** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

# **Washington,D.C. 20549**

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## **FORM10-Q**

| x                                                                                                                                                                                                                                                                        | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                     | ** ** | ** **                                                                                    |   |   |
| **For the  quarterly period ended July 1, 2006**                                                                                                                                                                                                                         |
| ** **                                                                                                                                                                                                                                                               |
| **or**                                                                                                                                                                                                                                                                   |
| ** **                                                                                                                                                                                                                                                               |
| o                                                                                                                                                                                                                                                                        | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                               |
| **For the transition period from                       to****                ** |

 
| Commission  File Number | ** ** | **Registrant,  State of Incorporation  Address and Telephone Number** | ** ** | **I.R.S.  Employer  Identification  Number** |
|-------------------------|------------|-----------------------------------------------------------------------|------------|----------------------------------------------|
|                    |       |                                                                  |       |                                         |
| **333-112055**          | ** ** | **VISANT  HOLDING CORP.**                                             | ** ** | **90-0207875**                               |
|                    |       | (Incorporated in  Delaware)                                           |       |                                         |
|                    |       |                                                                  |       |                                         |
|                    | ** ** | **357  Main Street  Armonk, New York 10504**                          |       |                                         |
|                    |       | Telephone:**(914) 595-8200**                                          |       |                                         |
|                    |       |                                                                  |       |                                         |
| **333-120386**          | ** ** | **VISANT  CORPORATION**                                               | ** ** | **90-0207604**                               |
|                    |       | (Incorporated in  Delaware)                                           |       |                                         |
|                    |       |                                                                  |       |                                         |
|                    | ** ** | **357  Main Street  Armonk, New York 10504**                          |       |                                         |
|                    |       | Telephone: **(914) 595-8200**                                         |       |                                         |

 

Indicate by check markwhether each registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports) and (2) has been subject to such filing requirement for the past90 days.   Yes x     No o

Indicate by check markwhether any of the registrants is a large accelerated filer, an acceleratedfiler, or non-accelerated filer. (See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act).

Large accelerated filer o        Acceleratedfiler o        Non-acceleratedfiler x

Indicate by check markwhether any of the registrants is a shell company (as defined in Rule 12b-2 ofthe Exchange Act).

Yes o      Nox

As of August 7, 2006,there were 5,973,659 shares of Class A Common Stock, par value $.01 per share,and one share of Class C Common Stock, par value $.01 per share, of VisantHolding Corp. outstanding and 1,000 shares of common stock, par value $.01 pershare, of Visant Corporation outstanding (all of which are owned beneficiallyby Visant Holding Corp.).

Visant Corporation meetsthe conditions set forth in General Instruction (H)(1)(a) and (b) of the Form10-Q and is therefore filing this Form 10-Q with the reduced disclosure formatspecified in General Instruction (H)(2) to such Form 10-Q.

 

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**FILINGFORMAT**

This Quarterly Report onForm 10-Q is a combined report being filed separately by two registrants:  Visant Holding Corp. (“Holdings”) and VisantCorporation, a wholly owned subsidiary of Holdings (“Visant”).  Unless the context indicates otherwise, anyreference in this report to the “Company”, “we”, “our”, “us” or “Holdings”refer to Visant Holding Corp., together with Visant Corporation and itsconsolidated subsidiaries.

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**TABLEOF CONTENTS**

 

**PARTI – FINANCIAL INFORMATION**

 
|            | ** ** | ** **                                                                                                                  | ** ** | ** ** |
|------------|------------|-----------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ITEM  1.   |       | Financial  Statements (Unaudited)                                                                                           |       |       |
|       |       |                                                                                                                        |       |       |
|       | ** ** | **Visant Holding Corp. and subsidiaries:**                                                                                  |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Statements of Operations for  the three and six months ended July 1, 2006 and July 2, 2005           |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Balance Sheets as of July 1,  2006, July 2, 2005 and December 31, 2005                          |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Statements of Cash Flows for  the six months ended July 1, 2006 and July 2, 2005                |       |       |
|       |       |                                                                                                                        |       |       |
|       | ** ** | **Visant Corporation and subsidiaries:**                                                                                    |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Statements of Operations for  the three and six months ended July 1, 2006 and July 2, 2005 |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Balance Sheets as of July 1,  2006, July 2, 2005 and December 31, 2005                          |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Condensed Consolidated Statements of Cash Flows for  the six months ended July 1, 2006 and July 2, 2005           |       |       |
|       |       |                                                                                                                        |       |       |
|       |       | Notes to Condensed Consolidated Financial Statements                                                                        |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 2.    |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                 |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 3.    |       | Quantitative and Qualitative Disclosures About Market  Risk                                                                 |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 4.    |       | Controls and Procedures                                                                                                     |       |       |
|       |       |                                                                                                                        |       |       |
|       | ** ** | **PART  II – OTHER INFORMATION**                                                                                       |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM  1.   |       | Legal  Proceedings                                                                                                          |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 1A.   |       | Risk Factors                                                                                                                |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 2.    |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 3.    |       | Defaults Upon Senior Securities                                                                                             |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 4.    |       | Submission of Matters to a Vote of Security Holders                                                                         |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM  5.   |       | Other  Information                                                                                                          |       |       |
|       |       |                                                                                                                        |       |       |
| ITEM 6.    |       | Exhibits                                                                                                                    |       |       |
|       |       |                                                                                                                        |       |       |
| Signatures |       |                                                                                                                        |       |       |

 

----

#####  

##### **PARTI.  FINANCIAL INFORMATION**

###### **ITEM 1.  FINANCIAL STATEMENTS**

**VISANT HOLDING CORP. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**
| ** **                                     | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|------------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                     | ** ** | **July 1,**                 | ** **  | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                          | ** ** | **2006**                         | ** **  | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Net sales**                                  | ** ** | **$**                            | **548,075** | ** **                     | **$**      | **549,587** | ** ** | **$** | **853,216** | ** ** | **$** | **850,521** | ** ** |
| Cost of products sold                          |       | 276,496                          |        | 294,548                        |       | 450,596 |   | 476,903 |   |
| Gross profit                                   | ** ** | **271,579**                      | ** **  | **255,039**                    | ** ** | **402,620** | ** ** | **373,618** | ** ** |
| Selling and  administrative expenses           |       | 125,641                          |        | 128,917                        |       | 222,519 |   | 227,485 |   |
| Transaction costs                              |       | —                           |        | 440                            |       | — |   | 1,324 |   |
| Special charges                                |       | (110                             | )           | 1,855                          |       | 2,634 |   | 4,549 |   |
| **Operating  income**                          | ** ** | **146,048**                      | ** **  | **123,827**                    | ** ** | **177,467** | ** ** | **140,260** | ** ** |
| Interest expense, net                          |       | 37,417                           |        | 30,389                         |       | 68,395 |   | 60,872 |   |
| Income before income  taxes                    | ** ** | **108,631**                      | ** **  | **93,438**                     | ** ** | **109,072** | ** ** | **79,388** | ** ** |
| Provision for income  taxes                    |       | 43,526                           |        | 38,518                         |       | 43,029 |   | 32,469 |   |
| **Income  from continuing operations**         | ** ** | **65,105**                       | ** **  | **54,920**                     | ** ** | **66,043** | ** ** | **46,919** | ** ** |
| Loss from discontinued  operations, net of tax |       | (3,341                           | )           | (1,394                         | )          | (5,415 | ) | (3,922 | ) |
| **Net income**                                 | ** ** | **$**                            | **61,764**  | ** **                     | **$**      | **53,526** | ** ** | **$** | **60,628** | ** ** | **$** | **42,997** | ** ** |

 

*The accompanying notes are an integral part of thecondensed consolidated financial statements*

1

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**VISANT HOLDING CORP. ANDSUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**
|                                                                                                                                                                         | ** ** | **July 1,** | ** **    | **July 2,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|---------------|------------------|------------|-----------------------|------------|
| **In thousands, except share amounts**                                                                                                              | ** ** | **2006**         | ** **    | **2005**         | ** ** | **2005**              | ** ** |
| **ASSETS**                                                                                                                                                              | ** ** | ** **       |          |             |       |                  |       |
| Cash and cash  equivalents                                                                                                                                              |       | $                | 138,488       |             | $          | 12,547                |       | $ | 20,706 |   |
| Accounts receivable, net                                                                                                                                                |       | 190,992          |          | 196,645          |       | 163,742               |       |
| Inventories, net                                                                                                                                                        |       | 110,308          |          | 108,767          |       | 128,962               |       |
| Salespersons overdrafts, net  of allowance of $13,165, $11,672 and $12,517, respectively                                                                                |       | 17,037           |          | 20,277           |       | 30,785                |       |
| Prepaid expenses and  other current assets                                                                                                                              |       | 12,776           |          | 9,106            |       | 16,739                |       |
| Deferred income taxes                                                                                                                                                   |       | 12,376           |          | 15,064           |       | 12,376                |       |
| Current assets of  discontinued operations                                                                                                                              |       | 61               |          | 7,597            |       | 8,495                 |       |
| **Total current assets**                                                                                                                                                | ** ** | **482,038**      | ** **    | **370,003**      | ** ** | **381,805**           | ** ** |
| Property, plant and  equipment                                                                                                                                          |       | 575,703          |          | 532,566          |       | 542,922               |       |
| Less accumulated  depreciation                                                                                                                                          |       | (331,263         | )             | (298,294         | )          | (311,954              | )          |
| Property, plant  and equipment, net                                                                                                                                     |       | 244,440          |          | 234,272          |       | 230,968               |       |
| Goodwill                                                                                                                                                                |       | 1,080,952        |          | 1,083,317        |       | 1,083,384             |       |
| Intangibles, net                                                                                                                                                        |       | 529,042          |          | 561,470          |       | 554,911               |       |
| Deferred financing costs,  net                                                                                                                                          |       | 55,281           |          | 57,060           |       | 50,400                |       |
| Other assets                                                                                                                                                            |       | 13,089           |          | 11,176           |       | 12,075                |       |
| Long-term assets of  discontinued operations                                                                                                                            |       | —           |          | 52,196           |       | 51,776                |       |
| **Total  assets**                                                                                                                                                       | ** ** | **$**            | **2,404,842** | ** **       | **$**      | **2,369,494**         | ** ** | **$** | **2,365,319** | ** ** |
|                                                                                                                                                                         |       |             |          |             |       |                  |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                          | ** ** | ** **       |          |             |       |                  |       |
| Short-term borrowings                                                                                                                                                   |       | $                | 12,420        |             | $          | 9,020                 |       | $ | 11,868 |   |
| Accounts payable                                                                                                                                                        |       | 64,010           |          | 47,311           |       | 54,664                |       |
| Accrued employee  compensation and related taxes                                                                                                                        |       | 39,329           |          | 40,106           |       | 39,984                |       |
| Commissions payable                                                                                                                                                     |       | 42,335           |          | 43,686           |       | 19,315                |       |
| Income taxes payable                                                                                                                                                    |       | 48,285           |          | 5,650            |       | 6,162                 |       |
| Customer deposits                                                                                                                                                       |       | 62,739           |          | 61,792           |       | 164,456               |       |
| Other accrued liabilities                                                                                                                                               |       | 39,642           |          | 31,679           |       | 35,595                |       |
| Current liablilties of  discontinued operations                                                                                                                         |       | 17,709           |          | 5,296            |       | 14,130                |       |
| **Total current liabilities**                                                                                                                                           | ** ** | **326,469**      | ** **    | **244,540**      | ** ** | **346,174**           | ** ** |
|                                                                                                                                                                    |       |             |          |             |       |                  |       |
| Long-term debt - less  current maturities                                                                                                                               |       | 1,860,709        |          | 1,592,245        |       | 1,501,246             |       |
| Deferred income taxes                                                                                                                                                   |       | 199,629          |          | 238,218          |       | 219,164               |       |
| Pension liabilities, net                                                                                                                                                |       | 23,506           |          | 26,963           |       | 25,112                |       |
| Other noncurrent  liabilities                                                                                                                                           |       | 18,829           |          | 6,452            |       | 18,187                |       |
| Long-term liabilities of  discontinued operations                                                                                                                       |       | 150              |          | 295              |       | 151                   |       |
| **Total  liabilities**                                                                                                                                                  | ** ** | **2,429,292**    | ** **    | **2,108,713**    | ** ** | **2,110,034**         | ** ** |
| Mezzanine equity                                                                                                                                                        |       | 9,411            |          | —           |       | —                |       |
| Common stock:                                                                                                                                                           |       |             |          |             |       |                  |       |
| Class A $.01 par value;  authorized 7,000,000 shares; issued and outstanding: 5,973,659 shares at July  1, 2006 and December 31, 2005; 5,971,577 shares at July 2, 2005 |       |             |          |             |       |                  |       |
| Class B $.01 par value;  non-voting; authorized 2,724,759 shares; issued and outstanding:                                                                               |       |             |          |             |       |                  |       |
| none at July 1, 2006,  December 31, 2005 and July 2, 2005                                                                                                               |       |             |          |             |       |                  |       |
| Class C $.01 par value;  authorized 1 share; issued and outstanding: 1 share at July 1, 2006,                                                                           |       |             |          |             |       |                  |       |
| December 31, 2005 and July  2, 2005                                                                                                                                     |       | 60               |          | 60               |       | 60                    |       |
| Additional  paid-in-capital                                                                                                                                             |       | 175,571          |          | 524,402          |       | 525,593               |       |
| Accumulated deficit                                                                                                                                                     |       | (210,340         | )             | (264,620         | )          | (270,968              | )          |
| Accumulated other  comprehensive income                                                                                                                                 |       | 848              |          | 939              |       | 600                   |       |
| **Total stockholders’ (deficit) equity**                                                                                                                           | ** ** | **(33,861**      | **)**         | **260,781**      | ** ** | **255,285**           | ** ** |
| **Total liabilities and  stockholders’ equity**                                                                                                                    | ** ** | **$**            | **2,404,842** | ** **       | **$**      | **2,369,494**         | ** ** | **$** | **2,365,319** | ** ** |

 

*Theaccompanying notes are an integral part of the condensed consolidated financialstatements*

 

2

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**VISANT HOLDING CORP. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

 
| ** **                                                                         | ** ** | **Six months ended** | ** **  |
|------------------------------------------------------------------------------------|------------|--------------------------------|-------------|
| ** **                                                                         | ** ** | **July 1,**               | ** **  | **July 2,** | ** ** |
| **In thousands**                                                              | ** ** | **2006**                       | ** **  | **2005** | ** ** |
| Net income                                                                         |       | $                              | 60,628      |   | $ | 42,997 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                           |        |   |   |
| Loss from discontinued operations                                                  |       | 5,415                          |        | 3,922 |   |
| Depreciation                                                                       |       | 22,080                         |        | 29,302 |   |
| Amortization of intangible assets                                                  |       | 25,609                         |        | 23,164 |   |
| Amortization of debt discount, premium and deferred  financing costs               |       | 13,903                         |        | 15,964 |   |
| Other amortization                                                                 |       | 402                            |        | 387 |   |
| Deferred income taxes                                                              |       | (11,976                        | )           | 29,632 |   |
| Stock-based compensation                                                           |       | 88                             |        | 43 |   |
| Loss on asset impairments                                                          |       | 2,341                          |        | — |   |
| Other                                                                              |       | (847                           | )           | (241 | ) |
| Changes in assets and liabilities:                                                 |       |                           |        |   |   |
| Accounts receivable                                                                |       | (20,010                        | )           | (40,212 | ) |
| Inventories                                                                        |       | 19,976                         |        | 20,853 |   |
| Salespersons overdrafts                                                            |       | 14,469                         |        | 9,420 |   |
| Accounts payable and accrued expenses                                              |       | 12,160                         |        | (9,309 | ) |
| Customer deposits                                                                  |       | (102,058                       | )           | (94,828 | ) |
| Commission payable                                                                 |       | 23,691                         |        | 28,892 |   |
| Income taxes payable                                                               |       | 42,014                         |        | (1,458 | ) |
| Other                                                                              |       | 5,538                          |        | 3,001 |   |
| **Net cash provided by operating activities of  continuing operations**            |       | 113,423                        |        | 61,529 |   |
| **Net cash used in operating activities of  discontinued operations**              |       | (12,384                        | )           | (6,764 | ) |
| **Net cash provided by operating activities**                                      | ** ** | **101,039**                    | ** **  | **54,765** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (34,503                        | )           | (30,549 | ) |
| Proceeds from  sale of property and equipment                                      |       | 1,317                          |        | 1,555 |   |
| Acquisition of  business                                                           |       | (13,590                        | )           | (1,016 | ) |
| Proceeds from  sale of business                                                    |       | 64,092                         |        | — |   |
| Other investing  activities, net                                                   |       | 9                              |        | (9 | ) |
| **Net cash provided by (used in) investing  activities of continuing operations**  |       | 17,325                         |        | (30,019 | ) |
| **Net cash used in investing activities of  discontinued operations**              |       | (673                           | )           | (74 | ) |
| **Net cash provided by (used in) investing  activities**                           | ** ** | **16,652**                     | ** **  | **(30,093** | **)** |
| Net short-term  borrowings                                                         |       | —                         |        | 800 |   |
| Principal  payments on long-term debt                                              |       | —                         |        | (103,500 | ) |
| Distribution to  shareholders                                                      |       | (340,700                       | )           | — |   |
| Proceeds from  issuance of long-term debt                                          |       | 350,000                        |        | — |   |
| Debt financing  costs                                                              |       | (9,300                         | )           | — |   |
| Net proceeds  from issuance of common stock                                        |       | —                         |        | 5,933 |   |
| Other                                                                              |       | —                         |        | (327 | ) |
| **Net cash used in financing activities**                                          | ** ** | **—**                     | ** **  | **(97,094** | **)** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 91                             |        | 5 |   |
| Increase  (decrease) in cash and cash equivalents                                  |       | 117,782                        |        | (72,417 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 20,706                         |        | 84,964 |   |
| **Cash and cash equivalents, end  of period**                                      | ** ** | **$**                          | **138,488** | ** ** | **$** | **12,547** | ** ** |

