<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 3, 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 No. 1-5064
JOSTENS, INC.
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(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
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant on March 3, 1998, was $890,609,303. The number of shares outstanding
of Registrant's only class of common stock on March 3, 1998, was 38,203,080.
1
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DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM
- ------------------------------------- ---------------
10-K Parts II and IV
Annual Report to Shareholders for
The Year Ended January 3, 1998
Proxy Statement for Annual Meeting of Parts I and III
Shareholders to be held April 23, 1998
2
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PART I
Item 1. BUSINESS
(a) The Company is a Minnesota corporation, incorporated in 1906. The
Company provides products and services that help people celebrate
achievement, reward performance, recognize service and commemorate
experiences throughout their lives. Products and services include:
yearbooks, class rings, graduation products, student photography
packages, customized business performance and service awards, sports
awards and customized affinity products.
In July 1997, the 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 January 3, 1998, the Company
had repurchased $20 million in common shares.
In July 1997, the Company purchased the Gold Lance class ring brand
from Town & Country Corporation for $9.5 million in cash. Under the
terms of the agreement, the Company purchased the Gold Lance name,
accounts and notes receivable, and tooling.
In March 1997, the Company closed its Porterville, California,
graduation announcement facility and transferred operations to the
Company's announcement plant in Shelbyville, Tennessee.
In February 1997 and October 1996, the Company entered into joint
venture agreements with partners in Columbia and Chile, respectively.
The Company began selling its products in these countries during
calendar 1997. The Company's commitment to provide financing to these
joint ventures is insignificant.
Since November 1996, Jostens has overseen a Mexican facility in Nuevo
Laredo, Mexico, which is being operated under a contract manufacturing
agreement. Based on the successful results of a test project completed
in February 1997, the Company transferred virtually all non-precious
metal ring finishing volume to the facility in Mexico. Furthermore, in
February 1988, the Company announced plans to shift some high school
gold ring finishing volume from the Attleboro, Massachusetts, and
Denton, Texas facilities, to the Nuevo Laredo, Mexico, facility.
In July 1996, the Company closed its Winnipeg, Manitoba, jewelry
manufacturing facility and transferred production to the Denton, Texas
plant. Additionally, a photography plant in Lachine, Quebec was closed
in January 1997 with processing volume transferred to the Winnipeg
facility.
In September 1995, the Company repurchased 7,011,108 shares of its
common stock, the maximum number of shares allowable for purchase, for
$169.3 million through a Modified Dutch Auction tender offer. The
repurchase was funded from the Company's cash and short-term investment
balance, as well as short-term borrowings.
In June 1995, the Company sold its JLC curriculum software subsidiary
to a group led by Bain Capital, Inc. Information related to the sale of
JLC is in the financial statement footnote "Discontinued Operations" on
pages 44 through 45 of the 1997 Annual Report to Shareholders.
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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 treated
Wicat Systems as a discontinued operation in June 1995, pending the
sale of the business. Information related to the sale of Wicat Systems
is in the financial statement footnote "Discontinued Operations" on
pages 44 through 45 of the 1997 Annual Report to Shareholders.
In October 1996, the Company elected to change its fiscal year end from
June 30 to the Saturday closest to December 31, effective December 29,
1996. The change was made to enable better business planning and
internal management.
(b) The Company's operations are classified into two business segments:
school-based recognition products and services (School Products) and
longevity and performance recognition products and services for
businesses (Recognition). Business segment financial information is in
the financial statement footnote "Business Segment Information"
on pages 43 and 44 of the 1997 Annual Report to Shareholders.
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(c) The Company's two business segments sell their products in elementary
schools, high schools, colleges and businesses in the 50 United States
and some foreign countries through a sales force of approximately 950
representatives. In the year ended June 30, 1995, the Company had a
discontinued operation (JLC) that produced educational software for
students in kindergarten through grade 12. The JLC discontinued
operation included JLC's Wicat subsidiary which was subsequently sold
in October 1995.
SCHOOL PRODUCTS SEGMENT
School Products recognizes individual and group achievement and
affiliation primarily in the academic market. School Products comprises
five businesses: Printing & Publishing, Jewelry, Graduation Products,
U.S. Photography and Jostens Canada. The School Products segment's
sales of $631.9 million in calendar 1997 included these five lines of
business and $6.9 million in other sales.
Printing & Publishing: The Company manufactures and sells student-
created yearbooks in elementary schools, junior high schools, high
schools and colleges. Independent sales representatives and their
associates work closely with each school's yearbook staff (both
students and a faculty adviser), assisting with the planning, editing,
layout and printing scheduling until the book is completed. The
Company's sales representatives work with the faculty advisers to renew
yearbook contracts each year. This business also prints commercial
brochures, and promotional books and materials. Printing & Publishing
contributed approximately 37% of School Products segment sales volume
for the year ended January 3, 1998 (calendar 1997), and 32%, 30%, 37%
and 36% for the year ended December 28, 1996 (calendar 1996), the six
months ended December 28, 1996 (the 1996 Transition Period), fiscal
1996 and fiscal 1995, respectively.
Jewelry: The Company manufactures and sells rings representing a
graduating class primarily to high school and college students. This
product line contributed approximately 28% of the School Products
segment sales volume in calendar 1997 and 25%, 38%, 28% and 27% in
calendar 1996, the 1996 Transition Period, fiscal 1996 and fiscal 1995,
respectively. Many schools have only one school-designated supplier to
its students each year. Rings may be sold through bookstores, other
campus stores, retail jewelry stores and within the school through
temporary order-taking booths. The Company, through its independent and
employee sales representatives, manages the process of interacting with
the student through ring design, promotion, ordering and presentation
to relieve school officials of any administrative burden connected with
students purchasing this symbol of achievement.
Graduation Products: The Company manufactures and sells graduation
announcements and accessories, diplomas and caps and gowns to students
and administrators in high schools and colleges. This product group
contributed approximately 24% of School Products segment sales volume
in calendar 1997, and 21%, 12% , 23% and 24% of sales to this segment
in calendar 1996, the 1996 Transition Period, fiscal 1996 and fiscal
1995, respectively. Jostens independent and employee sales
representatives make calls on schools and sales are taken through
temporary order-taking booths, telemarketing programs and college
bookstores.
Photography: U.S. Photography provides class and individual school
pictures to students in elementary, junior high and high school; high
school senior portrait photography; photography for proms and other
special events; and other photo-based products such as student ID
cards. These services are provided through a sales force and
independent dealers, who arrange the sittings/shootings at individual
schools or in their own studios. This business contributed
approximately 4% of School Products segment sales volume in calendar
1997, and 4%, 8%, 4% and 4% in calendar 1996, the 1996 Transition
Period, fiscal 1996 and fiscal 1995, respectively. The Company
processes the photos at its plants in the U.S. and Canada.
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Jostens Canada: The Company is the leader in school photography,
yearbooks and class rings in Canada. Approximately 59% of the calendar
1997 sales in Canada were from school photography. Jostens Canada
contributed approximately 6% of School Products segment sales in
calendar 1997, and 7%, 10%, 7% and 7%, in calendar 1996, the 1996
Transition Period, and fiscal 1996 and fiscal 1995, respectively.
MARKETS: School Products serves elementary schools, middle schools,
high schools, colleges, alumni associations and other organizations in
the United States and Canada through approximately 865 independent and
employee sales representatives. Jostens also maintains an international
sales force servicing primarily American schools and military
installations in about 50 countries.
PRODUCTS: School products include elementary through college yearbooks,
commercial printing, desktop publishing curriculum kits, class rings,
graduation caps and gowns, graduation announcements and accessories,
diplomas, alumni products, individual and group school pictures, and
senior graduation portraits .
SALES FORCE: The School Products segment markets its products primarily
through independent and employee sales representatives. Approximately
418 persons are dedicated to selling class rings and graduation
products, 326 to yearbooks and 121 to photography.
Information related to changes in sales representatives' contracts is
under the caption "Commitment and Contingencies" on pages 22 through
23, and pages 38 through 39 in the Company's Annual Report to
Shareholders for the year ended January 3, 1998.
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SEASONALITY: This segment experiences strong seasonal business swings
concurrent with the school year, with 40-45 percent of full-year sales
and 65-70 percent of full-year profits occurring in the period from
April to June. The business generally requires short-term financing
during the course of the year.
COMPETITION: The business of the School Products segment is highly
competitive, primarily in the pricing, product development and
marketing areas.
Printing & Publishing competition is primarily made up of two national
firms (Herff Jones and Taylor Publishing) and one smaller regional firm
(Walsworth Publishing). All compete on price, print quality, product
offerings and service. Technological offerings in the way of computer
based curricula are becoming a more significant market differentiator.
In the class ring business, the Company has two primary national
competitors: Herff Jones and Commemorative Brands (CBI), which markets
through the Balfour and ArtCarved brands. Herff Jones distributes its
product in schools, in a manner similar to the Company's, while CBI
distributes its product through multiple distribution channels
including schools, independent and chain jewelers and mass
merchandisers.
In the Graduation Products business, several national and numerous
local and regional competitors offer products similar to those of the
Company.
In Photography, the Company competes with Lifetouch, Olan Mills, Herff
Jones and a variety of regional and locally owned and operated
photographers. In Canada, the Company competes with Lifetouch and a
variety of regional and locally owned and operated photographers.
The Company's strategy for competing with these companies is based on
its service and quality.
RECOGNITION SEGMENT
The Recognition segment helps companies and other organizations promote
and recognize achievement in people's careers. It designs, communicates
and administers programs to help customers improve performance and
recognize employee service. It also produces awards for championship
team accomplishments and affinity products for associations.
This business manufactures and markets a wide variety of products sold
primarily to corporations and businesses in the United States and
Canada. The products manufactured by Recognition include customized and
personalized jewelry, rings, watches and engraved certificates. In
addition, this business also remarkets items manufactured by others for
incorporation into programs sold to Recognition customers. These
products include items supplied by Lenox, Hartmann, Waterman, Kirk
Stieff and Oneida.
MARKETS: Recognition serves customers from small and mid-size companies
to global corporations, professional and amateur sports teams and
special interest associations.
PRODUCTS: Recognition offers an assortment of products and services
tailored to the needs of the organization it is serving under a
Strategic Recognition(TM) approach. For global companies, the Company
customizes programs to meet specific customer needs.
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Standardized programs, such as Symphony(TM) and Crescendo(TM), provide
small and mid-size companies the same product and service features
without complex customization. Recognition enjoys exclusive product and
personalization distributor arrangements including
Hartmann luggage and Lenox china for the service award marketplace.
SALES FORCE: Recognition sells its products through approximately 85
independent sales representatives who develop programs incorporating
Recognition products.
COMPETITION: The Recognition business competes primarily with O.C.
Tanner and the Robbins Company on a national basis, as well as several
regional companies. Recognition focuses on service and product
offerings in competing with these companies.
JOSTENS, INC. -- INFORMATION REGARDING ALL BUSINESSES
BACK ORDERS: Because of the nature of the Company's business, generally
all orders are filled within a few months from the time of placement.
However, the School Products segment obtains student yearbook contracts
in one year for a significant portion of the yearbooks to be delivered
in the next year. Often the prices of the yearbooks are not established
at the time of the order because the content of the books may not have
been finalized. Subject to the foregoing qualifications, the Company
estimates that as of January 3, 1998, the backlog of orders related to
continuing operations was approximately $276.2 million, compared with
$260.8 million at December 28, 1996, primarily related to student
yearbooks, jewelry and graduation products. The Company expects most of
the backlog orders to be confirmed and filled in 1998.
ENVIRONMENTAL: Information related to the Company's environmental
management progam is under the caption "Commitment and Contingencies"
on pages 22 through 23, and pages 38 through 39 in the Company's Annual
Report to Shareholders for the year ended January 3, 1998.
RAW MATERIALS: All of the raw materials used by the Company are
available from several sources. Gold is an important raw material and
accounted for approximately 10% of the Company's cost of products sold
for the year ended January 3, 1998. For the 1996 Transition Period and
the fiscal
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years ended June 30, 1996 and 1995, gold usage accounted for
approximately 11%, 10% and 10%, respectively, of the Company's cost of
products sold.
INTELLECTUAL PROPERTY: The Company has no patents, licenses, franchises
or concessions that are material to it as a whole, but does have a
number of proprietary trade secrets, trademarks and copyrights that it
considers important. In addition, licenses are an important part of
certain aspects of the Company's businesses; however, the loss of any
license would not have a material affect on the Company's operations.
SIGNIFICANT CUSTOMERS: No material part of any business of the Company
depends upon a single customer or very few customers.
FEDERAL GOVERNMENT CONTRACTS: No material portion of the Company's
business is subject to renegotiation of profits or the termination of
contracts or subcontracts at the election of the United States
Government.
EMPLOYEES: At January 3, 1998, the total number of employees of the
Company was approximately 6,500 (not including independent sales
representatives). Because of seasonal fluctuations and the nature of
the business, the number of employees tends to vary.
As of January 3, 1998, the Company had 277 employees who were members
of two separate unions. The Company has not had a work stoppage or
strike that had a material impact on the Company's operations.
(d) The Company's foreign sales are derived primarily from operations in
Canada and the United Kingdom. The accounts and operations of the
Company's foreign businesses are not material. Local taxation, import
duties, fluctuation in currency exchange rates and restrictions on
exportation of currencies are among risks attendant to foreign
operations, but these risks are not considered material with respect to
the Company's business. The profit margin on foreign sales is
approximately the same as the profit margin on domestic sales.
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Item 2. PROPERTIES
The principal plants, which are owned by the Company unless
otherwise noted, are as follows:
APPROXIMATE
AREA IN
LOCATION PRINCIPAL PRODUCTS SQUARE FEET
Attleboro, Massachusetts Class Rings 52,000
Denton, Texas Class Rings 57,000
Nuevo Laredo, Mexico* Class Rings 43,000
Laurens, South Carolina Caps and Gowns 98,000
Laurens, South Carolina* Caps and Gowns 105,000
Red Wing, Minnesota Graduation Products 132,000
Shelbyville, Tennessee Graduation Products 87,000
Burnsville, Minnesota * Scholastic Support 47,000
Edina, Minnesota * IS Support 21,000
Owatonna, Minnesota ** Scholastic 118,000
Owatonna, Minnesota * Scholastic Support 24,000
Memphis, Tennessee Recognition Awards 67,000
Princeton, Illinois Recognition Awards 65,000
Sherbrooke, Quebec* Recognition Awards 15,000
Clarksville, Tennessee Yearbooks 105,000
State College, Pennsylvania Yearbooks 66,000
Topeka, Kansas Yearbooks 236,000
Visalia, California Yearbooks 96,000
Winston-Salem, North Carolina Yearbooks/Commercial Printing 132,000
Anaheim, California* Photography Retail 12,000
Webster, New York Photography Products 60,000
Winnipeg, Manitoba Photography and Yearbooks 69,000
Winnipeg, Manitoba * Class Rings 22,000
Executive offices are located in a company-owned general office building,
which has approximately 116,000 square feet and is located in a Minneapolis,
Minnesota suburb. A portion of this facility has been financed through
revenue bonds.
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Item 2. PROPERTIES (continued)
* Represents leased properties with the following expiration dates.
Nuevo Laredo 1998
Laurens 1998
Burnsville 2000
Edina 1999
Owatonna 2000
Sherbrooke 2002
Anaheim 1998
Winnipeg 2000
** Several locations.
Item 3. LEGAL PROCEEDINGS
There are no 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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Item 4A. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference is information under the caption "Election
of Directors" contained on pages 3 through 6 of the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 23,
1998. Executive officers of the Registrant are as follows:
<TABLE>
<CAPTION>
YEARS OF
SERVICE WITH
NAME THE COMPANY AGE TITLE AND BUSINESS EXPERIENCE
- ----- ----------- --- -----------------------------
<S> <C> <C> <C>
Robert C. Buhrmaster 5 50 CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Mr. Buhrmaster joined the Company in December 1992
as Executive Vice President and Chief Staff
Officer. He was named President and Chief
Operating Officer in June 1993; was named Chief
Executive Officer in March 1994; and was named
Chairman in February 1998. Prior to joining the
Company, Mr. Buhrmaster was with Corning, Inc. for
18 years, most recently as Senior Vice President of
Strategy and Business Development.
Carl H. Blowers 1 58 SENIOR VICE PRESIDENT - MANUFACTURING,
TECHNOLOGY, AND OPERATIONS
Mr. Blowers joined the Company in June 1996 as
Division Vice President, Manufacturing &
Engineering and was appointed to his current
position in February 1998. Prior to joining the
Company, Mr. Blowers was with Corning, Inc. for 27
years, most recently as Vice President and General
Manager of Corning's Advanced Materials and Process
Technologies Division.
Thomas W. Jans 2 49 VICE PRESIDENT AND PRESIDENT OF THE RECOGNITION
DIVISION
Mr. Jans joined the Company in August 1995 as
President of Business Recognition. He was appointed to
his current position in May 1997. From 1992 to 1995, he
worked for Carlson Travel, most recently as Executive
Vice President of Global Sales and Marketing.
David J. Larkin 0 58 EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING
OFFICER
Mr. Larkin joined the Company in February 1998 in
his current position. From 1995 to 1998, Mr.
Larkin was an independent management consultant.
Prior to 1995, he worked for Honeywell Inc. for 30
years, most recently as Chairman, President and CEO
of Honeywell Limited in Canada.
</TABLE>
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<TABLE>
YEARS OF
SERVICE WITH
NAME THE COMPANY AGE TITLE AND BUSINESS EXPERIENCE
- ----- ----------- --- -----------------------------
<S> <C> <C> <C>
Gregory S. Lea 4 45 VICE PRESIDENT - COLLEGE AND UNIVERSITY
Mr. Lea joined the Company in November 1993 as Vice
President - Total Quality Management. He was named
to his current position in June 1995. Prior to
joining the Company, Mr. Lea spent 19 years with
International Business Machines Corp. in various
financial, operations and quality positions.
John J. Mann 2 53 VICE PRESIDENT - SCHOLASTIC DIVISION
Mr. Mann joined the Company in April 1996 as
General Manager - Scholastic and was appointed to
his current position in May 1997. Prior to joining
the Company, Mr. Mann was a director at Coopers &
Lybrand Consulting. From 1991 to 1995, he worked
for Grand Metropolitan PLC, most recently as Senior
Vice President of strategic customer service
development at Pillsbury.
Lee U. McGrath 3 41 VICE PRESIDENT AND TREASURER
Mr. McGrath joined the Company in May 1995 in his
current position. For the six years prior to
joining the Company, he was the assistant treasurer
for H.B. Fuller Company, a manufacturer of chemical
products.
William N. Priesmeyer 1 53 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Mr. Priesmeyer joined the Company in August 1997 in
his current position. From April to August 1997,
Mr. Priesmeyer was Senior Vice President and CFO of
MVE Holdings. From 1994 to 1997, he was Senior
Vice President and CFO with Waldorf Corp.; and from
1993 to 1994 was Vice President and CFO for
DataCard Corp.
Kevin M. Whalen 5 38 VICE PRESIDENT - CORPORATE COMMUNICATIONS &
INVESTOR RELATIONS
Mr. Whalen joined the Company in 1993 as Director -
Corporate Communications and was appointed to his
current position in May 1997. Prior to joining the
Company, he worked for Honeywell Inc. for two years
as the Director of Corporate Public Relations.
</TABLE>
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
Incorporated by reference is information under the captions "Dividends"
on page 22; "Unaudited Quarterly Financial Data" on page 46 and
"Shareholder Information" on page 48 in the Company's Annual Report to
Shareholders for the year ended January 3, 1998.
Item 6. SELECTED FINANCIAL DATA
Incorporated by reference is information under the caption "Six-Year
Financial Summary" on page 47 in the Company's Annual Report to
Shareholders for the year ended January 3, 1998.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference is information under the caption "Management
Discussion and Analysis" on pages 16 through 24 of the Company's Annual
Report to Shareholders for the year ended January 3, 1998.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference are consolidated balance sheets of Jostens,
Inc. as of January 3, 1998, and December 28, 1996, and the related
consolidated statements of operations, changes in shareholders'
investment and cash flows for the years ended January 3, 1998, and
December 28, 1996 (unaudited); the six-month transition period ended
December 28, 1996; and the years ended June 30, 1996 and 1995, together
with the related notes and the report of Ernst & Young, LLP, independent
auditors, all contained on pages 25 through 46 of the Company's Annual
Report to Shareholders for the year ended January 3, 1998.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
In addition to certain information as to executive officers of the
Company included in Part I of this Form 10-K, the information on pages
3 through 6 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held April 23, 1998, with respect to directors and
executive officers of the Company, is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
Incorporated by reference is information under the caption "Executive
Compensation" on pages 8 through 15 of the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 23, 1998.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference is information under the caption "Shares held
by Directors and Officers" on page 7 of the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held April 23, 1998.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
15
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE 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 January 3, 1998, are
incorporated herein by reference.
PAGES IN
ANNUAL REPORT
-------------
Consolidated Balance Sheets -
January 3, 1998 and December 28, 1996 28 and 29
Statement of Consolidated Operations
for the years ended January 3, 1998, and
December 28, 1996 (unaudited); the six-month
period ended December 28, 1996; and the
years ended June 30, 1996 and 1995 26
Statement of Consolidated Cash Flows for the years 27
ended January 3, 1998, and December 28, 1996
(unaudited); the six-month period ended
December 28, 1996; and the years ended June 30,
1996 and 1995.
Statements of Consolidated Changes in
Shareholders' Investment for the years ended
January 3, 1998 and December 28, 1996 (unaudited);
the six-month period ended December 28, 1996;
and the years ended June 30, 1996 and 1995. 30
Notes to Consolidated Financial Statements 31 through 46
2. Financial Statement Schedule
PAGE IN
10-K
-------
Schedule II - Valuation and Qualifying Accounts S-1
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.
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Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(continued)
3. Executive Agreements
The following agreement is an exhibit to this Annual Report on
Form 10-K:
Deferred Compensation Plan
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
year ended January 3, 1998.
(c) Exhibits
2.a. Stock Purchase Agreement by and between JLC Holdings, Inc.
Software Systems Corp. and JLC Acquisition, Inc. and
Jostens, Inc. (incorporated by reference to Exhibit 2.1
contained in the Current Report on Form 8-K filed on
July 14, 1995).
3.a. Articles of Incorporation and Bylaws (Incorporated by
reference to Exhibit 3(a) contained in the Annual Report on
Form 10-K for the year ended June 30, 1993).
4.a. Rights Agreement dated August 9, 1998, between the Company
and Norwest Bank Minnesota, N.A. (incorporated by reference
to the Company's Form 8-A dated August 17, 1998, 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 1984 Stock Option Plan (incorporated by reference
to the Company's Registration Statement of Form S-8,
File No. 2-95076).
b. Company's 1987 Stock Option Plan (incorporated by reference
to the Company's Registration Statement of Form S-8, File
No. 33-19308).
c. 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).
d. 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).
e. Written description of the Company's Retired Director
Consulting Plan (incorporated by reference to the Company's
Form 8 dated May 2, 1991).
f. 1992 Stock Incentive Plan Performance Share Agreement (filed
with this report).
17
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Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(continued)
g. Employment and Separation Agreement dated February 3, 1997,
with Charles W. Schmid (incorporated by reference to Exhibit
10(j) contained in the Transition Report on Form 10-K for
the six-month period ended December 28, 1996).
h. Employment and Separation Agreement dated April 1, 1997, with
Jack Thornton.
i. Employment and Consulting Transition Agreement dated
December 19, 1997, with Orville E. Fisher, Jr.
j. Deferred Compensation Plan (filed with this report).
13. Annual Report to Shareholders for the year ended January 3,
1998.
21. List of Company subsidiaries.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 31, 1998
By /S/ ROBERT C. BUHRMASTER
-------------------------------
Robert C. Buhrmaster
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrants in
the capacities and on the dates indicated.
/S/ ROBERT C. BUHRMASTER
- --------------------------------- March 31, 1998
Robert C. Buhrmaster (Principal Executive Officer)
Chairman of the Board, President and
Chief Executive Officer and Director
/S/ WILLIAM N. PRIESMEYER
- ---------------------------------- March 31, 1998
William N. Priesmeyer (Principal Financial
and Accounting Officer)
Senior Vice President and Chief Financial Officer
/S/ LILYAN H. AFFINITO
- ---------------------------------- March 31, 1998
Lilyan H. Affinito
Director
/S/ MANNIE L. JACKSON
- ---------------------------------- March 31, 1998
Mannie L. Jackson
Director
/S/ JACK W. EUGSTER
- ---------------------------------- March 31, 1998
Jack W. Eugster
Director
/S/ RICHARD A. ZONA
- ---------------------------------- March 31, 1998
Richard A. Zona
Director
/S/KENDRICK B. MELROSE
- ---------------------------------- March 31, 1998
Kendrick B. Melrose
Director
/S/WALKER LEWIS
- ---------------------------------- March 31, 1998
Walker Lewis
Director
19
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
COL A. COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------
Additions
-----------------------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts - Deductions - End of
Description of Period Expenses Describe Describe Period
- --------------------------------------------------------------------------------------------------------------
Reserves and allowances deducted
from asset accounts:
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowances for uncollectible accounts:
Year ended January 3, 1998 $ 6,884 $ 2,245 $ - $ 1,683 (1) $ 7,446
Six months ended December 28, 1996 $ 5,966 $ 1,202 $ - $ 284 (1) $ 6,884
Year ended June 30, 1996 $ 9,049 $ 2,195 $ - $ 5,278 (1) $ 5,966
Year ended June 30, 1995 $13,749 $ 3,552 $ - $ 8,252 (2) $ 9,049
- --------------------------------------------------------------------------------------------------------------
Allowances for sales returns:
Year ended January 3, 1998 $ 4,787 $18,352 $ - $17,570 (3) $ 5,569
Six months ended December 28, 1996 $ 6,518 $ 6,308 $ - $ 8,039 (3) $ 4,787
Year ended June 30, 1996 $ 7,509 $12,951 $ - $13,942 (3) $ 6,518
Year ended June 30, 1995 $ 6,719 $12,763 $ - $11,973 (3) $ 7,509
- --------------------------------------------------------------------------------------------------------------
SFAS No. 109 valuation allowance:
Year ended January 3, 1998 $ 4,494 $ 451 (4) $ - $ 2,030 (10) $ 2,915
Six months ended December 28, 1996 $ 5,920 $ - $ - $ 1,426 (11) $ 4,494
Year ended June 30, 1996 $ 2,117 $ 3,803 (4) $ - $ - $ 5,920
Year ended June 30, 1995 $ 3,642 $ - $ - $ 1,525 (5) $ 2,117
- --------------------------------------------------------------------------------------------------------------
Overdraft reserves:
Year ended January 3, 1998 $ 7,344 $ 2,946 $ - $ 1,968 (1) $ 8,322
Six months ended December 28, 1996 $ 6,545 $ 1,740 $ - $ 941 (1) $ 7,344
Year ended June 30, 1996 $ 6,157 $ 2,838 $ - $ 2,450 (1) $ 6,545
Year ended June 30, 1995 $ 7,796 $ 1,943 $ - $ 3,582 (1) $ 6,157
- -------------------------------------------------------------------------------------------------------------
Reserves and allowances added
to liability accounts:
- -------------------------------------------------------------------------------------------------------------
Restructuring charges:
Year ended January 3, 1998 $ 1,300 $ - $ - $ 800 (9) $ 500
Six months ended December 28, 1996 $ 2,700 $ - $ - $ 1,400 (8) $ 1,300
Year ended June 30, 1996 $ 8,636 $ - $ - $ 5,936 (6) $ 2,700
Year ended June 30, 1995 $39,821 $ - $ - $31,185 (7) $ 8,636
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Note (1) -- Uncollectible accounts written off - net of recoveries.
Note (2) -- Uncollectible amounts written off - net of recoveries ($5,796)
plus disposition of Jostens Learning ($2,456).
Note (3) -- Returns processed against reserve.
Note (4) -- Increased due to the increase in foreign tax credits not likely
to be utilized.
Note (5) -- Reduced for utilization of Jostens Learning NOL.
Note (6) -- Payments ($2,400), Noncash items ($400), and disposition of
Wicat ($3,136).
Note (7) -- Payments ($21,090), Noncash items ($3,523) and disposition of
Jostens Learning ($6,572).
Note (8) -- Payments ($1,000), Noncash items ($400)
Note (9) -- Payments ($700), Noncash items ($100)
Note (10) -- Reduced for anticipated NOL utilization related to the
Photography business.
Note (11) -- To adjust reserve for foreign tax credits and NOL per the returns
as filed.
S-1
20
<PAGE>
JOSTENS, INC.
EXHIBIT 10.f. 1992 STOCK INCENTIVE PLAN
PERFORMANCE SHARE AGREEMENT
THIS AGREEMENT is entered into and effective as of this 24th day of
July, 1997 (the "Date of Grant"), by and between Jostens, Inc. (the "Company")
and ________________ (the "Grantee").
A. The Company has adopted the Jostens, Inc. 1992 Stock Incentive Plan (the
"Plan") authorizing the Board of Directors of the Company, or a committee as
provided for in the Plan (the Board or such a committee to be referred to as the
"Committee"), to grant performance share awards to certain employees and
non-employee consultants and independent contractors or agents of the Company
and its Subsidiaries (as defined in the Plan).
B. The Company desires to give the Grantee a proprietary interest in the
Company and an added incentive to advance the interests of the Company by
granting to the Grantee performance shares of common stock of the Company
pursuant to the Plan.
Accordingly, the parties agree as follows:
ARTICLE 1. GRANT.
The Company hereby grants to the Grantee as a matter of separate inducement
and agreement in connection with the Grantee's services to the Company, and not
in lieu of any salary or other compensation for services, a performance award
(the "Performance Award") consisting of shares (the "Performance Shares") of the
Company's common stock, par value $.33 1/3 per share (the "Common Stock"),
according to the terms and subject to the restrictions and conditions
hereinafter set forth and as set forth in the Plan.
ARTICLE 2. PERFORMANCE CRITERIA
The Grantee's right to receive a payout of the Performance Award shall be
subject to the following performance criteria for the Company's 1998 fiscal year
("CY98"):
2.1 RETURN ON ASSETS. Return on assets as publicly reported for the Company
for CY98 must be at least _______ percent (___%) for any Performance Shares to
be earned; and
2.2 EARNINGS PER SHARE (EPS): Earnings Per Share (EPS) for the Company for
CY98 as publicly reported and adjusted (as further defined in Schedule A
attached hereto and made a part hereof) must be at least 90% of the EPS target
of $____ per share ("EPS Target").
<PAGE>
ARTICLE 3: PAYOUT OF PERFORMANCE SHARES
3.1 If the performance criteria in Sections 2.1 and 2.2 are not met, no
Performance Shares shall be earned or payable under this Agreement.
3.2 If the performance criteria in Sections 2.1 and 2.2 are met, a number
of Performance Shares shall be earned by Grantee based on the following
percentages:
EPS Results Percentage of
(% OF EPS TARGET) PERFORMANCE SHARES EARNED
----------------- -------------------------
90% 25%
100% 100%
110% and above 150%
For EPS results between the points listed above, the percentage of
Performance Shares which shall be earned shall be determined by
interpolation.
3.3 The number of Performance Shares earned will be payable to Grantee in
shares of Common Stock and in cash as follows:
(a) COMMON STOCK:
Grantee will be issued the number of shares of Common Stock equal to
50% of the number Performance Shares Earned.
(b) CASH:
Grantee will be paid in cash equal to 50% of Performance Shares Earned
based on the Fair Market Value (as defined in the Plan) of Common
Stock on the on last trading day of CY98.
3.4 Payout of Performance Shares will occur as soon as administratively
possible after the final determination of EPS is made by the Compensation
Committee of the Board of Directors of the Company, but in no event later than
90 days after the end of CY98.
ARTICLE 4. DEFERRAL
4.1 ELECTION. Grantee may elect to defer, under the Company's Deferred
Compensation Plan, up to 100% of any payout of Performance Shares earned. The
deferral election under the Deferred Compensation Plan must be made by December
31, 1997 by separate election. The terms of any deferral will be governed by the
applicable provisions of the Deferred Compensation Plan.
2
<PAGE>
4.2 DEFERRAL ACCOUNT. Any deferral of Performance Shares Earned will be
credited to Grantee's deferred compensation account in equal allocations to
participant's Cash Account and Share Account as each is defined under the
Company's Deferred Compensation Plan.
ARTICLE 5. FORFEITURE
5.1 FORFEITURE. Any Performance Awards that are not earned under Section 3
above shall be forfeited effective at the end of CY98.
5.2 TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Except as otherwise
provided in Section 5.3 and 5.4 below, in the event that the Grantee's
employment or other service with the Company and all Subsidiaries is terminated
for any reason prior to the end of the Company's CY98, all rights of the Grantee
under this Agreement shall immediately terminate without notice of any kind, and
this Performance Award shall be terminated and the Performance Shares shall be
forfeited.
5.3 DEATH, DISABILITY OR RETIREMENT.
(a) In the event that the Grantee's employment or other service with the
Company is terminated by reason of the Grantee's death, Disability or
Retirement prior to the end of CY98, the Grantee will continue to have the
right to earn the Performance Shares for CY98 as if the Grantee had
remained in the employment of the Company through the end of CY98, provided
that the number of Performance Shares earned will be prorated based on the
proportion that the number of days in CY98 prior to such termination bears
to the total number of days in CY98.
(b) For purposes of this Agreement, "Disability" means the disability of
the Grantee as defined in the long-term disability plan of the Company or
Subsidiary then covering the Grantee or, if no such plan exists, the
permanent and total disability of the Grantee within the meaning of Section
22(e)(3) of the Code and "Retirement" means the retirement of the Grantee
pursuant to and in accordance with the regular (or, if approved by the
Committee for purposes of the Plan, early) retirement/pension plan of the
Company or Subsidiary then covering the Grantee.
5.4 CHANGE IN CONTROL.
(a) For purposes of this Section 5.4, the term "Change in Control" shall
have the meaning set forth in Section 13.1 of the Plan.
(b) If any events constituting a Change in Control of the Company shall
3
<PAGE>
occur, then Performance Shares shall be deemed to have been 100% earned and will
be paid out based on the fair market value of Common Stock immediately prior to
the effective date of the Change of Control, whether or not the Grantee remains
in the employ or service of the Company or any Subsidiary.
(c) Notwithstanding anything in this Section 5.4 to the contrary, if, with
respect to the Grantee, acceleration of the vesting of this Performance Award
(which acceleration could be deemed a "payment" within the meaning of Section
280G(b)(2) of the Code), together with any other payments which the Grantee has
the right to receive from the Company or any corporation which is a member of an
"affiliated group" (as defined in Section 1504(a) of the Code without regard to
Section 1504(b) of the Code) of which the Company is a member, would constitute
a "parachute payment" (as defined in Section 280G(b)(2) of the Code), the
payments to the Grantee as set forth herein shall be reduced to the largest
amount as will result in no portion of such payments being subject to the excise
tax imposed by Section 4999 of the Code.
ARTICLE 6. PERFORMANCE SHARE RESTRICTIONS
6.1 NO PRIVILEGES OF A SHAREHOLDER; TRANSFERABILITY. The Grantee shall not
be recorded on the books of the Company as the owner of any Common Stock related
to the Performance Award until such time as Performance Shares have been earned
and paid out pursuant to this Agreement. At such time the Company shall issue
one or more duly issued and executed stock certificates evidencing the same. The
Performance Award shall not be assignable or transferable by the Grantee, either
voluntarily or involuntarily, and shall not be subjected to any lien, directly
or indirectly, by operation of law or otherwise. Any attempt to transfer, assign
or encumber the Performance Award other than in accordance with this Agreement
and the Plan shall be null and void and shall void the Performance Award.
6.2 DIVIDENDS AND OTHER DISTRIBUTIONS. The Grantee shall have no right to
receive dividends or distributions with respect to Performance Award, including
stock dividends or dividends in kind, dividends or distributions paid in cash,
the proceeds of any stock split or the proceeds resulting from any changes or
exchanges described in Article 5 of this Agreement (all of which shall
collectively be referred to as "Dividend Proceeds"), until such time as
Performance Shares are earned and paid out.
ARTICLE 7. ADJUSTMENTS.
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering or divestiture (including a spin-off) or
any other change in the corporate structure or shares of the Company, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation), in order to
prevent dilution or enlargement of the rights of the Grantee,
4
<PAGE>
shall make appropriate adjustment (which determination shall be conclusive)
as to the number and kind of securities subject to this Performance Award.
ARTICLE 8. LIMITATION OF LIABILITY.
Nothing in this Agreement shall be construed to (a) limit in any way the
right of the Company to terminate the employment or service of the Grantee at
any time, or (b) be evidence of any agreement or understanding, express or
implied, that the Company will retain the Grantee in any particular position at
any particular rate of compensation or for any particular period of time.
ARTICLE 9. WITHHOLDING TAXES.
The Company is entitled to (i) withhold and deduct from the portion of the
Performance Shares Earned and paid in cash under Section 3.3(b), or from future
wages of the Grantee, all legally required amounts necessary to satisfy any
federal, state or local withholding tax requirements attributable to the earned
Performance Awards or (ii) require the Grantee to promptly remit the amount of
such withholding to the Company. In the event that the Company is unable to
withhold such amounts, for whatever reason, the Grantee hereby agrees to pay to
the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal, state or local law.
ARTICLE 10. SUBJECT TO PLAN.
The Performance Awards granted pursuant to this Agreement have been granted
under and are subject to the terms of the Plan. Terms of the Plan are
incorporated by reference herein in their entirety; and the Grantee, by
execution hereof, acknowledges having received a copy of the Plan. The
provisions of this Agreement shall be interpreted as to be consistent with the
Plan, and any ambiguities herein shall be interpreted by reference to the Plan.
In the event that any provision hereof is inconsistent with the terms of the
Plan, the terms of the Plan shall prevail.
ARTICLE 10. MISCELLANEOUS.
10.1 BINDING EFFECT. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
10.2 GOVERNING LAW. This Agreement and all rights and obligations hereunder
shall be construed in accordance with the Plan and governed by the laws of the
State of Minnesota.
10.3 ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire
agreement and understanding of the parties hereto with respect to the grant and
5
<PAGE>
exercise of this Award and the administration of the Plan and supersede all
prior agreements, arrangements, plans and understandings relating to the grant
and vesting of this Award and the administration of the Plan.
10.4 AMENDMENT AND WAIVER. Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties hereto or, in the case of a waiver, by the
party waiving compliance.
The parties hereto have executed this Agreement effective the day and year
first above written.
JOSTENS, INC.
By
-------------------------------
Its VICE PRESIDENT
GRANTEE
----------------------------------
6
<PAGE>
SCHEDULE A
The Company's Earnings Per Share (EPS) shall be calculated based on the EPS from
continuing operations as reported in the Company's audited consolidated
financial statements for the fiscal year as adjusted to eliminate charges for
any extraordinary or unusual items separately identified and quantified in the
MD&A section of the annual report or the footnotes to the audited financial
statements. Actual EPS as reported will be adjusted to eliminate the impact of
the share repurchase program.
The Compensation Committee of the Company's Board of Directors, however,
reserves the right, in its sole discretion, adjust (but not accelerate or
increase) the payout due any grantee by considering the effect on EPS of such
extraordinary or unusual items or by considering the effect of discontinued
operations on EPS. Such determination with respect to any one grantee shall have
no effect on the EPS calculation with respect to other grantees.
7
<PAGE>
Exhibit 10.h.
April 1, 1997
BUSINESS RESTRICTED
PERSONAL AND CONFIDENTIAL
Mr. Jack Thornton
RE: Employment and Separation Agreement
Dear Jack:
This letter when signed by you will void and supersede any prior agreements
between you and Jostens, Inc. ("Jostens") relating to your employment and
possible separation from "Jostens" and it will confirm the mutual arrangements
we have made for your continued employment and your planned separation from
Jostens.
The terms of the Agreement are as follows
1. You will continue in your current employment capacity with Jostens through
June 30, 1997. During that period of time you will assist as requested by
me in the transition of Jostens Printing, Photo and Canadian business
responsibilities to those individuals I appoint as being responsible for
assuming those duties. For the period up through June 30, 1997 you will
continue to receive all the benefits and perquisites that you are currently
receiving on the same basis and terms. At all times during this active
employment period with Jostens you, of course, will support, follow and
implement the directions and strategies requested by me as the Chief
Executive Officer of Jostens.
2. You agree to terminate your active employment duties with Jostens as of
June 30, 1997 ("Discontinuance of Active Employment").
3. Effective as of your Discontinuance of Active Employment, the terms set out
below will govern the separation arrangement between you and Jostens.
a. You will receive a special performance bonus based on the first six
(6) months performance under the current calendar year profit plan for
the Printing & Publishing, Photography and Canadian businesses
("Operating Businesses"). If you achieve the total aggregate planned
EBIT
<PAGE>
contribution amounts for these three business units for the six month
period ending June 30, 1997, Jostens will pay you a special
performance bonus equal to two (2) months of your current base salary.
This bonus will be paid to you in August, 1997.
b. You also will be eligible to participate in the regular calendar year
1997 management bonus program. This program has three basic components
consisting of
i. Twenty percent (20%) based on the full calendar year corporate
net income amounts;
ii. Twenty percent (20%) based on the full calendar year personal key
business initiatives (KBIs); and
iii. Sixty percent (60%) based on your operating business EBIT
contribution for the full calendar year.
You will be eligible for a bonus under this program on the following
basis:
A. The 20% corporate net income component payable to you will be
based on 50% of the final calendar year end company results.
B. The 20% KBI performance component will be based on your personal
performance against these KBIs through June 30, 1997 and will be
equal to one-half of the annualized level.
C. The bonus payment component related to the Operating Businesses
will be prorated upon the percent of aggregate "EBIT
contribution" earned by the Operating Businesses through June 30,
1997 versus the total projected "EBIT contribution" earned by the
Operating Businesses for the full twelve (12) month period ending
December 31, 1997. The management bonuses referred to in this
section will be paid to you in February 1998.
c. You will be eligible to participate in the Jostens Performance Pays
Program for the period through June 30, 1997 on the same basis as
other senior vice presidents of Jostens.
d. Commencing as of July 1, 1997 you will receive the equivalent of
sixteen (16) months of your then current base salary payable over a
period of the next sixteen (16) months ("Salary Continuation Period").
e. Payment for four (4) weeks' of unused vacation will be paid to you in
a lump sum within thirty (30) days of the Discontinuance of Active
Employment. No vacation will be accrued during the Salary Continuation
Period.
f. All of your current employee benefits and executive perquisites will
continue in the same manner as that of a full-time, active senior
executive of Jostens through your Salary Continuation Period with the
exception of
<PAGE>
your short and long-term disability and travel insurance, which will
no longer be effective as of your Discontinuance of Active Employment.
Through your Salary Continuation Period, you will continue to receive
the following employee benefits and receive years of service credit as
if you were still a full-time active employee of Jostens: health and
dental coverage, life insurance, continued eligibility and
participation in the Jostens 401(k) Retirement Savings Plan, Jostens
Pension Plan "D" and supplemental pension program on the same terms
and conditions as apply to other executive officers of Jostens.
g. For purposes of Jostens providing life, health and dental coverages,
Jostens will consider your separation date from Jostens to be
effective as of the last day of your Salary Continuation Period and
your annual base salary to be the annual rate as of June 30, 1997. You
will be eligible for normal COBRA benefits after October 30, 1998. In
addition, pursuant to the terms of the Jostens 401(k) Retirement
Savings Plan, you will continue to receive Jostens company matching
contributions under the Plan for all contributions made through
October 31, 1998.
h. You will be able to continue participatin in the current executive
vehicle lease program with your existing vehicle through the last day
of your Salary Continuation Period on the same basis that you
currently receive it which includes, among other things, insurance
coverage and vehicle registration costs.
i. To assist you in obtaining possible alternative employment, Jostens
will reimburse you for up to $25,000 for employment assistance costs
and services which you actually incur prior to the end of the Salary
Continuation Period. This payment will be provided to you to cover
re-employment assistance, outplacement services, search firms,
employment agencies or firms, personal travel expenses and other costs
you may incur as part of your efforts to seek other employment.
j. You will be eligible to continue your financial planning, executive
medical reimbursement and executive physical benefits on the same
basis as they have been provided to you in the past through the
conclusion of your Salary Continuation Period.
k. As of the Discontinuance of Active Employment you will no longer be
considered an insider of Jostens for federal securities rules
reporting purposes. Please note that the same reporting requirements
you have been obligated to follow in the past will continue to apply
for a period of six (6) months after the Discontinuance of Active
Employment.
l. For purposes of vesting and the exercise of any stock option grants
and restricted shares that you have been awarded in Jostens stock, you
will be considered a full-time active employee of Jostens through the
last day
<PAGE>
of your Salary Continuation Period, which date for purposes of these
stock awards will be considered your effective termination date from
Jostens.
m. In consideration for what Jostens has agreed to provide you as
identified above, you agree:
i. That from the date of this Agreement through the Salary
Continuation Period, you will support and endorse the strategies,
directions and goals of Jostens.
ii. That you will not, during or subsequent to your employment with
Jostens, divulge, furnish, or make accessible to anyone any
confidential proprietary information of Jostens or any of its
subsidiary or affiliated companies.
iii. That, during the period up to and including October 31, 1999, you
will not solicit or entice current Jostens employees or sales
representatives to accept employment with you or any new employer
with whom you may become associated.
iv. Unless specifically approved in writing by the General Counsel of
Jostens, you will not on or before October 31, 1999 serve as a
director, officer, employee, consultant, partner, representative,
agent, advisor or independent contractor of any company or
establish your own business which is in direct or indirect
competition with any of Jostens' current or currently planned
business activities.
v. Should you breach any terms of this paragraph, Jostens will be
entitled, in addition to any other legal rights it may have, to
terminate any unpaid monies that may be due you under this
Agreement and shall have the right to recover that portion of any
payments made to you under the terms of this Agreement. In
addition, you will forfeit any shares of restricted stock which
have not fully vested. In the event of a breach by either party,
the prevailing party in any subsequent litigation or arbitration
shall be entitled to recover their reasonable attorney's fees.
vi. To return all company property not otherwise provided for herein,
including keys and credit cards on or before June 30, 1997.
4. Jostens, its officers, directors, agents, employees, and subsidiary
companies, on one hand, and you, on the other hand, agree to release and
forever discharge each other from and to waive all causes of action,
damages, liability and claims of whatever nature relating to or arising out
of your employment with Jostens and the cessation of that employment
including, but not limited to, claims under federal, state, or local
discrimination laws, and the Age Discrimination and Employment Act,
provided however, that nothing herein shall release or
<PAGE>
discharge Jostens or you from obligations under this Agreement or which
arise after the date you sign this Agreement. Also, nothing herein shall
limit or restrict your right to indemnification, which right shall continue
through the Salary Continuation Period on the same basis as it is offered
to all other executive offices.
5. At Jostens' request, you will continue to fully cooperate with Jostens in
any current and future claims or lawsuits involving Jostens where you have
knowledge of the underlying facts. In addition, you will not voluntarily
aid, assist, or cooperate with any claimants or plaintiffs or their
attorneys or agents in any claims or lawsuits commenced in the future
against Jostens; provided, however, that nothing in this Agreement will be
construed to prevent you from testifying at an administrative hearing, a
deposition or in court in response to a lawful subpoena in any litigation
or proceeding involving Jostens. Jostens further agrees to reimburse you
for any requested out-of-pocket expenses you incur in cooperation with the
rendering of any assistance to Jostens pursuant to this paragraph.
6. This Agreement shall be binding upon Jostens and any of its successors in
interest and shall inure to the benefit of your heirs or successors. This
Agreement contains the entire agreement and understanding of the parties
and no representations have been made or relied upon by either party other
than those that are expressly set forth herein. This Agreement may not be
altered, modified or amended unless done in writing and signed by you and
an officer of Jostens. In the event of your death, the salary continuation
payments provided for in paragraph 2 (a) and (b) herein shall inure to the
benefit of your heirs.
7. Jostens, upon specific request, will provide legally appropriate
references. Should you wish to have any additional information released by
Jostens, you should request such in writing and agree to hold Jostens
harmless for any such information transmitted on your behalf pursuant to
your request.
You acknowledge that you have been given up to twenty-one (21) days to consider
this Agreement and have been advised and have had the opportunity to consult
legal counsel of your own choosing concerning this Agreement and that you have
entered into it of your own free will and without compulsion.
You have the right to rescind that portion of this waiver and release which
deals with charges or claims brought pursuant to the Minnesota Human Rights Act
or the Age Discrimination and Employment Act within fifteen (15) days from the
date you sign this Agreement. To be effective, this rescission must be in
writing and hand delivered or mailed to Jostens, Inc. to the attention of
Orville E. Fisher, Jr. within the fifteen (15) day period. If mailed, the
recision must be post marked within the fifteen (15) day period, and be properly
addressed to Jostens, Inc., 5501 Norman Center Drive, Minneapolis, Minnesota
55437, Attention: Orville E. Fisher, Jr. and sent by certified return receipt
requested. Rescission of the release will result in cessation of all payments
and benefits provided by Jostens pursuant hereto.
<PAGE>
If this Agreement and the conditions contained herein are agreeable to you,
please sign and return this letter to me within twenty-one (21) days or as soon
as possible, thereby noting your knowing and voluntary agreement.
Sincerely,
/s/ Robert C. Buhrmaster
Robert C. Buhrmaster
President and CEO
AGREED AND APPROVED:
/S/ JACK THORNTON
- ----------------------------------
Jack Thornton
Dated: APRIL 18, 1997
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Exhibit 10.i.
December 19, 1997
BUSINESS RESTRICTED
PERSONAL AND CONFIDENTIAL
Orville E. Fisher
RE: Employment and Consulting Transition Agreement
Dear Chip:
This letter when signed by you will confirm the mutual arrangements we have made
for your continued employment and the planned transition to your formal
retirement from and consulting services to be provided to Jostens. The effective
date of this Agreement will be January 31, 1998.
The terms of the Agreement are as follows:
1. You will continue in an employment capacity with Jostens through
January 31, 1999 (hereinafter referred to as the "Employment Period").
During that period of time you will assist in the transition of all of
your current duties and responsibilities to those individuals
responsible for assuming those duties. At all times during this
Employment Period with Jostens you, of course, will support, follow
and implement all reasonable directions and strategies requested by me
as the Chief Executive Officer of Jostens. Specifically, the
employment services to be provided by you herein will be to manage the
following specific projects to completion or transition to another
assigned Jostens employee: _____________________.
2. You agree to resign as an officer of Jostens and any of its
subsidiaries and joint ventures and from the Board of Directors of any
of Jostens subsidiaries or joint ventures effective as of January 31,
1998.
3. During the Employment Period and in consideration of the mutual
undertakings herein, the following terms will govern the relationship
between you and Jostens.
a. You will receive a management bonus for CY1997 (if any is earned)
in accordance with the terms offered to you under the 1997 Annual
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Management Bonus Plan, with 100% credit given for the KBI portion
of that program. This bonus will be paid at the same time as
Bonus payments are paid to other Jostens Executives under this
plan.
b. You will be paid an annual base salary in semi-monthly payments
equal to Two Hundred Thirty Thousand Eight Hundred Six and no/100
Dollars ($230,806) per year during the Employment Period.
c. All of your current employee benefits and executive perquisites
will continue in the same manner as that of a full-time, active
senior executive of Jostens through the Employment Period.
Through the Employment Period you will also continue to receive
the additional following employee benefits and receive vesting
and years of service credit in these benefits as if you were at
all times a full-time active senior executive of Jostens: health
and dental coverage, life insurance, continued eligibility and
participation in the Performance Pays Plan, Jostens Pension Plan
"D" and supplemental pension programs on the same terms and
conditions as apply to other senior executive officers of
Jostens. In addition, you will continue to receive, through the
full Employment Period, vesting and years of service credit under
the Executive Supplemental Retirement Agreement you have with the
Company. January 31, 1999 will be deemed your retirement date
from Jostens. As of the date of your retirement you will be 100%
vested in said plan and will be given credit for 24 years of
service and your benefit thereunder will be based upon an annual
base salary of $230,806.
d. For purposes of Jostens providing you with life, health and
dental coverage, Jostens will consider your separation retirement
date from Jostens to be effective as of the last day of the
Employment Period and your annual base salary to be $230,806. You
will be eligible for normal COBRA benefits after January 31,
1999. In addition, pursuant to the terms of the Jostens 401(k)
Retirement Savings Plan, you will continue to be eligible to
receive vesting and Jostens company matching contributions under
the Plan for all contributions to be made relating to all the
years through the Employment Period.
e. Payment for five (5) weeks of unused vacation will be made to you
in a lump sum by February 28, 1998. No vacation will be accrued
during the remainder of the Employment Period.
f. Jostens will continue to provide you with the lease of the
company vehicle currently in your possession and continue to
reimburse you for gas,
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insurance and other costs of operating that vehicle or
alternatively, you will be provided a monthly vehicle allowance
on the same basis as other top level senior executives of
Jostens. At the end of the Employment Period you will have the
option of returning the vehicle, personally continuing to pay the
lease payments or purchase said vehicle under the terms set by
the lessor.
g. You will continue to have the possession and use of Jostens'
personal computer and be eligible for charitable gift matching.
You will also be eligible for full reimbursement of all club dues
and assessments, long distance and cellular phone charges and for
financial planning, executive medical reimbursement and executive
physical benefits programs.
h. You will not be eligible for any other management bonus plans or
future stock award grants.
i. As of January 31, 1998 you will no longer be considered an
insider of Jostens for federal securities rules reporting
purposes. Please note that the same reporting requirements you
have been obligated to follow in the past will continue to apply
for a period of six (6) months after January 31, 1998.
j. Your vesting and exercise rights for the stock option grants and
restricted shares that you have been awarded in Jostens stock,
will continue as if you were a full-time active employee of
Jostens through the last day of the Consulting Period. January
31, 2000, which is the last day of the Consulting Period, will
for the purposes of all stock awards granted to you, be
considered your fully qualified effective retirement date from
Jostens.
In addition, the 3,500 performance shares awarded to you by the
Compensation Committee on July 24, 1997 shall be amended to
eliminate the EPS targets required to earn these shares. These
3,500 performance shares shall be deemed to be earned based on
criteria similar to those approved by the Compensation Committee
of the Board of Directors for other senior executives of the
Company.
k. Jostens will consider separately engaging you, after June 30,
1998, on terms mutually acceptable to both parties, to assist
Jostens in any merger or acquisition transactions, if you are at
the time actively involved in such career activities.
l. Jostens shall not be obligated to provide you with any office or
clerical services, on its premises, beyond February 6, 1998.
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4. During the period February 1, 1999 through January 31, 2000 you shall
be an independent consultant to Jostens and will be paid the sum of
$230,806 in equal semi-monthly payments during this period of time
(hereinafter referred to as the "Consulting Period"). During the
Consulting Period you will provide consulting services as reasonably
requested by me and that we mutually agree upon. You will not be
eligible for any Jostens employment benefits or executive perquisites
during the Consulting Period.
5. In consideration for what Jostens has agreed to provide you as
identified above, you agree:
a. At all times during the Employment Period and Consulting Period,
you will be publicly portrayed as Retiring from Jostens.
b. It is understood that you will be free to begin your active,
public search for new career opportunities as of January 1, 1998
and that anytime after January 31, 1998 you may become fully
engaged in other career activities. You agree not to undertake
any business activities during the Employment Period that would
prevent you from adequately performing the services you have
undertaken herein.
c. That from the date of this Agreement through the Employment
Period and Consulting Period, you will publicly support and
positively endorse the strategies, directions and goals of
Jostens.
d. That you will not, during or subsequent to your employment with
Jostens, divulge, furnish, or make accessible to anyone any
confidential proprietary information of Jostens or any of its
subsidiary or affiliated companies.
e. That, during the period up to and including January 31, 2000 you
will not solicit or entice current Jostens employees or sales
representatives to accept employment with you or any new employer
with whom you may become associated.
f. Unless specifically approved in writing by the General Counsel of
Jostens, which approval will not be unreasonably withheld, you
will not on or before January 31, 2002 serve as a director,
officer or employee of any company or establish your own business
which is in direct or indirect competition with any of Jostens'
business activities. Any request by you for confirmation that an
activity is not competitive or request for consent shall be
responded to within thirty (30) days of such request. Should you
breach this paragraph, Jostens shall be entitled to terminate any
unpaid monies that may be due you under Section 3.b. and Section
4 of this Agreement and shall have the right to recover any
payments made to you
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under Section 3.b and Section 4 of this Agreement during such
breach. The only other competitor restrictions that will apply to
you are the provisions of Section 11 of the Executive
Supplemental Retirement Agreement, which shall apply only to
payments under that agreement.
g. Should you breach any terms of Section 5 and such breach remains
uncured after providing you with twenty (20) days prior written
notice of such breach, Jostens will be entitled, in addition to
any other legal rights it may have, to terminate any unpaid
monies that may be due you under this Agreement and shall have
the right to recover that portion of any payments made to you
under the terms of this Agreement. In addition, you will forfeit
any shares of restricted stock which have not fully bested.
h. To return all company property not otherwise provided for herein,
including keys and credit cards on or before June 30, 1998
6. Jostens, its officers, directors, agents, employees and subsidiary
companies, on one hand, and you, on the other hand, agree to release
and forever discharge each other from and to waive all causes of
action, damages, liability and claims of whatever nature relating to
or arising out of your employment with Jostens and the cessation of
that employment including, but not limited to, claims under federal,
state, or local discrimination laws, and the Age Discrimination and
Employment Act, provided, however, that nothing herein shall release
or discharge Jostens or you from obligations under this Agreement or
which arise after the date you sign this Agreement. Also, nothing
herein shall limit or restrict your right to indemnification, which
right shall continue on the same basis as it is offered to all other
executive officers of Jostens.
7. At Jostens' request, you will continue to fully cooperate with Jostens
in any current and future claims or lawsuits involving Jostens where
you have knowledge of the underlying facts. In addition, you will not
voluntarily aid, assist, or cooperate with any claimants or plaintiffs
or their attorneys or agents in any claims or lawsuits commenced in
the future against Jostens; provided, however, that nothing in this
Agreement will be construed to prevent you from testifying at an
administrative hearing, a deposition or in court in response to a
lawful subpoena in any litigation or proceeding involving Jostens.
Jostens further agrees to reimburse you for any reasonable out of
pocket expenses you incur in cooperation with the rendering of any
assistance to Jostens pursuant to this paragraph.
8. Jostens will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Jostens to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent Jostens would be required to perform if no such succession had
taken place.
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This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should
die while any benefits, perquisites or any amounts would still be
payable hereunder as if you had continued to live, all such benefits,
perquisites and amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your wife, or,
if there is no such wife, to your estate.
9. This Agreement contains the entire agreement and understanding of the
parties and no representations have been made or relied upon by either
party other than those that are expressly set forth herein. This
Agreement may not be altered, modified or amended unless done in
writing and signed by you and an officer of Jostens.
10. Jostens, upon specific request, will provide legally appropriate
references. Should you wish to have any additional information
released by Jostens, you should request such in writing and agree to
hold Jostens harmless for any such information transmitted on your
behalf pursuant to your request. We also understand that you may
contact individuals within Jostens for personal references outside of
our normal Human Resource procedure. In this situation, we expect your
requests to be in writing and such company employees will be providing
their own personal opinion and not those of Jostens. In these
situations, you agree not to make any claims and shall hold Jostens
harmless for any information provided from your personal requests.
11. In the event of a breach by either party, the prevailing party in any
subsequent litigation or arbitration shall be entitled to recover
their reasonable attorney's fees.
You acknowledge that you have been given up to twenty-one (21) days to
consider this Agreement and have been advised and have had the
opportunity to consult legal counsel of your own choosing concerning
this Agreement and that you have entered into it of your own free will
and without compulsion.
You have the right to rescind that portion of this waiver and release
which deals with charges or claims brought pursuant to the Minnesota
Human Rights Act or the Age Discrimination and Employment Act within
fifteen (15) days from the date you sign this Agreement. To be
effective, this rescission must be in writing and hand delivered or
mailed to Jostens, Inc. to the attention of Brian K. Beutner within a
fifteen (15) day period, and be properly addressed to: Jostens, Inc.,
5501 Norman Center Drive, Minneapolis, MN 55437, Attn: Brian K.
Beutner, and sent by certified mail - return receipt requested.
Rescission of the release will result in cessation of all payments and
benefits provided by Jostens pursuant hereto.
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If this Agreement and the conditions contained herein are agreeable to
you, please sign and return this letter to me within twenty-one (21)
days or as soon as possible, thereby noting your knowing and voluntary
agreement.
Regards,
/s/ Robert C. Buhrmaster
----------------------------------
Robert C. Buhrmaster
President and CEO
AGREED AND ACCEPTED THIS 13TH DAY OF JANUARY, 1998.
/s/ Orville E. Fisher, Jr.
----------------------------------
Orville E. Fisher, Jr.
<PAGE>
EXHIBT 10.J.
JOSTENS, INC.
DEFERRED COMPENSATION PLAN
1998 REVISION
As Amended Effective as of January 1, 1998
<PAGE>
JOSTENS, INC.
DEFERRED COMPENSATION PLAN
1998 REVISION
TABLE OF CONTENTS
PAGE
ARTICLE 1. DESCRIPTION ................................................... 1
1.1. Plan Name ..................................................... 1
1.2. Plan Purposes ................................................. 1
1.3. Plan Type ..................................................... 1
1.4. Plan Background ............................................... 1
ARTICLE 2. PARTICIPATION ................................................. 2
2.1. Eligibility ................................................... 2
2.2. Transfer Among Participating Employers ........................ 2
2.3. Multiple Employment ........................................... 2
2.4. Ceasing to be Eligible ........................................ 3
2.5. Condition of Participation .................................... 3
2.6. Termination of Participation .................................. 3
ARTICLE 3. BENEFITS ...................................................... 4
3.1. Participant Accounts .......................................... 4
3.2. Deferral Credits .............................................. 4
3.3. Earnings Credits .............................................. 7
3.4. Vesting ....................................................... 8
3.5. Current Election by Qualified Director ........................ 8
ARTICLE 4. DISTRIBUTION .................................................. 10
4.1. Distribution to Participant ................................... 10
4.2. Distribution to Beneficiary ................................... 13
4.3. Limitations on Share Distributions ............................ 14
4.4. Payment in Event of Incapacity ................................ 14
ARTICLE 5. SOURCE OF PAYMENTS: NATURE OF INTEREST ....................... 15
5.1. Establishment of Trust ........................................ 15
5.2. Source of Payments ............................................ 15
5.3. Status of Plan ................................................ 15
5.4. Non-assignability of Benefits ................................. 16
ARTICLE 6. ADOPTION, AMENDMENT, TERMINATION .............................. 17
i
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6.1. Adoption ...................................................... 17
6.2. Amendment ..................................................... 17
6.3. Termination of Participation .................................. 17
6.4. Termination ................................................... 18
ARTICLE 7. DEFINITIONS, CONSTRUCTION AND INTERPRETATION .................. 19
7.1. Account ....................................................... 19
7.2. Active Participant ............................................ 19
7.3. Administrator ................................................. 19
7.4. Affiliated Organization ....................................... 19
7.5. Annual Bonus .................................................. 19
7.6. Base Compensation ............................................. 19
7.7. Board ......................................................... 20
7.8. Beneficiary ................................................... 20
7.9. Cash Account .................................................. 20
7.10. Change of Control ............................................ 20
7.11. Code ......................................................... 21
7.12. Company ...................................................... 21
7.13. Cross Reference .............................................. 21
7.14. Effective Date ............................................... 21
7.15. ERISA ........................................................ 21
7.16. Exchange Act ................................................. 21
7.17. Governing Law ................................................ 22
7.18. Headings ..................................................... 22
7.19. Long- Term Incentive Payout .................................. 22
7.20. Market Price ................................................. 22
7.21. Merger Date .................................................. 22
7.22. Number and Gender ............................................ 22
7.23. Participant .................................................. 22
7.24. Participating Employer ....................................... 22
7.25. Plan ......................................................... 23
7.26. Plan Year .................................................... 23
7.27. Plan Rules ................................................... 23
7.28. Qualified Director ........................................... 23
7.29. Qualified Employee ........................................... 23
7.30. Restricted Stock Unit Subaccount ............................. 23
7.31. Shares ....................................................... 23
7.32. Share Account ................................................ 23
7.33. Termination of Employment .................................... 24
7.34. Trust ........................................................ 24
7.35. Trustee ...................................................... 24
7.36. Unforeseeable Emergency ...................................... 24
ARTICLE 8. ADMINISTRATION ................................................ 25
8.1. Administrator ................................................. 25
8.2. Plan Rules and Regulations .................................... 25
8.3. Administrator's Discretion .................................... 25
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8.4. Specialist's Assistance ....................................... 25
8.5. Indemnification ............................................... 25
8.6. Benefit Claim Procedure ....................................... 25
8.7. Disputes ...................................................... 26
ARTICLE 9. MISCELLANEOUS ................................................. 28
9.1. Withholding and Offsets ....................................... 28
9.2. Other Benefits ................................................ 28
9.3. No Warranties Regarding Tax Treatment ......................... 28
9.4. No Rights to Continued Service Created ........................ 28
9.5. Successors .................................................... 28
iii
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JOSTENS, INC.
DEFERRED COMPENSATION PLAN
1998 REVISION
ARTICLE
1.
DESCRIPTION
1.1. PLAN NAME.
The name of the Plan is the "Jostens, Inc. Deferred Compensation Plan."
1.2. PLAN PURPOSES.
The purposes of the Plan are (a) to provide Active Participants with the
opportunity to defer receipt of a portion of the Base Compensation and, in the
case of Active Participants who are Qualified Employees, the Annual Bonus and
Long-Term Incentive Payout, that would otherwise be payable to them, (b) to
permit Active Participants who are Qualified Directors to elect to receive
current Base Compensation in the form of Shares and (c) to provide for the
annual grant to Participants who are Qualified Directors of restricted stock
units through credits to their Share Accounts pursuant to the Plan.
1.3. PLAN TYPE.
The Plan is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for Qualified Directors and a select group of
management or highly compensated employees. It is intended that, with respect to
participation by Qualified Directors, ERISA will not apply to the Plan and that,
with respect to participation by Qualified Employees, the Plan is exempt from
the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA by
operation of sections 201(2), 301(a)(3) and 401(a)(4) thereof, respectively, and
from the provisions of Title IV of ERISA, to the extent otherwise applicable, by
operation of section 4021(b)(6) thereof. The Plan is also intended to be
unfunded for tax purposes. The Plan will be construed and administered in a
manner that is consistent with and gives effect to the foregoing.
1.4. PLAN BACKGROUND.
(a) The Company adopted the Jostens, Inc. Directors' Deferred
Compensation Plan effective as of January 1, 1995. The Company adopted
the Jostens, Inc. Officers' Deferred Compensation Plan effective as of
January 1, 1996
(b) Effective as of the Merger Date, the Jostens, Inc. Directors'
Deferred Compensation Plan and the Jostens, Inc. Officers' Deferred
Compensation Plan were restated in the manner set forth in the
instrument entitled "Jostens, Inc. Deferred Compensation Plan" to
reflect the merger of the plans.
(c) Effective as of January 1, 1998, the Plan was restated in the
manner set forth in the 1998 Revision.
<PAGE>
ARTICLE
2.
PARTICIPATION
2.1. ELIGIBILITY.
(a) Each individual who is a Qualified Employee on the first day of a
Plan Year is eligible to make deferral elections pursuant to Sections
3.2(a), 3.2(b) and 3.2(c) with respect to the Plan Year. Each
individual who is a Qualified Director on the first day of a Plan Year
is eligible to make deferral elections pursuant to Section 3.2(a) with
respect to the Plan Year. Each individual who is a Qualified Director
on the date as of which a credit is made pursuant to Section 3.2(g) is
eligible to have such credit made to his or her Account.
(b) At any time during a Plan Year, the Administrator may determine
that an individual who became a Qualified Employee or Qualified
Director after the first day of the Plan Year is eligible to make a
deferral election pursuant to Section 3.2(a), but not Section 3.2(b)
or Section 3.2(c), with respect to the remainder of the Plan Year.
(c) A Participant who, pursuant to Section 3.2(b)(iii) or Section
3.2(c)(iii), has revoked a deferral election in connection with an
Unforeseeable Emergency or, pursuant to Section 4.1(d)(iii), has
received a distribution due to an Unforeseeable Emergency, is not
eligible to elect additional deferrals (of Base Salary, Annual Bonus
or Long-Term Incentive Payout) with respect to the remainder of the
Plan Year during which the revocation occurs or distribution is
received and the immediately following Plan Year.
(d) In conjunction with his or her initial election to participate in
the Plan, a Participant must elect, in accordance with Section 4.1(a),
whether his or her Account, other than his or her Restricted Stock
Unit Subaccount, will be distributed following his or her termination
of employment in the form of a lump sum payment or installment
payments. Such election is irrevocable and applies to all benefits
distributed to the Participant pursuant to the Plan except for
benefits attributable to his or her Restricted Stock Unit Subaccount.
2.2. TRANSFER AMONG PARTICIPATING EMPLOYERS.
A Qualified Employee Active Participant who transfers employment from one
Participating Employer to another Participating Employer and who continues to be
a Qualified Employee after the transfer will, for the duration of the Plan Year
during which the transfer occurs, continue to participate in the Plan, in
accordance with the election in effect for the portion of the Plan Year before
the transfer, as a Qualified Employee of such other Participating Employer.
2.3. MULTIPLE EMPLOYMENT.
A Qualified Employee Active Participant who is simultaneously employed as a
Qualified Employee with more than one Participating Employer will participate in
the Plan as a Qualified Employee of all such Participating Employers on the
basis of a single deferral election pursuant to Section 3.2 applied separately
to his or her Base Compensation, Annual Bonus and Long-Term Incentive Payout
from each such Participating Employer.
2
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2.4. CEASING TO BE ELIGIBLE.
An Active Participant who, during a Plan Year, is determined by the
Administrator to have ceased to be a Qualified Employee or Qualified Director is
not eligible for further deferral credits for the Plan Year pursuant to Section
3.2 other than such credits relating to Base Compensation with respect to the
period prior to such cessation.
2.5. CONDITION OF PARTICIPATION.
Each Qualified Employee and Qualified Director, as a condition of
participation in the Plan, is bound by all the terms and conditions of the Plan
and the Plan Rules, including, but not limited to, the reserved right of the
Company to amend or terminate the Plan and the provisions of Section 8.7, and
must furnish to the Administrator such pertinent information, and must execute
such election forms and other instruments, as the Administrator or Plan Rules
may require by such dates as the Administrator or Plan Rules may establish.
2.6. TERMINATION OF PARTICIPATION.
A Participant will cease to be such as of the date on which he or she is
not then eligible to make deferrals and his or her entire Account balance has
been distributed.
3
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ARTICLE
3.
BENEFITS
3.1. PARTICIPANT ACCOUNTS.
For each Participant, the Administrator will establish and maintain a Cash
Account, a Share Account or both to evidence amounts credited with respect to
the Participant pursuant to Sections 3.2 and 3.3 or credited to the
corresponding account under the Jostens, Inc. Directors' Deferred Compensation
Plan immediately prior to the Merger Date. Amounts credited to a Qualified
Director Participant's Share Account pursuant to Section 3.2(g) will be credited
to a separate subaccount within such Account called the Restricted Stock Unit
Subaccount. If a Qualified Employee Participant makes deferrals with respect to
Base Compensation, Annual Bonus or Long-Term Incentive Payout from more than one
Participating Employer, deferrals attributable to each such Participating
Employer will be credited to separate subaccounts within the appropriate
Account.
3.2. DEFERRAL CREDITS.
(a) Base Compensation deferrals will be made in accordance with the following
rules:
(i) An Active Participant may elect to defer a portion of his or her
Base Compensation for a Plan Year from a minimum percentage or dollar
amount to a maximum percentage or dollar amount, as specified in Plan
Rules. Any percentage so elected will automatically apply to the
Participant's Base Compensation as adjusted from time to time.
(ii) An election made pursuant to this subsection will not be
effective unless it is made on a properly completed election form
received by the Administrator by a date specified by the Administrator
which is prior to the first day of the Plan Year to which the election
relates or, in the case of an Active Participant who is determined by
the Administrator to be eligible to participate for a Plan Year
pursuant to Section 2.1(b), within 30 days after the Administrator's
determination.
(iii) One time during a Plan Year, a Participant may elect to increase
or decrease the rate or amount of deferrals made pursuant to this
subsection for the remainder of the Plan Year. In the case of an
Active Participant who is a Qualified Employee, the modification will
be effective as of the first day of the first payroll period that
follows by at least 30 days (or such shorter period as Plan Rules may
allow) the Administrator's receipt of a properly completed form. In
the case of an Active Participant who is a Qualified Director, the
modification will be effective with respect to any payment of Base
Compensation that (a) follows by at least 30 days (or such shorter
period as Plan Rules may allow) the Administrator's receipt of a
properly completed form and (b) relates to services as a Qualified
Director after the date on which the Administrator receives such
notice.
(iv) In addition to the modification permitted pursuant to clause (3),
an Active Participant may revoke a deferral election made pursuant to
this subsection at any time. In the case of an Active Participant who
is a Qualified Employee, the revocation will be effective as of the
first day of the first payroll period that
4
<PAGE>
follows by at least 30 days (or such shorter period as Plan Rules may
allow) the Administrator's receipt of a properly complete form. In the
case of an Active Participant who is a Qualified Director, the
revocation will be effective with respect to any payment of Base
Compensation that (a) follows by at least 30 days (or such shorter
period as Plan Rules may allow) the Administrator's receipt of a
properly completed form and (b) relates to services as a Qualified
Director after the date on which the Administrator receives such
notice. Upon making a revocation, the Active Participant will be
unable to make further deferrals of Base Compensation until the first
following Plan Year in which he or she is again determined by the
Administrator to be eligible to make deferrals.
(v) Any election, modification or revocation pursuant to this
subsection applies only to Base Compensation relating to services
performed after the effective date of the election, modification or
revocation.
(b) Annual Bonus deferrals by an Active Participant who is a Qualified Employee
will be made in accordance with the following rules:
(i) An Active Participant who is determined by the Administrator to be
eligible to participate for a Plan Year pursuant to Section 2.1(a) may
elect to defer a portion of his or her Annual Bonus for the Plan Year
from a minimum percentage or dollar amount to a maximum percentage or
dollar amount, as specified in Plan Rules.
(ii) An election made by a Participant pursuant to this subsection
will not be effective unless it is made on a properly completed
election form received by the Administrator by a date specified in
Plan Rules but not later than the last day of the Plan Year
immediately preceding the Plan Year in which the Annual Bonus is
earned.
(iii) An election pursuant to this Subsection (b) relating to the
deferral of an Annual Bonus is irrevocable after the latest date by
which it must be received by the Administrator to be effective;
provided, first, that an Active Participant may revoke a deferral
election made pursuant to this subsection in connection with an
Unforeseeable Emergency in which case no further deferrals (of Base
Compensation, Annual Bonus or Long-Term Incentive Payout) will be made
with respect to the Participant for the remainder of the Plan Year in
which the revocation is made and the next following Plan Year; or,
second, that if a Participant terminates employment with all
Affiliated Organizations or otherwise ceases to be a Qualified
Employee before the date as of which an Annual Bonus deferral is
credited to his or her Account, other than in connection with a
divestiture contemplated by Section 4.1(d)(ii) in which the
Participant is covered in a successor plan, the deferral election with
respect to such Annual Bonus will automatically be revoked as of the
date of the Participant's termination of employment or on which he or
she ceases to be a Qualified Employee, as the case may be.
(c) Long-Term Incentive Payout deferrals by an Active Participant who is a
Qualified Employee will be made in accordance with the following rules:
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(i) An Active Participant who is determined by the Administrator to be
eligible to participate for a Plan Year pursuant to Section 2.1(a) may
elect to defer a portion of his or her Long-Term Incentive Payout for
the Plan Year from a minimum percentage or dollar amount to a maximum
percentage or dollar amount, as specified in Plan Rules.
(ii) An election made by a Participant pursuant to this subsection
will not be effective unless it is made on a properly completed
election form received by the Administrator by a date specified in
Plan Rules but not later than the first day of the Plan Year
immediately preceding the Plan Year in which the Long-Term Incentive
Payout would have been paid to the Participant but for his or her
election.
(iii) An election pursuant to this Subsection (c) relating to the
deferral of a Long-Term Incentive Payout is irrevocable after the
latest date by which it must be received by the Administrator to be
effective; provided, first, that an Active Participant may revoke a
deferral election made pursuant to this subsection in connection with
an Unforeseeable Emergency in which case no further deferrals (of Base
Compensation, Annual Bonus or Long-Term Incentive Payout) will be made
with respect to the Participant for the remainder of the Plan Year in
which the revocation is made and the next following Plan Year; and,
second, that if a Participant terminates employment with all
Affiliated Organizations or otherwise ceases to be a Qualified
Employee before the date as of which a Long-Term Incentive Payout
deferral is credited to his or her Account, other than in connection
with a divestiture contemplated by Section 4.1(d)(ii) in which the
Participant is covered in a successor plan, the deferral election with
respect to such Long-Term Incentive Payout will automatically be
revoked as of the date of the Participant's termination of employment
or on which he or she ceases to be a Qualified Employee, as the case
may be.
(d) In conjunction with each deferral election made pursuant to Subsection (a)
and each deferral election made pursuant to Subsection (b) (or an election
made pursuant to the Jostens, Inc. Directors' Deferred Compensation Plan or
Jostens, Inc. Officers' Deferred Compensation Plan prior to the Merger Date
and in effect immediately prior to the Merger Date), an Active Participant
must elect, in accordance with and subject to Plan Rules, how the deferral
is to be allocated among his or her Cash Account and Share Account. Except
as provided in Section 3.3(c), such an election is irrevocable after the
latest date by which the deferral election to which it relates must be
received by the Administrator to be effective.
(e) Any deferral pursuant to Subsection (c) will be allocated between a
Participant's Cash Account and Share Account in the same proportion as the
Long-Term Incentive Payout is paid in cash and Shares, respectively, as
specified in the award agreement.
(f) Deferrals of an Active Participant's Base Compensation, Annual Bonus and
Long-Term Incentive Payout pursuant to this section will be credited to his
or her Cash Account or Share Account, as the case may be, as of the first
day of the month first following the date on which the Participant would
have otherwise received the Base Compensation, Annual Bonus or Long-Term
Incentive Payout but for his or her deferral election pursuant to this
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section. Such credits to a Participant's Cash Account will be in United
States dollars in an amount equal to the amount of the deferral allocated
to the Cash Account by the Participant. Such credits to a Participant's
Share Account will be the number of full and fractional shares determined
by dividing the United States dollar amount of the deferral allocated by
the Participant to the Share Account by the Market Price on the date as of
which the credit is made. If an Active Participant's Base Compensation,
Annual Bonus or Long-Term Incentive Payout would otherwise be paid in a
currency other than United States dollars, the Administrator will convert
from such other currency into United States dollars in accordance with Plan
Rules.
(g) As of the first day of the calendar quarter first following the date of the
Company's annual shareholders meeting, the Restricted Stock Unit Subaccount
of each Participant who is then a Qualified Director will be credited with
the number of full and fractional shares determined by dividing an amount
equal to 50 percent of the retainer payable by the Company to Qualified
Directors at the annual rate then in effect by the Market Price on the date
as of which the credit is made.
(h) In conjunction with the termination of the Company's Non-Employee Directors
Retirement Program effective immediately after the end of the Company's
annual meeting on October 24, 1996, the Account of each individual listed
on Exhibit A to the Plan will be credited with the amount set forth with
respect to the individual on Exhibit A representing the entire value of his
or her interest under the Non-Employee Directors Retirement Program. The
credit will be made as of January 2, 1997, and will be allocated between
the individual's Share Account and his or her Cash Account in accordance
with a separate written election made by the individual pursuant to Plan
Rules; provided, that if the individual fails to make such a separate
written election, the credit will be allocated between the individual's
Share Account and his or her Cash Account in accordance with his or her
most recent election pursuant to Section 3.2(d) or, in the absence of such
an election, to the individual's Cash Account. If an individual listed on
Exhibit A has not, prior to October 24, 1996, otherwise made an election
pursuant to Section 2.1(d) regarding the form of his or her distribution in
connection with his or her initial election to participate in the Plan, the
individual must, not later than December 3,1 1996, make such election on a
form provided by the Administrator; provided that if such an individual who
has not otherwise made an election pursuant to Section 2.1(d) has ceased to
be a member of the Company's board of directors on or before October 24,
1996, his or her Account will be distributed in the form of quarterly
installment payments for a period of four years commencing in accordance
with Section 4.1(b) and with the amount of each installment payment
determined in accordance with the applicable provisions of Section 4.1(c).
3.3. EARNINGS CREDITS.
(a) CASH ACCOUNT. As of the last day of each calendar month, a
Participant's Cash Account will be credited with earnings for the
month at a rate equal to the monthly equivalent of one percent plus
the annual rate shown for United States Treasury Notes with an
original maturity of not less than seven years and with a remaining
maturity closest to seven years in the "representative mid-afternoon
over-the-counter quotations supplied by the Federal Reserve Bank of
New York City, based on transactions of $1 million or more," as
reported in THE WALL STREET JOURNAL. The rate to be paid during each
calendar month will be fixed for the month as of the first business
day of the month.
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(b) SHARE ACCOUNT.
(i) As of the first day of the calendar quarter first following the
date on which dividends are paid on Shares, a Participant's Share
Account will be credited with that number of full and fractional
Shares determined by dividing the dollar amount of the dividends
that would have been payable to the Participant if the number of
Shares credited to the Share Account on the record date for such
dividend payment had then been registered in his or her name by
the Market Price on the date as of which the credit is made.
(ii) In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation,
rights offering or any other change in the Company's corporate
structure or Shares, the Administrator will make such adjustment,
if any, as the Administrator may deem appropriate in the number
and kinds of Shares credited to Share Accounts.
(c) ALLOCATION CHANGES.
(i) Subject to Section 3.3(c)(ii), one time during a Plan Year an
Active Participant who would otherwise have deferrals credited to
his or her Share Account during the Plan Year (attributable to
either deferrals of Base Compensation for the Plan Year pursuant
to Section 3.2(a) or a deferral of an Annual Bonus for the prior
Plan Year pursuant to Section 3.2(b) which has not yet been
credited to his or her Share Account pursuant to Section 3.3(b))
may elect to have all such deferrals instead credited to his or
her Cash Account. Such election will be effective for deferrals
credited during such Plan Year pursuant to Section 3.2 as of a
date that follows by at least 30 days (or such shorter period as
Plan Rules may allow) the Administrator's receipt of a properly
completed form.
(ii) Section 3.3(c)(i) does not apply to amounts credited to a
Participant's Share Account pursuant to Section 3.2(c) or a
Participant's Restricted Stock Unit Subaccount pursuant to
Section 3.2(g).
3.4. VESTING.
Each Participant always has a fully vested nonforfeitable interest in his
or her Account.
3.5. CURRENT ELECTION BY QUALIFIED DIRECTOR.
(a) An Active Participant who is a Qualified Director may elect to receive
any portion of his or her Base Compensation for a Plan Year that is
not subject to a deferral election pursuant to Section 3.2(a) in the
form of Shares. The election must be made in accordance with an is
subject to Plan Rules.
(b) An election made pursuant to this section will not be effective unless
it is made on a properly completed form received by the Administrator
by a date specified by the Administrator which is prior to the first
day of the Plan Year to which the election relates.
(c) An Active Participant may revoke an election made pursuant to this
section at any time. The revocation will be effective with respect to
any payment of Base Compensation that
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follows by at least 30 days (or such shorter period as Plan Rules may
allow) the Administrator's receipt of a properly completed form.
(d) If an Active Participant has elected to receive Base Compensation in
the form of Shares, Base Compensation covered by the election will be
deposited into an account established on behalf of the Active
Participant in the Company's dividend reinvestment plan. The deposit
will be made on or as soon as administratively practicable after the
first day of the calendar quarter following the calendar quarter
during which the Base Compensation would have been paid in cash but
for the Active Participant's election pursuant to this section.
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ARTICLE
4.
DISTRIBUTION
4.1. DISTRIBUTION TO PARTICIPANT.
(a) FORM.
(i) CASH ACCOUNT. A Participant's Cash Account will be distributed to
the Participant in the form of a lump sum payment or quarterly
installment payments for a period not to exceed ten years, as
elected by the Participant in conjunction with his or her initial
election to participate in the Plan. Any distribution from a
Participant's Cash Account will be made in cash.
(ii) SHARE ACCOUNT. A Participant's Restricted Stock Unit Subaccount
will be distributed to the Participant in the form of a lump sum
payment. The remainder of a Participant's Share Account will be
distributed to the Participant in the form of a lump sum payment
or annual installment payments for a period not to exceed ten
years, as elected by the Participant in conjunction with his or
her initial election to participate in the Plan. Subject to
Section 4.3, any distribution from a Participant's Share Account
will be made in full Shares and cash in lieu of any fractional
Share.
(b) TIME. Distribution to a Participant will be made or commence on or as
soon as administratively practicable after the first day of the
calendar quarter that follows by six months the date on which the
Participant terminates employment or ceases to be a member of the
Company's board of directors.
(c) AMOUNT.
(i) CASH ACCOUNT.
1. LUMP SUM. The amount of a lump sum payment from a
Participant's Cash Account will be equal to the balance of
the Account as of the first day of the calendar month
coinciding with or immediately preceding the date on which
the payment is made.
2. INSTALLMENTS. The amount of an installment payment from a
Participant's Cash Account will be determined by dividing
the balance of the Account as of the first day of the
calendar month coinciding with or immediately preceding the
date on which the payment is made by the total number of
remaining payments (including the current payment).
(ii) SHARE ACCOUNT.
1. LUMP SUM. A lump sum distribution from a Participant's Share
Account will consist of the number of full Shares credited
to the Account as of the first day of the calendar month
coinciding with or immediately preceding the date on which
the distribution is made plus cash in lieu of any
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fractional share then credited to the Account in an amount
based on the Market Price on that date.
2. INSTALLMENTS. Installment distributions from a Participant's
Share Account, other than the final distribution, will
consist of the number of Shares determined by dividing the
number of full and fractional Shares credited to the Account
as of the first day of the calendar month coinciding with or
immediately preceding the date on which the distribution is
made by the total number of remaining payments (including
the current payment) and rounding the quotient to the next
higher full share. The amount of the final payment will be
determined in accordance with clause 1.
(d) SPECIAL RULES. The provisions of this subsection apply notwithstanding
Subsection (a), (b) or (c) or any election by a Participant to the
contrary.
(i) NONDEDUCTIBILITY. If the Administrator determines in good faith
that there is a reasonable likelihood that any compensation paid
to a Participant by an Affiliated Organization for a taxable year
of the Affiliated Organization would not be deductible by the
Affiliated Organization solely by reason of the limitation under
Code section 162(m), to the extent deemed necessary by the
Administrator to ensure that the entire amount of any
distribution to the Participant is deductible, the Administrator
may defer all or any portion of the distribution. Any amounts
deferred pursuant to this subsection will continue to be credited
with earnings in accordance with Section 3.3. The deferred
amounts and earnings thereon will be distributed to the
Participant, or to his or her Beneficiary in the case of the
Participant's death, at the earliest possible date, as determined
by the Administrator in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable
year of the Affiliated Organization during which the distribution
is made will not be limited by Code section 162(m).
(ii) DIVESTITURES.
1. If some or all of the assets of a Participating Employer are
sold or otherwise disposed of to an unrelated third party,
other than in connection with a Change of Control, the
Administrator may, but is not required to, cause to be
distributed the Account of any Qualified Employee
Participant whose employment with all Affiliated
Organizations is terminated in connection with the sale or
disposition unless the acquirer adopts a successor plan
which is substantially similar to the Plan in all material
respects and expressly assumes the Participating Employer's
obligation to provide benefits to the Participant, in which
case the Participating Employer will cease to have any
obligation to provide benefits to the Participant pursuant
to the Plan as of the effective date of the assumption. Any
such distribution will be made in the form of a lump sum
payment as soon as administratively practicable after the
date of the sale or disposition. Any distribution from a
Participant's Cash Account will be made in cash and, subject
to Section 4.3, any distribution from a
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Participant's Share Account will be made in full Shares and
cash in lieu of any fractional Share. The amount of the
payment will be determined in accordance with Subsection
(c).
2. If a Participating Employer ceases to be an Affiliated
Organization, unless otherwise provided in an agreement
between an Affiliated Organization and the Participating
Employer or an Affiliated Organization and an unrelated
third-party acquirer:
(A) a Participant who is employed with the Participating
Employer or
(B) a Participant who is not employed with the Participating
Employer but has an Account balance attributable to service
with the Participating Employer as a Qualified Employee
will not become entitled to his or her Account balance
attributable to service with the Participating Employer as a
Qualified Employee solely as a result of the cessation and
the Participating Employer will, after the date on which it
ceases to be an Affiliated Organization, continue to be
solely responsible to provide benefits to the Participant at
least equal to the balance of the Account as of the
effective date of the cessation and as thereafter increased
by deferral credits relating to the period before the
effective date and earnings credits pursuant to Section 3.3.
(iii) WITHDRAWALS DUE TO UNFORESEEABLE EMERGENCY. A distribution will
be made to a Participant from his or her Cash Account if the
Participant submits a written distribution request to the
Administrator and the Administrator determines that the
Participant has experienced an Unforeseeable Emergency. The
amount of the distribution may not exceed the lesser of (a) the
amount necessary to satisfy the emergency, as determined by the
Administrator or (b) the balance of the Cash Account as of the
date of the distribution determined in accordance with Subsection
(c). The distribution will be made in the form of a lump sum cash
payment as soon as administratively practicable after the
Administrator's determination that the Participant has
experienced an Unforeseeable Emergency.
(iv) CHANGE OF CONTROL. Upon the occurrence of a Change of Control--
1. A Participant's Cash Account will be distributed to the
Participant in a lump sum cash payment on the effective date
of the Change of Control. The amount of the payment will be
determined in accordance with Subsection (c).
2. A Participant's Share Account will be distributed to the
Participant in a lump sum cash payment in lieu of Shares on
the effective date of the Change of Control. The amount of
the payment will be equal to the number of full and
fractional Shares then credited to the Participant's Share
Account multiplied by the greater of (i) the highest price
per Share paid for the purchase of Shares in connection with
the Change of Control
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or (ii) the highest Market Price paid during the 30-day
period immediately preceding the Change of Control.
(e) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from which a
distribution is made will be reduced by the amount of the distribution
as of the date of the distribution.
4.2. DISTRIBUTION TO BENEFICIARY.
(a) FORM. In the event of a Participant's death, the balance of the
Participant's Account will be distributed to the Participant's
Beneficiary in a lump sum payment whether or not payments had
commenced to the Participant in the form of installments prior to his
or her death. Any distribution from a Participant's Cash Account will
be made in cash and any distribution from a Participant's Share
Account will be made in full Shares and cash in lieu of any fractional
Share.
(b) TIME. Distribution to a Beneficiary will be made as soon as
administratively practicable after the date on which the Administrator
receives notice of the Participant's death.
(c) AMOUNT. The amount of the payment will be determined in accordance
with Section 4.1(c).
(d) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from which a
distribution is made will be reduced by the amount of the distribution
as of the date of the distribution.
(e) BENEFICIARY DESIGNATION.
(i) Each Participant may designate, on a form furnished by the
Administrator, one or more primary Beneficiaries or alternative
Beneficiaries to receive all or a specified part of his or her
Account after his or her death, and the Participant may change or
revoke any such designation from time to time. No such
designation, change or revocation is effective unless executed by
the Participant and received by the Administrator during the
Participant's lifetime. No designation of a Beneficiary other
than the Participant's spouse is effective unless the spouse
consents to the designation or the Administrator determines that
spousal consent cannot be obtained because the spouse cannot
reasonably be located or is legally incapable of consenting. The
consent must be in writing, must acknowledge the effect of the
election and must be witnessed by a notary public. The consent is
effective only with respect to the Beneficiary or class of
Beneficiaries so designated and only with respect to the spouse
who so consented.
(ii) If a Participant--
1. fails to designate a Beneficiary, or
2. revokes a Beneficiary designation without naming another
Beneficiary, or
3. designates one or more Beneficiaries, none of whom survives
the Participant or exists at the time in question,
13
<PAGE>
for all or any portion of his or her Account, such Account or
portion will be paid to the Participant's surviving spouse or, if
the Participant is not survived by a spouse, to the
representative of the Participant's estate.
(iii) The automatic Beneficiaries specified above and, unless the
designation otherwise specifies, the Beneficiaries designated by
the Participant, become fixed as of the Participant's death so
that, if a Beneficiary survives the Participant but dies before
the receipt of the payment due such Beneficiary, the payment will
be made to the representative of such Beneficiary's estate. Any
designation of a Beneficiary by name that is accompanied by a
description of relationship or only by statement of relationship
to the Participant is effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death.
4.3. LIMITATIONS ON SHARE DISTRIBUTIONS.
Notwithstanding any other provision of the Plan to the contrary, neither a
Participating Employer nor the Trustee is required to issue or distribute any
Shares under this Plan, and a distributee may not sell, assign, transfer or
otherwise dispose of Shares issued or distributed pursuant to the Plan, unless
(a) there is in effect with respect to such Shares a registration statement
under the Securities Act of 1933 and any applicable state securities laws or an
exemption from such registration under the Securities Act of 1933 and applicable
state securities laws and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Company deems
necessary or advisable. A Participating Employer or the Trustee may condition
such issuance, distribution, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing Shares, as may be deemed necessary or
advisable by the Company in order to comply with such securities laws or other
restrictions.
4.4. PAYMENT IN EVENT OF INCAPACITY.
If any individual entitled to receive any payment under the Plan is, in the
judgment of the Administrator, physically, mentally or legally incapable of
receiving or acknowledging receipt of the payment, and no legal representative
has been appointed for the individual, the Administrator may (but is not
required to) cause the payment to be made to any one or more of the following as
may be chosen by the Administrator: the Beneficiary (in the case of the
incapacity of a Participant); the institution maintaining the individual; a
custodian for the individual under the Uniform Transfers to Minors Act of any
state; or the individual's spouse, children, parents, or other relatives by
blood or marriage. The Administrator is not required to see to the proper
application of any such payment and the payment completely discharges all claims
under the Plan against the Participating Employer, the Plan and Trust to the
extent of the payment.
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ARTICLE
5.
SOURCE OF PAYMENTS; NATURE OF INTEREST
5.1. ESTABLISHMENT OF TRUST.
A Participating Employer may establish a Trust, or may be covered by a
Trust established by another Participating Employer, with an independent
corporate trustee. The Trust must (a) be a grantor trust with respect to which
the Participating Employer is treated as the grantor for purposes of Code
section 677, (b) not cause the Plan to be funded for purposes of Title I of
ERISA and (c) provide that the Trust assets will, upon the insolvency of a
Participating Employer, be used to satisfy claims of the Participating
Employer's general creditors. The Participating Employers may from time to time
transfer to the Trust cash, marketable securities or other property acceptable
to the Trustee in accordance with the terms of the Trust.
5.2. SOURCE OF PAYMENTS.
(a) Each Participating Employer will pay, from its general assets, the
portion of any benefit pursuant to Article 4 or Section 6.3 or 6.4
attributable to a Participant's Account with respect to that
Participating Employer, and all costs, charges and expenses relating
thereto.
(b) The Trustee will make distributions to Participants and Beneficiaries
from the Trust in satisfaction of a Participating Employer's
obligations under the Plan in accordance with the terms of the Trust.
The Participating Employer is responsible for paying any benefits
attributable to a Participant's Account with respect to that
Participating Employer that are not paid by the Trust.
(c) To the extent a Participating Employer other than the Company fails
for any reason to pay any benefit pursuant to the Plan when it is due
and the benefit is not paid by the Trustee from the Trust, the Company
will pay the unpaid portion of the benefit in accordance with the
terms of the Plan as if it were the Participating Employer obligated
to pay the benefit pursuant to Subsection (a).
5.3. STATUS OF PLAN.
Nothing contained in the Plan or Trust is to be construed as providing for
assets to be held for the benefit of any Participant or any other person or
persons to whom benefits are to be paid pursuant to the terms of this Plan, the
Participant's or other person's only interest under the Plan being the right to
receive the benefits set forth herein. The Trust is established only for the
convenience of the Participating Employers and the Participants, and no
Participant has any interest in the assets of the Trust prior to distribution of
such assets pursuant to the Plan. Until such time as Shares are distributed to a
Participant, Beneficiary of a deceased Participant or other person, he or she
has no rights as a shareholder with respect to any Shares credited to a Share
Account pursuant to the Plan. To the extent the Participant or any other person
acquires a right to receive benefits under this Plan or the Trust, such right is
no greater than the right of any unsecured general creditor of the Participating
Employer.
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5.4. NON-ASSIGNABILITY OF BENEFITS.
The benefits payable under the Plan and the right to receive future
benefits under the Plan may not be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered, or subjected to any charge or legal process.
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ARTICLE
6.
ADOPTION, AMENDMENT, TERMINATION
6.1. ADOPTION.
With the prior approval of the Administrator, an Affiliated Organization
may adopt the Plan and become a Participating Employer by furnishing to the
Administrator a certified copy of a resolution of its Board adopting the Plan.
6.2. AMENDMENT.
(a) The Company reserves the right to amend the Plan at any time to any
extent that it may deem advisable. To be effective, an amendment must
be stated in a written instrument approved in advance or ratified by
the Company's Board and executed in the name of the Company by its
President or a Vice President and attested by the Secretary or an
Assistant Secretary.
(b) An amendment adopted in accordance with Subsection (a) is binding on
all interested parties as of the effective date stated in the
amendment; provided, however, that no amendment will have any
retroactive effect so as to deprive any Participant, or the
Beneficiary of a deceased Participant, of any benefit to which he or
she is entitled under the terms of the Plan in effect immediately
prior to the effective date of the amendment, determined in the case
of a Participant who is employed by an Affiliated Organization, as if
he or she had terminated employment immediately prior to the effective
date of the amendment. Notwithstanding the foregoing, prior to, but
not after, a Change of Control, the Company reserves the right to
eliminate Section 4.1(d)(iv) with respect to the entire Account
balances of all or any group of Participants.
(c) Any amendment that changes the method of determining the earnings
credited to Participants' Accounts pursuant to Section 3.3 is
effective with respect to the portion of the Accounts attributable to
credits made before the date on which the amendment is adopted only if
the Company's Board determines in good faith that on that date, it is
reasonably likely that, in the long run, the new method will not
result in materially lower earnings credits than the old method.
(d) The provisions of the Plan in effect at the termination of a
Participant's employment will, except as otherwise expressly provided
by a subsequent amendment, continue to apply to such Participant.
6.3. TERMINATION OF PARTICIPATION.
Notwithstanding any other provision of the Plan to the contrary, if
determined by the Administrator to be necessary to ensure that the Plan is
exempt from ERISA to the extent contemplated by Section 1.3, or upon the
Administrator's determination that a Participant's interest in the Plan has been
or is likely to be includable in the Participant's gross income for federal
income tax purposes prior to the actual payment of benefits pursuant to the
Plan, the Administrator may take any or all of the following steps:
(a) terminate the Participant's future participation in the Plan;
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(b) cause the Participant's entire interest in the Plan to be distributed
to the Participant in the form of an immediate lump sum; and/or
(c) transfer the benefits that would otherwise be payable pursuant to the
Plan for all or any of the Participants to a new plan that is similar
in all material respects (other than those which require the action in
question to be taken.)
6.4. TERMINATION.
The Company reserves the right to terminate the Plan in its entirety at any
time. Each Participating Employer reserves the right to cease its participation
in the Plan at any time. The Plan will terminate in its entirety or with respect
to a particular Participating Employer as of the date specified by the Company
or such Participating Employer in a written instrument by its authorized
officers to the Administrator, adopted in the manner of an amendment. Upon the
termination of the Plan in its entirety or with respect to any Participating
Employer, the Company or Participating Employer, as the case may be, will either
cause (a) any benefits to which Participants have become entitled prior to the
effective date of the termination to continue to be paid in accordance with the
provisions of Article 4 or (b) the entire interest in the Plan of any or all
Participants, or the Beneficiaries of any or all deceased Participants, to be
distributed in the form of an immediate lump sum payment.
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ARTICLE
7.
DEFINITIONS, CONSTRUCTION AND INTERPRETATION
The definitions and rules of construction and interpretation set forth in
this article apply in construing the Plan unless the context otherwise
indicates.
7.1. ACCOUNT.
"Account" means the bookkeeping account or accounts maintained with respect
to a Participant pursuant to Section 3.1.
7.2. ACTIVE PARTICIPANT.
"Active Participant" with respect to a Plan Year is a Qualified Employee or
Qualified Director who is eligible to make deferrals pursuant to the Plan during
the Plan Year, for the portion of the Plan Year during which he or she remains
eligible.
7.3. ADMINISTRATOR.
The "Administrator" of the Plan is the Company's Benefits Administration
Committee or the person to whom administrative duties are delegated pursuant to
the provisions of Section 8.1, as the context requires.
7.4. AFFILIATED ORGANIZATION.
An "Affiliated Organization" is the Company and any corporation that is a
member of a controlled group of corporations within the meaning of Code section
414(b) that includes the Company.
7.5. ANNUAL BONUS.
"Annual Bonus" with respect to a Participant who is a Qualified Employee
for a Plan Year means the annual cash bonus earned during the Plan Year and paid
to the Participant by a Participating Employer during the following Plan Year or
that would have been so paid but for an election made pursuant to the Plan.
7.6. BASE COMPENSATION.
"Base Compensation" with respect to a Participant who is a Qualified
Employee for a Plan Year means the regular cash remuneration for services
rendered as a Qualified Employee or salary continuation benefits paid to the
Participant by a Participating Employer during the Plan Year or that would have
been so paid but for an election made pursuant to the Plan, excluding the
following:
(a) any bonus;
(b) the value of life insurance coverage included in the Participant's
wages under Code section 79;
(c) any car allowance, moving expense or mileage reimbursement;
19
<PAGE>
(d) any educational assistance payment;
(e) any lump sum severance pay;
(f) any payments under any qualified or nonqualified plan of deferred
compensation;
(g) any benefit under any qualified or nonqualified stock option or stock
purchase plan; or
(h) any other element of compensation specified in Plan Rules.
Base Compensation with respect to a Participant who is a Qualified Director
for a Plan Year means the compensation that is paid, or would be paid but for an
election made pursuant to the Plan, to the Qualified Director during the Plan
Year in cash for his or her services to the Company as an "independent" (I.E.,
non-employee) director of the Company, including, without limitation, retainer
fees for service on the Company's board of directors and committees of the board
and fees for attendance at regular or special meetings of the board and board
committees, but does not include travel expense allowances or other expense
reimbursement.
7.7. BOARD.
"Board" means the board of directors of the Affiliated Organization in
question. When the Plan provides for an action to be taken by the Board, the
action may be taken by any committee or individual authorized to take such
action pursuant to a proper delegation by the board of directors in question.
7.8. BENEFICIARY.
"Beneficiary" with respect to a Participant is the person designated or
otherwise determined under the provisions of Section 4.2(e) as the distributee
of benefits payable after the Participant's death. A person designated or
otherwise determined to be a Beneficiary under the terms of the Plan has no
interest in or right under the Plan until the Participant in question has died.
A Beneficiary will cease to be such on the day on which all benefits to which
he, she or it is entitled under the Plan have been distributed.
7.9. CASH ACCOUNT.
"Cash Account" with respect to a Participant is the bookkeeping account
described in Section 3.1.
7.10. CHANGE OF CONTROL.
(a) A "Change of Control" means (1) the sale, lease, exchange or other
transfer of substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to, or the merger
or consolidation of the Company with, a "person" or (2) a change of
control of the Company of a nature that would be required to be
reported pursuant to Section 13 or 15(d) of the Exchange Act, whether
or not the Company is then subject to such reporting requirement,
including, without limitation, such time as (a) any person becomes,
after January 1, 1996, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 25 percent
or more of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of
directors or (b) the "continuity directors" cease for any reason to
constitute at least a majority of the Company's board of directors.
20
<PAGE>
(b) For purposes of this section, (1) "person" means any individual,
corporation, partnership, group, association or other "person," as
such term is used in section 14(d) of the Exchange Act, other than the
Company, any corporation or other form of business entity that is
directly or indirectly controlled by the Company or any benefit plan
sponsored by the Company or a corporation or other form of business
entity that is directly or indirectly controlled by the Company and
(2) "continuity director" means any individual who is a member of the
Company's board of directors on January 1, 1996, while he or she is a
member of the board, and any individual who subsequently becomes a
member of the board whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority
of the directors who are continuity directors (either by a specific
vote or by approval of the proxy statement of the Company in which
such individual is named as a nominee for director without objection
to such nomination).
7.11. CODE.
"Code" means the Internal Revenue Code of 1986, as amended. Any reference
to a specific provision of the Code includes a reference to that provision as it
may be amended from time to time and to any successor provision.
7.12. COMPANY.
"Company" means Jostens, Inc.
7.13. CROSS REFERENCE.
References within a section of the Plan to a particular subsection refer to
that subsection within the same section and references within a section or
subsection to a particular clause refer to that clause within the same section
or subsection, as the case may be.
7.14. EFFECTIVE DATE.
"Effective Date" means January 1, 1996.
7.15. ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Any reference to a specific provision of ERISA includes a reference to
that provision as it may be amended from time to time and to any successor
provision.
7.16. EXCHANGE ACT.
"Exchange Act" means the Securities Exchange Act of 1934, as amended. Any
reference to a specific provision of the Exchange Act includes a reference to
that provision as it may be amended from time to time and to any successor
provision.
21
<PAGE>
7.17. GOVERNING LAW.
To the extent that state law is not preempted by the provisions of ERISA,
or any other laws of the United States, all questions pertaining to the
construction, validity, effect and enforcement of the Plan will be determined in
accordance with the internal, substantive laws of the State of Minnesota without
regard to its conflict of laws rules of the State of Minnesota or any other
jurisdiction.
7.18. HEADINGS.
The headings of articles and sections are included solely for convenience
of reference; if there exists any conflict between such headings and the text of
the Plan, the text will control.
7.19. LONG-TERM INCENTIVE PAYOUT.
"Long-Term Incentive Payout" with respect to a Participant who is a
Qualified Employee means a long-term incentive award payout made to the
Participant by a Participating Employer in the form of cash or Shares pursuant
to the Company's 1992 Stock Incentive Plan (or any successor plan) or the payout
that would have been made but for an election made pursuant to the Plan.
7.20. MARKET PRICE.
"Market Price" means the closing sale price for Shares on a specified date
or, if Shares were not then traded, on the most recent prior date when Shares
were traded, all as quoted in THE WALL STREET JOURNAL reports of New York Stock
Exchange - Composite Transactions.
7.21. MERGER DATE.
"Merger Date" means August 15, 1996.
7.22. NUMBER AND GENDER.
Wherever appropriate, the singular may be read as the plural, the plural
may be read as the singular and one gender may be read as the other gender.
7.23. PARTICIPANT.
"Participant" is a current or former Active Participant to whose Account
amounts have been credited pursuant to Article 3 and who has not ceased to be a
Participant pursuant to Section 2.6.
7.24. PARTICIPATING EMPLOYER.
"Participating Employer" is the Company and any other Affiliated
Organization that has adopted the Plan, or all of them collectively, as the
context requires. An Affiliated Organization will cease to be a Participating
Employer upon a termination of the Plan as to its Qualified Employees and the
satisfaction in full of all of its obligations under the Plan or upon its
ceasing to be an Affiliated Organization.
22
<PAGE>
7.25. PLAN.
"Plan" means the Jostens, Inc. Deferred Compensation Plan, as from time to
time amended or restated. In the case of a Participant who was a Participant in
the Jostens, Inc. Directors' Deferred Compensation Plan prior to the Merger
Date, references to the Plan for the period prior to the Merger Date are to the
Jostens, Inc. Directors' Deferred Compensation Plan. In the case of a
Participant who was a Participant in the Jostens, Inc. Officers' Deferred
Compensation Plan prior to the Merger Date, references to the Plan for the
period prior to the Merger Date are to the Jostens, Inc. Officers' Deferred
Compensation Plan.
7.26. PLAN YEAR.
"Plan Year" means the calendar year.
7.27. PLAN RULES.
"Plan Rules" are rules, policies, practices or procedures adopted by the
Administrator pursuant to Section 8.2.
7.28. QUALIFIED DIRECTOR.
"Qualified Director" means an individual who is a member of the Company's
board of directors and is independent (I.E., is not an employee of the Company
or any of its affiliates or subsidiaries).
7.29. QUALIFIED EMPLOYEE.
"Qualified Employee" means an individual who (a) is an executive of the
Company elected by the Company's board of directors or an employee of the
Company with a salary grade of 15 or above or (b) was an executive of the
Company elected by the Company's board of directors or an employee of the
Company with a salary grade of 15 or above on the date on which he or she ceased
to perform services for all Participating Employers as an employee if he or she
(i) is receiving salary continuation benefits from a Participating Employer and
(ii) has not received such salary continuation benefits for a period of more
than two consecutive years.
7.30. RESTRICTED STOCK UNIT SUBACCOUNT.
"Restricted Stock Unit Subaccount" with respect to a Participant is the
bookkeeping subaccount described in Section 3.1.
7.31. SHARES.
"Shares" means shares of common stock of the Company, $.33-1/3 par value,
or such other class or kind of shares or other securities as may be applicable
pursuant to Section 3.3(b)(ii).
7.32. SHARE ACCOUNT.
"Share Account" with respect to a Participant is the bookkeeping account
described in Section 3.1.
23
<PAGE>
7.33. TERMINATION OF EMPLOYMENT.
An individual who participates in the Plan as a Qualified Employee will be
deemed to have terminated employment for purposes of the Plan on the later of
(a) the date on which he or she has completely severed his or her employment
relationship with all Affiliated Organizations and (b) the earlier of the date
as of which (i) his or her salary continuation benefits from a Participating
Employer end and (ii) he or she has received such salary continuation benefits
for a period of two consecutive years.
7.34. TRUST.
"Trust" means any trust or trusts established by a Participating Employer
pursuant to Section 5.1.
7.35. TRUSTEE.
"Trustee" means the independent corporate trustee or trustees that at the
relevant time has or have been appointed to act as Trustee of the Trust.
7.36. UNFORESEEABLE EMERGENCY.
"Unforeseeable Emergency" means an unanticipated emergency that is caused
by an event beyond the Participant's control resulting in a severe financial
hardship that cannot be satisfied through other means. The existence of an
unforeseeable emergency will be determined by the Administrator.
24
<PAGE>
ARTICLE
8.
ADMINISTRATION
8.1. ADMINISTRATOR.
The general administration of the Plan and the duty to carry out its
provisions is vested in the Company's Benefits Administration Committee. Such
Committee may delegate such duty or any portion thereof to a named person and
may from time to time revoke such authority and delegate it to another person.
8.2. PLAN RULES AND REGULATIONS.
The Administrator has the discretionary power and authority to make such
Plan Rules as the Administrator determines to be consistent with the terms, and
necessary or advisable in connection with the administration, of the Plan and to
modify or rescind any such Plan Rules.
8.3. ADMINISTRATOR'S DISCRETION.
The Administrator has the discretionary power and authority to make all
determinations necessary for administration of the Plan, except those
determinations that the Plan requires others to make, and to construe,
interpret, apply and enforce the provisions of the Plan and Plan Rules whenever
necessary to carry out its intent and purpose and to facilitate its
administration, including, without limitation, the discretionary power and
authority to remedy ambiguities, inconsistencies, omissions and erroneous
benefit calculations. In the exercise of its discretionary power and authority,
the Administrator will treat all similarly situated persons uniformly.
8.4. SPECIALIST'S ASSISTANCE.
The Administrator may retain such actuarial, accounting, legal, clerical
and other services as may reasonably be required in the administration of the
Plan, and may pay reasonable compensation for such services. All costs of
administering the Plan will be paid by the Participating Employers.
8.5. INDEMNIFICATION.
The Participating Employers jointly and severally agree to indemnify and
hold harmless, to the extent permitted by law, each director, officer, and
employee of any Affiliated Organization against any and all liabilities, losses,
costs and expenses (including legal fees) of every kind and nature that may be
imposed on, incurred by, or asserted against such person at any time by reason
of such person's services in connection with the Plan, but only if such person
did not act dishonestly or in bad faith or in willful violation of the law or
regulations under which such liability, loss, cost or expense arises. The
Participating Employers have the right, but not the obligation, to select
counsel and control the defense and settlement of any action for which a person
may be entitled to indemnification under this provision.
8.6. BENEFIT CLAIM PROCEDURE.
(a) If a request for a benefit by a Participant or Beneficiary of a
deceased Participant is denied in whole or in part, he or she may, not
later than 30 days after the denial, file with the Administrator a
written claim objecting to the denial.
25
<PAGE>
(b) The Administrator, not later than 90 days after receipt of such claim,
will render a written decision to the claimant on the claim. If the
claim is denied, in whole or in part, such decision will include the
reason or reasons for the denial; a reference to the Plan provisions
on which the denial is based; a description of any additional material
or information, if any, necessary for the claimant to perfect his or
her claim; an explanation as to why such information or material is
necessary; and an explanation of the Plan's claim procedure.
(c) The claimant may file with the Administrator, not later than 60 days
after receiving the Administrator's written decision, a written notice
of request for review of the Administrator's decision, and the
claimant or his or her representative may thereafter review relevant
Plan documents which relate to the claim and may submit written
comments to the Administrator.
(d) Not later than 60 days after receipt of such review request, the
Administrator will render a written decision on the claim, which
decision will include the specific reasons for the decision, including
a reference to the Plan's specific provisions where appropriate.
(e) The foregoing 90- and 60-day periods during which the Administrator
must respond to the claimant may be extended by up to an additional
90- or 60 days, respectively, if special circumstances beyond the
Administrator's control so require and notice of such extension is
given to the claimant prior to the expiration of such initial 90- or
60-day period, as the case may be.
(f) A Participant or Beneficiary must exhaust the procedure described in
this section before making any claim of entitlement to benefits
pursuant to the Plan in any court or other proceeding.
8.7. DISPUTES.
(a) In the case of a dispute between a Qualified Employee Participant or
his or her Beneficiary and a Participating Employer, the Administrator
or other person relating to or arising from the Plan, the United
States District Court for the District of Minnesota is a proper venue
for any action initiated by or against the Participating Employer,
Administrator or other person and such court will have personal
jurisdiction over any Participant or Beneficiary named in the action.
(b) Regardless of where an action relating to or arising from the
participation in the Plan by a Qualified Employee is pending, the law
as stated and applied by the United States Court of Appeals for the
Eighth Circuit or the United States District Court for the District of
Minnesota will apply to and control all actions relating to the Plan
brought against the Plan, a Participating Employer, the Administrator
or any other person or against any such Participant or his or her
Beneficiary.
(c) In the event of a Change of Control, the Participating Employers will
pay all of the legal fees and expenses reasonably incurred by a
Participant or Beneficiary of a deceased Participant to enforce his or
her rights under the Plan as in effect immediately before such Change
of Control. The Participating Employers will pay such fees and
expenses promptly after bills therefor are submitted from time to time
by attorneys representing the claimant. However, the Participating
Employers will not be obligated to pay such fees and
26
<PAGE>
expenses if a court of competent jurisdiction finds of law that the
claim is not well grounded in fact and warranted by existing law or a
good faith argument for the extension, modification or reversal of
existing law and will be entitled to full reimbursement of any amounts
previously paid pursuant to this subsection. In any such proceeding,
the burden of proof is on the Participating Employers. Notwithstanding
anything else contained in the Plan, the rights of Participants and
their Beneficiaries under this subsection survive amendment of this
subsection, as well as termination of the Plan, after a Change of
Control, regardless of whether such rights arise before or after the
date of amendment or termination.
27
<PAGE>
ARTICLE
9.
MISCELLANEOUS
9.1. WITHHOLDING AND OFFSETS.
The Participating Employers and the Trustee retain the right to withhold
from any compensation, deferral and/or benefit payment pursuant to the Plan, any
and all income, employment, excise and other tax as the Participating Employers
or Trustee deems necessary and, prior to a Change of Control, the Participating
Employers may offset against amounts payable to a Participant or Beneficiary
under the Plan any amounts then owing to the Participating Employers by such
Participant or Beneficiary.
9.2. OTHER BENEFITS.
Neither amounts deferred nor amounts paid pursuant to the Plan constitute
salary or compensation for the purpose of computing benefits under any other
benefit plan, practice, policy or procedure of a Participating Employer unless
otherwise expressly provided thereunder.
9.3. NO WARRANTIES REGARDING TAX TREATMENT.
The Participating Employers make no warranties regarding the tax treatment
to any person of any deferrals or payments made pursuant to the Plan and each
Participant will hold the Administrator and the Participating Employers and
their officers, directors, employees, agents and advisors harmless from any
liability resulting from any tax position taken in good faith in connection with
the Plan.
9.4. NO RIGHTS TO CONTINUED SERVICE CREATED.
Neither the establishment of or participation in the Plan gives any
individual the right to continued employment or service on the Company's board
of directors or limits the right of the Participating Employer to discharge,
transfer, demote, modify terms and conditions of employment or service on the
Company's board of directors or otherwise deal with any individual without
regard to the effect which such action might have on him or her with respect to
the Plan.
9.5. SUCCESSORS.
Except as otherwise expressly provided in the Plan, all obligations of the
Participating Employers under the Plan are binding on any successor to the
Participating Employer whether the existence of such successor is the result of
a direct or indirect purchase, merger, consolidation or otherwise of all or
substantially all of the business and/or assets of the Participating Employer.
28
<PAGE>
[BACKGROUND ARTWORK]
helping
people
celebrate
life's important
moments
Annual Report 1997
[JOSTENS LOGO]
<PAGE>
[BACKGROUND PHOTOGRAPH]
For a century,
Jostens has created
products
and services
to help
our customers
celebrate
life's important
moments.
CREATING
<PAGE>
[BACKGROUND PHOTOGRAPH]
FOR MOST OF OUR HISTORY, THE FOCUS HAS BEEN ON STUDENTS.
A BRAND
GENERATIONS OF GRADUATES RECOGNIZE JOSTENS AS THE COMPANY THAT HELPED THEM
COMMEMORATE HIGH SCHOOL ACHIEVEMENTS.
1
<PAGE>
[BACKGROUND PHOTOGRAPH]
When you get down to it, our products are symbols of our customers' achievements
and affiliations, milestones that people celebrate throughout life.
BASED ON
Today, we're starting to use the power of the Jostens brand to reach out to
customers at other times in their lives.
2
<PAGE>
[BACKGROUND PHOTOGRAPH]
100 years
A CENTURY
one hundred years
We'll still be there to help students celebrate their accomplishments and to
commemorate dedicated service to a company. But we'll also be there more often,
reaching out to customers in more ways and in more places.
3
<PAGE>
[BACKGROUND PHOTOGRAPH]
OF MOMENTS
We may be known as a ring and yearbook company, but its really about more than
that -- it's about helping people celebrate.
4
<PAGE>
[BACKGROUND PHOTOGRAPH]
We want to be the company people choose to help them celebrate their most
important moments and accomplishments.
TO CELEBRATE
Jostens.
When you get there,
we'll be there.
5
<PAGE>
[BACKGROUND ARTWORK]
Jostens provides products and services that help people celebrate achievement,
reward performance, recognize service and commemorate experiences.
We provide these achievement and affiliation products in partnership with the
diverse organizations people belong to throughout their lives. As a partner, we
are committed to delivering value and quality that exceed the needs of the
people and organizations we serve. Jostens is a team of employees and
independent business partners. Our aim is to be the world leader in providing
achievement and affiliation products and to constantly deliver exceptional
performance.
6
<PAGE>
[BAR GRAPH]
sales
continuing operations
($ in millions)
93 652.4
94 641.9
95 673.0
96 708.7
97 742.5
[BAR GRAPH]
earnings per diluted share
continuing operations
(in $)*
93 .19
94 .62
95 1.22
96 1.28
97 1.47
[BAR GRAPH]
return on investment
(in %)*
93 (3.7)
94 (5.7)
95 19.1
96 26.3
97 47.7
FINANCIAL HIGHLIGHTS
JOSTENS INC.
Year ended
--------------------------------------
January 3, 1998 December 28, 1996
Dollars in millions, (unaudited)
except ratio and per-share data
- -------------------------------- --------------- ------------------
STATEMENT OF OPERATIONS
Net sales $ 742.5 $ 708.7
Net income 57.2 36.3
------- -------
BALANCE SHEET DATA
Working capital $ 6.3 $ 11.8
Current ratio 1.0 1.0
Total assets 390.7 383.8
Long-term debt 3.6 3.9
Shareholders investment 127.1 112.6
------- -------
COMMON SHARE DATA
Earnings per share: basic $ 1.47 $ 0.94
diluted 1.47 0.94
Cash dividends per share .88 .66
Stock price: high 28-13/16 24-3/8
low 20 17-1/4
------- -------
* EPS and ROI graphs reflect June fiscal year-end results for 1993-1996, and
calendar 1997 results. In 1996, the company changed from a June year end to
the Saturday closest to December 31, resulting in a six-month transition
period from July 1 to December 28, 1996. The 1997 year ended January 3, 1998.
7
<PAGE>
[PHOTO OF ROBERT C. BUHRMASTER]
WORK IN PROGRESS
Jostens Inc.
a letter from Robert C. Buhrmaster, chairman,
president and chief executive officer.
TO OUR INVESTORS
Three words summarize Jostens in 1997: WORK IN PROCESS. Since our last
report*, we have made excellent progress on our plan to transform Jostens from a
"ring and yearbook" company to one that people call upon to help celebrate their
most important moments.
Our approach continues to be to improve our infrastructure, to build upon
the strength of our current businesses and to reach consumers in new ways.
Making the changes necessary to put this century-old company on a healthy,
upward track for the future is taking time, energy and resources and we are
moving forward.
In this year's report, I will share with you my candid assessment of where
we stand in the transformation process, the progress we made last year and the
issues we will tackle in 1998.
FINANCIAL RESULTS
The changes necessary for the company's long-term health required
substantial reinvestment in 1997. Consequently, our aim was to strike a balance
between investing in priority initiatives and delivering a meaningful return to
shareholders. I believe we accomplished that.
Our company earned net income of $57.2 million, or $1.47 per share. That
represents a strong increase over 1996 reported net income of $36.3 million, or
94 cents per share. However, 1996 results were reduced by 35 cents per share for
an environmental charge and a new inventory cost accounting system.
Our ability to balance investments and shareholder returns came, in part,
from success at offsetting some of our internal investments during the year. For
example, the one-time costs associated with closing a graduation announcement
plant and buying the Gold Lance(R) retail ring business were roughly offset by a
terrific, companywide effort to reduce gold inventory. That effort, part of an
ongoing emphasis on working capital management, provided a one-time earnings
benefit of 10 cents per share in 1997. Results also benefited by 5 cents per
share from lower taxes related to a tax loss carryforward.
All in, our fundamental business performance delivered $1.42 per share, up
about 10 percent from $1.29 in 1996, on a comparable basis. Much of that
improvement came from strong performance in our three largest businesses
Printing & Publishing, Jewelry and Graduation Products. Underpinning the results
were efficiency gains from initiatives begun in the second half of 1996 and
early 1997, as well as from a continuing emphasis on consumer-based marketing
programs which drove much of our growth.
For example, we sold 5 percent more class rings last year, solidifying a
turnaround after ending 12 straight years of decline in 1994. The 1997 increase
was led by healthy consumer interest in specially designed rings for high school
students in the "millennium classes," which graduate in 1999, 2000 and 2001.
* In 1996, Jostens changed its fiscal year. As a result, the period from
July 1 through December 28, 1996, was treated as a six-month transition
period. Consequently, no annual report was published.
8
<PAGE>
In Printing & Publishing, we delivered a record number of yearbooks, gained
market share and introduced Pay By Mail, a new direct-bill program designed to
streamline the buying process. It also spurs buying interest; we experienced
double-digit gains in student purchases in schools that had Pay By Mail in 1997.
Graduation Products, as well, had good results, as more students moved from
a la carte product purchases to convenient and easy-to-understand product
packages.
In addition to our three big school businesses, Jostens Canada had strong
profit performance despite being affected by labor strikes by teachers in
Ontario and postal workers nationwide.
In Recognition, 1997 performance was flat with 1996 on an apples-to-apples
basis, and was less than we anticipated. Although we won a healthy amount of
business with our new Strategic Recognition(TM) programs, we lost one-time
product sales at about the same rate. We did win some highly visible
championship accounts -- making jewelry for the 1997 Super Bowl champion Green
Bay Packers, the Chicago Bulls in the NBA and the Detroit Red Wings, winners of
the NHL's Stanley Cup. Recognition has significant opportunity to grow
profitably; we have another year or so of preparatory work before this business
can start living up to its potential.
In the U.S. Photography business, results were disappointing. Sales from
our independent photo dealers were below expectations, and we had higher than
expected costs in some of our company-owned sites, as well as in our photo
processing plant.
Across the company, sales increased about 5 percent last year, to $742.5
million. Gross margin also improved, demonstrating results from our initiatives
of the last few years. General and administrative expenses rose with sales as we
reinvested in the next round of improvements.
TRANSFORMING THE COMPANY
Our vision of the future is simple: To be the company people select to help
them celebrate lifes important moments.
Implicit in that vision is a commitment to strengthen our mainline
businesses and to develop new ways to reach customers beyond the school and
workplace. Also implicit is that Jostens must undergo substantial change a
transformation, if you will.
For a century, Jostens has enjoyed success in the school and business
recognition markets. However, two byproducts have emerged over the years to
hinder us as we attempt to become faster and more agile: We have too much
complexity and some lingering organizational silos.
The effect of those byproducts is that we devote too much effort and
resource to maintaining our business. We need to simplify what we do and make
sure everyone across the company is working together to generate profitable
growth.
Making that happen was at the root of our activities in 1997.
NEW IN 97
- - Pay By Mail billing program
- - Hear the Year(TM) music CD product
- - Launched identity/brand initiative
- - Implemented college market strategy
- - Purchased Gold Lance(R) retail ring business
- - Won NBA, NFL and NHL pro championship accounts
- - Repurchased $20 million in Jostens shares
- - Introduced Strategic Recognition(TM) concept
- - Opened joint ventures in Chile, Colombia
- - Announcement plant consolidation
- - Completed systems program design
- - Millennium(TM) class ring offering
- - Start-up of Mexico plant
9
<PAGE>
[PHOTOGRAPH OF OTTO JOSTEN]
great people
sharing a goal
together
Otto Josten
(in vest)
opened his shop in 1897 and built an organization with good people.
THE JOSTENS BRAND
Last summer, for instance, in conjunction with our centennial celebration,
we launched a new logo and identity system. The new image is designed to present
a uniform, energetic "look" to our consumers. The Jostens name is widely known,
and we are starting for the first time to consciously build brand awareness and
preference.
Hand in hand with our branding activity is new business development. In the
last few months, we have begun researching and testing several concepts to
extend our brand and help customers celebrate.
MANUFACTURING
In mid-1996, we began a thorough review of our manufacturing capacity and
requirements. That effort centers on two objectives: improve efficiency and,
where possible, consolidate plants while retaining peak production capacity,
maintaining product quality and meeting delivery requirements.
To date, we have closed three plants, including a ring plant in Winnipeg,
Manitoba, and a small photography processing facility near Montreal. In both
cases, volume was transferred smoothly to other Jostens facilities.
In 1997, we closed the graduation announcement plant in Porterville,
Calif., and consolidated production in our Shelbyville, Tenn., facility. Easing
the human impact was the fact that nearly 30 of our Porterville workers
transferred to Shelbyville.
We expect the three consolidations to reduce annual costs by about $4
million, starting in 1998.
In addition, we established an operation in Nuevo Laredo, Mexico. In early
1997, we tested the ability to perform ring finishing operations at the Nuevo
Laredo facility. Based on that test, we increased the number of rings finished
in Mexico, with its attendant lower cost structure.
While decisions to consolidate facilities are difficult because of their
impact on people, they are necessary to preserve future jobs and the long-term
health of the organization.
ORGANIZATIONAL ALIGNMENT
To drive the company in a single, unified direction, we are aligning the
organization behind common goals and objectives. In a company that has
historically operated in a decentralized manner, organizational alignment
represents a cultural change for employees and independent sales
representatives.
In 1997 we took several steps toward alignment.
Performance Pays Bonus Plan. We created the Performance Pays bonus program
for all company employees. Performance Pays results in cash bonuses for all
employees if Jostens achieves net income targets established at the start of the
year
10
<PAGE>
[PHOTOGRAPH OF M.J. BAUER]
living strategic recognition
M. J. Bauer
was among the first to receive the Jostens Leader Award
and approved by the board. The objective of Performance Pays is to give everyone
some "skin in the game" to raise awareness of and provide financial incentives
to act in ways that support the company's business and financial objectives.
Jostens Quest. We also began Jostens Quest, a program that provides a
coordinated framework for recognizing and rewarding employee service and
performance that furthers our mission, goals and business objectives.
Jostens Quest was developed by our Recognition business as an element of
the new Strategic Recognition program offering. The beauty of Jostens Quest is
that we are linking together our various incentive and recognition efforts to
better motivate people to actively support company objectives.
Independent Sales Force. For the independent sales representatives,
organizational alignment means new ways of working with Jostens as we intensify
efforts to better understand our consumers.
We are taking a common-sense approach in making changes necessary to
continue improving our businesses. At the same time, we recognize that the
changes represent a significant cultural shift for many of our independent sales
representatives.
For example, in 1997, we continued shifting to consumer-based marketing
programs, easy-to-understand pricing and a consistent selling process. Where
those concepts have been applied, business and profitability has increased.
We also established an initial framework for sales force performance
management, including territory and account profitability. In addition, we set
the stage for standardized policies, processes and programs necessary
streamlining steps as we install new, common information systems.
All of these changes are designed to better link what's good for the sales
representative and whats good for the company so that we're all motivated to
generate profitable growth.
College Sales Force. We took a somewhat more dramatic approach with the
sales force serving the college market for Jewelry and Graduation Products. In
college, we faced myriad issues, underscored by this historical reality: Jostens
(and our competitors) treated college as an extension of the high school market,
when in fact it is a distinct market.
In 1997, we acknowledged that reality and completely changed our market
model.
Today, we have segmented the college market, with our sales force deployed
not against geographic territories but against specific accounts offering the
greatest business opportunities.
No longer are we merely selling rings and announcements to students. We are
utilizing value-adding programs to help school administrators build closer
relationships with students, as well as faculty, alumni and other important
constituencies. Our products become the symbols of those relationships and
affinities.
11
<PAGE>
[PHOTOGRAPH]
continuous pride in
artisanship
In addition, we changed from an independent sales force to an employee
sales force. We retained about half of our independent representatives as
employees, and we filled the balance of positions with strong sales
professionals from other industries. The combination is an energetic and
enthusiastic group that increased sales in the college market in 1997, even as
we made fundamental changes in the business.
I am enthusiastic about the preliminary results. In the first six months of
the new college approach, we signed a number of major multi-year, multi-product
accounts, and generated more new ideas and had more bids in the pipeline than at
any other time in my five years with Jostens.
Frankly, we have also been pleasantly surprised by the power of the Jostens
brand and the loyalty it enjoys in the college marketplace.
1998 OUTLOOK
Even more than 1997, the coming year will be a time of reinvestment and
internally focused activity, as we reach peak effort on some critical
initiatives. We will focus our efforts on three areas in 1998 systems,
manufacturing and market leadership all of which build on our 1997
accomplishments.
SYSTEMS
In 1998, we begin a multi-year, business-by-business implementation of
common, integrated information systems. This project will for the first time put
the entire company on a common systems platform, enabling us to serve customers
better and to gather and analyze relevant business information as never before.
This is the first significant systems program in more than 20 years, so we are
making a quantum step forward in our systems capabilities.
Because of the installation timeline, we will also upgrade some of our
current systems to be year-2000 compliant.
The systems initiative is critical to our ability to work smarter and
faster, and it requires a substantial investment in people and dollars. However,
I expect the benefits to yield significant efficiency gains, as well as enhance
our ability to serve customers better, faster and more precisely.
MANUFACTURING
We will continue with our manufacturing activities in 1998, with the
potential for further plant consolidations. Whether or not that occurs, we will
maintain our vigilance on improving efficiency and strengthening our operating
capabilities.
12
<PAGE>
[PHOTOGRAPH OF CLASS RINGS]
moments that change a life
Unique schoolwide ring designs symbolize alumni affinity with their alma mater.
MARKET LEADERSHIP
Even as we continue to make internal improvements in systems and
manufacturing, we are looking outward, examining what it will take for Jostens
to be a leader in our markets in the future. We have enjoyed solid leadership
positions in most of our businesses over the years, but future success will
require new and different skills. Determining those requirements is the emphasis
of the market leadership initiative in 1998.
This effort will focus further attention on aligning Jostens and our
independent sales representatives, as we implement new policies and practices
designed to simplify our business, complete the shift to research-based
marketing programs and institute performance-based management practices.
It will also entail a broad look at what we do today and what we CAN do for
our customers in the future. Well look at everything including markets,
distribution channels, products and the Jostens brand.
SUMMARY
1997 was an eventful year for our company. We reflected on a hundred years
of success that started when Otto Josten opened his small business in Owatonna,
Minn. We celebrated our centennial with an energetic new image for a new century
a look this book was designed to project. We began peering into the future to
understand how to reach more customers more often
Thanks to the hard work of thousands of Jostens people, 1997 was also a
year of action and change. We made tangible progress in ways that enabled us to
improve financial performance and make some of the difficult but important
changes necessary to keep Jostens vibrant and successful for the long run.
1998 will be a year much like 1997, as we continue improving the
infrastructure, strengthening our businesses and working on new opportunities.
We anticipate that our mainline businesses will have a strong year, and we
expect to use the resulting improvement in profitability to fund reinvestments
and generate modest earnings growth. In addition, well utilize our strong cash
flow and balance sheet to retire shares under our $100 million repurchase
authorization a move that should help boost earnings per share.
As with 1997, the watchword in 1998 is balance making the changes necessary
for Jostens to be a more dynamic company while delivering reasonable results for
our shareholders.
I look forward to sharing with you our company's progress in the year
ahead.
/s/ Robert C. Buhrmaster
- ---------------------------------
Robert C. Buhrmaster,
Chairman, President and Chief Executive Officer
13
<PAGE>
JOSTENS AT A GLANCE
<TABLE>
<CAPTION>
CORE PRODUCTS SERVICES/NEW PRODUCTS CUSTOMERS
<S> <C> <C>
Printing & Yearbooks, memory books YearTech(R) desktop publishing Students in elementary, junior
Publishing and related items, kits, yearbook class curriculum, high and senior high schools,
commercial printing services. Hear The Year(TM) music CD, corporations, ad agencies and
Jostens Rennaisance(R) program direct mailers.
to recognize academic
achievement.
Jewelry Class, school and athletic HIGH SCHOOL: Millennium(TM) ring Students and parents of
rings symbolizing affinity collection, Jostens Renaissance. students in junior high, senior
or achievement. COLLEGE: Custom Collegiate high and colleges/universities.
Collection(TM) (one ring design for
one school), Complete Custom
Collegiate Collection(TM)(a ring for
each student).
Graduation Products Graduation announcements, HIGH SCHOOL: Jostens Renaissance, Students and parents of
diplomas, caps and gowns, BDG new gown offering. students in junior high, senior
accessories and other COLLEGE: Senior Salute(TM) high and colleges/universities.
graduation-related items. program to boost commencement
participation.
Jostens Canada Class and individual school Student ID cards, Elementary, junior high and
pictures, senior portraits, Hear The Year, senior high school students
special school event photos Millennium collection, across Canada.
and related products, Excellence in Education(TM)
yearbooks, and class rings. recognition program.
Photography Class and individual school PanelXPress(R) Elementary, junior high and
pictures, senior portraits, photo page layout service. senior high school students in
special school event photos the United States.
and related products.
Recognition Programs and products that New Strategic Recognition(TM) Executives, managers and
help motivate, recognize and system helps clients align employees of companies and
reward individual and team all recognition and corporations.
contributions that support performance initiatives to
organizational objectives. support the organization's
vision, mission, goals
and values; jewelry
products for sports fans.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
MANUFACTURING COMPETITORS DISTRIBUTION SALES (IN MILLIONS)
[BAR GRAPH]
<S> <C> <C> <C> <C>
Visalia, Calif. Herff Jones In schools via independent sales 93 192.3
Topeka, Kan. Taylor Publishing agents and sales associates. 94 192.6
Winston/Salem, N.C. Walsworth 95 205.0
State College, Pa. 96 220.4
Clarksville, Tenn. 97 233.7
[BAR GRAPH]
Attleboro, Mass. Commemorative In junior and senior high schools via 93 152.6
Denton, Texas Brands independent sales agents and sales 94 146.7
Nuevo Laredo, Mexico (ArtCarved and associates, and through retail 95 161.2
Burnsville, Minn. Balfour brands), jewelers and merchants. 96 171.7
Herff Jones 97 180.9
In colleges and universities via
employee sales force, through college
bookstores.
[BAR GRAPH]
Red Wing, Minn. Herff Jones In schools via independent sales 93 126.9
Laurens, S.C. Commemorative Brands agents and sales associates, and 94 124.2
Shelbyville, Tenn. Carlson Craft through retail jewelers and merchants. 95 136.9
96 142.7
In colleges and universities via 97 153.7
employee sales force, through college
bookstores.
[BAR GRAPH]
Winnipeg, Manitoba Lifetouch In schools via statutory employees. 93 44.9
D. W. Friesen 94 40.7
Herff Jones 95 41.3
96 40.0
97 38.7
[BAR GRAPH]
Webster, N.Y. Lifetouch In schools via independent photo 93 28.1
Olan Mills dealers and through employees and 94 25.4
freelance photographers. 95 22.8
96 24.4
97 25.5
[BAR GRAPH]
Princeton, Ill. O.C. Tanner Directly to clients via independent 93 97.7
Memphis, Tenn. Tiffany sales agents. 94 103.9
Red Wing, Minn. Robbins 95 96.9
Sherbrooke, Quebec 96 101.3
97 103.7
</TABLE>
15
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
JOSTENS INC.
The company occasionally may make statements regarding its business and
markets, such as projections of future performance, statements of managements
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", "believe",
"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 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 company's ability 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.
INTRODUCTION
In October 1996, Jostens elected to change its fiscal year end from June 30
to the Saturday closest to December 31, effective December 29, 1996. The change
was made to enable better business planning and internal management. The
Consolidated Financial Statements and Notes include the company's results of
operations and cash flows for the years ended January 3, 1998 (calendar 1997),
and December 28, 1996 (calendar 1996)(unaudited); the six-month transition
period ended December 28, 1996; and fiscal years ended June 30, 1996 and 1995.
This discussion summarizes significant factors that affected the
consolidated operating results, financial condition and liquidity of Jostens in
the 1997 and 1996 (unaudited) calendar years and the two fiscal years ended June
30, 1996 and 1995. Material in this section reflects the June 1995 sale of the
Jostens Learning Corporation (JLC) subsidiary and the October 1995 sale of the
Wicat Systems business, both of which are treated as discontinued operations in
the statements of consolidated operations presented in this report.
16
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED JANUARY 3, 1998, COMPARED WITH YEAR ENDED DECEMBER 28, 1996
(UNAUDITED) Sales in calendar 1997 increased 4.8 percent to $742.5 million from
$708.7 million in calendar 1996. The sales improvement was driven by increases
in sales volume and pricing in the company's three largest business lines
Printing & Publishing, Jewelry and Graduation Products. Price increases in
calendar 1997 varied by business and ranged from zero to 5 percent, reflecting
the company's continued efforts to minimize price increases. Gross margin in
calendar 1997 was 52.7 percent, compared with 50.1 percent in calendar 1996. The
2.6 percentage point increase primarily reflects the July 1996 implementation of
a new inventory cost accounting system, which provides more precise, detailed
performance information by product within each line. The new system results in a
more accurate valuation of inventories and recording of cost of products sold
during the individual quarters, consistent with the manner used to value
inventory at previous June year ends. As a result of this implementation, the
cost of products sold reported during the six months ended December 28, 1996,
was $16.9 million (26 cents per share) higher than what would have been reported
using the prior method, while the cost of products sold in the six months ended
June 28, 1997, had an equally positive impact. Implementation of the new cost
accounting system does not impact the comparability of reported cost of products
sold or earnings per share for the six months ended January 3, 1998, since the
new cost accounting system was in place for both the 1997 and 1996 periods. Also
contributing to the increase in 1997 gross margins was a gold inventory
reduction program, which decreased total net costs by $6.8 million (10 cents per
share) in calendar 1997 as a result of a gain recognized related to a LIFO
inventory liquidation. The positive impact of the new cost accounting system and
the gold reduction program on the calendar 1997 and 1996 comparisons were
partially offset by higher training costs in calendar 1997 to prepare a new
facility in Mexico for its irst peak ring finishing season, as well as by costs
to consolidate the company's two graduation announcement plants (see subsequent
discussion under "Plant Consolidation").
Selling and administrative expenses increased to $291.5 million from $282.9
million in calendar 1996. As a percentage of sales, selling and administrative
expenses in calendar 1997 were 39.3 percent, compared with 39.9 percent in
calendar 1996. The decrease in costs as a percentage of sales primarily relates
to the recognition of an additional $6 million in reserves during calendar 1996
to cover continued environmental investigation and cleanup costs (see subsequent
discussion under "Commitments and Contingencies"). The decrease in the calendar
1997 selling and administrative expenses as a percentage of sales was partially
offset by higher salary and legal costs associated with changing the college
sales force from independent representatives to employees, and by the
development of products and marketing materials for the Gold Lance retail ring
business, which was acquired in 1997 (see subsequent discussion under "Capital
Expenditures, Product Development and Acquisition").
The company's strong cash position in calendar 1997 reduced the need for
short-term borrowing, which lowered net interest expense to $6.3 million from $9
million in calendar 1996. The lower borrowing levels in calendar 1997 primarily
resulted from a greater emphasis on customer deposit programs, partially offset
by a $9.5 million payment to Town & Country Corporation to buy Gold Lance. The
company's positive cash position was also impacted when, in July 1997, the Board
of Directors authorized the repurchase of up to $100 million in shares of
Jostens common stock. Under the authorization, shares may be repurchased
periodically in the open market and through privately negotiated transactions.
17
<PAGE>
The repurchase is to be funded from the company's cash and short-term
investment balance, as well as short-term borrowings. As of January 3, 1998, the
company had repurchased $20 million in common shares.
The company's calendar 1997 effective income tax rate was 38.8 percent,
compared with 42.3 percent in calendar 1996. The decrease was primarily
attributed to the company's initial efforts to combine the U.S. Photography
legal entity with the main U.S. businesses. As a result, the company reduced
income tax expense by recognizing $2 million (5 cents per share) of accumulated
net operating loss (NOL) carryforward benefits through the reversal of a
deferred tax asset reserve. Management expects the effective tax rate to be
between 40 and 41 percent in 1998.
Calendar 1997 net income was $57.2 million, or earnings per share of $1.47
(basic and diluted), compared with net income in calendar 1996 of $36.3 million,
or earnings per share of 94 cents (basic and diluted).
SCHOOL PRODUCTS SEGMENT Sales in this segment increased 5.2 percent to
$638.8 million in calendar 1997, compared with $607.4 million in calendar 1996.
The sales increase was primarily driven by gains in the Printing & Publishing,
Jewelry and Graduation Products businesses, which recorded calendar 1997 sales
of $233.7, $180.9 and $153.1 million, respectively.
Growth in Printing & Publishing stemmed from new marketing programs and
products that targeted the winning of new accounts and increased volume in the
existing account base. Yearbook sales increased over calendar 1996 by 8 percent,
offset by a decline in commercial printing sales of $2 million. The reduction of
commercial printing sales was anticipated as more production capacity was used
to produce higher-margin yearbook products.
In Jewelry, overall ring sales in the high school and college markets
increased about 5 percent. In high school, the number of class rings sold
increased by 5 percent, led by healthy consumer acceptance of specially designed
rings for the graduating classes of 1999, 2000 and 2001, the "millennium
classes". Results through December 1997 put the company on track for a fourth
straight year of unit-volume improvement after a 12-year decline.
In Graduation Products, the average sales dollars per customer and the
number of customers who purchased products increased in calendar 1997. The
business also continued a product and process simplification effort, completing
those activities in the cap and gown product line.
In Photography, sales increased 4.6 percent to $25.5 million, compared with
$24.4 million in calendar 1996. The 1997 sales growth was predominately due to
volume increases in new retail sites. Despite the sales increase, profitability
slipped due to manufacturing cost overruns, as well as higher than expected
start-up costs associated with some company-operated retail sites.
Jostens Canada sales were $38.7 million, compared with $40 million in the
year-earlier period. The decline primarily resulted from strikes by Ontario
school teachers and the Canadian postal service, which hindered the company's
ability to take and ship orders in the peak fall season. Jostens has closed two
facilities in Canada, a ring manufacturing plant in Winnipeg, Manitoba, in
calendar 1996 and a photography facility in Montreal in calendar 1997.
Production from both plants was transferred to other Jostens facilities.
Operating profit for the School Products segment was $107.5 million and
$85.3 million in calendar years 1997 and 1996, respectively. The 26 percent
increase resulted primarily from increased sales, the new inventory cost
accounting system implemented in 1996, and the gold inventory reduction program.
The increase in profits was partially offset by training costs associated with a
new facility in Mexico, as well as costs associated with consolidating the
company's two graduation announcement facilities.
18
<PAGE>
RECOGNITION SEGMENT Recognition sales increased 2.3 percent to $103.7
million, compared with sales in calendar 1996 of $101.3 million. The business
gained new accounts and sales volume with a new Strategic Recognition program
concept, with high-profile account wins in professional sports and with the
introduction of jewelry products for fans of sports teams. These gains were
largely offset by declines in the sale of individual products to corporate
accounts.
Operating profit for the Recognition segment was $8.9 million and $3
million in calendar years 1997 and 1996, respectively. The increase was
primarily attributed to the calendar year 1997 gold reduction program, as well
as a $6 million environmental liability charge in calendar 1996.
YEAR ENDED JUNE 30, 1996, COMPARED WITH YEAR ENDED JUNE 30, 1995
Sales from continuing operations increased 4.5 percent in the year ended
June 30, 1996 (fiscal 1996), to $695.1 million from $665.1 million in the year
ended June 30, 1995 (fiscal 1995). The fiscal 1996 sales increase was driven by
gains in the company's three largest business lines Printing & Publishing,
Jewelry and Graduation Products. There were minimal price increases in fiscal
1996, reflecting a continued effort to minimize price increases. Gross margin in
fiscal 1996 was 52.2 percent, compared with 52.8 percent in fiscal 1995. The
margin decline in fiscal 1996 resulted from higher than expected manufacturing
costs incurred to handle record page volume and meet yearbook delivery
commitments as sales volumes shifted to the June quarter.
Selling and administrative expenses increased to $268.1 million in fiscal
1996 from $256.8 million in fiscal 1995. The fiscal 1996 increase in selling and
administrative expenses was primarily due to planned investments in the
businesses, including marketing materials, business development and pilot
projects for new business, as well as increased commission rates for class rings
and graduation products. As a percentage of sales, these expenses remained
consistent at 38.6 percent in fiscal 1996 and fiscal 1995.
In September 1995, the company repurchased 7 million shares of its common
stock for $169.3 million through a Modified Dutch Auction tender offer. The
repurchase was funded from the company's cash and short-term investment balance,
as well as short-term borrowings. The result was an increase in fiscal 1996
interest expense of $4 million. In addition, interest income decreased $2.6
million from fiscal 1995 due to lower cash balances following the share
repurchase.
Net income in fiscal 1996 was $51.6 million, compared with $50.4 million in
fiscal 1995. Basic earnings per share were $1.29 ($1.28 diluted) in fiscal 1996,
compared with $1.11 ($1.10 diluted) in fiscal 1995. Earnings per share from
continuing operations prior to the change in accounting principle and
discontinued operations were $1.29 ($1.28 diluted) in fiscal 1996 and $1.23
($1.22 diluted) in fiscal 1995.
SCHOOL PRODUCTS SEGMENT. Sales in this segment increased 5.3 percent to
$594.9 million in fiscal 1996, compared with $565 million in fiscal 1995. Record
sales were recorded in the Printing & Publishing ($217.2 million), Jewelry
($166.4 million) and Graduation Products ($138.5 million) businesses in fiscal
1996.
Printing & Publishing produced a record number of yearbook pages in fiscal
1996, reflecting success at retaining current accounts and winning new accounts.
This business also successfully positioned itself as the preferred yearbook
supplier in the industry, based on customer surveys.
In Jewelry, nearly 10 percent more high school rings were sold in fiscal
1996 than fiscal 1995, and the number of rings sold overall increased nearly 12
percent in 1996. Much of the unit gain resulted from newly repositioned ring
programs, including a high school program introduced nationwide in 1996.
19
<PAGE>
In Graduation Products, sales growth was driven by an increase in the
number of customers who purchased products and by an increase in the average
sales dollars per customer.
U.S. Photography sales were $23.4 million, a 3 percent decline from fiscal
1995, due to the loss of a large wholesale dealer and about 50 school accounts.
However, efforts to build closer ties between Photography and Printing &
Publishing resulted in about $1 million in new photography sales in fiscal 1996.
Jostens Canada sales were $40.6 million, compared with $41.7 million in
fiscal 1995. The decline resulted from fewer graduation portrait orders and from
a slightly lower percentage of students buying school photo packages. Currency
exchange rate fluctuations partially offset the sales decline.
The School Products segment's fiscal 1996 operating profit was $107.6
million, essentially flat with fiscal 1995 levels, despite record sales volumes
in its main business lines. Increased selling and administrative expenses offset
sales increases as the company invested in marketing materials, business
development and pilot projects for new business, as well as increased commission
rates for class rings and graduation products. Operating profit in fiscal 1996
was also affected by lower gross margins associated with sales volumes shifting
to the June quarter.
RECOGNITION SEGMENT Sales were $100.2 million, compared with $100.1 million
in fiscal 1995.
Operating profit increased 102 percent to $9.5 million in fiscal 1996,
compared with $4.7 million in fiscal 1995. The fiscal 1996 operating profit
increase reflected successful efforts to simplify work processes, reduce costs
and lower the costs associated with carrying slow-moving and excess inventories.
Additionally, fiscal 1995 operating profit was impacted by charges to establish
an environmental reserve and abandon a unique computer system.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities, short-term borrowings and, in
fiscal 1995, net proceeds from the sale of discontinued operations, have been
Jostens' principal sources of liquidity. Cash has been used primarily for
dividends, capital expenditures, the purchase of Gold Lance in calendar 1997,
share repurchases and the repayment of $50 million medium-term notes in calendar
1996.
Operating activities generated cash of $120.8 million in calendar 1997
primarily due to net income adjusted for depreciation, amortization and deferred
taxes ($75.9 million), an increase in customer deposits ($22.6 million) and
other working capital reductions.
Compared with calendar 1996, the company generated $22.3 million more cash
from operating activities in calendar 1997. This increase related primarily to a
$7.7 million increase in net income adjusted for depreciation, amortization and
deferred taxes, and by cash generated ($14.6 million) as a result of
management's working capital reduction efforts.
The decrease in cash provided from operating activities in fiscal 1996 over
fiscal 1995 was primarily attributable to decreases in restructuring reserves
and retained liabilities related to discontinued operations ($21.5 million) and
the pension liability ($8.1 million), along with increases in the levels of
accounts receivable ($10.4 million) and inventory ($8.2 million) balances. The
accounts receivable increase was driven by sales volumes shifting to the fourth
quarter as manufacturing efficiencies enabled the company to produce products
closer to customer-selected delivery dates. The increase in inventory was
primarily related to additional raw materials in the cap and gown business in
anticipation of a new product offering in 1997.
20
<PAGE>
While operating cash flows were sufficient to fund capital expenditures and
cash dividends in fiscal 1995, the company returned to its typical need for
seasonal short-term borrowings beginning in fiscal 1996 following the $169.3
million share repurchase. Because most of the company's sales volume occurs in
quarters ending in December and June, Jostens usually requires interim financing
of inventories and receivables. The company has a $180 million, five-year bank
credit agreement. Credit available for borrowing is reduced by commercial paper
borrowings outstanding. At January 3, 1998, $130 million was available under the
bank credit agreement as a result of $50 million in outstanding commercial paper
borrowings. In addition, the company had available unsecured demand facilities
with three banks totaling $84.6 million at January 3, 1998. These demand
facilities are renegotiated periodically based on the anticipated seasonal needs
for short-term financing. There were no borrowings outstanding under these
demand facilities at January 3, 1998.
Average short-term borrowing was $94.4 million in calendar 1997, $109
million in the 1996 transition period, $68.4 million in fiscal 1996 and zero in
fiscal 1995, with highs of $143 million in calendar 1997, $164 million in the
1996 transition period and $127 million in fiscal 1996. In fiscal 1995, the
company's strong cash position, which resulted primarily from the net proceeds
from the sale of discontinued operations, eliminated the need for short-term
borrowing. As planned, short-term financing resumed in fiscal 1996 as the
company returned $169.3 million to shareholders through the September 1995 share
repurchase.
Management believes that cash generated from operating activities, together
with credit available under the bank credit agreement and demand facilities,
will be sufficient to fund planned capital expenditures, dividends and seasonal
build-ups of inventories and accounts receivable in 1998.
CAPITAL EXPENDITURES, PRODUCT DEVELOPMENT AND ACQUISITION
The company invested $24.4 million in capital expenditures in calendar
1997, compared with $16.9 million in calendar 1996. The largest investments in
calendar 1997 were to upgrade processes and yearbook printing technology and to
enhance certain management information and communication systems. Capital
expenditures in fiscal 1996 were $15.4 million, compared with $19.1 million in
fiscal 1995. Approximately $38 million in capital projects are planned for 1998,
including approximately $19 million to install and implement common, integrated
systems in School Products, Recognition and corporate. The projects are expected
to be funded internally.
The company purchased the Gold Lance class ring brand from Town & Country
Corporation for $9.5 million in cash on July 31, 1997. Under the terms of the
agreement, the company purchased the Gold Lance name, accounts and notes
receivable, and tooling. The company also incurred $383,000 of direct,
acquisition-related costs, which were capitalized as part of the purchase price.
The acquisition was recorded using the purchase method of accounting, which
resulted in the recording of $5.9 million of goodwill that is being amortized
over 10 years.
YEAR 2000 CONVERSION COSTS
Management has initiated a companywide program to prepare the company's
computer systems and applications, microprocessor-driven equipment, external
relationships and customers for the year 2000. Both internal and external
resources are being utilized to implement new software and integrate the
company's systems. Those systems that will not be replaced before the year 2000
are being modified to make them year-2000 compliant. The total year 2000 project
cost is estimated at $50 million, which includes $35 million to purchase and
implement new software that will be capitalized
21
<PAGE>
as part of the companywide systems replacement program and $15 million that will
be expensed as incurred. Through calendar 1997, the company incurred
approximately $7 million ($5.6 million capitalized), primarily to assess systems
replacement program requirements, develop a modification plan and purchase new
hardware and software.
The project is estimated to be completed not later than October 1999, which
is prior to any anticipated impact on its operating systems. The company
believes that with modifications to existing software and conversions to new
software, the year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made on time, the year 2000 issue could have a material impact on the operations
of the company.
The costs of the project and the date when the company believes it will
complete the year 2000 modifications are based on managements 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, and similar uncertainties.
DIVIDENDS
The company paid $34.2 million to shareholders in calendar 1997 and $34.1
million in calendar 1996. In fiscal 1996, $35.5 million in cash dividends were
paid to shareholders, compared with $40 million in fiscal 1995. Dividends
declared in calendar 1997 were 88 cents per share verses 66 cents per share in
calendar 1996. The year-to-year increase was due to the timing of declarations.
The annual dividend was 88 cents per share in fiscal 1996 and 1995.
COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL As part of its 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 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 January 3, 1998, the company had identified
three sites requiring further investigation. However, the company has not been
designated as a potentially responsible party at any site.
During the six-month period ending December 28, 1996, the company adopted
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 $1million to $9
million; $6.6 million had been accrued. As of January 3, 1998, the company had
made payments of $1.3 million, bringing the reserve balance to $5.3 million. The
current portion of the reserve ($1.3 million) is included with "other accrued
liabilities" on the consolidated balance sheets, while the long-term portion ($4
million) is included with "other noncurrent liabilities."
While Jostens may have a right of contribution or reimbursement under
insurance policies, amounts recoverable from other entities with respect to a
particular site are not considered until recoveries are deemed probable. No
assets for potential recoveries were established as of January 3, 1998.
22
<PAGE>
SALES FORCE For 52 sales representatives who served the college market in
the Jewelry and Graduation Products businesses, the company changed their
contract status from independent sales representatives to company employees
effective July 1, 1997. As of July 1, all college sales positions were filled
either with incumbents or new sales professionals. The change from independent
representatives to employees was made to better enable the company to address
market needs and strengthen its market position.
The previous independent agent contracts called for a transition
commission, which historically was paid by the new sales representatives who
assumed responsibility for the accounts of the outgoing representative, with the
company acting as a collection agent. College sales representatives who elected
to become Jostens employees forfeited their right to the transition commission
in exchange for participation in a newly created severance plan and other
employee benefit programs. As a result, the company will ratably recognize about
$4 million of severance costs over these representatives' estimated average
remaining service period of five years. During calendar 1997, the company
recognized $358,000 of these severance costs.
Representatives who elected not to become employees will receive estimated
future transition payments from the company of $5.5 million in exchange for
helping to transition and retain existing business and for signing agreements
not to compete. These costs will be ratably recognized as a charge to operations
over the individual noncompete periods, typically three years. Calendar 1997
costs associated with nonemployee representatives were $763,000.
Management expects payments in future years relating to the severance plan
and transition payments to be partially offset by reduced operating costs.
Management also believes the change in contractual relationship will have
positive business results and the associated liabilities will not have a
material negative impact in the future.
The company, in calendar 1997, also communicated contractual changes and
policy clarifications to the approximately 350 independent sales representatives
who serve the high school Jewelry and Graduation Products market. The changes,
which took effect July 1, 1997 and do not affect the representatives independent
status, are intended to better align the interests of the sales force with the
company's interests.
DISCONTINUED OPERATIONS
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 January 3, 1998, the
entire $13 million was 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 Leveraged
Entity. In the second quarter of fiscal 1996, the
23
<PAGE>
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 JLC's efforts in 1996 to raise additional equity
capital for ongoing cash requirements, JLC requested that the company
restructure its interests in JLC. On November 8, 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 on 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 31, 1998, 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, as the $4 million reduction in the note receivables 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 has
incurred losses since the sale in 1995, however, the company believes that the
carrying value is not impaired based on current facts and circumstances.
PLANT CONSOLIDATION
In March 1997, the company announced it would close its Porterville,
Calif., graduation announcement facility and transfer all operations to the
company's announcement plant in Shelbyville, Tenn. As a result, the company
recorded a pre-tax charge to operations of $3 million in the first quarter of
1997, primarily to accrue for severance and other employee-related costs,
generally expected to be incurred over the following 12 months. As of January 3,
1998, the accrual decreased by $2.6 million due to incurred costs of $2.2
million and revisions to the initial estimate of $438,000.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income, and SFAS No. 131, Disclosure about Segment of an
Enterprise and Related Information. SFAS No. 130 establishes standards for
reporting and presenting comprehensive income and its components. SFAS No. 131
establishes standards for defining operating segments and reporting certain
information regarding operating segments. The company does not believe that
either statement will have a material impact on the financial statements since
both standards are for informational purposes only. If the company determines
that it has a reporting obligation under either new standard, the necessary
information will be disclosed as part of the company's financial reporting when
effective.
24
<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 managements 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, composed 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/ Willian N. Priesmeyer
- ----------------------------------
William N. Priesmeyer
Senior Vice President and Chief Financial Officer
/s/ Robert C. Buhrmaster
- ----------------------------------
Robert C. Buhrmaster,
President and Chief Executive Officer
Minneapolis, Minn., February 2, 1998
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Jostens, Inc.: We have audited the accompanying
consolidated balance sheets of Jostens, Inc. and subsidiaries as of January 3,
1998 and December 28, 1996, and the related consolidated statements of
operations, changes in shareholders' investment and cash flows for the year
ended January 3, 1998, the six-month period ended December 28, 1996, and the
years ended June 30, 1996 and 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jostens, Inc.
and subsidiaries as of January 3 1998, and December 28, 1996 and the
consolidated results of their operations and cash flows for the year ended
January 3, 1998, the six month period ended December 28, 1996 and the years
ended June 30, 1996 and 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to the financial statements, the company changed
its method of accounting for postemployment benefits during the year ended June
30, 1995.
/s/ Ernst & Young LLP
- ----------------------------------
Ernst & Young LLP
Minneapolis, Minn., February 2, 1998
25
<PAGE>
STATEMENTS OF CONSOLIDATED OPERATIONS
JOSTENS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years ended Six months ended Years ended
--------------------------- ----------------- ----------------
January 3 December 28 December 28 June 30
1998 1996 1996 1996 1995
In thousands, except per-share data (unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 742,479 $ 708,734 $ 277,118 $ 695,149 $ 665,099
Cost of Products Sold 351,290 353,938 141,493 332,212 313,659
- ------------------------------------------------------------------------------------------------------------
391,189 354,796 135,625 362,937 351,440
Selling and Administrative Expenses 291,527 282,870 131,473 268,135 256,822
- ------------------------------------------------------------------------------------------------------------
OPERATING INCOME 99,662 71,926 4,152 94,802 94,618
Interest Income 587 370 204 2,080 4,727
Interest Expense (6,866) (9,343) (4,330) (9,403) (5,452)
- ------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 93,383 62,953 26 87,479 93,893
Income Taxes 36,200 26,617 829 35,854 38,027
- ------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 57,183 36,336 (803) 51,625 55,866
LOSS FROM DISCONTINUED OPERATIONS,
NET OF TAX -- -- -- -- (4,864)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX -- -- -- -- (634)
- ------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 57,183 $ 36,336 $ (803) $ 51,625 $ 50,368
============================================================================================================
BASIC EARNINGS (LOSS) PER COMMON SHARE
Continuing Operations $ 1.47 $ 0.94 $ (0.02) $ 1.29 $ 1.23
Loss from Discontinued Operations -- -- -- -- (0.11)
Cumulative Effect of Change
In Accounting Principle -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1.47 $ 0.94 $ (0.02) $ 1.29 $ 1.11
============================================================================================================
SHARES USED TO COMPUTE BASIC
PER-SHARE AMOUNTS 38,773 38,639 38,647 40,157 45,492
- ------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Continuing Operations $ 1.47 $ 0.94 $ (0.02) $ 1.28 $ 1.22
Loss From Discontinued Operations -- -- -- -- (0.11)
Cumulative Effect of Change
In Accounting Principle -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1.47 $ 0.94 $ (0.02) $ 1.28 $ 1.10
============================================================================================================
SHARES USED TO COMPUTE DILUTED
PER-SHARE AMOUNTS 38,969 38,815 38,763 40,337 45,588
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
26
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
JOSTENS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years ended Six months ended Years ended
--------------------------- ----------------- ----------------
January 3 December 28 December 28 June 30
1998 1996 1996 1996 1995
In thousands, except per-share data (unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 57,183 $ 36,336 $ (803) $ 51,625 $ 50,368
Depreciation 19,845 15,962 8,992 14,999 18,357
Amortization 2,297 1,726 942 1,558 9,982
Deferred Income Taxes (3,403) 14,158 6,929 7,229 607
CHANGES IN ASSETS AND LIABILITIES, NET
OF EFFECTS FROM SALE OF
DISCONTINUED OPERATIONS:
Accounts Receivable (651) (6,409) 22,844 (10,401) (1,303)
Inventories 6,431 18,103 (19,525) (8,157) 2,436
Prepaid Expenses and
Other Current Assets (602) (6,041) (7,400) 993 434
Accounts Payable 6,206 6,887 8,071 460 (11,009)
Other 33,485 17,744 (17,285) (29,431) 11,070
- ------------------------------------------------------------------------------------------------------------
120,791 98,466 2,765 28,875 80,942
- ------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital Expenditures (24,381) (16,864) (9,897) (15,371) (19,142)
Software Development Costs (JLC) -- -- -- -- (9,560)
Business Acquisition (9,883) -- -- -- --
Net Proceeds From Sale of
Discontinued Operations -- -- -- 1,813 49,471
Other -- -- -- -- 4,074
- ------------------------------------------------------------------------------------------------------------
(34,264) (16,864) (9,897) (13,558) 24,843
- ------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Cash Dividends (34,198) (34,135) (17,011) (35,515) (40,000)
Exercise of Stock Options 11,926 625 168 2,136 225
Short-term Borrowing (40,938) (1,420) 63,325 27,587 --
Reduction in Long-term Debt (281) (50,018) (50,018) (355) (368)
Share Repurchase (20,000) -- -- (169,332) --
Other 393 -- -- -- --
- ------------------------------------------------------------------------------------------------------------
(83,098) (84,948) (3,536) (175,479) (40,143)
- ------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND SHORT-TERM INVESTMENTS 3,429 (3,346) (10,668) (160,162) 65,642
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF PERIOD 2,639 5,985 13,307 173,469 107,827
- ------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS,
END OF PERIOD $ 6,068 $ 2,639 $ 2,639 $ 13,307 $ 173,469
============================================================================================================
CASH PAID DURING THE YEAR FOR:
Income Taxes $ 26,300 $ 28,800 $ 22,100 $ 34,300 $ 15,100
Interest 5,900 5,511 3,200 8,700 4,200
============================================================================================================
</TABLE>
See notes to consolidated financial statements
27
<PAGE>
CONSOLIDATED BALANCE SHEETS
JOSTENS INC. AND SUBSIDIARIES
January 3 December 28
Dollars in thousands, except per-share data 1998 1996
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Short-term investments $ 6,068 $ 2,639
Accounts receivable, net of
allowance of $7,446 and $6,884,
respectively 108,697 107,314
Inventories: Finished products 38,122 40,174
Work-in-process 29,388 28,176
Materials and supplies 24,552 30,143
- --------------------------------------------------------------------------------
92,062 98,493
Deferred income taxes 15,543 14,928
Other receivables, net of allowance
of $8,322 and $7,344, respectively 25,495 24,893
Prepaid expenses and other current assets 4,679 9,233
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 252,544 257,500
- --------------------------------------------------------------------------------
OTHER ASSETS
Intangibles, net 30,749 27,264
Note receivable, net of $35,044 discount and
$13,181 deferred gain 12,925 12,925
Noncurrent deferred income taxes 7,743 4,349
Other 12,631 14,166
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 64,048 58,704
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land 4,928 5,104
Buildings 35,500 36,868
Machinery and equipment 191,319 168,953
- --------------------------------------------------------------------------------
231,747 210,925
Accumulated depreciation and amortization (157,609) (143,282)
- --------------------------------------------------------------------------------
Total property and equipment 74,138 67,643
- --------------------------------------------------------------------------------
TOTAL ASSETS $390,730 $383,847
================================================================================
See notes to consolidated financial statements
28
<PAGE>
CONSOLIDATED BALANCE SHEETS
JOSTENS INC. AND SUBSIDIARIES
January 3 December 28
1998 1996
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable $ 49,974 $ 90,912
Accounts payable 30,553 24,347
Salaries, wages and commissions 38,668 32,583
Customer deposits 98,659 76,034
Income taxes 11,098 6,938
Other accrued liabilities 17,281 14,933
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 246,233 245,747
OTHER NONCURRENT LIABILITIES 17,404 25,487
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 263,637 271,234
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
January 3, 1998 -- 38,422;
December 28, 1996 -- 38,665 12,853 12,888
Capital surplus -- 1,480
Retained earnings 118,386 101,567
Foreign currency translation adjustment (4,146) (3,322)
- --------------------------------------------------------------------------------
TOTAL SHAREHOLDERS INVESTMENT 127,093 112,613
- --------------------------------------------------------------------------------
$ 390,730 $ 383,847
================================================================================
29
<PAGE>
STATEMENTS OF CONSOLIDATED CHANGES IN SHAREHOLDERS INVESTMENT
JOSTENS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Foreign
currency
Common shares Capital Retained translation
Dollars in thousands, except per-share data Number Amount surplus earnings adjustment Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1994 45,482 $15,160 $152,996 $ 92,855 $(4,430) $256,581
Stock options and restricted stock net 1,414 1,414
Net income 50,368 50,368
Cash dividends declared of $.88 per share (40,000) (40,000)
Change in cumulative translation adjustment 260 260
Adjustment in minimum pension liability 1,990 1,990
- ----------------------------------------------------------------------------------------------------------------
BALANCE JUNE 30, 1995 45,482 15,160 154,410 105,213 (4,170) 270,613
Stock options and restricted stock net 182 61 1,903 1,964
Share repurchase (7,011) (2,337) (155,168) (11,827) (169,332)
Net income 51,625 51,625
Cash dividends declared of $.88 per share (34,015) (34,015)
Tax benefit of stock options 171 171
Change in cumulative translation adjustment 899 899
Adjustment in minimum pension liability (124) (124)
- ----------------------------------------------------------------------------------------------------------------
BALANCE JUNE 30, 1996 38,653 12,884 1,316 110,872 (3,271) 121,801
Stock options and restricted stock net 12 4 164 168
Net loss (803) (803)
Cash dividends declared of $.22 per share (8,506) (8,506)
Change in cumulative translation adjustment (51) (51)
Adjustment in minimum pension liability 4 4
- ----------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 28, 1996 38,665 12,888 1,480 101,567 (3,322) 112,613
Stock options and restricted stock net 584 241 11,452 11,693
Share repurchase (827) (276) (14,430) (5,294) (20,000)
Net income 57,183 57,183
Cash dividends declared of $.88 per share (34,198) (34,198)
Tax benefit of stock options 1,498 1,498
Change in cumulative translation adjustment (824) (824)
Adjustment in minimum pension liability (872) (872)
- ----------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 3, 1998 38,422 $12,853 $ -- $118,386 $(4,146) $127,093
================================================================================================================
</TABLE>
See notes to consolidated financial statements
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JOSTENS INC. AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS OVERVIEW Jostens provides products and services that help people
recognize achievement and affiliation throughout their lives. The company's
products include yearbooks, class rings, graduation products, school photography
and service and achievement awards for businesses.
FISCAL YEAR In October 1996, the company elected to change its fiscal year
end from June 30 to the 52- or 53-week period ending the Saturday closest to
December 31, effective December 29, 1996. The change was made to enable better
business planning and internal management. The Consolidated Financial Statements
and Notes include the company's results of operations and cash flows for the
years ended January 3, 1998, and December 28, 1996 (unaudited); the six-month
transition period ended December 28, 1996; and fiscal years ended June 30, 1996
and 1995. Calendar 1997 consists of 53 weeks, while calendar 1996 and fiscal
years 1996 and 1995 consist of 52 weeks.
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.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. The most
significant areas that require the use of managements estimates relate to the
allowance for uncollectible receivables, inventory reserves, sales returns,
warranty costs, environmental reserves, valuation of intangibles and deferred
income tax valuations.
CASH AND SHORT-TERM INVESTMENTS 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 and are considered cash equivalents.
All investments in debt securities have an original maturity of three months or
less and are considered to be held to maturity. The short-term securities are
carried at amortized cost, which approximates fair value. Negative cash balances
of $14.1 million and $9.4 million at January 3, 1998, and December 28, 1996,
respectively, have been reclassified to "accounts payable" on the consolidated
balance sheets.
INVENTORIES In July 1996, the company implemented a new inventory cost
accounting system, which provides more precise, detailed performance information
by product within each line. The new system results in a more accurate valuation
of inventories and recording of cost of products sold during the individual
quarters, consistent with the manner used to value inventory at previous June
year ends. As a result of this implementation, cost of products sold reported
during the six months ended December 28, 1996, was $16.9 million (26 cents per
share) higher than what would have been reported using the prior method, while
cost of products sold in the six months ended June 28, 1997, had an equally
positive impact. Implementation of the new cost accounting system does not
impact the comparability of reported cost of products sold or earnings per share
for the six months ended January 3, 1998, since the new cost accounting system
was in place for both the 1997 and 1996 periods.
31
<PAGE>
Inventories are stated at the lower of cost or market. Cost is primarily
determined using standard costs, which approximate costs utilizing the first-in,
first-out (FIFO) method. Gold and certain other precious metal inventories
aggregating $677,000 at January 3, 1998, and $3.8 million at December 28, 1996,
are stated at the lower of last-in, first-out (LIFO) cost or market, and are
$6.8 and $15 million lower in the respective periods than such inventories
determined under the lower of FIFO cost or market. During the year ended January
3, 1998, gold inventory quantities were reduced, which caused a liquidation of
LIFO inventory values. The liquidation increased net income by $6.8 million (10
cents per share).
INVENTORY OBSOLESCENCE The company uses a systematic methodology that
includes quarterly evaluations of inventory, based upon business trends, to
specifically identify obsolete, slow-moving and nonsalable inventory. Inventory
reserves are evaluated quarterly to ensure they reflect the current business
environment and trends.
INTANGIBLES Intangibles primarily represent the excess of the purchase
price over the fair value of the net tangible assets of acquired businesses and
are amortized over various periods of up to 40 years. Accumulated amortization
at January 3, 1998, and December 28, 1996, was $19.3 million and $17 million,
respectively. The carrying value of intangible assets is assessed semiannually,
or more often when factors indicate an impairment. The company employs an
undiscounted cash flow method to assess these assets. The intangible balance
also includes the intangible asset related to additional minimum pension
liability of $1.4 million and $1.6 million at January 3, 1998, and December 28,
1996, respectively.
PROPERTY AND EQUIPMENT Property and equipment are carried at cost.
Depreciation and amortization on buildings, machinery and equipment and
purchased software, including software implementation costs, is provided
principally on the straight-line method for financial reporting purposes over
their estimated useful lives: buildings, 15 to 40 years; machinery and
equipment, three to 10 years; purchased software, two to five years. The
carrying value of property, equipment and purchased software is assessed when
circumstances indicate that their carrying value may be impaired or not
recoverable. The company determines such impairment by measuring undiscounted
future cash flows. If an impairment is present, the assets are reported at fair
value.
Beginning in fiscal 1996, the company capitalized certain software
implementation costs. Prior to 1996, such costs were not significant.
Implementation costs are expensed until the company has determined that the
software will result in probable future economic benefits and management has
committed to funding the project. Thereafter, all direct implementation costs
and purchased software costs are capitalized and amortized using the
straight-line method over the remaining estimated useful lives, not exceeding
five years.
INCOME TAXES The company records income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
This statement requires the use of the asset and liability method of accounting
for income taxes. Deferred taxes are recognized for the estimated taxes
ultimately payable or recoverable based on enacted tax law. Changes in enacted
tax rates are reflected in the tax provision as they occur.
SALES, SALES RETURNS AND WARRANTY COSTS Sales are recognized when product
is shipped. Provisions for sales returns and warranty costs are recorded at the
time of sale based on historical information and current trends.
FOREIGN CURRENCY The company enters into foreign currency forward contracts
to hedge purchases of inventory in foreign currency. The purpose of these
hedging activities is to protect the company from the risk that inventory
purchases denominated in foreign currency will be adversely affected by changes
in foreign currency rates. All
32
<PAGE>
contracts at January 3, 1998, mature within one year and are held for purposes
other than trading. The amount of contracts outstanding at January 3, 1998, and
December 28, 1996, were $2.4 and $4 million, respectively. The company is
exposed to credit loss in the event of nonperformance by counterparties on
foreign exchange forward contracts. Jostens does not anticipate nonperformance
by any of these counterparties. The amount of this credit exposure is generally
limited to unrealized gains on the contracts. At January 3, 1998, and December
28, 1996, there were no material unrealized gains or losses on outstanding
foreign currency forward contracts.
Assets and liabilities denominated in foreign currency are translated at
the current exchange rate as of the balance sheet date, and income statement
amounts are translated at the average monthly exchange rate. Translation
adjustments resulting from fluctuations in exchange rates are recorded in a
separate component of equity. Realized and unrealized gains and losses on
foreign currency forward contracts used to purchase inventory with no firm
purchase commitments are recognized currently in net income because they do not
qualify as hedges for accounting purposes. Realized and unrealized gains and
losses on forward contracts used to purchase inventory for which the company has
firm purchase commitments qualify as accounting hedges and are therefore
deferred and recognized in income when the inventory is sold.
EARNINGS PER COMMON SHARE The company adopted SFAS No. 128, Earnings Per
Share, in the fourth quarter of calendar 1997. Adopting this statement 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 basic earnings per share. The adoption
of SFAS No. 128 did not have a material impact on earnings per share, as
indicated below:
<TABLE>
<CAPTION>
Year ended Jan. 3, 1998 Year ended Dec. 28, 1996 Six-months ended Dec. 28, 1996
---------------------------- --------------------------- --------------------------------
In thousands, except Per-share Per-share Per-share
per-share data Income Shares amount Income Shares amount Income Shares amount
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Net income (loss) $57,183 38,773 $1.47 $36,336 38,639 $0.94 $(803) 38,647 $(0.02)
- --------------------------------------------------------------------------------------------------------------------
Effect of
dilutive securities
Options 196 133 90
Awards -- 43 26
- --------------------------------------------------------------------------------------------------------------------
Diluted EPS
Net income (loss) $57,183 38,969 $1.47 $36,336 38,815 $0.94 $(803) 38,763 $(0.02)
====================================================================================================================
Year ended June 30, 1996 Year ended June 30, 1995
--------------------------- ---------------------------------
Per-share Per-share
In thousands, except per-share data Income Shares amount Income Shares amount
- --------------------------------------------------------------------------------------------------------------------
Basic EPS
Income $51,625 40,157 $1.29 $50,368 45,492 $1.11
- --------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities
Options 153 96
Awards 27
- --------------------------------------------------------------------------------------------------------------------
Diluted EPS
Net income $51,625 40,337 $1.28 $50,368 45,588 $1.10
====================================================================================================================
</TABLE>
33
<PAGE>
An insignificant number of restricted shares and stock options were excluded
from the weighted average shares outstanding because they would have an
anti-dilutive effect.
POSTEMPLOYMENT BENEFITS In the first quarter of fiscal 1995, the company
adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits.
Adopting this statement resulted in a $1.1 million ($600,000 after tax) charge
to operations.
NEW ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131,
Disclosure about Segment of an Enterprise and Related Information. SFAS No. 130
establishes standards for reporting and presenting comprehensive income and its
components. SFAS No. 131 establishes standards for defining operating segments
and reporting certain information regarding operating segments. The company does
not believe that either statement will have a material impact on the financial
statements since both standards are for informational purposes only. If the
company determines that it has a reporting obligation under either new standard,
the necessary information will be disclosed as part of the company's financial
reporting when effective.
RECLASSIFICATION Certain balances at December 28, 1996, and June 30, 1996
and 1995, have been reclassified to conform to the January 3, 1998,
presentation.
BORROWINGS
The company has a $180 million, five-year bank credit agreement that
expires in December 2000. Credit available under the agreement is reduced by
commercial paper borrowings outstanding. Annual fees and interest on borrowings
are based on the company's commercial paper rating. Annual fees range from 0.075
percent to 0.15 percent of the commitment. Under the restrictive covenants of
the agreement, the company must maintain a defined minimum interest coverage
ratio and a maximum leverage ratio. At January 3, 1998, $130 million was
available under the bank credit agreement.
Amounts related to the company's commercial paper program follow:
<TABLE>
<CAPTION>
Years ended (unaudited) Six months ended Year ended
Dollars in millions January 3, December 28, June 30, June 30,
1998 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at end of period $ 50 $90.9 $90.9 $27.6
Weighted average interest rate 6.2% 5.9% 6.0% 5.6%
Maximum outstanding during the period $ 143 $ 164 $ 164 $ 127
Average borrowing level during the period $94.4 $90.8 $ 109 $68.4
</TABLE>
Commercial paper outstanding is due within 90 days and is included in notes
payable in the consolidated balance sheets.
In addition, the company had available at January 3, 1998, unsecured demand
facilities with three banks totaling $84.6 million. Such credit arrangements are
renegotiated periodically based on the anticipated seasonal needs for short-term
financing.
In October 1997, the company entered into a 12-month interest rate swap
agreement that commenced on December 29, 1997, as a means of managing its
interest rate risk. Under the terms of the agreement, the company pays interest
at a rate of 5.89 percent and receives interest weekly at a floating rate equal
to the seven-day U.S. commercial paper rate, without the exchange of the
underlying notional amount upon which the payments are based. The notional
amount of the agreement changes weekly based on the
34
<PAGE>
company's planned borrowing needs and ranges from $35 million to $85 million.
The difference to be paid or received from counterparties as interest rates
change will be included in other liabilities or assets, with the corresponding
amount accrued and recognized as an adjustment of interest expense related to
the debt. There were no material interest rate differences as of January 3,
1998.
The fair values of swap agreements are not recognized in the financial
statements. Gains and losses on terminations of interest rate swap agreements
are deferred as an adjustment to the carrying amount of the outstanding debt and
amortized as an adjustment to interest expense related to the debt over the
remaining term of the original contract life of the terminated swap agreement.
If a designated debt obligation is extinguished early, any realized or
unrealized gain or loss from the swap agreement would be recognized in income
during the same period as the debt extinguishment.
INCOME TAXES
Income (loss) from continuing operations before taxes, discontinued operations
and changes in accounting principle are as follows:
<TABLE>
<CAPTION>
Year ended Six months ended Years ended
Dollars in thousands January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic $88,275 $(3,585) $82,818 $87,009
Foreign 5,108 3,611 4,661 6,884
-----------------------------------------------------------------
$93,383 $ 26 $87,479 $93,893
=================================================================
</TABLE>
The components of the provision for income taxes attributable to earnings from
continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended Six months ended Years ended
Dollars in thousands January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal $30,227 $(6,943) $21,425 $23,272
State 6,864 (101) 5,385 5,198
Foreign 2,512 948 2,041 3,518
-----------------------------------------------------------------
39,603 (6,096) 28,851 31,988
Deferred (3,403) 6,925 7,003 6,039
-----------------------------------------------------------------
$36,200 $ 829 $35,854 $38,027
=================================================================
</TABLE>
The following summarizes the differences between income taxes computed at the
U.S. statutory rate and income tax expense from continuing operations for
financial reporting purposes:
<TABLE>
<CAPTION>
Year ended Six months ended Years ended
Dollars in thousands January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax at U.S. statutory rate $32,684 $ 9 $30,618 $32,862
State income taxes, net of
federal income tax benefit 4,223 (84) 4,012 3,682
Reduction in deferred
tax valuation allowance (2,030) -- --
All other, net 1,323 904 1,224 1,483
-----------------------------------------------------------------
$36,200 $829 $35,854 $38,027
=================================================================
</TABLE>
35
<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 liabilites and assests as of January 3, 1998, and
December 28, 1996, are as follows:
January 3 December 28
Dollars in thousands 1998 1996
- ------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES
Tax over book depreciation $(3,763) $(4,507)
Discount on note receivable -- (1,920)
Other, net (5,085) (4,381)
----------------------------
DEFERRED TAX LIABILITIES (8,848) (10,808)
----------------------------
DEFERRED TAX ASSETS
Reserves not recognized for tax purposes 12,489 14,287
Net operating loss and tax credit
carryforwards of acquired companies 1,844 3,905
Foreign tax credit carryforwards 2,915 2,464
Deferred gain on sale of Jostens Learning 5,908 5,908
Other, net 11,893 8,015
----------------------------
35,049 34,579
VALUATION ALLOWANCE (2,915) (4,494)
----------------------------
DEFERRED TAX ASSETS 32,134 30,085
----------------------------
NET DEFERRED TAX ASSET $23,286 $19,277
============================
At January 3, 1998, the company had net operating loss carryforwards (NOLs)
from business acquisitions of $3.5 million for federal income tax purposes that
expire in the years 1998 through 2002. In calendar 1997, the company reduced the
valuation reserve for certain of these NOLs related to the Photography business.
The company has initiated plans to consolidate two of its legal entities, which
management believes will allow the company to utilize the previously reserved
NOLs. The company also has research and experimentation and foreign tax credit
carryforwards of $3.5 million that expire in 1998 through 2002. The foreign tax
credits of $2.9 million and $2.5 million at January 3, 1998, and December 28,
1996, respectively, have been fully reserved.
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 current-year service. The projected benefit
obligation is the present value of benefits, assuming future compensation
levels, for services rendered to date.
36
<PAGE>
The components of pension expense follow:
<TABLE>
<CAPTION>
Year ended Six months ended Years ended
Dollars in thousands January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost $ 3,988 $1,899 $3,459 $3,366
Interest on projected
benefit obligation 8,346 4,061 7,737 7,447
Return on assets:
Actual gain (39,899) (5,910) (28,589) (7,556)
Deferred 28,246 479 18,830 (262)
Amortization (7) 28 137 243
--------------------------------------------------------------
PENSION COST $ 674 $557 $1,574 $3,238
==============================================================
</TABLE>
The funded status of the company's pension plans based on valuations as of
September 30 for each year follows:
January 3, 1998
-------------------------------------------
Plans whose assets Plans whose accrued
exceed benefits
accrued benefits exceed assets
-------------------------------------------
Vested benefit obligation $ 86,878 $16,976
Accumulated benefit obligation 90,754 17,736
Projected benefit obligation 98,819 18,851
Fair value of plan assets 167,246 --
- -----------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 68,427 (18,851)
Unrecognized net (gain) loss (52,100) 2,507
Unrecognized prior service cost 9,041 1,328
Unrecognized net (asset) obligation
at transition (5,169) 96
Adjustment required to recognize
miniumum liability -- (3,059)
- -----------------------------------------------------------------------------
NET PENSION ASSET (LIABILITY) IN
CONSOLIDATED BALANCE SHEETS $ 20,199 $(17,979)
=============================================================================
<TABLE>
<CAPTION>
December 28, 1996
---------------------------------------------
Plans whose assets Plans whose accrued
exceed benefits
In thousands accrued benefits exceed assets
---------------------------------------------
<S> <C> <C>
Vested benefit obligation $ 81,833 $ 15,710
Accumulated benefit obligation 85,537 16,435
Projected benefit obligation 93,270 17,430
Fair value of plan assets 125,857 --
- -------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 32,587 (17,430)
Unrecognized net (gain) loss (22,966) 1,019
Unrecognized prior service cost 9,132 1,568
Unrecognized net (asset)
obligation at transition (6,078) 110
Adjustment required to recognize
miniumum liability -- (1,767)
- -------------------------------------------------------------------------------
NET PENSION ASSET (LIABILITY) IN
CONSOLIDATED BALANCE SHEETS $ 12,675 $(16,500)
===============================================================================
</TABLE>
Plan assets consist primarily of corporate equity as well as corporate and U.S.
government debt and real estate. Corporate equity investments include the fair
value of the company's common stock of $5.3 million at January 3, 1998, and $4.5
million at December 28, 1996.
37
<PAGE>
The assumptions used in determining the components of pension expense and the
funded status follow:
<TABLE>
<CAPTION>
Year Ended Six Months Ended Years Ended
January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average discount rates 7.75% 7.75% 7.75% 8.00%
Rates of increase in compensation 5.00% 5.00% 5.00% 5.00%
Expected rate of return on assets 10.00% 10.00% 10.00% 8.75%
</TABLE>
The company's retirement savings plan, which covers substantially all nonunion
employees, provides for a matching contribution by the company on amounts,
limited to 6 percent of compensation, contributed by employees. The company's
contribution, in the form of Jostens common shares purchased in the open market,
was $2.3 million for the year ended January 3, 1998, $1.1 million for the
six-month period ended December 28, 1996, and $2.4 million for each of the two
fiscal years ended June 30, 1996 and 1995, representing 50 percent of eligible
employee contributions.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Jostens provides medical insurance benefits for substantially all retirees.
Employees who retired before June 30, 1993, 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 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. Postretirement benefit expense was $323,000 for the year ended January
3, 1998, $154,000 for the six months ended December 28, 1996, and $481,000 and
$60,000 for the fiscal years ended June 30, 1996 and 1995, respectively.
The accumulated postretirement benefit obligation, based on valuations as
of September 30, as of January 3, 1998, and December 28, 1996, are $6.9 million
and $7.1 million, respectively.
The assumptions used in determining the benefit obligation in the year
ended January 3, 1998, included a medical plan cost trend rate of 9 percent,
declining to 6 percent in 2002, and a weighted average discount rate of 7.75
percent. Assumptions used in the six-month period ended December 28, 1996,
included a medical plan cost trend rate of 10 percent, declining to 6 percent in
2002, and a weighted average discount rate of 7.75 percent. Fiscal 1996
assumptions included a medical plan cost trend rate of 12 percent, declining to
6 percent in the year 2002, and weighted average discount rate of 7.75 percent.
Fiscal 1995 assumptions included a medical plan cost trend rate of 13.4 percent,
declining to 7.9 percent in 2000, and a weighted average discount rate of 8
percent. 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 $279,000, with minimal
impact on interest cost and no impact on service cost since benefits for future
retirees are defined-dollar benefits unrelated to health care benefits.
Unrecognized net gains or losses in excess of 10 percent of the accumulated
postretirement benefit obligation are amortized over the average remaining
service period of active plan participants.
COMMITMENTS AND CONTINGENCIES
GOLD FORWARD CONTRACTS. Jostens has forward contracts of $11.4 million for
commitments to purchase gold that mature at various times in 1998.
LITIGATION Jostens is a party to litigation arising in the normal course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. Management believes the effect on the company's results of
38
<PAGE>
operations and financial position, if any, for the disposition of these matters
will not be material.
ENVIRONMENTAL As part of its environmental management program, the company
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 liability include,
among others, the following: whether the company had 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 January 3, 1998, the company had identified
three sites requiring further investigation. However, the company has not been
designated as a potentially responsible party at any site.
During the six-month period ending December 28, 1996, the company adopted
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 January 3, 1998, the company had
made payments of $1.3 million, bringing the reserve balance to $5.3 million. The
current portion of the reserve ($1.3 million) is included with "other accrued
liabilities" on the consolidated balance sheets, while the long-term portion ($4
million) is included with "other noncurrent liabilities."
While Jostens may have a right of contribution or reimbursement under
insurance policies, amounts recoverable from other entities with respect to a
particular site are not considered until recoveries are deemed probable. No
assets for potential recoveries were established as of January 3, 1998.
SALES FORCE For sales representatives' who serve the college market in the
Jewelry and Graduation Products businesses, the company changed their contract
status from independent sales representatives to company employees effective
July 1, 1997. The change from independent representatives to employees was made
to better enable the company to address market needs and strengthen its position
in the market.
These representatives previous contracts called for a transition
commission, which historically was paid by the new sales representatives who
assumed responsibility for the accounts of the outgoing representative, with the
company acting as a collection agent. College sales representatives who elected
to become Jostens employees forfeited their right to the transition commission
in exchange for participation in a newly created severance plan and other
employee benefit programs. As a result, the company will recognize approximately
$4 million of severance costs ratably over these representatives' estimated
average remaining service period of five years. As of January 3, 1998, the
company had recognized $358,000 of these severance costs. Representatives who
elected not to become employees will receive estimated future transition
payments from the company of $5.5 million in exchange for helping to transition
and retain existing business and for signing agreements not to compete. These
costs will be recognized as a charge to operations ratably over the individual
noncompete periods, generally three years. As of January 3, 1998, the company
had recognized $763,000 of these costs associated with nonemployee
representatives.
ACQUISITION
The company purchased the Gold Lance class ring brand from Town & Country
Corporation for $9.5 million in cash on July 31, 1997. Under the terms of the
agreement, the company purchased the Gold Lance name, accounts and notes
receivable, and tooling. The company also incurred $383,000
39
<PAGE>
of direct, acquisition-related costs, which were capitalized as part of the
purchase price. The acquisition was recorded using the purchase method of
accounting, which resulted in the recording of $5.9 million of goodwill that is
being amortized over 10 years.
SHAREHOLDERS' INVESTMENT
SHARE REPURCHASES In July 1997, the 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 January 3, 1998, the company had repurchased $20 million in
common shares. In September 1995, the company repurchased 7,011,108 shares of
its common stock, the maximum number of shares allowable for purchase, for
$169.3 million through a Modified Dutch Auction tender offer. The repurchase was
funded from the company's cash and short-term investment balance, and short-term
borrowings.
STOCK OPTIONS AND RESTRICTED STOCK Under stock option plans, the company
has granted to key employees options to purchase Jostens common shares at 100
percent of the market price on the dates the options are granted. One plan also
provides for increases in the number of shares available for future grants equal
to 1 percent of the outstanding common shares on July 1 of each year through
2002. The company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
employee stock options and long-term management incentive plans, which are
described below. Accordingly, no compensation cost has been recognized for these
plans. Had compensation cost for the company's stock option and long-term
management incentive plans been determined based on fair value at the grant
dates for awards under those plans consistent with the method of SFAS No. 123,
Accounting for Stock-Based Compensation, the company's net income and earnings
per share would have been affected as indicated by the pro-forma amounts
indicated below.
Six Months
Year Ended Ended Year Ended
Dollars in thousands, January 3 December 28 June 30
except per-share data 1998 1996 1996
- --------------------------------------------------------------------
Net income (loss)
As reported $57,183 $ (803) $51,625
Pro forma $56,800 $ (905) $51,500
- --------------------------------------------------------------------
Basic earnings per share
As reported $ 1.47 $(0.02) $ 1.29
Pro forma $ 1.46 $(0.02) $ 1.28
- --------------------------------------------------------------------
Diluted earnings per share
As reported $ 1.47 $(0.02) $ 1.28
Pro forma $ 1.46 $(0.02) $ 1.28
- --------------------------------------------------------------------
The pro-forma amounts indicated above reflect the amortization to expense
the estimated fair value of the stock awards over the awards' vesting period.
The effects of applying the fair value method of measuring compensation expense
for the year ended January 3, 1998, the six months ended December 28, 1996, and
fiscal 1996 are not likely to be representative of the effects for future years,
in part because the fair value method was applied only to stock options granted
after June 30, 1995.
40
<PAGE>
The weighted average fair values of options granted in the year ended
January 3, 1998, the six-month period ended December 28, 1996, and fiscal 1996
are $4.44, $3.01 and $4.18 per option, respectively. The company used weighted
average assumptions in the Black-Scholes option pricing model in estimating the
fair value of stock options at the date of grant, as shown in the chart on the
right:
Six Months
Year Ended Ended Year Ended
January 3 December 28 June 30
1998 1996 1996
- -------------------------------------------------------------------------
Risk-free interest rate 5.4% 6.2% 6.2%
Dividend yield 3.6% 4.7% 3.9%
Volatility factor of the
expected market price
of the company's common
stock 22% 20% 20%
Expected life of the
award (years) 4.7 5.2 5.2
- -------------------------------------------------------------------------
Following is a summary of stock option activity:
<TABLE>
<CAPTION>
Year ended Six-months ended Year ended Year ended
January 3, 1998 December 28, 1996 June 30, 1996 June 30, 1995
------------------------ ----------------------- ------------------------ ------------------------
In thousands, Weighted-average Weighted-average Weighted-average Weighted-average
except dollar amounts Shares exercise price Shares exercise price Shares exercise price Shares exercise price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding--
beginning of year 2,882 $22.13 2,751 $22.38 2,971 $22.39 2,400 $24.96
Granted 496 $24.69 192 $18.66 278 $22.61 822 $18.28
Exercised (581) $25.05 (26) $19.32 (163) $17.53 (28) $11.78
Forfeited (582) $25.14 (35) $24.95 (335) $25.04 (223) $23.94
- ----------------------------------------------------------------------------------------------------------------------------
Outstanding--
end of year 2,215 $22.31 2,882 $22.13 2,751 $22.38 2,971 $22.39
Exercisable at
end of year 969 $23.79 1,573 $24.73 1,491 $24.87 1,576 $24.77
Reserved for issuance 4,272 4,448 4,098 3,849
Available for
future grants 1,966 1,511 1,292 775
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
At January 3, 1998, the range of exercise prices on outstanding options are as
follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------------------------------- -------------------------------------
Range of Number outstanding Weighted average Weighted average Number exercisable Weighted average
exercise prices (in thousands) remaining life (in years) exercise price (in thousands) exercise price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16.56--$20.00 1,063 6.6 $18.22 415 $18.12
$20.01--$25.00 819 8.1 $24.21 221 $24.07
$25.01--$30.00 122 3.0 $26.16 122 $26.16
$30.01--$34.19 211 3.7 $33.26 211 $33.26
- -----------------------------------------------------------------------------------------------------------------------------
2,215 6.7 $22.31 969 $23.79
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
In fiscal 1995, certain members of the Jostens senior management team were
granted performance share units as part of a long-term management incentive
plan. Performance share units were tied directly to attaining specific financial
performance targets. Performance units that were awarded were converted into a
restricted stock award, which was subject to transfer and vesting restrictions
based upon continuous employment of the recipient. In addition, holders of
restricted shares had voting, liquidation and other rights with respect to these
shares and received dividends paid on common stock. A portion of these
performance share units were to be converted into restricted shares in each of
fiscal years 1995 and 1996 and the year ended January 3, 1998, contingent upon
achieving the financial performance targets established under the plan.
Performance share unit and restricted share activity under this plan are
summarized as follows:
Performance Restricted
In thousands Share Units Shares
- -------------------------------------------------------------------
BALANCES, JUNE 30, 1994 -- --
- -------------------------------------------------------------------
Granted 171,573 --
Converted (53,290) 53,290
- -------------------------------------------------------------------
BALANCES, JUNE 30, 1995 118,283 53,290
- -------------------------------------------------------------------
Granted 13,807 --
Canceled (77,144) --
Redeemed -- (5,141)
- -------------------------------------------------------------------
BALANCES, JUNE 30, 1996 54,946 48,149
- -------------------------------------------------------------------
Canceled (5,333) --
- -------------------------------------------------------------------
BALANCES, DECEMBER 28, 1996 49,613 48,149
- -------------------------------------------------------------------
Canceled (49,613) --
Lapse of restriction -- 48,149
- -------------------------------------------------------------------
BALANCES, JANUARY 3, 1998 -- --
===================================================================
In fiscal 1995, restricted shares were awarded under this plan as a result
of achieving 1995 performance share unit targets, resulting in $1.2 million in
expense in fiscal 1995. The company did not achieve the fiscal 1996 and calendar
1997 financial targets. As a result, the remaining outstanding performance share
units under this plan were canceled. In addition, certain participating
employees terminated their employment with the company in fiscal 1996, resulting
in the cancellation of additional performance share units and the redemption of
previously issued restricted shares.
In July 1997, a new management incentive plan was approved. Under the plan,
certain members of the senior management team will receive the market value of
up to 56,400 shares of Jostens common stock upon achieving specific financial
targets for the year ending January 2, 1999. If all or part of the award is
earned, participants will be paid 50 percent of the value of the award in cash
and 50 percent in unrestricted common stock of the company.
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 percent or more, or announces a tender offer for 25 percent or more,
of the company's common shares. If a person acquires at least 25 percent 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 percent discount. The rights, which expire in August
1998, may be redeemed by the company at a price of 1 cent per right at any time
prior to the 30th day after a person has acquired at least 20 percent of the
company's outstanding shares.
42
<PAGE>
BUSINESS SEGMENT INFORMATION
The company's operations are classified into two business segments:
school-based recognition products and services (School Products) and longevity
and performance recognition products and services for businesses (Recognition).
The School Products segment manufactures and sells products and services
including yearbooks, class rings, graduation products and student photography
packages, as well as customized products for university alumni and other
affinity groups.
Operations within the Recognition segment include the manufacture and sale
of customized sales, service and business achievement awards.
Income from continuing operations by business segment is defined as sales
less operating costs and expenses. Income and expense not allocated to business
segments include investment income, interest expense and certain corporate
administrative costs.
Identifiable assets are assets used exclusively in the operations of each
business segment and are reflected after eliminating intercompany balances.
Corporate assets principally comprise cash, short-term investments, deferred
income tax assets, notes receivable and certain property and equipment.
Financial information by reportable business segment is included in the
following summary:
<TABLE>
<CAPTION>
Years ended Years ended June 30
----------------------------------- -------------------
January 3, 1998 December 28, 1996 Six months ended
Dollars in thousands (unaudited) December 28, 1996 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
School Products $638,828 $607,411 $236,042 $594,941 $565,033
Recognition 103,651 101,323 41,076 100,208 100,066
- -----------------------------------------------------------------------------------------------------
CONSOLIDATED $742,479 $708,734 $277,118 $695,149 $665,099
=====================================================================================================
INCOME FROM CONTINUING OPERATIONS
- -----------------------------------------------------------------------------------------------------
School Products $107,534 $ 85,334 $ 20,632 $107,648 $107,071
Recognition 8,916 3,048 (4,403) 9,468 4,727
Corporate items
and eliminations (16,788) (16,456) (12,077) (22,314) (17,180)
- -----------------------------------------------------------------------------------------------------
Consolidated 99,662 71,926 4,152 94,802 94,618
Net interest expense (6,279) (8,973) (4,126) (7,323) (725)
- ------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $93,383 $62,953 $ 26 $ 87,479 $ 93,893
======================================================================================================
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Years ended Years ended
----------------------------------- -------------------
January 3, 1998 December 28, 1996 Six months ended
Dollars in thousands (unaudited) December 28, 1996 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IDENTIFIABLE ASSETS
School Products $280,177 $265,970 $265,970 $253,736 $236,424
Recognition 43,080 42,905 42,905 46,960 45,177
Discontinued operations -- -- -- 6,165
Corporate items and
eliminations 67,473 74,972 74,972 83,278 260,202
- -----------------------------------------------------------------------------------------------------
CONSOLIDATED $390,730 $383,847 $383,847 $383,974 $547,968
=====================================================================================================
DEPRECIATION AND AMORTIZATION
School Products $ 16,220 $ 12,616 $ 7,085 $ 11,395 $ 10,951
Recognition 3,002 2,426 1,409 2,056 2,111
Discontinued operations -- -- 13,179
Corporate items 2,920 2,646 1,440 3,106 2,098
- -----------------------------------------------------------------------------------------------------
CONSOLIDATED $ 22,142 $ 17,688 $ 9,934 $ 16,557 $ 28,339
=====================================================================================================
CAPITAL EXPENDITURES
School Products $ 14,774 $ 13,758 $ 7,691 $ 12,948 $ 8,540
Recognition 2,036 1,732 1,434 463 1,369
Discontinued operations -- -- 2,559
Corporate items 7,571 1,374 773 1,960 6,674
- -----------------------------------------------------------------------------------------------------
CONSOLIDATED $ 24,381 $ 16,864 $ 9,898 $ 15,371 $ 19,142
=====================================================================================================
</TABLE>
In the year ended January 3, 1998, gold inventory quantities were reduced,
which caused a liquidation of LIFO inventory values. The liquidation increased
net income by $6.8 million (10 cents per share). Income from continuing
operations for the year ended December 28, 1996, includes an additional $16.9
million (26 cents per share) in cost of products sold for School Products
related to the new inventory cost accounting system, as well as $6 million (9
cents per share) in environmental charges to cover a continued environmental
investigation and cleanup at a Recognition plant.
DISCONTINUED OPERATIONS
In June 1995, the company 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, the company also agreed to pay $13 million over
two years to fund certain JLC existing liabilities. As of January 3, 1998, the
entire $13 million was 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
44
<PAGE>
tax) was originally recorded at the time of the JLC sale and deferred in
accordance with the SEC Staff Accounting Bulletin No. 81, Gain Recognition on
the Sale of a Business or Operating Assets to a Highly 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 31, 1998, 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 receivables 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 has
incurred losses in 1997, 1996 and 1995; however, the company believes the
carrying value is not impaired, based on current facts and circumstances.
Significant accounting policies relevant to discountinued operations
included those related to capitalization of software development costs and
software revenue recognition. JLC capitalized software development costs when
the project reached technological feasibility and ceased capitalization when the
product was ready for release. Research and development costs related to
software and development that had not reached technological feasibility were
expensed as incurred. Software development costs were amortized on the
straight-line method over a maximum of five years or the expected life of the
product, provided that no significant vendor or post-contract obligations
remained outstanding and collection of the resulting receivable was deemed
probable. Revenue generated from service contracts and post-contract customer
support on software was recognized ratably over the period of the contract. The
revenue recognition for instruction and user training was part of the service
contract recognized ratably over the life of the contract. For insignificant
vendor and post-contract obligations remaining at the time of shipment, the
company's policy was to accrue all such obligations.
Revenue and income data related to discontinued operations is as follows:
JLC / Wicat Systems Year ended June 30
Dollars in thousands 1995
------------------------------------------
Revenue $108.6
Income tax benefit 2.5
Loss from operations $ 4.9
45
<PAGE>
PLANT CONSOLIDATION
In March 1997, the company announced it would close its Porterville,
Calif., graduation announcement facility and transfer all operations to the
company's announcement plant in Shelbyville, Tenn. As a result, the company
recorded a pre-tax charge to operations of $3 million in the first quarter of
1997, primarily to accrue for severance and other employee-related costs,
generally expected to be incurred over the following 12 months. As of January 3,
1998, the accrual decreased by $2.6 million due to incurred costs of $2.2
million and revisions to the initial estimate of $438,000.
UNAUDITED QUARTERLY FINANCIAL DATA JOSTENS INC. AND SUBSIDIARIES
YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
Total
Dollars in thousands, except per-share data First Second Third Fourth year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $150,437 $297,316 $109,079 $185,647 $742,479
Gross margin $ 86,041 $151,025 $ 45,671 $108,452 $391,189
Income from continuing operations $ 9,954 $ 38,323 $ (6,187) $ 15,093 $ 57,183
Net income $ 9,954 $ 38,323 $ (6,187) $ 15,093 $ 57,183
Earnings per share (1): basic $ 0.26 $ 0.99 $ (0.16) $ 0.39 $ 1.47
diluted $ 0.26 $ 0.98 $ (0.16) $ 0.39 $ 1.47
Stock price: high $ 22 7/8 $ 26 7/8 $ 28 13/16 $ 27 15/16 $ 28 13/16
low $ 20 $ 21 5/8 $ 23 1/4 $ 22 3/16 $ 20
Dividends per share $ 0.22 $ 0.22 $ 0.22 $ 0.22 $ 0.88
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 28, 1996
Total
Dollars in thousands, except per-share data First Second Third Fourth year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $141,863 $289,753 $105,399 $171,719 $708,734
Gross margin (2) $ 81,347 $137,824 $ 44,552 $ 91,073 $354,796
Income from continuing operations $ 6,773 $ 30,366 $ (5,027) $ 4,224 $ 36,336
Net Income $ 6,773 $ 30,366 $ (5,027) $ 4,224 $ 36,336
Earnings per share (1): basic $ 0.18 $ 0.79 $ (0.13) $ 0.11 $ 0.94
diluted $ 0.17 $ 0.78 $ (0.13) $ 0.11 $ 0.94
Stock price: high $ 24 3/8 $ 22 7/8 $ 20 7/8 $ 22 1/4 $ 24 3/8
low $ 21 3/4 $ 19 5/8 $ 17 1/4 $ 19 5/8 $ 17 1/4
Dividends per share (3) $ 0.22 $ 0.22 $ -- $ 0.22 $ 0.66
==========================================================================================================================
</TABLE>
(1) Amounts may not total to the annual earnings per share because each quarter
and the year are calculated separately based on average outstanding shares and
common share equivalents during that period.
(2) The implementation of the new
inventory cost accounting system in July 1996 had the effect of increasing cost
of products sold $16.9 million for calendar 1996.
(3) No cash dividend was declared in the third quarter due to the timing of the
delcarations. The third quarter dividend of 22 cents per share was declared in
the fourth quarter of calendar year 1996. The fourth quarter dividend of 22
cents per share was declared in January 1997.
46
<PAGE>
SIX-YEAR FINANCIAL SUMMARY
JOSTENS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six months
Year ended ended Year ended Year ended Year ended Year ended Year ended
January 3 December 28 June 30 June 30 June 30 June 30 June 30
In millions, except per-share data 1998 1996 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales $742.5 $277.1 $695.1 $665.1 $649.9 $634.8 $639.2
Cost of products sold 351.3 141.5 332.2 313.7 313.8 310.4 314.0
Net interest expense 6.3 4.1 7.3 0.7 5.0 5.7 8.7
Income taxes 36.2 0.8 35.9 38.0 20.5 10.7 29.8
Income (loss) -- continuing operations 57.2 (0.8) 51.6 55.9 28.0 8.5 45.2
Return on sales -- continuing operations 7.7% (0.3%) 7.4% 8.4% 4.3% 1.3% 7.1%
Net income (loss) 57.2 (0.8) 51.6 50.4 (16.2) (12.7) 59.2
Return on investment 47.7% (0.7%) 26.3% 19.1% (5.7%) (3.7%) 16.9%
- -------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Current assets $252.5 $257.5 $251.3 $402.4 $396.1 $401.6 $436.3
Working capital 6.3 11.8 8.9 206.3 172.7 185.3 232.2
Current ratio 1.0 1.0 1.0 2.1 1.8 1.9 2.2
Property and equipment, net 74.1 67.6 67.0 67.8 75.8 88.9 89.2
Total assets 390.7 383.8 384.0 548.0 569.8 613.5 643.3
Notes payable 50.0 90.9 27.6
Long-term debt, including
current maturities 3.6 3.9 53.9 54.3 54.8 55.3 79.4
Shareholders investment 127.1 112.6 121.8 270.6 256.6 315.7 364.7
- -------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Basic EPS -- continuing operations $ 1.47 $(0.02) $ 1.29 $ 1.23 $ 0.61 $ 0.19 $ 1.00
Basic EPS -- net income (loss) 1.47 (0.02) 1.29 1.11 (0.36) (0.28) 1.32
Diluted EPS -- continuing operations 1.47 (0.02) 1.28 1.22 0.62 0.19 1.09
Diluted EPS -- net income (loss) 1.47 (0.02) 1.28 1.10 (0.36) (0.28) 1.43
Cash dividends declared .88 0.22 0.88 0.88 0.88 0.88 0.84
Book value 3.31 2.91 3.15 5.95 5.64 6.95 8.10
Common shares outstanding 38.4 38.7 38.7 45.5 45.5 45.4 45.0
Stock price high 28 13/16 22 1/4 25 1/8 21 5/8 20 7/8 31 1/4 37 3/8
Stock price low 20 17 1/4 19 1/2 15 3/4 15 1/8 16 1/2 24 1/8
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The financial information above reflects Jostens Learning, Wicat Systems and
Sportswear as discontinued operations. Restructuring charges totaling $8.5
million and $40.2 million were recorded in continuing operations and $60.9
million and $25.4 million in discontinued operations in the fourth quarters of
fiscal 1994 and 1993, respectively. In fiscal 1994, $16.9 million was recorded
for provisions related to revised estimates of reserves for inventories,
receivables and overdrafts. Net income for fiscal 1993 reflects the cumulative
effect of adopting SFAS No. 106 of $6.7 million ($4.2 million after tax, or 9
cents per share). Net income for fiscal 1995 reflects the cumulative effect of
adopting SFAS No. 112 of $1.1 million ($600,000 after tax, or 1 cent per share).
47
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
LILYAN H. AFFINITO Former Vice Chairman of the Board, President and Chief
Operations Officer of Maxxam Group Inc.; Director, Caterpillar Inc., Chrysler
Corp., Kmart Corp. (Member, Audit Committee and Compensation Committee)
ROBERT C. BUHRMASTER Chairman of the Board, President and Chief Executive
Officer, Jostens Inc.; Director, The Toro Company. (Member, Executive Committee)
JACK W. EUGSTER Chairman of the Board, President and Chief Executive Officer,
Musicland Stores Corp.; Director, Damark International Inc., Donaldson Co. Inc.,
MidAmerican Energy Co., ShopKo Stores Inc. (Member, Audit Committee,
Compensation Committee and Executive Committee)
MANNIE L. JACKSON Chairman of the Board, Harlem Globetrotters Inc.; Former
Senior Vice President-Corporate Marketing and Administration, Honeywell Inc.;
Director, Ashland Inc., Martech Controls-South Africa, Reebok International
Ltd., The Stanley Works. (Member, Compensation Committee)
WALKER LEWIS Senior Adviser, SBC Warburg Dillon Read; Chairman of the Board,
Devon Value Advisers; Former Chairman of the Board, Strategic Planning
Associates; Former President, Avon Products Inc., U.S. Division; Director,
American Management Systems, Owens Corning.
KENDRICK B. MELROSE Chairman of the Board and Chief Executive Officer, The Toro
Company; Director, Donaldson Company Inc., SurModics Inc., Valspar Corp.
(Member, Audit Committee)
RICHARD A. ZONA Vice Chairman-Finance, U.S. Bancorp. (Member, Audit Committee,
Compensation Committee, Executive Committee)
MANAGEMENT
ROBERT C. BUHRMASTER, 50, Chairman of the Board, President and Chief Executive
Officer, an employee since 1992.
DAVID J. LARKIN, 58, Executive Vice President and Chief Operating Officer, an
employee since 1998.
CARL H. BLOWERS, 58, Senior Vice President-Operations, with Jostens since 1996.
WILLIAM N. PRIESMEYER, 53, Senior Vice President and Chief Financial Officer, an
employee since 1997.
BRIAN K. BEUTNER, 35, Corporate Secretary, an employee since 1991.
TOM JANS, 49, Vice President and President-Business Recognition, an employee
since 1995.
GREG S. LEA, 45, Vice President and General Manager-Colleges and Universities,
an employee since 1993.
JOHN MANN, 53, Vice President and General Manager-Scholastic, an employee since
1996.
LEE U. MCGRATH, 41, Vice President-Treasurer, an employee since 1995.
KEVIN M. WHALEN, 38, Vice President-Corporate Communications, an employee since
1993.
SHAREHOLDER INFORMATION
ANNUAL MEETING OF SHAREHOLDERS The annual meeting of shareholders will be held
at 10 a.m. Thursday, April 23, 1998, in the Jostens auditorium, 5501 Norman
Center Drive, Minneapolis, Minn. All shareholders are invited to attend.
SHAREHOLDER INFORMATION People who want more information about Jostens (such as
annual reports, form 10-Q and 10-K reports and automatic dividend reinvestment
brochures) or who have questions about stockholdings, dividend checks, transfer
requirements and address changes should contact the company's transfer agent and
registrar: Norwest Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854.
Telephone: (800) 468-9716.
DIVIDEND REINVESTMENT Jostens' automatic dividend reinvestment service is a
convenient way for shareholders to increase their investment in the company.
About 40 percent of Jostens' registered shareholders use this service, which
applies quarterly dividends and optional cash deposits to the purchase of
additional Jostens shares. Shareholders interested in this service can obtain a
brochure by contacting Norwest Shareowner Services at the address listed above.
Stock Exchange Listing Jostens common stock is traded on the New York Stock
Exchange under the trading symbol JOS. There were approximately 7,300
shareholders of record as of December 31, 1997.
[RECYCLED SYMBOL]
This report was printed by the Jostens facility in Winston-Salem, N.C., on
recycled (and recyclable) paper containing 10% post-consumer waste.
48
<PAGE>
[BACKGROUND PHOTO]
Jostens: helping people celebrate important moments that create a lifetime of
memories.
<PAGE>
[BACKGROUND ARTWORK]
celebrate!
[JOSTENS LOGO]
For more information about products and services from Jostens, please
contact us.
Jostens Inc.
5501 Norman Center Drive
Minneapolis, Minnesota 55437
Telephone (612) 830-3300
www.jostens.com
<PAGE>
JOSTENS, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
State or Other
Name Jurisdiction of Organization
---- ----------------------------
American Yearbook Company, Inc. Kansas
Jostens Canada, Ltd. Manitoba, Canada
Jostens Direct, Inc. Minnesota
Jostens Photography, Inc. California
The Jostens Foundation, Inc. Minnesota
<PAGE>
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Annual Report (Form 10-K) of
Jostens, Inc. of our report dated February 2, 1998, included in the 1997 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 2-95076, 33-19308, 33-58414 and 33-
00713 on Form S-8 of Jostens, Inc. of our report dated February 2, 1998, 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 the Annual Report (Form 10-K) of
Jostens, Inc.
/s/ Ernst & Young LLP
- ---------------------
Ernst & Young LLP
Minneapolis, Minnesota
March 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED JANUARY 3,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JAN-03-1998
<CASH> 0
<SECURITIES> 6,068
<RECEIVABLES> 116,143
<ALLOWANCES> (7,446)
<INVENTORY> 92,062
<CURRENT-ASSETS> 252,544
<PP&E> 231,747
<DEPRECIATION> (157,609)
<TOTAL-ASSETS> 390,730
<CURRENT-LIABILITIES> 246,233
<BONDS> 3,600
0
0
<COMMON> 12,853
<OTHER-SE> 114,240
<TOTAL-LIABILITY-AND-EQUITY> 390,730
<SALES> 742,479
<TOTAL-REVENUES> 742,479
<CGS> 351,290
<TOTAL-COSTS> 351,290
<OTHER-EXPENSES> 291,527
<LOSS-PROVISION> 2,245
<INTEREST-EXPENSE> 6,866
<INCOME-PRETAX> 93,383
<INCOME-TAX> 36,200
<INCOME-CONTINUING> 57,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,183
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED
DECEMBER 28, 1996 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> DEC-28-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-28-1996
<CASH> 0
<SECURITIES> 2,639
<RECEIVABLES> 114,198
<ALLOWANCES> (6,884)
<INVENTORY> 98,493
<CURRENT-ASSETS> 257,500
<PP&E> 210,925
<DEPRECIATION> (143,282)
<TOTAL-ASSETS> 383,847
<CURRENT-LIABILITIES> 245,747
<BONDS> 3,881
0
0
<COMMON> 12,888
<OTHER-SE> 99,725
<TOTAL-LIABILITY-AND-EQUITY> 383,847
<SALES> 277,118
<TOTAL-REVENUES> 277,118
<CGS> 141,493
<TOTAL-COSTS> 141,493
<OTHER-EXPENSES> 131,473
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,330)
<INCOME-PRETAX> 26
<INCOME-TAX> 829
<INCOME-CONTINUING> (803)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (803)
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
JOSTENS, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 10,755
<SECURITIES> 2,552
<RECEIVABLES> 136,125
<ALLOWANCES> (5,966)
<INVENTORY> 78,968
<CURRENT-ASSETS> 251,339
<PP&E> 188,251
<DEPRECIATION> (121,214)
<TOTAL-ASSETS> 383,974
<CURRENT-LIABILITIES> 242,463
<BONDS> 3,874
0
0
<COMMON> 12,884
<OTHER-SE> 108,917
<TOTAL-LIABILITY-AND-EQUITY> 383,974
<SALES> 695,149
<TOTAL-REVENUES> 695,149
<CGS> 332,212
<TOTAL-COSTS> 332,212
<OTHER-EXPENSES> 268,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,403
<INCOME-PRETAX> 87,479
<INCOME-TAX> 35,854
<INCOME-CONTINUING> 51,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,625
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.28
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS,
INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED JUNE 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 12,373
<SECURITIES> 161,096
<RECEIVABLES> 133,441
<ALLOWANCES> (9,049)
<INVENTORY> 71,394
<CURRENT-ASSETS> 402,368
<PP&E> 184,556
<DEPRECIATION> (116,731)
<TOTAL-ASSETS> 547,968
<CURRENT-LIABILITIES> 196,087
<BONDS> 53,899
0
0
<COMMON> 15,160
<OTHER-SE> 255,453
<TOTAL-LIABILITY-AND-EQUITY> 547,968
<SALES> 665,099
<TOTAL-REVENUES> 665,099
<CGS> 313,659
<TOTAL-COSTS> 313,659
<OTHER-EXPENSES> 256,822
<LOSS-PROVISION> 3,552
<INTEREST-EXPENSE> 5,452
<INCOME-PRETAX> 93,893
<INCOME-TAX> 38,027
<INCOME-CONTINUING> 55,866
<DISCONTINUED> (4,864)
<EXTRAORDINARY> 0
<CHANGES> (634)
<NET-INCOME> 50,368
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.10
</TABLE>
