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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 1-5064

Jostens, Inc.
(Exact name of Registrant as specified in its charter)

        Registrant's telephone number: (952) 830-3300

        Securities registered pursuant to Section 12(b) of the Act: None

        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 requirement for the past 90 days. Yes ý No o

        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. Yes o No ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý

        The aggregate market value of voting and non-voting stock held by nonaffiliates of the Registrant on March 20, 2003: not applicable. The number of shares outstanding of each of the Registrant's classes of common stock on March 20, 2003, were as follows: Class A: 2,825,218; Class B: 5,300,000; Class C: 811,020; Class D: 20,000; Class E: 0; and Undesignated: 0.

        Documents incorporated by Reference: None

Jostens, Inc. and Subsidiaries
Annual Report on Form 10-K
For the Year Ended December 28, 2002

PART I

ITEM 1.    BUSINESS

        We are a leading provider of school-related affinity products and services including yearbooks, class rings and graduation products in North America. We also provide school photography services of which we have a leading market share in Canada. Our 106-year history of providing quality products and superior service has enabled us to develop long-standing and extensive relationships with schools throughout the United States and Canada.

        Jostens is a Minnesota corporation. Unless otherwise indicated, all references to "Jostens," "we," "our" and "us" refer to Jostens, Inc. and its subsidiaries. Our principal executive offices are located at 5501 Norman Center Drive, Minneapolis, Minnesota 55437. Our main phone number is (952) 830-3300 and our Internet address is www.jostens.com.

        We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. In addition, you may obtain a copy of our filings at www.sec.gov.

Products and Services

        We manage our business on the basis of one reportable segment: the development, manufacturing and distribution of school-related affinity products and services. We market our products and services primarily in the United States and Canada through independent sales representatives. We also market certain of our products and services through a direct employee-based sales organization. Our complementary products and services are sold through a single sales management organization, which is supported by a single marketing organization. All of our products and services are offered to similar customers, predominantly high school and college students. We offer four principal lines of products and services: printing and publishing, jewelry, graduation products and photography. In 2002, 2001 and 2000, approximately 42%, 41% and 40% of net sales were derived from our printing and publishing products, 27%, 28% and 28% from our jewelry products, 24%, 24% and 25% from our graduation products and 7% in all three years from our photography products and services. Approximately 95% of our 2002 and 2001 net sales and 94% of our 2000 net sales were in the U.S. market. Additional information is set forth below in ITEM 8, Note 13 of the Notes to Consolidated Financial Statements.

        Printing and Publishing

        We manufacture and sell yearbooks in high schools, middle and elementary schools and colleges. Our independent sales representatives and our technical support employees work closely with each school's yearbook staff (both students and faculty advisers), assisting with the planning, editing, layout, production, printing and distribution of the completed yearbooks. In addition, our independent sales representatives work with the faculty advisers to renew yearbook contracts. We also print commercial brochures, promotional materials and books.

        Jewelry

        We design, manufacture and sell class rings primarily to high school and college students and other specialty markets. Most schools have only one school-designated supplier who sells the school's official class ring to its students each year. Class rings are sold within the high schools, through college bookstores, other campus stores, retail jewelry stores and the Internet. A significant portion of our class rings are sold within the high school where our independent sales representatives and customer service employees manage the in-school process of interacting with the students through ring design, promotion and ordering. We also sell jewelry products for athletic champions.

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        Graduation Products

        We manufacture and sell graduation announcements, accessories, diplomas and caps and gowns to students and administrators primarily in high schools and colleges. Our independent and employee sales representatives take sales orders through in-school access, telemarketing programs, college bookstores and the Internet.

        Photography

        We process and sell photography products, providing class and individual school pictures to students in middle, elementary and high schools in Canada and the United States. Additionally, we provide high school senior portrait photography, photography for proms and special events and other photo-based products such as student ID cards. Our independent and employee sales representatives arrange the sittings at individual schools or in their own studios.

Seasonality

        We experience seasonality concurrent with the North American school year, with nearly one half of full-year sales and about three fourths of full-year operating income occurring in the second quarter.

Competition

        We have four primary competitors, which vary across our product lines and services. They include Herff Jones, Inc. (Herff Jones), Walsworth Publishing Company (Walsworth), Lifetouch, Inc. (Lifetouch) and American Achievement Corporation (AAC), which is the parent corporation of Taylor Publishing Company (Taylor) and Commemorative Brands, Inc. (CBI).

        In the sale of yearbooks, we compete primarily with Herff Jones, Taylor, Walsworth and Lifetouch. Each competes on the basis of print quality, price, product offerings and service. Customization and personalization combined with technical assistance and customer service capabilities are important factors in yearbook production.

        Customer service and manufacturing expertise are also particularly important in the sale of class rings because of the high degree of customization and the emphasis on timely delivery. Class rings are marketed through various channels that have different quality and price points. Our primary competitors in the sale of class rings are Herff Jones and CBI. CBI markets the Balfour and ArtCarved brands. Herff Jones distributes its product only in schools, while CBI distributes its product through multiple distribution channels, including schools, independent and chain jewelers and mass merchandisers.

        In the sale of graduation products, we compete primarily with Herff Jones and CBI as well as numerous local and regional competitors who offer products similar to ours. Each competes on the basis of product offerings, product quality, price and service with particular importance given to establishing a proven track record of timely delivery of quality products.

        In the sale of photography products and services, we compete primarily with Lifetouch, Herff Jones and a variety of regional and locally owned and operated photographers.

Backlog

        Because of the nature of our business, all orders are generally filled within a few months from the time of placement. However, we typically obtain contracts in the second quarter of one year for student yearbooks to be delivered in the second and third quarters of the subsequent year. Often the total revenue pertaining to a yearbook order is not established at the time of the order because the content

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of the book is not final. Subject to the foregoing qualifications, we estimate the backlog of orders, primarily related to student yearbooks, was approximately $324.0 million, $308.0 million and $291.0 million as of the end of 2002, 2001 and 2000, respectively. We expect most of the 2002 backlog to be confirmed and filled in 2003.

Environmental

        Matters pertaining to the environment are set forth below in ITEM 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and in ITEM 8, Note 8 of the Notes to Consolidated Financial Statements.

Raw Materials

        The principal raw materials that we purchase are gold and other precious metals, paper products, and precious, semiprecious and synthetic stones. Any material increase in the price of gold could adversely impact our cost of sales.

        We purchase substantially all synthetic and semiprecious stones from a single supplier located in Germany who is also a supplier to almost all of the class ring manufacturers in the United States. We believe that the loss of this supplier could adversely affect our business during the time period in which alternate sources would adapt their production capabilities to meet increased demand.

        Matters pertaining to our market risks are set forth below in ITEM 7A, Quantitative and Qualitative Disclosures about Market Risk.

Intellectual Property

        We have licenses, patents, trademarks and copyrights that, in the aggregate, are an important part of our business. However, we do not regard our business as being materially dependent upon any single license, patent, trademark or copyright. We have patent and trademark registration applications pending and will pursue other filings and registrations as appropriate to establish and preserve our intellectual property rights.

Employees

        As of the end of February 2003, we had approximately 6,700 employees, of which approximately 300 were members of two separate unions. Because of the seasonality of our business, the number of employees tends to vary. We have never suffered an interruption of business that has had an impact on our operations as a result of a labor dispute and consider our relationship with our employees to be good.

Foreign Operations

        Our foreign sales are derived primarily from operations in Canada. The accounts and operations of our foreign businesses, excluding Canada, are not significant. 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 significant with respect to our business. The gross profit margin on foreign sales is approximately the same as the gross profit margin on domestic sales.

        Foreign operations financial information is set forth below in ITEM 8, Note 13 and Note 15 of the Notes to Consolidated Financial Statements.

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Previous Transactions

        On December 27, 1999, we entered into a merger agreement with Saturn Acquisition Corporation, an entity organized for the sole purpose of effecting a merger on behalf of certain affiliates of Investcorp S.A. (Investcorp) and other investors. On May 10, 2000, Saturn Acquisition Corporation merged with and into Jostens, with Jostens as the surviving corporation. The merger was part of a recapitalization of Jostens, which resulted in affiliates of Investcorp and the other investors acquiring approximately 92% of our post-merger common stock. The remaining 8% of our common stock was held by pre-recapitalization shareholders and certain members of senior management. As a result of the transaction, our shares were de-listed from the New York Stock Exchange.

        The recapitalization was funded by (a) $495.0 million of borrowings under a senior credit facility with a syndicate of banks, (b) issuance of $225.0 million in principal amount of senior subordinated notes and warrants to purchase 425,060 shares of our common stock, (c) issuance of $60.0 million in principal amount of redeemable preferred stock and warrants to purchase 531,325 shares of our common stock and (d) $208.7 million of proceeds from the sale of shares of common stock to affiliates of Investcorp and the other investors.

        The proceeds from these financings funded (a) the payment of $823.6 million to holders of common stock representing $25.25 per share, (b) repayment of $67.6 million of outstanding indebtedness, (c) payment of approximately $10.0 million in consideration for cancellation of employee stock options, (d) payments of approximately $72.0 million of fees and expenses associated with the recapitalization including $12.7 million of advisory fees paid to an affiliate of Investcorp and (e) a pre-payment of $7.5 million for a management and consulting agreement for a five-year term with an affiliate of Investcorp.

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ITEM 2.    PROPERTIES

        Our properties are summarized below:

(1)

All owned domestic properties represent collateral under the senior secured credit facility.

(2)

Closed and currently held for sale.

(3)

Leased to another business as of the end of 2002. Facility was sold in January 2003.

(4)

Currently under sublease to another business.

        We also have office space, primarily for our photography product line that we lease in 26 locations totaling 45,000 square feet.

        We believe our production facilities are suitable for their purpose and are adequate to support our businesses. The extent of utilization of individual facilities varies due to the seasonal nature of the business.

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ITEM 3.    LEGAL PROCEEDINGS

        Matters pertaining to legal proceedings are set forth below in ITEM 7 and ITEM 8, Note 8 of the Notes to Consolidated Financial Statements.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        As a result of the merger and recapitalization on May 10, 2000 as discussed in ITEM 1, our common shares were de-listed from the New York Stock Exchange. Currently, there is no established public trading market for our common stock. Shares of Class A common stock have been traded on a limited and sporadic basis from time to time over-the-counter on the so-called "pink sheets." This limited trading activity may not represent a reliable market indicator for our Class A common shares. Shares of Class B, Class C and Class D common stock are not traded.

        We do not intend to pay dividends to any class of our common shareholders. Furthermore, our ability to pay dividends is limited by the terms of our senior secured credit facility and the senior subordinated notes.

        The number of shareholders of record for each class of common stock at March 20, 2003 are as follows: Class A—183; Class B—13; Class C—1; Class D—11 and Class E—None.

Recent Sales of Unregistered Securities

        We have not issued nor sold securities within the past three years pursuant to offerings that were not registered under the Securities Act of 1933, as amended (the "Securities Act"), except on May 10, 2000 as part of the merger and recapitalization, we:

•

issued shares of our common stock for an aggregate price of $208.7 million;



•

issued $60.0 million in principal amount of redeemable, payment-in-kind preferred shares with detachable warrants to purchase 531,325 shares of our common stock (at an exercise price of $0.01 per share and a term of 11 years) to DB Capital Investors for $60.0 million; and



•

issued $225.0 million in principal amount of 12.75% notes with detachable warrants to purchase 425,060 shares of our common stock (at an exercise price of $0.01 per share and exercisable through 2010) to Deutsche Bank Securities Inc., UBS Warburg LLC and Goldman, Sachs & Co. for $215.9 million.

        The transactions set forth above were undertaken in reliance upon exemption from the registration requirements of the Securities Act afforded by Section 4(2), Rule 144A under the Securities Act and/or Regulation D and Regulation S promulgated hereunder, as sales not involving a public offering. In October 2000, we consummated a registered exchange offer with respect to the 12.75% senior subordinated notes described above, pursuant to which all such privately placed securities were exchanged for registered securities.

        Additional information is set forth below in ITEM 8, Note 12 of the Notes to Consolidated Financial Statements, ITEM 11 and ITEM 12.

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ITEM 6.    SELECTED FINANCIAL DATA

        The table below sets forth summary consolidated historical data relating to Jostens. The summary historical financial information for the five fiscal years in the period ended December 28, 2002 was derived from the audited historical consolidated financial statements of Jostens.

(1)

Certain Statement of Operations and other data have been reclassified for all periods presented to reflect the results of discontinued operations as set forth below in ITEM 7 and ITEM 8, Note 14 of the Notes to Consolidated Financial Statements.

(2)

The cumulative effect of accounting change, net of tax, reflects changes in our accounting for certain sales transactions as set forth below in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Net loss in 2000 also reflects an after-tax loss on discontinued operations of $2.3 million and a $6.7 million pre-tax charge for equity losses and a write-down of two internet investments as set forth in ITEM 8, Note 17 of the Notes to Consolidated Financial Statements.

(3)

Net income in 2002 reflects an after-tax gain on discontinued operations of $1.6 million for the reversal of certain disposal charges and a $1.8 million pre-tax loss on redemption of senior subordinated notes payable.

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(4)

Net income in 2001 reflects a pre-tax loss on discontinued operations of $36.5 million ($22.4 million after tax) and a pre-tax special charge of $2.5 million as set forth below in ITEM 7 and ITEM 8, Note 14 and Note 15 of the Notes to Consolidated Financial Statements.

(5)

Net income in 1999 reflects an after-tax loss on discontinued operations of $0.8 million and a special charge of $20.2 million ($13.3 million after tax).

(6)

Net income in 1998 reflects an after-tax gain from discontinued operations of $5.9 million, a pre-tax gain of $3.7 million resulting from a reduction in LIFO gold inventories and an after tax charge of $15.7 million for the write-off of the Josten's Learning Corp. (JLC) notes receivable of $12.0 million and related net deferred tax assets of $3.7 million.

(7)

Represents current assets (excluding cash and cash equivalents) less current liabilities (excluding short-term borrowings and current maturities of long-term debt).

(8)

Earnings per share calculations include the effect of dividends and accretion on redeemable preferred shares.

(9)

Subsequent to the merger and recapitalization on May 10, 2000 as discussed in ITEM 1, we have not paid nor do we plan to pay dividends to any class of our common shareholders.

(10)

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, transaction costs, special charges, results of discontinued operations, loss on redemption of senior subordinated notes payable, equity losses and write-down of investments and the loss on the write-off of the JLC notes.

(11)

Free cash flow represents cash provided by or used for operating and investing activities. It excludes the effects of cash flow from financing activities.

(12)

Adjusted EBITDA and free cash flow are not measures of performance under generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for net income, cash flows from operations, or other income and cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. Moreover, adjusted EBITDA and free cash flow are not standardized measures and may be calculated in a number of ways. Accordingly, the adjusted EBITDA and free cash flow information provided might not be comparable to other similarly titled measures provided by other companies. Adjusted EBITDA and free cash flow are included herein because we understand that adjusted EBITDA and free cash flow are customarily used as criteria in evaluation of companies.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

        Our disclosure and analysis in this report may contain "forward-looking statements." Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project," or "continue," or the negative thereof or similar words. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual results may vary materially. Investors are cautioned not to place undue reliance on any forward-looking statements. Investors should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties.

        Any change in the following factors may impact the achievement of results:

•

our ability to satisfy our debt obligations, including related covenants;



•

the seasonality of our sales and operating income;



•

our relationship with our independent sales representatives and employees;

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•

the fluctuating prices of raw materials, primarily gold;



•

our dependence on a key supplier for our synthetic and semiprecious stones;



•

fashion and demographic trends;



•

the competitive environment;



•

general economic conditions;



•

litigation cases, if decided against us, may adversely affect our financial results; and



•

environmental regulations that could impose substantial costs upon us may adversely affect our financial results.

        The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Except to the extent required by law, we undertake no obligation to publicly update or revise any forward-looking statements.

        The following discussion should be read in conjunction with the selected historical financial data presented in ITEM 6 and our consolidated financial statements and supplementary data presented in ITEM 8 of this Form 10-K. In the text below, financial statement amounts have been rounded and the percentage changes are based on the financial statements.

CRITICAL ACCOUNTING POLICIES

        We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we used in applying the critical accounting policies. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely event that would result in materially different amounts being reported.

Revenue Recognition

        We recognize revenue when the earnings process is complete, evidenced by an agreement between Jostens and the customer, delivery and acceptance has occurred, collectibility is probable and pricing is fixed and determinable. Provisions for warranty costs, which are primarily related to our jewelry products, are recorded based on historical information and current trends.

Allowance for Sales Returns

        We make estimates of potential future product returns related to current period product revenue. We analyze historical returns, current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of the allowance for sales returns. Significant management judgments and estimates must be made and used in connection with establishing the

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allowance for sales returns in any accounting period. Material differences could result in the amount and timing of our revenue for any period if we made different judgments or utilized different estimates. On a historical basis, the actual returns have not exceeded the estimates made by management.

Allowance for Doubtful Accounts and Allowance for Salespersons Overdrafts

        We make estimates of potentially uncollectible customer accounts receivable and receivables arising from sales representative draws paid in excess of earned commissions. Our reserves are based on an analysis of customer and salesperson accounts and historical write-off experience. Our analysis includes the age of the receivable, customer or salesperson creditworthiness and general economic conditions. We believe the results could be materially different if historical trends do not reflect actual results or if economic conditions worsened. On a historical basis, the actual uncollectible accounts have not exceeded the estimates made by management.

Goodwill

        We adopted Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Intangible Assets" and as a result discontinued the amortization of goodwill. Goodwill is tested for impairment annually or whenever an impairment indicator arises. If events or circumstances change, including reductions in anticipated cash flows generated by operations, goodwill could become impaired and result in a charge to earnings.

Pension and Postretirement Benefits

        Pension and other postretirement benefit costs and obligations are dependent on assumptions used to develop the actuarial valuation of such amounts. These assumptions include discount rates, expected return on plan assets, rate of compensation increases, health care cost trend rates, mortality rates and other factors. The actuarial assumptions used in our pension and postretirement reporting are reviewed annually and compared with external benchmarks to ensure that they accurately account for our future pension obligations. While we believe that the assumptions used are appropriate, differences in actual experience or changes in the assumptions could materially affect our financial position or results of operations.

Income Taxes

        As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items such as capital assets for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheet. We must then assess the likelihood that our deferred tax assets will be recovered from taxable income of the appropriate character within the carryback or carryforward period and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. We have estimated a tax valuation allowance related to capital loss and foreign tax credit carryforwards because we believe the tax benefits are not likely to be fully realized.

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RESULTS OF OPERATIONS

        The following table sets forth selected information from our Consolidated Statement of Operations, expressed as a percentage of net sales.

Percentages in this table may reflect rounding adjustments.
NM = percentage not meaningful

Year Ended December 28, 2002 Compared to the Year Ended December 29, 2001

Net Sales

        Net sales increased $19.4 million, or 2.6%, to $756.0 million for 2002 from $736.6 million for 2001. The increase in net sales resulted from price increases across all product lines averaging approximately

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2.2% and slight volume/mix increases. Specific factors contributing to the increase in net sales from 2001 to 2002 include:

•

increased volume as a result of net account growth across most of our product lines;



•

increased volume in printing due to an increase in the number of pages per yearbook including more color pages; and



•

territory additions and new product development in photography.

        These increases were partially offset by the following:

•

decreased volume in the jewelry and graduation product lines as a result of the loss of a large college customer;



•

decreased jewelry revenue attributed to a shift in product mix toward non-precious metals with lower price points;



•

volume decreases in jewelry due to a slight decline in the number of rings sold per high school;



•

volume decreases in graduation products due to lower dollars spent per student; and



•

decreased volume in printing due to less commercial volume.

Gross Profit

        Gross profit increased $14.7 million, or 3.5%, to $440.0 million for 2002 from $425.3 million for 2001. As a percentage of net sales, gross profit margin increased 50 basis points to 58.2% in 2002 from 57.7% in 2001. The increase in gross profit margin is attributed to:

•

general price increases across all product lines;



•

continued improvement in plant efficiencies including the implementation of lean manufacturing principles; and



•

a favorable sales mix of our printing products resulting in increased higher margin yearbook volume and decreased lower margin commercial printing volume.

        These profit improvements were partially offset by an increase in the price of gold compared to 2001, higher employee benefit costs and a general shift in consumer spending toward lower-priced products with lower profit margins in some of our product lines.

Selling and Administrative Expenses

        Selling and administrative expenses increased $5.5 million, or 1.8%, to $306.4 million for 2002 from $300.9 million for 2001. As a percentage of net sales, selling and administrative expenses decreased 40 basis points to 40.5% for 2002 compared to 40.9% for 2001. The $5.5 million increase is primarily due to:

•