<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1 to
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
June 30, 1993 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
<PAGE>
PART II
Item 6. SELECTED FINANCIAL DATA
The information under the caption "Ten-Year Financial Summary"
contained on page 23 in the Company's annual report to
shareholders for the year ended June 30, 1993, is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information under the caption "Financial Review of Operations"
contained on pages 12 and 13 of the Company's annual report to
shareholders for the year ended June 30, 1993, is incorporated
herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of Jostens, Inc. as of June 30,
1993 and 1992, and the related statements of consolidated income,
changes in shareholder's investment and cash flows for each of the
years in the three-year period ended June 30, 1993, together with
the related notes and the report of Ernst & Young, independent
auditors, all contained on pages 14 through 22 of the Company's
annual report to shareholders for the year ended June 30, 1993,
is incorporated herein by reference.
<PAGE>
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, 1993, are incorporated herein
by reference.
Pages in
Annual Report
Consolidated Balance Sheets -
June 30, 1993 and 1992 14 and 15
Statements of Consolidated Income
for the Years Ended June 30,
1993, 1992, and 1991 16
Statements of Consolidated Changes
in Shareholders' Investment
for the Years Ended June 30,
1993, 1992, and 1991 16
Statements of Consolidated Cash
Flows for the Years Ended June 30,
1993, 1992, and 1991 17
Notes to Consolidated Financial
Statements 18 through 21
(a) 2.Financial Statement Schedules
Page in
10-K
Schedule VIII - Valuation and
Qualifying Accounts S-1
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 totally-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.
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONT.)
(a) 3.Executive Agreements
The following agreements are exhibits to this Annual Report on
Form 10-K:
Employment Agreement with H. William Lurton
Employment Agreement with Carl E. Zeiger
Employment Termination Agreement with John Kernan
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
fourth quarter of the year ended June 30, 1993.
(c) Exhibits
3. a. Articles of Incorporation and Bylaws (Exhibit I filed
herewith).
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).
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONT.)
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. Form of Employment Agreement entered into with Mr. Lurton
(incorporated by reference to the Company's Form 8 dated
May 2, 1991).
i. Employment Agreement with Mr. Zeiger (Exhibit II filed
herewith).
j. Employment Termination Agreement with Mr. Kernan (Exhibit
III filed herewith).
k. The Company's 1981 Performance Award Plan (incorporated
by reference to the Company's Form 8 dated May 2, 1991).
l. 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).
m. Written description of the Company's Retired Director
Consulting Plan (incorporated by reference to the
Company's Form 8 dated May 2, 1991).
11. Computation of earnings per share.
13. Annual Report to Shareholders for the year ended June 30,
1993.
22. List of Company's subsidiaries.
24. Consent of Independent Auditors.
28. Proxy Statement for the Annual Meeting of Shareholders to
be held October 28, 1993.
<PAGE>
JOSTENS, INC
EXHIBIT INDEX TO FORM 10-K/A
AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended June 30, 1993
Item No. Item Method of Filing
13. Annual Report to Shareholders for Electronically
the Year Ended June 30, 1993
24. Consent of Independent Auditors Electronically
<PAGE>
EXHIBIT 24 - 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 6, 1993, included in the 1993
Annual Report to Shareholders of Jostens, Inc.
Our audits also included the financial statement schedule of Jostens, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents 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; Post-effective 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 6, 1993, 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 schedule included in this
Annual Report (Form 10-K) of Jostens, Inc.
ERNST & YOUNG
Minneapolis, Minnesota
March 24, 1994
<PAGE>
EXHIBIT 13 - ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED JUNE 30, 1993
FINANCIAL HIGHLIGHTS
(In millions, except per share data)
Years ended June 30,
1993 1992 % Change
INCOME STATEMENT
Net Sales.......................................$914.8 $924.2 (1) %
Restructuring Charges, Net of Tax............... (47.2) - -
Change in Accounting Principle, Net of Tax...... (4.2) - -
Net Income (Loss)............................... (12.1) 62.0 -
_________________________________________________________________________
BALANCE SHEET DATA
Working Capital.................................$180.5 $227.9 (21) %
Current Ratio................................... 1.9 2.3 -
Total Assets.................................... 583.3 612.4 (5)
Long-Term Debt.................................. 54.8 55.5 (1)
Shareholders' Investment........................ 313.3 362.4 (14)
_________________________________________________________________________
COMMON SHARE DATA
Earnings (Loss) Per Share.......................$ (.27) $ 1.38 - %
Cash Dividends.................................. .88 .84 5
Book Value...................................... 6.90 8.05 (14)
Stock Price High................................ 31 1/4 37 3/8 -
Stock Price Low................................. 16 1/2 24 1/8 -
_________________________________________________________________________
<PAGE>
FINANCIAL REVIEW OF OPERATIONS
Jostens, Inc. and Subsidiaries
SALES AND EARNINGS
For the 1993 fiscal year, sales decreased 1% to $915 million, compared to $924
million in 1992. The 1992 sales level represented a 2% gain over 1991 sales
of $909 million, which were up 9% from the preceding year.
