UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 3, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-5064
Jostens, Inc.
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(Exact name of Registrant as specified in its charter)
Minnesota 41-0343440
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification number)
5501 Norman Center Drive, Minneapolis, Minnesota 55437
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612-830-3300)
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 [_]
On August 2, 1999, there were 33,937,577 shares of the Registrant's common stock
outstanding.
Jostens, Inc.
Part I. Financial Information Page
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 3,
1999 and July 4, 1998 3
Condensed Consolidated Balance Sheets as of July 3, 1999, July 4, 1998 and January 2, 1999 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 3, 1999 and
July 4, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures about Market Risk 12
Part II. Other Information
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Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
2
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Condensed Consolidated Statements of Operations
Jostens Inc. and Subsidiaries
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Three months ended Six months ended
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(unaudited) (unaudited)
July 3 July 4 July 3 July 4
In thousands, except per-share data 1999 1998 1999 1998
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Net sales $ 303,161 $ 298,879 $ 469,519 $ 467,156
Cost of products sold 140,744 142,559 209,243 211,232
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Gross margin 162,417 156,320 260,276 255,924
Selling and administrative expenses 95,334 91,743 178,636 172,268
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Operating income 67,083 64,577 81,640 83,656
Net interest expense 1,459 1,331 2,498 2,622
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Income before income taxes 65,624 63,246 79,142 81,034
Income taxes 26,578 25,614 32,053 32,906
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Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128
========================================================================================================================
Earnings per common share
Basic $ 1.14 $ 1.02 $ 1.37 $ 1.29
Diluted $ 1.14 $ 1.01 $ 1.36 $ 1.28
========================================================================================================================
Weighted average common shares outstanding
Basic 34,128 37,002 34,488 37,368
Diluted 34,208 37,202 34,590 37,551
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Cash dividends declared per common share $ 0.22 $ 0.22 $ 0.44 $ 0.44
========================================================================================================================
See notes to condensed consolidated financial statements
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3
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Condensed Consolidated Balance Sheets
Jostens Inc. and Subsidiaries
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(unaudited)
--------------------------
July 3 July 4 January 2
In thousands 1999 1998 1999
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ASSETS
CURRENT ASSETS
Short-term investments $ 8,405 $ 11,415 $ 2,595
Accounts receivable, net of allowance of $6,234, $7,667 and $7,308, respectively 129,379 119,947 106,347
Inventories 77,783 82,547 90,494
Deferred income taxes 14,682 15,543 14,682
Other receivables, net of allowance of $7,157, $6,975 and $7,061, respectively 11,934 13,841 20,689
Prepaid expenses and other current assets 4,382 4,133 5,737
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Total current assets 246,565 247,426 240,544
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OTHER ASSETS
Intangibles, net 27,638 29,498 28,165
Notes receivable, net - 12,925 -
Noncurrent deferred income taxes - 7,743 -
Other 14,163 12,453 8,811
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Total other assets 41,801 62,619 36,976
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Property and equipment 268,654 248,801 256,165
Less accumulated depreciation (179,583) (168,439) (167,518)
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Property and equipment, net 89,071 80,362 88,647
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$ 377,437 $ 390,407 $ 366,167
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable $ 93,690 $ 69,920 $ 93,922
Accounts payable 16,002 22,256 23,682
Employee compensation 23,160 17,492 27,560
Commissions payable 51,641 42,083 22,131
Customer deposits 53,576 51,417 92,092
Income taxes 30,953 24,416 4,713
Other accrued liabilities 21,092 19,473 23,679
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Total current liabilities 290,114 247,057 287,779
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Other noncurrent liabilities 19,298 17,784 19,836
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Total liabilities 309,412 264,841 307,615
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT
Preferred shares, $1.00 par value: authorized 4,000 shares, none issued - - -
Common shares, $.33 1/3 par value: authorized 100,000 shares, issued
July 3, 1999 - 34,049; July 4, 1998 - 37,007; January 2, 1999 - 35,071 11,350 12,382 11,690
Retained earnings 63,672 118,879 54,627
Accumulated other comprehensive loss (6,997) (5,695) (7,765)
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Total shareholders' investment 68,025 125,566 58,552
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$ 377,437 $ 390,407 $ 366,167
========================================================================================================================
See notes to condensed consolidated financial statements
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4
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Condensed Consolidated Statements of Cash Flows
Jostens Inc. and Subsidiaries
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Six months ended
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(unaudited)
July 3 July 4
In thousands 1999 1998
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OPERATING ACTIVITIES
Net income $ 47,089 $ 48,128
Depreciation 11,663 11,111
Amortization 1,131 1,203
Changes in assets and liabilities:
Accounts receivable (23,032) (11,250)
Inventories 12,711 9,515
Other receivables 8,755 11,654
Prepaid expenses and other current assets 1,355 546
Accounts payable (2,497) (6,727)
Employee compensation (4,400) (1,954)
Commissions payable 29,510 22,861
Customer deposits (38,516) (47,242)
Income taxes 26,240 13,318
Other (2,715) 3,140
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Net cash provided by operating activities 67,294 54,303
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INVESTING ACTIVITIES
Purchases of property and equipment (13,339) (17,576)
Equity investment (5,000) -
Other 654 -
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Net cash used for investing activities (17,685) (17,576)
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FINANCING ACTIVITIES
Net short-term borrowings (repayments) (5,415) 18,376
Principle payments on long-term debt - (11)
Dividends paid (15,231) (16,565)
Proceeds from exercise of stock options 1,854 1,534
Repurchases of common stock (25,007) (34,714)
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Net cash used for financing activities (43,799) (31,380)
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CHANGE IN SHORT-TERM INVESTMENTS 5,810 5,347
SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 2,595 6,068
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SHORT-TERM INVESTMENTS, END OF PERIOD $ 8,405 $ 11,415
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See notes to condensed consolidated financial statements
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5
Jostens Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for a fair
presentation of financial position, results of operations and cash flows
for the periods presented. These adjustments consist of normal, recurring
items. Because of the seasonal nature of our business, the results of
operations for any interim period are not necessarily indicative of results
for the full year. The condensed consolidated financial statements and
notes are presented as permitted by the requirements for Form 10-Q and do
not contain certain information included in our annual consolidated
financial statements and notes. This Form 10-Q should be read in
conjunction with our consolidated financial statements and notes included
in our 1998 Annual Report to Shareholders.
Certain balances have been reclassified to conform to the July 3, 1999
presentation.
Cash and Short-term Investments
Negative cash balances of $3.2 million and $12.5 million at July 3, 1999
and July 4, 1998, respectively, have been reclassified to "accounts
payable" on the condensed consolidated balance sheets.
(2) EARNINGS PER COMMON SHARE
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share are computed by dividing net income by the average number of common
shares outstanding, including the dilutive effects of options, restricted
stock and contingently issuable shares. Unless otherwise noted, references
are to diluted earnings per share. The following table sets forth the
computation of basic and diluted earnings per share for the three month and
six month periods:
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Three months ended Six months ended
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July 3 July 4 July 3 July 4
In thousands, except per-share data 1999 1998 1999 1998
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EARNINGS PER SHARE - BASIC
Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128
Weighted average common shares outstanding - basic 34,128 37,002 34,488 37,368
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Net income per share - basic $ 1.14 $ 1.02 $ 1.37 $ 1.29
===========================================================================================================================
EARNINGS PER SHARE - DILUTED
Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128
Weighted average common shares outstanding - basic 34,128 37,002 34,488 37,368
Effect of dilutive securities:
Stock options and awards 80 200 102 183
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Weighted average common shares outstanding - diluted 34,208 37,202 34,590 37,551
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Net income per share - diluted $ 1.14 $ 1.01 $ 1.36 $ 1.28
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6
(3) SUPPLEMENTAL BALANCE SHEET INFORMATION
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July 3 July 4 January 2
In thousands 1999 1998 1999
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INVENTORIES
Finished goods $ 24,465 $ 22,252 $ 38,141
Work-in-process 27,089 31,462 29,735
Raw materials and supplies 26,229 28,833 22,618
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Total inventories $ 77,783 $ 82,547 $ 90,494
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(4) COMPREHENSIVE INCOME
Comprehensive income and its components, net of tax, are as follows:
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Three months ended Six months ended
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July 3 July 4 July 3 July 4
In thousands 1999 1998 1999 1998
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Net income $ 39,046 $ 37,632 $ 47,089 $ 48,128
Change in cumulative translation adjustment 517 (829) 768 (557)
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Comprehensive income $ 39,563 $ 36,803 $ 47,857 $ 47,571
====================================================================================================
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(5) BUSINESS SEGMENTS
Financial information by reportable business segment is included in the
following summary:
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Three months ended Six months ended
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(unaudited) (unaudited)
July 3 July 4 July 3 July 4
In thousands 1999 1998 1999 1998
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NET SALES FROM EXTERNAL CUSTOMERS
School Products $ 266,135 $ 264,598 $ 408,923 $ 402,658
Recognition 31,938 28,768 53,536 55,445
Other 5,088 5,513 7,060 9,053
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CONSOLIDATED $ 303,161 $ 298,879 $ 469,519 $ 467,156
=============================================================================================
OPERATING INCOME
School Products $ 76,484 $ 70,741 $ 100,942 $ 94,297
Recognition 2,033 3,602 2,162 5,625
Other (11,434) (9,766) (21,464) (16,266)
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Consolidated 67,083 64,577 81,640 83,656
Net interest expense (1,459) (1,331) (2,498) (2,622)
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INCOME BEFORE INCOME TAXES $ 65,624 $ 63,246 $ 79,142 $ 81,034
=============================================================================================
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(6) SUBSEQUENT EVENT
On July 23, 1999, we filed a debt shelf registration statement with the
Securities and Exchange Commission for the possible sale of up to $150
million of debt securities. In addition, we have up to $50 million of debt
securities available for issuance under a prior shelf registration.
