-----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, W2L9syV9I+z2TMBWP9BkmPSQX35j80Wc/dTxkaCyauNoDdx9rdtOf2swtgjcSIhF Y0pSnDFzjXP21JZbuE+gBQ== 0001045969-98-000435.txt : 19980520 0001045969-98-000435.hdr.sgml : 19980520 ACCESSION NUMBER: 0001045969-98-000435 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980519 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: SEC FILE NUMBER: 001-05064 FILM NUMBER: 98628038 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 APRIL 4,1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ___ Commission file number 1-5064 JOSTENS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Minnesota 41-0343440 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 5501 Norman Center Drive, Minneapolis, Minnesota 55437 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) 612-830-3300 --------------------------------------------------- (Registrant's telephone number including area code) -------------------------------------------------------------------- (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the registrant's only class of common stock on May 11, 1998 was 36,999,120. 1 JOSTENS, INC. INDEX Part I. Financial Information - ------------------------------ Item 1. Financial Statements (Unaudited): Condensed Consolidated Balance Sheets as of April 4, 1998, March 29, 1997 and January 3, 1998 Condensed Consolidated Statements of Operations for the Three Months Ended April 4, 1998 and March 29,1997 Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 4, 1998 and March 29,1997 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information - -------------------------- Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures - ---------- 2 JOSTENS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER-SHARE DATA)
(Unaudited) ------------------------ April 4, March 29, January 3, 1998 1997 1998 --------- --------- --------- CURRENT ASSETS: Short-term investments $ 6,884 $ 11,097 $ 6,068 Accounts receivable, net 129,717 136,712 108,697 Inventories: Finished products 32,191 28,884 38,122 Work-in-process 64,870 64,716 29,388 Materials and supplies 35,502 37,243 24,552 --------- --------- --------- 132,563 130,843 92,062 Deferred income taxes 15,543 14,928 15,543 Prepaid expenses 5,048 2,690 4,679 Other receivables 27,811 25,793 25,495 --------- --------- --------- 317,566 322,063 252,544 OTHER ASSETS: Intangibles, net 30,162 26,826 30,749 Note receivable, net 12,925 12,925 12,925 Deferred income taxes 7,743 11,393 7,743 Other 11,882 13,777 12,631 --------- --------- --------- 62,712 64,921 64,048 PROPERTY AND EQUIPMENT 238,742 214,603 231,747 Accumulated depreciation (163,232) (147,884) (157,609) --------- --------- --------- 75,510 66,719 74,138 --------- --------- --------- $ 455,788 $ 453,703 $ 390,730 ========= ========= ========= CURRENT LIABILITIES: Notes payable $ 83,257 $ 99,896 $ 49,974 Accounts payable 25,005 19,349 30,553 Salary, benefits and commissions 53,396 52,397 38,668 Customer deposits 140,801 120,187 98,659 Other liabilities 19,466 14,125 17,281 Income taxes 14,791 13,453 11,098 --------- --------- --------- 336,716 319,407 246,233 OTHER NON-CURRENT LIABILITIES 17,717 19,003 17,404 SHAREHOLDERS' INVESTMENT: Preferred shares, $1.00 par value: Authorized 4,000 shares, none issued -- -- -- Common shares, $.33 1/3 par value: Authorized 100,000 shares, Issued - 37,217, 38,727 and 38,422 shares, respectively 12,451 12,909 12,853 Capital surplus -- 2,669 -- Retained earnings 93,770 103,124 119,378 Accumulated other comprehensive income (4,866) (3,409) (5,138) --------- --------- --------- 101,355 115,293 127,093 --------- --------- --------- $ 455,788 $ 453,703 $ 390,730 ========= ========= =========
See notes to condensed consolidated financial statements 3 JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER-SHARE DATA) Three Months Ended -------------------------- April 4, March 29, 1998 1997 -------- -------- NET SALES $168,277 $150,437 Cost of products sold 68,673 64,396 -------- -------- 99,604 86,041 Selling and administrative expenses 80,525 67,464 -------- -------- OPERATING INCOME 19,079 18,577 Net interest expense 1,291 1,704 -------- -------- 17,788 16,873 Income taxes 7,292 6,919 -------- -------- NET INCOME $ 10,496 $ 9,954 ======== ======== BASIC EARNINGS PER COMMON SHARE $ 0.28 $ 0.26 ======== ======== Basic average shares outstanding 37,734 38,697 ======== ======== DILUTED EARNINGS PER COMMON SHARE $ 0.28 $ 0.26 ======== ======== Diluted average shares outstanding 37,900 38,880 ======== ======== DIVIDENDS DECLARED PER COMMON SHARE $ 0.22 $ 0.22 ======== ======== See notes to condensed consolidated financial statements 4 JOSTENS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three Months Ended --------------------------- April 4, March 29, 1998 1997 -------- -------- OPERATING ACTIVITIES Net income $ 10,496 $ 9,954 Depreciation and amortization 6,098 5,073 Changes in assets and liabilities (5,587) (4,566) -------- -------- 11,007 10,461 -------- -------- INVESTING ACTIVITIES Capital expenditures (6,968) (3,678) -------- -------- FINANCING ACTIVITIES Short-term borrowings 33,283 8,984 Cash dividends (8,425) (8,517) Stock options 903 1,210 Share repurchases (29,231) -- Other 247 (2) -------- -------- (3,223) 1,675 -------- -------- INCREASE IN SHORT-TERM INVESTMENTS $ 816 $ 8,458 ======== ========
