-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TbrDq8rmkPotBBAWJmIfkp04iQJZchxhi9p9kuGENKO75s9B7XeKJozwpm4KHHSE zR2O3/KziHXy5zmaZbUcrg== 0000950131-96-002078.txt : 19960513 0000950131-96-002078.hdr.sgml : 19960513 ACCESSION NUMBER: 0000950131-96-002078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOSTENS INC CENTRAL INDEX KEY: 0000054050 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [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: 96559055 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 FORM 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 MARCH 31,1996 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 April 27, 1996 was 38,652,421. 1 JOSTENS, INC. INDEX Part I. Financial Information - ------------------------------- Item 1. Financial Statements (Unaudited): Condensed Consolidated Balance Sheets as of March 31, 1996 and 1995 and June 30, 1995 Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 1996 and 1995 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1995. 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 - ---------- 2 JOSTENS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per-share data)
(Unaudited) March 31, June 30, ------------------------------- ----------- 1996 1995 1995 ---------- ---------- ----------- CURRENT ASSETS: Cash and short-term investments $ 3,569 $ 65,906 $ 173,469 Accounts receivable 132,396 150,722 124,392 Inventories: Finished products 27,308 28,786 17,079 Work-in-process 80,184 76,453 26,928 Materials and supplies 34,744 36,389 27,387 ---------- ---------- ----------- 142,236 141,628 71,394 Deferred income taxes 17,845 39,985 17,845 Prepaid expenses 2,879 5,432 2,869 Other receivables 26,290 23,855 12,399 ---------- ---------- ----------- 325,215 427,528 402,368 OTHER ASSETS: Intangibles 29,746 45,826 30,915 Note receivable 12,925 - 18,969 Deferred income taxes 15,590 - 15,590 Software development costs - 26,139 - Other 13,078 15,206 12,301 ---------- ---------- ----------- 71,339 87,171 77,775 PROPERTY AND EQUIPMENT 192,850 218,245 184,556 Accumulated depreciation (124,461) (147,421) (116,731) ---------- ---------- ----------- 68,389 70,824 67,825 ---------- ---------- ----------- $ 464,943 $ 585,523 $ 547,968 ========== ========== =========== CURRENT LIABILITIES: Notes payable $ 85,889 $ - $ - Accounts payable 14,203 20,842 17,624 Salary, wages, and commissions 40,383 47,282 52,544 Customer deposits 102,546 97,764 36,367 Other liabilities 24,034 53,802 54,180 Income taxes 18,279 16,917 35,372 ---------- ---------- ----------- 285,334 236,607 196,087 LONG-TERM DEBT 53,732 54,097 53,899 DEFERRED INCOME TAXES - 5,943 - OTHER NON-CURRENT LIABILITIES 16,800 30,646 27,369 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 - 38,593, 45,490 and 45,482 shares, respectively 12,883 15,210 15,160 Capital surplus 1,554 153,478 154,410 Retained earnings 97,638 94,384 105,213 Foreign currency translation (2,998) (4,842) (4,170) ---------- ---------- ----------- 109,077 258,230 270,613 ---------- ---------- ----------- $ 464,943 $ 585,523 $ 547,968 ========== ========== ===========
See notes to condensed consolidated financial statements 3 JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per-share data)
Three Months Ended Nine Months Ended March 31, March 31, ---------------------------- -------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net Sales $ 141,863 $ 139,038 $ 405,396 $ 394,684 Cost of products sold 60,516 61,113 180,283 178,949 ---------- ---------- ---------- ---------- 81,347 77,925 225,113 215,735 Selling and administrative expenses 67,303 62,611 184,041 173,070 ---------- ---------- ---------- ---------- Operating Income 14,044 15,314 41,072 42,665 Net interest expense (income) 2,564 (465) 5,040 488 ---------- ---------- ---------- ---------- 11,480 15,779 36,032 42,177 Income taxes 4,707 6,342 14,773 16,784 ---------- ---------- ---------- ---------- Income from Continuing Operations 6,773 9,437 21,259 25,393 Discontinued Operations: Loss from operations, net of tax - (926) - (3,225) Cumulative effect of change in accounting principle, net of tax - - - (634) ---------- ---------- ---------- ---------- Net Income $ 6,773 $ 8,511 $ 21,259 $ 21,534 ========== ========== ========== ========== Earnings per common share: Continuing operations $ 0.18 $ 0.21 $ 0.52 $ 0.56 Loss from discontinued operations - (0.03) - (0.08) Cumulative effect of change in accounting principle - - - (0.01) ---------- ---------- ---------- ---------- Net Income $ 0.18 $ 0.18 $ 0.52 $ 0.47 ========== ========== ========== ========== Average shares outstanding 38,632 45,493 40,673 45,493 ========== ========== ========== ========== Dividends declared per common share $ 0.22 $ 0.22 $ 0.66 $ 0.44 ========== ========== ========== ==========
See notes to condensed consolidated financial statements 4 JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended March 31, -------------------------- 1996 1995 --------- --------- OPERATING ACTIVITIES Net income $ 21,259 $ 21,534 Depreciation and amortization 13,215 22,992 Changes in assets and liabilities (84,047) (43,797) --------- --------- (49,573) 729 --------- --------- INVESTING ACTIVITIES Capital expenditures (13,019) (10,591) Software development costs - (6,737) Minority investments - 4,322 --------- --------- (13,019) (13,006) --------- --------- FINANCING ACTIVITIES Short-term borrowing 85,889 - Cash dividends (27,013) (30,006) Share Repurchase (168,389) - Other 2,205 362 --------- -------- (107,308) (29,644) --------- -------- Decrease in cash and short-term investments $(169,900) $(41,921) ========= ======== See notes to condensed consolidated financial statements
5 JOSTENS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Because of the seasonal nature of the company's business, the results of operations for the nine months ended March 31, 1996, are not necessarily indicative of the results for the entire year ending June 30, 1996. Certain fiscal 1995 balances have been reclassified to conform to the fiscal 1996 presentation. For further information, refer to the consolidated financial statements and footnotes included in the company's annual report on Form 10-K for the year ended June 30, 1995. SHARE REPURCHASE In September 1995, the company repurchased 7,011,108 shares of its common stock, the maximum number of shares available for purchase, for $24 per share, or $168.3 million in total, 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. DISCONTINUED OPERATIONS In June 1995, the company sold its Jostens Learning Corp. (JLC) curriculum software subsidiary to a group led by Bain Capital, Inc. The condensed consolidated statements of income for the three and nine months ended March 31, 1995, have been reclassified accordingly. (See Management's Discussion and Analysis for further discussion). 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 from June 1995 on, pending the sale of the business. (See Management's Discussion and Analysis for further discussion). CHANGE IN ACCOUNTING PRINCIPLE The company adopted 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. 6 EARNINGS PER COMMON SHARE Earnings per common share have been computed by dividing net income by the average number of common shares outstanding for the period. The impact of any additional shares issuable upon exercise of dilutive stock options is not material. Average shares outstanding decreased approximately 7 million shares for the three months ended March 31, 1996, compared with the same period last year due to the share repurchase discussed above. DIVIDENDS The dividends declared for the nine months ended March 31, 1995, differ from those for the nine months ended March 31, 1996, due to the timing of the fourth- quarter declaration in fiscal 1994. The third-quarter dividend, declared in April, was $.22 for fiscal 1996 and 1995. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Net working capital was $39.9 million and $206.3 million at March 31, 1996, and June 30, 1995, respectively. The decrease in working capital was primarily due to the repurchase of over 7 million shares of common stock for $168.3 million in the first quarter of fiscal 1996. The seasonality of the company's business normally requires interim financing of operations and inventories, and these cash requirements have typically been met by issuing short-term commercial paper. In fiscal 1995, the company did not require short-term borrowing due to the large cash balance at the beginning of the year from the January 1994 sale of the Sportswear business. Accounts receivable declined $18.3 million from March 31, 1995, primarily related to the sale of JLC ($34.4 million) offset by sales increases in the School Products segment. Accounts receivable increased $8 million from June 30, 1995, due largely to the seasonality of collections in the School Products segment. Inventories increased from June 30, 1995, due to the seasonality of the business. Other receivables represent receivables from sales representatives who historically are in overdraft positions in the first three quarters of the year due to the payment of draws prior to commissions being earned. Other receivables increased from $12.4 million at June 30, 1995, to $26.3 million at March 31, 1996, due to the company's seasonality of sales. Prepaid expenses, intangibles, software development costs, and accounts payable all decreased from March 31, 1995. These reductions were primarily due to the sale of JLC. Salaries, wages and commissions payable declined from $52.5 million at June 