SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30,1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
Commission file number 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)
(Former name, address and fiscal year, if changed since last
report)
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
The number of shares outstanding of the registrant's only class
of common stock on September 30, 1994 was 45,490,306.
JOSTENS, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of September 30,
1994 and 1993 and June 30, 1994
Condensed Consolidated Statements of Income for the
Three Months Ended September 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1994 and 1993
Notes to Condensed Consolidated 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
JOSTENS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
September 30, June 30,
1994 1993 1994
(Restated)
CURRENT ASSETS
Cash and
short-term investments $ 19,449 $ 1,281 $107,827
Accounts receivable 132,659 175,966 149,206
Inventories:
Finished products 25,326 42,418 28,026
Work-in-process 38,478 65,445 23,879
Materials and supplies 40,548 51,550 30,733
104,352 159,413 82,638
Deferred income tax 39,985 23,449 39,985
Prepaid expenses 6,571 13,267 6,123
Other receivables 22,556 28,688 10,338
325,572 402,064 396,117
OTHER ASSETS
Intangibles 46,907 47,008 47,737
Software development costs 25,428 54,347 29,356
Other 16,662 26,651 20,850
88,997 128,006 97,943
PROPERTY AND EQUIPMENT 210,827 219,610 207,641
Accumulated depreciation (138,046) (134,308) (131,870)
72,781 85,302 75,771
$487,350 $615,372 $569,831
CURRENT LIABILITIES
Notes payable $ - $ 81,935 $ -
Accounts payable 25,017 28,305 33,192
Salaries, wages
and commissions 29,976 27,104 68,394
Customer deposits 21,938 21,295 36,080
Other liabilities 57,865 58,365 71,065
Income taxes 2,829 (3,819) 14,663
137,625 213,185 223,394
LONG-TERM DEBT 54,259 54,670 54,267
DEFERRED INCOME TAXES 5,943 10,661 5,943
OTHER NON-CURRENT LIABILITIES 30,716 18,567 29,646
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 - 45,490, 45,446 and
45,482 shares, respectively 15,163 15,147 15,160
Capital surplus 153,007 152,580 152,996
Retained earnings 94,171 153,491 92,855
Foreign currency translation (3,534) (2,929) (4,430)
258,807 318,289 256,581
$487,350 $615,372 $569,831
JOSTENS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
September 30,
1994 1993
(Restated)
NET SALES $131,557 $148,738
Cost of products sold 66,096 79,307
65,461 69,431
Selling and administrative expenses 61,878 65,627
OPERATING INCOME 3,583 3,804
Net interest expense 250 1,365
3,333 2,439
Income taxes 1,383 988
INCOME FROM CONTINUING OPERATIONS 1,950 1,451
DISCONTINUED OPERATIONS:
Income from operations, net of tax - 1,027
Cumulative effect of change in accounting
principle, net of taxes (634) -
NET INCOME $ 1,316 $ 2,478
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ .04 $ .03
Income from discontinued operations - .02
Cumulative effect of change in
accounting principle (.01) -
Net income $ .03 $ .05
Average shares outstanding 45,488 45,439
Dividends declared per common share $ - $ -
JOSTENS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
September 30,
1994 1993
(Restated)
OPERATING ACTIVITIES
Net income $ 1,316 $ 2,478
Depreciation and amortization 7,162 8,978
Changes in assets and liabilities (87,340) (89,277)
(78,862) (77,821)
INVESTING ACTIVITIES
Capital expenditures (2,405) (1,963)
Software development costs (1,438) (4,542)
Minority investments 4,322 -
479 (6,505)
FINANCING ACTIVITIES
Short-term borrowing - 81,935
Cash dividends (10,001) (9,993)
Other 6 101
(9,995) 72,043
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (88,378) $ (12,283)
JOSTENS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RESTATEMENT
As previously announced, and as previously reflected and fully
explained in the 1994 annual report, the financial statements
for the quarter ended September 30, 1993 have been restated as
the Company has revised the accounting treatment of several
items to more fully conform its accounting policies and
practices to generally accepted accounting principles. The
restatement increased shareholders' investment at September 30,
1993, by $3.9 million, and increased net income for the three
months ended September 30, 1993, by $1.5 million ($.03 per
share) from amounts previously reported.
The Company had not previously made these accounting
adjustments because they were immaterial individually and in
the aggregate to the Company's financial position and results
of operations in the previous years to which they relate.
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 three months ended September 30, 1994, are not necessarily
indicative of the results for the entire year ending June 30,
1995.
Certain fiscal 1994 balances have been reclassified to conform
to the fiscal 1995 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, 1994.
DISCONTINUED OPERATIONS
In January 1994, the Company sold its Sportswear business which
has been recorded as a discontinued operation, and the
historical financial statements have been reclassified
accordingly. (See Management Discussion and Analysis for
further discussion).
CHANGE IN ACCOUNTING PRINCIPLE
The Company was required to and did adopt SFAS 112, Employers'
Accounting for Post-Employment Benefits, in the first quarter
of fiscal 1995. The charge to earnings was $1.1 million ($.6
million after tax, $.01 per share), representing the cumulative
amount of liability to be recorded under SFAS 112 as of the
beginning of fiscal 1995.
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
The first quarter dividend, declared in October, was $.22 for
fiscal 1995 and 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Net working capital was $187.9 and $172.7 million at September
30, 1994, and June 30, 1994, respectively. The seasonality of
the Company's business normally requires interim financing of
operations and inventories and these cash requirements have
typically been met through the issuance of short-term
commercial paper. However, due to the sale of the Sportswear
business and improved cash flow from operations during fiscal
1994, the Company ended the fiscal year with cash and short-
term investments of $107.8 million. These funds, along with the
proceeds from Jostens Learning's sale of its Adult business and
equity interest in Optical Data Corporation which occurred in
the first quarter of fiscal 1995 ($7.5 and $4.2 million,
respectively), were used to finance the Company's operations
during the first quarter of fiscal 1995.
Accounts receivable are down $16.5 million from June 30, 1994,
due to improved collections, sale of Jostens Learning's Adult
business and lower sales in the first quarter of 1995 which
seasonally has the smallest sales volume. Accounts receivable
are down $43.3 million from September 30, 1993, primarily due
to the sale of Sportswear ($19.1 million at September 30, 1993)
in the third quarter of fiscal 1994; a change in estimates
charge ($7.7 million) as described in the annual report, taken
in the third quarter of fiscal 1994; and the sale of Jostens
Learning's Adult business.
Inventories have increased from June 30, 1994, due to the
seasonality of the business. The decrease from September 30,
1993, is due to the sale of Sportswear in fiscal 1994 ($27.3
million at September 30, 1993); change in estimates charge
($3.2 million) as described in the annual report and which was
recorded in the third quarter of fiscal 1994; and reduced
inventories at Jostens Learning ($18.5 million) due to
restructuring of that business in fiscal 1994.
Other receivables have increased from $10.3 million at June 30,
1994 to $22.6 million at September 30, 1994 due to the
Company's seasonality of sales. The balance represents
receivables from sales representatives who historically are in
overdraft positions in the first quarter due to the payment of
draws, prior to commissions being earned. The decrease in
other receivables from September 30, 1993 to September 30,
1994, is primarily due to a change in estimate charge ($6.0
million) as described in the annual report and which was
recorded in the third quarter of fiscal 1994.
Software development costs have decreased from June 30, 1994,
primarily due to the sale of Jostens Learning's Adult business.
Software development costs have decreased from September 30,
1993, due primarily to the restructuring charges at Jostens
Learning and the sale of the Adult business.
Other assets have decreased by $4.2 million from June 30, 1994,
due to the sale of the Company's equity investment in Optical
Data Corporation that related to the Jostens Learning business.
Salaries, wages and commissions payable decreased from $68.4
million at June 30, 1994, to $30.0 million at September 30,
1994. The majority of the decrease is attributable to the
timing of commission payments (approximately $23.1 million).
Commissions accrued at year end were paid in the first quarter
while few sales were generated in the first quarter to
replenish the balance. The remainder of the decrease is
primarily due to payment of bonuses and severance accruals
related to the restructuring.
Capital expenditures through September 30, 1994, are $2.4
million, approximately $.4 million higher than the comparable
period in fiscal 1994. Major projects in process include a
business systems upgrade involving new hardware and software
for field and headquarter locations.
Interest expense is $.5 million lower than last year due to the
strong cash position at year end which reduced the Company's
need for short-term borrowing for operational needs from $81.9
million last year in the first quarter to zero this quarter. In
addition, due to the strong cash position, interest income is
higher than last year by $.6 million.
RESULTS OF OPERATIONS
Continued Operations
Net sales for the three months ended September 30, 1994, were
$131.6 million, a decrease of 12% from last year's volume of
$148.7 million. Overall, the Company's school-related
businesses generate relatively small volume in the first
quarter, since schools are closed until September.
Recognition's sales were up 5% compared to last fiscal year.
Order rates are ahead of year-earlier levels, particularly in
the Printing and Publishing business. The Company's lower
sales were due primarily to planned reductions in the U.S.
Photography and Jostens Learning businesses relating to the
restructurings that previously occurred in both of these
businesses. The planned reduction in sales in the Photography
business is due to its move away from lower margin business and
reduction in capacity due to closing of two plants in fiscal
1994. Reduced sales at Jostens Learning reflects the sale of
the Adult business and progress with exiting the hardware
business as planned for in Jostens Learning's restructuring.
The Company has signed a letter of intent with a third party
vendor to provide hardware services and maintenance. The
Company has also signed agreements with two major software
wholesalers to distribute Jostens Home Learning line of stand-
alone software products at the retail level.
The Company has asked Goldman Sachs, an investment banker, to
help explore possible alliances between Jostens Learning and
communications and technology companies that share interest in
the information superhighway. This may provide Jostens
Learning with alternate ways of delivering its products which
will enable them to reach more students in more schools and
homes. This review will commence in the second quarter and is
expected to be completed later in the fiscal year.
Cost of products sold was $66.1 million for the current quarter
versus $79.3 million for the first three months of the
preceding fiscal year. Costs, as a percent of sales, were
50.2% as compared to 53.3% in the same period last year. The
improved margins are primarily attributable to Jostens Learning
progress of exiting the hardware business, (which has lower-
margins) and lower software amortization due to the fiscal 1994
restructuring at Jostens Learning.
Selling and administrative expenses were $61.9 million for the
quarter, a decrease of $3.7 million from the first quarter of
fiscal year 1994. The decrease is due to cost reduction
efforts of the 1994 restructuring at Jostens Learning and
corporate, cost reductions associated with the closing of
photography plants that were part of the fiscal 1993
restructuring as well as some timing delays in sales and
marketing programs. Jostens Learning also recorded a loss of
$.8 million on two facilities that were vacated as a result of
the personnel reductions. The Company estimates that an
additional loss of $1.5 million will be incurred over the
remainder of the fiscal year as additional lease space is
vacated and abandoned in accordance with the restructuring
plan.
Since a significant percentage of the Company's sales are in
the school business, and with schools not in session for most
of the quarter, the first three months are seasonally the
smallest sales volume. Therefore, amounts reported for the
three months ended September 30, 1994, vary significantly from
the results for the fourth quarter of the previous fiscal year.
Historically, the first quarter is the smallest in sales
volume, while selling and administrative expenses are not
reduced correspondingly since they are geared toward future
sales. Thus, the Company's pre-tax margins are lowest during
the first quarter.
Discontinued Operations - Sale of Sportswear Business
In January 1994, the Company sold its Sportswear business to a
subsidiary of Fruit of the Loom for $46.7 million. The future
impact of this sale on continuing operations and cash flow is
expected to be immaterial. Revenues and income taxes included
in discontinued operations related to the Sportswear business
as of September 30, 1993, were net sales of $29,191 and income
tax expense of $699.
RESTRUCTURING UPDATE
The 1993 restructuring accrual decreased by $1.7 million in the
first quarter of fiscal 1995 due to payments made. The
remaining restructuring accrual at September 30, 1994, is $9.9
million. The Company expects payments relating to the
remaining $9.9 million of accruals to occur in subsequent
periods as follows: fiscal 1995, $7.2 million; fiscal 1996 $1.7
million; fiscal 1997, and beyond $1.0 million.
The 1994 restructuring accrual decreased by $7.2 million in the
first quarter of fiscal 1995 due to $5.9 million of payments
and $1.3 million from exits of ancillary lines of business.
The remaining restructuring accrual at September 30, 1994, is
$21.0 million. The Company expects payments relating to the
remaining $21.0 million of accruals to occur in fiscal 1995,
$14.0 million, and fiscal 1996, $7.0 million
Among the accomplishments of Jostens Learning principally
related to the fiscal 1994 restructuring were the following:
1) It has established a new customer training model to reduce
the number of Jostens Learning employees necessary to support
teacher training. This model began to be offered for sale in
the first quarter in connection with the sale of Training PLUS,
a new and more efficient teacher training program. Deliveries
should begin later in the fiscal year. 2) It began taking
orders for the new single management system, called Advantage.
Deliveries of this single integrated learning operating system,
as well as customer upgrades to the single system, are expected
to begin at the end of the current school year in June 1995.
3) It signed a letter of intent with a third party vendor to
provide hardware services and maintenance to Jostens Learning
customers.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule
(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 report to be signed
on its behalf by the undersigned thereunto duly authorized.
JOSTENS, INC.
Date November 14, 1994 /s/ Robert C. Buhrmaster
Robert C. Buhrmaster
President and Chief Executive Officer
/s/ Trudy A. Rautio
Trudy A. Rautio
Senior Vice President -Finance
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 27--FINANCIAL DATA SCHEDULE
(In Thousands)
This schedule contains summary financial information extracted
from Jostens, Inc. consolidated financial statements and is
qualified in its entirety by reference to such financial
statements.
Cash and cash items $ (5,094)
Marketable securities 24,543
Notes and accounts receivable-trade 146,735
Allowances for doubtful accounts (14,076)
Inventory 104,352
Total current assets 325,572
Property, plant and equipment 210,827
Accumulated depreciation (138,046)
Total assets 487,350
Total current liabilities 137,625
Bonds, mortgages and similar debt 54,259
Preferred stock - mandatory redemption 0
Preferred stock - no mandatory redemption 0
Common stock 15,163
Other stockholders' equity 243,644
Total liabilities and stockholders' equity 487,350
Net sales of tangible products 131,557
Total revenues 131,557
Cost of tangible goods sold 66,096
Total costs and expenses applicable
to sales and revenues 66,096
Other costs and expenses 61,878
Provision for doubtful accounts and notes 317
Interest and amortization of debt discount 250
Income before taxes and other items 3,333
Income tax 1,383
Income(loss) continuing operations 1,950
Discontinued operations 0
Extraordinary items 0
Cumulative effect - changes in accounting principles (634)
Net income(loss) 1,316
Earnings per share - primary .03
Earnings per share - fully diluted .03