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 three months ended April 4, 1998, are not necessarily indicative of the results for the entire year ending January 2, 1999. For further information, refer to the consolidated financial statements and footnotes in the Company's Form 10-K for the year ended January 3, 1998. INCOME TAXES The Company provides for income taxes in interim periods based on the estimated effective income tax rate for the complete fiscal year. EARNINGS PER COMMON SHARE The adoption of Statement of Financial Accounting Standard (SFAS) No. 128 in 1997 resulted in disclosure of both "basic" and "diluted" earnings per share. Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the average number of common shares outstanding, including the dilutive effects of options, restricted stock and contingently issuable shares. Unless otherwise noted, references are to diluted earnings per share. The adoption of SFAS No. 128 did not have a material impact on earnings per share, as follows:
THREE MONTHS ENDED APRIL 4, 1998 THREE MONTHS ENDED MARCH 29, 1997 ------------------------------------- ------------------------------------ PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT ---------- ---------- ----------- ---------- ---------- ---------- BASIC EPS Net income available $ 10,496 37,734 $ 0.28 $ 9,954 38,697 $ 0.26 - ------------------------------------------------------------------------------------------------------------------ EFFECT OF DILUTIVE SECURITIES Options 143 136 Awards 23 47 - ------------------------------------------------------------------------------------------------------------------ DILUTED EPS Net income available $ 10,496 37,900 $ 0.28 $ 9,954 38,880 $ 0.26 ==================================================================================================================
COMPREHENSIVE INCOME As of January 4, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME. SFAS 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or total shareholders' investment. SFAS 130 requires minimum pension liability adjustments and foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' investment, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. During the first quarter of 1998 and 1997, total comprehensive income amounted to $10,224 and $9,921, respectively. DIVIDENDS Dividends of 22 cents per share were declared in January and paid in March in both 1998 and 1997. 6 COMMITMENTS AND CONTINGENCIES Litigation. Taylor Publishing Company filed a civil suit against Jostens on January 14, 1997 in the United States District Court for the Eastern District of Texas. In the suit, Taylor alleges that the Company violated federal antitrust laws with respect to the yearbook publishing market, interfered with Taylor's sales representatives, and improperly sought trade secrets. Taylor, citing the loss of school accounts over the last four years, argued that such loss of business resulted directly from the Company's attempt to monopolize the yearbook business. On May 13, 1998 a jury delivered a verdict awarding Taylor $8.5 million (which is automatically tripled to $25.5 million under the antitrust laws) on the antitrust claims, plus attorneys' fees, and up to $11.5 million on the other claims not deemed to be part of the antitrust damage award. Judgment has not been entered pending post trial motions before the court. The Company intends to vigorously pursue reversal of the decision and is therefore unable to estimate the potential loss, if any. Accordingly, no amount has been accrued as of April 4, 1998. Environmental. As part of its continuing environmental management program, Jostens is involved in various environmental improvement activities. As sites are identified and assessed in this program, the Company determines potential environmental liability. Factors considered in assessing this liability include, among others, the following: whether the Company has been designated as a potentially responsible party, the number of other potentially responsible parties designated at the site, the stage of the proceedings and available environmental technology. As of April 4, 1998, the Company had identified three sites requiring further investigation. However, the Company had not been designated as a potentially responsible party at any site. In 1996, the Company adopted the provisions of Statement of Position (SOP) 96-1, Environmental Remediation Liabilities. Under SOP 96-1, the Company is required to assess the likelihood that an environmental liability has been incurred and to accrue for the best estimate of any loss where the likelihood of incurrence is assessed as probable and the amount can be reasonably estimated. Management has assessed the likelihood that a loss has been incurred at its sites as probable and, based on findings included in remediation reports, estimates the potential loss to range from $1 million to $9 million; $6.6 million had been accrued. As of April 4, 1998, the Company had made payments of $1.7 million, bringing the reserve balance to $4.9 million. The current portion of the reserve ($892,000) was included with "other liabilities" on the consolidated balance sheets, while the long-term portion ($4 million) was included with "other non-current liabilities." While Jostens may have a right of contribution or reimbursement under insurance policies, amounts that may be recoverable from other entities by the Company with respect to a particular site are not considered until recoveries are deemed to be probable. No assets for potential recoveries were established as of April 4, 1998. PLANT CONSOLIDATION In April 1998, the Company announced the closing of its Webster, N.Y., photo processing facility with plans to transfer all operations to the Company's photo processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company will record a pre-tax charge to operations of approximately $3 million in the second quarter of 1998, primarily to accrue for severance and other employee-related costs. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company occasionally may make statements regarding its business and markets, such as projections of future performance, statements of management's plans and objectives, forecasts of market trends and other matters. To the extent such statements are not historical fact, they may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements containing the words or phrases "will likely result," "are expected to," "will continue," "anticipates," "believes," "estimate," "projected," or similar expressions are intended to identify forward-looking statements. Forward-looking statements may appear in this document or other documents, reports, press releases and written or oral presentations made by officers of the Company to shareholders, analysts, news organizations or others. All such forward-looking statements speak only as of the date on which the statements are made. Actual results could be affected by one or more factors, which could cause the results to differ materially. Therefore, all forward-looking statements are qualified in their entirety by such factors, including the factors listed below. Such factors may be more fully discussed periodically in the Company's subsequent filings with the Securities and Exchange Commission (SEC). Any change in the following factors may impact the achievement of results in forward-looking statements: the price of gold; the Company's access to students and consumers in schools; the seasonality of the Company's business; regulatory and accounting rules with respect to the Company's independent sales force; the Company's relationship with its sales force; fashion and demographic trends; the general economy, especially during peak buying seasons for the Company's products and services; the ability of the Company to respond to customer change orders and delivery schedules; competitive pricing and program changes; continued success improving operating efficiencies; and the impact of Year-2000 compliance on computer-based systems of the Company and its external relationships. The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact the Company's business. RESULTS OF OPERATIONS Net sales for the three months ended April 4, 1998 were $168.3 million, representing an increase of 11.9 percent over the comparable prior-year period. The sales improvement was driven by growth in the Graduation Products business, where new marketing programs produced good consumer response. In addition, the Company succeeded in a planned effort to shift about $6 million of announcement production and deliveries to the first quarter from the peak second quarter. Solid ring demand in the Jewelry business also drove sales, due in part to the success of the Company's Millennium class ring products. Cost of products sold was $68.7 million for the three months ended April 4, 1998. Costs as a percentage of sales for the three-month period were 40.8 percent, compared with 42.8 percent in the same period last year. The decrease in costs as a percentage of sales during the 1998 first quarter resulted from product mix, plant production efficiencies and a $3 million charge made in the first quarter of 1997 due to the Porterville, Calif., plant closing. These decreases were slightly offset by a $600,000 charge relating to one-time costs associated with volume shifts from the Attleboro, Mass., plant to the Denton, Texas and Nuevo Laredo, Mexico plants. Selling and administrative expenses were $80.5 million for the quarter compared with $67.5 million in the comparable prior-year period. As a percentage of sales, selling and administrative expenses for the three-month period was 47.9 percent, compared with 44.8 percent in the same period last year. 8 The increase in the 1998 first quarter was primarily the result of expenses incurred related to information systems implementation, a $1 million charge for the centralization of Jewelry customer service, increased commissions due to increased sales, and first-quarter 1998 operating expenses for Gold Lance, which was not part of the Company in the comparable prior-year period. Net interest expense for the first quarter of 1998 was $1.3 million compared with $1.7 million in the comparable prior-year period. The decrease in net interest expense corresponded with a decrease in average borrowings under the Company's notes payable and commercial paper program due principally to increased customer deposits. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operating activities and short-term borrowings were Jostens' principal sources of liquidity during the three-month period. Cash generated from these activities was used primarily for dividends, capital expenditures, and share repurchases. Operating activities provided cash of $11 million for the first quarter of 1998, primarily due to net income ($10.5 million). The change in assets and liabilities for the quarter used $5.6 million of cash as increases in customer deposits ($42.1 million) and salary, benefits and commissions ($14.7 million) were offset by greater levels of increases in inventory ($40.5 million) and accounts receivable ($21 million). These fluctuations reflect the seasonality of the business. The Company generated $3.3 million more cash from operating activities in the first quarter of 1998 than in the same period in 1997. This increase resulted primarily from improved accounts receivable collections ($8.4 million) and a contribution of $6.8 million in 1997 to fund the company's pension plan. Those increases were offset by additional inventory spending ($8.2 million) due to the building of selected product lines and the timing of month-end as well as lower levels of salary and commission accruals ($5.1 million) primarily due to the Porterville, Calif., plant closing and the transition of the college market independent representatives to Company employees in 1997. Because most of the Company's sales volume occurs in the second and fourth quarters, Jostens usually requires additional interim financing of inventories and receivables. To provide the necessary financing, the Company maintains a bank credit agreement that is reduced by commercial paper outstanding. The Company has a $180 million five-year bank agreement that expires in December 2000. At April 4, 1998, $96.7 million was available under the bank credit agreement as a result of $83.3 million in outstanding borrowings. In addition, the Company had unsecured demand facilities with three banks totaling $84.6 million, none of which was outstanding at April 4, 1998. These demand facilities are renegotiated periodically based on the anticipated seasonal needs for short-term financing. Commercial paper borrowings were included in notes payable in the consolidated balance sheet. Management believes that cash expected to be generated from operating activities, together with credit available under the bank credit agreement and demand facilities, will be sufficient to fund planned capital expenditures, share repurchases, dividends and any incremental working capital requirements in 1998. SHARE REPURCHASE In July 1997, Jostens' board of directors authorized the repurchase of up to $100 million in shares of the Company's common stock. Under the authorization, shares may be repurchased periodically in the open market and through privately negotiated transactions. The repurchase is to be funded from the Company's cash and short-term investment balance, as well as short-term borrowings. As of April 4, 1998, the Company had repurchased $49 million in common shares, $29.2 million of which were purchased in the first quarter of 1998. 9 CAPITAL EXPENDITURES, PRODUCT DEVELOPMENT AND ACQUISITION Year-to-date capital expenditures through April 4, 1998, were $7 million, approximately $3 million higher than the comparable period in 1997. The increase resulted primarily from costs incurred due to the replacement of School Products, Recognition and corporate management information systems and capitalized tooling costs for the Company's Scholastic and Recognition businesses. YEAR 2000 CONVERSION COSTS Management has initiated a company-wide program to prepare the Company's information systems infrastructure, microprocessor-driven equipment, external relationships and customers for the year 2000. Both internal and external resources are being utilized to implement the program. Systems that will not be replaced before the year 2000 are undergoing remediation to achieve Year-2000 functionality. The total Year 2000 program cost is estimated at approximately $50 million, which includes $35 million to purchase and implement new software that will be capitalized as part of the company-wide systems replacement program and $15 million that will be expensed as incurred. As of April 4, 1998, the Company had incurred approximately $11.9 million ($9 million capitalized), primarily to assess Year 2000 issues, develop a strategic plan, complete implementation of several major code remediation initiatives and purchase new hardware and software. The program is estimated to be completed no later than October 1999, in advance of any anticipated impact on Company operating systems. Based on the Year 2000 program, management believes the Year 2000 issue will not pose significant operational problems for its computer systems. The Year 2000 issue could, however, have a material impact on the operations of the Company in the event of significant deviation from several Year 2000 program initiatives. The costs of the project and the date when the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved, and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, the impact of Year 2000 compliance on computer based systems of the Company's external relationships and similar uncertainties. SALE OF JOSTENS LEARNING CORPORATION (JLC) In June 1995, Jostens sold its JLC curriculum software subsidiary to a group led by Bain Capital, Inc. for $50 million in cash; a $36 million unsecured, subordinated note maturing in eight years with a stated interest rate of 11 percent; and a separate $4 million note with a stated interest rate of 8.3 percent convertible into 19 percent of the equity of Jostens Learning, subject to dilution in certain events. The notes were recorded at fair value, using an estimated 20 percent discount rate on the $36 million note, resulting in a discount of $9.9 million. As part of the JLC sale, Jostens also agreed to pay $13 million over two years to fund certain JLC existing liabilities. As of June 28, 1997, the entire $13 million has been paid. In October 1995, the Company sold its Wicat Systems business to Wicat Acquisition Corp., a private investment group. Wicat Systems was the small, computer-based aviation training subsidiary of JLC that was retained in the sale of JLC but held for sale. The Company received $1.5 million in cash plus a promissory note for approximately $150,000 from the sale. The Company treated Wicat Systems as a discontinued operation in June 1995, pending the sale of the business. A transaction gain of $11.1 million ($5.8 million after tax) was originally recorded at the time of the JLC sale and deferred in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 81, Gain Recognition on the Sale of a Business or Operating Assets to a Highly 10 Leveraged Entity. In October 1995, the deferred gain increased to $17.2 million ($9.7 million after tax) as a result of the sale of Wicat ($5.3 million) and some accrual settlements ($800,000). In conjunction with its efforts to raise additional equity capital for ongoing cash requirements, JLC requested that the Company restructure its interests in JLC. In November 1996, the Company restructured terms of its $36 million, unsecured, subordinated note from JLC in conjunction with a third-party equity infusion into JLC. Terms of the restructuring resulted in the exchange of the $36 million unsecured, subordinated note and accrued interest for a new $57.2 million unsecured, subordinated note maturing June 29, 2003, with a stated interest rate of 6 percent and rights to early redemption discounts. The early redemption discounts, exercisable only in whole at JLC's option, adjust periodically and range from a 60 percent discount on the face value if redeemed by December 27, 1997, to 40 percent if redeemed by March 31, 2003. The new note was recorded at fair value using an estimated 20 percent discount rate on the $57.2 million note, resulting in a discount of $35.1 million. The restructuring had no impact on the net carrying value of Jostens' investment in JLC, since the $4 million reduction in the note receivable's carrying value was offset by a corresponding reduction in the deferred gain to $13.2 million ($7.3 million after tax). The adjusted $13.2 million gain and interest on the notes receivable will be deferred until cash flows from the operating activities of JLC are sufficient to fund debt service, dividend or any other covenant requirements. The deferred gain is presented in the condensed consolidated balance sheets as an offset to notes receivable. The notes receivable balance represents amounts owed by JLC related to the sale of JLC net of a $35.1 million discount and the deferred gain. Despite the equity infusion and restructuring of Jostens' interests in JLC, there is no guarantee that JLC will be able to repay the note. JLC incurred losses in 1997, 1996 and 1995; however, the Company believes that such carrying value is not impaired based on current facts and circumstances. PLANT CONSOLIDATION In April 1998, the Company announced the closing of its Webster, N.Y., photo processing facility with plans to transfer all operations to the Company's photo processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company will record a pre-tax charge to operations of approximately $3 million in the second quarter of 1998, primarily to accrue for severance and other employee-related costs. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings Taylor Publishing Company filed a civil suit against Jostens on January 14, 1997 in the United States District Court for the Eastern District of Texas. In the suit, Taylor alleges that the Company violated federal antitrust laws with the respect to the yearbook publishing market, interfered with Taylor's sales representatives, and improperly sought trade secrets. Taylor, citing the loss of school accounts over the last four years, argued that such loss of business resulted directly from the Company's attempt to monopolize the yearbook business. On May 13, 1998 a jury delivered a verdict awarding Taylor $8.5 million (which is automatically tripled to $25.5 million under the antitrust laws) on the antitrust claims, plus attorneys' fees, and up to $11.5 million on the other claims not deemed to be part of the antitrust damage award. Judgment has not been entered pending post trial motions before the court. The Company intends to vigorously pursue reversal of the decision through the post trial and appellate processes. There are no other material pending or threatened legal, governmental, administrative or other proceedings to which the Company or any subsidiary as a defendant or plaintiff is subject. Item 4. Submissions of Matters to a Vote of Security Holders (a) The Company's Annual Meeting of Shareholders was held on April 23, 1998. (b) At the Annual Meeting, the following proposals were voted on by the shareholders as indicated below: 1. To elect two directors, for three year terms. Name In Favor Withhold Authority ---- -------- ------------------ Mannie L. Jackson 31,687,999 329,957 Walker Lewis 31,687,339 330,617 2. To ratify the appointment of Ernst & Young LLP as the independent auditors of the Company for 1998. In Favor Against Abstain -------- ------- ------- 31,726,995 252,797 38,164 3. To request the elimination of election of directors by classes. In Favor Against Abstain Broker Non-Vote -------- ------- ------- --------------- 18,918,929 10,420,785 145,092 2,533,150 4. To request redemption of, or a binding vote on, the Company's Shareholder Rights Plan. In Favor Against Abstain Broker Non-Vote -------- ------- ------- --------------- 20,798,717 8,505,112 2,714,127 2,533,150 Item 6. Exhibits and reports on Form 8-K (a) Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter for which this report is filed. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOSTENS, INC. Date May 19, 1998 /s/ Robert C. Buhrmaster --------------------------------------- Robert C. Buhrmaster Chairman, President and Chief Executive Officer /s/ William N. Priesmeyer --------------------------------------- William N. Priesmeyer Senior Vice President and Chief Financial Officer 13 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 THREE MONTH PERIOD ENDED APRIL 4, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-02-1999 JAN-04-1998 APR-04-1998 0 6,884 137,338 (7,621) 132,563 317,566 238,742 (163,232) 455,788 336,716 3,600 0 0 12,451 88,904 455,788 168,277 168,277 68,673 68,673 80,525 315 1,291 17,788 7,292 10,496 0 0 0 10,496 .28 .28
EX-27.1 3 RESTATED FDS 3 MOS. ENDED 09-30-1995
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 (1,184) 3,540 112,945 (9,398) 98,838 250,540 188,794 (120,873) 409,285 231,577 53,890 0 0 12,854 91,998 409,285 97,754 97,754 45,800 45,800 47,892 680 (198) 4,260 1,747 2,513 0 0 0 2,513 .06 .06
EX-27.2 4 RESTATED FDS 6 MOS. ENDED 12-31-1995
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1996 JUL-01-1995 DEC-31-1995 (5,563) 5,985 109,925 (9,020) 116,596 265,164 201,427 (128,901) 412,485 280,828 3,899 0 0 12,864 97,153 412,485 263,533 263,533 119,639 119,639 116,866 1,300 2,476 24,552 10,066 14,486 0 0 0 14,486 .35 .35
EX-27.3 5 RESTATED FDS 9 MOS. ENDED 03-31-1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 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) 464,943 335,334 3,732 0 0 12,883 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 .53 .52
EX-27.4 6 RESTATED FDS 3 MOS. ENDED 09-30-1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-28-1996 JUL-01-1996 SEP-30-1996 0 859 115,280 (6,129) 94,093 245,138 190,176 (124,210) 378,318 241,490 3,864 0 0 12,887 103,988 378,318 105,399 105,399 60,847 60,847 51,155 221 1,917 (8,520) (3,493) (5,027) 0 0 0 (5,027) (.13) (.13)
EX-27.5 7 RESTATED FDS 3 MOS. ENDED 03-29-1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 29, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-03-1998 DEC-29-1996 MAR-29-1997 0 11,097 143,140 (6,428) 130,843 322,063 214,603 (147,884) 453,703 319,407 3,879 0 0 12,909 102,384 453,703 150,437 150,437 64,396 64,396 67,464 422 1,704 16,873 6,919 9,954 0 0 0 9,954 .26 .26
EX-27.6 8 RESTATED FDS 6 MOS. ENDED 06-28-1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-03-1998 DEC-29-1996 JUN-28-1997 0 18,536 144,740 6,237 76,722 263,376 217,790 (151,999) 401,301 231,751 3,876 0 0 13,002 136,962 401,301 447,753 447,753 210,687 210,687 152,097 832 3,144 81,825 33,548 48,277 0 0 0 48,277 1.25 1.24
EX-27.7 9 RESTATED FDS 9 MOS. ENDED 09-27-1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JOSTENS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 27, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-03-1998 DEC-29-1996 SEP-27-1997 0 3,240 115,752 (6,676) 88,051 242,746 224,887 (154,998) 381,075 231,250 3,589 0 0 12,947 118,049 381,075 556,832 556,832 274,095 274,095 206,901 1,255 4,498 71,338 29,248 42,090 0 0 0 42,090 1.08 1.08
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