30, 1995, to $40.4 million at March 31, 1996, due to the timing of commission payments which fluctuate with the seasonality of the business. The $6.9 million decrease from March 31, 1995, is primarily related to the sale of JLC. Customer deposits increased from $36.4 million at June 30, 1995, to $102.5 million at March 31, 1996, primarily due to the seasonality of the School Products segment, which has its largest sales volumes in the fourth quarter. The $4.8 million increase in customer deposits from March 31, 1995, relates to increased year-to-date sales volume coupled with a shift in sales volume to the fourth quarter in fiscal 1996. Income taxes payable decreased $17.1 million from June 30, 1995, due to fiscal 1995 tax payments made in the first quarter of fiscal 1996. Other current liabilities declined $30.1 million from June 30, 1995, due to dividends accrued in fiscal 1995 and paid in the first quarter of fiscal 1996; scheduled payments made against the accruals established for the JLC transaction; and reductions in reserves related to the sale of Wicat. The $29.8 million decrease in other current liabilities from March 31, 1995, was due to the sale of JLC. Other noncurrent liabilities decreased $10.6 million from June 30, 1995, and $13.8 million from March 31, 1995. The decreases were primarily related to reductions in pension liabilities due to additional funding, as well as to liabilities that have become current. 8 The decrease in shareholders' investment from June 30, 1995, and March 31, 1995, was primarily due to the share repurchase in the first quarter of fiscal 1996. Capital expenditures through March 31, 1996, were $13.0 million, approximately $2.4 million higher than the comparable period in fiscal 1995. Major projects in process include a business systems upgrade involving new hardware and software for field and headquarters locations and updating manufacturing equipment and processes with new technology, primarily digital imaging. Net interest expense increased $3.0 million and $4.6 million, respectively, for the three and nine months ended March 31, 1996, over the comparable periods of the prior fiscal year. The increase is due to the company returning to a more normal level of short-term borrowing for operational needs and funding the share repurchase in the first quarter of fiscal 1996. The company did not require short-term borrowing in fiscal 1995 due to the strong cash position from fiscal 1994. 9 RESULTS OF OPERATIONS Continuing Operations - --------------------- Net sales for the three and nine months ended March 31, 1996, were $141.9 million and $405.4 million, respectively, representing increases of 2.0% and 2.7% over the comparable prior-year periods. The third quarter, typically a lower sales volume quarter, generates approximately 20% of annual sales. In fiscal 1996, sales volumes are shifting to the fourth quarter as manufacturing efficiencies enable the company to produce products closer to customer selected delivery dates as well as promotional programs being executed on college campuses. Cost of products sold were $60.5 million and $180.3 million, respectively, for the three and nine months ended March 31, 1996. Costs, as a percentage of sales, for the three and nine months ended March 31, 1996, were 42.7% and 44.5%, respectively, compared with 44.0% and 45.3% in the same periods last year. The improved margins are being driven primarily by two factors. The first is the continuation of process improvements in Jewelry manufacturing, where the new, simplified high school ring pricing program has enabled plants to process orders faster. The second factor is an improving cost structure in the Recognition business. The reengineering efforts that were initiated earlier this year are beginning to take effect through improved inventory systems, reduced product offerings, lower administrative staffing and closer attention to profitability by customer. Selling and administrative expenses were $67.3 million and $184.0 million, respectively, for the three and nine months ended March 31, 1996. Expenses, as a percentage of sales, for the three and nine months ended March 31, 1996, were 47.4% and 45.4 %, respectively, compared with 45.0% and 43.9% in the same periods last year. The higher costs were due to planned investments in sales force automation, marketing initiatives designed to fuel business growth, and an effective commission rate that was slightly higher than the prior year periods. While the first three quarters of the fiscal year typically have low volume due to the school calendar, selling and administrative expenses are not reduced correspondingly since they are geared toward future sales, resulting in lower pre-tax margins in the first three quarters of the year. Discontinued Operations - Sale of Jostens Learning Corporation: 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. 