 25 percent or more, of the company's common shares.
If a person acquires at least 25 percent of the company's outstanding shares,
each right will entitle the holder to purchase the company's common shares
having a market value of twice the exercise price of the right. If the company
is acquired in a merger or other business combination, each right will entitle
the holder to purchase common stock of the acquiring company at a similar 50
percent discount. The rights, which expire in August 1998, may be redeemed by
the company at a price of 1 cent per right at any time prior to the 30th day
after a person has acquired at least 20 percent of the company's outstanding
shares.
BUSINESS SEGMENT INFORMATION
The company's operations are classified into three business segments: school
based recognition products and services (School Products), technology-based
educational products and services (Jostens Learning), and corporate recognition
and performance incentive products and services (Recognition).
The School Products segment manufactures and sells school-based recognition
products and services including yearbooks, class rings, graduation products and
student photography packages, as well as customized products for university
alumni.
Jostens Learning produces technology-based educational programs for kindergarten
through grade 12. The segment also develops, markets and services technology
based learning improvement solutions to end users in the aviation market.
The business consists of hardware, software and service components.
Operations within the Recognition segment include the manufacture and sale of
customized sales, service and performance awards.
Operating income(loss) from continuing operations by business segment is defined
as sales less operating costs and expenses. Income and expense not allocated to
business segments include investment income, interest expense and corporate
administrative costs.
Identifiable assets are those assets used exclusively in the operations of each
business segment and are reflected after elimination of intercompany balances.
Corporate assets are principally comprised of cash, short-term investments,
deferred income tax assets and certain property and equipment.
Financial information by reportable business segment is
included in the following summary:
(Dollars in thousands) 1994 1993 1992
(Restated)(Restated)
Net Sales
School Products $546,191 $540,691 $543,961
Jostens Learning 177,469 201,624 219,314
Recognition 103,678 94,106 95,255
Consolidated $827,338 $836,421 $858,530
Income (Loss) from
Continuing Operations
School Products $ 73,463 $ 40,042 $ 85,062
Jostens Learning (84,180) (15,263) 23,357
Recognition 9,489 8,582 7,576
Corporate items and
eliminations (27,570) (23,638) (8,889)
Consolidated (28,798) 9,723 107,106
Net interest expense (4,980) (5,652) (8,449)
Income (Loss) from Continuing
Operations Before Income
Taxes $(33,778) $ 4,071 $ 98,657
(Dollars in thousands) 1994 1993 1992
(Restated) (Restated)
Identifiable Assets
School Products $225,249 $260,927 $287,038
Jostens Learning 119,999 193,608 187,226
Recognition 47,315 48,068 49,320
Discontinued operations - 53,184 38,151
Corporate items and
eliminations 177,268 57,663 81,605
Consolidated $569,831 $613,450 $643,340
Depreciation and Amortization
School Products $ 11,700 $ 12,634 $ 12,071
Jostens Learning 24,013 17,301 12,644
Recognition 1,775 2,267 2,107
Discontinued operations - 1,479 1,253
Corporate items and
eliminations 1,439 1,215 1,225
Consolidated $ 38,927 $ 34,896 $ 29,300
Capital Expenditures
School Products $ 6,252 $ 9,769 $ 9,478
Jostens Learning 3,994 7,360 5,527
Recognition 1,054 1,550 1,582
Discontinued operations - 1,229 1,835
Corporate items and
eliminations 3,902 992 2,006
Consolidated $ 15,202 $ 20,900 $ 20,428
Corporate expenses in fiscal 1992 are reduced by gains related to the sale of
the Broderbund investment.
Jostens Learning and corporate had restructuring charges of $60.9 million and
$8.5 million in fiscal 1994 and $10.4 million and $3.7 million in fiscal 1993,
respectively. School Products also had restructuring charges of $36.5 million in
fiscal 1993.
Income from continuing operations for School Products in fiscal 1994 includes
$16.4 million of provisions for revised estimates of inventories, receivables
and overdrafts. Income from continuing operations for Recognition in fiscal 1994
includes $500,000 for revised estimates of inventories.