All prior year financial data has been restated to reflect the August 1992
merger with Wicat Systems, Inc., which was accounted for as a pooling of
interests.
Over the past three years, sales have increased at an annual compound rate of
3%. The purchase of businesses accounted for 2% of the sales increase for
fiscal 1991. Sales price increases averaged approximately 2% in 1993, 3% in
1992 and 5% in 1991.
The Company's lower sales and earnings level was the result of a substantial
shortfall in Jostens Learning June orders. For the year, Jostens Learning
sales were $202 million, a decrease of 8% from the 1992 level. Revenues were
below expectations due primarily to school budget pressures, uncertainties
regarding future federal education programs and funding, and Wicat integration
delays.
Overall School Products sales declined 1% to $543 million. Both the Printing
and Publishing and Graduation Products areas posted sales gains. Unit sales
of high school and college rings approximated last year's levels, reversing
the decline of the past several years. Recognition sales were down 1% from
the previous year to $94 million. Sportswear sales increased 20% to $76
million, with the business returning to profitability for the year.
Gross margins for the year were 46.5%, down from 47.4% in 1992 and 1991. This
reflects the lower margins reported this fiscal year by Jostens Learning and
U.S. photography. Selling and administrative expenses were up as a percent
of sales over the previous fiscal year which primarily reflects lower than
expected sales levels, as well as higher product development costs.
In order to gain greater focus on Jostens key businesses and strategically
position the Company for the future, the Company began restructuring certain
of its key businesses in the fourth quarter. In conjunction therewith,
restructuring charges totaling $70.6 million were recorded in the fourth
quarter of fiscal 1993 (see restructuring note to the consolidated financial
statements). This amount includes the restructuring of the U.S. photography
and sportswear businesses, the realignment of the School Products sales force
and planned headcount reductions and related costs in several operations. The
Company expects the majority of the future cash outlays to occur in fiscal
1994 with the final cash outlays occurring in fiscal 1995. These cash outlays
are expected to be funded by the operations of the Company. The headcount
reductions and goodwill write-downs should reduce fiscal 1994 operating costs
by $5-8 million but are expected to be offset by one time costs of
reengineering studies and related implementation in fiscal 1994 and 1995.
<PAGE>
Reduction in outstanding debt, cash received from the Wicat Systems
acquisition and lower short-term borrowing rates resulted in reduced net
interest costs in 1993. Net interest expense in 1992 was favorably impacted
by a reduction in outstanding debt and reduced short-term borrowing rates
versus the previous year.
Net income (loss) for the year was ($12.1) million, down from $62.0 million
last year. Included within the 1993 net loss are after-tax restructuring
charges of $47.2 million and an after-tax charge of $4.2 million associated
with the early adoption of SFAS No. 106 for postretirement benefits.
Earnings (loss) per share was ($.27) after restructuring charges and
implementation of SFAS No. 106. Prior to such charges, earnings per share
were $.87 in 1993, which compares to $1.38 reported in 1992.
Successful implementation of Jostens' cost reduction and asset utilization
goals, and improved growth at Jostens Learning should result in a stronger
performance for 1994.
FINANCIAL POSITION
Working capital totaled $180.5 million at June 30, 1993, reflecting a 1.9 to
1 current ratio. Cash and short-term investments were $13.6 million, down
from $58.6 million the previous year. Reduction of long-term debt accounted
for $24 million of the decrease and the remainder of the decline was primarily
the result of reduced operating cash flow associated with current year
financial results.
The increase in inventory balances was primarily due to Jostens Learning which
had a substantial shortfall in sales during June, and the Sportswear business
which was supporting a new upscale apparel product line. Gold and certain
other inventories aggregating $2.2 million at year-end were stated at the
lower of cost determined by the last-in, first-out (LIFO) method or market and
were $13.1 million lower than such inventories determined under the lower of
first-in, first-out cost or market.
Intangibles decreased to $42.0 million in 1993 from $55.4 million in 1992.
The decrease was primarily due to goodwill write-offs which were a result of
the restructuring.
Software development costs increased to $49.5 million in 1993 from $37.9
million in 1992. The increase was due to $16.6 million of continuing software
development costs, net of amortization, which were offset by $5 million in
write-offs due to the restructuring.
