16.

Business Segments

The Company’s three reportable segments consist of:

•

Scholastic—provides services in conjunction with the marketing, sale and production of class rings and an array of graduation products and other scholastic affinity products to students and administrators primarily in high schools, colleges and other post-secondary institutions;

•

Memory Book—provides services in conjunction with the publication, marketing, sale and production of school yearbooks, memory books and related products that help people tell their stories and chronicle important events; and

•

Marketing and Publishing Services—provides services in conjunction with the development, marketing, sale and production of multi-sensory and interactive advertising sampling systems and packaging, primarily for the fragrance, cosmetic and personal care segments, and provides innovative products and related services to the direct marketing sector. The group also produces book components primarily for the educational and trade publishing segments.

Scholastic

The Scholastic segment provides services in conjunction with the marketing, sale and production of class rings and an array of graduation products, such as caps, gowns, diplomas and announcements, graduation-related accessories and other scholastic affinity products. In the Scholastic segment, our focus is on the school channel, and we primarily serve U.S. high schools, colleges and universities, marketing and selling products to students and administrators. Jostens relies primarily on a network of independent sales representatives to sell its scholastic products. Jostens provides customer service in the marketing and sale of class rings and related jewelry products and certain other graduation products. Jostens also provides ongoing warranty service on its class and affiliation rings. Jostens maintains product-specific tooling as well as a library of school logos and mascots that can be used repeatedly for specific school accounts over time. In addition to its class ring offerings, Jostens also designs, manufactures, markets and sells championship rings for professional sports and affinity rings for a variety of specialty markets. Since the acquisition of Neff, a single source provider of custom award programs and apparel, in March 2007 and the Company’s subsequent acquisitions in 2009 and 2010 in the varsity jacket business, we also market, manufacture and sell an array of additional scholastic products, including chenille letters, varsity jackets, mascot mats, plaques and sports apparel in schools and through a dealer network.

Memory Book

Jostens provides services in conjunction with the publication, marketing, sale and production of memory books, and related products that help people tell their stories and chronicle important events. Jostens’ strong brand recognition is deeply rooted in its school-by-school relationships and in its consistent ability to deliver high quality products and services and innovate to meet market demands. Jostens primarily services U.S. high schools, colleges, universities, elementary schools and middle schools. Jostens generates the majority of its revenues from high school accounts. Jostens’ independent sales representatives and technical support employees assist students and faculty advisers with the planning and layout of yearbooks, including through the provision of online layout and editorial tools to assist the schools in the publication of the yearbook. With a new class of students each year and periodic faculty advisor turnover, Jostens’ independent sales representatives and customer service employees are the main point of continuity for the yearbook production process on a year-to-year basis. Jostens also offers online memory book products and related services, enabling the consumer to create personal, hard or soft-cover memory books to chronicle important events.

Marketing and Publishing Services

The Marketing and Publishing Services segment includes operations in sampling, direct marketing and publishing services. The sampling operations provide services in conjunction with the development, marketing, sale and production of multi-sensory and interactive advertising sampling systems and packaging, primarily for the fragrance, cosmetic and personal care segments. With over a 100-year history, Arcade pioneered the leading ScentStrip^® product in 1980. Since then, we have developed an extensive portfolio of proprietary, patented and patent-pending technologies that can be incorporated into various conventional and online marketing programs designed to reach the consumer at home or in-store, including magazine and catalog inserts, statement enclosures, blow-ins, direct mail, direct sell and point-of-sale materials and gift-with-purchase/purchase-with-purchase programs. Since the acquisition of Color Optics, a specialty packaging provider, in April 2011, the Company also markets, manufactures and sells highly decorated packaging solutions to the cosmetic and consumer products industries. The direct marketing operations specialize in high-quality, in-line printed products and can accommodate large marketing projects with a wide range of dimensional printed products and in-line finishing production, data processing and mailing services. The products range from conventional direct marketing pieces to integrated offerings with data collection and tracking features. The personalized imaging capabilities can offer individualized messages to each recipient within a geographical area or demographic group for targeted marketing efforts. The publishing services business produces book components, including book covers and jackets, and employs specialized techniques to create highly decorated covers.

The following table presents information of the Company by business segment:


*In thousands*	2012			2011			2010
*Net sales*
Scholastic	$	445,790		$	474,667		$	469,730
Memory Book		346,070			362,380			375,866
Marketing and Publishing Services		364,297			380,774			395,310
Inter-segment eliminations		(815	)		(29	)		(19	)

	$	1,155,342		$	1,217,792		$	1,240,887

*Operating income (loss)*
Scholastic	$	25,260		$	34,948		$	25,635
Memory Book		92,284			103,137			116,549
Marketing and Publishing Services		(12,344	)		13,792			55,637

	$	105,200		$	151,877		$	197,821

*Interest, net*
Scholastic	$	62,110		$	64,071		$	34,812
Memory Book		47,861			49,365			27,657
Marketing and Publishing Services		48,953			50,700			28,824

	$	158,924		$	164,136		$	91,293

*Depreciation and Amortization*
Scholastic	$	33,023		$	32,627		$	31,879
Memory Book		38,408			39,424			39,164
Marketing and Publishing Services		33,102			34,032			33,537

	$	104,533		$	106,083		$	104,580

*Capital expenditures*
Scholastic	$	17,025		$	12,440		$	9,831
Memory Book		16,949			29,949			22,295
Marketing and Publishing Services		18,158			13,136			18,097

	$	52,132		$	55,525		$	50,223

*Goodwill*
Scholastic	$	301,027		$	309,878		$	309,927
Memory Book		391,178			391,178			391,614
Marketing and Publishing Services		226,741			282,058			306,958

	$	918,946		$	983,114		$	1,008,499

*Intangible assets*
Scholastic	$	158,539		$	145,941		$	163,355
Memory Book		120,977			168,984			186,706
Marketing and Publishing Services		121,807			133,469			153,748

	$	401,323		$	448,394		$	503,809

*Total assets*
Scholastic	$	664,308		$	668,179		$	683,727
Memory Book		697,683			749,932			762,240
Marketing and Publishing Services		564,415			626,383			698,008

	$	1,926,406		$	2,044,494		$	2,143,975

Net sales are reported in the geographic area where the final sales to customers are made, rather than where the transaction originates. No single customer accounted for more than 10% of revenue in any of 2012, 2011 and 2010.

The following table presents net sales by class of similar products and certain geographic information for the Company:


*In thousands*	2012		2011		2010
*Net sales by classes of similar products*
Memory book and yearbook products and services	$	345,281	$	362,380	$	375,866
Graduation and affinity products		253,341		261,849		261,383
Class ring and jewelry products		192,449		212,818		208,347
Sampling products and services		192,195		174,831		146,757
Book components		94,788		108,784		132,109
Direct marketing products and services		77,288		97,130		116,425

	$	1,155,342	$	1,217,792	$	1,240,887

*Net sales by geographic area*
United States	$	1,055,217	$	1,116,602	$	1,164,100
Canada		30,830		38,436		33,777
France		21,663		30,925		18,715
Other		47,632		31,829		24,295

	$	1,155,342	$	1,217,792	$	1,240,887

*Net property, plant and equipment and intangible assets by geographic area*
United States	$	1,514,461	$	1,634,369	$	1,719,293
Other, primarily Canada		9,473		7,189		7,466

	$	1,523,934	$	1,641,558	$	1,726,759