Unaudited Quarterly Financial Data
Jostens Inc. and Subsidiaries
Fiscal 1994
(Dollars in thousands, Income(Loss) Earnings(Loss) Per Share
except per-share data) from Net Net
Net Gross Continuing Income Continuing Income Stock Price Dividends
Sales Margin Operations (Loss) Operations (Loss) High Low Per Share
First
Previously reported $167,182 $ 72,005 $ 962 $ 962 $ .02 $ .02
Discontinued operations (29,191) (7,423) (1,027) - (.02) -
Effect of restatement 10,747 4,849 1,516 1,516 .03 .03
Restated $148,738 $ 69,431 $ 1,451 $ 2,478 $ .03 $ .05 $20 7/8 $18 0/0 $.22
Second
Previously reported $223,425 $ 99,180 $ 3,900 $ 3,900 $ .09 $ .09
Discontinued operations (22,901) (2,072) 1,837 - .04 -
Effect of restatement (2,556) (508) (28) (28) - -
Restated $197,968 $ 96,600 $ 5,709 $ 3,872 $ .13 $ .09 $20 5/8 $17 1/2 $.22
Third $158,726 $ 75,761 $ (9,247) $ 1,740 $(.20) $ .04 $20 0/0 $16 5/8 $.22
Fourth $321,906 $159,064 $(24,259) $(24,259) $(.54) $(.54) $17 1/2 $15 1/8 $.22
Total Year $827,338 $400,856 $(26,346) $(16,169) $(.58) $(.36) $20 7/8 $15 1/8 $.88
The quarterly financial data above includes the effects of the restatement that
occurred in the third quarter of 1994 and the effects of reclassifying Sportswear as a
discontinued operation.
A gain of $18.5 million ($11 million after tax) related to the sale of Sportswear was
recorded in the third quarter of fiscal 1994.
In the third quarter of fiscal 1994, $16.9 million was recorded for provisions related
to revised estimates of reserves for inventories, receivables and overdrafts.
Restructuring charges totaling $69.4 million were recorded in the fourth quarter of
1994.
Unaudited Quarterly Financial Data
Jostens Inc. and Subsidiaries
Fiscal 1993
(Dollars in thousands, Income(Loss) Earnings(Loss) Per Share
except per-share data) from Net Net
Net Gross Continuing Income Continuing Income Stock Price Dividends
Sales Margin Operations (Loss) Operations (Loss) High Low Per Share
First
Previously reported $153,943 $ 70,538 $ 850 $ (3,300) $ .02 $(.07)
Discontinued operations (19,072) (4,559) (87) - - -
Effect of restatement 7,311 3,337 966 966 .02 .02
Restated $142,182 $ 69,316 $ 1,729 $ (2,334) $ .04 $(.05) $27 1/2 $23 3/4 $.22
Second
Previously reported $222,188 $ 99,899 $ 9,881 $ 9,881 $ .21 $ .21
Discontinued operations (17,998) (3,598) 509 - .01 -
Effect of restatement (1,131) (544) (135) (135) - -
Restated $203,059 $ 95,757 $ 10,255 $ 9,746 $ .22 $ .21 $31 1/4 $24 7/8 $.22
Third
Previously reported $184,964 $ 91,078 $ 5,458 $ 5,458 $ .12 $ .12
Discontinued operations (16,516) (922) (145) - - -
Effect of restatement (3,816) (2,040) (902) (902) (.02) (.02)
Restated $164,632 $ 88,116 $ 4,411 $ 4,556 $ .10 $ .10 $29 0/0 $24 1/8 $.22
Fourth
Previously reported $353,753 $163,858 $(24,136) $(24,136) $(.53) $(.53)
Discontinued operations (29,228) (8,543) 7,693 - .17 -
Effect of restatement 2,023 3,374 (504) (504) (.01) (.01)
Restated $326,548 $158,689 $(16,947) $(24,640) $(.37) $(.54) $28 3/8 $16 1/2 $.22
Total year $836,421 $411,878 $ (552) $(12,672) $(.01) $(.28) $31 1/4 $16 1/2 $.88
The quarterly financial data above includes the effects of the restatement
that occurred in the third quarter of 1994.
