-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, E4ZuvgAQnWNGHPHjddv0lRWh9B268cmU6rA0OKTMHVb2JdKCZylGZwhF5SQ72Rtd SusSgVTV31OT6/3aK6kIhA== 0000054050-94-000014.txt : 19941116 0000054050-94-000014.hdr.sgml : 19941116 ACCESSION NUMBER: 0000054050-94-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOSTENS INC CENTRAL INDEX KEY: 0000054050 STANDARD INDUSTRIAL CLASSIFICATION: 3911 IRS NUMBER: 410343440 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05064 FILM NUMBER: 94559130 BUSINESS ADDRESS: STREET 1: 5501 NORMAN CTR DR CITY: MINNEAPOLIS STATE: MN ZIP: 55437 BUSINESS PHONE: 6128303300 MAIL ADDRESS: STREET 1: 5501 NORMAN CENTER DRIVE CITY: MINNEAPOLIS STATE: MN ZIP: 55437 10-Q 1 1ST QTR 1995 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 1-5064 JOSTENS, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0343440 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 5501 Norman Center Drive, Minneapolis, Minnesota 55437 (Address of principal executive offices) (Zip Code) 612-830-3300 (Registrant's telephone number including area code) (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the registrant's only class of common stock on September 30, 1994 was 45,490,306. JOSTENS, INC. INDEX Part I. Financial Information Item 1. Financial Statements (Unaudited): Condensed Consolidated Balance Sheets as of September 30, 1994 and 1993 and June 30, 1994 Condensed Consolidated Statements of Income for the Three Months Ended September 30, 1994 and 1993 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1994 and 1993 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures JOSTENS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) September 30, June 30, 1994 1993 1994 (Restated) CURRENT ASSETS Cash and short-term investments $ 19,449 $ 1,281 $107,827 Accounts receivable 132,659 175,966 149,206 Inventories: Finished products 25,326 42,418 28,026 Work-in-process 38,478 65,445 23,879 Materials and supplies 40,548 51,550 30,733 104,352 159,413 82,638 Deferred income tax 39,985 23,449 39,985 Prepaid expenses 6,571 13,267 6,123 Other receivables 22,556 28,688 10,338 325,572 402,064 396,117 OTHER ASSETS Intangibles 46,907 47,008 47,737 Software development costs 25,428 54,347 29,356 Other 16,662 26,651 20,850 88,997 128,006 97,943 PROPERTY AND EQUIPMENT 210,827 219,610 207,641 Accumulated depreciation (138,046) (134,308) (131,870) 72,781 85,302 75,771 $487,350 $615,372 $569,831 CURRENT LIABILITIES Notes payable $ - $ 81,935 $ - Accounts payable 25,017 28,305 33,192 Salaries, wages and commissions 29,976 27,104 68,394 Customer deposits 21,938 21,295 36,080 Other liabilities 57,865 58,365 71,065 Income taxes 2,829 (3,819) 14,663 137,625 213,185 223,394 LONG-TERM DEBT 54,259 54,670 54,267 DEFERRED INCOME TAXES 5,943 10,661 5,943 OTHER NON-CURRENT LIABILITIES 30,716 18,567 29,646 SHAREHOLDERS' INVESTMENT Preferred shares, $1.00 par value: Authorized 4,000 shares None issued - - - Common shares, $.33 1/3 par value: Authorized 100,000 shares Issued - 45,490, 45,446 and 45,482 shares, respectively 15,163 15,147 15,160 Capital surplus 153,007 152,580 152,996 Retained earnings 94,171 153,491 92,855 Foreign currency translation (3,534) (2,929) (4,430) 258,807 318,289 256,581 $487,350 $615,372 $569,831 JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended September 30, 1994 1993 (Restated) NET SALES $131,557 $148,738 Cost of products sold 66,096 79,307 65,461 69,431 Selling and administrative expenses 61,878 65,627 OPERATING INCOME 3,583 3,804 Net interest expense 250 1,365 3,333 2,439 Income taxes 1,383 988 INCOME FROM CONTINUING OPERATIONS 1,950 1,451 DISCONTINUED OPERATIONS: Income from operations, net of tax - 1,027 Cumulative effect of change in accounting principle, net of taxes (634) - NET INCOME $ 1,316 $ 2,478 EARNINGS (LOSS) PER COMMON SHARE Continuing operations $ .04 $ .03 Income from discontinued operations - .02 Cumulative effect of change in accounting principle (.01) - Net income $ .03 $ .05 Average shares outstanding 45,488 45,439 Dividends declared per common share $ - $ - JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended September 30, 1994 1993 (Restated) OPERATING ACTIVITIES Net income $ 1,316 $ 2,478 Depreciation and amortization 7,162 8,978 Changes in assets and liabilities (87,340) (89,277) (78,862) (77,821) INVESTING ACTIVITIES Capital expenditures (2,405) (1,963) Software development costs (1,438) (4,542) Minority investments 4,322 - 479 (6,505) FINANCING ACTIVITIES Short-term borrowing - 81,935 Cash dividends (10,001) (9,993) Other 6 101 (9,995) 72,043 DECREASE IN CASH AND SHORT-TERM INVESTMENTS $ (88,378) $ (12,283) JOSTENS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS RESTATEMENT As previously announced, and as previously reflected and fully explained in the 1994 annual report, the financial statements for the quarter ended September 30, 1993 have been restated as the Company has revised the accounting treatment of several items to more fully conform its accounting policies and practices to generally accepted accounting principles. The restatement increased shareholders' investment at September 30, 1993, by $3.9 million, and increased net income for the three months ended September 30, 1993, by $1.5 million ($.03 per share) from amounts previously reported. The Company had not previously made these accounting adjustments because they were immaterial individually and in the aggregate to the Company's financial position and results of operations in the previous years to which they relate. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10- 01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Because of the seasonal nature of the Company's business, the results of operations for the three months ended September 30, 1994, are not necessarily indicative of the results for the entire year ending June 30, 1995. Certain fiscal 1994 balances have been reclassified to conform to the fiscal 1995 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1994. DISCONTINUED OPERATIONS In January 1994, the Company sold its Sportswear business which has been recorded as a discontinued operation, and the historical financial statements have been reclassified accordingly. (See Management Discussion and Analysis for further discussion). CHANGE IN ACCOUNTING PRINCIPLE The Company was required to and did adopt SFAS 112, Employers' Accounting for Post-Employment Benefits, in the first quarter of fiscal 1995. The charge to earnings was $1.1 million ($.6 million after tax, $.01 per share), representing the cumulative amount of liability to be recorded under SFAS 112 as of the beginning of fiscal 1995. EARNINGS PER COMMON SHARE Earnings per common share have been computed by dividing net income by the average number of common shares outstanding. The impact of any additional shares issuable upon exercise of dilutive stock options is not material. DIVIDENDS The first quarter dividend, declared in October, was $.22 for fiscal 1995 and 1994. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Net working capital was $187.9 and $172.7 million at September 30, 1994, and June 30, 1994, respectively. The seasonality of the Company's business normally requires interim financing of operations and inventories and these cash requirements have typically been met through the issuance of short-term commercial paper. However, due to the sale of the Sportswear business and improved cash flow from operations during fiscal 1994, the Company ended the fiscal year with cash and short- term investments of $107.8 million. These funds, along with the proceeds from Jostens Learning's sale of its Adult business and equity interest in Optical Data Corporation which occurred in the first quarter of fiscal 1995 ($7.5 and $4.2 million, respectively), were used to finance the Company's operations during the first quarter of fiscal 1995. Accounts receivable are down $16.5 million from June 30, 1994, due to improved collections, sale of Jostens Learning's Adult business and lower sales in the first quarter of 1995 which seasonally has the smallest sales volume. Accounts receivable are down $43.3 million from September 30, 1993, primarily due to the sale of Sportswear ($19.1 million at September 30, 1993) in the third quarter of fiscal 1994; a change in estimates charge ($7.7 million) as described in the annual report, taken in the third quarter of fiscal 1994; and the sale of Jostens Learning's Adult business. Inventories have increased from June 30, 1994, due to the seasonality of the business. The decrease from September 30, 1993, is due to the sale of Sportswear in fiscal 1994 ($27.3 million at September 30, 1993); change in estimates charge ($3.2 million) as described in the annual report and which was recorded in the third quarter of fiscal 1994; and reduced inventories at Jostens Learning ($18.5 million) due to restructuring of that business in fiscal 1994. Other receivables have increased from $10.3 million at June 30, 1994 to $22.6 million at September 30, 1994 due to the Company's seasonality of sales. The balance represents receivables from sales representatives who historically are in overdraft positions in the first quarter due to the payment of draws, prior to commissions being earned. The decrease in other receivables from September 30, 1993 to September 30, 1994, is primarily due to a change in estimate charge ($6.0 million) as described in the annual report and which was recorded in the third quarter of fiscal 1994. Software development costs have decreased from June 30, 1994, primarily due to the sale of Jostens Learning's Adult business. Software development costs have decreased from September 30, 1993, due primarily to the restructuring charges at Jostens Learning and the sale of the Adult business. Other assets have decreased by $4.2 million from June 30, 1994, due to the sale of the Company's equity investment in Optical Data Corporation that related to the Jostens Learning business. Salaries, wages and commissions payable decreased from $68.4 million at June 30, 1994, to $30.0 million at September 30, 1994. The majority of the decrease is attributable to the timing of commission payments (approximately $23.1 million). Commissions accrued at year end were paid in the first quarter while few sales were generated in the first quarter to replenish the balance. The remainder of the decrease is primarily due to payment of bonuses and severance accruals related to the restructuring. Capital expenditures through September 30, 1994, are $2.4 million, approximately $.4 million higher than the comparable period in fiscal 1994. Major projects in process include a business systems upgrade involving new hardware and software for field and headquarter locations. Interest expense is $.5 million lower than last year due to the strong cash position at year end which reduced the Company's need for short-term borrowing for operational needs from $81.9 million last year in the first quarter to zero this quarter. In addition, due to the strong cash position, interest income is higher than last year by $.6 million. RESULTS OF OPERATIONS Continued Operations Net sales for the three months ended September 30, 1994, were $131.6 million, a decrease of 12% from last year's volume of $148.7 million. Overall, the Company's school-related businesses generate relatively small volume in the first quarter, since schools are closed until September. Recognition's sales were up 5% compared to last fiscal year. Order rates are ahead of year-earlier levels, particularly in the Printing and Publishing business. The Company's lower sales were due primarily to planned reductions in the U.S. Photography and Jostens Learning businesses relating to the restructurings that previously occurred in both of these businesses. The planned reduction in sales in the Photography business is due to its move away from lower margin business and reduction in capacity due to closing of two plants in fiscal 1994. Reduced sales at Jostens Learning reflects the sale of the Adult business and progress with exiting the hardware business as planned for in Jostens Learning's restructuring. The Company has signed a letter of intent with a third party vendor to provide hardware services and maintenance. The Company has also signed agreements with two major software wholesalers to distribute Jostens Home Learning line of stand- alone software products at the retail level. The Company has asked Goldman Sachs, an investment banker, to help explore possible alliances between Jostens Learning and communications and technology companies that share interest in the information superhighway. This may provide Jostens Learning with alternate ways of delivering its products which will enable them to reach more students in more schools and homes. This review will commence in the second quarter and is expected to be completed later in the fiscal year. Cost of products sold was $66.1 million for the current quarter versus $79.3 million for the first three months of the preceding fiscal year. Costs, as a percent of sales, were 50.2% as compared to 53.3% in the same period last year. The improved margins are primarily attributable to Jostens Learning progress of exiting the hardware business, (which has lower- margins) and lower software amortization due to the fiscal 1994 restructuring at Jostens Learning. Selling and administrative expenses were $61.9 million for the quarter, a decrease of $3.7 million from the first quarter of fiscal year 1994. The decrease is due to cost reduction efforts of the 1994 restructuring at Jostens Learning and corporate, cost reductions associated with the closing of photography plants that were part of the fiscal 1993 restructuring as well as some timing delays in sales and marketing programs. Jostens Learning also recorded a loss of $.8 million on two facilities that were vacated as a result of the personnel reductions. The Company estimates that an additional loss of $1.5 million will be incurred over the remainder of the fiscal year as additional lease space is vacated and abandoned in accordance with the restructuring plan. Since a significant percentage of the Company's sales are in the school business, and with schools not in session for most of the quarter, the first three months are seasonally the smallest sales volume. Therefore, amounts reported for the three months ended September 30, 1994, vary significantly from the results for the fourth quarter of the previous fiscal year. Historically, the first quarter is the smallest in sales volume, while selling and administrative expenses are not reduced correspondingly since they are geared toward future sales. Thus, the Company's pre-tax margins are lowest during the first quarter. Discontinued Operations - Sale of Sportswear Business In January 1994, the Company sold its Sportswear business to a subsidiary of Fruit of the Loom for $46.7 million. The future impact of this sale on continuing operations and cash flow is expected to be immaterial. Revenues and income taxes included in discontinued operations related to the Sportswear business as of September 30, 1993, were net sales of $29,191 and income tax expense of $699. RESTRUCTURING UPDATE The 1993 restructuring accrual decreased by $1.7 million in the first quarter of fiscal 1995 due to payments made. The remaining restructuring accrual at September 30, 1994, is $9.9 million. The Company expects payments relating to the remaining $9.9 million of accruals to occur in subsequent periods as follows: fiscal 1995, $7.2 million; fiscal 1996 $1.7 million; fiscal 1997, and beyond $1.0 million. The 1994 restructuring accrual decreased by $7.2 million in the first quarter of fiscal 1995 due to $5.9 million of payments and $1.3 million from exits of ancillary lines of business. The remaining restructuring accrual at September 30, 1994, is $21.0 million. The Company expects payments relating to the remaining $21.0 million of accruals to occur in fiscal 1995, $14.0 million, and fiscal 1996, $7.0 million Among the accomplishments of Jostens Learning principally related to the fiscal 1994 restructuring were the following: 1) It has established a new customer training model to reduce the number of Jostens Learning employees necessary to support teacher training. This model began to be offered for sale in the first quarter in connection with the sale of Training PLUS, a new and more efficient teacher training program. Deliveries should begin later in the fiscal year. 2) It began taking orders for the new single management system, called Advantage. Deliveries of this single integrated learning operating system, as well as customer upgrades to the single system, are expected to begin at the end of the current school year in June 1995. 3) It signed a letter of intent with a third party vendor to provide hardware services and maintenance to Jostens Learning customers. PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibit 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOSTENS, INC. Date November 14, 1994 /s/ Robert C. Buhrmaster Robert C. Buhrmaster President and Chief Executive Officer /s/ Trudy A. Rautio Trudy A. Rautio Senior Vice President -Finance JOSTENS, INC. AND SUBSIDIARIES EXHIBIT 27--FINANCIAL DATA SCHEDULE (In Thousands) This schedule contains summary financial information extracted from Jostens, Inc. consolidated financial statements and is qualified in its entirety by reference to such financial statements. Cash and cash items $ (5,094) Marketable securities 24,543 Notes and accounts receivable-trade 146,735 Allowances for doubtful accounts (14,076) Inventory 104,352 Total current assets 325,572 Property, plant and equipment 210,827 Accumulated depreciation (138,046) Total assets 487,350 Total current liabilities 137,625 Bonds, mortgages and similar debt 54,259 Preferred stock - mandatory redemption 0 Preferred stock - no mandatory redemption 0 Common stock 15,163 Other stockholders' equity 243,644 Total liabilities and stockholders' equity 487,350 Net sales of tangible products 131,557 Total revenues 131,557 Cost of tangible goods sold 66,096 Total costs and expenses applicable to sales and revenues 66,096 Other costs and expenses 61,878 Provision for doubtful accounts and notes 317 Interest and amortization of debt discount 250 Income before taxes and other items 3,333 Income tax 1,383 Income(loss) continuing operations 1,950 Discontinued operations 0 Extraordinary items 0 Cumulative effect - changes in accounting principles (634) Net income(loss) 1,316 Earnings per share - primary .03 Earnings per share - fully diluted .03 -----END PRIVACY-ENHANCED MESSAGE-----