Other accrued liabilities increased to $66.2 million in 1993 from $29.2
million in 1992. The increase was primarily due to $31.3 million of
restructuring charges and $6.7 million of postretirement benefit costs related
to SFAS No. 106 which were included in other accrued liabilities in 1993.
Salaries, wages and commissions increased to $33.6 million in 1993 from $17.6
in 1992. The increase was primarily due to accrued severance expense of $6.9
million from the restructuring as well as write-offs of salesperson overdrafts
of $8.3 million which increases the net commission accruals.
<PAGE>
Generally, the Company's cash requirements have been met with internally
generated funds and through short-term borrowings. The seasonality of certain
businesses requires the interim financing of inventories and receivables.
These short-term borrowings averaged $42.6 million in fiscal 1993 and reached
a high of $83.3 million during the year. This compares to average short-term
borrowings of $38.0 million and $68.7 million in fiscal 1992 and 1991
respectively, with highs of $93.9 million for fiscal 1992 and $113.5 million
for fiscal 1991. The average interest rate paid on these borrowings was
approximately 4.0% for fiscal 1993 compared to 5.6% for fiscal 1992 and 7.5%
for fiscal 1991. These borrowings were made primarily under unsecured line
of credit arrangements with four banks totaling $95 million in fiscal 1993 and
$105 million for fiscal 1992 and 1991 as well as unsecured demand facilities
of $70 million for fiscal 1993 and $75 million for fiscal 1992 and 1991.
Seasonal financing needs for 1994 will be covered under comparable credit
arrangements.
During fiscal 1992, the Company issued $50 million in medium-term notes, which
are due in fiscal 1997. Long-term debt, as a percent of total capitalization,
was 15% as of June 30, 1993.
Shareholders' investment declined 14% to $313.3 million, down from $362.4
million in 1992. This reduction is primarily attributable to the
restructuring charges recorded during fiscal 1993. Book value at June 30,
1993, was $6.90 per share versus $8.05 for the prior year.
CAPITAL EXPENDITURES AND PRODUCT DEVELOPMENT
Capital expenditures were $20.9 million for the year, up slightly from $20.4
million in 1992. Capital additions planned for fiscal 1994 will approximate
$22 million and include upgraded manufacturing, computer and technical
equipment for all areas of the Company.
Fiscal 1993 gross product development costs were $46.9 million, compared to
$35.4 million in the prior year. Fiscal 1994 product development costs will
be in the range of $35-40 million and will be internally funded.
DIVIDENDS
Cash dividends paid to shareholders in 1993 totaled $40.8 million. In October
1992, the Board of Directors increased the annual dividend to $.88 per share,
up 5% from the $.84 paid in fiscal 1992.
<PAGE>
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, which is 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/ H. William Lurton
H. William Lurton
Chairman of the Board and
Chief Executive Officer
/s/ Robert C. Buhrmaster
Robert C. Buhrmaster
President and
Chief Operating Officer
August 6, 1993
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Jostens, Inc. and Subsidiaries
(In thousands)
<CAPTION>
June 30,
1993 1992
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments.............. $ 13,564 $ 58,610
Accounts receivable, net of allowance
of $7,045 and $5,681, respectively......... 201,121 214,749
Inventories
Finished products.......................... 41,773 33,104
Work-in-process............................ 46,580 40,675
Materials and supplies..................... 42,833 44,082
131,186 117,861
Deferred Income Taxes........................ 16,729 3,593
Prepaid expenses............................. 16,665 13,457
Total Current Assets..................... 379,265 408,270
OTHER ASSETS
Intangibles.................................. 42,005 55,352
Software development costs................... 49,524 37,878
Minority investments and other............... 23,659 21,792
Total Other Assets....................... 115,188 115,022
PROPERTY AND EQUIPMENT
Land......................................... 7,032 6,993
Buildings.................................... 44,288 44,094
Machinery and equipment...................... 167,571 156,280
218,891 207,367
Accumulated depreciation..................... (130,003) (118,212)
Total Property and Equipment............. 88,888 89,155
$583,341 $612,447
See notes to consolidated financial statements
<PAGE>
June 30,
1993 1992
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable............................ $ 54,230 $ 48,634
Salaries, wages and commissions............. 33,643 17,581
Customer deposits........................... 34,621 32,413
Other accrued liabilities................... 66,165 29,199
Dividends payable........................... 9,993 8,640
Income taxes................................ (414) 19,966
Current maturities on long-term debt........ 494 23,923
Total Current Liabilities.............. 198,732 180,356
LONG-TERM DEBT - LESS CURRENT MATURITIES....... 54,843 55,470
DEFERRED INCOME TAXES.......................... 16,430 14,200
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 1993 - 45,425; 1992 - 45,033....... 15,142 15,010
Capital surplus............................. 140,131 134,542
Retained earnings........................... 160,812 213,707
Foreign currency translation adjustment..... (2,749) (838)
Total Shareholders' Investment......... 313,336 362,421
$583,341 $612,447
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED INCOME
Jostens, Inc. and Subsidiaries
(In thousands, except per share data)
<CAPTION>
Years ended June 30,
1993 1992 1991
<S> <C> <C> <C>
NET SALES....................................... $914,848 $924,167 $908,844
Cost of products sold........................... 489,475 486,200 477,621
425,373 437,967 431,223
Selling and administrative expenses............. 353,881 331,251 318,308
Restructuring charges........................... 70,581 - -
OPERATING INCOME................................ 911 106,716 112,915
Interest expense ............................... 5,652 8,449 10,043
(4,741) 98,267 102,872
Income taxes.................................... 3,206 36,293 37,957
INCOME (LOSS) BEFORE CHANGE IN
ACCOUNTING PRINCIPLE.......................... (7,947) 61,974 64,915
Cumulative effect of change in accounting
principle, net of taxes....................... (4,150) - -
NET INCOME (LOSS)............................... $(12,097) $ 61,974 $ 64,915
EARNINGS (LOSS) PER COMMON SHARE
Before change in accounting principle......... $ (0.18) $ 1.38 $ 1.46
Cumulative effect of change in accounting
principle..................................... (0.09) - -
Net Income (Loss)............................. $ (0.27) $ 1.38 $ 1.46
STATEMENTS OF CONSOLIDATED CHANGES IN SHAREHOLDERS' INVESTMENT
Common Shares Capital Retained
Number Amount Surplus Earnings
BALANCE - JUNE 30, 1990................. 43,985 $14,662 $127,458 $151,037
Employee stock options exercised..... 359 120 4,942
Shares issued for acquired company.... 450 150 (801) 3,030
Transactions of pooled company........ (61) (21) (1,117)
Net income........................... 64,915
Cash dividends of $.80 per share..... (32,710)
BALANCE - JUNE 30, 1991................. 44,733 14,911 130,482 186,272
Employee stock options exercised..... 270 90 3,697
Transactions of pooled company........ 30 9 363
Net income............................ 61,974
Cash dividends of $.84 per share...... (34,539)
BALANCE - JUNE 30, 1992................. 45,033 15,010 134,542 213,707
Employee stock options exercised...... 194 65 3,217
Transactions of pooled company........ 198 67 2,372
Net income (loss)..................... (12,097)
Cash dividends of $.88 per share...... (40,798)
BALANCE - JUNE 30, 1993................. 45,425 $15,142 $140,131 $160,812
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Jostens, Inc. and Subsidiaries
(In thousands)
<CAPTION>
Years ended June 30,
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $(12,097) $ 61,974 $ 64,915
Depreciation and amortization.................. 34,896 29,300 26,934
Non-cash restructuring charges................. 15,624 - -
Deferred income taxes.......................... (10,906) 7,338 6,967
Changes in assets and liabilities:
Accounts receivable.......................... 13,628 (6,844) (41,309)
Inventories.................................. (13,325) 532 (5,994)
Prepaid expenses............................. (3,208) (1,383) (2,133)
Accounts payable............................. 5,596 18,987 2,954
Other........................................ 34,188 (12,018) (2,478)
64,396 97,886 49,856
INVESTMENT ACTIVITIES
Capital expenditures........................... (20,900) (20,428) (24,330)
Software development costs..................... (27,515) (22,145) (13,224)
Minority investments........................... (1,824) (2,031) (4,699)
Sale of Broderbund investment.................. - 19,522 -
(50,239) (25,082) (42,253)
FINANCING ACTIVITIES
Cash dividends................................. (40,798) (34,539) (32,710)
Exercise of stock options...................... 5,721 4,159 5,230
Reduction in long-term debt.................... (24,126) (24,444) (21,848)
Issuance of medium-term notes.................. - 50,000 -
Short-term borrowing........................... - (35,231) 35,231
(59,203) (40,055) (14,097)
CHANGE IN CASH AND SHORT-TERM INVESTMENTS........ (45,046) 32,749 (6,494)
CASH AND SHORT-TERM INVESTMENTS - BEGINNING
OF YEAR........................................ 58,610 25,861 32,355
CASH AND SHORT-TERM INVESTMENTS - END OF YEAR.... $ 13,564 $ 58,610 $ 25,861
See notes to consolidated financial statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Jostens, Inc. and Subsidiaries
(In thousands)
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. The accounts and operations
of the Company's foreign subsidiaries are not material.
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 $24.2, $33.4 and $30.7
million and $7.5, $8.5, and $12.0 million, respectively, for 1993, 1992 and
1991.
Inventories - Gold and certain other inventories aggregating $2.2 million at
June 30, 1993 and $2.0 million at June 30, 1992, are stated at the lower of
last-in, first-out (LIFO) cost or market, and are $13.1 and $12.9 million
lower in the respective years than such inventories determined under the lower
of first-in, first-out (FIFO) cost or market. All other inventories are
stated at the lower of cost (FIFO) or market.
Intangibles - Intangibles represent the excess of the purchase price over the
fair value of the net tangible assets of acquired businesses. Intangibles,
including goodwill, are being amortized over various periods of up to 40
years. Accumulated amortization at June 30, 1993 was $21.7 million.
Software Development Costs - Jostens Learning Corporation, a wholly-owned
subsidiary of the Company, capitalizes software development costs when project
technological feasibility is established and concluding when the product is
ready for release. Research and development costs related to software
development 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, 1993, 1992 and 1991 was $10.9, $6.0 and $5.6
million, respectively. Accumulated amortization at June 30, 1993 was $30.9
million.
Operating Leases - The Company's noncancelable minimum rental commitments for
facilities and equipment for the fiscal years 1994 through 1998 and beyond are
$6.5, $5.9, $4.1, $2.8, $.7 and $3.9 million, respectively. Operating lease
rental expenses for June 30, 1993, 1992, and 1991 were $10.7, $10.0, and $8.6
million, respectively.
Depreciation - Depreciation on buildings and machinery and equipment is
provided principally on the straight line method for financial reporting
purposes and on accelerated methods for income tax purposes, over their
estimated useful lives; buildings - 15 to 40
years, machinery and equipment - 3 to 10 years.
Revenue Recognition - Jostens Learning recognizes revenue for hardware and
software upon shipment of the product. Revenue generated from service
contracts and post-contract customer support on software is recognized ratably
over the period of the contract. For all other Jostens businesses, revenue
is recognized upon shipment of the product.
<PAGE>
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.
Reclassification - Certain 1992 and 1991 balances have been reclassified to
conform to the 1993 presentation.
LONG-TERM DEBT AND OTHER BORROWINGS
Long-term debt consists of the following:
June 30,
1993 1992
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
Note payable to bank, due in
September 1992, plus interest
at 8.1%................................. - 23,000
Other..................................... 1,737 2,793
55,337 79,393
Less current maturities................... 494 23,923
$ 54,843 $ 55,470
Interest expense on long-term debt for 1993, 1992 and 1991 was $4.8, $6.3 and
$4.7 million, respectively. Annual maturities on long-term debt in fiscal
years 1995 through 1997 are $.6, $.4, and $50.0 million, respectively.
During fiscal 1993, the Company had unsecured line of credit arrangements with
four banks totaling $95 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 three banks totalling $70 million. Such credit arrangements
are renegotiated periodically based on the anticipated seasonal needs for
short-term financing. In compensation for its credit arrangements, the
Company incurred certain commitment fees, which were not significant.
<PAGE>
INCOME TAXES
The Company adopted SFAS No. 109, "Accounting for Income Taxes," as of the
beginning of fiscal 1993. The effect of this change on the results of
operations was not material.
Pre-tax income (loss) before change in accounting principle was as follows:
1993 1992 1991
Domestic..............................$(13,359) $ 93,633 $ 95,508
Foreign............................... 8,618 4,634 7,364
$ (4,741) $ 98,267 $102,872
The components of the provision for income taxes attributable to income (loss)
before change in accounting principle were as follows:
1993 1992 1991
Federal...............................$ 8,833 $ 21,479 $ 22,388
State................................. 1,945 4,229 4,988
Foreign............................... 3,688 3,285 3,337
14,466 28,993 30,713
Deferred.............................. (11,260) 7,300 7,244
$ 3,206 $ 36,293 $ 37,957
The following summarizes the differences between income taxes computed at the
U.S. statutory rate to income tax expense for financial reporting purposes:
1993 1992 1991
Tax at U.S. statutory rate............$ (1,612) $ 33,411 $ 34,976
State income taxes, net of federal
income tax benefit................. 79 3,944 4,406
Nondeductible restructuring charges... 3,054 - -
All other, net........................ 1,685 (1,061) (1,425)
$ 3,206 $ 36,293 $ 37,957
<PAGE>
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, 1993 were as
follows:
___________________________________________________________________________
1993
Deferred tax liabilities -
Tax over book depreciation....................... $ 4,404
Capitalized software development costs........... 19,068
Other, net....................................... 11,059
34,531
Deferred tax assets -
Accounts receivable, principally due to allowance
for doubtful accounts.......................... 2,876
Restructuring charges............................ 16,586
Net operating loss and tax credit carryforwards of
acquired company............................... 12,455
Other, net....................................... 9,160
41,077
Less valuation allowance...................... (6,247)
Net deferred tax assets.......................... 34,830
$ (299)
At June 30, 1993, the Company has net operating loss carryforwards of $32.1
million for federal income tax purposes that expire in the years 1998 through
2004. The Company also has tax credit carryforwards of $1.5 million which
expire in the years 1996 through 2004.
BUSINESS SEGMENT INFORMATION
The Company is engaged in one business - the design, manufacture and sale of
products created to promote and recognize achievement, including yearbooks,
class rings, graduation products, student photography packages, technology-
based educational products and services, customized sales and service awards,
sports awards, custom-imprinted sportswear and customized products for
university alumni. Its products are sold primarily through independent sales
representatives in schools and businesses in the United States and Canada.
<PAGE>
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. The excess of plan assets over the projected
benefit obligation is amortized against future pension costs.
<TABLE>
The components of pension cost and the funded status were as follows:
___________________________________________________________________________________________
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost................................ $ 2,924 $ 3,288 $ 3,156
Interest on projected benefit obligation.... 5,066 4,676 4,112
Return on assets - actual................... (6,164) (6,964) (9,896)
- deferred................. 93 1,273 4,790
Amortization................................ (654) (164) (285)
Pension cost................................ $ 1,265 $ 2,109 $ 1,877
___________________________________________________________________________________________
March 31,
1993 1992 1991
Vested benefit obligation................... $ 64,710 $ 57,037 $ 45,552
Accumulated benefit obligation.............. 68,500 58,485 46,996
Projected benefit obligation................ 77,548 64,440 57,906
Fair value of plan assets................... 86,725 86,121 78,169
___________________________________________________________________________________________
Plan assets in excess of projected
benefit obligation........................ $ 9,177 $ 21,681 $ 20,263
Unrecognized net gain....................... (11,052) (17,546) (13,214)
Unrecognized prior service cost............. 13,899 9,143 8,147
Unrecognized net asset at transition........ (9,259) (10,168) (11,077)
Prepaid pension cost........................ $ 2,765 $ 3,110 $ 4,119
</TABLE>
Plan assets are comprised primarily of corporate and U.S. government debt,
real estate and corporate equity, including $6.0 million of common stock of
the Company.
The assumptions used in determining the components of pension cost and the
funded status were a discount rate of 8%, compensation increase of 6% and
return on assets of 8%.
The Company's retirement savings plan, which covers substantially all non-
union employees, provides for a matching contribution by the Company on
amounts, limited to 6% of compensation, contributed by the employees. The
Company's contribution for the years ended June 30, 1993, 1992 and 1991 was
$1.8, $1.4 and $1.7 million, respectively, representing 33 1/3% of eligible
employee contributions in 1993, 25% in 1992 and 33 1/3% in 1991.<PAGE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides medical insurance benefits for eligible 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, the Company 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 costs of these benefits, as recorded under the previous accounting policy,
were $.6 and $.7 million in fiscal 1992 and 1991, respectively. The
postretirement benefit cost for fiscal 1993 under SFAS No. 106 was as follows:
Postretirement benefit cost -
Service cost of benefits earned.............................. $ 92
Interest cost of benefit obligation.......................... 523
$ 615
The actuarial present value of postretirement benefit obligations and the
amount reported in the consolidated balance sheets as of June 30, 1993 were
as follows:
Accumulated postretirement benefit obligations -
Retirees..................................................... $5,177
Fully eligible active participants........................... 139
Other active participants.................................... 1,432
6,748
Unrecognized net loss........................................ 267
$7,015
The assumptions used in determining the benefit obligation included a medical
plan cost trend rate of 15%, declining to 6% in the year 2002 and a weighted
average discount rate of 8%. 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
$.4 million with minimal impact on interest cost, and no impact on service
cost since benefits for future retirees are defined dollar benefits not
related to health care benefits.
The Financial Accounting Standards Board has issued Statement No. 112,
"Employers' Accounting for Postemployment Benefits," which 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. <PAGE>
ACQUISITIONS
In August 1992, the Company acquired Wicat Systems, Inc. (Wicat), 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 and
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 two fiscal years
preceding the merger were as follows:
Net Net Earnings
Sales Income Per Share
1992
Jostens................................. $876,395 $ 61,413 $ 1.50
Wicat................................... 47,772 561
Combined................................ $924,167 $ 61,974 $ 1.38
1991
Jostens................................. $859,878 $ 64,164 $ 1.58
Wicat................................... 48,966 751
Combined................................ $908,844 $ 64,915 $ 1.46
RESTRUCTURING CHARGES
In the fourth quarter of fiscal 1993, the Company recorded a $70.6 million
restructuring charge. This amount includes $32 million for the restructuring
of the U.S. photography business of which $13 million relates to goodwill
write-offs, $13 million relates to plant shutdowns, and the remaining $6
million primarily relates to the write-offs of abandoned receivables from
independent sales representatives and dealers. The remaining $39 million of
restructuring charges include $10 million which related primarily to headcount
reductions and relocation expenses; $5 million for the write-off of certain
software development costs at Jostens Learning; $15 million for the possible
sale of the Sportswear business; and the remaining $9 million primarily
relates to sales force restructure and policy changes and included receivable
write-offs of abandoned receivables from independent sales representatives who
were terminated. These charges reduced after-tax earnings by $47.2 million
or $1.05 per share.
The restructuring charges included $30.3 million of asset write-offs and $40.3
million of accruals of which $38.2 million remains accrued at June 30, 1993,
including $31.3 million classified in other accrued liabilities. Cash
payments made on the accruals in 1993 were $2.1 million.
<PAGE>
STOCK OPTIONS
Under stock option plans, the Company has granted options to key employees to
purchase common shares of the Company at 100% of the market price on the dates
the options are granted.
The following summarizes the changes in stock options outstanding:
Options Outstanding
1993 1992 1991
Beginning of year.................... 2,181 2,138 2,331
Granted.............................. 521 427 417
Exercised............................ (200) (339) (420)
Cancelled............................ ( 56) ( 45) (190)
End of year.......................... 2,446 2,181 2,138
At June 30, 1993, the exercise price on outstanding options ranged from $1.21
to $34.19 per share and .7 million common shares were reserved for future
grants under the stock option plans. As of June 30, 1993, 1,313 options were
exercisable under the plan.
Jostens Learning Corporation (JLC) may grant options to key employees, under
its stock option plan, to purchase common shares of JLC at the fair market
value on the date the options are granted. Options to purchase up to 21.2
million shares, or approximately 15% of the total outstanding shares, may be
granted under the plan. Options vest at 20% 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 JLC 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 JLC shares for cash or Jostens common
shares. As of June 30, 1993, options for 16.5 million shares were outstanding
at exercise prices ranging from $1.45 to $3.21 per share of which 2.2 million
shares were exercisable. The fair value of the stock at June 30, 1993 was
below the exercise price.
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% or more, or
announces a tender offer for 25% or more, of the Company's common shares. If
a person acquires at least 25% 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%
discount. The rights, which expire in August 1998, may be redeemed by the
Company at a price of $.01 per right at any time prior to the 30th day after
a person has acquired at least 20% of the Company's outstanding shares.
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA
Jostens, Inc. and Subsidiaries
(In thousands, except per share data)
<CAPTION>
Net Gross Net Earnings Stock Price Dividends
Sales Margin Income Per Share High Low Per Share
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1993
First........ $153,943 $ 73,175 $( 3,300) $(.07) $ 27 1/2 $ 23 3/4 $ .22
Second....... 222,188 102,489 9,881 .22 31 1/4 24 7/8 .22
Third........ 184,964 91,989 5,458 .12 29 24 1/8 .22
Fourth....... 353,753 157,720 (24,136) (.54) 28 3/8 16 1/2 .22
$914,848 $425,373 $(12,097) $(.27)
Fiscal 1992
First........ $152,932 $ 70,471 $ 2,872 $ .06 $ 36 $30 5/8 $ .21
Second....... 246,759 112,619 15,883 .36 35 3/8 28 1/2 .21
Third........ 176,087 93,398 10,041 .22 37 3/8 28 7/8 .21
Fourth....... 348,389 161,479 33,178 .74 30 24 1/8 .21
$924,167 $437,967 $ 61,974 $1.38
First quarter 1993 earnings have been restated to reflect the unfunded obligation of $6.7 million
($4.2 million after tax and $.09 per share) calculated under SFAS No. 106.
Restructuring charges totaling $70.6 million were recorded in the fourth quarter of fiscal 1993.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TEN YEAR FINANCIAL SUMMARY
(In millions, except per share data)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income Statement
Net Sales............................ $914.9 $924.2 $908.8 $834.0 $737.7
Cost of Products Sold................ 489.5 486.2 477.6 440.7 379.0
Interest Expense (Income)............ 5.7 8.4 10.0 9.5 6.8
Income Taxes......................... 3.2 36.3 38.0 34.3 31.7
Income (Loss)- Continuing Operations. (7.9) 62.0 64.9 61.9 52.4
Return on Sales...................... (.9)% 6.7% 7.1% 7.4% 7.1%
Net Income........................... (12.1) 62.0 64.9 61.9 52.4
Return on Investment................. (3.6)% 17.9% 20.8% 22.5% 21.9%
____________________________________________________________________________________________
BALANCE SHEET DATA
Current Assets....................... $379.3 $408.3 $363.7 $320.8 $310.3
Working Capital...................... 180.5 227.9 163.5 154.7 148.9
Current Ratio........................ 1.9 2.3 1.8 1.9 1.9
Property and Equipment............... 218.9 207.4 192.3 173.5 154.8
Total Assets......................... 583.3 612.4 575.1 518.4 495.7
Long-Term Debt....................... 54.8 55.5 31.9 53.6 75.5
Shareholders' Investment............. 313.3 362.4 330.5 293.6 257.2
____________________________________________________________________________________________
COMMON SHARE DATA
EPS (Loss)- Continuing Operations.... $ (.18) $ 1.38 $ 1.46 $ 1.41 $ 1.21
EPS (Loss)- Net Income............... (.27) 1.38 1.46 1.41 1.21
Cash Dividends....................... .88 .84 .80 .72 .64
Book Value........................... 6.90 8.05 7.40 6.68 5.93
Common Shares ....................... 45.4 45.0 44.7 44.0 43.3
Stock Price High..................... 31 1/4 37 3/8 38 5/8 30 3/8 22 1/4
Stock Price Low...................... 16 1/2 24 1/8 23 1/2 20 7/8 16 1/2
Restructuring charges totaling $70.6 million were recorded in the fourth quarter of fiscal 1993.
1993 earnings include the unfunded obligation of $6.7 million ($4.2 million after tax and $.09
per share) calculated under SFAS No. 106.
See notes to consolidated financial statements.
<PAGE>
TEN YEAR FINANCIAL SUMMARY
(In millions, except per share data)
(Continued)
1988 1987 1986 1985 1984
Income Statement
Net Sales............................ $615.1 $534.5 $488.5 $431.2 $404.2
Cost of Products Sold................ 318.8 272.6 247.9 217.2 210.2
Interest Expense (Income)............ 5.0 9.1 (3.0) (4.6) (4.0)
Income Taxes......................... 25.8 28.6 33.8 25.9 20.7
Income (Loss)- Continuing Operations. 34.3 20.3 30.2 24.7 17.6
Return on Sales...................... 5.6% 3.8% 6.2% 5.7% 4.4%
Net Income........................... 78.7 30.8 36.6 33.3 25.7
Return on Investment................. 41.9% 15.4% 14.6% 13.5% 13.1%
____________________________________________________________________________________________
BALANCE SHEET DATA
Current Assets....................... $346.3 $286.1 $270.8 $285.1 $282.6
Working Capital...................... 194.1 148.7 150.1 190.1 183.9
Current Ratio........................ 2.3 2.1 2.2 3.0 2.9
Property and Equipment............... 125.6 111.2 101.3 97.6 92.6
Total Assets......................... 465.4 412.1 387.5 375.8 363.0
Long-Term Debt....................... 92.8 109.5 10.4 11.4 11.8
Shareholders' Investment............. 221.0 156.4 244.4 257.2 236.4
____________________________________________________________________________________________
COMMON SHARE DATA
EPS (Loss)- Continuing Operations.... $ .81 $ .48 $ .64 $ .52 $ .38
EPS (Loss)- Net Income............... 1.86 .73 .78 .71 .55
Cash Dividends....................... .56 .48 .44 .40 .35
Book Value........................... 5.17 3.74 5.28 5.39 5.01
Common Shares ....................... 42.6 41.6 46.2 47.6 47.0
Stock Price High..................... 24 3/8 25 18 1/4 13 1/4 10
Stock Price Low...................... 15 1/8 15 1/8 11 1/4 7 3/4 7 3/4
Restructuring charges totaling $70.6 million were recorded in the fourth quarter of fiscal 1993.
1993 earnings include the unfunded obligation of $6.7 million ($4.2 million after tax and $.09
per share) calculated under SFAS No. 106.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
JOSTENS, INC.
Date: March 24, 1994 /s/ Robert C. Buhrmaster
Robert C. Buhrmaster
President and Chief Executive Officer
(acting Principal Financial Officer)