First quarter 1993 net income reflects the cumulative effect of adopting SFAS
No.106 of $6.7 million ($4.2 million after tax and 9 cents per share).
Restructuring charges totaling $65.6 million were recorded in the fourth
quarter of fiscal 1993. The charges include $15 million related to Sportswear and are now
classified as discontinued operations.
Certain 1993 amounts have been reclassified to conform to the 1994 presentation.
Five-Year Financial Summary
Jostens Inc. and Subsidiaries
(Dollars in millions, except per share data)
1994 1993 1992 1991 1990
(Restated) (Restated) (Restated) (Restated)
Statement of Operations
Net Sales $827.3 $836.4 $858.5 $841.4 $759.9
Cost of Products Sold 426.5 424.5 427.8 421.2 379.8
Net Interest Expense 5.0 5.7 8.4 10.0 9.5
Income Taxes (7.4) 4.6 38.3 37.5 32.8
Income (Loss) - Continuing Operations (26.3) (.6) 60.3 59.9 54.6
Return on Sales (3.2)% (.1)% 7.0% 7.1% 7.2%
Net Income (Loss) (16.2) (12.7) 59.2 61.6 58.5
Return on Investment (5.7)% (3.7)% 16.9% 19.6% 21.0%
Balance Sheet Data
Current Assets $396.1 $401.6 $436.3 $389.4 $338.1
Working Capital 172.7 185.3 232.2 167.7 155.3
Current Ratio 1.8 1.9 2.2 1.8 1.9
Property and Equipment 207.6 218.9 207.4 192.3 173.5
Total Assets 569.8 613.5 643.3 596.4 538.5
Long-Term Debt 54.3 54.8 55.5 31.9 53.6
Shareholders' Investment 256.6 315.7 364.7 333.6 295.3
Common Share Data
EPS (Loss) - Continuing Operations $ (.58) $ (.01) $ 1.34 $ 1.34 $ 1.25
EPS (Loss) - Net Income (.36) (.28) 1.32 1.38 1.34
Cash Dividends .88 .88 .84 .80 .72
Book Value 5.64 6.95 8.10 7.46 6.71
Common Shares 45.5 45.4 45.0 44.7 44.0
Stock Price High 20 7/8 31 1/4 37 3/8 38 5/8 30 3/8
Stock Price Low 15 1/8 16 1/2 24 1/8 23 1/2 20 7/8
The financial statements for fiscal years prior to 1994 have been restated to reflect
the effects of the third quarter 1994 restatement. Such statements also have been
reclassified to present Sportswear as a discontinued operation.
Restructuring charges totaling $69.4 million and $65.6 million were recorded in the
fourth quarters of fiscal 1994 and 1993, respectively. The 1993 restructuring charges
included $15 million related to Sportswear and are now classified as discontinued
operations.
In 1994, $16.9 million was recorded for provisions related to revised estimates of
reserves for inventories, receivables and overdrafts.
1993 net income reflects the cumulative effect of adopting SFAS No.106 of $6.7 million
($4.2 million after tax and 9 cents per share).
Board of Directors
Lilyan H. Affinito* Former Vice Chair of the Board, Maxxam Group Inc.; Director,
Caterpillar Inc., Chrysler Corp., NYNEX, Tambrands Inc.,
Lillian Vernon Corp., Kmart Corp.
William A. Andres* Retired Chairman and Chief Executive Officer, Dayton
Hudson Corp.; Director, International Multifoods, Scott Paper Company, Lowe's
Companies Inc., Hannaford Bros. Co.
Fred D. Bjork Retired Executive Vice President, Jostens Inc.
