<PAGE>
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 APRIL 4,1998
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 May 11, 1998 was 36,999,120.
1
<PAGE>
JOSTENS, INC.
INDEX
Part I. Financial Information
- ------------------------------
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of April 4, 1998, March 29, 1997
and January 3, 1998
Condensed Consolidated Statements of Operations for the Three Months Ended
April 4, 1998 and March 29,1997
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
April 4, 1998 and March 29,1997
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 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
- ----------
2
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
------------------------
April 4, March 29, January 3,
1998 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Short-term investments $ 6,884 $ 11,097 $ 6,068
Accounts receivable, net 129,717 136,712 108,697
Inventories:
Finished products 32,191 28,884 38,122
Work-in-process 64,870 64,716 29,388
Materials and supplies 35,502 37,243 24,552
--------- --------- ---------
132,563 130,843 92,062
Deferred income taxes 15,543 14,928 15,543
Prepaid expenses 5,048 2,690 4,679
Other receivables 27,811 25,793 25,495
--------- --------- ---------
317,566 322,063 252,544
OTHER ASSETS:
Intangibles, net 30,162 26,826 30,749
Note receivable, net 12,925 12,925 12,925
Deferred income taxes 7,743 11,393 7,743
Other 11,882 13,777 12,631
--------- --------- ---------
62,712 64,921 64,048
PROPERTY AND EQUIPMENT 238,742 214,603 231,747
Accumulated depreciation (163,232) (147,884) (157,609)
--------- --------- ---------
75,510 66,719 74,138
--------- --------- ---------
$ 455,788 $ 453,703 $ 390,730
========= ========= =========
CURRENT LIABILITIES:
Notes payable $ 83,257 $ 99,896 $ 49,974
Accounts payable 25,005 19,349 30,553
Salary, benefits and commissions 53,396 52,397 38,668
Customer deposits 140,801 120,187 98,659
Other liabilities 19,466 14,125 17,281
Income taxes 14,791 13,453 11,098
--------- --------- ---------
336,716 319,407 246,233
OTHER NON-CURRENT LIABILITIES 17,717 19,003 17,404
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 - 37,217, 38,727
and 38,422 shares, respectively 12,451 12,909 12,853
Capital surplus -- 2,669 --
Retained earnings 93,770 103,124 119,378
Accumulated other comprehensive income (4,866) (3,409) (5,138)
--------- --------- ---------
101,355 115,293 127,093
--------- --------- ---------
$ 455,788 $ 453,703 $ 390,730
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Three Months Ended
--------------------------
April 4, March 29,
1998 1997
-------- --------
NET SALES $168,277 $150,437
Cost of products sold 68,673 64,396
-------- --------
99,604 86,041
Selling and administrative expenses 80,525 67,464
-------- --------
OPERATING INCOME 19,079 18,577
Net interest expense 1,291 1,704
-------- --------
17,788 16,873
Income taxes 7,292 6,919
-------- --------
NET INCOME $ 10,496 $ 9,954
======== ========
BASIC EARNINGS PER COMMON SHARE $ 0.28 $ 0.26
======== ========
Basic average shares outstanding 37,734 38,697
======== ========
DILUTED EARNINGS PER COMMON SHARE $ 0.28 $ 0.26
======== ========
Diluted average shares outstanding 37,900 38,880
======== ========
DIVIDENDS DECLARED PER COMMON SHARE $ 0.22 $ 0.22
======== ========
See notes to condensed consolidated financial statements
4
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 4, March 29,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,496 $ 9,954
Depreciation and amortization 6,098 5,073
Changes in assets and liabilities (5,587) (4,566)
-------- --------
11,007 10,461
-------- --------
INVESTING ACTIVITIES
Capital expenditures (6,968) (3,678)
-------- --------
FINANCING ACTIVITIES
Short-term borrowings 33,283 8,984
Cash dividends (8,425) (8,517)
Stock options 903 1,210
Share repurchases (29,231) --
Other 247 (2)
-------- --------
(3,223) 1,675
-------- --------
INCREASE IN SHORT-TERM INVESTMENTS $ 816 $ 8,458
======== ========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED 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 three months ended April 4, 1998, are not necessarily
indicative of the results for the entire year ending January 2, 1999.
For further information, refer to the consolidated financial statements and
footnotes in the Company's Form 10-K for the year ended January 3, 1998.
INCOME TAXES
The Company provides for income taxes in interim periods based on the estimated
effective income tax rate for the complete fiscal year.
EARNINGS PER COMMON SHARE
The adoption of Statement of Financial Accounting Standard (SFAS) No. 128 in
1997 resulted in disclosure of both "basic" and "diluted" earnings per 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 adoption of SFAS No. 128 did not have a material impact
on earnings per share, as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 4, 1998 THREE MONTHS ENDED MARCH 29, 1997
------------------------------------- ------------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income available $ 10,496 37,734 $ 0.28 $ 9,954 38,697 $ 0.26
- ------------------------------------------------------------------------------------------------------------------
EFFECT OF DILUTIVE SECURITIES
Options 143 136
Awards 23 47
- ------------------------------------------------------------------------------------------------------------------
DILUTED EPS
Net income available $ 10,496 37,900 $ 0.28 $ 9,954 38,880 $ 0.26
==================================================================================================================
</TABLE>
COMPREHENSIVE INCOME
As of January 4, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME. SFAS 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or total shareholders' investment. SFAS 130 requires
minimum pension liability adjustments and foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
investment, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
During the first quarter of 1998 and 1997, total comprehensive income amounted
to $10,224 and $9,921, respectively.
DIVIDENDS
Dividends of 22 cents per share were declared in January and paid in March in
both 1998 and 1997.
6
<PAGE>
COMMITMENTS AND CONTINGENCIES
Litigation. Taylor Publishing Company filed a civil suit against Jostens on
January 14, 1997 in the United States District Court for the Eastern District of
Texas. In the suit, Taylor alleges that the Company violated federal antitrust
laws with respect to the yearbook publishing market, interfered with Taylor's
sales representatives, and improperly sought trade secrets. Taylor, citing the
loss of school accounts over the last four years, argued that such loss of
business resulted directly from the Company's attempt to monopolize the yearbook
business. On May 13, 1998 a jury delivered a verdict awarding Taylor $8.5
million (which is automatically tripled to $25.5 million under the antitrust
laws) on the antitrust claims, plus attorneys' fees, and up to $11.5 million on
the other claims not deemed to be part of the antitrust damage award. Judgment
has not been entered pending post trial motions before the court. The Company
intends to vigorously pursue reversal of the decision and is therefore unable to
estimate the potential loss, if any. Accordingly, no amount has been accrued as
of April 4, 1998.
Environmental. As part of its continuing environmental management program,
Jostens is involved in various environmental improvement activities. As sites
are identified and assessed in this program, the Company determines potential
environmental liability. Factors considered in assessing this liability include,
among others, the following: whether the Company has been designated as a
potentially responsible party, the number of other potentially responsible
parties designated at the site, the stage of the proceedings and available
environmental technology. As of April 4, 1998, the Company had identified three
sites requiring further investigation. However, the Company had not been
designated as a potentially responsible party at any site.
In 1996, the Company adopted the provisions of Statement of Position (SOP) 96-1,
Environmental Remediation Liabilities. Under SOP 96-1, the Company is required
to assess the likelihood that an environmental liability has been incurred and
to accrue for the best estimate of any loss where the likelihood of incurrence
is assessed as probable and the amount can be reasonably estimated. Management
has assessed the likelihood that a loss has been incurred at its sites as
probable and, based on findings included in remediation reports, estimates the
potential loss to range from $1 million to $9 million; $6.6 million had been
accrued. As of April 4, 1998, the Company had made payments of $1.7 million,
bringing the reserve balance to $4.9 million. The current portion of the reserve
($892,000) was included with "other liabilities" on the consolidated balance
sheets, while the long-term portion ($4 million) was included with "other
non-current liabilities."
While Jostens may have a right of contribution or reimbursement under insurance
policies, amounts that may be recoverable from other entities by the Company
with respect to a particular site are not considered until recoveries are deemed
to be probable. No assets for potential recoveries were established as of
April 4, 1998.
PLANT CONSOLIDATION
In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility with plans to transfer all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
will record a pre-tax charge to operations of approximately $3 million in the
second quarter of 1998, primarily to accrue for severance and other
employee-related costs.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company occasionally may make statements regarding its 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," "will continue," "anticipates," "believes," "estimate,"
"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
officers of the Company to shareholders, analysts, news organizations or others.
All such 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 the Company's 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: the price of gold; the Company's access to students
and consumers in schools; the seasonality of the Company's business; regulatory
and accounting rules with respect to the Company's independent sales force; the
Company's relationship with its sales force; fashion and demographic trends; the
general economy, especially during peak buying seasons for the Company's
products and services; the ability of the Company to respond to customer change
orders and delivery schedules; competitive pricing and program changes;
continued success improving operating efficiencies; and the impact of Year-2000
compliance on computer-based systems of the Company and its external
relationships.
The foregoing factors are not exhaustive, and new factors may emerge or changes
to the foregoing factors may occur that would impact the Company's business.
RESULTS OF OPERATIONS
Net sales for the three months ended April 4, 1998 were $168.3 million,
representing an increase of 11.9 percent over the comparable prior-year period.
The sales improvement was driven by growth in the Graduation Products business,
where new marketing programs produced good consumer response. In addition, the
Company succeeded in a planned effort to shift about $6 million of announcement
production and deliveries to the first quarter from the peak second quarter.
Solid ring demand in the Jewelry business also drove sales, due in part to the
success of the Company's Millennium class ring products.
Cost of products sold was $68.7 million for the three months ended April 4,
1998. Costs as a percentage of sales for the three-month period were 40.8
percent, compared with 42.8 percent in the same period last year. The decrease
in costs as a percentage of sales during the 1998 first quarter resulted from
product mix, plant production efficiencies and a $3 million charge made in the
first quarter of 1997 due to the Porterville, Calif., plant closing. These
decreases were slightly offset by a $600,000 charge relating to one-time costs
associated with volume shifts from the Attleboro, Mass., plant to the Denton,
Texas and Nuevo Laredo, Mexico plants.
Selling and administrative expenses were $80.5 million for the quarter compared
with $67.5 million in the comparable prior-year period. As a percentage of
sales, selling and administrative expenses for the three-month period was 47.9
percent, compared with 44.8 percent in the same period last year.
8
<PAGE>
The increase in the 1998 first quarter was primarily the result of expenses
incurred related to information systems implementation, a $1 million charge for
the centralization of Jewelry customer service, increased commissions due to
increased sales, and first-quarter 1998 operating expenses for Gold Lance, which
was not part of the Company in the comparable prior-year period.
Net interest expense for the first quarter of 1998 was $1.3 million compared
with $1.7 million in the comparable prior-year period. The decrease in net
interest expense corresponded with a decrease in average borrowings under the
Company's notes payable and commercial paper program due principally to
increased customer deposits.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities and short-term borrowings were Jostens'
principal sources of liquidity during the three-month period. Cash generated
from these activities was used primarily for dividends, capital expenditures,
and share repurchases.
Operating activities provided cash of $11 million for the first quarter of 1998,
primarily due to net income ($10.5 million). The change in assets and
liabilities for the quarter used $5.6 million of cash as increases in customer
deposits ($42.1 million) and salary, benefits and commissions ($14.7 million)
were offset by greater levels of increases in inventory ($40.5 million) and
accounts receivable ($21 million). These fluctuations reflect the seasonality of
the business.
The Company generated $3.3 million more cash from operating activities in the
first quarter of 1998 than in the same period in 1997. This increase resulted
primarily from improved accounts receivable collections ($8.4 million) and a
contribution of $6.8 million in 1997 to fund the company's pension plan. Those
increases were offset by additional inventory spending ($8.2 million) due to the
building of selected product lines and the timing of month-end as well as lower
levels of salary and commission accruals ($5.1 million) primarily due to the
Porterville, Calif., plant closing and the transition of the college market
independent representatives to Company employees in 1997.
Because most of the Company's sales volume occurs in the second and fourth
quarters, Jostens usually requires additional interim financing of inventories
and receivables. To provide the necessary financing, the Company maintains a
bank credit agreement that is reduced by commercial paper outstanding. The
Company has a $180 million five-year bank agreement that expires in December
2000. At April 4, 1998, $96.7 million was available under the bank credit
agreement as a result of $83.3 million in outstanding borrowings. In addition,
the Company had unsecured demand facilities with three banks totaling $84.6
million, none of which was outstanding at April 4, 1998. These demand facilities
are renegotiated periodically based on the anticipated seasonal needs for
short-term financing. Commercial paper borrowings were included in notes payable
in the consolidated balance sheet.
Management believes that cash expected to be generated from operating
activities, together with credit available under the bank credit agreement and
demand facilities, will be sufficient to fund planned capital expenditures,
share repurchases, dividends and any incremental working capital requirements in
1998.
SHARE REPURCHASE
In July 1997, Jostens' board of directors authorized the repurchase of up to
$100 million in shares of the Company's common stock. Under the authorization,
shares may be repurchased periodically in the open market and through privately
negotiated transactions. The repurchase is to be funded from the Company's cash
and short-term investment balance, as well as short-term borrowings. As of April
4, 1998, the Company had repurchased $49 million in common shares, $29.2 million
of which were purchased in the first quarter of 1998.
9
<PAGE>
CAPITAL EXPENDITURES, PRODUCT DEVELOPMENT AND ACQUISITION
Year-to-date capital expenditures through April 4, 1998, were $7 million,
approximately $3 million higher than the comparable period in 1997. The increase
resulted primarily from costs incurred due to the replacement of School
Products, Recognition and corporate management information systems and
capitalized tooling costs for the Company's Scholastic and Recognition
businesses.
YEAR 2000 CONVERSION COSTS
Management has initiated a company-wide program to prepare the Company's
information systems infrastructure, microprocessor-driven equipment, external
relationships and customers for the year 2000. Both internal and external
resources are being utilized to implement the program. Systems that will not be
replaced before the year 2000 are undergoing remediation to achieve Year-2000
functionality. The total Year 2000 program cost is estimated at approximately
$50 million, which includes $35 million to purchase and implement new software
that will be capitalized as part of the company-wide systems replacement program
and $15 million that will be expensed as incurred. As of April 4, 1998, the
Company had incurred approximately $11.9 million ($9 million capitalized),
primarily to assess Year 2000 issues, develop a strategic plan, complete
implementation of several major code remediation initiatives and purchase new
hardware and software.
The program is estimated to be completed no later than October 1999, in advance
of any anticipated impact on Company operating systems. Based on the Year 2000
program, management believes the Year 2000 issue will not pose significant
operational problems for its computer systems. The Year 2000 issue could,
however, have a material impact on the operations of the Company in the event of
significant deviation from several Year 2000 program initiatives.
The costs of the project and the date when the Company believes it will complete
the Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved, 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 the Company's external relationships and similar uncertainties.
SALE OF JOSTENS LEARNING CORPORATION (JLC)
In June 1995, Jostens sold its JLC curriculum software subsidiary to a group led
by Bain Capital, Inc. for $50 million in cash; a $36 million unsecured,
subordinated note maturing in eight years with a stated interest rate of 11
percent; and a separate $4 million note with a stated interest rate of 8.3
percent convertible into 19 percent of the equity of Jostens Learning, subject
to dilution in certain events. The notes were recorded at fair value, using an
estimated 20 percent discount rate on the $36 million note, resulting in a
discount of $9.9 million.
As part of the JLC sale, Jostens also agreed to pay $13 million over two years
to fund certain JLC existing liabilities. As of June 28, 1997, the entire $13
million has been paid.
In October 1995, the Company sold its Wicat Systems business to Wicat
Acquisition Corp., a private investment group. Wicat Systems was the small,
computer-based aviation training subsidiary of JLC that was retained in the sale
of JLC but held for sale. The Company received $1.5 million in cash plus a
promissory note for approximately $150,000 from the sale. The Company treated
Wicat Systems as a discontinued operation in June 1995, pending the sale of the
business.
A transaction gain of $11.1 million ($5.8 million after tax) was originally
recorded at the time of the JLC sale and deferred in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 81, Gain
Recognition on the Sale of a Business or Operating Assets to a Highly
10
<PAGE>
Leveraged Entity. In October 1995, the deferred gain increased to $17.2 million
($9.7 million after tax) as a result of the sale of Wicat ($5.3 million) and
some accrual settlements ($800,000).
In conjunction with its efforts to raise additional equity capital for ongoing
cash requirements, JLC requested that the Company restructure its interests in
JLC. In November 1996, the Company restructured terms of its $36 million,
unsecured, subordinated note from JLC in conjunction with a third-party equity
infusion into JLC. Terms of the restructuring resulted in the exchange of the
$36 million unsecured, subordinated note and accrued interest for a new $57.2
million unsecured, subordinated note maturing June 29, 2003, with a stated
interest rate of 6 percent and rights to early redemption discounts. The early
redemption discounts, exercisable only in whole at JLC's option, adjust
periodically and range from a 60 percent discount on the face value if redeemed
by December 27, 1997, to 40 percent if redeemed by March 31, 2003. The new note
was recorded at fair value using an estimated 20 percent discount rate on the
$57.2 million note, resulting in a discount of $35.1 million. The restructuring
had no impact on the net carrying value of Jostens' investment in JLC, since the
$4 million reduction in the note receivable's carrying value was offset by a
corresponding reduction in the deferred gain to $13.2 million ($7.3 million
after tax).
The adjusted $13.2 million gain and interest on the notes receivable will be
deferred until cash flows from the operating activities of JLC are sufficient to
fund debt service, dividend or any other covenant requirements. The deferred
gain is presented in the condensed consolidated balance sheets as an offset to
notes receivable. The notes receivable balance represents amounts owed by JLC
related to the sale of JLC net of a $35.1 million discount and the deferred
gain. Despite the equity infusion and restructuring of Jostens' interests in
JLC, there is no guarantee that JLC will be able to repay the note. JLC incurred
losses in 1997, 1996 and 1995; however, the Company believes that such carrying
value is not impaired based on current facts and circumstances.
PLANT CONSOLIDATION
In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility with plans to transfer all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
will record a pre-tax charge to operations of approximately $3 million in the
second quarter of 1998, primarily to accrue for severance and other
employee-related costs.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Taylor Publishing Company filed a civil suit against Jostens on January 14, 1997
in the United States District Court for the Eastern District of Texas. In the
suit, Taylor alleges that the Company violated federal antitrust laws with the
respect to the yearbook publishing market, interfered with Taylor's sales
representatives, and improperly sought trade secrets. Taylor, citing the loss of
school accounts over the last four years, argued that such loss of business
resulted directly from the Company's attempt to monopolize the yearbook
business. On May 13, 1998 a jury delivered a verdict awarding Taylor $8.5
million (which is automatically tripled to $25.5 million under the antitrust
laws) on the antitrust claims, plus attorneys' fees, and up to $11.5 million on
the other claims not deemed to be part of the antitrust damage award. Judgment
has not been entered pending post trial motions before the court. The Company
intends to vigorously pursue reversal of the decision through the post trial and
appellate processes.
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 4. Submissions of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on April 23, 1998.
(b) At the Annual Meeting, the following proposals were voted on by the
shareholders as indicated below:
1. To elect two directors, for three year terms.
Name In Favor Withhold Authority
---- -------- ------------------
Mannie L. Jackson 31,687,999 329,957
Walker Lewis 31,687,339 330,617
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for 1998.
In Favor Against Abstain
-------- ------- -------
31,726,995 252,797 38,164
3. To request the elimination of election of directors by classes.
In Favor Against Abstain Broker Non-Vote
-------- ------- ------- ---------------
18,918,929 10,420,785 145,092 2,533,150
4. To request redemption of, or a binding vote on, the Company's
Shareholder Rights Plan.
In Favor Against Abstain Broker Non-Vote
-------- ------- ------- ---------------
20,798,717 8,505,112 2,714,127 2,533,150
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter for which this report is filed.
12
<PAGE>
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 May 19, 1998 /s/ Robert C. Buhrmaster
---------------------------------------
Robert C. Buhrmaster
Chairman, President and Chief Executive
Officer
/s/ William N. Priesmeyer
---------------------------------------
William N. Priesmeyer
Senior Vice President and
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH
PERIOD ENDED APRIL 4, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 0
<SECURITIES> 6,884
<RECEIVABLES> 137,338
<ALLOWANCES> (7,621)
<INVENTORY> 132,563
<CURRENT-ASSETS> 317,566
<PP&E> 238,742
<DEPRECIATION> (163,232)
<TOTAL-ASSETS> 455,788
<CURRENT-LIABILITIES> 336,716
<BONDS> 3,600
0
0
<COMMON> 12,451
<OTHER-SE> 88,904
<TOTAL-LIABILITY-AND-EQUITY> 455,788
<SALES> 168,277
<TOTAL-REVENUES> 168,277
<CGS> 68,673
<TOTAL-COSTS> 68,673
<OTHER-EXPENSES> 80,525
<LOSS-PROVISION> 315
<INTEREST-EXPENSE> 1,291
<INCOME-PRETAX> 17,788
<INCOME-TAX> 7,292
<INCOME-CONTINUING> 10,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,496
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> (1,184)
<SECURITIES> 3,540
<RECEIVABLES> 112,945
<ALLOWANCES> (9,398)
<INVENTORY> 98,838
<CURRENT-ASSETS> 250,540
<PP&E> 188,794
<DEPRECIATION> (120,873)
<TOTAL-ASSETS> 409,285
<CURRENT-LIABILITIES> 231,577
<BONDS> 53,890
0
0
<COMMON> 12,854
<OTHER-SE> 91,998
<TOTAL-LIABILITY-AND-EQUITY> 409,285
<SALES> 97,754
<TOTAL-REVENUES> 97,754
<CGS> 45,800
<TOTAL-COSTS> 45,800
<OTHER-EXPENSES> 47,892
<LOSS-PROVISION> 680
<INTEREST-EXPENSE> (198)
<INCOME-PRETAX> 4,260
<INCOME-TAX> 1,747
<INCOME-CONTINUING> 2,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,513
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH
PERIOD ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> (5,563)
<SECURITIES> 5,985
<RECEIVABLES> 109,925
<ALLOWANCES> (9,020)
<INVENTORY> 116,596
<CURRENT-ASSETS> 265,164
<PP&E> 201,427
<DEPRECIATION> (128,901)
<TOTAL-ASSETS> 412,485
<CURRENT-LIABILITIES> 280,828
<BONDS> 3,899
0
0
<COMMON> 12,864
<OTHER-SE> 97,153
<TOTAL-LIABILITY-AND-EQUITY> 412,485
<SALES> 263,533
<TOTAL-REVENUES> 263,533
<CGS> 119,639
<TOTAL-COSTS> 119,639
<OTHER-EXPENSES> 116,866
<LOSS-PROVISION> 1,300
<INTEREST-EXPENSE> 2,476
<INCOME-PRETAX> 24,552
<INCOME-TAX> 10,066
<INCOME-CONTINUING> 14,486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,486
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH
PERIOD ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 3,569
<RECEIVABLES> 141,544
<ALLOWANCES> (9,148)
<INVENTORY> 142,236
<CURRENT-ASSETS> 325,215
<PP&E> 192,850
<DEPRECIATION> (124,461)
<TOTAL-ASSETS> 464,943
<CURRENT-LIABILITIES> 335,334
<BONDS> 3,732
0
0
<COMMON> 12,883
<OTHER-SE> 96,194
<TOTAL-LIABILITY-AND-EQUITY> 464,943
<SALES> 405,396
<TOTAL-REVENUES> 405,396
<CGS> 180,283
<TOTAL-COSTS> 180,283
<OTHER-EXPENSES> 184,041
<LOSS-PROVISION> 1,715
<INTEREST-EXPENSE> 5,040
<INCOME-PRETAX> 36,032
<INCOME-TAX> 14,773
<INCOME-CONTINUING> 21,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,259
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 859
<RECEIVABLES> 115,280
<ALLOWANCES> (6,129)
<INVENTORY> 94,093
<CURRENT-ASSETS> 245,138
<PP&E> 190,176
<DEPRECIATION> (124,210)
<TOTAL-ASSETS> 378,318
<CURRENT-LIABILITIES> 241,490
<BONDS> 3,864
0
0
<COMMON> 12,887
<OTHER-SE> 103,988
<TOTAL-LIABILITY-AND-EQUITY> 378,318
<SALES> 105,399
<TOTAL-REVENUES> 105,399
<CGS> 60,847
<TOTAL-COSTS> 60,847
<OTHER-EXPENSES> 51,155
<LOSS-PROVISION> 221
<INTEREST-EXPENSE> 1,917
<INCOME-PRETAX> (8,520)
<INCOME-TAX> (3,493)
<INCOME-CONTINUING> (5,027)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,027)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH
PERIOD ENDED MARCH 29, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 0
<SECURITIES> 11,097
<RECEIVABLES> 143,140
<ALLOWANCES> (6,428)
<INVENTORY> 130,843
<CURRENT-ASSETS> 322,063
<PP&E> 214,603
<DEPRECIATION> (147,884)
<TOTAL-ASSETS> 453,703
<CURRENT-LIABILITIES> 319,407
<BONDS> 3,879
0
0
<COMMON> 12,909
<OTHER-SE> 102,384
<TOTAL-LIABILITY-AND-EQUITY> 453,703
<SALES> 150,437
<TOTAL-REVENUES> 150,437
<CGS> 64,396
<TOTAL-COSTS> 64,396
<OTHER-EXPENSES> 67,464
<LOSS-PROVISION> 422
<INTEREST-EXPENSE> 1,704
<INCOME-PRETAX> 16,873
<INCOME-TAX> 6,919
<INCOME-CONTINUING> 9,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,954
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH
PERIOD ENDED JUNE 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 0
<SECURITIES> 18,536
<RECEIVABLES> 144,740
<ALLOWANCES> 6,237
<INVENTORY> 76,722
<CURRENT-ASSETS> 263,376
<PP&E> 217,790
<DEPRECIATION> (151,999)
<TOTAL-ASSETS> 401,301
<CURRENT-LIABILITIES> 231,751
<BONDS> 3,876
0
0
<COMMON> 13,002
<OTHER-SE> 136,962
<TOTAL-LIABILITY-AND-EQUITY> 401,301
<SALES> 447,753
<TOTAL-REVENUES> 447,753
<CGS> 210,687
<TOTAL-COSTS> 210,687
<OTHER-EXPENSES> 152,097
<LOSS-PROVISION> 832
<INTEREST-EXPENSE> 3,144
<INCOME-PRETAX> 81,825
<INCOME-TAX> 33,548
<INCOME-CONTINUING> 48,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,277
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.24
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH
PERIOD ENDED SEPTEMBER 27, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 0
<SECURITIES> 3,240
<RECEIVABLES> 115,752
<ALLOWANCES> (6,676)
<INVENTORY> 88,051
<CURRENT-ASSETS> 242,746
<PP&E> 224,887
<DEPRECIATION> (154,998)
<TOTAL-ASSETS> 381,075
<CURRENT-LIABILITIES> 231,250
<BONDS> 3,589
0
0
<COMMON> 12,947
<OTHER-SE> 118,049
<TOTAL-LIABILITY-AND-EQUITY> 381,075
<SALES> 556,832
<TOTAL-REVENUES> 556,832
<CGS> 274,095
<TOTAL-COSTS> 274,095
<OTHER-EXPENSES> 206,901
<LOSS-PROVISION> 1,255
<INTEREST-EXPENSE> 4,498
<INCOME-PRETAX> 71,338
<INCOME-TAX> 29,248
<INCOME-CONTINUING> 42,090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,090
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