7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
We occasionally may make statements regarding our business and markets, such as
projections of future performance, statements of management's plans and
objectives, forecasts of market trends and other matters. To the extent such
statements are not historical fact, they may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Statements containing the words or phrases "will likely result," "are
expected to," "expects," "will continue," "anticipates," "believes,"
"estimates," "projected," or similar expressions are intended to identify
forward-looking statements. Forward-looking statements may appear in this
document or other documents, reports, press releases and written or oral
presentations made by our officers to shareholders, analysts, news organizations
or others. All forward-looking statements speak only as of the date on which the
statements are made. Actual results could be affected by one or more factors,
which could cause the results to differ materially. Therefore, all
forward-looking statements are qualified in their entirety by such factors,
including the factors listed below. Such factors may be more fully discussed
periodically in our subsequent filings with the Securities and Exchange
Commission (SEC).
Any change in the following factors may impact the achievement of results in
forward-looking statements: our access to students and consumers in schools; the
seasonality of our business; our ability to ship backlog; our relationship with
our sales force; fashion and demographic trends; the general economy, especially
during peak buying seasons for our products and services; our ability to respond
to customer change orders and delivery schedules; our ability to maintain our
customer base; competitive pricing and program changes; our ability to
successfully execute new programs; the price of gold; our ability to continue
improving operating efficiencies; the impact of year 2000 compliance on our
computer-based systems and our external relationships; and the costs and impact
of our information systems implementations.
The foregoing factors are not exhaustive, and new factors may emerge or changes
to the foregoing factors may occur that would impact our business.
RESULTS OF OPERATIONS
The following table sets forth selected information from our Condensed
Consolidated Statements of Operations, expressed as a percentage of net sales.
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Three months ended Six months ended
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(unaudited) Percent (unaudited) Percent
July 3 July 4 increase July 3 July 4 increase
1999 1998 (decrease) 1999 1998 (decrease)
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Net sales 100.0% 100.0% 1.4% 100.0% 100.0% 0.5%
Cost of products sold 46.4% 47.7% (1.3%) 44.6% 45.2% (0.9%)
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Gross margin 53.6% 52.3% 3.9% 55.4% 54.8% 1.7%
Selling and administrative expenses 31.4% 30.7% 3.9% 38.0% 36.9% 3.7%
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Operating income 22.2% 21.6% 3.9% 17.4% 17.9% (2.4%)
Net interest expense 0.5% 0.4% 9.6% 0.5% 0.6% (4.7%)
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Income before income taxes 21.7% 21.2% 3.8% 16.9% 17.3% (2.3%)
Income taxes 8.8% 8.6% 3.8% 6.8% 7.0% (2.6%)
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Net income 12.9% 12.6% 3.8% 10.0% 10.3% (2.2%)
===========================================================================================================================
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8
Net sales
Net sales for the three and six months ended July 3, 1999 were higher than net
sales for the comparable periods in 1998 by $4.3 million and $2.4 million or 1.4
percent and 0.5 percent. The $4.3 million increase in second-quarter sales was
driven primarily by clearing excess order backlog in Recognition, which was
built due to the first-quarter conversion to new information systems. The $2.4
million increase in sales on a year-to-date basis compared with last year was
the result of a $6.3 million increase in School Products, offset by sales
declines of $1.9 million in Recognition and $2 million in the Other segment.