Robert C. Buhrmaster President and Chief Executive Officer, Jostens Inc.;
Director, Marietta Corp.
Mannie L. Jackson** Senior Vice President-Corporate Marketing and
Administration, Honeywell Inc.; Majority Owner, Chairman and Chief Executive
Officer, Harlem Globetrotters International; Director, Ashland Oil Corp.
Robert P. Jensen** Chairman, Jostens Inc.; Former Chairman and Chief Executive
Officer, GK Technologies, Inc., Tiger International, Inc., EF Hutton LBO Inc.;
Advisory Director, Bank of New York.
John W. Stodder* Vice Chairman and Audit Committee Chairman, Jostens Inc.;
Independent Corporate Finance Consultant; Director, Tally Industries Inc.,
Stevens Graphics Corp., Trans Leasing Intl. Inc.
* Member, Audit Committee, Compensation and Stock Option Committee, and
Executive Committee
** Member, Audit Committee and Executive Committee
Corporate Management
Robert C. Buhrmaster, 47, President and Chief Executive Officer, joined Jostens
in 1992.
Orville E. Fisher Jr., 50, Corporate Senior Vice President, General Counsel and
Secretary, joined Jostens in 1975.
John L. Jones, 55, Corporate Senior Vice President-Human Resources, joined
Jostens in 1992.
Charles W. Schmid, 51, Corporate Senior Vice President and Chief Marketing
Officer, joined Jostens in 1994.
Ellis F. Bullock Jr., 49, Corporate Vice President-Community Relations, joined
Jostens in 1978.
Greg S. Lea, 42, Corporate Vice President-Total Quality Management, joined
Jostens in 1993.
R. Rick Prather, 52, President-Recognition, joined Jostens in 1969.
Robb L. Prince, 53, Corporate Vice President and Treasurer, joined Jostens in
1973.
Trudy A. Rautio, 41, Corporate Vice President and Controller, joined Jostens in
1993.
Antonio E. W. Sago, 48, Corporate Vice President and General Manager-Jostens
Canada and U.S. Photography, joined Jostens in 1985.
Stanley E. Sanderson Jr., 59, President and CEO of Jostens Learning, joined
Jostens in 1994.
G. Nichols Simonds, 55, Corporate Vice President and Chief
Information Officer, joined Jostens in 1993.
Jack Thornton, 41, Corporate Vice President and General Manager-Printing &
Publishing, joined Jostens in 1978.
Shareholder Information
Annual Meeting of Shareholders will be held at 10 a.m. Thursday, October 27,
1994, in the Jostens auditorium, 5501 Norman Center Drive, Minneapolis, MN. All
shareholders are invited to attend.
Shareholder Inquiries. Requests for information about Jostens, including annual
and quarterly reports, Form 10-K reports and other company financial
communications, may be directed to: Investor Relations, Jostens Inc., 5501
Norman Center Drive, Minneapolis, MN 55437-1088. Phone: (612) 830-3398.
Dividend Reinvestment. Jostens' automatic dividend reinvestment service is a
convenient way for shareholders to increase their investment in the company.
Approximately 35 percent of Jostens' shareholders use this service, which
applies quarterly dividends and optional cash deposits to the purchase of
additional Jostens shares. Information about this service can be obtained by
writing Jostens' Investor Relations.
Transfer Agent and Registrar. Shareholders with questions about stockholdings,
dividend checks, transfer requirements and address changes should contact:
Norwest Bank Minnesota, N.A., 161 North Concord Exchange, P.O. Box 738, South
St. Paul, MN 55075-0738. Phone: (612) 450-4064.
Stock Exchange Listing. Jostens common stock is traded on the New York Stock
Exchange (symbol: JOS). The number of common shareholders of record as of June
30, 1994, was approximately 9,700.
The Annual Report of Corporate Responsibility is available by writing: The
Jostens Foundation, 5501 Norman Center Drive, Minneapolis, MN 55437-1088.
Facilities
United States Phoenix, Ariz.; Porterville, San Diego and Visalia, Calif.;
Atlanta, Ga.; Princeton and Springfield, Ill.; Topeka, Kan.; Attleboro, Mass.;
East Lansing, Mich.; Burnsville, Eden Prairie, Minneapolis (Corporate
headquarters), Owatonna (3) and Red Wing, Minn.; Jackson, Miss.; Webster, N.Y.;
Winston_Salem, N.C.; State College, Pa.; Laurens, S.C.; Clarksville, Memphis (2)
and Shelbyville, Tenn.; Denton and Irving, Texas; Orem, Utah.
International Surrey, England; Winnipeg (2), Manitoba; Mississauga, Ontario; and
Montreal and Sherbrooke, Quebec.
This report was printed by the Jostens commercial printing facility in Winston-
Salem, N.C., on recycled (and recyclable) paper, 50% total recovered fiber,
mininum 10% post-consumer fiber.
For more information about products and services from Jostens please contact us.
Our headquarters address is 5501 Norman Center Drive, Minneapolis, MN 55437, or
you may reach us by calling (612) 830-3300.
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
State or Other
Name Jurisdiction of Organization
American Yearbook Company, Inc. Kansas
Hunter Publishing Company North Carolina
Jostens Canada, Ltd. Manitoba, Canada
Jostens Engraving Company Minnesota
Jostens Learning Corporation Illinois
Jostens/Massachusetts, Inc. Massachusetts
Jostens Photography, Inc. Minnesota
Jostens Publishing Group, Inc. Minnesota
S. C. Cap and Gown, Inc. South Carolina
The Jostens Foundation, Inc. Minnesota
Wayneco Enterprises, Inc. Pennsylvania
Wicat Systems, Inc. Minnesota
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Jostens, Inc. of our report dated August 5, 1994, included in the 1994
Annual Report to Shareholders of Jostens, Inc.
Our audits also included the financial statement schedule of Jostens, Inc.
listed in Item 14(a). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in Registration Statement
Number 33-40233 and Registration Statement Number 33-37076 on Form S-3;
Registration Statement Number 33-49968 on Form S-4; Posteffective Amendment
Number 1 to Registration Statement Number 2-69666 and Registration Statement
Numbers 2-95076, 33-19308, 33-30396, 33-30397, 33-58414 and 33-59270 on
Form S-8 of Jostens, Inc. and in the related Prospectuses of our report dated
August 5, 1994, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedules included in this
Annual Report (Form 10-K) of Jostens, Inc.
ERNST & YOUNG LLP
Minneapolis, Minnesota
September 28, 1994
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 27--FINANCIAL DATA SCHEDULE
(In Thousands)
This schedule contains summary financial information extracted from Jostens,
Inc. consolidated financial statements and is qualified in its entirety by
reference to such financial statements.
Cash and cash items $ 8,629
Marketable securities 99,198
Notes and accounts receivable-trade 162,955
Allowances for doubtful accounts 13,749
Inventory 82,638
Total current assets 396,117
Property, plant and equipment 207,641
Accumulated depreciation 131,870
Total assets 569,831
Total current liabilities 223,394
Bonds, mortgages and similar debt 54,267
Preferred stock - mandatory redemption 0
Preferred stock - no mandatory redemption 0
Common stock 15,160
Other stockholders' equity 241,421
Total liabilities and stockholders' equity 569,831
Net sales of tangible products 827,338
Total revenues 827,338
Cost of tangible goods sold 426,482
Total costs and expenses applicable to
sales and revenues 426,482
Other costs and expenses 429,654
Provision for doubtful accounts and notes 10,576
Interest and amortization of debt discount 6,803
Loss before taxes and other items (33,778)
Income tax (7,432)
Income(loss) continuing operations (26,346)
Discontinued operations 10,177
Extraordinary items 0
Cumulative effect - changes in
accounting principles 0
Net income(loss) (16,169)
Earnings per share - primary (.36)
Earnings per share - fully diluted (.36)