 

*Theaccompanying notes are an integral part of the condensed consolidated financialstatements*

* *

3

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**VISANT CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**
| ** **                                     | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|------------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                     | ** ** | **July 1,**                 | ** **  | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                          | ** ** | **2006**                         | ** **  | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Net  sales**                                 | ** ** | **$**                            | **548,075** | ** **                     | **$**      | **549,587** | ** ** | **$** | **853,216** | ** ** | **$** | **850,521** | ** ** |
| Cost of products  sold                         |       | 276,496                          |        | 294,548                        |       | 450,596 |   | 476,903 |   |
| Gross profit                                   | ** ** | **271,579**                      | ** **  | **255,039**                    | ** ** | **402,620** | ** ** | **373,618** | ** ** |
| Selling and  administrative expenses           |       | 125,557                          |        | 128,901                        |       | 222,356 |   | 227,425 |   |
| Transaction  costs                             |       | —                           |        | 440                            |       | — |   | 1,324 |   |
| Special charges                                |       | (110                             | )           | 1,855                          |       | 2,634 |   | 4,549 |   |
| **Operating income**                           | ** ** | **146,132**                      | ** **  | **123,843**                    | ** ** | **177,630** | ** ** | **140,320** | ** ** |
| Interest  expense, net                         |       | 24,749                           |        | 25,996                         |       | 50,919 |   | 52,144 |   |
| Income before  income taxes                    | ** ** | **121,383**                      | ** **  | **97,847**                     | ** ** | **126,711** | ** ** | **88,176** | ** ** |
| Provision for  income taxes                    |       | 47,318                           |        | 39,478                         |       | 48,817 |   | 35,368 |   |
| **Income from continuing operations**          |       | 74,065                           |        | 58,369                         |       | 77,894 |   | 52,808 |   |
| Loss from  discontinued operations, net of tax |       | (3,341                           | )           | (1,394                         | )          | (5,415 | ) | (3,922 | ) |
| **Net  income**                                | ** ** | **$**                            | **70,724**  | ** **                     | **$**      | **56,975** | ** ** | **$** | **72,479** | ** ** | **$** | **48,886** | ** ** |

 

*Theaccompanying notes are an integral part of the condensed consolidated financialstatements*

 

4

----

 

**VISANT CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)**
| ** **                                                                                       | ** ** | **July 1,** | ** **    | **July 2,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------|---------------|------------------|------------|-----------------------|------------|
| **In thousands, except share amounts**                                       | ** ** | **2006**         | ** **    | **2005**         | ** ** | **2005**              | ** ** |
| **ASSETS**                                                                                       | ** ** | ** **       |          |             |       |                  |       |
| Cash and cash  equivalents                                                                       |       | $                | 136,792       |             | $          | 11,849                |       | $ | 19,874 |   |
| Accounts receivable,  net                                                                        |       | 190,992          |          | 196,645          |       | 163,742               |       |
| Inventories, net                                                                                 |       | 110,308          |          | 108,767          |       | 128,962               |       |
| Salespersons  overdrafts, net of allowance of $13,165, $11,672 and $12,517, respectively         |       | 17,037           |          | 20,277           |       | 30,785                |       |
| Prepaid expenses and  other current assets                                                       |       | 12,976           |          | 9,106            |       | 16,774                |       |
| Deferred income taxes                                                                            |       | 12,376           |          | 15,064           |       | 12,376                |       |
| Current assets of  discontinued operations                                                       |       | 61               |          | 7,597            |       | 8,495                 |       |
| **Total  current assets**                                                                        | ** ** | **480,542**      | ** **    | **369,305**      | ** ** | **381,008**           | ** ** |
| Property, plant and  equipment                                                                   |       | 575,703          |          | 532,566          |       | 542,922               |       |
| Less accumulated  depreciation                                                                   |       | (331,263         | )             | (298,294         | )          | (311,954              | )          |
| Property, plant  and equipment, net                                                              |       | 244,440          |          | 234,272          |       | 230,968               |       |
| Goodwill                                                                                         |       | 1,080,952        |          | 1,083,317        |       | 1,083,384             |       |
| Intangibles, net                                                                                 |       | 529,042          |          | 561,470          |       | 554,911               |       |
| Deferred financing  costs, net                                                                   |       | 41,563           |          | 51,854           |       | 45,430                |       |
| Other assets                                                                                     |       | 13,089           |          | 11,176           |       | 12,075                |       |
| Long-term assets of  discontinued operations                                                     |       | —           |          | 52,196           |       | 51,776                |       |
| **Total  assets**                                                                                | ** ** | **$**            | **2,389,628** | ** **       | **$**      | **2,363,590**         | ** ** | **$** | **2,359,552** | ** ** |
|                                                                                             |       |             |          |             |       |                  |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                   | ** ** | ** **       |          |             |       |                  |       |
| Short-term borrowings                                                                            |       | $                | 12,420        |             | $          | 9,020                 |       | $ | 11,868 |   |
| Accounts payable                                                                                 |       | 63,386           |          | 47,311           |       | 54,664                |       |
| Accrued employee  compensation and related taxes                                                 |       | 39,329           |          | 40,106           |       | 39,984                |       |
| Commissions payable                                                                              |       | 42,335           |          | 43,686           |       | 19,315                |       |
| Income taxes payable                                                                             |       | 50,967           |          | 5,559            |       | 6,557                 |       |
| Customer deposits                                                                                |       | 62,739           |          | 61,792           |       | 164,456               |       |
| Other accrued  liabilities                                                                       |       | 36,946           |          | 31,678           |       | 35,660                |       |
| Current liablilties of  discontinued operations                                                  |       | 17,709           |          | 5,296            |       | 14,130                |       |
| **Total  current liabilities**                                                                   | ** ** | **325,831**      | ** **    | **244,448**      | ** ** | **346,634**           | ** ** |
|                                                                                             |       |             |          |             |       |                  |       |
| Long-term debt - less  current maturities                                                        |       | 1,316,500        |          | 1,416,500        |       | 1,316,500             |       |
| Deferred income taxes                                                                            |       | 215,985          |          | 247,733          |       | 232,019               |       |
| Pension liabilities,  net                                                                        |       | 23,506           |          | 26,963           |       | 25,112                |       |
| Other noncurrent  liabilities                                                                    |       | 18,829           |          | 6,452            |       | 18,188                |       |
| Long-term liabilities  of discontinued operations                                                |       | 150              |          | 295              |       | 150                   |       |
| **Total  liabilities**                                                                           | ** ** | **1,900,801**    | ** **    | **1,942,391**    | ** ** | **1,938,603**         | ** ** |
| ** **                                                                                       |       |             |          |             |       |                  |       |
| Common stock $.01 par  value; authorized: 2,000,000 shares; issued and outstanding: 1,000 shares |       | —           |          | —           |       | —                |       |
| Additional  paid-in-capital                                                                      |       | 663,909          |          | 667,883          |       | 668,758               |       |
| Accumulated deficit                                                                              |       | (175,930         | )             | (247,623         | )          | (248,409              | )          |
| Accumulated other  comprehensive income                                                          |       | 848              |          | 939              |       | 600                   |       |
| **Total  stockholder’s equity**                                                             | ** ** | **488,827**      | ** **    | **421,199**      | ** ** | **420,949**           | ** ** |
| **Total liabilities and  stockholder’s equity**                                             | ** ** | **$**            | **2,389,628** | ** **       | **$**      | **2,363,590**         | ** ** | **$** | **2,359,552** | ** ** |

 

*The accompanying notes are an integral part of the condensedconsolidated financial statements*

5

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**VISANTCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**
| ** **                                                                         | ** ** | **Six months ended** | ** **  |
|------------------------------------------------------------------------------------|------------|----------------------|-------------|
| ** **                                                                         | ** ** | **July 1,**          | ** **  | **July 2,** | ** ** |
| **In thousands**                                                                   | ** ** | **2006**             | ** **  | **2005** | ** ** |
| Net income                                                                         |       | $                    | 72,479      |   | $ | 48,886 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |       |                 |        |   |   |
| Loss from discontinued operations                                                  |       | 5,415                |        | 3,922 |   |
| Depreciation                                                                       |       | 22,080               |        | 29,302 |   |
| Amortization of intangible assets                                                  |       | 25,609               |        | 23,164 |   |
| Amortization of debt discount, premium and deferred  financing costs               |       | 3,888                |        | 7,158 |   |
| Other amortization                                                                 |       | 402                  |        | 387 |   |
| Deferred income taxes                                                              |       | (8,475               | )           | 32,792 |   |
| Loss on asset impairments                                                          |       | 2,341                |        | — |   |
| Other                                                                              |       | (847                 | )           | (198 | ) |
| Changes in assets and liabilities:                                                 |       |                 |        |   |   |
| Accounts receivable                                                                |       | (20,010              | )           | (40,212 | ) |
| Inventories                                                                        |       | 19,976               |        | 20,853 |   |
| Salespersons overdrafts                                                            |       | 14,469               |        | 9,420 |   |
| Accounts payable and accrued expenses                                              |       | 11,536               |        | (9,310 | ) |
| Customer deposits                                                                  |       | (102,058             | )           | (94,828 | ) |
| Commission payable                                                                 |       | 23,691               |        | 28,892 |   |
| Income taxes payable                                                               |       | 44,301               |        | (1,718 | ) |
| Other                                                                              |       | 2,611                |        | 1,949 |   |
| **Net cash provided by operating activities of  continuing operations**            |       | 117,408              |        | 60,459 |   |
| **Net cash used in operating activities of  discontinued operations**              |       | (12,384              | )           | (6,764 | ) |
| **Net cash provided by operating activities**                                      | ** ** | **105,024**          | ** **  | **53,695** | ** ** |
| Purchases of property, plant and equipment                                         |       | (34,503              | )           | (30,549 | ) |
| Proceeds from sale of property and equipment                                       |       | 1,317                |        | 1,555 |   |
| Acquisition of business                                                            |       | (13,590              | )           | (1,016 | ) |
| Proceeds from sale of business                                                     |       | 64,092               |        | — |   |
| Other investing activities, net                                                    |       | 9                    |        | (9 | ) |
| **Net cash provided by (used in) investing  activities of continuing operations**  |       | 17,325               |        | (30,019 | ) |
| **Net cash used in investing activities of  discontinued operations**              |       | (673                 | )           | (74 | ) |
| **Net cash provided by (used in) investing  activities**                           | ** ** | **16,652**           | ** **  | **(30,093** | **)** |
| Net short-term borrowings                                                          |       | —               |        | 800 |   |
| Principal payments on long-term debt                                               |       | —               |        | (103,500 | ) |
| Distribution to shareholders                                                       |       | (4,849               | )           | — |   |
| Net contribution from Visant Holding Corp.                                         |       | —               |        | 9,000 |   |
| Other                                                                              |       | —               |        | (327 | ) |
| **Net cash used in financing  activities**                                         | ** ** | **(4,849**           | **)**       | **(94,027** | **)** |
| Effect of exchange rate changes on cash and cash equivalents                       |       | 91                   |        | 5 |   |
| Increase (decrease) in cash and cash equivalents                                   |       | 116,918              |        | (70,420 | ) |
| Cash and cash equivalents, beginning of period                                     |       | 19,874               |        | 82,269 |   |
| **Cash and cash equivalents, end of period**                                       | ** ** | **$**                | **136,792** | ** ** | **$** | **11,849** | ** ** |

 

*The accompanying notes are anintegral part of the condensed consolidated financial statements*

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**1.    Overview and Basis of Presentation**

***Overview***

The Company is amarketing and publishing services enterprise servicing the school affinity,direct marketing, fragrance and cosmetics sampling and educational publishingmarkets.  The Company was formed throughthe October 2004 consolidation of Jostens, Inc. (“Jostens”), Von HoffmannHoldings Inc. (“Von Hoffmann”) and AHC I Acquisition Corp. (“Arcade”).  These subsidiaries operate in four reportablesegments:  Jostens Scholastic, JostensYearbook, Marketing and Publishing Services and Educational Textbook.

***Basis ofPresentation***

Theunaudited condensed consolidated financial statements included herein are thoseof:

·                  VisantHolding Corp. and its wholly-owned subsidiaries (“Holdings”) which includeVisant Corporation (“Visant”); and

·                  Visantand its wholly-owned subsidiaries.

Thereare no significant differences between the results of operations and financialcondition of Visant and those of Holdings other than certain indebtedness ofHoldings.  Holdings has 10.25% seniordiscount notes, which had an accreted value of $194.2 million, $175.7 millionand $184.7 million as of July 1, 2006, July 2, 2005 and December 31, 2005,respectively, and $350.0 million principal amount of 8.75% Senior Notes as ofJuly 1, 2006.

All significant intercompany balances and transactionshave been eliminated in consolidation.

Theaccompanying unaudited condensed consolidated financial statements of Holdingsand Visant, and their respective subsidiaries, are presented pursuant to therules and regulations of the United States Securities and Exchange Commission(the “SEC”) in accordance with disclosure requirements for the quarterly reporton Form 10-Q.  In the opinion ofmanagement, all adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation have been included.  Operating results for the interim periodspresented are not necessarily indicative of the results that may be expectedfor the full year.  These financialstatements should be read in conjunction with the consolidated financialstatements and footnotes included in Holdings’ and Visant’s Annual Report onForm 10-K for the fiscal year ended December 31, 2005.

The preparation ofthe financial statements in conformity with accounting principles generallyaccepted in the United States requires the Company to make estimates andassumptions that affect the amounts reported in the financial statements andaccompanying notes.  Actual results coulddiffer from those estimates.

***Recent Accounting Pronouncements***

Effective January 1, 2006, we adopted SFAS 123R, whichrequires the recognition of compensation expense related to all equity awardsgranted, including awards modified, repurchased, or cancelled based on the fairvalues of the awards at the grant date. For the three months and six months ended July 1, 2006, we recognizedcompensation expense related to stock options of less than $0.1 million for bothperiods.  See Note 15, *Share-based Compensation*, to the Condensed ConsolidatedFinancial Statements for further discussion and details.

In June 2006, theFASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes” (“FIN 48”), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements in accordance withFASB Statement No. 109, “Accounting for Income Taxes”.  FIN 48 requires applying a “more likely thannot” threshold to the recognition and derecognition of tax positions.  The new guidance will be effective for us onJanuary 1, 2007.  We are currentlystudying its provisions to determine the impact, if any, on our financialstatements.

7

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**2.    Significant Accounting Policies**

***Revenue Recognition***

TheSEC’s Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”,provides guidance on the application of accounting principles generallyaccepted in the United States to selected revenue recognition issues. Inaccordance with SAB No. 104, the Company recognizes revenue when the earningsprocess is complete, evidenced by an agreement between the Company and thecustomer, delivery and acceptance has occurred, collectibility is probable andpricing is fixed or determinable. Revenue is recognized when (1) products areshipped (if shipped FOB shipping point), (2) products are delivered (if shippedFOB destination) or (3) as services are performed as determined by contractualagreement, but in all cases only when risk of loss has transferred to thecustomer and the Company has no further performance obligations.

***Cost of Products Sold***

Cost of products soldprimarily include the cost of paper and other materials, direct and indirectlabor and related benefit costs, depreciation of production assets and shippingand handling costs.

***Shipping and Handling***

Net sales include amountsbilled to customers for shipping and handling costs. Costs incurred forshipping and handling are recorded in cost of products sold.

***Selling and Administrative Expenses***

Selling andadministrative expenses primarily include salaries and related benefits ofsales and administrative personnel, sales commissions, amortization ofintangibles and professional fees such as audit and consulting fees.

***Advertising***

The Company expenses advertising costs asincurred.  Selling and administrativeexpenses included advertising expense of $0.9 million for the quarter endedJuly 1, 2006 and $1.3 million for the quarter ended July 2, 2005.  Advertising expense totaled $2.2 million for thesix months ended July 1, 2006 and $2.6 million for the same period last year.

***Warranty Costs***

Provisions for warranty costs related to Jostens’scholastic products, particularly class rings, are recorded based on historicalinformation and current trends in manufacturing costs due to their lifetimewarranty. The provision related to the lifetime warranty is based on the numberof rings manufactured in the prior school year consistent with industrystandards. The provision for the lifetime warranty on rings was approximately$0.4 million for each of the quarters ended July 1, 2006 and July 2, 2005. Forthe six months ended July 1, 2006 and July 2, 2005, the provision for thewarranty was $0.6 million and $0.7 million, respectively.  Warranty repair costs for rings manufacturedin the current school year are expensed as incurred. Accrued warranty costsincluded in the consolidated balance sheets were approximately $1.0 million asof July 1, 2006, July 2, 2005 and December 31, 2005.

***Share-based Compensation***

Effective January 1, 2006, the Company adoptedStatement of Financial Accounting Standards (“SFAS”) 123 (revised 2004), *Share Based Payment* (“SFAS 123R”), which requires therecognition of compensation expense related to all equity awards grantedincluding awards modified, repurchased, or cancelled based on the fair valuesof the awards at the grant date.  For thethree month and six month periods ended July 1, 2006, the Company recognizedcompensation expense related to stock options of less than $0.1 million, whichis included in selling,

8

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general andadministrative expenses.  Refer to Note15, *Stock-based Compensation*, for furtherdetails.

***MezzanineEquity***

Certain management stockholder agreements contain arepurchase feature whereby Holdings’ is obligated, under certain circumstancessuch as death and disability, to repurchase the common shares from the holderand settle amounts in cash.  Inaccordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 107, “*Share-Based Payment*”, such equity instruments are consideredtemporary equity and have been reclassified from additional paid-in-capital tomezzanine equity in the balance sheet as of July 1, 2006.

**3.    The Transactions**

OnOctober 4, 2004, an affiliate of Kohlberg Kravis Roberts & Co. L.P. (“KKR”)and affiliates of DLJ Merchant Banking Partners completed transactions(collectively, the “Transactions”) which created a marketing and publishingservices enterprise, servicing the school affinity products, direct marketing,fragrance and cosmetics sampling and educational markets comprised of theoperations of Jostens, Von Hoffmann, The Lehigh Press, Inc. and Arcade.

Prior to the Transactions, Von Hoffmann and Arcade wereeach controlled by affiliates of DLJ Merchant BankingPartners II, L.P. (“DLJMBP II”) and DLJ Merchant BankingPartners III, L.P. (“DLJMBP III”) owned approximately 82.5% of Holdings’outstanding equity, with the remainder held by other co-investors and certainmembers of management.  Upon consummationof the Transactions, an affiliate of KKR invested $256.1 million and was issuedequity interests representing approximately 49.6% of the voting interest and45.0% of the economic interest of the Company and affiliates of DLJMBP IIIheld equity interests representing approximately 41.0% of the voting interestand 45.0% of the economic interest, with the remainder held by otherco-investors and certain members of management. In connection with the Transactions, approximately $175.6 million of theproceeds were distributed to certain shareholders, and certain treasury stockheld by Von Hoffmann was redeemed.   After giving effect to the issuance of equity to additional members ofmanagement, as of August 7, 2006, affiliates of KKR and DLJMBP III (the “Sponsors”)held approximately 49.1% and 41.0%, respectively, of the voting interests ofthe Company, while each continued to hold approximately 44.6% of the economicinterests.  As of August 7, 2006, theother co-investors held approximately 8.4% of the voting interests and 9.1% ofthe economic interests of the Company, and members of management heldapproximately 1.6% of the voting interests and approximately 1.7% of theeconomic interests.

**4.   Restructuring Activity and Other Special Charges**

***RestructuringActivity***

During the secondquarter of 2006, the Company recorded a net reversal of $0.1 million of specialcharges.  The Company reduced itsrestructuring accrual by $0.2 million for amounts related to the 2004 closureof its Jostens Red Wing facility.  TheMarketing and Publishing Services segment recorded $0.1 million of severancecosts and related benefits associated with the reduction of eight employees.

During the secondquarter of 2005, the Company recorded $1.9 million of special charges. JostensScholastic recorded $1.6 million of severance costs and related benefitsassociated with a headcount reduction of 19 Jostens Scholastic employees.  The Marketing and Publishing Services andEducational Textbook segments recorded charges of $0.2 million and $0.1million, respectively, related to severance costs that reduced headcount byfour employees.

For the six monthsended July 1, 2006, the Company recorded $2.6 million of special charges. Thesespecial charges included $0.1 million related to Jostens Scholastic, less than$0.1 million related to Jostens Yearbook, and $0.2 million related to theMarketing and Publishing Services segment for severance costs and relatedbenefits.  Headcount reductionsassociated with these activities were eight for Jostens Scholastic, two forJostens Yearbook,

9

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and 11 for Marketing andPublishing Services. Additionally, the Company recognized an impairment loss of$2.3 million related to the pending sale of its Jostens headquarters building.

For the six monthsended July 2, 2005, the Company incurred $4.5 million of special charges,including $3.1 million for Jostens Scholastic and $0.4 million for JostensYearbook, associated with severance costs and related benefits resulting fromthe reduction in headcount of 37 Jostens Scholastic and four Jostens Yearbookemployees.  The Company recordedseverance charges of $0.5 million related to the reduction in the Marketing andPublishing Services segment’s personnel as well as $0.3 million of costsrelated to a withdrawal liability under a union retirement plan that is payablein connection with the consolidation of certain operations.  Additionally, the Company recorded $0.2million related to the personnel reduction in the Educational Textbook segment.

Restructuringaccruals of $2.0 million, $4.8 million and $3.3 million as of July 1, 2006,July 2, 2005 and December 31, 2005, respectively, are included in other accruedliabilities in the condensed consolidated balance sheets.  The accruals as of December 31, 2005 includedamounts provided for severance related to reductions in corporate andadministrative employees from Jostens and the Marketing and Services segment,included the consolidation of the Marketing and Service segment’s one-andtwo-color print operations.

On acumulative basis through July 1, 2006, the Company incurred $20.7 million ofemployee severance costs related to initiatives during the period from 2004 toJuly 1, 2006, which affected an aggregate of 518 employees. As of July 1, 2006,the Company had paid $18.7 million in cash related to these initiatives.

Changes in the restructuring accruals during thefirst six months of 2006 were as follows:

| In thousands             | ** ** | **2006 Initiatives** | ** ** | **2005 Initiatives** | ** ** | **2004 Initiatives** | ** ** | **Total** | ** ** |
|-------------------------------|------------|---------------------------|------------|---------------------------|------------|---------------------------|------------|-----------|------------|
| Balance at  December 31, 2005 |       | $                         | —     |                      | $          | 1,257                     |       | $         | 2,027      |   | $ | 3,284 |   |
| Restructuring charges         |       | 503                       |       | —                    |       | —                    |       | 503       |       |
| Severance paid                |       | (298                      | )          | (949                      | )          | (550                      | )          | (1,797    | )          |
| Balance at July 1, 2006       | ** ** | **$**                     | **205**    | ** **                | **$**      | **308**                   | ** ** | **$**     | **1,477**  | ** ** | **$** | **1,990** | ** ** |

 

The Company expects theremaining severance related to the 2004, 2005 and 2006 initiatives to be paidduring 2006.

***Other Special Charges***

During the first quarter of2006, the Company recognized an impairment loss related to the pending sale ofits Jostens headquarters building.  As aresult of the pending sale, the Company determined the carrying value of thebuilding was not recoverable and subsequently reduced the carrying value by$2.3 million to its estimated fair value. The impairment loss was allocated to both Jostens segments.

**5.   Acquisitions**

On June 16, 2006,the Company acquired substantially all of the assets and assumed certainliabilities of the Dixon Web operation of the Sleepeck Printing Company, aprovider of innovative marketing services located in Dixon, Illinois, forapproximately $13.1 million in cash, subject to certain working capital adjustments.  At the time of acquisition, the name of thebusiness was changed to Dixon Direct Corp. (“Dixon”).  The results of Dixon’s operations have beenincluded in the consolidated financial statements since that date.  The acquisition, combined with targetedcapital expenditures to be made at the Dixon facility, are expected tosignificantly expand Visant’s marketing services capacity and productioncapabilities.

The acquisitionwas accounted for as a purchase in accordance with the provisions of SFAS 141, *Business Combinations*. The cost of the acquisition was allocated to the tangible and intangibleassets acquired and liabilities

10

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assumed based upontheir relative fair values as of the date of the acquisition.  The estimates utilized to determine the purchaseprice allocation are subject to change.

The allocation ofthe purchase price was as follows:
|                                | ** ** | **(In thousands)** | ** ** |
|--------------------------------|------------|-------------------------|------------|
| Current assets                 |       | $                       | 4,189      |   |
| Property, plant  and equipment |       | 9,600                   |       |
| Goodwill                       |       | 2,239                   |       |
| Current  liabilities           |       | (2,747                  | )          |
| Other  non-current liabilities |       | (191                    | )          |
| Purchase price                 | ** ** | **$**                   | **13,090** | ** ** |

 

Dixon is reportedas part of the Marketing and Publishing Services business segment, and as suchall of its goodwill will be included in this segment.   All of the goodwill will be fully amortizablefor tax purposes.

This acquisition was notmaterial to the Company’s operations, financial position or cash flows.

**6.   Discontinued operations**

Duringthe second quarter, the Company entered into definitive agreements to sell itsJostens Photography businesses, which previously comprised a reportablesegment.  The sales closed on June 30,2006 with the Company recognizing an aggregate $0.2 million net loss on thetransaction and aggregate net proceeds of $64.1 million.  Accordingly, this segment has been reportedas discontinued operations for all periods presented.

Included in the net loss from discontinuedoperations in the consolidated statements of operations are the following:
| ** **                                         | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                         | ** ** | **July 1,**                 | ** ** | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                              | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net sales from  discontinued operations            |       | $                                | 14,242     |                           | $          | 12,932 |   | $ | 21,692 |   | $ | 21,118 |   |
|                                               |       |                             |       |                           |       |   |   |   |   |
| Pretax loss from  discontinued operations          |       | (5,075                           | )          | $                              | (2,090     | ) | (8,480 | ) | $ | (6,015 | ) |
| Income tax  benefit from discontinued operations   |       | 1,933                            |       | 696                            |       | 3,264 |   | 2,093 |   |
| Net operating  loss from discontinued operations   |       | (3,142                           | )          | (1,394                         | )          | (5,216 | ) | (3,922 | ) |
| Loss on sale of  segment, net of tax               |       | (199                             | )          | —                         |       | (199 | ) | — |   |
| **Loss from discontinued  operations, net of tax** | ** ** | **$**                            | **(3,341** | **)**                          | **$**      | **(1,394** | **)** | **$** | **(5,415** | **)** | **$** | **(3,922** | **)** |

 

Included in loss on sale of segment is tax expense of$5.7 million arising from the taxable gain on the transaction.

These businesses have also been classified separatelyin the Consolidated Balance Sheets as discontinued operations. The majorclasses of assets and liabilities of discontinued operations are summarized asfollows:

11

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| ** **                                                | ** ** | **July 1,** | ** ** | **July 2,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------|------------|-------------|------------|-------------|------------|------------------|------------|
| **In thousands**                                          | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2005**         | ** ** |
| ** **                                                |       |        |       |        |       |             |       |
| **Assets:**                                               |       |        |       |        |       |             |       |
| Accounts receivable,  net                                 |       | $           | —     |        | $          | 440              |       | $ | 598 |   |
| Inventories, net                                          |       | —      |       | 2,410       |       | 1,820            |       |
| Salespersons overdrafts                                   |       | —      |       | 4,617       |       | 5,878            |       |
| Prepaid expenses and  other current assets                |       | 61          |       | 130         |       | 199              |       |
| **Total current assets of  discontinued operations**      |       | 61          |       | 7,597       |       | 8,495            |       |
|                                                      |       |        |       |        |       |             |       |
| Property, plant and  equipment, net                       |       | —      |       | 4,980       |       | 4,931            |       |
| Goodwill                                                  |       | —      |       | 25,017      |       | 25,017           |       |
| Intangibles, net                                          |       | —      |       | 22,199      |       | 21,828           |       |
| **Total assets of discontinued  operations**              | ** ** | **$**       | **61**     | ** **  | **$**      | **59,793**       | ** ** | **$** | **60,271** | ** ** |
|                                                      |       |        |       |        |       |             |       |
| **Liabilities:**                                          |       |        |       |        |       |             |       |
| Accounts payable                                          |       | $           | 2,759      |        | $          | 457              |       | $ | 1,947 |   |
| Accrued employee  compensation and related taxes          |       | 1,127       |       | 1,550       |       | 1,610            |       |
| Commissions payable                                       |       | 991         |       | 1,107       |       | 1,640            |       |
| Customer deposits                                         |       | —      |       | 175         |       | 1,865            |       |
| Other accrued  liabilities                                |       | 11,125      |       | 270         |       | 5,343            |       |
| **Total current liabilities of  discontinued operations** |       | 16,002      |       | 3,559       |       | 12,405           |       |
|                                                      |       |        |       |        |       |             |       |
| Other noncurrent liabilities                              |       | 150         |       | 295         |       | 151              |       |
| **Total liabilities of  discontinued operations**         | ** ** | **$**       | **16,152** | ** **  | **$**      | **3,854**        | ** ** | **$** | **12,556** | ** ** |

 

In addition $1.7million of transition benefits relating to the Jostens Recognition business,which was discontinued in 2001, are included in “current liabilities ofdiscontinued operations” in the condensed consolidated balance sheet for allperiods presented.  Transition benefitswill continue to be paid through the period of statutory obligations.

**7.    Comprehensive Income**

The following amounts were included in determining comprehensive incomefor Holdings as of the dates indicated:
| ** **                                   | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **July 1,**                 | ** ** | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                        | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                   |       | $                                | 61,764     |                           | $          | 53,526 |   | $ | 60,628 |   | $ | 42,997 |   |
| Change in  cumulative translation adjustment |       | 305                              |       | (295                           | )          | 248 |   | (520 | ) |
| Comprehensive income                         |       | $                                | 62,069     |                           | $          | 53,231 |   | $ | 60,876 |   | $ | 42,477 |   |

 

The following amounts were included in determiningcomprehensive income for Visant Corporation as of the dates indicated:
| ** **                                   | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **July 1,**                 | ** ** | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                        | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                   |       | $                                | 70,724     |                           | $          | 56,975 |   | $ | 72,479 |   | $ | 48,886 |   |
| Change in  cumulative translation adjustment |       | 305                              |       | (295                           | )          | 248 |   | (520 | ) |
| Comprehensive income                         |       | $                                | 71,029     |                           | $          | 56,680 |   | $ | 72,727 |   | $ | 48,366 |   |

 

12

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** **

**8.   AccountsReceivable and Inventories**

Accounts receivable, net, was comprised of thefollowing:

| In thousands                | ** ** | **July 1,  2006** | ** **  | **July 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------|------------|------------------------|-------------|------------------------|------------|-----------------------------|------------|
| Trade receivables                |       | $                      | 206,829     |                   | $          | 212,534                     |       | $ | 174,085 |   |
| Allowance for doubtful  accounts |       | (3,968                 | )           | (3,892                 | )          | (4,409                      | )          |
| Allowance for sales  returns     |       | (11,869                | )           | (11,997                | )          | (5,934                      | )          |
| Accounts receivable,  net        | ** ** | **$**                  | **190,992** | ** **             | **$**      | **196,645**                 | ** ** | **$** | **163,742** | ** ** |

 

Net inventorieswere comprised of the following:

| In thousands           | ** ** | **July 1,  2006** | ** **  | **July 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------|------------|------------------------|-------------|------------------------|------------|-----------------------------|------------|
| Raw materials and  supplies |       | $                      | 53,345      |                   | $          | 48,953                      |       | $ | 53,263 |   |
| Work-in-process             |       | 43,750                 |        | 50,938                 |       | 50,540                      |       |
| Finished goods              |       | 15,115                 |        | 11,048                 |       | 27,061                      |       |
|                        |       | 112,210                |        | 110,939                |       | 130,864                     |       |
| LIFO reserve                |       | (1,902                 | )           | (2,172                 | )          | (1,902                      | )          |
| Inventories, net            | ** ** | **$**                  | **110,308** | ** **             | **$**      | **108,767**                 | ** ** | **$** | **128,962** | ** ** |

 

***Precious Metals Consignment Arrangement***

The Company has a precious metals consignmentarrangement with a major financial institution whereby it currently has theability to obtain up to $32.5 million in consigned inventory.  As requiredby the terms of the consignment agreement, the Company does not take title toconsigned inventory until payment.  Accordingly, the Company does notinclude the value of consigned inventory or the corresponding liability in thefinancial statements.  The value of consigned inventory at July 1, 2006,July 2, 2005 and December 31, 2005, was $20.0 million, $17.1 million and $26.1million, respectively.  The consignmentagreement does not have a stated term, and therefore it can be terminated byeither party upon 60 days written notice. Additionally, the Company expensed consignment fees related to thisfacility of $0.2 million and $0.1 million for the three months ended July 1,2006 and July 2, 2005, respectively and $0.4 million and $0.2 million for thesix months ended July 1, 2006 and July 2, 2005, respectively.

**9.   Goodwilland Other Intangible Assets, net**

The changes in thecarrying amount of goodwill were as follows:

13

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|                                      | ** ** | **Six months ended** | ** **    | **Year ended** | ** ** |
|--------------------------------------|------------|--------------------------------|---------------|---------------------|------------|
| ** **                           | ** ** | **July 1,**               | ** **    | **July 2,**    | ** ** | **December 31,** | ** ** |
| **In thousands**                | ** ** | **2006**                       | ** **    | **2005**            | ** ** | **2005** | ** ** |
| Balance at beginning of  period      |       | $                              | 1,083,384     |                | $          | 1,083,428 |   | $ | 1,083,428 |   |
| Goodwill acquired  during the period |       | 2,239                          |          | 17                  |       | 23 |   |
| Reduction in goodwill                |       | (4,704                         | )             | —              |       | — |   |
| Purchase price adjustments           |       | —                         |          | (113                | )          | (113 | ) |
| Currency translation                 |       | 33                             |          | (15                 | )          | 46 |   |
| Balance at end of period             | ** ** | **$**                          | **1,080,952** | ** **          | **$**      | **1,083,317** | ** ** | **$** | **1,083,384** | ** ** |

 

Goodwill acquired during the six months ended July 1,2006 of $2.2 million relates to the acquisition of Dixon, which is included inthe Marketing and Publishing Services reporting segment.  The reduction in goodwill for the six monthsended July 1, 2006 of $4.7 million is attributable to the resolution of anincome tax uncertainty that arose in connection with a purchase businesscombination completed by Jostens in May of 2000.  The goodwill reduction was allocated to theJostens Scholastic and Jostens Yearbook reporting segments in the amount of$2.0 million and $2.7 million, respectively.

As of July 1, 2006, goodwill had been allocated toreporting segments as follows:
| In thousands                  | ** ** | ** ** | ** **    |
|------------------------------------|------------|------------|---------------|
| Jostens  Scholastic                |       | $          | 295,668       |   |
| Jostens Yearbook                   |       | 391,932    |          |
| Marketing and  Publishing Services |       | 280,968    |          |
| Educational  Textbook              |       | 112,384    |          |
| Goodwill                           | ** ** | **$**      | **1,080,952** | ** ** |

 

Informationregarding other intangible assets, net as of the dates indicated, is asfollows:
| ** **                     | ** ** | ** **                      | ** ** | **July 1, 2006**  | ** **  | **July 2, 2005**    | ** ** | **December 31, 2005** | ** ** |
|--------------------------------|------------|---------------------------------|------------|-----------------------------|-------------|-------------------------------|------------|---------------------------------|------------|
| **In thousands**          | ** ** | **Estimated  useful life** | ** ** | **Gross  carrying  amount** | ** **  | **Accumulated  amortization** | ** ** | **Net**                         | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| School relationships           |       | 10 years                        |       | $                           | 330,000     |                          | $          | (96,724                         | )          | $ | 233,276 |   | $ | 330,000 |   | $ | (63,851 | ) | $ | 266,149 |   | $ | 330,000 |   | $ | (80,288 | ) | $ | 249,712 |   |
| Internally developed software  |       | 2 to 5 years                    |       | 12,200                      |        | (9,395                        | )          | 2,805                           |       | 12,200 |   | (6,655 | ) | 5,545 |   | 12,200 |   | (8,055 | ) | 4,145 |   |
| Patented/unpatented technology |       | 3 years                         |       | 19,752                      |        | (14,426                       | )          | 5,326                           |       | 19,668 |   | (9,978 | ) | 9,690 |   | 19,752 |   | (12,201 | ) | 7,551 |   |
| Customer relationships         |       | 4 to 40 years                   |       | 32,259                      |        | (9,113                        | )          | 23,146                          |       | 32,759 |   | (7,328 | ) | 25,431 |   | 31,759 |   | (8,178 | ) | 23,581 |   |
| Other                          |       | 3 years                         |       | 38,931                      |        | (18,622                       | )          | 20,309                          |       | 16,619 |   | (6,144 | ) | 10,475 |   | 39,717 |   | (13,975 | ) | 25,742 |   |
|                           |       |                            |       | 433,142                     |        | (148,280                      | )          | 284,862                         |       | 411,246 |   | (93,956 | ) | 317,290 |   | 433,428 |   | (122,697 | ) | 310,731 |   |
| Trademarks                     |       | Indefinite                      |       | 244,180                     |        | —                        |       | 244,180                         |       | 244,180 |   | — |   | 244,180 |   | 244,180 |   |   |   | 244,180 |   |
|                           | ** ** | ** **                      | ** ** | **$**                       | **677,322** | ** **                    | **$**      | **(148,280**                    | **)**      | **$** | **529,042** | ** ** | **$** | **655,426** | ** ** | **$** | **(93,956** | **)** | **$** | **561,470** | ** ** | **$** | **677,608** | ** ** | **$** | **(122,697** | **)** | **$** | **554,911** | ** ** |

 

Amortization expense related to other intangibleassets was $12.9 million and $10.5 million for the three months ended July 1,2006 and July 2, 2005, respectively.  For the six months ended July 1,2006 and July 2, 2005, amortization expense related to other intangible assetswas $25.6 and $23.2 million, respectively.

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Based on intangible assets in service as of July 1,2006, estimated amortization expense for the remainder of 2006 and each of thefive succeeding fiscal years is $22.1 million, $44.2 million, $41.9 million,$37.1 million, $36.5 million and $35.2 million, respectively.

**10.   Long-TermDebt**

Long-term debt consistsof the following:
| **In thousands**                                                                                                                                                                                                                                                                                                                        | ** ** | **July 1,  2006** | ** **    | **July 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|---------------|------------------------|------------|-----------------------------|------------|
| **Holdings:**                                                                                                                                                                                                                                                                                                                                |       |                   |          |                   |       |                        |       |
|                                                                                                                                                                                                                                                                                                                                         |       |                   |          |                   |       |                        |       |
| Senior discount  notes, 10.25% fixed rate, net of discount of $52,991 at July 1, 2006, $71,455  at July 2, 2005 and $62,454 at December 31, 2005, with semi-annual interest  accretion through December 1, 2008, thereafter semi-annual interest payments  of $12.7 million, accreted principal due and payable at maturity - December  2013 |       | $                      | 194,209       |                   | $          | 175,745                     |       | $ | 184,746 |   |
| Senior notes,  8.75% fixed rate, with semi-annual interest payments of $15.3 million,  principal due and payable at maturity - December 2013                                                                                                                                                                                            |       | 350,000                |          | —                 |       | —                      |       |
| **Visant:**                                                                                                                                                                                                                                                                                                                                  | * *   | * *               | * *      | * *               | * *   | * *                    | * *   |
| Borrowings under  our senior secured credit facility:                                                                                                                                                                                                                                                                                        |       |                   |          |                   |       |                        |       |
| Term Loan A,  variable rate, 6.00% at July 2, 2005, paid in full at  December 31, 2005                                                                                                                                                                                                                                                       |       | —                 |          | 90,000                 |       | —                      |       |
| Term Loan C,  variable rate, 7.07% at July 1, 2006, 5.94% at July 2, 2005 and 6.78% at  December 31, 2005 with semi-annual principal and interest payments through October  1, 2011                                                                                                                                                          |       | 816,500                |          | 826,500                |       | 816,500                     |       |
|                                                                                                                                                                                                                                                                                                                                         |       |                   |          |                   |       |                        |       |
| Senior  subordinated notes, 7.625% fixed rate, with semi-annual interest payments of  $19.1 million, principal due and payable at maturity - October 2012                                                                                                                                                                               |       | 500,000                |          | 500,000                |       | 500,000                     |       |
|                                                                                                                                                                                                                                                                                                                                         |       | **1,860,709**          | ** **    | **1,592,245**          | ** ** | **1,501,246**               |       |
| Less current  portion                                                                                                                                                                                                                                                                                                                        |       | —                 |          | —                 |       | —                      |       |
| ** **                                                                                                                                                                                                                                                                                                                                   | ** ** | **$**                  | **1,860,709** | ** **             | **$**      | **1,592,245**               | ** ** | **$** | **1,501,246** | ** ** |

 

In connection with the Transactions, Visant enteredinto senior secured credit facilities, providing for an aggregate amount of$1,270 million, including a $250 million revolving credit facility, andissued $500 million aggregate principal amount of 7.625% seniorsubordinated notes.   Also in connectionwith the Transactions, Jostens, Von Hoffmann and Arcade repaid their existingindebtedness having an aggregate face value of $1,392.6 million, including theredemption value of certain remaining redeemable preferred stock.

Visant’s obligations under the senior secured creditfacilities are unconditionally and irrevocably guaranteed jointly and severallyby Visant Secondary Holdings Corp., a direct wholly-owned subsidiary ofHoldings and the direct parent of Visant, and by Visant’s material current andfuture domestic subsidiaries.  Theobligations of Visant’s principal Canadian operating subsidiary under thesenior secured credit facilities are unconditionally and irrevocably guaranteedjointly and severally by Visant Secondary Holdings Corp., Visant, Visant’smaterial current and future domestic subsidiaries and Visant’s other currentand future Canadian subsidiaries.  Visant’sobligations under the senior secured credit facilities, and the guarantees ofthose obligations, are secured by substantially all of Visant’s assets andsubstantially all of the assets of Visant Secondary Holdings Corp. and Visant’smaterial current and future domestic subsidiaries, including but not limitedto:

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·            all ofVisant’s capital stock and the capital stock of each of Visant’sexisting and future direct and indirect subsidiaries, except that with respectto foreign subsidiaries such lien and pledge is limited to 65% of the capitalstock of “first-tier” foreign subsidiaries; and

·            substantiallyall of Visant’s material existing and future domestic subsidiaries’ tangibleand intangible assets.

The obligations of Jostens Canada Ltd. under thesenior secured credit facilities, and the guarantees of those obligations, aresecured by the collateral referred to in the prior paragraph and substantiallyall of the tangible and intangible assets of Jostens Canada Ltd. and each ofVisant’s other current and future Canadian subsidiaries.

Amounts borrowed under the term loan facilities thatare repaid or prepaid may not be reborrowed. Visant’s senior secured facilities allow us, subject to certainconditions, to incur additional term loans under the term loan C facility, orunder a new term facility, in either case in an aggregate principal amount ofup to $300 million, which additional term loans will have the same security andguarantees as the term A and C loan facilities.

The senior secured credit facilities require Visant tomeet a maximum total leverage ratio, a minimum interest coverage ratio and amaximum capital expenditures limitation. In addition, the senior secured credit facilities contain certainrestrictive covenants which will, among other things, limit Visant’s and itssubsidiaries’ ability to incur additional indebtedness, pay dividends, prepaysubordinated debt, make investments, merge or consolidate, change the business,amend the terms of Visant’s subordinated debt and engage in certain other activitiescustomarily restricted in such agreements. It also contains certain customary events of default, subject to graceperiods, as appropriate.

The dividend restrictions under the Visant seniorsecured credit facilities apply only to Visant and Visant Secondary HoldingsCorp., and essentially prohibit all dividends other than (1) for dividends paidon or after April 30, 2009 and used by Holdings to make regularly-scheduledcash interest payments on its senior discount notes, subject to compliance withthe interest coverage covenant after giving effect to such dividends, (2) forother dividends so long as the amount thereof does not exceed $50 million plusan additional amount based on Visant’s net income and the amount of any capitalcontributions received by Visant after October 4, 2005 and (3) pursuant toother customary exceptions, including redemptions of stock made with other,substantially similar stock or with proceeds of concurrent issuances ofsubstantially similar stock.

The indentures governing Visant’s senior subordinatednotes and Holdings’ senior discount notes and senior notes also containnumerous covenants including, among other things, restrictions on the abilityto:  incur or guarantee additionalindebtedness or issue disqualified or preferred stock; pay dividends or makeother equity distributions; repurchase or redeem capital stock; makeinvestments or other restricted payments; sell assets or consolidate or mergewith or into other companies; create limitations on the ability of restrictedsubsidiaries to make dividends or distributions to its parent company; engagein transactions with affiliates; and create liens.

The indenture governing the Visant notes restrictsVisant and its restricted subsidiaries from paying dividends or making anyother distributions on account of Visant’s or any restricted subsidiary’sequity interests (including any dividend or distribution payable in connectionwith any merger or consolidation) other than (1) dividends or distributions byVisant payable in equity interests of Visant or in options, warrants or otherrights to purchase equity interests or (2) dividends or distributions by arestricted subsidiary, subject to certain exceptions.

The indentures governing Holdings’ senior discountnotes and senior notes restricts Holdings and its restricted subsidiaries fromdeclaring or paying dividends or making any other distribution (including anypayment by Holdings or any restricted subsidiary of Holdings in connection withany merger or consolidation involving Holdings or any of its restrictedsubsidiaries) on account of Holdings’ or any of its restricted subsidiaries’equity interests (other than dividends or distributions payable in certainequity interests and dividends payable to Holdings or any restricted subsidiaryof Holdings), subject to certain exceptions.

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Visant’s senior secured credit facilities and seniorsubordinated notes contain certain cross-default and cross-accelerationprovisions whereby a default under or acceleration of other material debt obligationswould cause a default under or acceleration of the senior secured creditfacilities and the Visant senior subordinated notes.

Any failure to comply with the covenants under thesenior secured credit facilities would constitute a default under the seniorsecured credit facilities, which could result in an acceleration of the loansand other obligations owing thereunder. As of July 1, 2006, the Company was in compliance with all covenantsunder its material debt obligations.

At the end of the first quarter of 2006, Holdingsprivately placed, $350.0 million of 8.75% Senior Notes due 2013, withsettlement on April 4, 2006.  As aresult, on April 4, 2006, the Company received proceeds net of $9.3 million ofdeferred financing costs.  All netproceeds from the offering were used to fund a dividend to stockholders ofHoldings, which was paid on April 4, 2006. The senior unsecured notes are not guaranteed by any of the Company’ssubsidiaries.

During the second quarter ended July 1, 2006, Visanttransferred approximately $4.8 million of cash to Holdings to allow Holdings tomake a scheduled interest payment related to the $350 million 8.75% SeniorNotes due 2013.  This is reflected in Visant’s condensed consolidatedbalance sheet as a return of capital and presented in the condensedconsolidated statement of cash flows as a distribution to shareholder. These amounts eliminate in consolidation and have no impact on Holdings’consolidated financial statements.

As of July 1, 2006, there was $12.4 million outstandingin the form of short-term borrowings under the senior secured creditfacilities, all of which relate to Jostens’ Canadian subsidiary, at a weightedaverage interest rate of 7.00%, and an additional $15.7 million outstanding inthe form of letters of credit, leaving $221.9 million available under the $250million revolving credit facility.

**11.   DerivativeFinancial Instruments and Hedging Activities**

The Company’s involvementwith derivative financial instruments is limited principally to managing well-definedinterest rate and foreign currency exchange risks.  Forward foreign currency exchange contractsmay be used to hedge the impact of currency fluctuations primarily on inventorypurchases denominated in euros.  At July1, 2006, there were no contracts related to these activities outstanding.

**12.   Commitmentsand Contingencies**

The Company issubject to market risk associated with changes in the price of preciousmetals.  To mitigate the commodity pricerisk, the Company may from time to time enter into forward contracts topurchase gold, platinum and silver based upon the estimated ounces needed tosatisfy projected customer demand.  Thepurchase commitment at July 1, 2006 was $19.8 million with delivery datesoccurring throughout this year.  Theseforward purchase contracts are considered normal purchases and therefore notsubject to the requirements of SFAS 133. The fair market value of the open precious metal forward contracts atJuly 1, 2006 was $18.9 million, calculated by valuing each contract at quoted futuresprices.

***Environmental***

The Company’s operations are subject to a wide varietyof federal, state, local and foreign laws and regulations governing emissionsto air, discharges to waters, the generation, handling, storage,transportation, treatment and disposal of hazardous substances and othermaterials, and employee health and safety matters. Costs incurred to complywith such laws and regulations have become more stringent over time.

Also, as an owner and operator of real property or agenerator of hazardous substances, the Company may be subject to environmentalcleanup liability, regardless of fault, pursuant to the ComprehensiveEnvironmental

17

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Response, Compensationand Liability Act or analogous state laws, as well as to claims for harm tohealth or property or for natural resource damages arising out of contaminationor exposure to hazardous substances. Some of the Company’s current or pastoperations have involved metalworking and plating, printing, and otheractivities that have resulted in environmental conditions that have given riseto liabilities.

As part of the environmental management program, theCompany is currently involved in environmental remediation on a propertyformerly owned and operated by Jostens for jewelry manufacturing. AlthoughJostens no longer owns the site, Jostens continues to manage the remediationproject, which began in 2000. As of July 1, 2006, Jostens had made paymentstotaling $7.8 million for remediation at this site. During 2001, Jostensreceived reimbursement from its insurance carrier in the amount of $2.7million, net of legal costs. Based on findings included in remediation reports,the Company estimates that the cost required to finish addressing environmentalconditions is not material. The Company has properly accrued this amount in theconsolidated balance sheet as of July 1, 2006. Additionally, Jostens has ongoing monitoring obligations following thecompletion of remediation.  A No FurtherRemediation Letter was issued in July 2006 with respect to this matter.  The Company will have ongoing monitoringobligations.  The Company does not expectthe cost of such ongoing monitoring to be material.

While Jostens may have an additional right ofcontribution or reimbursement under insurance policies, amounts recoverablefrom other entities with respect to a particular site are not considered untilrecoveries are deemed probable.

***Legal Proceedings***

On February 11, 2004, plaintiff Christian Pocinofiled a complaint against Jostens in the Superior Court of California for theCounty of Los Angeles for alleged breach of express warranty (Cal. Comm. CodeSection 2313), and for alleged violation of California’s false advertisingand unfair competition laws (Cal. Bus. & Prof. Code Sections 17500 and17200). Plaintiff alleged that Jostens violated these laws by purportedlyviolating Federal Trade Commission “guides” with regard to the marketing andsale of jewelry. Specifically, plaintiff contended that: (1) Jostensfailed to comply with the FTC guide that every use of the word “stone” beimmediately preceded by the word “imitation”, “synthetic” or a similar term;and (2) Jostens failed to comply with a separate FTC guide relating to useof the word silver in connection with Jostens’ SilverElite® with platinumalloy. Plaintiff sought equitable relief and unspecified monetary damages onbehalf of himself and a purported class of similarly-situated consumers.

Jostens brought a demurrer and motion to strike theplaintiff’s complaint on June 25, 2004, challenging the legal sufficiencyof plaintiff’s allegations on the basis, inter alia, that the FTC guides arenonbinding and that plaintiff’s allegations generally failed to state a claimon which relief could be granted. On August 13, 2004, the Superior Courtsustained Jostens’ demurrer with leave to amend.

On August 25, 2004, the plaintiff filed anamended complaint which contained substantially the same allegations regarding “stones”while dropping the claims regarding SilverElite® with platinum. OnSeptember 29, 2004, Jostens filed another demurrer/motion to strike, challengingthe legal sufficiency of plaintiff’s amended complaint. On November 24,2004, the Superior Court again sustained Jostens’ demurrer with leave to amend.The plaintiff filed a second amended complaint dated December 16, 2004.The court dismissed the action on January 26, 2005. The plaintiff appealedthe court’s decision and oral arguments were heard on March 15, 2006. Inthe matter of Christian Pocino v. Jostens, Inc., the Court of Appeal of theState of California affirmed the trial court’s judgment in favor of Jostens inearly May 2006.  The order became finalat the beginning of July 2006.

In communications with U.S. Customs and BorderProtection (“Customs”), the Company learned of an alleged inaccuracy of thetariff classification for certain of Jostens’ imports from Mexico. Jostenspromptly filed with Customs a voluntary disclosure to limit its monetaryexposure. The effect of these alleged tariff classification errors is that backduties and fees (or “loss of revenue”) may be owed on imports dating back fiveyears. Additionally, Customs may impose interest on the loss of revenue, if anyis determined. Presently, no formal notice of, or demand for, any alleged lossof revenue has been issued by Customs. A review of Jostens’ import practiceshas revealed that during the relevant five-year period, Jostens’ merchandisequalified for duty-free tariff treatment under the North American Free TradeAgreement (“NAFTA”), in which case there should be no loss of revenue orinterest payment owed Customs. However, Customs’ allegations indicate thatJostens committed a technical oversight in claiming the preferential tarifftreatment. Through its prior disclosure to Customs, Jostens has addressed thistechnical oversight

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and asserted that themerchandise did in fact qualify for duty-free tariff treatment under NAFTA andthat there is no associated loss of revenue. Jostens is in the early stages ofadministrative review of this matter, and it is not clear what Customs’position will be with respect to the alleged tariff classification errors orthat Jostens will not be foreclosed under statute from making post-entry NAFTAclaims for those imports made prior to 2004. Jostens intends to vigorouslydefend its position and has recorded no accrual for any potential liability.However, there can be no assurance that Jostens will be successful in itsdefense or that the disposition of this matter will not have a material effecton the business, financial condition and results of operations of the Company.

The Company is also a party to other litigationarising in the normal course of business. The Company regularly analyzescurrent information and, as necessary, provides accruals for probableliabilities on the eventual disposition of these matters. The Company believes theeffect on the business, financial condition and results of operations, if any,for the disposition of these matters will not be material, however, there canbe no assurance in this regard.

**13.   IncomeTaxes**

TheCompany has provided income tax provisions based on its best estimate of theconsolidated effective tax rates applicable for the entire year.  The estimated consolidated effective taxrates for continuing operations for the six months ended July 1, 2006 were40.0% and 39.0% for Holdings and Visant, respectively.  These rates were lower than the effectiverates of 41.4% and 40.0%, respectively, used for the Company’s first quarterdue largely to a reduced unfavorable tax effect of the amount of anticipatedearnings repatriation from continuing operations in Canada.

Forthe six-month period ended July 1, 2006, the effective tax rates for continuingoperations were 39.5% and 38.5% for Holdings and Visant, respectively, as aresult of applying the estimated consolidated effective tax rates and reducingthe deferred tax valuation allowance by $0.6 million during the firstquarter.  For the comparable six-monthperiod ended July 2, 2005, the effective income tax rates for continuing operationsfor Holdings and Visant were 40.9% and 40.1%, respectively.

During April 2006, Holdings was notified by theInternal Revenue Service that the congressional Joint Committee on Taxation hadapproved a claim for refund by Jostens for the taxable years 2000 and 2001. TheCompany received a Federal refund of approximately $7.6 million, including $1.2million of interest. A substantial portion of the tax refund represents areduction of goodwill.  The reduction ofgoodwill for the six months ended July 1, 2006 of $4.7 million is attributableto the resolution of an income tax uncertainty that arose in connection with apurchase business combination completed by Jostens in May of 2000.

During the quarter ended July 1, 2006, the Companyfurther reduced its deferred tax valuation allowance by $5.7 million becausethe Company estimates that as a result of the sale of Jostens Photographybusinesses, $4.1 million of tax benefit attributable to foreign tax creditcarryforwards will be realized and $1.6 million of tax benefit attributable tocapital loss carryforwards will be realized. The effect of these changes in the deferred tax valuation allowance hasbeen included in the net loss from Discontinued Operations.

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**14.**                               Pensionand Other Postretirement Benefit Plans

Net periodic benefit cost for pension and otherpostretirement benefit plans is presented below:
| ** **                               | ** ** | **Pension benefits**        | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **Three months ended** | ** ** | **Three months ended** | ** ** |
| ** **                               | ** ** | **July 1,**                 | ** ** | **July 2,**                 | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                    | ** ** | **2006**                         | ** ** | **2005**                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                             |       | $                                | 1,549      |                             | $          | 1,825 |   | $ | 5 |   | $ | 10 |   |
| Interest cost                            |       | 3,747                            |       | 3,711                            |       | 49 |   | 78 |   |
| Expected return on plan  assets          |       | (5,653                           | )          | (5,314                           | )          | — |   | — |   |
| Administrative expenses                  |       | 102                              |       | 179                              |       | — |   | — |   |
| Amortization of prior  year service cost |       | (119                             | )          | 13                               |       | (46 | ) | — |   |
| Net periodic benefit  expense            | ** ** | **$**                            | **(374**   | **)**                            | **$**      | **414** | ** ** | **$** | **8** | ** ** | **$** | **88** | ** ** |

 
| ** **                               | ** ** | **Pension benefits**      | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **Six months ended** | ** ** | **Six months ended**   | ** ** |
| ** **                               | ** ** | **July 1,**               | ** ** | **July 2,**                 | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                    | ** ** | **2006**                       | ** ** | **2005**                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                             |       | $                              | 3,098      |                             | $          | 3,650 |   | $ | 10 |   | $ | 20 |   |
| Interest cost                            |       | 7,494                          |       | 7,421                            |       | 98 |   | 156 |   |
| Expected return on plan  assets          |       | (11,306                        | )          | (10,627                          | )          | — |   | — |   |
| Administrative expenses                  |       | 204                            |       | 358                              |       | — |   | — |   |
| Amortization of prior  year service cost |       | (238                           | )          | 26                               |       | (92 | ) | — |   |
| Net periodic benefit  expense            | ** ** | **$**                          | **(748**   | **)**                            | **$**      | **828** | ** ** | **$** | **16** | ** ** | **$** | **176** | ** ** |

 

As of December 31, 2005, the Company did not expect tocontribute to its qualified pension plans in 2006 due to the funded status ofthe plans. This estimate has not changed as of July 1, 2006. For the six monthsended July 1, 2006, the Company did not make any contributions to the qualifiedpension plans and contributed $1.1 million and $0.1 million to its nonqualifiedpension plans and postretirement welfare plans, respectively.

**15.**                               Stock-basedCompensation

The 2003 Stock Incentive Plan (the “2003 Plan”) wasapproved by the Board of Directors and effective as of October 30, 2003.The 2003 Plan permits us to grant key employees and certain other persons stockoptions and stock awards and provides for a total of 288,023 shares of commonstock for issuance of options and awards to employees of the Company and atotal of 10,000 shares of common stock for issuance of options and awards todirectors and other persons providing services to the Company. The maximumgrant to any one person shall not exceed in the aggregate 70,400 shares. Optiongrants consist of “time options”, which vest and become exercisable in annualinstallments over the first five years following the date of grant and/or “performanceoptions”, which vest and become exercisable over the first five years followingthe date of grant at varying levels based on the achievement of certain EBITDAtargets, and in any event by the eighth anniversary of the date of grant. Uponthe occurrence of a “change in control” (as defined in the 2003 Plan), theunvested portion of any time option will immediately become vested andexercisable, and the vesting and exercisability of the unvested portion of anyperformance option may accelerate depending on the timing of the change ofcontrol and return on the equity investment by DLJMBP III in the Company asprovided under the 2003 Plan. The Transactions did not constitute a change ofcontrol under the 2003 Plan. Options issued under the 2003 Plan expire on thetenth anniversary of the grant date. The shares underlying the options aresubject to certain transfer and other restrictions set forth in that certainStockholders

20

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Agreement datedJuly 29, 2003 by and among the Company and certain holders of the capitalstock of the Company. We do not anticipate additional options to be grantedunder the 2003 Plan. As of July 1, 2006 there were 53,659 options vested underthe 2003 Plan and 2,420 unvested and subject to vesting.

In connection with the Transactions, all options topurchase Von Hoffmann and Arcade common stock that were outstanding immediatelyprior to the Transactions were cancelled and extinguished. Consideration paidin respect of the Von Hoffmann options was an amount equal to the differencebetween the per share Transaction consideration and the exercise price,resulting in an aggregate payment of approximately $5.4 million included in “transactioncosts” for 2004. No consideration was paid in respect of the Arcade options.

In connection with the closing of the Transactions, weestablished the 2004 Stock Option Plan (the “2004 Plan”), which permits us togrant key employees and certain other persons various equity-based awards,including stock options and restricted stock. The plan, currently known as theThird Amended and Restated 2004 Stock Option Plan for Key Employees of VisantHolding Corp. and Subsidiaries, provides for issuance of a total of 510,230shares of Holdings Class A Common Stock. Under his employment agreement,the Company’s Chief Executive Officer receives awards of stock options andrestricted stock under the plan. Additional members of management are eligibleto receive equity-based awards. Option grants consist of “time options”, whichvest and become exercisable in annual installments over a five-year period fromthe date of grant, and/or “performance options”, which vest and becomeexercisable over the first five years following the date of grant based uponthe achievement of certain EBITDA and other performance targets, and in anyevent by the eighth anniversary of the date of grant. Upon the occurrence of a “changein control” (as defined in the plan), the unvested portion of any time optionwill immediately become vested and exercisable, and the vesting andexercisability of the unvested portion of any performance option may accelerateif certain EBITDA or other performance measures have been satisfied. The optionexercise period is determined at the time of grant of the option but may notextend beyond the end of the calendar year that is 10 calendar years after thedate of the option is granted. All options, restricted shares and any commonstock for which such equity awards are exercised or with respect to whichrestrictions lapse are governed by a management stockholders’ agreement andsale participation agreement. As of July 1, 2006 there were 77,999 optionsvested under the 2004 Plan and 251,337 unvested and subject to vesting.

Prior to January 1, 2006, the Company applied theintrinsic method under Accounting Principles Board Opinion (“APB”) 25, “*Accounting for Stock Issued to Employees*.” Since all optionspreviously granted to employees were at fair value, no compensation cost wasreflected in net income (loss). For the quarter ended and six months ended July2, 2005, the Company’s pro forma net income (loss) incorporating thestock-based compensation expense provisions under SFAS 123 would not have beenmaterially different than reported net income.

Effective January 1, 2006, the Company adopted SFAS123R, which requires the recognition of compensation expense related to allequity awards based on the fair values of the awards at the grant date. Priorto the adoption of SFAS 123R, the Company used the minimum value method in itsSFAS 123 pro forma disclosure and therefore applied the prospective transitionmethod as of the effective date. Under the prospective transition method, theCompany would recognize compensation expense for equity awards granted,modified and canceled subsequent to the date of adoption.

On April 4, 2006, the Company declared and paid aspecial cash dividend of $57.03 per share to the common stockholders ofHoldings. In connection with the special cash dividend, on April 4, 2006 theexercise prices of issued and outstanding options as of April 4, 2006 under the2003 Plan and the 2004 Plan were reduced by an amount equal to the dividend. The2003 and 2004 Plans and underlying stock option agreements contain provisionsthat provide for anti-dilutive protection in the case of certain extraordinarycorporate transactions, such as the special dividend, and the incrementalcompensation cost, defined as the difference in the fair value of the modifiedaward immediately before and after the modification, was calculated as zero. Asa result of the above modification, all stock option awards previouslyaccounted for under APB 25 will be prospectively accounted for under SFAS 123R.Accordingly, no incremental compensation cost was recognized as a result of themodification.

The Company had granted non-employee awards to certainrelated parties, as disclosed in Note 17, *Related-PartyTransactions,*prior to January 1, 2006, for which compensationexpense has been recorded in 2006 and 2005.

21

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For the three month and six month periods ended July1, 2006, the Company recognized total compensation expense related to stockoptions of less than $0.1 million, which is included in selling, general andadministrative expenses. As of July 1, 2006 there was no unrecognizedcompensation cost related to nonvested share based compensation awards grantedunder the stock plan, as upon modification and the application of theprospective method the shares were determined to have a historical value ofzero. During the three month and six month periods ended July 1, 2006 nooptions have vested.

The following table summarizes stock option activityfor Holdings:

|                                   | ** ** | **Shares**                          | ** ** | **Weighted -  average  exercise price** | ** ** | ** ** |
|-----------------------------------|------------|-------------------------------------|------------|---------------------------------------------------|------------|------------|
| ** **                        | ** ** | **(Shares in thousands)** | ** ** | ** **                                        |
| Outstanding at December  31, 2005 |       | 388                                 |       | $                                                 | 37.78      | *          |   |
| Granted                           |       | —                              |       | —                                            |       |       |
| Cancelled                         |       | (3                                  | )          | $                                                 | 39.07      |       |   |
| Outstanding at July 1,  2006      |       | 385                                 |       | $                                                 | 37.76      |       |   |
| Exercisable at  July 1, 2006      |       | 132                                 |       | $                                                 | 35.40      |       |   |

----

                           *      Weighted average exercise price at December 31, 2005 has beenadjusted to reflect the special dividend.

The weighted average remaining contractual life ofoutstanding options at July 1, 2006 was approximately 8.6 years.

**16.**                               BusinessSegments

The Company operates in four reportable segments.During the second quarter, the Company entered into definitive agreements tosell its Jostens Photography businesses, which previously comprised areportable segment. Accordingly, this segment has been reported as discontinuedoperations and as a result the number of reportable segments reduced from fiveto four for all periods presented. The four reportable segments consist of thefollowing:

*Jostens Scholastic* segmentprovides services related to the marketing, sale and production of class ringsand an array of graduation products.

*Jostens Yearbook*segment **provides services related to the publication,marketing, sale and production of yearbooks.**

*Marketing andPublishing Services* segmentproduces multi-sensory and interactive advertising sampling systems, primarilyfor the fragrance, cosmetics and personal care markets, and innovative, highlypersonalized products primarily targeted to the direct marketing sector. Thegroup also produces testing and supplemental materials and related componentsfor educational publishers.

*EducationalTextbook*segment, which doesbusiness under the Von Hoffmann name, produces four-color case-boundeducational textbooks.

The following table presents information of Holdingsby business segment:

22

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|                                      | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|--------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                           | ** ** | **July 1,**                 | ** **  | **July 2,**               | ** ** | **July 1,** | ** ** | **July 2,** | ** ** |
| **In thousands**                     | ** ** | **2006**                         | ** **  | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| ***Net  sales***                     |       |                             |        |                           |       |   |   |   |   |
| Jostens Scholastic                   |       | $                                | 129,854     |                           | $          | 139,614 |   | $ | 264,237 |   | $ | 263,194 |   |
| Jostens Yearbook                     |       | 254,339                          |        | 244,266                        |       | 262,634 |   | 252,238 |   |
| Marketing and  Publishing Services   |       | 120,695                          |        | 111,653                        |       | 242,370 |   | 239,409 |   |
| Educational Textbook                 |       | 46,315                           |        | 56,316                         |       | 89,097 |   | 100,386 |   |
| Inter-segment  eliminations          |       | (3,128                           | )           | (2,262                         | )          | (5,122 | ) | (4,706 | ) |
| ** **                           | ** ** | **$**                            | **548,075** | ** **                     | **$**      | **549,587** |   | **$** | **853,216** | ** ** | **$** | **850,521** | ** ** |
|                                 |       |                             |        |                           |       |   |   |   |   |
| ***Operating  income***              | ** ** | ** **                       | ** **  | ** **                     |       | ** ** | ** ** | ** ** | ** ** |
| Jostens Scholastic                   |       | $                                | 21,742      |                           | 14,249     |   | $ | 42,555 |   | 25,141 |   |
| Jostens Yearbook                     |       | 101,724                          |        | 88,959                         |       | 87,712 |   | 71,973 |   |
| Marketing and  Publishing Services   |       | 14,477                           |        | 11,275                         |       | 35,343 |   | 29,141 |   |
| Educational Textbook                 |       | 8,105                            |        | 9,344                          |       | 11,857 |   | 14,005 |   |
| ** **                           | ** ** | **$**                            | **146,048** | ** **                     | **$**      | **123,827** |   | **$** | **177,467** | ** ** | **$** | **140,260** | ** ** |
| ** **                           |       |                             |        |                           |       |   |   |   |   |
| ***Depreciation  and amortization*** |       |                             |        |                           |       |   |   |   |   |
| Jostens Scholastic                   |       | $                                | 6,688       |                           | $          | 6,888 |   | $ | 13,984 |   | $ | 15,584 |   |
| Jostens Yearbook                     |       | 9,416                            |        | 10,985                         |       | 17,975 |   | 20,252 |   |
| Marketing and  Publishing Services   |       | 5,963                            |        | 6,764                          |       | 11,911 |   | 13,199 |   |
| Educational Textbook                 |       | 2,162                            |        | 1,908                          |       | 4,221 |   | 3,818 |   |
| ** **                           | ** ** | **$**                            | **24,229**  | ** **                     | **$**      | **26,545** |   | **$** | **48,091** | ** ** | **$** | **52,853** | ** ** |

 

**17.**                               RelatedParty Transactions

***Management Services Agreement***

In connection with the Transactions, theCompany entered into a management services agreement with the Sponsors pursuantto which the Sponsors agreed to provide certain structuring, consulting andmanagement advisory services. Under the agreement, the Sponsors receive anannual advisory fee of $3.0 million that is payable quarterly and whichincreases by 3% per year. The Company paid $0.8 million and $0.7 million asadvisory fees to the Sponsors for the three month periods ended July 1, 2006and July 2, 2005, respectively. For the six month periods ended July 1, 2006and July 2, 2005, the Company paid $1.5 million as advisory fees to theSponsors. The agreement also provides for certain indemnification by the Companyof the Sponsors and their affiliates, directors, officers and representatives.

***Other***

The Company retainedCapstone Consulting (“Capstone”) in 2004 to provide consulting services tocertain segments primarily to identify and advise on potential opportunities toimprove operating efficiencies. During the three months and six months endedJuly 1, 2006, Capstone did not provide consulting services to the Company. Althoughneither KKR nor any entity affiliated with KKR owns any of the equity ofCapstone, KKR has provided financing to Capstone. In March 2005, anaffiliate of Capstone invested $1.3 million in the Company’s Class A

23

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Common Stock and has beengranted 13,527 options to purchase Class A Common Stock under the 2004Stock Option Plan.

**18.**                               CondensedConsolidating Guarantor Information

As discussed inNote 10, *Long-Term Debt*, Visant’s obligationsunder the senior secured credit facilities and the 7.625% senior subordinatednotes are guaranteed by certain of its wholly-owned subsidiaries on a full, unconditionaland joint and several basis. On June 30, 2006, the Company consummated the saleof its Jostens Photography businesses in Canada and the United States. As aresult, the remaining non-guarantor subsidiaries under the senior securedfacilities and 7.625% senior subordinated notes are considered insignificant tothe consolidated financial statements of Visant.

**19.**                               SubsequentEvents

On July 20, 2006, theCompany completed the sale of Jostens’ headquarters building and an adjacentparcel of vacant land in Bloomington, Minnesota for net proceeds totalingapproximately $9.1 million (including a letter of credit for $2.6 million thatmay be drawn upon the earlier of the occurrence of certain events or thepassage of time). Jostens’ executive offices have relocated to leasedfacilities in Bloomington, Minnesota. The Company expects to record a net gainrelating to this transaction in the third quarter.

On July 7, 2006, Visantmade an optional pre-payment of $100.0 million on its Term Loan C facility.

24

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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except where otherwise indicated, management’s discussion and analysis offinancial condition and results of operations is provided with respect toHoldings, which has materially the same financial condition and results ofoperations as Visant.  This discussionand analysis should be read in conjunction with our condensed consolidatedfinancial statements and notes thereto.

**CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS**

This report contains forward-looking statementsincluding, without limitation, statements concerning the conditions in ourindustry, expected cost savings, our operations, our economic performance andfinancial condition, including, in particular, statements relating to ourbusiness and growth strategy and product development efforts. Theseforward-looking statements are not historical facts, but only predictions andgenerally can by identified by the use of statements that include such words as“may”, “might”, “should”, “estimate”, “project”, “plan”, “anticipate”, “expect”,“intend”, “outlook”, “believe” and other similar expressions that are intendedto identify forward-looking statements and information. These forward-lookingstatements are based on estimates and assumptions by our management that,although we believe to be reasonable, are inherently uncertain and subject to anumber of risks and uncertainties. These risks and uncertainties include,without limitation, those identified under Item 1A. *Risk Factors*included in our 2005 Annual Report on Form 10-K and elsewhere in this report.

The following listrepresents some, but not necessarily all, of the factors that could causeactual results to differ from historical results or those anticipated orpredicted by these forward-looking statements:

·       our substantialindebtedness;

·       our inability to implementour business strategy and achieve anticipated cost savings in a timely andeffective manner;

·       competition from othercompanies;

·       the seasonality of ourbusinesses;

·       the loss of significantcustomers or customer relationships;

·       fluctuations in rawmaterial prices;

·       our reliance on a limitednumber of suppliers;

·       our reliance on numerouscomplex information systems;

·       the reliance of ourbusinesses on limited production facilities;

·       the amount of capitalexpenditures required for our businesses;

·       labor disturbances;

·       environmental regulations;

·       foreign currencyfluctuations and foreign exchange rates;

·       the outcome of litigation;

·       control by ourstockholders;

·       our dependency on the saleof school textbooks;

·       the textbook adoption cycleand levels of government funding for education spending;

·       Jostens, Inc.’sreliance on independent sales representatives; and

25

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·       the failure of our samplingsystems to comply with U.S. postal regulations.

We caution you that the foregoing list of importantfactors is not exclusive. In addition, in light of these risks anduncertainties, the matters referred to in the forward-looking statements containedin this report may not in fact occur. Forward-looking statements speak only asof the date they are made and we undertake no obligation to update publicly orrevise any of them in light of new information, future events or otherwise,except as required by law.

**GENERAL**

We are a leading marketing and publishing servicesenterprise servicing the school affinity, direct marketing, fragrance andcosmetics sampling and educational publishing markets. We were formed throughthe October 2004 consolidation of Jostens, Von Hoffmann and Arcade.

Weoperate in four reportable segments. During the second quarter, we entered intodefinitive agreements to sell our Jostens Photography businesses, whichpreviously comprised a reportable segment. Accordingly, this segment has beenreported as discontinued operations and as a result the number of reportablesegments has been reduced from five to four for all periods presented.  The four reportable segments consist of thefollowing:

*Jostens Scholastic* segmentprovides services related to the marketing, sale and production of class ringsand an array of graduation products.

*Jostens Yearbook* segment **provides services related to thepublication, marketing, sale and production of yearbooks.**

*Marketing and Publishing Services*segment produces multi-sensory and interactive advertising sampling systems,primarily for the fragrance, cosmetics and personal care markets, andinnovative, highly personalized products primarily targeted to the directmarketing sector.  The group also producestesting and supplemental materials and related components for educationalpublishers.

*Educational Textbook* segment,which does business under the Von Hoffmann name, produces four-color case-boundeducational textbooks.

The price of gold has increased dramatically duringthe past year and we expect the volatility in the price of gold to continue atleast through the balance of the year.  These higher gold prices haveimpacted, and could further impact, our operating expenses as well as the levelof spending by our customers in the Jostens Scholastic segment.

**TheTransactions**

OnOctober 4, 2004, an affiliate of KKR and affiliates of DLJ Merchant BankingPartners completed the Transactions which created a marketing and publishingservices enterprise, servicing the school affinity products, direct marketing,fragrance and cosmetics sampling and educational markets comprised of theoperations of Jostens, Von Hoffmann, The Lehigh Press, Inc. and Arcade.

Prior to the Transactions, Von Hoffmann and Arcade wereeach controlled by affiliates of DLJMBP II and DLJ DLJMBP III ownedapproximately 82.5% of Holdings’ outstanding equity, with the remainder held byother co-investors and certain members of management.  Upon consummation of the Transactions, anaffiliate of KKR invested $256.1 million and was issued equity interestsrepresenting approximately 49.6% of the voting interest and 45.0% of theeconomic interest in Holdings and affiliates of DLJMBP III held equityinterests representing approximately 41.0% of the voting interest and 45.0% ofthe economic interest, with the remainder held by other co-investors andcertain members of management.  Inconnection with the Transactions, approximately $175.6 million of the proceedswere distributed to certain shareholders, and certain treasury stock held byVon Hoffmann was redeemed.  After givingeffect to the issuance of equity to additional members of management, as ofAugust 7, 2006, affiliates of KKR and DLJMBP III held approximately 49.1% and41.0%, respectively, of the voting interests of Holdings, while each continuedto hold

26

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approximately 44.6% of the economic interests.  As of August 7, 2006, the other co-investorsheld approximately 8.4% of the voting interest and 9.1% of the economicinterests of Holdings, and members of management held approximately 1.6% of thevoting interest and approximately 1.7% of the economic interests.

**CRITICALACCOUNTING POLICIES**

The preparation ofinterim financial statements involves the use of certain estimates that differfrom those used in the preparation of the annual financial statements, the mostsignificant of which relates to income taxes. For purposes of preparing our interim financial statements, we utilizean estimated annual effective tax rate based on estimates of the componentsthat impact the tax rate.  Thosecomponents are re-evaluated each interim period and, if changes in ourestimates are significant, we modify our estimate of the annual effective taxrate and make any required adjustments in the interim period.

There have been nomaterial changes to our critical accounting policies and estimates as describedin Item 7 of our Form 10-K for the fiscal year ended December 31, 2005.

**RecentAccounting Pronouncements**

Effective January 1, 2006, we adopted SFAS 123R, whichrequires the recognition of compensation expense related to all equity awardsgranted, including awards modified, repurchased, or cancelled based on the fairvalues of the awards at the grant date. For the three months and six months ended July 1, 2006, we recognizedcompensation expense related to stock options of less than $0.1 million forboth periods.  See Note 15, *Share-based Compensation*, to the Condensed ConsolidatedFinancial Statements for further discussion and details.

In June 2006, theFASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes” (“FIN 48”), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements in accordance withFASB Statement No. 109, “Accounting for Income Taxes”.  FIN 48 requires applying a “more likely thannot” threshold to the recognition and derecognition of tax positions.  The new guidance will be effective for us onJanuary 1, 2007.  We are currentlystudying its provisions to determine the impact, if any, on our financialstatements.

27

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**RESULTS OF OPERATIONS**

**ThreeMonths Ended July 1, 2006 Compared to the Three Months Ended July 2, 2005**

The followingtable sets forth selected information derived from Holdings’ condensedconsolidated statements of operations for the three-month periods ended July 1,2006 and July 2, 2005.
| ** **                                     | ** **   | **Three months ended** | ** **   | ** **       | ** **   | ** **        | ** **   |
|------------------------------------------------|--------------|----------------------------------|--------------|------------------|--------------|-------------------|--------------|
| ** **                                     | ** **   | **July 1,**                 | ** **   | **July 2,** | ** **   | ** **        | ** **   | ** ** | ** ** |
| **In thousands**                          | ** **   | **2006**                         | ** **   | **2005**         | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                                      |         | $                                | 548,075      |             | $            | 549,587           |         | $ | (1,512 | ) | (0.3 | )% |
| Cost of products  sold                         |         | 276,496                          |         | 294,548          |         | (18,052           | )            | (6.1 | )% |
| Gross profit                                   |         | 271,579                          |         | 255,039          |         | 16,540            |         | 6.5 | % |
| *% of net sales*                               | *** *** | ***49.6***                       | ***%***      | ***46.5***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| * *                                       | * *     | * *                         | * *     | * *         | * *     | * *          | * *     | * * | * * |
| Selling and  administrative expenses           |         | 125,641                          |         | 128,917          |         | (3,276            | )            | (2.5 | )% |
| *% of net sales*                               | *** *** | ***22.9***                       | ***%***      | ***23.5***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                   | *** *** | *** ***                     | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Transaction  costs                             |         | —                           |         | 440              |         | (440              | )            | NM |   |
| Special charges                                |         | (110                             | )            | 1,855            |         | (1,965            | )            | NM |   |
| Operating income                               |         | 146,048                          |         | 123,827          |         | 22,221            |         | 17.9 | % |
| *% of net sales*                               | *** *** | ***26.6***                       | ***%***      | ***22.6***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                   | *** *** | *** ***                     | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Interest  expense, net                         |         | 37,417                           |         | 30,389           |         | 7,028             |         | 23.1 | % |
| Income before  income taxes                    |         | 108,631                          |         | 93,438           |         | 15,193            |         |   |   |
| Provision for  income taxes                    |         | 43,526                           |         | 38,518           |         | 5,008             |         | 13.0 | % |
| Income from  continuing operations             |         | 65,105                           |         | 54,920           |         | 10,185            |         | 18.5 | % |
| Loss from  discontinued operations, net of tax |         | (3,341                           | )            | (1,394           | )            | (1,947            | )            | 139.7 | % |
| Net income                                     |         | $                                | 61,764       |             | $            | 53,526            |         | $ | 8,238 |   | 15.4 | % |

 

NM = Not meaningful

28

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The followingtable sets forth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the three-month periods ended July 1,2006 and July 2, 2005.  For additionalfinancial information about our operating segments, see Note 16, *Business Segments,* to the Condensed Consolidated FinancialStatements.
| ** **                         | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|------------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                         | ** ** | **July 1,**                 | ** ** | **July 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**              | ** ** | **2006**                         | ** ** | **2005**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                          |       |                             |       |             |       |              |       |   |   |
| Jostens  Scholastic                |       | $                                | 129,854    |             | $          | 139,614           |       | $ | (9,760 | ) | (7.0 | )% |
| Jostens Yearbook                   |       | 254,339                          |       | 244,266          |       | 10,073            |       | 4.1 | % |
| Marketing and  Publishing Services |       | 120,695                          |       | 111,653          |       | 9,042             |       | 8.1 | % |
| Educational  Textbook              |       | 46,315                           |       | 56,316           |       | (10,001           | )          | (17.8 | )% |
| Inter-segment  eliminations        |       | (3,128                           | )          | (2,262           | )          | (866              | )          | NM |   |
|                               |       | $                                | 548,075    |             | $          | 549,587           |       | $ | (1,512 | ) | (0.3 | )% |
| Operating income                   |       |                             |       |             |       |              |       |   |   |
| Jostens  Scholastic                |       | $                                | 21,742     |             | $          | 14,249            |       | $ | 7,493 |   | 52.6 | % |
| Jostens Yearbook                   |       | 101,724                          |       | 88,959           |       | 12,765            |       | 14.3 | % |
| Marketing and  Publishing Services |       | 14,477                           |       | 11,275           |       | 3,202             |       | 28.4 | % |
| Educational  Textbook              |       | 8,105                            |       | 9,344            |       | (1,239            | )          | (13.3 | )% |
|                               |       | $                                | 146,048    |             | $          | 123,827           |       | $ | 22,221 |   | 17.9 | % |

 

NM - notmeaningful

 

*NetSales. *Consolidatednet sales decreased $1.5 million, or 0.3%, to $548.1 million for the threemonths ended July 1, 2006 from $549.6 million for the same period in 2005.

The net sales ofthe Jostens Scholastic segment decreased $9.8 million, or 7.0%, to $129.9million for the second quarter of 2006 from $139.6 million for the secondquarter of 2005. The decrease was primarily attributable to timing, sinceduring the 2005 second quarter Jostens recognized a shift of scholastic netsales from the 2005 first quarter due to production challenges in 2005.  Such a shift did not occur in 2006.  Jostens Yearbook net sales increased $10.1million, or 4.1%, to $254.3 million for the quarter ended July 1, 2006 comparedto $244.3 million in the second quarter of 2005 due to price increases andaccount growth.

The net sales ofthe Marketing and Publishing Services segment increased $9.0 million, or 8.1%,to $120.7 million during the second quarter of 2006 from $111.7 million in thesecond quarter of 2005.  This increasewas attributable to higher sales of paper to our customers of approximately$5.2 million as well as higher direct marketing sales.  On June 16, 2006, we acquired the assets ofDixon Direct, which contributed slightly to the net sales of the Marketing andPublishing Services segment for the quarter.

The net sales ofthe Educational Textbook business decreased $10.0 million, or 17.8%, to $46.3million in the second quarter of 2006 from $56.3 million in the second quarterof 2005 due to lower sales of paper of approximately $4.4 million as well aslower volume from certain customers.

*GrossProfit. *Gross profit increased $16.5 million, or 6.5%,to $271.6 million for the three months ended July 1, 2006 from $255.0 millionfor the same period in 2005.  As a percentage of net sales, gross profitmargin increased to 49.6% for the three months ended July 1, 2006 from 46.5%for the same period in 2005.  The $16.5 million increase in gross profitfor the three month period in 2006 was driven by improved diploma businessperformance in

29

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the Jostens Scholasticsegment and increased production efficiency in the Jostens Yearbook segment, aswell as cost savings realized from synergy programs that benefited allbusinesses.  In addition, approximately$1.8 million of the increased gross profit related to a reduction in depreciationand amortization expense, most significantly due to a reduction in Jostenspurchase accounting amortization compared to the prior year period.  Gross profit improvements in the JostensScholastic segment were offset somewhat by higher gold costs in 2006.

*Sellingand Administrative Expenses.  *Sellingand administrative expenses decreased $3.3 million, or 2.5%, to $125.6 millionfor the three months ended July 1, 2006 from $128.9 million in 2005.  As a percentage of net sales, selling andadministrative expenses decreased 0.6% to 22.9% for the second quarter of 2006from 23.5% for the same period in 2005. The $3.3 million decrease was primarily due to the impact ofadministrative headcount reductions and various other cost savings realizedfrom synergy programs and lower depreciation and amortization expense.  These savings were partially offset by higherprofessional fees of $0.5 million.

*Special Charges. *Duringthe second quarter of 2006, we recorded a reversal of $0.2 million that relatedto the 2004 closure of Jostens’ Red Wing facility.  The Marketing and Publishing Services segmentrecorded $0.1 million of severance costs and related benefits associated withthe reduction of eight employees.

During the secondquarter of 2005, we recorded $1.9 million of special charges. JostensScholastic recorded $1.6 million of severance costs and related benefitsassociated with a headcount reduction of 19 Jostens Scholastic employees.  The Marketing and Publishing Services andEducational Textbook segments recorded charges of $0.2 million and $0.1 million,respectively, related to severance costs that reduced headcount by fouremployees.

*OperatingIncome. *As a result ofthe aforementioned items,**consolidatedoperating income increased $22.2 million, or 17.9%, to $146.0 million for thethree months ended July 1, 2006 from $123.8 million in 2005.  As a percentage of net sales, operatingincome increased to 26.6% for the second quarter of 2006 from 22.6% for thesame period in 2005.

*Net interest expense. *Net interest expense wascomprised of the following:
| ** **                                                           | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                                           | ** ** | **July 1,**                 | ** ** | **July 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                | ** ** | **2006**                         | ** ** | **2005**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                          | ** ** | ** **                       | ** ** | ** **       | ** ** | ** **        | ** ** | ** ** | ** ** |
| Interest expense                                                     |       | $                                | 24,617     |             | $          | 23,091            |       | $ | 1,526 |   | 6.6 | % |
| Amortization of  debt discount, premium and deferred financing costs |       | 1,944                            |       | 3,207            |       | (1,263            | )          | (39.4 | )% |
| Interest income                                                      |       | (1,812                           | )          | (302             | )          | (1,510            | )          | NM |   |
|                                                                 | ** ** | **24,749**                       | ** ** | **25,996**       | ** ** | **(1,247**        | **)**      | (4.8 | )% |
| **Holdings:**                                                        | ** ** | ** **                       | ** ** | ** **       | ** ** | ** **        | ** ** | ** ** | ** ** |
| Interest expense                                                     |       | 7,468                            |       | —           |       | 7,468             |       | NM |   |
| Amortization of  debt discount, premium and deferred financing costs |       | 5,200                            |       | 4,452            |       | 748               |       | 16.8 | % |
| Interest income                                                      |       | —                           |       | (59              | )          | 59                |       | NM |   |
|                                                                 | ** ** | **12,668**                       | ** ** | **4,393**        | ** ** | **8,275**         |       | 188.4 | % |
| ** **                                                           | ** ** | **$**                            | **37,417** | ** **       | **$**      | **30,389**        | ** ** | **$** | **7,028** |   | 23.1 | % |

 

NM = Not meaningful

30

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Net interest expense increased $7.0 million, or 23.1%,to $37.4 million for the three months ended July 1, 2006 as compared to $30.4million for the same prior year period.  The increase was due mainly toHoldings’ new 8.75% senior notes as well as the result of higher interest rateson our variable rate term loan debt during the first three months of 2006compared to the same prior year period.

*Incometaxes. *We providedincome tax provisions based on our best estimate of the consolidated effectivetax rates applicable for the entire year. Based on that estimate, for the three months ended July 1, 2006, weprovided income tax provisions at consolidated rates of 40.1% and 39.0% forHoldings and Visant, respectively.  Forthe comparable three-month period ended July 2, 2005, the effective rates ofincome tax provision for Holdings and Visant were 41.2% and 40.3%,respectively.

*Loss fromdiscontinued operations. *Duringthe second quarter, we entered into definitive agreements to sell our JostensPhotography businesses, which previously was a reportable segment.  The sale closed on June 30, 2006 with usrecognizing a $0.2 million net loss on the transaction during the secondquarter of 2006.  The operations fromthis segment resulted in losses of $3.1 million and $1.4 million for thequarters ended July 1, 2006 and July 2, 2005, respectively.

*NetIncome. *As a result of the aforementioned items, netincome increased $8.2 million, or 15.4%, to net income of $61.8 millionfor the three months ended July 1, 2006 compared to net income of$53.5 million for the same period in 2005.

**Six Months Ended July 1, 2006Compared to the Six Months Ended July 2, 2005**

The following table sets forth selected informationderived from Holdings’ condensed consolidated statements of operations for thesix-month periods ended July 1, 2006 and July 2, 2005.

|                                                | ** **   | **Six months ended** | ** **   | ** **       | ** **   | ** **        | ** **   |
|------------------------------------------------|--------------|--------------------------------|--------------|------------------|--------------|-------------------|--------------|
| ** **                                     | ** **   | **July 1,**               | ** **   | **July 2,** | ** **   | ** **        | ** **   | ** ** | ** ** |
| **In thousands**                          | ** **   | **2006**                       | ** **   | **2005**         | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                                      |         | $                              | 853,216      |             | $            | 850,521           |         | $ | 2,695 |   | 0.3 | % |
| Cost of products sold                          |         | 450,596                        |         | 476,903          |         | (26,307           | )            | (5.5 | )% |
| Gross profit                                   |         | 402,620                        |         | 373,618          |         | 29,002            |         | 7.8 | % |
| *% of  net sales*                              | * *     | ***47.2***                     | ***%***      | ***43.8***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| * *                                       | * *     | * *                       | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Selling and  administrative expenses           |         | 222,519                        |         | 227,485          |         | (4,966            | )            | (2.2 | )% |
| *% of  net sales*                              | *** *** | ***26.1***                     | ***%***      | ***26.7***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                   | *** *** | *** ***                   | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Transaction costs                              |         | —                         |         | 1,324            |         | (1,324            | )            | NM |   |
| Special charges                                |         | 2,634                          |         | 4,549            |         | (1,915            | )            | NM |   |
| Operating income                               |         | 177,467                        |         | 140,260          |         | 37,207            |         | 26.5 | % |
| *% of  net sales*                              | *** *** | ***20.8***                     | ***%***      | ***16.4***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                   | *** *** | *** ***                   | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Interest expense, net                          |         | 68,395                         |         | 60,872           |         | 7,523             |         | 12.4 | % |
| Income before income  taxes                    |         | 109,072                        |         | 79,388           |         | 44,730            |         |   |   |
| Provision for income  taxes                    |         | 43,029                         |         | 32,469           |         | 10,560            |         | 32.5 | % |
| Income from continuing  operations             |         | 66,043                         |         | 46,919           |         | 19,124            |         | 40.8 | % |
| Loss from discontinued  operations, net of tax |         | (5,415                         | )            | (3,922           | )            | (1,493            | )            | 38.1 | % |
| Net income                                     | ** **   | $                              | 60,628       |             | $            | 42,997            |         | $ | 17,631 |   | 41.0 | % |

 

----

NM = Not meaningful

31

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The following table setsforth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the six-month periods ended July 1,2006 and July 2, 2005.  For additionalfinancial information about our operating segments, see Note 16, *Business Segments,* to the Condensed Consolidated FinancialStatements.

 

|                                    | ** ** | **Six months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|------------------------------------|------------|--------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                         | ** ** | **July 1,**               | ** ** | **July 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**              | ** ** | **2006**                       | ** ** | **2005**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                          |       |                           |       |             |       |              |       |   |   |
| Jostens Scholastic                 |       | $                              | 264,237    |             | $          | 263,194           |       | $ | 1,043 |   | 0.4 | % |
| Jostens Yearbook                   |       | 262,634                        |       | 252,238          |       | 10,396            |       | 4.1 | % |
| Marketing and  Publishing Services |       | 242,370                        |       | 239,409          |       | 2,961             |       | 1.2 | % |
| Educational Textbook               |       | 89,097                         |       | 100,386          |       | (11,289           | )          | (11.2 | )% |
| Inter-segment  eliminations        |       | (5,122                         | )          | (4,706           | )          | (416              | )          | NM |   |
|                               |       | $                              | 853,216    |             | $          | 850,521           |       | $ | 2,695 |   | 0.3 | % |
| Operating income                   |       |                           |       |             |       |              |       |   |   |
| Jostens Scholastic                 |       | $                              | 42,555     |             | $          | 25,141            |       | $ | 17,414 |   | 69.3 | % |
| Jostens Yearbook                   |       | 87,712                         |       | 71,973           |       | 15,739            |       | 21.9 | % |
| Marketing and  Publishing Services |       | 35,343                         |       | 29,141           |       | 6,202             |       | 21.3 | % |
| Educational Textbook               |       | 11,857                         |       | 14,005           |       | (2,148            | )          | (15.3 | )% |
|                               |       | $                              | 177,467    |             | $          | 140,260           |       | $ | 37,207 |   | 26.5 | % |

 

----

NM - not meaningful

 

*NetSales. *Consolidatednet sales increased $2.7 million, or 0.3%, to $853.2 million for the six monthsended July 1, 2006 from $850.5 million for the same period in 2005.

The net sales ofthe Jostens Scholastic segment increased $1.0 million, or 0.4%, to $264.2million for the first six months of 2006 from $263.2 million for the first sixmonths of 2005. The increase was primarily attributable to higher revenue fromjewelry, offset by lower diploma sales due to timing of production.  Jostens Yearbook net sales increased $10.4million, or 4.1%, to $262.6 million for the six months ended July 1, 2006compared to $252.2 million in the six months ended July 2, 2005 due to priceincreases and account growth.

The net sales ofthe Marketing and Publishing Services segment increased $3.0 million, or 1.2%,to $242.4 million during the six-month period ended July 1, 2006 from $239.4million in the same period of 2005.  Thisincrease was primarily attributable to higher sales of paper to customers ofapproximately $3.6 million, while higher sales of direct marketing materials wereoffset by lower sampling sales during the period.

The net sales ofthe Educational Textbook business decreased $11.3 million, or 11.2%, to $89.1million in the first six months of 2006 from $100.4 million in the first sixmonths of 2005 due to lower sales of paper of approximately $3.9 million aswell as lower sales volume to certain customers.

*GrossProfit. *Gross profit increased $29.0 million, or 7.8%,to $402.6 million for the six months ended July 1, 2006 from $373.6 million forthe same period in 2005.  As a percentage of net sales, gross profitmargin increased to 47.2% for the six months ended July 1, 2006 from 43.8% forthe same period in 2005.   The $29.0million increase primarily related to improved diploma business performance inthe Jostens Scholastic segment and improved production efficiencies in theJostens Yearbook segment, as well as cost savings realized from synergyprograms that benefited all businesses. Approximately $4.0 million of the improvement related to a reduction indepreciation and amortization expense, most significantly due to a reduction inJostens’ purchase accounting amortization compared to the prior yearperiod.   Gross profit improvementswere offset somewhat by higher gold costs in 2006.

32

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*Sellingand Administrative Expenses. *Sellingand administrative expenses decreased $5.0 million, or 2.2%, to $222.5 millionfor the six months ended July 1, 2006 from $227.5 million in 2005.  As a percentage of net sales, selling andadministrative expenses decreased 0.6% to 26.1% for the first six months of2006 from 26.7% for the same period in 2005. The $5.0 million decrease was primarily due to the impact ofadministrative headcount reductions and various cost savings realized from synergyprograms as well as lower depreciation and amortization expense.

*Special Charges. *Forthe six months ended July 1, 2006, we recorded $2.6 million of special charges.These special charges included $0.1 million related to Jostens Scholastic, lessthan $0.1 million related to Jostens Yearbook, and $0.2 million related to theMarketing and Publishing Services segment for severance costs and relatedbenefits.  Headcount reductionsassociated with these activities were eight for Jostens Scholastic, two forJostens Yearbook, and 11 for Marketing and Publishing Services. Additionally,we recognized an impairment loss of $2.3 million related to the pending sale ofour Jostens headquarters building.

For the six monthsended July 2, 2005, we incurred $4.5 million of special charges, including $3.1million for Jostens Scholastic and $0.4 million for Jostens Yearbook associatedwith severance costs and related benefits resulting from the reduction inheadcount of 37 Jostens Scholastic and four Jostens Yearbook employees.  We recorded severance charges of $0.5 millionrelated to the reduction of Marketing and Publishing Services segment personnelas well as $0.3 million of costs related to a withdrawal liability under aunion retirement plan that is payable in connection with the consolidation ofcertain operations.  Additionally, werecorded $0.2 million of special charges related to the personnel reduction inthe Educational Textbook segment.

*OperatingIncome. *As a result ofthe aforementioned items, consolidated operating income increased $37.2million, or 26.5%, to $177.5 million for the six months ended July 1, 2006 from$140.3 million in 2005.  As a percentageof net sales, operating income increased to 20.8% for the first six months of2006 from 16.4% for the same period in 2005.

*Netinterest expense. *Netinterest expense was comprised of the following:

|                                                                      | ** ** | **Six months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                                           | ** ** | **July 1,**               | ** ** | **July 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                | ** ** | **2006**                       | ** ** | **2005**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                          |       |                           |       |             |       |              |       |   |   |
| Interest expense                                                     |       | $                              | 49,215     |             | $          | 45,863            |       | $ | 3,352 |   | 7.3 | % |
| Amortization of  debt discount, premium and deferred financing costs |       | 3,888                          |       | 7,158            |       | (3,270            | )          | (45.7 | )% |
| Interest income                                                      |       | (2,184                         | )          | (877             | )          | (1,307            | )          | NM |   |
|                                                                 |       | **50,919**                     | ** ** | **52,144**       | ** ** | **(1,225**        | **)**      | (2.3 | )% |
| **Holdings:**                                                        |       |                           |       |             |       |              |       |   |   |
| Interest expense                                                     |       | 7,468                          |       | —           |       | 7,468             |       | NM |   |
| Amortization of debt  discount, premium and deferred financing costs |       | 10,015                         |       | 8,806            |       | 1,209             |       | 13.7 | % |
| Interest income                                                      |       | (7                             | )          | (78              | )          | 71                |       | NM |   |
|                                                                 |       | **17,476**                     | ** ** | **8,728**        | ** ** | **8,748**         |       | 100.2 | % |
| ** **                                                           |       | **$**                          | **68,395** | ** **       | **$**      | **60,872**        | ** ** | **$** | **7,523** |   | 12.4 | % |

 

----

NM = Not meaningful

 

Net interest expense increased $7.5 million, or 12.4%,to $68.4 million for the six months ended July 1, 2006 as compared to $60.9million for the same prior year period.  The increase was due mainly toHoldings’ new 8.75%

33

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seniornotes as well as the result of higher interest rates on our variable rate termloan debt during the first six months of 2006 compared to the same prior yearperiod.  This was partially offset bylower average term loan debt outstanding and an increase in interest income of$1.2 million resulting from a tax refund received by Jostens.

*Incometaxes**. *For the six-month period endedJuly 1, 2006, the effective tax rates for continuing operations were 39.5% and38.5% for Holdings and Visant, respectively, as a result of applying theestimated consolidated effective tax rates and reducing the deferred taxvaluation allowance by $0.6 million during the first quarter.  For the comparable six-month period endedJuly 2, 2005, the effective income tax rates for continuing operations forHoldings and Visant were 40.9% and 40.1%, respectively.

DuringApril 2006, Holdings was notified by the Internal Revenue Service that thecongressional Joint Committee on Taxation had approved a claim for refund byJostens for the taxable years 2000 and 2001. The Company received a Federalrefund of approximately $7.6 million, including $1.2 million of interest. Asubstantial portion of the tax refund represents a reduction of goodwill.  The reduction of goodwill for the six monthsended July 1, 2006 of $4.7 million is attributable to the resolution of anincome tax uncertainty that arose in connection with a purchase businesscombination completed by Jostens in May of 2000.

During the quarterended July 1, 2006, the Company further reduced its deferred tax valuationallowance by $5.7 million because the Company estimates that as a result of thesale of Jostens Photography businesses, $4.1 million of tax benefitattributable to foreign tax credit carryforwards will be realized and $1.6million of tax benefit attributable to capital loss carryforwards will berealized.  The effect of these changes inthe deferred tax valuation allowance has been included in the net loss fromDiscontinued Operations.

*Loss fromdiscontinued operations. *Duringthe quarter ended July 1, 2006, we entered into definitive agreements to sellour Jostens Photography businesses, which previously was a reportablesegment.  The sale closed on June 30,2006 with us recognizing a $0.2 million net loss on the transaction for the sixmonths ended July 1, 2006.  Operationsfor the Jostens Photography businesses resulted in losses of $5.2 million and$3.9 million for the six months ended July 1, 2006 and July 2, 2005,respectively.

*NetIncome. *As a result of the aforementioned items, netincome increased $17.6 million, or 41.0%, to net income of $60.6 millionfor the six months ended July 1, 2006 compared to net income of $43.0million for the same period in 2005.

**LIQUIDITYAND CAPITAL RESOURCES**

The followingtable presents cash flow activity of Holdings for the first six months offiscal 2006 and 2005 and should be read in conjunction with our condensedconsolidated statements of cash flows.

|                                                      | ** ** | **Six months ended** | ** **  |
|------------------------------------------------------|------------|--------------------------------|-------------|
| ** **                                           | ** ** | **July 1,**               | ** **  | **July 2,** | ** ** |
| **In thousands**                                | ** ** | **2006**                       | ** **  | **2005** | ** ** |
| Net cash  provided by operating activities           |       | $                              | 101,039     |   | $ | 54,765 |   |
| Net cash  provided by (used in) investing activities |       | 16,652                         |        | (30,093 | ) |
| Net cash used in  financing activities               |       | —                         |        | (97,094 | ) |
| Effect of  exchange rate change on cash              |       | 91                             |        | 5 |   |
| Net change in  cash and cash equivalents             | ** ** | **$**                          | **117,782** | ** ** | **$** | **(72,417** | **)** |

 

For the six monthsended July 1, 2006, operating activities generated cash of $101.0 millioncompared with cash generated by operating activities of $54.8 million for thesame prior year period.  The $46.3million increase

34

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related to increasedearnings and the reduction of working capital levels for the six months ended2006 compared to the same prior year period. Included in the cash flows from operating activities is cash used indiscontinued operations of $12.4 million and $6.8 million for the six-monthperiods ended July 1, 2006 and July 2, 2005, respectively.  Consequently, the cash provided by continuingoperations was $113.4 million and $61.5 million for the first six months of2006 and 2005, respectively.

Net cash providedby investing activities for the six months ended July 1, 2006 was $16.7million, compared with $30.1 million used in investing activities for thecomparable 2005 period.  The $46.7 million increase related to proceeds of$64.1 million from the sale of the Jostens Photography businesses offset by theacquisition of the assets of  the Dixonoperations for $13.1 million (subject to working capital adjustments).

During the sixmonths ended July 1, 2006, financing activities consisted of proceeds from theissuance by Holdings of $350.0 million of senior notes with $9.3 million usedfor debt financing costs related to the notes and a distribution to Holdings’stockholders of $340.7 million. Therefore, there was no net cash provided by or used in financingactivities in the first half of 2006.  Duringthe first six months of 2005, cash used in financing activities was $97.1million, which was comprised of debt prepayments of $103.5 million offset by$5.9 million from proceeds of equity investments by certain members ofmanagement.

During the secondquarter ended July 1, 2006, Visant transferred approximately $4.8 million ofcash to Holdings to allow Holdings to make a scheduled interest payment relatedto the $350 million 8.75% Senior Notes due 2013.  This is reflected inVisant’s condensed consolidated balance sheet as a return of capital andpresented in the condensed consolidated statement of cash flows as adistribution to shareholder.  These amounts eliminate in consolidation andhave no impact on Holdings’ consolidated financial statements.

As of July 1,2006, we had cash and cash equivalents of $138.5 million.  Our principalsources of liquidity are cash flows from operating activities and borrowingsunder Visant’s senior secured credit facilities, which included $221.9 millionavailable under Visant’s revolving credit facility as of July 1, 2006.  Weuse cash primarily for debt service obligations, capital expenditures and tofund other working capital requirements.  We intend to fund ongoingoperations through cash generated by operations and borrowings under therevolving credit facility.  In early July2006, we used our excess cash to make an additional prepayment on our term loandebt of $100 million.

As of July 1,2006, we were in compliance with all covenants under our material debt obligations.

Based upon thecurrent level of operations, we believe that cash flow from operations,available cash and short-term investments, together with borrowings availableunder Visant’s senior secured credit facilities, are adequate to meet ourfuture liquidity needs for the next 12 months.

#### **ITEM 3.          QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

There have been nomaterial changes in our exposure to market risk during the quarter ended July1, 2006.  For additional information,refer to Item 7A of our 2005 Form 10-K.

#### **ITEM 4.          CONTROLSAND PROCEDURES**

Ourmanagement is responsible for establishing and maintaining adequate controlsover financial reporting, as defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934 (“the Exchange Act”). Our management, underthe supervision of our Chief Executive Officer and Vice President, Finance,evaluated the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rule 13a-15(e) under theExchange Act) as of the end of the period covered by this report. Theevaluation was conducted based on the framework established by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in *Internal Control—Integrated Framework.*Based upon thatevaluation, our Chief Executive Officer and Vice President, Finance concludedthat these disclosure controls and procedures are effective.

35

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During the quarterended July 1, 2006, there have been no changes in our internal controls overfinancial reporting in connection with the above described evaluation thatmaterially affected, or are reasonably likely to materially affect, thesecontrols.

**PART II.  OTHER INFORMATION**

#### **ITEM 1.          LEGALPROCEEDINGS**

The following were developments during the threemonths ended July 1, 2006 of material pending legal proceedings to which we orany of our subsidiaries are a party.

In early May 2006,the Court of Appeal of the State of California affirmed the trial court’sjudgment in favor of Jostens in previously pending litigation, as described inNote 12, *Commitments and Contingencies*, to theCondensed Consolidated Financial Statements.

The order became final atthe beginning of July 2006, subsequent to the end of the second quarter.

#### **ITEM 1A.       RISKFACTORS**

There have been nomaterial changes in our risk factors during the quarter ended July 1,2006.  For additional information, referto Item 1A of our 2005 Annual Report on Form 10-K.

#### **ITEM 2.          UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None.

#### **ITEM 3.          DEFAULTSUPON SENIOR SECURITIES**

None.

#### **ITEM 4.          SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

None.

#### **ITEM 5.          OTHERINFORMATION**

None.

#### **ITEM 6.          EXHIBITS**

**(a)****                                 **Exhibits
| 31.1 |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. |
|------|--------|------------------------------------------------------------------------------------------------------------------------------|

 

36

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| 31.2   |   | Certification of Vice President, Finance pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                         |
| 31.3   |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.  |
|   |   |                                                                                                                         |
| 31.4   |   | Certification of Vice President, Finance pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.  |
|   |   |                                                                                                                         |
| 32.1   |   | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. |
|   |   |                                                                                                                         |
| 32.2   |   | Certification of Vice President, Finance pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. |
|   |   |                                                                                                                         |
| 32.3   |   | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.  |
|   |   |                                                                                                                         |
| 32.4   |   | Certification of Vice President, Finance pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.  |

 

37

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrants have dulycaused this report to be signed on their behalf by the undersigned thereuntoduly authorized.
|                       | **VISANT  HOLDING CORP.**     |
|-----------------------|-------------------------------|
|                  |                          |
|                  |                          |
| Date: August 11, 2006 | /s/ Marc L.  Reisch           |
|                  | Marc L. Reisch                |
|                  | *President  and*              |
|                  | *Chief  Executive Officer*    |
|                  |                          |
|                  |                          |
| Date: August 11, 2006 | /s/ Paul B.  Carousso         |
|                  | Paul B. Carousso              |
|                  | *Vice  President, Finance*    |
|                  | *(Chief  Accounting Officer)* |

 

38

----

 

**SIGNATURES**

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrants have duly caused thisreport to be signed on their behalf by the undersigned thereunto dulyauthorized.
|                       | **VISANT  CORPORATION**       |
|-----------------------|-------------------------------|
|                  |                          |
|                  |                          |
| Date: August 11, 2006 | /s/ Marc L.  Reisch           |
|                  | Marc L. Reisch                |
|                  | *President  and*              |
|                  | *Chief  Executive Officer*    |
|                  |                          |
|                  |                          |
| Date: August 11, 2006 | /s/ Paul B.  Carousso         |
|                  | Paul B. Carousso              |
|                  | *Vice  President, Finance*    |
|                  | *(Chief  Accounting Officer)* |

 

39

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