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Jostens, Inc.

FOUNDED: 1897

Contact Information:

HEADQUARTERS: 5501 Norman Center Dr.
Minneapolis, MN 55437
PHONE: (952)830-3300
FAX: (952)830-3293
URL: http://www.jostens.com

OVERVIEW

Minneapolis, Minnesota-based Jostens, Inc. makes class rings for high school and college students. The firm also produces rings for sports championship teams such as the World Series, Super Bowl, and NHL Stanley Cup winners. Additional activities include yearbook production, school photography, and the manufacture of graduations caps and gowns.

COMPANY FINANCES

After four consecutive years of growth, revenues for Jostens reached $805 million in 2000. However, they had yet to return to their 1993 high of $914.8 million. Profits of $57.2 million in 1997 fell to $41.8 million in 1998. Although profits improved marginally to $43.2 million in 1999, the firm posted an $18.7 million loss in 2000. That year, an investment company called Investcorp took Jostens private. Jostens returned to profitability in 2001, posting earnings of $4.1 million.

ANALYSTS' OPINIONS

Many analysts believed Jostens was on the right track in the early 2000s. Shortly after the firm had decided to refocus on its core school-based operations, it had been taken private by Investcorp. As a private company, Jostens no longer needed to invest resources into efforts to boost its stock price, which had remained flat for years regardless of the firm's performance. According to Merrill Lynch Global Securities analyst George Chalhoub, as quoted in a May 2001 issue of Minneapolis-St. Paul City Business, "There's been a few bumps thus far as the jewelry hasn't met predictions during the last two quarters, but the company is now reorganizing and has the freedom to make the necessary changes. It's worked for them, and I would expect to see them grow." Other analysts, however, believe the school market for things like rings and yearbooks is nearing saturation.

HISTORY

Otto Josten founded a small jewelry and watch repair business in Owatonna, Minnesota, in 1897. Three years later, Josten began making emblems and awards for local schools. The young company started making class rings, which came in only one size and did not include gem-stones, in 1906.

After several years of modest growth, Josten hired his first full-time salesperson, Daniel C. Gainey, in 1922. A former football coach and teacher, Gainey found he was also skilled in sales. During his first year, he sold $18,000 worth of rings. In 1923 Josten hired four additional part-time salespersons and focused his business, by then called Jostens Manufacturing Co., on ring making. Josten sold his watch making and repair assets in 1930, using the proceeds to build a ring manufacturing plant. By the mid-1930s, sales had exceeded $500,000. In addition, Gainey had taken over as chairman and CEO.

In an effort to lessen its reliance on ring sales, Jostens diversified into graduation announcements in 1946. Four years later, the firm launched the American Yearbook Co. Jostens bought Educational Supply Company, a school diploma maker, in 1958. The following year, Jostens completed its initial public offering. Growth via acquisitions helped boost sales to $26 million in 1962. The company listed its shares on the New York Stock Exchange in 1965. Acquisitions in the late 1960s included National School Studios, based in Winnipeg, Manitoba. By then the firm had positioned itself as the largest class ring and yearbook maker in the United States with sales of nearly $100 million.

The 1970s proved much more tumultuous for the firm. A power struggle that started in the late 1960s after Gainey retired left the firm without stable leadership for nearly four years. In 1972 H. William Lurton took over as CEO and began working to restore order to Jostens. Diversification beyond educational products, once thought to be essential to future growth, was soon halted. Lurton sold off a greeting cards manufacturer and a men's accessories business that had been acquired by previous management. Efforts to offer travel services via Jostens Travel, a unit created in 1972, were halted as well.

Declining high school enrollment began to concern Lurton in the early 1980s. Believing that investors would see this erosion of Jostens' core market as an indication that the firm's outlook was in question, Lurton decided to organize a management buyout. The board of directors approved this plan in 1982. However, managers willing to invest money in such a buyout failed to materialize. Lurton then decided to ward off potential downturns in sales by targeting private schools for the first time. In fact, the firm actually began to purchase private schools. During 1983 and 1984, Jostens bought San Gabriel Colleges of California, Metridata Education Systems of Kentucky, and three vocational schools. The firm also diversified into educational software with the purchase of the Educational Systems Division of Borg-Warner Corp. Sales in 1985 grew to $400 million, and Jostens found itself listed as a Fortune 500 company for the first time. Prescription Learning Corporation (PLC), acquired in 1986, was consolidated with other educational software holdings in 1989 to form Jostens Learning Corp.

Jostens sold its proprietary schools, numbering 36 at the time, to CareerCom Corp. in 1987. By then, employees totaled 9,000, and the firm's independent sales staff had grown to 1,400. An average return on investment of 27 percent between 1983 and 1989 caught the attention of Wall Street analysts. Fortune magazine named Jostens one of the "Companies That Compete Best" in 1989. The following year, Corporate Report Minnesota named Lurton "Executive of the Year" and Industry Week named Lurton one of "America's Unsung Heroes."

Jostens diversified into award and recognition products in 1990 by acquiring both Gordon B. Miller & Co. and Lenox Awards. By 1992 Jostens Learning Corp. accounted for 20 percent of earnings. Because the educational technology market was relatively untapped, many analysts believed that the firm was poised for continued success. In August of that year, Jostens acquired rival Wicat Systems and convinced Dell Computer Corp. to begin marketing a Jostens line of 386 and 486 personal computer systems. Instead of realizing the expected growth, however, Jostens posted a loss of $12.1 million in 1993. The downturn was due at least in part to educational budget cuts.

Robert C. Buhrmaster succeeded Lurton in 1993. He began to restore the firm's focus on its core class ring, yearbook, and recognition operations by reducing educational technology efforts. He eliminated layers of management and placed the firm's various divisions under more direct control of top executives. Losses persisted in 1994, prompting the firm to sell Jostens Learning Corp. to an investor group headed by Bain Capital, Inc. for $90 million the following year.

Restructuring continued into 1997, when the firm devised a new logo and increased marketing efforts. To reduce costs, Jostens moved a portion of its ring manufacturing operations to Mexico. That year, Jostens also bought Gold Lance, a retail class ring line, from Town & Country Corp. Investcorp paid $950 million for Jostens in 2000, taking the firm private. The following year, the firm began to divest its general awards and employee recognition operations. In addition, Jostens closed a distribution center in Memphis, Tennessee, and a manufacturing plant in Sherbrooke, Quebec.

STRATEGY

One of Jostens' key strategies throughout its growth and development in the twentieth century was direct sales. Although the firm first used its own salespersons to peddle class rings at nearby schools, rapid growth eventually prompted Jostens to develop a nationwide network of independent sales representatives. According to a May 1998 issue of St. Paul Pioneer Press, "Industry observers and Jostens' competitors attribute the company's market strength to making quality products, providing reliable service to students and parents, and hiring enterprising independent sales representatives who build long-term relationships with schools and gain access for in-school marketing."

Jostens tended to waver between strategies of growth via diversification and a return to core operations. In the late 1990s, as the firm once again narrowed its focus to school-based operations, it also began working on developing brand awareness. For example, Jostens developed a new corporate logo. In addition, the purchase of the Gold Lance class ring brand in 1997 was designed to push the Jostens brand into the retail class ring market, a segment traditionally dominated by retailing giants like J.C. Penney and Wal-Mart. Despite intense competition, Jostens' efforts to develop its brand awareness helped the company maintain a dominant share of the class ring market.

PRODUCTS

Along with class rings and athletic rings, Jostens sells graduation announcements, diplomas, caps and gowns, senior and prom portraits, student IDs, group and individual school pictures, and yearbooks.

CORPORATE CITIZENSHIP

The Jostens Foundation gives $500,000 annually to nonprofit community-based youth and education endeavors. The firm also matches a portion of the charitable donations made by employees, grants a number of post-secondary scholarships to family members of Jostens employees, and sponsors United Way fundraisers.

SOURCES OF INFORMATION

Bibliography

Carlson, Scott. "Running Rings Around Competition." St. Paul Pioneer Press, May 1998.

"Jostens, Inc." International Directory of Company Histories. Detroit: Gale Group, 1999.

Jostens, Inc. Home Page, 2002. Available at http://www.jostens.com.

"Jostens to Close Memphis and Canadian Operations." Memphis Business Journal, 23 March 2001.

Martyka, Jim. "Leveraged Buyouts Bring Flexibility." Minneapolis-St. Paul City Business, 4 May 2001.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Jostens, Inc.'s primary SICs are:

3172 Personal Leather Goods, Not Elsewhere Classified

3911 Jewelry, Precious Metal

Also investigate companies by their North American Industry Classification System Codes, also known as NAICS codes. Jostens, Inc.'s primary NAICS codes are:

316993 Personal Leather Goods (except Women's Handbag and Purse) Manufacturing

339911 Jewelry (except Costume) Manufacturing