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 from June 1995 on, pending the sale of the business. A transaction gain of $11.1 million was originally recorded at the time of the JLC sale and deferred in accordance with accounting rules relating to the sale of a business or operating assets to a highly leveraged entity. In the second quarter of fiscal 1996 the deferred gain increased as a result of the sale of Wicat ($5.3 million) and some accrual settlements ($.8 million). The adjusted $17.2 million gain ($9.7 million after tax) 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 sheet as an offset to notes receivable. The notes receivable balance represents amounts owed by JLC related to the sale of JLC net of a discount of $9.9 million and the deferred gain. 10 As part of the transaction Jostens also agreed to pay $13 million over two years to fund certain JLC existing liabilities; $7.9 million has been paid through March 31, 1996. JLC had net sales of $89.9 million, an income tax benefit of $1.1 million and a loss from operations of $3.2 million as of March 31, 1995, which are included in discontinued operations. RESTRUCTURING UPDATE The company's restructuring accruals decreased by $2.5 million in the first three quarters of fiscal 1996 to $3.1 million at March 31, 1996, due to cash payments of $2.1 million and noncash items of $.4 million. The restructuring accruals are expected to be reduced by $.1 million of noncash items for the remainder of fiscal 1996 and $.6 million in 1997 and beyond, while the future cash outlay is estimated to be $.5 million for the remainder of 1996 and $1.9 million in 1997 and beyond. ENVIRONMENTAL As part of its continuing 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 this liability include, among others, the following: whether the company has been designated as a potentially responsible party, the number of other potentially responsible parties designated at the site, the stage of the proceedings, and available environmental technology. When the potential liability amounts are probable and reasonably estimable, the company accrues the best estimate available. For specific sites where only a range of liability is probable and reasonably estimable and no amount in the range is a better estimate than another, the company accrues the low end of that range. While the company may have a right of contribution or reimbursement under insurance policies, amounts that may be recoverable from other entities with respect to a particular site are not considered until recoveries are deemed to be probable. No assets for potential recoveries have been established as of March 31, 1996. The company also assesses reasonably possible environmental liability beyond that which has been accrued. This liability is not probable, but is more likely than remote. As of March 31, 1996, the company has identified three sites requiring further investigation. The potential liability cannot be fully assessed since the sites are in the early stages of investigation; however, the amount of environmental liability identified that is reasonably possible is in the range of $.6 million to $4.6 million. The amount accrued to date with respect to potential liability is $.6 million and is recorded as part of "other accrued liabilities." The company does not expect to incur liabilities at the higher end of the range based on the limited information currently available. In addition, two other sites nearing completion did not require any accruals as of March 31, 1996. The company has not been designated as a potentially responsible party at any site. SHARE REPURCHASE In September 1995, the company repurchased 7,011,108 shares of its common stock, the maximum number of shares available for purchase, for $24 per share, or $168.3 million in total, 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. 11 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOSTENS, INC. Date May 10, 1996 \s\ Robert C. Buhrmaster ------------ ------------------------------------- Robert C. Buhrmaster President and Chief Executive Officer \s\ Trudy A. Rautio ------------------------------------- Trudy A. Rautio Senior Vice President and Chief Financial Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Jostens, Inc. condensed consolidated financial statements as of and for the period ended March 31, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 0 3,569 141,544 (9,148) 142,236 325,215 192,850 (124,461) 464,943 285,334 53,732 12,883 0 0 96,194 464,943 405,396 405,396 180,283 180,283 184,041 1,715 5,040 36,032 14,773 21,259 0 0 0 21,259 .52 .52
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