Josten of Owatonna, MN: company history

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From History of Jostens, Inc. - Funding Universe

http://www.fundinguniverse.com/company-histories/jostens-inc-history/

 

Begun in 1897 by Otto Josten, Josten (later changed to Jostens) was originally a small jewelry and watch repair business located in Owatonna, Minnesota. In 1900 the founder began manufacturing emblems and awards for nearby schools and in 1906, the year of incorporation, Josten added class rings to his product line, to be sold to schools throughout the Midwest. The company remained small and relatively inconspicuous until Daniel C. Gainey, a former teacher and football coach, was hired in 1922 as the first full-time Jostens ring salesman. The rings at the time carried no gemstones and were all one size. Yet Gainey, with his dynamic and winning personality, secured sales of $18,000 within his first year. The amount was so large that he was forced to return to Owatonna to ensure personally that production demands could be met. By 1923 Gainey had enlisted four more sales representatives--all part-time--and revenues quickly rose to $70,000. Thus class rings became the central concern for the Jostens Manufacturing Company. In 1930 the watchmaking and repair business was sold and the capital was used to construct the company's first ring manufacturing plant. Three years later, with sales approaching the $500,000 mark, Gainey was elected chairman and CEO, positions he held until his retirement in 1968. According to several accounts, Gainey's greatest contribution to the company was his establishment and motivation of a nationwide sales force. Direct sales through independent representatives remain the primary source for the company's virtually uninterrupted growth.

 

During World War II Jostens contributed to the war effort by adapting its plant and equipment to manufacture precision parts and other materials. Major expansion came following the end of the war. In 1946 the company added graduation announcements to its offerings; in 1950 Jostens launched the American Yearbook Company. Both moves further tapped the education market and made the company less dependent on seasonal sales from rings. In 1958 the company made its first acquisition, purchasing the Ohio-based Educational Supply Company, a manufacturer of school diplomas. Jostens went public the following year and a seemingly unending series of acquisitions, which fortified the company's dominance of the high school and college products markets, characterized the next ten years. Sales for 1962 totaled $26 million; three years later the company obtained its listing on the New York Stock Exchange. In 1968 the company expanded into the Canadian photography market with the purchase of Winnipeg-based National School Studios. By this time Jostens was the undisputed domestic leader in both class ring and yearbook sales. Gainey's retirement, however, coupled with Jostens's relocation to Minneapolis in 1969, triggered a tumultuous period that nearly shipwrecked the then nearly $100-million-dollar company.

 

 

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Rocky Start to Leadership Change: 1970s

Star Tribune columnist Dick Youngblood, reflecting back on this period, wrote: "Jostens had been in turmoil since the late 1960s, when company patriarch Daniel C. Gainey, a major stockholder, pretended to retire as CEO. The trouble was, Gainey remained active enough over the ensuing four years to force the resignation of three chairmen and a president, including his own son." In 1970, amidst the turmoil, a top-performing Jostens salesman and division manager was appointed executive vice-president and effectively became the company's chief operating officer. His name was H. William (Bill) Lurton. Unbeknownst to senior management, however, including Lurton, Gainey had begun negotiations with acquisition-hungry Bristol-Myers. Once Gainey's plan surfaced, several top Jostens officials tendered their resignations; Lurton was among the few who remained. Although Bristol-Myers halted negotiations after the management fallout, Jostens remained in peril under the leadership of replacement CEO Richard Schall. A former top official at General Mills and Metro-Goldwyn-Mayer, Schall, according to Corporate Report editor Terry Fiedler, "presided over Jostens for about 18 months before the advent of what amounted to a palace coup." An outsider with little knowledge of the business, Schall had brought in his own management team and radically disrupted the friendly, teamwork-oriented corporate culture and threatened to move the company too quickly into new, uncharted territory. "The Lurton-led old guard demanded that Schall leave, threatening to leave themselves if he didn't. The directors sided with the old guard and in February 1972 Lurton became CEO of Jostens."

Twenty-one years later, Lurton remained in the position, well-liked by his employees and greatly esteemed by his fellow Minnesota CEOs. During his early tenure he moved quickly to reestablish Jostens as a thriving, focused company. Diversification beyond educational products, thought to be the key to the company's future, was renewed only for a short time before being curtailed in large part. In 1974 Lurton divested Jostens of a greeting cards manufacturer and a men's accessories business. Five years later he also rid the company of interests in wedding rings and library supplies. Jostens Travel, first organized in 1972, also was dissolved before the end of the decade. Jostens did keep at least one peripheral acquisition, Artex Enterprises, for the long term. A manufacturer of custom-imprinted athletic and casual wear, the Artex label survives within the Jostens Sportswear division and is marketed primarily through mass merchants.

 

Changing Demographics Challenge Lurton: 1980s

Aside from the aftermath of the Gainey debacle, Lurton's greatest challenge as a CEO came in the late 1970s and early 1980s, when demographic studies clearly showed that the last of the baby boom generation had graduated from high school and, therefore, beyond the core products line. According to Jackey Gold in Financial World, "Lurton's worry was that declining high school enrollments would shake Wall Street's faith in the company's ability to perform. Jostens' board of directors, too, became infected by such concerns and in August 1982 approved Lurton's proposal for a management buyout." The decision to go private was, for lack of financing, never realized; neither, however, was the company's forecasted decline.

Instead, Lurton launched a concerted campaign to impress Wall Street and counteract potential downswings in profits by boldly entering the proprietary schools business. Beginning in 1983, he acquired San Gabriel Colleges of California and Metridata Education Systems of Kentucky. Three additional private vocational schools were acquired in 1984. That same year Jostens also entered the audiovisual learning and educational software fields by acquiring the Educational Systems Division of Borg-Warner Corporation, which it later renamed Jostens Learning Systems. The new flurry of purchases carried sales to more than $400 million in 1985, when Jostens was accorded Fortune 500 status for the first time. In 1986 the company acquired Illinois-based Prescription Learning Corporation (PLC). A developer of customized computer hardware, software, and support services for the educational market, PLC was merged with Education Systems Corporation three years later to form Jostens Learning Corporation (JLC), a wholly owned subsidiary.