The increase in School Products sales was driven by price increases mainly in
Printing & Publishing and Graduation Products and higher sales of add-on
features in the Printing & Publishing product lines. These increases were
impacted by the loss of about $8 million in Jewelry and Graduation Products
sales volume due to a sales group leaving in mid-1998.
The $1.9 million sales decline in Recognition was due to lower volume, which
resulted from issues related to the first-quarter implementation of new
information systems. We anticipate full-year 1999 sales for Recognition to be
lower than 1998 levels. Other segment sales declined $2 million due to lower
volume in our direct marketing program to college alumni.
Gross Margin
Gross margin for the three and six months ended July 3, 1999 was 53.6 percent
and 55.4 percent, compared with 52.3 percent and 54.8 percent for the comparable
periods in 1998. The 3.9 percent and 1.7 percent increase in gross margin for
the three and six month periods are the result of improved manufacturing
efficiencies in School Products and sales of higher margin add-on features in
the Printing & Publishing product lines. This was offset by higher costs
associated with the first-quarter implementation of new information systems in
our Recognition segment.
Selling and Administrative Expenses
Selling and administrative expenses for the three and six months ended July 3,
1999 were $95.3 million and $178.6 million, compared with $91.7 million and
$172.3 million for the comparable periods in 1998. The 3.9 percent and 3.7
percent increases over the prior-year periods are the result of higher costs
related to investments in information systems and higher costs associated with
market development activities, including new products and processes to decrease
field administrative costs.
Net Interest Expense
Net interest expense for the three and six months ended July 3, 1999 was $1.5
million and $2.5 million, compared with $1.3 million and $2.6 million for
comparable periods in 1998. The year-over-year changes in net interest expense
reflected lower average interest rates on higher average short-term borrowings
in 1999 versus 1998.
Income Taxes
Income taxes have been accrued at an overall effective rate of 40.5 percent for
the three and six months ended July 3, 1999, compared with 40.5 percent and 40.6
percent for the comparable periods last year.
School Products Segment
School Products segment sales increased 0.6 percent from last year to $266.1
million in the second quarter of 1999 and year-to-date sales were up 1.6 percent
from last year to $408.9 million. The year-over-year changes were driven by
price increases mainly in Printing & Publishing and Graduation Products and
higher sales of add-on features in the Printing & Publishing product lines.
These increases were impacted by the loss of about $8 million in Jewelry and
Graduation Products sales volume due to a sales group leaving in mid-1998.
Operating income for School Products for the three and six months ended July 3,
1999 was $76.5 million and $100.9 million, as compared with $70.7 million and
$94.3 million for the comparable periods in 1998. The year-over-year increases
were primarily the result of improved manufacturing efficiencies and sales of
higher margin add-on features in the Printing & Publishing product lines.
9
Recognition Segment
Recognition segment sales for the three and six months ended July 3, 1999 were
$31.9 million and $53.5 million, compared with $28.8 million and $55.4 million
for the comparable periods in 1998. The 11 percent increase in second-quarter
sales was driven by clearing excess order backlog that was built in the
first-quarter of 1999. The year-to-date sales decline of 3.4 percent over the
prior-year period was due to lower volume. The changes resulted from issues
related to the conversion of new information systems in the first-quarter of
1999. We anticipate full-year 1999 sales and operating income for Recognition to
be lower than 1998 levels.
Operating income for the three and six months ended July 3, 1999 was $2 million
and $2.2 million, compared with $3.6 million and $5.6 million for comparable
periods in 1998. The year-over-year decreases were the result of lower sales
volume and higher costs associated with the first-quarter implementation of a
new information system.
Other Segment
The Other segment comprises primarily unallocated corporate expenses, as well as
results from direct marketing, international and new product sales channels.
Sales for the three- and six-month periods ended July 3, 1999 were $5.1 million
and 7.1 million, compared with $5.5 million and $9.1 million for the comparable
periods in 1998. The $2 million year-to-date decrease over the prior-year period
was due to lower sales volume resulting from decreased response rates in our
direct marketing channel to college alumni.
Operating losses for the three- and six-month periods ended July 3, 1999 were
$11.4 million and $21.5 million, compared with $9.8 million and $16.3 million
for the comparable periods in 1998. The $1.6 million second-quarter increase and
$5.2 million year-to-date increase were primarily the result of higher costs
related to investments in information systems and higher costs associated with
market development activities, including new products and processes to decrease
field administrative costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities was our principal source of funds
during the six-month ended July 3, 1999 and was used primarily to pay down
short-term borrowings, repurchase common stock, pay dividends, and fund capital
expenditures and equity investments.
Operating activities generated cash of $67.3 million in the first-half of 1999,
compared with $54.3 million for the same period in 1998. The increase of $13
million was due to a variety of favorable factors, including a change in the
timing of customer deposit collections, a decrease in inventories due to
decreased cycle times and the timing of income tax payments. This was offset by
an increase in accounts receivable due to customer invoicing issues in
Recognition related to the implementation of new information systems.
Capital expenditures for the first-half of 1999 were $13.3 million compared with
$17.6 million for the same period in 1998. The $4.3 million decrease reflected
higher investments in the first-half of 1998 primarily related to Photography
plant consolidation efforts and other manufacturing equipment.
In the first-half of 1999, we invested $5 million to take an ownership position
of about 4 percent in the FamilyEducation Network, a privately held company,
which creates web sites for schools to link school districts with students and
their families.
In December 1998, the Board of Directors authorized the repurchase of up to $100
million in shares of our common stock. For the six months ended July 3, 1999, we
repurchased 1.1 million shares for $25 million, including 464,000 shares for $10
million in the second quarter.
YEAR 2000
We have developed programs to address the impact of the year 2000 on our
computer systems. Key financial, information and operational systems, including
equipment with embedded microprocessors, have been inventoried and assessed, and
detailed programs are in place for the required systems modifications or
replacements. Progress against these programs is monitored and reported to
management and to the Audit Committee of the Board of
10
Directors on a regular basis. Both internal and external resources are being
utilized to implement the programs. Systems that will not be replaced before
2000 are being modified to achieve year 2000 functionality. The total year 2000
program cost is estimated at $51 million. Approximately $36 million of the $51
million will be used to license and implement new software that will be
capitalized as part of a companywide systems replacement program, and $15
million will be expensed as incurred. The estimated program cost includes
internally allocated expenses such as salaries, benefits and contractor costs.
Spending on the project since inception in 1997 has been $46.1 million, of which
$34.2 million has been capitalized. In the six months ended July 3, 1999, we
spent $9.9 million, including $6.9 million in capital spending.
We have divided the year 2000 program into eight planks covering the following
areas: 1) mainframe infrastructure; 2) central legacy applications; 3) shared
technical infrastructure; 4) distributed systems and manufacturing technology by
product line; 5) distributed systems and manufacturing technology by plant; 6)
external agents; 7) legal and audit; and 8) conversions to new software systems.
Each plank is separated into three categories based on the potential impact on
our operations: mission critical, high impact and low impact.
Mission critical inventory items (computer hardware, software, embedded
equipment, machinery and devices, and to external suppliers of products and
services).are those where loss or interruption of functionality, support or
delivery would have a catastrophic impact on customers, operations or earnings.
High impact inventory items are those where loss or interruption of
functionality, support or delivery would have a serious impact on internal
productivity with minor impact to customers. Low impact inventory items are
those where loss or interruption of functionality, support or delivery would
have a nominal impact on internal productivity with no impact to customers.
We have completed most mission critical activities. Outstanding critical tasks
include upgrading the Oracle-based software used in the Cap & Gown manufacturing
facility, which is scheduled for completion in the third quarter of 1999. All
mission critical activities are scheduled to be completed by September 1999 and
are subject to ongoing integration testing throughout 1999. For external
agents, the testing phase that began after critical activities were completed in
March 1999 will consist primarily of confirming third-party readiness and our
alternatives for ensuring continuity of the products and services they provide.
For legal and audit, the monitoring phase that began after critical activities
were completed in March 1999 will continue throughout 1999. As of July 26,
1999, the completion status of the mission critical planks was:
Year 2000 project completion percentage
Actual Estimated
July 26 September 30
Mission critical activities by plank 1999 1999
- -------------------------------------------------------------------------------------------------------------------
1. Mainframe infrastructure 100% 100%
2. Central legacy applications 99% 100%
3. Shared technical infrastructure 98% 100%
4. Distributed systems and manufacturing technology, by product line 100% 100%
5. Distributed systems and manufacturing technology, by plant 97% 100%
6. External agents due diligence and contingency planning 94% 100%
7. Legal and audit 93% 100%
8. Conversions to new software systems 87% 100%
We believe that modifications to existing software and conversions to new
software for mission critical activities are sufficiently on schedule so the
year 2000 issue will not pose significant operational problems.
Activities on all high impact categories are scheduled to be completed by
September 1999 and low impact activities are scheduled to be completed by June
2000.
11
As part of the external agents plank, we are in contact with suppliers and
customers to assess the potential impact on operations if key third parties do
not convert their systems in a timely manner. Risk assessment, readiness
evaluation, action plans and contingency plans related to these third parties
were completed in March 1999. We believe that critical suppliers are either
year 2000 ready or have adequate plans in place to address the year 2000 issue.
We have substantially completed a comprehensive analysis of and contingency
planning process for operational problems and costs (including the loss of
revenues) that could most likely result from a potential failure by us or
certain third parties to achieve year 2000 compliance on a timely basis. In
planning for the most reasonably likely worst case scenarios, we believe the
information technology systems and manufacturing systems will be ready for the
year 2000, but we may experience isolated incidents of noncompliance. We plan
to allocate resources to be ready to take action if these events occur. We
also recognize the risks to us if other key suppliers in areas such as
utilities, communications, transportation, banking and government are not ready
for the year 2000, and we have developed plans to minimize the potential adverse
impacts of these risks.
The costs of the program and the dates when we believe the year 2000
modifications will be completed are based on best estimates. Estimates were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. There can be no guarantee
that we will achieve these estimates, and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the impact of year 2000 compliance on computer-based systems of
our suppliers and customers, and similar uncertainties.
SUBSEQUENT EVENT
On July 23, 1999, we filed a debt shelf registration statement with the
Securities and Exchange Commission for the possible sale of up to $150 million
of debt securities. In addition, we have up to $50 million of debt securities
available for issuance under a prior shelf registration.
Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our market risk during the six months
ended July 3, 1999. For additional information, refer to page 20 of our 1998
Annual Report to Shareholders.
12
Part II. Other Information
Item 1. Legal Proceedings
In January 1999, a federal judge in Texas overturned a jury's $25.3
million verdict against Jostens in an antitrust lawsuit. The judge,
acting on Jostens' post-trial motions, set aside the jury's verdict
and dismissed all claims against Jostens in the case. Yearbook
competitor Taylor Publishing, a unit of Insilco Holding Corp. and the
plaintiff in the case has appealed the decision and will seek to have
the jury verdict reinstated. Briefs have been filed and the parties
are awaiting a date for oral argument. No costs were accrued related
to the lawsuit, because management determined a potential loss was
unlikely.
There are no other material pending or threatened legal, governmental,
administrative or other proceedings to which the company or any
subsidiary as a defendant or plaintiff is subject.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation (incorporated by reference
to Exhibit 3(a) contained in the Annual Report on Form
10-K for 1993 and to Exhibit 1 of Form 8-A filed on
August 5, 1998)
3.2 By-laws
4.1 Rights Agreement, dated July 23, 1998, between
Jostens, Inc. and Norwest Bank Minnesota, N.A.
(incorporated by reference to the company's Form 8-A
filed on August 5, 1998)
4.2 Form of Indenture, dated 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 Registration Statement on Form S-3, File
No. 33-40233)
10.1 Credit Agreement, dated December 20, 1995, between
Jostens, Inc. and The First National Bank of Chicago
10.2 Amendment to Credit Agreement, dated July 14, 1997,
between Jostens, Inc. and The First National Bank of
Chicago
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated July 21, 1999, announcing earnings for
the three and six months ended July 3, 1999
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JOSTENS, INC.
Registrant
Date: August 13, 1999 By /s/ Robert C. Buhrmaster
---------------------------------------
Robert C. Buhrmaster
Chairman of the Board, President and
Chief Executive Officer
Date: August 13, 1999 By /s/ William N. Priesmeyer
---------------------------------------
William N. Priesmeyer
Senior Vice President and Chief
Financial Officer
14
EXHIBIT INDEX
Exhibit Description
- ------- -----------
3.2 By-laws
10.1 Credit Agreement, dated December 20, 1995, between Jostens, Inc. and
The First National Bank of Chicago
10.2 Amendment to Credit Agreement, dated July 14, 1997, between Jostens,
Inc. and The First National Bank of Chicago
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule