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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No. 1 to
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: Commission file number:
December 31, 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 Identification Number)
incorporation or organization)
5501 Norman Center Drive, Minneapolis, Minnesota 55437
(Address of principal executive offices) (Zip Code)
612-830-3300
(Registrant's telephone number including area code)
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JOSTENS, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets as of December 31, 1993 and 1992
and June 30, 1993
Condensed Statements of Income for the Three Months Ended
December 31, 1993 and 1992 and the Six Months Ended
December 31, 1993 and 1992
Condensed Statements of Cash Flows for the Six Months Ended
December 31, 1993 and 1992
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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JOSTENS, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(in thousands)
December 31, June 30,
1993 1992 1993
(Restated)
CURRENT ASSETS
Cash and short-term investments $ 11,916 $ 8,081 $ 13,564
Accounts receivable 140,001 161,316 201,121
Inventories:
Finished products 41,767 33,018 41,773
Work-in-process 72,893 77,031 46,580
Materials and supplies 50,879 52,714 42,833
165,539 162,763 131,186
Deferred income taxes 16,729 3,593 16,729
Prepaid expenses 15,718 18,451 16,665
349,903 354,204 379,265
OTHER ASSETS
Intangibles 41,438 54,772 42,005
Software development costs 55,755 46,718 49,524
Minority investments and other 24,582 23,650 23,659
121,775 125,140 115,188
PROPERTY AND EQUIPMENT 222,470 216,904 218,891
Accumulated depreciation (139,144) (126,983) (130,003)
83,326 89,921 88,888
$555,004 $569,265 $583,341
CURRENT LIABILITIES
Notes payable $ 34,977 $ 42,315 $ -
Accounts payable 23,293 25,835 54,230
Salaries, wages and commissions (6,235) (12,639) 33,643
Customer deposits 54,188 48,335 34,621
Other liabilities 70,117 27,671 76,652
Income taxes (870) 6,978 (414)
175,470 138,495 198,732
LONG-TERM DEBT 54,465 55,047 54,843
DEFERRED INCOME TAXES 16,430 14,200 16,430
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 - 45,449, 45,316
and 45,425 shares, respectively 15,150 15,105 15,142
Capital surplus 140,620 138,200 140,131
Retained earnings 155,671 209,459 160,812
Foreign currency translation (2,802) (1,241) (2,749)
308,639 361,523 313,336
$555,004 $569,265 $583,341
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<TABLE>
JOSTENS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1993 1992 1993 1992
(Restated)
<S> <C> <C> <C> <C>
NET SALES $223,425 $222,188 $390,607 $376,131
Cost of products sold 124,245 122,289 219,422 205,694
Selling and administrative expenses 90,803 82,259 159,826 148,673
215,048 204,548 379,248 354,367
OPERATING INCOME 8,377 17,640 11,359 21,764
Interest expense 1,822 1,973 3,187 3,647
6,555 15,667 8,172 18,117
Income taxes 2,655 5,786 3,310 7,386
INCOME BEFORE CHANGE IN
ACCOUNTING PRINCIPLE 3,900 9,881 4,862 10,731
Cumulative effect of change in
accounting principle, net of taxes - - - (4,150)
NET INCOME $ 3,900 $ 9,881 $ 4,862 $ 6,581
EARNINGS PER COMMON SHARE
Before change in accounting
principle $ .09 $ .22 $ .11 $ .24
Cumulative effect of change in
accounting principle - - - (.09)
Net Income $ .09 $ .22 $ .11 $ .15
Average Shares Outstanding 45,448 45,290 45,443 45,263
Dividends Declared Per Common Share $ .22 $ .22 $ .22 $ .22
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JOSTENS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
December 31,
1993 1992
(Restated)
OPERATING ACTIVITIES
Net income $ 4,862 $ 6,581
Depreciation and amortization 19,258 16,954
Changes in assets and liabilities (35,188) (59,527)
(11,068) (35,992)
INVESTING ACTIVITIES
Capital expenditures (5,844) (11,746)
Software development costs (9,829) (14,067)
(15,673) (25,813)
FINANCING ACTIVITIES
Short-term borrowing 34,977 42,315
Reduction in long-term debt (378) (23,879)
Cash Dividends (10,003) (9,969)
Cash Dividends-Wicat shares - (860)
Other 497 3,669
25,093 11,276
DECREASE IN CASH AND SHORT-TERM INVESTMENTS $ (1,648) $ (50,529)
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JOSTENS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Because of the seasonal nature of the
Company's business, the results of operations for the six months ended
December 31, 1993, are not necessarily indicative of the results for the
entire year ending June 30, 1994.
The Company elected early adoption of SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in June 1993. This change was
effective as of the beginning of the 1993 fiscal year and comparative amounts
have been restated accordingly.
Certain fiscal 1993 balances have been reclassified to conform to the fiscal
1994 presentation.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended June 30, 1993.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed by dividing net income by the
average number of common shares outstanding. The impact of any additional
shares issuable upon exercise of dilutive stock options is not material.
DIVIDENDS
Cash dividends declared for the six months ended December 31, 1993 and 1992
do not include the second quarter dividend of $.22 declared in January 1994
and 1993.
SUBSEQUENT EVENT
On January 31, 1994 a purchase agreement with an effective date of January 1,
1994, was executed to sell the Sportswear division, Artex Manufacturing Co
Inc., to a subsidiary of Fruit of the Loom.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Working capital was $157.7 and $163.8 million at December 31, 1993 and June
30, 1993, respectively. The current period changes in the components of
working capital reflect improved collection of accounts receivables, a build-
up in inventories, additional customer deposits and the payment of
salesperson's commissions accrued at fiscal year-end. The seasonality of the
Company's business requires the interim financing of operations and
inventories and these cash requirements are met through the issuance of short-
term commercial paper.
The year over year changes in intangibles and other liabilities since December
31, 1992 are due to the restructuring charges recorded in the fourth quarter
of fiscal 1993. The restructuring accrual has decreased by approximately $6.4
million from year-end to December 31, 1993 due to payments made in the first
half of fiscal 1994 relating to the accrual. The effects of the restructuring
are expected to 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. Accounts receivable are lower than
last year due to improved collections as well as certain write-offs that
occurred during the restructuring. Inventories have increased due to higher
year-end carryover balances at Jostens Learning and Sportswear.
RESULTS OF OPERATIONS
Net sales for the three and six months ended December 31, 1993 were $223.4 and
$390.6 million, respectively, representing increases of 1% and 4% over the
comparable periods of the prior fiscal year. Sportswear posted double-digit
sales growth for the first half while all other divisions posted increases in
sales with the exception of Canada and Jostens Learning. Jostens Learning
sales were down significantly due to a shift in sales mix to more hardware
sales, which carry lower margins than software products. Although
discouraging, these results may or may not be predictive of annual results
since the majority of Jostens Learning's sales are recorded in the fourth
quarter. Management has announced its intent to thoroughly evaluate and take
decisive steps during the next two quarters to deal with the significant
issues it faces in its Jostens Learning business. The Company has engaged a
consulting firm to provide an analysis of the markets in which Jostens
Learning competes as well as Jostens Learning's position within those markets.
Together with this consulting firm, the Company will determine what changes
to the Jostens Learning business, if any, are necessary to more adequately
address the marketplace. This is a total review of the business and may
result in the sale of the business or substantial restructuring of Jostens
Learning to accomplish the objectives defined during this evaluation process.
No decisions have been made to date, therefore, the effect these possible
actions may have on year end results are not predictable at this time.
Cost of products sold was $124.2 and $219.4 million, respectively, for the
three and six months ended December 31, 1993. Costs, as a percent of sales,
were 55.6% and 56.2%, respectively, as compared to 55.0% and 54.7% in the same
periods last year. Two factors contributed to this increase: First, Jostens
Learning lower-margin hardware sales were up significantly compared to last
year. Second, Sportswear comprised a higher proportion of sales and reflects
lower margins than other product groups.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Selling and administrative expenses were $90.8 and $159.8 million,
respectively, for the three and six months ended December 31, 1993, which as
a percent of sales, were up over the comparable periods of the prior fiscal
year, due primarily to significant timing differences during the second
quarter. A large portion of these costs vary proportionally with sales.
Sportswear royalties, as a percent of sales, increased from the prior year,
due to higher percentage of licensed sales, resulting in $1.2 million of
additional costs in the first half. The prior year results include
approximately $2 million of transaction costs relating to the August 1992
merger with Wicat Systems, Inc. Since the Wicat transaction costs were not
deductible for tax purposes, last year's effective tax rate was higher than
the current tax rate.
Net income for the three and six months ended December 31, 1993 was $3.9 and
$4.9 million, respectively. Earnings per share were $.09 and $.11, compared
to $.22 and $.24 the prior year, based on our historical accounting practices
and before the effects of a change in accounting principle.
Because a significant percentage of the company's sales are in the school
market, the first half is seasonally the smallest sales volume since school
is not in session for one-third of the time. Thus, the Company's pre-tax
margins are lowest during the first half.
On January 31, 1994 a purchase agreement with an effective date of January 1,
1994 was executed to sell the Sportswear division, Artex Manufacturing Co
Inc., to a subsidiary of Fruit of the Loom for $46.7 million. The proceeds
from the sale provided a positive effect on cash flow for the third quarter.
The elimination of Sportswear sales will affect future cash flow, but will be
offset by the fact Jostens will no longer have to finance Sportswear inventory
and receivables. Therefore, future impact on continuing operations and cash
flow should be immaterial due to the sale of Sportswear. Sportswear's
condensed income statement for fiscal 1994, 1993 and 1992 are as follows:
Six Months Ended Year Ended Year Ended
December 31, 1993 1993 1992
(In Millions)
Net Sales $52.1 $82.8 $68.5
Cost of Products Sold 42.6 65.2 57.8
Selling and Administrative Expenses 10.8 15.5 12.6
Operating Income $(1.3) $ 2.1 $(1.9)
H. William Lurton, retired as Chairman and Chief Executive Officer on October
28, 1993 and from the Board of Directors as of December 31, 1993.
Robert P. Jensen was named Chairman of the Board on October 28, 1993. The
Board is in the process of conducting a search for a new Chief Executive
Officer to replace H. William Lurton.
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Not applicable
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
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)
