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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:

•

higher spending on information systems related to the upgrade of our transaction processing system and application development in one of our product lines and



•

higher commissions and general and administrative expenses, both as a result of increased sales.

        These increases were partially offset by reduced spending for outside legal counsel in connection with the resolution of a specific legal matter pending in 2001.

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Loss on Redemption of Senior Subordinated Notes Payable

        As a result of redeeming $7.5 million principal amount of our 12.75% senior subordinated notes due May 2010, we recognized a loss of $1.8 million in 2002 consisting of a $0.8 million write-off of unamortized original issuance discount and deferred financing costs and a $1.0 million premium paid on redemption of the notes.

Net Interest Expense

        Net interest expense decreased $9.4 million, or 12.3%, to $67.3 million for 2002 as compared to $76.8 million for 2001. The decrease was due to a lower average outstanding debt balance and a lower average interest rate as a result of refinancing a portion of our senior secured credit facility combined with the effects of general market conditions.

Provision for Income Taxes

        Our effective tax rate for continuing operations was 56.2% for 2002 compared to 41.2% for 2001. The increase was due primarily to the effect of additional federal and state income taxes attributable to earnings repatriated from our Canadian subsidiary. We anticipate a 2003 effective tax rate between 41% and 42%.

Income from Continuing Operations

        Income from continuing operations increased $1.7 million, or 6.5%, to $28.3 million for 2002 from $26.5 million for 2001 as a result of increased net sales, improved gross profit margin and lower net interest expense offset by an increase in our provision for income taxes.

Year Ended December 29, 2001 Compared to the Year Ended December 30, 2000

Net Sales

        Net sales increased $12.0 million, or 1.7%, to $736.6 million for 2001 from $724.6 million for 2000. The increase in net sales resulted from price increases in most of our product lines averaging approximately 3.0% offset partially by volume/mix decreases of 1.3%. Specific factors contributing to the increase in net sales from 2000 to 2001 include:

•

increased volume in printing due to an increase in delivered yearbook copies per school;



•

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



•

increased volume in printing due to higher commercial volume; and



•

territory additions and new product development in photography.

        These increases were partially offset by the following:

•

decreased volume in printing due to declines in yearbook add-on features and the number of school accounts;



•

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



•

volume decreases in graduation products due to decreased buy rates and dollars spent per student; and



•

unfavorable foreign exchange variance on Canadian sales.

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Gross Profit

        Gross profit increased $5.8 million, or 1.4%, to $425.3 million for 2001 from $419.5 million for 2000. As a percentage of net sales, gross profit margin decreased slightly to 57.7% in 2001 from 57.9% in 2000. The slight decrease was primarily the result of unfavorable manufacturing variances associated with lower volumes for jewelry and graduation products in the high school market combined with unfavorable foreign exchange variances for Canadian manufacturing costs. This decrease was partially offset by our continued emphasis on manufacturing efficiencies including the implementation of lean manufacturing principles.

Selling and Administrative Expenses

        Selling and administrative expenses decreased $0.8 million, or 0.3%, to $300.9 million for 2001 from $301.7 million for 2000. As a percentage of net sales, selling and administrative expenses decreased 70 basis points to 40.9% for 2001 compared to 41.6% for 2000. The decrease reflects lower spending on information systems and lower commission expenses primarily due to volume decreases in jewelry and graduation announcements in the high school market combined with changes in the commission program for Canadian sales. These decreases were offset by:

•

higher selling and marketing expenses related to programs and initiatives;



•

higher customer service expenses related to additional temporary labor in order processing; and



•

higher general and administrative expenses due to full year amortization of our prepaid management fee in 2001 compared to a partial year in 2000 and increased costs for outside legal counsel associated with a specific legal matter in 2001.

Special Charges

        During 2001, we recorded special charges totaling $2.5 million. We incurred costs of $2.1 million for severance and related separation benefits in connection with the departure of a senior executive and two other management personnel. In addition, we elected to terminate our joint venture operations in Mexico City, Mexico and took a charge of $0.4 million, primarily to write off the net investment. We utilized $2.3 million of the aggregate special charge in 2001 and less than $0.1 million in 2002. The remaining liability of $0.2 million is classified in "other current liabilities" in our Consolidated Balance Sheet as it primarily consists of separation benefits that will continue to be paid out over the next six months as specified under the separation agreement.

Net Interest Expense

        Net interest expense increased $17.9 million, or 30.3%, to $76.8 million for 2001 as compared to $58.9 million for 2000. The increase is due to the full year impact of our recapitalization financing, which occurred on May 10, 2000, offset by a declining outstanding debt balance and a lower average interest rate.

Provision for Income Taxes

        Our effective tax rate for continuing operations was 41.2% for 2001 compared to 289.2% for 2000, which reflected the 2000 impact of non-deductible transaction costs of approximately $27.0 million.

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Income (Loss) from Continuing Operations

        Income from continuing operations increased $37.0 million to $26.5 million for 2001 from a loss of $10.5 million for 2000 largely as a result of transaction costs of $46.4 million incurred in 2000 associated with the merger and recapitalization on May 10, 2000.

DISCONTINUED OPERATIONS

        In December 2001, our board of directors approved a plan to exit our former Recognition business in order to focus our resources on our core School Products business. The results of the Recognition business are reflected as discontinued operations in our Consolidated Statement of Operations for all periods presented. The following table sets forth revenue and loss from discontinued operations.

        As a result of problems encountered with a system implementation that took place in 1999, revenue from the discontinued business continued to decline in 2001. Furthermore, in 2001, the pre-tax loss from the results of discontinued operations included costs to hire, train and support a new sales force following the loss of seasoned sales representatives in 1999 and 2000.

        During 2001, the results of discontinued operations encompassed the period through the December 3, 2001 measurement date. The $27.4 million pre-tax loss on disposal of the discontinued business consisted of a non-cash charge of $11.1 million to write off certain net assets of the Recognition business plus a $16.3 million charge for accrued costs related to exiting the Recognition business.

        During 2002, we reversed $2.3 million of the accrued charges based on our revised estimates for employee separation costs and phase-out costs. Of the total adjustment, $0.5 million resulted from modifying our anticipated workforce reduction from 150 to 130 full-time positions and $1.8 million resulted from lower information systems, customer service and internal support costs and lower receivable write-offs than originally anticipated. In addition, we reversed $0.4 million in other liabilities for a total pre-tax gain on discontinued operations of $2.7 million ($1.6 million net of tax). Components of the accrued disposal costs, which are included in "current liabilities of discontinued operations" in our Consolidated Balance Sheet are as follows:

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        Separation benefits will continue to be paid out in 2003 over the benefit period as specified under our severance plan and transition benefits will continue to be paid through 2004.

LIQUIDITY AND CAPITAL RESOURCES

        Our primary cash needs are for debt service obligations, capital expenditures, working capital and general corporate purposes. At the end of 2002, we had cash and cash equivalents of $10.9 million. Our free cash flow for 2002 was $32.7 million compared to $55.8 million and $17.3 million for 2001 and 2000, respectively. Free cash flow excludes the effects of cash flow from financing activities.

Operating Activities

        Operating activities generated cash of $55.5 million in 2002 compared with $71.6 million in 2001 and $35.5 million in 2000. The following items contributed to the decline in operating cash flow in 2002:

•

smaller improvements in inventory levels and customer deposits received than in 2001;



•

an approximate $17 million payment for federal and state income taxes including interest charges in connection with the completion of an IRS audit discussed below; and



•

the use of cash for severance and phase-out costs of discontinued operations, net of asset collections.

        Partially offsetting the above items, operating cash flow was favorably impacted in 2002 by an increase in net income mainly as a result of the $22.4 million loss on discontinued operations incurred in 2001, but also as a result of a $9.2 million increase in operating income, exclusive of special charges and the loss on redemption of our senior subordinated notes payable, and a $9.4 million decrease in net interest expense compared to 2001. The increase in net income was offset, however, by a $17.6 million increase in our provision for income taxes from continuing operations due to higher taxable income plus additional federal and state income taxes attributable to earnings repatriated from our Canadian subsidiary.

        During 2002, we agreed to certain adjustments proposed by the Internal Revenue Service in connection with its audit of our federal income tax returns filed for years 1996 through 1998. As a result of the audit, we agreed to pay additional federal taxes of $11.3 million. Combined with additional state taxes and interest charges, the liability related to these adjustments, which had previously been accrued, was approximately $17 million. In addition, we have filed an appeal with the Internal Revenue Service concerning a further proposed adjustment of approximately $8 million. While the appeal process may take up to two years to complete, we believe the outcome of this matter will not have a material impact on our results of operations.

        The $36.1 million increase in operating cash flow in 2001 over 2000 was primarily due to higher net income mainly as a result of transaction costs incurred in 2000 of $46.4 million related to the merger and recapitalization, but also as a result of a $6.6 million increase in operating income exclusive of special charges and the transaction costs. The increase in net income was partially offset by a $20.1 million increase in loss on discontinued operations and a $17.8 million increase in net interest expense compared to 2000. In addition, cash was favorably impacted by reduced inventories and the timing of customer deposits. Also in 2000, we recorded a non-cash charge of $6.7 million for equity losses and a write-down to zero against our investment in two privately held Internet companies and a non-cash charge of $5.9 million for the net of tax cumulative effect of our change in method of accounting for certain sales transactions as set forth below in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements.

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Investing Activities

        Capital expenditures in 2002, 2001 and 2000 were $22.8 million, $22.7 million and $22.2 million, respectively, reflecting comparable spending on technology, expansion of our color printing capacity and replacement projects in all three years.

        In 2001, investing activities included proceeds of $4.0 million from the sale of our distribution facility in Memphis, Tennessee and proceeds of $2.5 million from the sale of certain assets of our Recognition business. These items are included in discontinued operations in our Consolidated Statement of Operations. In 2000, we sold our minority equity position in a privately held Internet company for $5.0 million, which resulted in no gain or loss.

Financing Activities

        Net cash used for financing activities in 2002, 2001 and 2000 was $64.8 million, $39.3 million and $29.3 million, respectively. Substantially all of the net cash used for financing activities in 2002 and 2001 related to principal payments on our long-term debt. During 2002 and 2001, we made scheduled principal payments of $20.9 million and $14.9 million, respectively, and voluntarily prepaid an additional $40.0 million and $24.0 million, respectively, of principal on our senior secured credit facility. Also during 2002, we voluntarily redeemed $7.5 million principal amount of our 12.75% senior subordinated notes due May 2010 (the "notes") for $8.5 million.

        During 2002, we reacquired 79,015 warrants to purchase 149,272 actual equivalent shares of common stock for total consideration paid of $2.7 million. The detachable warrants were issued with the notes. We may, from time to time, purchase outstanding debt and equity securities for cash in private transactions, in the market or otherwise, subject to compliance with our debt and preferred stock commitments.

        Net cash used for financing activities in 2000 consisted of proceeds from the new senior secured credit facility, issuance of the notes, issuance of redeemable preferred stock and issuance of common stock tendered in the transaction, the pay-off of credit facilities existing prior to the transaction and a $16.0 million voluntary principal payment on our senior secured credit facility.

        Future mandatory principal payment obligations under Term Loan A are $7.2 million due June 30, 2003 and $7.9 million due December 31, 2003. Thereafter, semi-annual principal payments increase $0.7 million per semi-annual period through December 2005, with a final payment of $5.3 million due in May 2006. On July 31, 2002, we amended and restated our senior secured credit facility to provide for the replacement of Term Loan B with a new Term Loan C in the amount of $330.0 million. Future mandatory principal payment obligations under Term Loan C are $1.0 million per semi-annual period through June 30, 2008 followed by three semi-annual installments of $103.3 million though December 31, 2009. The $217.5 million in notes come due May 2010. In addition, mandatory interest obligations on the notes are $13.9 million semi-annually through May 2010.

        We experience seasonality that corresponds to the North American school year. To help manage the seasonal nature of our cash flow, we have a $150.0 million revolving credit facility that expires on May 31, 2006. The term loans and borrowings under the revolving credit facility collectively are referred to as the "senior secured credit facility". Our second amended and restated senior secured credit facility dated December 13, 2002 adds our Canadian subsidiary as a borrower under the revolving credit facility for an amount not to exceed $20.0 million. In connection with the amendment and restatement, we have guaranteed the revolving credit facility of our Canadian subsidiary upon the occurrence of any event of default under any credit document. At the end of 2002, there was $9.0 million outstanding in the form of short-term borrowings at our Canadian subsidiary and an additional $9.9 million outstanding in the form of letters of credit, leaving $131.1 million available under this facility. We also have a precious metals consignment arrangement with a major financial

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institution whereby we have the ability to obtain up to $30.0 million in consigned inventory. At the end of 2002, we had $12.6 million available under this facility.

        The notes are not collateralized and are subordinate in right of payment to the senior secured credit facility, which is collateralized by substantially all the assets of our operations and all of our capital stock (limited to 65% in the case of foreign subsidiaries). The senior secured credit facility requires that we meet certain financial covenants, ratios and tests, including a maximum leverage ratio and a minimum interest coverage ratio. In addition, we are required to pay certain fees in connection with the senior secured credit facility, including letter of credit fees, agency fees and commitment fees. The senior secured credit facility and the notes contain certain cross-default provisions whereby a violation of a covenant under one debt obligation would, consequently, violate covenants under the other debt obligation. At the end of 2002, we were in compliance with all covenants.

        The redeemable, payment-in-kind, preferred shares have an initial liquidation preference of $60.0 million and are entitled to receive dividends at 14.0% per annum, compounded quarterly, and are payable either in cash or in additional shares of the same series of preferred stock. We plan to pay dividends in additional shares of preferred stock for the foreseeable future. The redeemable preferred shares are subject to mandatory redemption by Jostens in May 2011.

        Our ability to make scheduled principal payments on existing indebtedness or to refinance our indebtedness, including the notes, will depend on our future financial and operating performance, which to a certain extent is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on the current anticipated level of operations, we believe that cash flows from operations and available cash, together with available borrowings under the senior secured credit facility will be adequate to meet our anticipated future requirements for working capital, budgeted capital expenditures and scheduled payments of principal and interest on our indebtedness for the next twelve months. We may, however, need to refinance all or a portion of the principal of the notes on or prior to maturity. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under the senior secured credit facility in an amount sufficient to enable us to service our indebtedness, including the notes. In addition, there can be no assurance that we will be able to effect any refinancing on commercially reasonable terms, or at all.

Contractual Obligations

        The following table shows due dates and amounts of our contractual obligations:

(1)

Also outstanding is $9.9 million in the form of letters of credit.

(2)

Includes payment-in-kind dividends compounded quarterly through maturity in May 2011.

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COMMITMENTS AND CONTINGENCIES

Environmental

        As part of our environmental management program, we are involved in various environmental remediation activities. As sites are identified and assessed in this program, we determine potential environmental liabilities. Factors considered in assessing liability include, but are not limited to: whether we have 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.

        In 1996, we assessed the likelihood as probable that a loss had been incurred at one of our sites based on findings included in remediation reports and from discussions with legal counsel. As of the end of 2002, we had made payments totaling $7.1 million for remediation at this site and our Consolidated Balance Sheet included $1.1 million in "other accrued liabilities" related to this site. During 2001, we received reimbursement from our insurance carrier in the amount of $2.7 million, net of legal costs. While we may have an additional right of contribution or reimbursement under insurance policies, amounts recoverable from other entities with respect to a particular site are not considered until recoveries are deemed probable. No assets for potential recoveries were established as of the end of 2002. We believe the effect on our consolidated results of operations, cash flows and financial position, if any, for the disposition of this matter will not be material.

Litigation

        A federal antitrust action was served on Jostens on October 23, 1998. The complainant, Epicenter Recognition, Inc. (Epicenter), alleges that Jostens has attempted to monopolize the market of high school graduation products in the state of California. Epicenter is a successor to a corporation formed by four of our former independent sales representatives. The plaintiff claimed damages of approximately $3 million to $10 million under various theories and differing sized relevant markets. Epicenter waived its right to a jury, so the case was tried before a judge in U.S. District Court in Orange County, California. On June 18, 2002, the Court found, among other things, that while Jostens' use of rebates, contributions and value-added programs are legitimate business practices widely practiced in the industry and do not violate antitrust laws, our use of multi-year Total Service Program contracts violated Section 2 of the Sherman Act because these agreements could "exclude competition by making it difficult for a new vendor to compete against Jostens."

        On July 12, 2002, the Court entered an initial order providing, among other things, that Epicenter be awarded damages of $1.00, trebled pursuant to Section 15 of the Clayton Act, and that in the state of California, Jostens was enjoined for a period of ten years from utilizing any contract, including those for Total Service Programs, for a period which extends for more than one year (the "Initial Order"). The Initial Order also provided for payment to Epicenter of reasonable attorneys fees and costs. Jostens made a motion to set aside the Initial Order. On August 23, 2002, the Court entered its ruling on the motion, and granted, in part, Jostens' motion for relief from judgment, changing the Initial Order and enjoining Jostens for only five years, and allowing Jostens to enter into multi-year agreements in the following specific circumstances: (1) when a school requests a multi-year agreement, in writing and on its own accord, or (2) in response to a competitor's offer to enter into a multi-year agreement. On August 23, 2002, the Court entered an additional order granting Epicenter's motion for attorneys' fees in the amount of $1.6 million plus $0.1 million in out-of-pocket expenses for a total award of $1.7 million. On September 12, 2002, Jostens filed a Notice of Appeal to the Ninth Circuit of the United States Court of Appeals. Payment of attorney fees and costs are stayed pending appeal. In November 2002, Jostens issued a letter of credit in the amount of $2.0 million to secure the judgment on attorney fees and costs. Jostens continues to vigorously appeal this matter based upon substantive and procedural grounds. Our brief on appeal was filed with the Court on February 13, 2003.

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        We are a party to other litigation arising in the normal course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. We believe the effect on our consolidated results of operations, cash flows and financial position, if any, for the disposition of these matters, including the Epicenter matter discussed above, will not be material.

NEW ACCOUNTING STANDARDS

SFAS 143—Accounting for Asset Retirement Obligations

        In June 2001, the FASB issued SFAS 143, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We will implement this statement on December 29, 2002, the beginning of our fiscal year. The impact of such adoption is not anticipated to have a material effect on our financial statements.

SFAS 145—Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections

        In April 2002, the FASB issued SFAS 145, which rescinds SFAS 4, "Reporting Gains and Losses from Extinguishments of Debt," SFAS 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and amends SFAS 13, "Accounting for Leases." During 2002, we adopted the provisions of SFAS 145. Accordingly, for 2002 the $1.8 million loss on redemption of our 12.75% senior subordinated notes due May 2010 has been classified as an operating expense as it does not meet the criteria to be classified as an extraordinary loss.

SFAS 146—Accounting for Costs Associated with Exit or Disposal Activities

        In June 2002, the FASB issued SFAS 146, which clarifies the accounting for costs associated with exit or disposal activities. We will implement this statement for all activities occurring subsequent to December 28, 2002. The impact of such adoption is not anticipated to have a material effect on our financial statements.

SFAS 148—Accounting for Stock-Based Compensation—Transition and Disclosure

        In December 2002, the FASB issued SFAS 148, which amends SFAS 123 "Accounting for Stock-Based Compensation." This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of SFAS 123 and APB 28, "Interim Financial Reporting," to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We will continue to account for stock-based compensation in accordance with APB 25. As such, we do not expect SFAS 148 to have a material effect on our financial statements. We have adopted the disclosure-only provisions of SFAS 148 as of December 28, 2002.

FIN 45—Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others

        In November 2002, the FASB issued Interpretation (FIN) 45, which requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. FIN 45 also expands the disclosures required by a guarantor about its obligations

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under certain guarantees that it has issued. Initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. We do not expect FIN 45 to have a material effect on our financial statements.

RECENTLY PASSED LEGISLATION

        On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Act"), which immediately impacts Securities and Exchange Commission registrants, public accounting firms, lawyers and securities analysts. This legislation is the most comprehensive since the passage of the Securities Acts of 1933 and 1934. It has far reaching effects on the standards of integrity for corporate management, boards of directors and executive management. We do not expect any material adverse effect as a result of the passage of this legislation; however, the full scope of the Act has not been determined. We have formed a disclosure committee, which has assessed our disclosure controls and internal controls. While it is not yet clear whether all sections of the Act will apply to us, we intend to follow best practices with respect to the Act. We are in the process of updating our Code of Ethics and Business Conduct, have assessed our anonymous reporting procedures including our internal hotline and have conducted educational sessions on requirements of the Act for our board of directors and executive management.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

        We are subject to market risk associated with changes in interest rates, foreign currency exchange rates and commodity prices. To reduce any one of these risks, we may at times use financial instruments. All hedging transactions are authorized and executed under clearly defined policies and procedures, which prohibit the use of financial instruments for trading purposes.

Interest Rate Risk

        We are subject to market risk associated with changes in the London Interbank Offered Rate (LIBOR) in connection with our senior secured credit facility. We periodically prepare a sensitivity analysis to estimate our exposure to market risk on our floating rate debt. If short-term interest rates or the LIBOR averaged 10% more or less in 2002 and 2001, our interest expense would have changed by $2.4 million and $3.2 million, respectively.

Foreign Currency Risk

        From time to time, we may enter into foreign currency contracts to hedge purchases of inventory denominated in foreign currency. The purpose of these hedging activities is to protect us from the risk that inventory purchases denominated in foreign currencies will be adversely affected by changes in foreign currency rates. Our principal currency exposures relate to the Canadian dollar and the euro. We consider our market risk in such activities to be immaterial. Our foreign operations are primarily in Canada, and substantially all transactions are denominated in the local currency.

Commodity Price Risk

        We are subject to market risk associated with changes in the price of gold. To mitigate our commodity price risk, we enter into gold forward contracts based upon the estimated ounces needed to satisfy projected customer requirements. We periodically prepare a sensitivity analysis to estimate our exposure to market risk on our open gold forward purchase contracts. The market risk associated with these contracts was $0.2 million and $0.7 million as of the end of 2002 and 2001, respectively, and was estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in fair value and giving effect to the increase in fair value over our aggregate forward contract commitment.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Accountants

To the Shareholders and Directors of Jostens, Inc.:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders' equity (deficit) and comprehensive income (loss) and of cash flows present fairly, in all material respects, the consolidated financial position of Jostens, Inc. and its subsidiaries at December 28, 2002 and December 29, 2001, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended December 28, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Jostens, Inc.'s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 5 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," on December 30, 2001.

PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
February 12, 2003

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JOSTENS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of the consolidated financial statements.

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JOSTENS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 28, 2002 and December 29, 2001

The accompanying notes are an integral part of the consolidated financial statements.

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JOSTENS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS