** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

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

 

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## **FORM 10-Q**

## ** **

| **ý**                                       | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                                             |       |                                                                                          |
| **For  the Quarterly Period Ended July 2, 2005** |
| ** **                                       | ** ** | ** **                                                                                    |
| **or**                                           |
| ** **                                       | ** ** | ** **                                                                                    |
| **o**                                            | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

** **
| **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)  One Byram Brook Place, Suite 202  Armonk, New York 10504  Telephone: (914) 595-8200** |       |                                         |
|                         |       |                                                                                                                 |       |                                         |
| **333-120386**               |       | **VISANT  CORPORATION**                                                                                              |       | **90-0207604**                               |
|                         |       | **(Incorporated  in Delaware)  One Byram Brook Place, Suite 202  Armonk, New York 10504  Telephone: (914) 595-8200** |       |                                         |

 

**SecuritiesRegistered Pursuant to Section 12(b) of the Act:**None

 

### **Securities Registered Pursuant toSection 12(g) of the Act:** None

 

Indicate by check markwhether each registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (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 ý     No o

 

Indicate by check markwhether any of the registrants is an accelerated filer (as defined in Rule12b-2 of the Act). Yes o     No ý

 

As of August 12, 2005,there were 5,971,577 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, anyreferences in this report to the “Company”, “we”, “our”, “us” or “Holdings”refers to Visant Holding Corp., together with Visant Corporation and itsconsolidated subsidiaries.  

 

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**TABLEOF CONTENTS**

 
|       | **PART I – 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 2, 2005 and  July 3, 2004 |       |
|       |                                                                                                               |       |
|       | Condensed Consolidated  Balance Sheets as of July 2, 2005, July 3, 2004 and January 1, 2005                        |       |
|       |                                                                                                               |       |
|       | Condensed Consolidated  Statements of Cash Flows for the six months ended July 2, 2005 and July 3,  2004           |       |
|       |                                                                                                               |       |
|       | **Visant Corporation and  subsidiaries:**                                                                          | ** ** |
|       |                                                                                                               |       |
|       | Condensed Consolidated  Statements of Operations for the three and six months ended July 2, 2005 and  July 3, 2004 |       |
|       |                                                                                                               |       |
|       | Condensed Consolidated  Balance Sheets as of July 2, 2005, July 3, 2004 and January 1, 2005                        |       |
|       |                                                                                                               |       |
|       | Condensed Consolidated  Statements of Cash Flows for the six months ended July 2, 2005 and July 3,  2004           |       |
|       |                                                                                                               |       |
|       | 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 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 |                                                                                                               |       |

 

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**PART I.   FINANCIAL INFORMATION**

 

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

 

**VISANTHOLDING CORP. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                           | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|--------------------------------------|------------|------------------------|-------------|----------------------|------------|
| **In thousands**                     | ** ** | **July 2,  2005**      | ** **  | **July 3,  2004**    | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| **Net  sales**                       | ** ** | **$**                  | **562,519** | ** **           | **$**      | **547,711** | ** ** | **$** | **871,639** | ** ** | **$** | **857,795** | ** ** |
| Cost of products  sold               |       | 303,202                |        | 324,485              |       | 492,716 |   | 516,807 |   |
| Gross profit                         | ** ** | **259,317**            | ** **  | **223,226**          | ** ** | **378,923** | ** ** | **340,988** | ** ** |
| Selling and  administrative expenses |       | 135,215                |        | 134,632              |       | 238,392 |   | 241,905 |   |
| Transaction  costs                   |       | 440                    |        | —               |       | 1,324 |   | — |   |
| Special charges                      |       | 1,855                  |        | 430                  |       | 4,807 |   | 1,120 |   |
| **Operating  income**                | ** ** | **121,807**            | ** **  | **88,164**           | ** ** | **134,400** | ** ** | **97,963** | ** ** |
| Loss on  redemption of debt          |       | —                 |        | —               |       | — |   | 420 |   |
| Interest  expense, net               |       | 30,459                 |        | 43,192               |       | 61,027 |   | 85,729 |   |
| Income before  income taxes          | ** ** | **91,348**             | ** **  | **44,972**           | ** ** | **73,373** | ** ** | **11,814** | ** ** |
| Provision for  income taxes          |       | 37,822                 |        | 13,308               |       | 30,376 |   | 7,696 |   |
| **Net  income**                      | ** ** | **$**                  | **53,526**  | ** **           | **$**      | **31,664** | ** ** | **$** | **42,997** | ** ** | **$** | **4,118** | ** ** |

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

1

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**VISANTHOLDING CORP. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| **In thousands, except share  amounts**                                                                                                                                                  | ** ** | **July 2,  2005** | ** **    | **July 3,  2004** | ** ** | **January 1,  2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-------------------|------------|----------------------|------------|
| **ASSETS**                                                                                                                                                                               |       |              |          |              |       |                 |       |
| Cash and cash  equivalents                                                                                                                                                               |       | $                 | 12,547        |              | $          | 32,225               |       | $ | 84,964 |   |
| Accounts  receivable, net                                                                                                                                                                |       | 197,085           |          | 184,946           |       | 158,243              |       |
| Inventories, net                                                                                                                                                                         |       | 111,177           |          | 100,549           |       | 129,450              |       |
| Salespersons  overdrafts, net of allowance of $13,732, $10,510 and $12,722, respectively                                                                                                 |       | 24,894            |          | 21,414            |       | 35,415               |       |
| Prepaid expenses  and other current assets                                                                                                                                               |       | 9,236             |          | 12,000            |       | 13,639               |       |
| Deferred income  taxes                                                                                                                                                                   |       | 15,064            |          | 14,573            |       | 58,892               |       |
| **Total  current assets**                                                                                                                                                                | ** ** | **370,003**       | ** **    | **365,707**       | ** ** | **480,603**          | ** ** |
| Property, plant  and equipment                                                                                                                                                           |       | 539,402           |          | 500,504           |       | 521,284              |       |
| Less accumulated  depreciation                                                                                                                                                           |       | (300,150          | )             | (244,757          | )          | (280,161             | )          |
| Property, plant  and equipment, net                                                                                                                                                      | ** ** | **239,252**       | ** **    | **255,747**       | ** ** | **241,123**          | ** ** |
| Goodwill                                                                                                                                                                                 |       | 1,108,334         |          | 1,119,740         |       | 1,108,445            |       |
| Intangibles, net                                                                                                                                                                         |       | 583,669           |          | 643,650           |       | 606,195              |       |
| Deferred  financing costs, net                                                                                                                                                           |       | 57,060            |          | 39,631            |       | 64,127               |       |
| Other assets                                                                                                                                                                             |       | 11,176            |          | 11,080            |       | 10,904               |       |
| **Total  assets**                                                                                                                                                                        | ** ** | **$**             | **2,369,494** | ** **        | **$**      | **2,435,555**        | ** ** | **$** | **2,511,397** | ** ** |
|                                                                                                                                                                                     |       |              |          |              |       |                 |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                            |       |              |          |              |       |                 |       |
| Book overdrafts                                                                                                                                                                          |       | $                 | —        |              | $          | 2,964                |       | $ | — |   |
| Short-term  borrowings                                                                                                                                                                   |       | 9,020             |          | 34,675            |       | 8,300                |       |
| Accounts payable                                                                                                                                                                         |       | 47,768            |          | 47,470            |       | 53,505               |       |
| Accrued employee  compensation and related taxes                                                                                                                                         |       | 41,656            |          | 40,628            |       | 46,860               |       |
| Commissions  payable                                                                                                                                                                     |       | 44,793            |          | 45,122            |       | 16,694               |       |
| Customer  deposits                                                                                                                                                                       |       | 61,967            |          | 58,632            |       | 156,511              |       |
| Current portion  of long-term debt                                                                                                                                                       |       | —            |          | 5,150             |       | 19,950               |       |
| Other accrued  liabilities                                                                                                                                                               |       | 39,336            |          | 86,206            |       | 44,486               |       |
| **Total  current liabilities**                                                                                                                                                           | ** ** | **244,540**       | ** **    | **320,847**       | ** ** | **346,306**          | ** ** |
|                                                                                                                                                                                     |       |              |          |              |       |                 |       |
| Long-term debt -  less current maturities                                                                                                                                                |       | 1,592,245         |          | 1,398,493         |       | 1,667,231            |       |
| Redeemable  preferred stock                                                                                                                                                              |       | —            |          | 255,387           |       | —               |       |
| Deferred income  taxes                                                                                                                                                                   |       | 238,218           |          | 248,437           |       | 252,414              |       |
| Pension  liabilities, net                                                                                                                                                                |       | 26,963            |          | 28,322            |       | 27,489               |       |
| Other noncurrent  liabilities                                                                                                                                                            |       | 6,747             |          | 5,822             |       | 5,643                |       |
| **Total  liabilities**                                                                                                                                                                   | ** ** | **2,108,713**     | ** **    | **2,257,308**     | ** ** | **2,299,083**        | ** ** |
|                                                                                                                                                                                     |       |              |          |              |       |                 |       |
| Commitments and  contingencies                                                                                                                                                           |       |              |          |              |       |                 |       |
|                                                                                                                                                                                     |       |              |          |              |       |                 |       |
| Common stock:                                                                                                                                                                            |       |              |          |              |       |                 |       |
| Class A $.01 par  value; authorized 7,000,000 shares; issued and outstanding: 5,971,577 shares at  July 2, 2005; 5,909,844 shares at January 1, 2005 and 504,584 shares at July  3, 2004 |       |              |          |              |       |                 |       |
| Class B $.01 par  value; non-voting; authorized 2,724,759 shares; issued and outstanding: none  at July 2, 2005 and January 1, 2005;   2,724,759 shares at July 3, 2004             |       |              |          |              |       |                 |       |
| Class C $.01 par  value; authorized 1 share; issued and outstanding: 1 share at July 2, 2005 and  January 1, 2005; none at July 3, 2004                                                  |       | 60                |          | 32                |       | 59                   |       |
| Additional  paid-in-capital                                                                                                                                                              |       | 524,402           |          | 380,377           |       | 518,413              |       |
| Accumulated  deficit                                                                                                                                                                     |       | (264,620          | )             | (202,801          | )          | (307,617             | )          |
| Accumulated  other comprehensive income                                                                                                                                                  |       | 939               |          | 1,192             |       | 1,459                |       |
| Officer notes  receivable                                                                                                                                                                |       | —            |          | (553              | )          | —               |       |
| **Total  stockholders’ equity**                                                                                                                                                     | ** ** | **260,781**       | ** **    | **178,247**       | ** ** | **212,314**          | ** ** |
| **Total  liabilities and stockholders’ equity**                                                                                                                                     | ** ** | **$**             | **2,369,494** | ** **        | **$**      | **2,435,555**        | ** ** | **$** | **2,511,397** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

2

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**VISANTHOLDING CORP. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

 
| ** **                                                                         | ** ** | **Six months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------|------------|
| **In thousands**                                                                   | ** ** | **July 2,  2005**    | ** ** | **July 3,  2004** | ** ** |
| Net income                                                                         |       | $                    | 42,997     |   | $ | 4,118 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                 |       |   |   |
| Depreciation                                                                       |       | 30,600               |       | 30,152 |   |
| Amortization of  intangible assets                                                 |       | 23,536               |       | 56,620 |   |
| Amortization of  debt discount, premium and deferred financing costs               |       | 15,964               |       | 11,382 |   |
| Other  amortization                                                                |       | 387                  |       | 424 |   |
| Accrued interest  on redeemable preferred stock                                    |       | —               |       | 24,563 |   |
| Deferred income  taxes                                                             |       | 29,632               |       | (23,813 | ) |
| Loss on  redemption of debt                                                        |       | —               |       | 420 |   |
| Other                                                                              |       | (198                 | )          | (176 | ) |
| Changes in  assets and liabilities:                                                |       |                 |       |   |   |
| Accounts  receivable                                                               |       | (39,533              | )          | (43,231 | ) |
| Inventories                                                                        |       | 20,299               |       | 13,184 |   |
| Accounts payable  and accrued expenses                                             |       | (5,037               | )          | 2,040 |   |
| Customer  deposits                                                                 |       | (96,499              | )          | (92,834 | ) |
| Other                                                                              |       | 32,617               |       | 64,186 |   |
| **Net  cash provided by operating activities**                                     | ** ** | **54,765**           | ** ** | **47,035** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (30,623              | )          | (19,262 | ) |
| Other investing  activities, net                                                   |       | 530                  |       | 5,196 |   |
| **Net  cash used in investing activities**                                         | ** ** | **(30,093**          | **)**      | **(14,066** | **)** |
| Net book  overdrafts                                                               |       | —               |       | 2,964 |   |
| Net short-term  borrowings                                                         |       | 800                  |       | (7,328 | ) |
| Principal  payments on long-term debt                                              |       | (103,500             | )          | (43,309 | ) |
| Redemption of  senior subordinated notes                                           |       | —               |       | (5,800 | ) |
| Proceeds from  issuance of long-term debt                                          |       | —               |       | 4,000 |   |
| Net proceeds  from issuance of common stock                                        |       | 5,933                |       | — |   |
| Other                                                                              |       | (327                 | )          | (321 | ) |
| **Net  cash used in financing activities**                                         | ** ** | **(97,094**          | **)**      | **(49,794** | **)** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 5                    |       | (62 | ) |
| Decrease in cash  and cash equivalents                                             |       | (72,417              | )          | (16,887 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 84,964               |       | 49,112 |   |
| **Cash  and cash equivalents, end of period**                                      | ** ** | **$**                | **12,547** | ** ** | **$** | **32,225** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

3

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**VISANTCORPORATION AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                           | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|--------------------------------------|------------|------------------------|-------------|----------------------|------------|
| **In thousands**                     | ** ** | **July 2,  2005**      | ** **  | **July 3,  2004**    | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| **Net  sales**                       | ** ** | **$**                  | **562,519** | ** **           | **$**      | **547,711** | ** ** | **$** | **871,639** | ** ** | **$** | **857,795** | ** ** |
| Cost of products  sold               |       | 303,202                |        | 324,485              |       | 492,716 |   | 516,807 |   |
| Gross profit                         | ** ** | **259,317**            | ** **  | **223,226**          | ** ** | **378,923** | ** ** | **340,988** | ** ** |
| Selling and  administrative expenses |       | 135,199                |        | 134,601              |       | 238,332 |   | 241,796 |   |
| Transaction  costs                   |       | 440                    |        | —               |       | 1,324 |   | — |   |
| Special charges                      |       | 1,855                  |        | 430                  |       | 4,807 |   | 1,120 |   |
| **Operating  income**                | ** ** | **121,823**            | ** **  | **88,195**           | ** ** | **134,460** | ** ** | **98,072** | ** ** |
| Loss on  redemption of debt          |       | —                 |        | —               |       | — |   | 420 |   |
| Interest  expense, net               |       | 26,066                 |        | 39,156               |       | 52,299 |   | 77,759 |   |
| Income before  income taxes          | ** ** | **95,757**             | ** **  | **49,039**           | ** ** | **82,161** | ** ** | **19,893** | ** ** |
| Provision for  income taxes          |       | 38,782                 |        | 7,776                |       | 33,275 |   | 6,230 |   |
| **Net  income**                      | ** ** | **$**                  | **56,975**  | ** **           | **$**      | **41,263** | ** ** | **$** | **48,886** | ** ** | **$** | **13,663** | ** ** |

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

4

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**VISANTCORPORATION AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| **In thousands, except share amounts**                                                            | ** ** | **July 2,  2005** | ** **    | **July 3,  2004** | ** ** | **January 1,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-------------------|------------|----------------------|------------|
| **ASSETS**                                                                                        |       |              |          |              |       |                 |       |
| Cash and cash  equivalents                                                                        |       | $                 | 11,849        |              | $          | 28,565               |       | $ | 82,269 |   |
| Accounts  receivable, net                                                                         |       | 197,085           |          | 184,946           |       | 158,243              |       |
| Inventories, net                                                                                  |       | 111,177           |          | 100,549           |       | 129,450              |       |
| Salespersons  overdrafts, net of allowance of $13,732, $10,510 and $12,722, respectively          |       | 24,894            |          | 21,414            |       | 35,415               |       |
| Prepaid expenses  and other current assets                                                        |       | 9,236             |          | 11,804            |       | 13,639               |       |
| Deferred income  taxes                                                                            |       | 15,064            |          | 14,573            |       | 58,892               |       |
| **Total  current assets**                                                                         | ** ** | **369,305**       | ** **    | **361,851**       | ** ** | **477,908**          | ** ** |
| Property, plant  and equipment                                                                    |       | 539,402           |          | 495,588           |       | 521,284              |       |
| Less accumulated  depreciation                                                                    |       | (300,150          | )             | (244,675          | )          | (280,161             | )          |
| Property, plant  and equipment, net                                                               | ** ** | **239,252**       | ** **    | **250,913**       | ** ** | **241,123**          | ** ** |
| Goodwill                                                                                          |       | 1,108,334         |          | 1,119,740         |       | 1,108,445            |       |
| Intangibles, net                                                                                  |       | 583,669           |          | 643,650           |       | 606,195              |       |
| Deferred  financing costs, net                                                                    |       | 51,854            |          | 33,939            |       | 58,679               |       |
| Other assets                                                                                      |       | 11,176            |          | 11,080            |       | 10,904               |       |
| **Total  assets**                                                                                 | ** ** | **$**             | **2,363,590** | ** **        | **$**      | **2,421,173**        | ** ** | **$** | **2,503,254** | ** ** |
|                                                                                              |       |              |          |              |       |                 |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**                                                     |       |              |          |              |       |                 |       |
| Book overdrafts                                                                                   |       | $                 | —        |              | $          | 2,964                |       | $ | — |   |
| Short-term  borrowings                                                                            |       | 9,020             |          | 34,675            |       | 8,300                |       |
| Accounts payable                                                                                  |       | 47,768            |          | 47,286            |       | 53,505               |       |
| Accrued employee  compensation and related taxes                                                  |       | 41,656            |          | 40,628            |       | 46,860               |       |
| Commissions  payable                                                                              |       | 44,793            |          | 45,122            |       | 16,694               |       |
| Customer  deposits                                                                                |       | 61,967            |          | 58,632            |       | 156,511              |       |
| Current portion  of long-term debt                                                                |       | —            |          | 5,150             |       | 19,950               |       |
| Other accrued  liabilities                                                                        |       | 39,244            |          | 81,876            |       | 45,707               |       |
| **Total  current liabilities**                                                                    | ** ** | **244,448**       | ** **    | **316,333**       | ** ** | **347,527**          | ** ** |
|                                                                                              |       |              |          |              |       |                 |       |
| Long-term debt -  less current maturities                                                         |       | 1,416,500         |          | 1,235,515         |       | 1,500,050            |       |
| Redeemable  preferred stock                                                                       |       | —            |          | 255,387           |       | —               |       |
| Deferred income  taxes                                                                            |       | 247,733           |          | 251,778           |       | 258,769              |       |
| Pension  liabilities, net                                                                         |       | 26,963            |          | 28,322            |       | 27,489               |       |
| Other noncurrent  liabilities                                                                     |       | 6,747             |          | 5,822             |       | 5,643                |       |
| **Total  liabilities**                                                                            | ** ** | **1,942,391**     | ** **    | **2,093,157**     | ** ** | **2,139,478**        | ** ** |
|                                                                                              |       |              |          |              |       |                 |       |
| Commitments and  contingencies                                                                    |       |              |          |              |       |                 |       |
|                                                                                              |       |              |          |              |       |                 |       |
| Common stock  $.01 par value; authorized: 2,000,000 shares; issued and outstanding: 1,000  shares |       | —            |          | —            |       | —               |       |
| Additional  paid-in-capital                                                                       |       | 667,883           |          | 519,815           |       | 658,826              |       |
| Accumulated  deficit                                                                              |       | (247,623          | )             | (192,438          | )          | (296,509             | )          |
| Accumulated  other comprehensive income                                                           |       | 939               |          | 1,192             |       | 1,459                |       |
| Officer notes  receivable                                                                         |       | —            |          | (553              | )          | —               |       |
| **Total  stockholder’s equity**                                                              | ** ** | **421,199**       | ** **    | **328,016**       | ** ** | **363,776**          | ** ** |
| **Total  liabilities and stockholder’s equity**                                              | ** ** | **$**             | **2,363,590** | ** **        | **$**      | **2,421,173**        | ** ** | **$** | **2,503,254** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

5

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**VISANTCORPORATION AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

 
| ** **                                                                         | ** ** | **Six months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------|------------|
| **In thousands**                                                                   | ** ** | **July 2,  2005**    | ** ** | **July 3,  2004** | ** ** |
| Net income                                                                         |       | $                    | 48,886     |   | $ | 13,663 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                 |       |   |   |
| Depreciation                                                                       |       | 30,600               |       | 30,070 |   |
| Amortization of  intangible assets                                                 |       | 23,536               |       | 56,620 |   |
| Amortization of  debt discount, premium and deferred financing costs               |       | 7,158                |       | 3,649 |   |
| Other  amortization                                                                |       | 387                  |       | 424 |   |
| Accrued interest  on redeemable preferred stock                                    |       | —               |       | 24,563 |   |
| Deferred income  taxes                                                             |       | 32,792               |       | (20,946 | ) |
| Loss on  redemption of debt                                                        |       | —               |       | 420 |   |
| Other                                                                              |       | (198                 | )          | (176 | ) |
| Changes in  assets and liabilities:                                                |       |                 |       |   |   |
| Accounts  receivable                                                               |       | (39,533              | )          | (43,231 | ) |
| Inventories                                                                        |       | 20,299               |       | 13,184 |   |
| Accounts payable  and accrued expenses                                             |       | (5,038               | )          | 2,330 |   |
| Customer  deposits                                                                 |       | (96,499              | )          | (92,834 | ) |
| Other                                                                              |       | 31,305               |       | 60,045 |   |
| **Net  cash provided by operating activities**                                     | ** ** | **53,695**           | ** ** | **47,781** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (30,623              | )          | (14,346 | ) |
| Other investing  activities, net                                                   |       | 530                  |       | 5,196 |   |
| **Net  cash used in investing activities**                                         | ** ** | **(30,093**          | **)**      | **(9,150** | **)** |
| Net book  overdrafts                                                               |       | —               |       | 2,964 |   |
| Net short-term  borrowings                                                         |       | 800                  |       | (7,328 | ) |
| Principal  payments on long-term debt                                              |       | (103,500             | )          | (43,250 | ) |
| Redemption of  senior subordinated notes                                           |       | —               |       | (5,800 | ) |
| Net contribution  from Visant Holding Corp.                                        |       | 9,000                |       | — |   |
| Other                                                                              |       | (327                 | )          | (321 | ) |
| **Net  cash used in financing activities**                                         | ** ** | **(94,027**          | **)**      | **(53,735** | **)** |
| Effect of exchange  rate changes on cash and cash equivalents                      |       | 5                    |       | (62 | ) |
| Decrease in cash  and cash equivalents                                             |       | (70,420              | )          | (15,166 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 82,269               |       | 43,731 |   |
| **Cash  and cash equivalents, end of period**                                      | ** ** | **$**                | **11,849** | ** ** | **$** | **28,565** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

6

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**Notes to Condensed Consolidated FinancialStatements (Unaudited)**

***Visant Holding Corp. and subsidiaries***

 

**1.****              SignificantAccounting Policies**

 

***Basisof Presentation***

The unaudited condensedconsolidated financial statements included herein are those of:

 

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

•                  Visantand its wholly-owned subsidiaries.

 

All significantintercompany balances and transactions have been eliminated in consolidation.

 

As a result of the 2004Transactions as discussed in Note 2, the condensed consolidated financialstatements include the consolidation of Jostens, Inc. (“Jostens”), Von HoffmannHoldings, Inc. (“Von Hoffmann”) and AHC I Acquisition Corp. (“Arcade”),entities under common control since July 30, 2003.

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information and with the instructions to Form 10-Q andRule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation have beenincluded.  Operating results for theinterim periods presented are not necessarily indicative of the results thatmay be expected for the full year.  Thesefinancial statements should be read in conjunction with the consolidatedfinancial statements and footnotes included in our Form 10-K for the fiscalyear ended January 1, 2005 (“2004 Form 10-K”).

 

The preparation of ourfinancial statements in conformity with accounting principles generallyaccepted in the United States requires us to make estimates and assumptionsthat affect the amounts reported in the financial statements and accompanyingnotes.  Actual results could differ fromthose estimates.

 

***Stock-Based Compensation***

We apply the intrinsic method prescribed by Accounting Principles BoardOpinion (“APB”) 25, *Accounting for StockIssued to Employees,*and related interpretations in accounting forstock options granted to employees and non-employee directors.  Accordingly, since all options are granted ator above fair value, no compensation cost is typically reflected in net income(loss) for these plans.  Our pro formanet income incorporating the amortization of the stock-based compensationexpense determined under the fair value recognition provisions of Statement ofFinancial Accounting Standards (“SFAS”) 123, *Accountingfor Stock-Based Compensation,*would not have been materiallydifferent from the reported net income in the statements of operations for theperiods presented.

 

***Recent Accounting Pronouncements***

 

***SFAS 123R –Statement of Accounting Standards No. 123 (revised 2004) Share-Based Payment***

InDecember 2004, the Financial Accounting Standards Board (“FASB”) issued arevision of SFAS 123.  This statementeliminates the alternative to use the intrinsic value method of accounting thatwas permitted in SFAS 123 as originally issued and will require recognition ofcompensation expense related to all equity awards granted after the requiredeffective date and to awards modified, repurchased, or cancelled after thatdate based on the grant date fair values of the awards.  This statement is effective for us as of thefirst interim or annual reporting period that commences after December 15,2005.  We have not yet determined theimpact of adopting this statement on our consolidated financial position,results of operations or cash flows.

 

***FSP 109-2 – Accounting andDisclosure Guidance for the Foreign Earnings Repatriation Provision within theAmerican Jobs Creation Act of 2004.***

In October 2004, the American Jobs Creation Actof 2004 (the “AJC Act”) was signed into law. This legislation

 

7

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creates, among other things, a temporary incentivefor U.S. multinational companies to repatriate accumulated income earnedoutside the U.S. at a favorable rate of tax.  In December 2004, the FASBissued Staff Position (FSP) 109-2, which provides accounting and disclosureguidance for the repatriation provision. Although we intend to repatriate earnings from our Canadiansubsidiary in an amount that could range from $8 million to $13 million, wehave not yet completed our analysis of the tax effect of such adistribution.  Due to the complexity ofthe calculations, we anticipate that our analysis of the tax benefit ofrepatriation will be completed by the fourth quarter of 2005 and that theeffect on the Company’s effective annual rate will be recorded at that time.

 

**2.****              2004 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 “2004 Transactions”) which created a specialty printing,marketing and school-related affinity products and services organizationcomprised of the operations of Jostens, Von Hoffmann, including Von Hoffmann’ssubsidiary, The Lehigh Press, Inc., and Arcade.

 

Prior to the 2004Transactions, Von Hoffmann and Arcade were each controlled by affiliates ofDLJ Merchant Banking Partners II, L.P. (“DLJMBP II”), andDLJ Merchant Banking Partners III, L.P. (“DLJMBP III”) owned approximately82.5% of Holdings’ outstanding equity, with the remainder held by otherco-investors and certain members of management. Upon consummation of the 2004 Transactions, an affiliate of KKR invested$256.1 million and was issued equity interests representing approximately 49.6%of Holdings’ voting interest and 45% of Holdings’ economic interest.   Approximately $175.6 million of the proceedswere distributed to certain shareholders, and certain treasury stock held byVon Hoffmann was redeemed.  As a resultof the 2004 Transactions, affiliates of DLJMBP III held equity interestsrepresenting approximately 41% of our voting interest and 45% of our economicinterest, with the remainder held by other co-investors and certain members ofmanagement.  After giving effect to theissuance of equity to additional members of management, as of May 13, 2005affiliates of KKR and DLJMBP III held approximately 49.1% and 41%,respectively, of the voting interests of Holdings, while each continues to holdapproximately 45% of Holdings’ economic interest.

 

In connection with the2004 Transactions, Visant entered into new senior secured credit facilities,providing for an aggregate amount of $1,270 million, including a$250 million revolving credit facility, and issued $500 millionaggregate principal amount of 75/8 % senior subordinatednotes.   Also in connection with the 2004Transactions, Jostens, Von Hoffmann and Arcade repaid their existingindebtedness having an aggregate face value of $1,392.6 million including the redemptionvalue of certain remaining redeemable preferred stock.

 

**3.****              Comprehensive Income**

 

The following amounts were included in determiningcomprehensive income for Holdings:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|----------------------|------------|
| **In thousands**                             | ** ** | **July 2,  2005**      | ** ** | **July 3,  2004**    | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| Net income                                   |       | $                      | 53,526     |                 | $          | 31,664 |   | $ | 42,997 |   | $ | 4,118 |   |
| Change in  cumulative translation adjustment |       | (295                   | )          | 75                   |       | (520 | ) | 286 |   |
| Comprehensive  income                        |       | $                      | 53,231     |                 | $          | 31,739 |   | $ | 42,477 |   | $ | 4,404 |   |

 

8

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Thefollowing amounts were included in determining comprehensive income for Visant:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|----------------------|------------|
| **In thousands**                             | ** ** | **July 2,  2005**      | ** ** | **July 3,  2004**    | ** ** | **July 2,  2005** | ** ** | **July 3,  2004** | ** ** |
| Net income                                   |       | $                      | 56,975     |                 | $          | 41,263 |   | $ | 48,886 |   | $ | 13,663 |   |
| Change in  cumulative translation adjustment |       | (295                   | )          | 75                   |       | (520 | ) | 286 |   |
| Comprehensive  income                        |       | $                      | 56,680     |                 | $          | 41,338 |   | $ | 48,366 |   | $ | 13,949 |   |

 

**4.****              Accounts Receivableand Inventories**

 

Accounts receivable, net were comprised of the following:

 
| **In thousands**                 | ** ** | **July 2,  2005** | ** **  | **July 3,  2004** | ** ** | **January 1,  2005** | ** ** |
|----------------------------------|------------|-------------------|-------------|-------------------|------------|----------------------|------------|
| Trade  receivables               |       | $                 | 212,974     |              | $          | 198,949              |       | $ | 167,663 |   |
| Allowance for  doubtful accounts |       | (3,892            | )           | (3,789            | )          | (3,621               | )          |
| Allowance for  sales returns     |       | (11,997           | )           | (10,214           | )          | (5,799               | )          |
| Accounts receivable,  net        | ** ** | **$**             | **197,085** | ** **        | **$**      | **184,946**          | ** ** | **$** | **158,243** | ** ** |

 

Net inventories werecomprised of the following:

 
| **In thousands**            | ** ** | **July 2,  2005** | ** **  | **July 3,  2004** | ** ** | **January 1,  2005** | ** ** |
|-----------------------------|------------|-------------------|-------------|-------------------|------------|----------------------|------------|
| Raw materials  and supplies |       | $                 | 48,953      |              | $          | 52,165               |       | $ | 44,989 |   |
| Work-in-process             |       | 50,938            |        | 34,584            |       | 47,695               |       |
| Finished goods              |       | 13,458            |        | 15,034            |       | 38,938               |       |
|                        |       | 113,349           |        | 101,783           |       | 131,622              |       |
| LIFO reserve                |       | (2,172            | )           | (1,234            | )          | (2,172               | )          |
| Inventories, net            | ** ** | **$**             | **111,177** | ** **        | **$**      | **100,549**          | ** ** | **$** | **129,450** | ** ** |

 

9

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**5.****             ****Goodwill and Other Intangible Assets, net**

 

The changes in the carrying amount of goodwill wereas follows:

 
| ** **                           | ** ** | **Six months ended** | ** **    |
|--------------------------------------|------------|----------------------|---------------|
| **In thousands**                     | ** ** | **July 2,  2005**    | ** **    | **July 3,  2004** | ** ** |
| Balance at  beginning of year        |       | $                    | 1,108,445     |   | $ | 1,138,664 |   |
| Goodwill  acquired during the period |       | 17                   |          | 14 |   |
| Purchase price  adjustments          |       | (113                 | )             | (18,908 | ) |
| Currency  translation                |       | (15                  | )             | (30 | ) |
| Balance at end  of period            | ** ** | **$**                | **1,108,334** | ** ** | **$** | **1,119,740** | ** ** |

 

Asof July 2, 2005, $717.2 million and $391.1 million of goodwill has been allocated to Jostens and the Print Group,respectively.

 

Duringthe first six months of 2004, purchase price adjustments primarily related to areduction in the fair value of Jostens' redeemable preferred stock.

 

Information regarding our other intangible assets,net as of the dates indicated is as follows:

 
| ** **                      | ** ** | ** **                 | ** ** | **July 2, 2005**            | ** **  | **July 3, 2004**              | ** ** |
|---------------------------------|------------|----------------------------|------------|-----------------------------|-------------|-------------------------------|------------|
| **In thousands**                | ** ** | **Estimated  useful life** | ** ** | **Gross  carrying  amount** | ** **  | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| School  relationships           |       | 10 years                   |       | $                           | 330,000     |                          | $          | (63,851 | ) | $ | 266,149 |   | $ | 330,000 |   | $ | (30,977 | ) | $ | 299,023 |   |
| Order backlog                   |       | 1.5 years                  |       | 48,700                      |        | (48,700                       | )          | — |   | 49,394 |   | (37,292 | ) | 12,102 |   |
| Internally  developed software  |       | 2 to 5 years               |       | 12,200                      |        | (6,655                        | )          | 5,545 |   | 12,200 |   | (3,183 | ) | 9,017 |   |
| Patented/unpatented  technology |       | 3 years                    |       | 19,668                      |        | (9,978                        | )          | 9,690 |   | 19,592 |   | (5,529 | ) | 14,063 |   |
| Customer  relationships         |       | 4 to 40 years              |       | 36,455                      |        | (9,225                        | )          | 27,230 |   | 35,455 |   | (6,530 | ) | 28,925 |   |
| Other                           |       | 3 years                    |       | 16,619                      |        | (6,144                        | )          | 10,475 |   | 17,619 |   | (1,679 | ) | 15,940 |   |
|                            |       |                       |       | 463,642                     |        | (144,553                      | )          | 319,089 |   | 464,260 |   | (85,190 | ) | 379,070 |   |
| Trademarks                      |       | Indefinite                 |       | 264,580                     |        | —                        |       | 264,580 |   | 264,580 |   | — |   | 264,580 |   |
| ** **                      | ** ** | ** **                 | ** ** | **$**                       | **728,222** | ** **                    | **$**      | **(144,553** | **)** | **$** | **583,669** | ** ** | **$** | **728,840** | ** ** | **$** | **(85,190** | **)** | **$** | **643,650** | ** ** |

 

Amortization expense related to other intangibleassets was $11.8 million and $44.4 million for the three months ended July 2,2005 and July 3, 2004, respectively.  Forthe six months ended July 2, 2005 and July 3, 2004, amortization expenserelated to other intangible assets was $23.5 and $56.6 million, respectively.

 

Based on intangible assets in service as of July 2,2005, estimated amortization expense for the remainder of 2005 and each of thefive succeeding fiscal years is $23.2 million, $44.4 million, $40.6 million,$38.8 million, $34.9 million and $34.7 million, respectively.

 

10

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**6.****              Special Charges**

 

Duringthe second quarter of 2005, we recorded $1.9 million of special charges relatingto severance payments and related benefits associated with on-going initiativesat Jostens and the Print Group.  Jostensrecorded $1.6 million relating to a headcount reduction of 19 employees whilethe Print Group recorded $0.3 million related to severance costs reducingheadcount by four employees.

 

Forthe six months ended June 2005, we incurred $4.8 million of special charges,including $3.8 million related to severance costs and related benefitsassociated with the reduction in headcount of 44 Jostens employees.  The Print Group recorded severance of $0.7million related to a reduction in personnel of five employees, as well as $0.3million of costs related to a withdrawal liability under a union retirementplan that is payable in connection with the consolidation of certainoperations.  As of July 2, 2005, we havepaid $2.4 million related to initiatives begun in 2005 (“2005 initiatives”),which have affected 49 employees.

 

Restructuring accruals of$4.8 million as of July 2, 2005 and $8.1 million as of January 1, 2005 areincluded in other accrued liabilities in the condensed consolidated balancesheets.  The accruals as of January 1,2005 include amounts provided for severance related to reductions in corporateand administrative employees from both Jostens and the Print Group, as well as the consolidation of our PrintGroup’s one- and two-color print operations.

 

Ona cumulative basis through July 2, 2005, we incurred $13.4 million of employeeseverance costs related to initiatives begun in 2004 (“2004 initiatives”),which affected 310 employees.  To date,we have paid $10.6 million in cash related to these initiatives.

 

Changesin the restructuring accruals during the six months of 2005 were as follows:

 
| ** **                  | ** ** | **2004 Initiatives** | ** ** | **2005 Initiatives**            | ** ** | **Total**  | ** ** |
|-----------------------------|------------|----------------------|------------|---------------------------------|------------|------------|------------|
| **In thousands**            | ** ** | **Amount**           | ** ** | **No. of  employees  affected** | ** ** | **Amount** | ** ** | **No. of  employees  affected** | ** ** | **Amount** | ** ** | **No. of  employees  affected** | ** ** |
| Balance at  January 1, 2005 |       | $                    | 8,121      |                            | 162        |       | $          | — |   | — |   | $ | 8,121 |   | 162 |   |
| Restructuring  charges      |       | —               |       | —                          |       | 4,461      |       | 49 |   | 4,461 |   | 49 |   |
| Severance paid              |       | (5,343               | )          | (162                            | )          | (2,428     | )          | (33 | ) | (7,771 | ) | (195 | ) |
| Balance at July  2, 2005    | ** ** | **$**                | **2,778**  | ** **                      | **—** | ** ** | **$**      | **2,033** | ** ** | **16** | ** ** | **$** | **4,811** | ** ** | **16** | ** ** |

 

Weexpect the majority of the remaining severance to be paid during 2005.

 

11

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**7.****              Long-Term Debt**

 

Long-termdebt consists of the following:

 
| **In thousands**                                                                                                                                                                                                                                                                                                                                  | ** ** | **July 2,  2005** | ** **    | **July 3,  2004** | ** ** | **January 1,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-------------------|------------|----------------------|------------|
| **Visant:**                                                                                                                                                                                                                                                                                                                                       | ** ** | ** **        | ** **    | ** **        | ** ** | ** **           | ** ** |
| Borrowings under  our senior secured credit facility:                                                                                                                                                                                                                                                                                             |       |              |          |              |       |                 |       |
| Term Loan A,  variable rate, 6.00 percent at July 2, 2005 and 4.90 percent at January 1,  2005 with semi-annual principal and interest payments through October 2010                                                                                                                                                                              |       | $                 | 90,000        |              | $          | —               |       | $ | 150,000 |   |
| Term Loan C,  variable rate, 5.94 percent at July 2, 2005 and 4.65 percent at January 1,  2005 with semi-annual principal and interest payments through October 2011                                                                                                                                                                              |       | 826,500           |          | —            |       | 870,000              |       |
| Senior subordinated  notes, 7.625 percent fixed rate, with semi-annual interest payments of $19.1  million, principal due and payable at maturity - October 2012                                                                                                                                                                                  |       | 500,000           |          | —            |       | 500,000              |       |
| Term loan -  Jostens, variable rate, 3.86 percent at July 3, 2004, paid in full October  2004                                                                                                                                                                                                                                                     |       |              |          | 417,704           |       | —               |       |
| Senior  subordinated notes - Jostens, 12.75 percent fixed rate, including premium of  $20,880 at July 3, 2004, paid in full October 2004                                                                                                                                                                                                          |       | —            |          | 224,865           |       | —               |       |
| Senior notes -  Von Hoffmann, 10.25 percent fixed rate, including premium of $2,485 at July  3, 2004, paid in full October 2004                                                                                                                                                                                                                   |       | —            |          | 277,485           |       | —               |       |
| Senior  subordinated notes - Von Hoffmann, 10.375 percent fixed rate, paid in full  October 2004                                                                                                                                                                                                                                                  |       | —            |          | 100,000           |       | —               |       |
| Subordinated  exchange debentures - Von Hoffmann, 13.5 percent fixed rate, paid in full  October 2004                                                                                                                                                                                                                                             |       | —            |          | 44,181            |       | —               |       |
| Senior notes -  Arcade, 10.5 percent fixed rate, paid in full October 2004                                                                                                                                                                                                                                                                        |       | —            |          | 103,510           |       | —               |       |
| Amended and  restated notes - Arcade, 16.0 percent fixed rate, net of discount of $5,015  at July 3, 2004, paid in full October 2004                                                                                                                                                                                                              |       | —            |          | 72,920            |       | —               |       |
| ** **                                                                                                                                                                                                                                                                                                                                        | ** ** | **1,416,500**     | ** **    | **1,240,665**     | ** ** | **1,520,000**        | ** ** |
| Less current  portion                                                                                                                                                                                                                                                                                                                             |       | —            |          | 5,150             |       | 19,950               |       |
| ** **                                                                                                                                                                                                                                                                                                                                        | ** ** | **1,416,500**     | ** **    | **1,235,515**     | ** ** | **1,500,050**        | ** ** |
|                                                                                                                                                                                                                                                                                                                                              |       |              |          |              |       |                 |       |
| **Holdings:**                                                                                                                                                                                                                                                                                                                                     |       |              |          |              |       |                 |       |
| Senior discount  notes, 10.25 percent fixed rate, net of discount of $71,455 at July 2, 2005,  $88,165 at July 3, 2004 and $80,019 at January 1, 2005, with semi-annual  interest accretion through December 1, 2008, thereafter semi-annual interest  payments of $12.7 million, accreted principal due and payable at maturity - December  2013 |       | 175,745           |          | 159,035           |       | 167,181              |       |
| Promissory note,  variable rate, 3.45 percent at April 3, 2004, paid in full December 2004                                                                                                                                                                                                                                                        |       | —            |          | 3,943             |       | —               |       |
| ** **                                                                                                                                                                                                                                                                                                                                        | ** ** | **$**             | **1,592,245** | ** **        | **$**      | **1,398,493**        | ** ** | **$** | **1,667,231** | ** ** |

 

During the six monthsended July 2, 2005, Visant voluntarily prepaid $103.5 million of its term loansunder its senior secured credit facilities, including all originally scheduled principalpayments due under its term loans A and C in 2005 through most of 2009.  As of July 2, 2005, there was $9.0 millionoutstanding in the form of short-term borrowings at our Canadian subsidiary ata

 

12

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weighted averageinterest rate of 5.1% and an additional $15.8 million outstanding in the formof letters of credit, leaving $225.2 million available under the revolvingcredit facility.

 

In conjunction with the2004 Transactions as described in Note 2, we repaid the existing indebtednessof Jostens, Von Hoffmann and Arcade in full.

 

Visant’sobligations under the senior secured credit facilities are unconditionally andirrevocably guaranteed jointly and severally by Visant Secondary HoldingsCorp., a direct wholly-owned subsidiary of Holdings and the direct parent ofVisant, and by Visant’s material current and future domestic subsidiaries.  The obligations of Visant’s principalCanadian operating subsidiary under the senior secured credit facilities are unconditionallyand irrevocably guaranteed jointly and severally by Visant Secondary HoldingsCorp., by Visant, by Visant’s material current and future domestic subsidiariesand by Visant’s other current and future Canadian subsidiaries.  Visant’s obligations under the senior securedcredit facilities, and the guarantees of those obligations, are secured bysubstantially all of Visant’s assets and substantially all of the assets ofVisant Secondary Holdings Corp. and Visant’s material current and future domesticsubsidiaries, including but not limited to:

 

•      all of Visant’s capital stock and thecapital stock of each of Visant’s existing and future direct and indirectsubsidiaries, except that with respect to foreign subsidiaries such lien andpledge is limited to 65% of the capital stock of “first-tier” foreignsubsidiaries; and

 

•      substantially all of Visant’s materialexisting and future domestic subsidiaries’ tangible and intangible assets.

 

Theobligations of Jostens Canada Ltd. under the senior secured credit facilities,and the guarantees of those obligations, are secured by the collateral referredto in the prior paragraph and substantially all of the tangible and intangibleassets of Jostens Canada Ltd. and each of Visant’s other current and future Canadiansubsidiaries.

 

The senior secured creditfacilities require Visant to meet a maximum total leverage ratio, a minimuminterest coverage ratio and a maximum capital expenditures limitation.  In addition, the senior secured creditfacilities contain certain restrictive covenants which will, among otherthings, limit Visant’s and its subsidiaries’ ability to incur additionalindebtedness, pay dividends, prepay subordinated debt, make investments, mergeor consolidate, change our business, amend the terms of our subordinated debtand engage in certain other activities customarily restricted in suchagreements.  It also contains certaincustomary events of default, subject to grace periods, as appropriate.

 

Theindentures governing Visant’s senior subordinated notes and Holdings’ seniordiscount notes also contain numerous covenants including, among other things,restrictions on our ability to:  incur orguarantee additional indebtedness or issue disqualified or preferred stock; paydividends or make other equity distributions; repurchase or redeem capitalstock; make investments or other restricted payments; sell assets orconsolidate or merge with or into other companies; create limitations on theability of our restricted subsidiaries to make dividends or distributions tous; engage in transactions with affiliates; and create liens.

 

Visant’ssenior secured credit facilities and senior subordinated notes contain certaincross-default and cross-acceleration provisions whereby a default under oracceleration of other material debt obligations would cause a default under oracceleration of the senior secured credit facilities and the Visant seniorsubordinated notes.

 

Asof July 2, 2005, we were in compliance with all covenants under our material debtobligations.

 

**8.****     RedeemablePreferred Stock**

 

In conjunction with the2004 Transactions as described in Note 2, all outstanding shares of redeemablepreferred stock of Jostens and Arcade, together with accrued dividends, wereredeemed in full.

 

13

----

 

**9.****     DerivativeFinancial Instruments and Hedging Activities**

 

Ourinvolvement with derivative financial instruments is limited principally tomanaging well-defined interest 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 July2, 2005, there were no contracts outstanding.

 

 **10.****         Commitments**

 

Weare subject to market risk associated with changes in the price of preciousmetals.  To mitigate our commodity pricerisk, we enter into forward contracts to purchase gold, platinum and silverbased upon the estimated ounces needed to satisfy projected customerdemand.  Our purchase commitment at July2, 2005 was $8.3 million with delivery dates occurring throughout 2005.  These forward purchase contracts areconsidered normal purchases and therefore subject to a scope exclusion of therequirements of SFAS 133, *Accounting forDerivative Instruments and Hedging Activities. *The fair market value of our open precious metal forwardcontracts as of July 2, 2005 was $8.4 million and was calculated by valuingeach contract at quoted futures prices.

 

**11.****  IncomeTaxes**

 

Consistentwith the provisions of APB 28, *InterimFinancial Reporting*, we have provided an income tax provision basedon our best estimate of the consolidated effective tax rate applicable for theentire year.  Based on those estimates,for the six months ended July 2, 2005, we provided an income tax provisionat a consolidated effective rate of 41.4% and 40.5% for Holdings and Visant,respectively.  The annual effective taxrate does not include any anticipated benefit attributable to the dividendrepatriation provisions under the American Jobs Creation Act of 2004 asdiscussed in Note 1.  Our preliminaryevaluation indicates that the benefit of the repatriation would result in aneffective tax rate for the year between 39% and 40%.

 

For the comparablesix-month period ended July 3, 2004, the effective income tax rate forHoldings and Visant was 65.1% and 31.3%, respectively.  These tax rates reflect the combined effectof separately reported effective tax rates for Holdings and our acquired companiesprior to the 2004 Transactions.  Accordingly,these tax rates are not intended to reflect a combined effective tax rate thatwould have been reported if the 2004 Transactions had occurred at the beginningof the 2004 fiscal period.

 

The consolidatedeffective tax rates remained the same for the six month period ended July 2,2005 as they were for the three month period ended April 2, 2005, since therehave not been any significant events that would warrant a change in rate.

 

14

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**12.****  Pensionand Other Postretirement Benefit Plans**

 

Net periodic benefit cost for our pension and other postretirementbenefit plans is presented below:

 
| ** **                               | ** ** | **Pension benefits**   | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Three months ended** | ** ** | **Three months ended**      | ** ** |
| ** **                               | ** ** | **July 2,**            | ** ** | **July 3,**                 | ** ** | **July 2,** | ** ** | **July 3,** | ** ** |
| **In thousands**                         | ** ** | **2005**               | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                             |       | $                      | 1,825      |                        | $          | 1,824 |   | $ | 10 |   | $ | 10 |   |
| Interest cost                            |       | 3,711                  |       | 3,540                       |       | 78 |   | 87 |   |
| Expected return  on plan assets          |       | (5,314                 | )          | (4,914                      | )          | — |   | — |   |
| Administrative  expenses                 |       | 179                    |       | 96                          |       | — |   | — |   |
| Amortization of  prior year service cost |       | 13                     |       | 12                          |       | — |   | — |   |
| Net periodic  benefit expense            |       | **$**                  | **414**    | ** **                  | **$**      | **558** | ** ** | **$** | **88** | ** ** | **$** | **97** | ** ** |

 
| ** **                               | ** ** | **Pension benefits** | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|----------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Six months ended** | ** ** | **Six months ended**        | ** ** |
| ** **                               | ** ** | **July 2,**          | ** ** | **July 3,**                 | ** ** | **July 2,** | ** ** | **July 3,** | ** ** |
| **In thousands**                         | ** ** | **2005**             | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                             |       | $                    | 3,650      |                        | $          | 3,649 |   | $ | 20 |   | $ | 21 |   |
| Interest cost                            |       | 7,421                |       | 7,079                       |       | 156 |   | 174 |   |
| Expected return  on plan assets          |       | (10,627              | )          | (9,827                      | )          | — |   | — |   |
| Administrative  expenses                 |       | 358                  |       | 191                         |       | — |   | — |   |
| Amortization of  prior year service cost |       | 26                   |       | 24                          |       | — |   | — |   |
| Net periodic  benefit expense            |       | **$**                | **828**    | ** **                  | **$**      | **1,116** | ** ** | **$** | **176** | ** ** | **$** | **195** | ** ** |

 

For the six months endedJuly 2, 2005, we made contributions totaling $1.5 million to the pension plansand $0.4 million to the postretirement welfare plans.  This is consistent with our projectedcontributions for 2005 of $2.7 million to the pension plans and $0.7 million tothe postretirement benefit plans as disclosed in our 2004 Form 10-K.

 

15

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**13.****  BusinessSegments**

 

Ourreportable segments consist of Jostens and our Print Group.  Jostens is a leading provider ofschool-related affinity products and services that help people celebrateimportant moments, recognize achievements and build affiliation.  Jostens’ products include yearbooks, classrings, graduation products and school photography.  Visant’s Print Group includes the productionof four-color case bound and soft-cover educational textbooks and textbookcovers, standardized test materials and related components for majoreducational publishers in the United States. The Print Group also producesbusiness-to-business catalogues and multi-sensory and interactive advertisingsampling systems for the fragrance, cosmetics and personal care markets, aswell as other consumer product markets, and a range of innovative printingproducts and services to the direct marketing sector.

 

Thefollowing tables present information of Holdings by business segment.

 
| ** **                       | ** ** | **Three months ended July 2, 2005** | ** ** |
|----------------------------------|------------|-------------------------------------|------------|
| ** **                       | ** ** | ** **                          | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                         | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                   | 396,812    |   | $ | 165,707 |   | $ | — |   | $ | 562,519 |   |
| Inter-segment  net sales         |       | —                              |       | 862 |   | (862 | ) | — |   |
| Operating income                 |       | 99,838                              |       | 21,969 |   | — |   | 121,807 |   |
| Depreciation and  amortization   |       | 18,706                              |       | 8,672 |   | — |   | 27,378 |   |
|                                  |            |                                     |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Three months ended July 3, 2004** | ** ** |
|----------------------------------|------------|-------------------------------------|------------|
| ** **                       | ** ** | ** **                          | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                         | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                   | 376,186    |   | $ | 171,525 |   | $ | — |   | $ | 547,711 |   |
| Operating income                 |       | 62,818                              |       | 25,346 |   | — |   | 88,164 |   |
| Depreciation and  amortization   |       | 51,045                              |       | 7,515 |   | — |   | 58,560 |   |
|                                  |            |                                     |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Six months ended July 2, 2005** | ** ** |
|----------------------------------|------------|-----------------------------------|------------|
| ** **                       | ** ** | ** **                        | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                       | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                 | 536,550    |   | $ | 335,089 |   | $ | — |   | $ | 871,639 |   |
| Inter-segment  net sales         |       | —                            |       | 1,258 |   | (1,258 | ) | — |   |
| Operating income                 |       | 89,908                            |       | 44,492 |   | — |   | 134,400 |   |
| Depreciation and  amortization   |       | 37,506                            |       | 17,017 |   | — |   | 54,523 |   |
|                                  |            |                                   |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Six months ended July 3, 2004** | ** ** |
|----------------------------------|------------|-----------------------------------|------------|
| ** **                       | ** ** | ** **                        | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                       | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                 | 519,271    |   | $ | 338,524 |   | $ | — |   | $ | 857,795 |   |
| Operating income                 |       | 56,862                            |       | 41,101 |   | — |   | 97,963 |   |
| Depreciation and  amortization   |       | 69,684                            |       | 17,512 |   | — |   | 87,196 |   |
|                                  |            |                                   |            |  |  |  |  |  |  |  |  |  |  |

 

16

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14.   **Condensed ConsolidatingGuarantor Information**

 

Asdiscussed in Note 7, Visant’s obligations under the senior secured creditfacilities and the 75/8% senior subordinated notes are guaranteedby certain of its wholly-owned subsidiaries on a full unconditional and jointand several basis.  The following tablespresent condensed consolidating financial information for Visant, as issuer,and its guarantor subsidiaries.

 

**CONDENSED CONSOLIDATING STATEMENT OFOPERATIONS (UNAUDITED)**

**Threemonths ended July 2, 2005**

 
| ** **                                        | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                    | ** ** | **$**      | **—** | ** **     | **$**      | **546,265**    | ** ** | **$**            | **20,968** | ** **  | **$**      | **(4,714** | **)** | **$** | **562,519** | ** ** |
| Cost of products  sold                            |       | (5,183     | )          | 303,842        |       | 9,257          |       | (4,714           | )          | 303,202     |       |
| Gross profit                                      |       | 5,183      |       | 242,423        |       | 11,711         |       | —           |       | 259,317     |       |
| Selling and  administrative expenses              |       | 289        |       | 126,480        |       | 8,430          |       | —           |       | 135,199     |       |
| Transaction  costs                                |       | 440        |       | —         |       | —         |       | —           |       | 440         |       |
| Special charges                                   |       | —     |       | 1,855          |       | —         |       | —           |       | 1,855       |       |
| **Operating  income**                             | ** ** | **4,454**  | ** ** | **114,088**    | ** ** | **3,281**      | ** ** | **—**       | ** ** | **121,823** | ** ** |
| Net interest  expense                             |       | 20,600     |       | 26,329         |       | 189            |       | (21,052          | )          | 26,066      |       |
| Equity  (earnings) loss in subsidiary, net of tax |       | (52,295    | )          | (2,028         | )          | —         |       | 54,323           |       | —      |       |
| Income (loss)  before income taxes                |       | 36,149     |       | 89,787         |       | 3,092          |       | (33,271          | )          | 95,757      |       |
| Provision for  (benefit from) income taxes        |       | 10,696     |       | 37,492         |       | 1,064          |       | (10,470          | )          | 38,782      |       |
| **Net  income (loss)**                            | ** ** | **$**      | **25,453** | ** **     | **$**      | **52,295**     | ** ** | **$**            | **2,028**  | ** **  | **$**      | **(22,801** | **)** | **$** | **56,975** | ** ** |

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Sixmonths ended July 2, 2005**

 
| ** **                                        | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                    | ** ** | **$**      | **—** | ** **     | **$**      | **845,316**    | ** ** | **$**            | **34,839** | ** **  | **$**      | **(8,516** | **)** | **$** | **871,639** | ** ** |
| Cost of products  sold                            |       | (5,183     | )          | 490,419        |       | 15,998         |       | (8,518           | )          | 492,716     |       |
| Gross profit                                      |       | 5,183      |       | 354,897        |       | 18,841         |       | 2                |       | 378,923     |       |
| Selling and  administrative expenses              |       | (163       | )          | 223,582        |       | 14,913         |       | —           |       | 238,332     |       |
| Transaction  costs                                |       | 539        |       | 785            |       | —         |       | —           |       | 1,324       |       |
| Special charges                                   |       | —     |       | 4,549          |       | 258            |       | —           |       | 4,807       |       |
| **Operating  income**                             | ** ** | **4,807**  | ** ** | **125,981**    | ** ** | **3,670**      | ** ** | **2**            | ** ** | **134,460** | ** ** |
| Net interest  expense                             |       | 46,225     |       | 52,808         |       | 380            |       | (47,114          | )          | 52,299      |       |
| Equity  (earnings) loss in subsidiary, net of tax |       | (43,645    | )          | (2,177         | )          | —         |       | 45,822           |       | —      |       |
| Income (loss)  before income taxes                |       | 2,227      |       | 75,350         |       | 3,290          |       | 1,294            |       | 82,161      |       |
| Provision for  (benefit from) income taxes        |       | 461        |       | 31,705         |       | 1,113          |       | (4               | )          | 33,275      |       |
| **Net  income**                                   | ** ** | **$**      | **1,766**  | ** **     | **$**      | **43,645**     | ** ** | **$**            | **2,177**  | ** **  | **$**      | **1,298** | ** ** | **$** | **48,886** | ** ** |

 

17

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**CONDENSED CONSOLIDATING STATEMENT OFOPERATIONS (UNAUDITED)**

**Threemonths ended July 3, 2004**

 
| ** **                                        | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
| **Net  sales**                                    | ** ** | **$**      | **—** | ** **     | **$**      | **530,544**    | ** ** | **$**            | **22,797** | ** ** | **$**      | **(5,630** | **)** | **$** | **547,711** | ** ** |
| Cost of products  sold                            |       | —     |       | 317,524        |       | 12,653         |       | (5,692           | )          | 324,485    |       |
| Gross profit                                      |       | —     |       | 213,020        |       | 10,144         |       | 62               |       | 223,226    |       |
| Selling and  administrative expenses              |       | —     |       | 126,443        |       | 8,158          |       | —           |       | 134,601    |       |
| Special charges                                   |       | —     |       | 430            |       | —         |       | —           |       | 430        |       |
| **Operating  income**                             | ** ** | **—** | ** ** | **86,147**     | ** ** | **1,986**      | ** ** | **62**           | ** ** | **88,195** | ** ** |
| Net interest  expense                             |       | —     |       | 38,937         |       | 219            |       | —           |       | 39,156     |       |
| Equity  (earnings) loss in subsidiary, net of tax |       | (41,118    | )          | (1,212         | )          | —         |       | 42,330           |       | —     |       |
| Income (loss)  before income taxes                |       | 41,118     |       | 48,422         |       | 1,767          |       | (42,268          | )          | 49,039     |       |
| Provision for  (benefit from) income taxes        |       | —     |       | 7,304          |       | 555            |       | (83              | )          | 7,776      |       |
| **Net  income (loss)**                            | ** ** | **$**      | **41,118** | ** **     | **$**      | **41,118**     | ** ** | **$**            | **1,212**  | ** ** | **$**      | **(42,185** | **)** | **$** | **41,263** | ** ** |

 

**CONDENSED CONSOLIDATING STATEMENT OFOPERATIONS (UNAUDITED)**

**Sixmonths ended July 3, 2004**

 
| ** **                                        | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
| **Net  sales**                                    | ** ** | **$**      | **—** | ** **     | **$**      | **830,633**    | ** ** | **$**            | **35,442** | ** ** | **$**      | **(8,280** | **)** | **$** | **857,795** | ** ** |
| Cost of products  sold                            |       | —     |       | 506,282        |       | 18,803         |       | (8,278           | )          | 516,807    |       |
| Gross profit                                      |       | —     |       | 324,351        |       | 16,639         |       | (2               | )          | 340,988    |       |
| Selling and  administrative expenses              |       | —     |       | 227,202        |       | 14,594         |       | —           |       | 241,796    |       |
| Special charges                                   |       | —     |       | 1,120          |       | —         |       | —           |       | 1,120      |       |
| **Operating  income (loss)**                      | ** ** | **—** | ** ** | **96,029**     | ** ** | **2,045**      | ** ** | **(2**           | **)**      | **98,072** | ** ** |
| Loss on  redemption of debt                       |       | —     |       | 420            |       | —         |       | —           |       | 420        |       |
| Net interest  expense                             |       | —     |       | 77,273         |       | 486            |       | —           |       | 77,759     |       |
| Equity  (earnings) loss in subsidiary, net of tax |       | (13,661    | )          | (1,086         | )          | —         |       | 14,747           |       | —     |       |
| Income (loss)  before income taxes                |       | 13,661     |       | 19,422         |       | 1,559          |       | (14,749          | )          | 19,893     |       |
| Provision for  (benefit from) income taxes        |       | —     |       | 5,761          |       | 473            |       | (4               | )          | 6,230      |       |
| **Net  income (loss)**                            | ** ** | **$**      | **13,661** | ** **     | **$**      | **13,661**     | ** ** | **$**            | **1,086**  | ** ** | **$**      | **(14,745** | **)** | **$** | **13,663** | ** ** |

 

18

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**July 2,2005**

 
| ** **                                           | ** ** | ** **    | ** **    | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|---------------|---------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| **In thousands**                                     | ** ** | **Visant**    | ** **    | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           |       |          |          |           |       |           |       |             |       |          |       |
| Cash and cash  equivalents                           |       | $             | 9,330         |           | $          | (4,804         | )          | $                | 7,323      |          | $          | — |   | $ | 11,849 |   |
| Accounts  receivable, net                            |       | 1,053         |          | 184,668        |       | 11,364         |       | —           |       | 197,085       |       |
| Inventories, net                                     |       | —        |          | 107,630        |       | 3,573          |       | (26              | )          | 111,177       |       |
| Salespersons  overdrafts, net                        |       | —        |          | 18,200         |       | 6,694          |       | —           |       | 24,894        |       |
| Intercompany  receivable (payable)                   |       | 14,475        |          | 696            |       | —         |       | (15,171          | )          | —        |       |
| Prepaid expenses  and other current assets           |       | 1,081         |          | 7,632          |       | 523            |       | —           |       | 9,236         |       |
| Deferred income  taxes                               |       | (449          | )             | 15,438         |       | 75             |       | —           |       | 15,064        |       |
| **Total  current assets**                            | ** ** | **25,490**    | ** **    | **329,460**    | ** ** | **29,552**     | ** ** | **(15,197**      | **)**      | **369,305**   | ** ** |
| Property, plant,  and equipment, net                 |       | 356           |          | 235,451        |       | 3,445          |       | —           |       | 239,252       |       |
| Goodwill                                             |       | —        |          | 1,066,382      |       | 41,952         |       | —           |       | 1,108,334     |       |
| Intangibles, net                                     |       | —        |          | 562,759        |       | 20,910         |       | —           |       | 583,669       |       |
| Deferred  financing costs, net                       |       | 51,854        |          | —         |       | —         |       | —           |       | 51,854        |       |
| Intercompany  receivable (payable)                   |       | 1,398,786     |          | 94,195         |       | 499            |       | (1,493,480       | )          | —        |       |
| Other assets                                         |       | —        |          | 11,751         |       | 1,137          |       | (1,712           | )          | 11,176        |       |
| Investment in  subsidiaries                          |       | 418,141       |          | 65,924         |       | —         |       | (484,065         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**         | **1,894,627** | ** **     | **$**      | **2,365,922**  | ** ** | **$**            | **97,495** | ** **    | **$**      | **(1,994,454** | **)** | **$** | **2,363,590** | ** ** |
|                                                 |       |          |          |           |       |           |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        | ** ** | ** **    | ** **    | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **    | ** ** |
| Short-term  borrowings                               |       | $             | —        |           | $          | —         |       | $                | 9,020      |          | $          | — |   | $ | 9,020 |   |
| Accounts payable                                     |       | 2,499         |          | 43,774         |       | 1,495          |       | —           |       | 47,768        |       |
| Accrued employee  compensation                       |       | 7,197         |          | 32,383         |       | 2,076          |       | —           |       | 41,656        |       |
| Commissions  payable                                 |       | —        |          | 42,818         |       | 1,975          |       | —           |       | 44,793        |       |
| Customer deposits                                    |       | —        |          | 57,339         |       | 4,628          |       | —           |       | 61,967        |       |
| Intercompany  payable (receivable)                   |       | 57,358        |          | 20,449         |       | 1,318          |       | (79,125          | )          | —        |       |
| Other accrued  liabilities                           |       | 9,587         |          | 27,339         |       | 2,333          |       | (15              | )          | 39,244        |       |
| **Total  current liabilities**                       | ** ** | **76,641**    | ** **    | **224,102**    | ** ** | **22,845**     | ** ** | **(79,140**      | **)**      | **244,448**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,416,500     |          | —         |       | —         |       | —           |       | 1,416,500     |       |
| Intercompany  payable (receivable)                   |       | 42,840        |          | 1,450,640      |       | —         |       | (1,493,480       | )          | —        |       |
| Deferred income  taxes                               |       | —        |          | 239,133        |       | 8,600          |       | —           |       | 247,733       |       |
| Pension  liabilities, net                            |       | (322          | )             | 27,285         |       | —         |       | —           |       | 26,963        |       |
| Other noncurrent  liabilities                        |       | —        |          | 6,621          |       | 126            |       | —           |       | 6,747         |       |
| **Total  liabilities**                               | ** ** | **1,535,659** | ** **    | **1,947,781**  | ** ** | **31,571**     | ** ** | **(1,572,620**   | **)**      | **1,942,391** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **358,968**   | ** **    | **418,141**    | ** ** | **65,924**     | ** ** | **(421,834**     | **)**      | **421,199**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**         | **1,894,627** | ** **     | **$**      | **2,365,922**  | ** ** | **$**            | **97,495** | ** **    | **$**      | **(1,994,454** | **)** | **$** | **2,363,590** | ** ** |

 

19

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**July 3,2004**

 
| ** **                                           | ** ** | ** **  | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|-------------|-------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| **In thousands**                                     | ** ** | **Visant**  | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           |       |        |        |           |       |           |       |             |       |          |       |
| Cash and cash  equivalents                           |       | $           | —      |           | $          | 24,996         |       | $                | 3,569      |          | $          | — |   | $ | 28,565 |   |
| Accounts  receivable, net                            |       | —      |        | 173,624        |       | 11,322         |       | —           |       | 184,946       |       |
| Inventories, net                                     |       | —      |        | 97,471         |       | 3,107          |       | (29              | )          | 100,549       |       |
| Salespersons  overdrafts, net                        |       | —      |        | 15,714         |       | 5,700          |       | —           |       | 21,414        |       |
| Prepaid expenses  and other current assets           |       | —      |        | 10,853         |       | 951            |       | —           |       | 11,804        |       |
| Deferred income  taxes                               |       | —      |        | 14,498         |       | 75             |       | —           |       | 14,573        |       |
| **Total  current assets**                            | ** ** | **—**  | ** **  | **337,156**    | ** ** | **24,724**     | ** ** | **(29**          | **)**      | **361,851**   | ** ** |
| Property, plant,  and equipment, net                 |       | —      |        | 247,057        |       | 3,856          |       | —           |       | 250,913       |       |
| Goodwill                                             |       | —      |        | 1,080,261      |       | 39,479         |       | —           |       | 1,119,740     |       |
| Intangibles, net                                     |       | —      |        | 620,056        |       | 23,594         |       | —           |       | 643,650       |       |
| Deferred  financing costs, net                       |       | —      |        | 33,939         |       | —         |       | —           |       | 33,939        |       |
| Other assets                                         |       | —      |        | 10,860         |       | 1,931          |       | (1,711           | )          | 11,080        |       |
| Investment in  subsidiaries                          |       | 329,745     |        | 60,948         |       | —         |       | (390,693         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**       | **329,745** | ** **     | **$**      | **2,390,277**  | ** ** | **$**            | **93,584** | ** **    | **$**      | **(392,433** | **)** | **$** | **2,421,173** | ** ** |
|                                                 |       |        |        |           |       |           |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        |       |        |        |           |       |           |       |             |       |          |       |
| Book overdrafts                                      |       | $           | —      |           | $          | 2,964          |       | $                | —     |          | $          | — |   | $ | 2,964 |   |
| Short-term  borrowings                               |       |        | —      |           |       | 25,000         |       |             | 9,675      |          |       | — |   |   | 34,675 |   |
| Accounts payable                                     |       | —      |        | 45,299         |       | 1,987          |       | —           |       | 47,286        |       |
| Accrued employee  compensation                       |       | —      |        | 38,449         |       | 2,179          |       | —           |       | 40,628        |       |
| Commissions  payable                                 |       | —      |        | 43,449         |       | 1,673          |       | —           |       | 45,122        |       |
| Customer deposits                                    |       | —      |        | 54,413         |       | 4,219          |       | —           |       | 58,632        |       |
| Current portion  of long-term debt                   |       | —      |        | 5,150          |       | —         |       | —           |       | 5,150         |       |
| Deferred income  taxes                               |       | —      |        | —         |       | —         |       | —           |       | —        |       |
| Intercompany  (receivable) payable                   |       | —      |        | (1,775         | )          | 1,775          |       | —           |       | —        |       |
| Other accrued  liabilities                           |       | —      |        | 79,704         |       | 2,183          |       | (11              | )          | 81,876        |       |
| **Total  current liabilities**                       | ** ** | **—**  | ** **  | **292,653**    | ** ** | **23,691**     | ** ** | **(11**          | **)**      | **316,333**   | ** ** |
| Long-term debt,  less current maturities             |       | —      |        | 1,235,515      |       | —         |       | —           |       | 1,235,515     |       |
| Redeemable  preferred stock                          |       | —      |        | 255,387        |       | —         |       | —           |       | 255,387       |       |
| Deferred income  taxes                               |       | —      |        | 242,946        |       | 8,832          |       | —           |       | 251,778       |       |
| Pension  liabilities, net                            |       | —      |        | 28,322         |       | —         |       | —           |       | 28,322        |       |
| Other noncurrent  liabilities                        |       | —      |        | 5,709          |       | 113            |       | —           |       | 5,822         |       |
| **Total  liabilities**                               | ** ** | **—**  | ** **  | **2,060,532**  | ** ** | **32,636**     | ** ** | **(11**          | **)**      | **2,093,157** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **329,745** | ** **  | **329,745**    | ** ** | **60,948**     | ** ** | **(392,422**     | **)**      | **328,016**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**       | **329,745** | ** **     | **$**      | **2,390,277**  | ** ** | **$**            | **93,584** | ** **    | **$**      | **(392,433** | **)** | **$** | **2,421,173** | ** ** |

 

20

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**January1, 2005**

 
| ** **                                           | ** ** | ** **  | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|-------------|-------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| ** **                                           | ** ** | **Visant**  | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           |       |        |        |           |       |           |       |             |       |          |       |
| Cash and cash  equivalents                           |       | $           | 80,933      |           | $          | (2,241         | )          | $                | 3,577      |          | $          | — |   | $ | 82,269 |   |
| Accounts  receivable, net                            |       | —      |        | 147,262        |       | 10,981         |       | —           |       | 158,243       |       |
| Inventories, net                                     |       | —      |        | 127,036        |       | 2,443          |       | (29              | )          | 129,450       |       |
| Salespersons  overdrafts, net                        |       | —      |        | 27,541         |       | 7,874          |       | —           |       | 35,415        |       |
| Prepaid expenses  and other current assets           |       | 530         |        | 12,648         |       | 461            |       | —           |       | 13,639        |       |
| Intercompany  (payable) receivable                   |       | (85,221     | )           | 85,221         |       | —         |       | —           |       | —        |       |
| Deferred income  taxes                               |       | —      |        | 58,817         |       | 75             |       | —           |       | 58,892        |       |
| **Total  current assets**                            | ** ** | **(3,758**  | **)**       | **456,284**    | ** ** | **25,411**     | ** ** | **(29**          | **)**      | **477,908**   | ** ** |
| Property, plant,  and equipment, net                 |       | 62          |        | 236,714        |       | 4,347          |       | —           |       | 241,123       |       |
| Goodwill                                             |       | —      |        | 1,066,320      |       | 42,125         |       | —           |       | 1,108,445     |       |
| Intangibles, net                                     |       | —      |        | 585,285        |       | 20,910         |       | —           |       | 606,195       |       |
| Deferred  financing costs, net                       |       | 58,679      |        | —         |       | —         |       | —           |       | 58,679        |       |
| Intercompany  (payable) receivable                   |       | (58,679     | )           | 58,114         |       | 565            |       | —           |       | —        |       |
| Other assets                                         |       | —      |        | 10,425         |       | 2,191          |       | (1,712           | )          | 10,904        |       |
| Investment in  subsidiaries                          |       | 375,015     |        | 63,747         |       | —         |       | (438,762         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**       | **371,319** | ** **     | **$**      | **2,476,889**  | ** ** | **$**            | **95,549** | ** **    | **$**      | **(440,503** | **)** | **$** | **2,503,254** | ** ** |
|                                                 |       |        |        |           |       |           |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        |       |        |        |           |       |           |       |             |       |          |       |
| Short-term  borrowings                               |       | $           | —      |           | $          | —         |       | $                | 8,300      |          | $          | — |   | $ | 8,300 |   |
| Accounts payable                                     |       | 2,508       |        | 49,278         |       | 1,719          |       | —           |       | 53,505        |       |
| Accrued employee  compensation                       |       | 308         |        | 44,487         |       | 2,065          |       | —           |       | 46,860        |       |
| Commissions  payable                                 |       | —      |        | 14,173         |       | 2,521          |       | —           |       | 16,694        |       |
| Customer deposits                                    |       | —      |        | 151,103        |       | 5,408          |       | —           |       | 156,511       |       |
| Current portion  of long-term debt                   |       | 19,950      |        | —         |       | —         |       | —           |       | 19,950        |       |
| Intercompany  (receivable) payable                   |       | (9,707      | )           | 26,073         |       | 475            |       | (16,841          | )          | —        |       |
| Other accrued  liabilities                           |       | 9,595       |        | 33,512         |       | 2,611          |       | (11              | )          | 45,707        |       |
| **Total  current liabilities**                       | ** ** | **22,654**  | ** **  | **318,626**    | ** ** | **23,099**     | ** ** | **(16,852**      | **)**      | **347,527**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,500,050   |        | —         |       | —         |       | —           |       | 1,500,050     |       |
| Intercompany  (receivable) payable                   |       | (1,500,050  | )           | 1,500,050      |       | —         |       | —           |       | —        |       |
| Deferred income  taxes                               |       | —      |        | 250,066        |       | 8,703          |       | —           |       | 258,769       |       |
| Pension  liabilities, net                            |       | —      |        | 27,489         |       | —         |       | —           |       | 27,489        |       |
| Other noncurrent  liabilities                        |       | —      |        | 5,643          |       | —         |       | —           |       | 5,643         |       |
| **Total  liabilities**                               | ** ** | **22,654**  | ** **  | **2,101,874**  | ** ** | **31,802**     | ** ** | **(16,852**      | **)**      | **2,139,478** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **348,665** | ** **  | **375,015**    | ** ** | **63,747**     | ** ** | **(423,651**     | **)**      | **363,776**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**       | **371,319** | ** **     | **$**      | **2,476,889**  | ** ** | **$**            | **95,549** | ** **    | **$**      | **(440,503** | **)** | **$** | **2,503,254** | ** ** |

 

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**CONDENSED CONSOLIDATING STATEMENT OFCASH FLOWS (UNUADITED)**

**Sixmonths ended July 2, 2005**

 
| ** **                                                    | ** ** | ** **  | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|-------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                              | ** ** | **Visant**  | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| Net income  (loss)                                            |       | $           | 1,766      |           | $          | 43,645         |       | $                | 2,177      |        | $          | 1,298 |   | $ | 48,886 |   |
| Other cash  provided by (used in) operating activities        |       | 18,215      |       | (12,966        | )          | 858            |       | (1,298           | )          | 4,809       |       |
| **Net  cash provided by operating activities**                | ** ** | **19,981**  | ** ** | **30,679**     | ** ** | **3,035**      | ** ** | **—**       | ** ** | **53,695**  | ** ** |
| Purchases of  property, plant, and equipment                  |       | (295        | )          | (30,250        | )          | (78            | )          | —           |       | (30,623     | )          |
| Proceeds from  asset sales                                    |       | —      |       | 1,555          |       | —         |       | —           |       | 1,555       |       |
| Other investing  activities, net                              |       | —      |       | (1,009         | )          | (16            | )          | —           |       | (1,025      | )          |
| **Net  cash used in investing activities**                    | ** ** | **(295**    | **)**      | **(29,704**    | **)**      | **(94**        | **)**      | **—**       | ** ** | **(30,093** | **)**      |
| Net short-term  borrowings                                    |       | —      |       | —         |       | 800            |       | —           |       | 800         |       |
| Principal  payments on long-term debt                         |       | (103,500    | )          | —         |       | —         |       | —           |       | (103,500    | )          |
| Intercompany  (receivable) payable                            |       | 3,198       |       | (3,198         | )          | —         |       | —           |       | —      |       |
| Net contribution  from Visant Holding Corp                    |       | 9,000       |       |           |       |           |       |             |       | 9,000       |       |
| Other financing  activities, net                              |       | 13          |       | (340           | )          | —         |       | —           |       | (327        | )          |
| **Net  cash (used in) provided by financing activities**      | ** ** | **(91,289** | **)**      | **(3,538**     | **)**      | **800**        | ** ** | **—**       | ** ** | **(94,027** | **)**      |
| Effect of  exchange rate changes on cash and cash equivalents |       | —      |       | —         |       | 5              |       | —           |       | 5           |       |
| (Decrease) increase  in cash and cash equivalents             |       | (71,603     | )          | (2,563         | )          | 3,746          |       | —           |       | (70,420     | )          |
| Cash and cash  equivalents, beginning of period               |       | 80,933      |       | (2,241         | )          | 3,577          |       | —           |       | 82,269      |       |
| **Cash  and cash equivalents, end of period**                 | ** ** | **$**       | **9,330**  | ** **     | **$**      | **(4,804**     | **)**      | **$**            | **7,323**  | ** **  | **$**      | **—** | ** ** | **$** | **11,849** | ** ** |

 

**CONDENSED CONSOLIDATING STATEMENT OFCASH FLOWS (UNUADITED)**

**Sixmonths ended July 3, 2004**

 
| ** **                                                    | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                              | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| Net income  (loss)                                            |       | $          | 13,661     |           | $          | 13,661         |       | $                | 1,086      |        | $          | (14,745 | ) | $ | 13,663 |   |
| Other cash (used  in) provided by operating activities        |       | (13,661    | )          | 33,822         |       | (788           | )          | 14,745           |       | 34,118      |       |
| **Net  cash provided by operating activities**                | ** ** | **—** | ** ** | **47,483**     | ** ** | **298**        | ** ** | **—**       | ** ** | **47,781**  | ** ** |
| Purchases of  property, plant, and equipment                  |       | —     |       | (14,138        | )          | (208           | )          | —           |       | (14,346     | )          |
| Proceeds from  asset sales                                    |       | —     |       | 5,295          |       | —         |       | —           |       | 5,295       |       |
| Other investing  activities, net                              |       | —     |       | (99            | )          | —         |       | —           |       | (99         | )          |
| **Net  cash used in investing activities**                    | ** ** | **—** | ** ** | **(8,942**     | **)**      | **(208**       | **)**      | **—**       | ** ** | **(9,150**  | **)**      |
| Net book  overdraft borrowings (repayments)                   |       | —     |       | 2,964          |       |           |       | —           |       | 2,964       |       |
| Net short-term  borrowings (repayments)                       |       | —     |       | (4,238         | )          | (3,090         | )          | —           |       | (7,328      | )          |
| Principal  payments on long-term debt                         |       | —     |       | (43,250        | )          | —         |       | —           |       | (43,250     | )          |
| Redemption of  senior subordinated notes                      |       | —     |       | (5,800         | )          | —         |       | —           |       | (5,800      | )          |
| Other financing  activities, net                              |       | —     |       | (321           | )          | —         |       | —           |       | (321        | )          |
| **Net  cash (used in) provided by financing activities**      | ** ** | **—** | ** ** | **(50,645**    | **)**      | **(3,090**     | **)**      | **—**       | ** ** | **(53,735** | **)**      |
| Effect of  exchange rate changes on cash and cash equivalents |       | —     |       | —         |       | (62            | )          | —           |       | (62         | )          |
| (Decrease)  increase in cash and cash equivalents             |       | —     |       | (12,104        | )          | (3,062         | )          | —           |       | (15,166     | )          |
| Cash and cash  equivalents, beginning of period               |       | —     |       | 37,100         |       | 6,631          |       | —           |       | 43,731      |       |
| **Cash  and cash equivalents, end of period**                 | ** ** | **$**      | **—** | ** **     | **$**      | **24,996**     | ** ** | **$**            | **3,569**  | ** **  | **$**      | **—** | ** ** | **$** | **28,565** | ** ** |

 

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

 

Exceptwhere otherwise indicated, management’s discussion and analysis of financialcondition and results of operations is provided with respect to Holdings, whichhas materially the same as the financial condition and results of operations asVisant.  This discussion and analysisshould be read in conjunction with our condensed consolidated financialstatements and notes thereto.

 

**CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This report may contain “forward-lookingstatements.”  The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for certainforward-looking statements so long as such information is identified asforward-looking and is accompanied by meaningful cautionary statementsidentifying important factors that could cause actual results to differmaterially from those projected in the information.  Forward-looking statements are based on ourcurrent expectations or forecasts of future events.  Forward-looking statements generally can beidentified by the use of forward-looking terminology such as “may”, “might”, “will”,“should”, “estimate”, “project”, “plan”, “anticipate”, “expect”, “intend”, “outlook”,“continue”, “believe”, or the negative thereof or other similar expressions,which are intended to identify forward-looking statements and information.  Such forward-looking statements involve knownand unknown risks, uncertainties and other important factors that could causethe actual results, performance or achievements of the Company, or industryresults, to differ materially from historical results, any future results,performance or achievements expressed or implied by such forward-lookingstatements.  These forward-lookingstatements are based on estimates and assumptions by our management that,although we believe are reasonable, are inherently uncertain and subject to anumber of risks and uncertainties and you should not place undue reliance onthem.

 

Such risks anduncertainties include, but are not limited to, the following: our substantialindebtedness; our inability to implement our business strategy and achieveanticipated cost savings in a timely and effective manner; competition fromother companies; the seasonality of our businesses; the loss of significantcustomers or customer relationships; fluctuations in raw material prices; ourreliance on a limited number of suppliers; our reliance on numerous complexinformation systems; the reliance of our businesses on limited productionfacilities; the amount of capital expenditures required at our businesses;labor disturbances; environmental regulations; foreign currency fluctuationsand foreign exchange rates; the outcome of litigation; control by our controllingstockholders; the dependency on the sale of school textbooks; the textbookadoption cycle and levels of government funding for education spending; Jostens’reliance on independent sales representatives; and the failure of our samplingsystems to comply with U.S. postal regulations. These factors could cause actual results to differ materially fromhistorical results or those anticipated or predicted by the forward-lookinginformation.

 

We caution that theforegoing list of important factors is not exclusive.  Forward-looking statements speak only as ofthe 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 generate a significant portion of our net sales through the sale ofspecialty printing and marketing products to the North American educationsector.  Our printing and marketingproducts include, among others, yearbooks, educational materials, diplomas,announcements, direct marketing materials and commercial printing.  We also manufacture and distribute non-printschool-related affinity products and services, such as class rings, caps andgowns and school photography.  We sellour products and services to end customers through different sales channels,including independent sales representatives and dedicated sales forces.  Our sales and results of operations areimpacted by general economic conditions, seasonality, costs of raw materials,school population trends, product quality and service and price.

 

Our reportable segmentsconsist of Jostens and the Print Group.  Jostensis a leading provider of school-related affinity products and services thathelp people celebrate important moments, recognize achievements and buildaffiliation.  Jostens’ products includeyearbooks, class rings, graduation products and school photography.

 

23

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The Print Group includes the production of four-color casebound and soft-cover educational textbooks and textbook covers, standardizedtest materials and related components for major educational publishers in theUnited States. The Print Group also produces business-to-business cataloguesand multi-sensory and interactive advertising sampling systems for thefragrance, cosmetics and personal care markets, as well as other consumerproduct markets, and a range of innovative printing products and services tothe direct marketing sector.

 

**2004 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 “2004 Transactions”) which created a specialty printing,marketing and school-related affinity products and services organizationcomprised of the operations of Jostens, Von Hoffmann, including Von Hoffmann’ssubsidiary, The Lehigh Press, Inc., and Arcade.

 

Prior to the 2004Transactions, Von Hoffmann and Arcade were each controlled by affiliates ofDLJ Merchant Banking Partners II, L.P. (“DLJMBP II”), andDLJ Merchant Banking Partners III, L.P. (“DLJMBP III”) owned approximately82.5% of Holdings’ outstanding equity, with the remainder held by otherco-investors and certain members of management. Upon consummation of the 2004 Transactions, an affiliate of KKR invested$256.1 million and was issued equity interests representing approximately 49.6%of Holdings’ voting interest and 45% of Holdings’ economic interest.  Approximately $175.6 million of the proceedswere distributed to certain shareholders, and certain treasury stock held byVon Hoffmann was redeemed.  As a resultof the 2004 Transactions, affiliates of DLJMBP III held equity interestsrepresenting approximately 41% of our voting interest and 45% of our economicinterest, with the remainder held by other co-investors and certain members ofmanagement.  After giving effect to theissuance of equity to additional members of management, as of May 13, 2005affiliates of KKR and DLJMBP III held approximately 49.1% and 41%, respectively,of the voting interests of Holdings, while each continues to hold approximately45% of Holdings’ economic interest.

 

In connection with the2004 Transactions, Visant entered into new senior secured credit facilities,providing for an aggregate amount of $1,270 million, including a$250 million revolving credit facility, and issued $500 millionaggregate principal amount of 75/8% senior subordinatednotes.  Also in connection with the 2004Transactions, Jostens, Von Hoffmann and Arcade repaid their existingindebtedness having an aggregate face value of $1,392.6 million includingredemption value of certain remaining redeemable preferred stock.

 

**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 January 1, 2005 (“2004Form 10-K”).

 

**Recent Accounting Pronouncements**

 

***SFAS 123R –Statement of Accounting Standards No. 123 (revised 2004) Share-Based Payment***

InDecember 2004, the Financial Accounting Standards Board (“FASB”) issued arevision of SFAS 123.  This statementeliminates the alternative to use the intrinsic value method of accounting thatwas permitted in SFAS 123 as originally issued and will require recognition ofcompensation expense related to all equity awards granted after the requiredeffective date and to awards modified, repurchased, or cancelled after that datebased on the grant date fair values of the awards.  This statement is effective for us as of thefirst interim or annual reporting period that

 

24

----

 

commences after December 15, 2005.  Wehave not yet determined the impact of adopting this statement on ourconsolidated financial position, results of operations or cash flows.

 

***FSP 109-2 – Accounting andDisclosure Guidance for the Foreign Earnings Repatriation Provision within theAmerican Jobs Creation Act of 2004.***

In October 2004, the American Jobs Creation Actof 2004 (the “AJC Act”) was signed into law. This legislation creates, among other things, a temporary incentive forU.S. multinational companies to repatriate accumulated income earned outsidethe U.S. at a favorable rate of tax.  InDecember 2004, the FASB issued Staff Position (FSP) 109-2, which providesaccounting and disclosure guidance for the repatriation provision.  Although we intend to repatriate earningsfrom our Canadian subsidiary in an amount that could range from $8 million to$13 million, we have not yet completed our analysis of the tax effect of such repatriation.  Due to the complexity of the calculations, weanticipate that our analysis of the tax benefit of repatriation will be completedby the fourth quarter of 2005 and that the effect on the Company’s effectiveannual rate will be recorded at that time.

 

**RESULTS OF OPERATIONS**

 

**Three Months Ended July 2, 2005Compared to the Three Months Ended July 3, 2004**

 

The following table setsforth selected information derived from Holdings’ condensed consolidatedstatements of operations for the three-month periods ended July 2, 2005 andJuly 3, 2004.

 
| ** **                           | ** ** | **Three months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|--------------------------------------|------------|------------------------|------------|-------------|------------|-------------------|------------|
| ** **                           | ** ** | **July 2,**            | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                     | ** ** | **2005**               | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                            |       | $                      | 562,519    |        | $          | 547,711           |       | $ | 14,808 |   | 2.7 | % |
| Cost of products  sold               |       | 303,202                |       | 324,485     |       | (21,283           | )          | (6.6 | %) |
| Gross profit                         |       | 259,317                |       | 223,226     |       | 36,091            |       | 16.2 | % |
| *%  of net sales*                    | * *   | ***46.1***             | ***%***    | ***40.8***  | ***%***    |              |       |   |   |
|                                 |       |                   |       |        |       |              |       |   |   |
| Selling and  administrative expenses |       | 135,215                |       | 134,632     |       | 583               |       | 0.4 | % |
| *%  of net sales*                    | * *   | ***24.0***             | ***%***    | ***24.6***  | ***%***    | * *          | * *   | * * | * * |
| * *                             | * *   | * *               | * *   | * *    | * *   | * *          | * *   | * * | * * |
| Transaction  costs                   |       | 440                    |       | —      |       | 440               |       | NM |   |
| Special charges                      |       | 1,855                  |       | 430         |       | 1,425             |       | NM |   |
| Operating income                     |       | 121,807                |       | 88,164      |       | 33,643            |       | 38.2 | % |
| *%  of net sales*                    | * *   | ***21.7***             | ***%***    | ***16.1***  | ***%***    | * *          | * *   | * * | * * |
| * *                             | * *   | * *               | * *   | * *    | * *   | * *          | * *   | * * | * * |
| Loss on  redemption of debt          |       | —                 |       | —      |       | —            |       | NM |   |
| Interest  expense, net               |       | 30,459                 |       | 43,192      |       | (12,733           | )          | (29.5 | %) |
| Income before  income taxes          |       | 91,348                 |       | 44,972      |       | 46,376            |       |   |   |
| Provision for  income taxes          |       | 37,822                 |       | 13,308      |       | 24,514            |       | 184.2 | % |
| Net income                           |       | $                      | 53,526     |        | $          | 31,664            |       | $ | 21,862 |   | 69.0 | % |

 

----

NM = Not meaningful

 

The following table setsforth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the three-month periods ended July 2,2005 and July 3, 2004.  For additionalfinancial information about our operating segments, see Note 13 of the Notes toCondensed Consolidated Financial Statements.

 

25

----

 
| ** **                  | ** ** | **Three months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|-----------------------------|------------|------------------------|------------|-------------|------------|-------------------|------------|
| ** **                  | ** ** | **July 2,**            | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**            | ** ** | **2005**               | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                   |       |                   |       |        |       |              |       |   |   |
| Jostens                     |       | $                      | 396,812    |        | $          | 376,186           |       | $ | 20,626 |   | 5.5 | % |
| Print Group                 |       | 166,569                |       | 171,525     |       | (4,956            | )          | (2.9 | %) |
| Inter-segment  eliminations |       | (862                   | )          | —      |       | (862              | )          | NM |   |
|                        |       | $                      | 562,519    |        | $          | 547,711           |       | $ | 14,808 |   | 2.7 | % |
| Operating income            |       |                   |       |        |       |              |       |   |   |
| Jostens                     |       | $                      | 99,838     |        | $          | 62,818            |       | $ | 37,020 |   | 58.9 | % |
| Print Group                 |       | 21,969                 |       | 25,346      |       | (3,377            | )          | (13.3 | %) |
|                        |       | $                      | 121,807    |        | $          | 88,164            |       | $ | 33,643 |   | 38.2 | % |

 

----

NM - notmeaningful

 

***NetSales***

Consolidated net salesincreased $14.8 million, or 2.7%, to $562.5 million for the three months endedJuly 2, 2005 from $547.7 million for the same prior year period.

 

Jostens’ net salesincreased $20.6 million, or 5.5%, to $396.8 million for the current period to$376.2 million for the same prior year period. Jostens’ second quarter revenues are comprised primarily from theproduction and sale of yearbooks.  The5.5% increase from the prior year was primarily attributable to improvedyearbook printing sales and, to a lesser extent, a shift of graduation productsales into the second quarter from the first quarter as compared to the sameperiod last year due to the timing of deliveries.

 

Print Group net sales decreased $5.0 million, or 2.9%,to $166.6 million for the current period compared to $171.5 million for thesame prior year period.  The decrease wasdue primarily to lower book and premedia sales. The lower book sales were primarilyattributable to the manufacture of fewer non-educational books resulting fromthe first quarter closing of the Frederick, Maryland plant, and, to a lesserextent, lower pricing for certain educational products and lower throughput inour four-color facility due primarily to the reduction in run length andincreased complexity related to state-specific textbooks.

 

***GrossProfit***

Gross profit increased$36.1 million, or 16.2%, to $259.3 million for the three months ended July 2,2005 from $223.2 million for the same prior year period.  As a percentage of net sales, gross profitmargin increased to 46.1% for the current three-month period from 40.8% for thesame period last year.

 

The increased grossprofit as a percent of sales in the second quarter was primarily a result ofapproximately $33 million of less purchase accounting amortization than thesecond quarter of 2004 relating to Jostens. This amortization was primarily related to order backlog intangibleassets associated with the accounting of the purchase of Jostens in July 2003.  Excluding the impact of this adjustment,gross profit decreased to 46.5% from an adjusted gross margin of 47.2%.  This decrease was due mainly to an additional$10 million of incremental diploma costs incurred at Jostens as a result ofproduction issues associated with the relocation of its Red Wing manufacturingfacility to certain other facilities.  Jostensexpects to incur an additional $1 to $2 million of higher than planned diplomacosts in the third quarter of 2005.  Marginswere also affected by slightly lower margins in the Print Group for thequarter.  This reduction was partiallyoffset by margin improvement in Jostens’ yearbook printing.

 

***Sellingand Administrative Expenses***

Selling andadministrative expenses increased $0.6 million, or 0.4%, to $135.2 million forthe three months ended July 2, 2005 from $134.6 million for the same prior yearperiod.  As a percentage of net sales,selling and administrative expenses decreased 0.6 percentage points to 24.0%for the current three-month period from 24.6% for the same period last year.  The $0.6 million increase was primarily dueto higher commission expense related to the timing of Jostens sales offsetsomewhat by the impact of administrative headcount reductions.

 

26

----

 

***SpecialCharges***

Duringthe second quarter of 2005, we recorded $1.9 million of special charges.  Of this amount, $1.6 million related toseverance payments and related benefits associated with the reduction inheadcount of 19 Jostens employees.  Wealso recorded severance of $0.3 million related to Print Group personnel.

 

***Operating Income***

Consolidated operatingincome increased $33.6 million, or 38.2%, to $121.8 million for the threemonths ended July 2, 2005 from $88.2 million for the same prior yearperiod.  As a percentage of net sales,operating income increased to 21.7% for the current three-month period from16.1% for the same period last year.

 

Jostens operating incomeincreased $37.0 million, or 58.9%, to $99.8 million for the current three-monthperiod compared to $62.8 million for the same period last year.  The increase in Jostens’ operating income wasprimarily a result of approximately $33 million of less purchase accountingamortization than the second quarter of 2004 relating as well as theimplementation of cost reduction initiatives, offset somewhat by an additional$10 million of diploma costs.

 

Print Group operatingincome decreased $3.4 million, or 13.3%, to $22.0 million for the three monthsended July 2, 2005 from $25.3 million for the same prior year period primarilydue to lower book and premedia sales.

 

***NetInterest Expense***

Net interest expense iscomprised of the following:

 
| ** **                                                                                        | ** ** | **Three months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------------------------------------|------------|------------------------|------------|-------------|------------|-------------------|------------|
| ** **                                                                                        | ** ** | **July 2,**            | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                                                  | ** ** | **2005**               | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                                                       |       |                   |       |        |       |              |       |   |   |
| Interest expense                                                                                  |       | $                      | 23,300     |        | $          | 24,384            |       | $ | (1,084 | ) | (4.4 | %) |
| Accrued interest  on mandatorily redeemable preferred stock and subordinated exchange  debentures |       | —                 |       | 12,641      |       | (12,641           | )          | NM |   |
| Amortization of  debt discount, premium and deferred financing costs                              |       | 3,207                  |       | 2,238       |       | 969               |       | 43.3 | % |
| Interest income                                                                                   |       | (441                   | )          | (107        | )          | (334              | )          | NM |   |
|                                                                                              |       | **26,066**             | ** ** | **39,156**  | ** ** | **(13,090**       | **)**      | (33.4 | %) |
| **Holdings:**                                                                                     |       |                   |       |        |       |              |       |   |   |
| Interest expense                                                                                  |       | —                 |       | 35          |       | (35               | )          | NM |   |
| Amortization of  debt discount, premium and deferred financing costs                              |       | 4,452                  |       | 4,006       |       | 446               |       | 11.1 | % |
| Interest income                                                                                   |       | (59                    | )          | (5          | )          | (54               | )          | NM |   |
|                                                                                              |       | **4,393**              | ** ** | **4,036**   | ** ** | **357**           |       | 8.8 | % |
|                                                                                              |       | **$**                  | **30,459** | ** **  | **$**      | **43,192**        | ** ** | **$** | **(12,733** | **)** | (29.5 | %) |

 

----

NM = Not meaningful

 

27

----

 

Net interest expensedecreased $12.7 million, or 29.5%, to $30.5 million for the three months endedJuly 2, 2005 as compared to $43.2 million for the same prior year period.  The decrease was the result of our new debt arrangementsat lower interest rates put in place in connection with the consummation of the2004 Transactions.

 

***IncomeTaxes***

Consistentwith the provisions of APB 28, *InterimFinancial Reporting*, we have provided an income tax provision basedon our best estimate of the consolidated effective tax rate applicable for theentire year.  Based on those estimates,for the three months ended July 2, 2005, we provided an income taxprovision at a consolidated effective rate of 41.4% and 40.5% for Holdings andVisant, respectively.  The annualeffective tax rate does not include any anticipated benefit attributable to thedividend repatriation provisions under the American Jobs Creation Act of2004.  Our preliminary evaluationindicates that the benefit of the repatriation would result in an effective taxrate for the year between 39% and 40%.

 

Forthe comparable three-month period ended July 3, 2004, the effective incometax rate for Holdings and Visant was 29.6% and 15.9%, respectively.  These tax rates reflect the combined effectof separately reported effective tax rates for Holdings and our acquiredcompanies prior to the 2004 Transactions. Accordingly, these tax rates are not intended to reflect a combinedeffective tax rate that would have been reported if the 2004 Transactions hadoccurred at the beginning of the 2004 fiscal period.

 

The consolidatedeffective tax rates have remained the same for the three month period ended July2, 2005 as they were for the three month period ended April 2, 2005, sincethere have not been any significant events that would warrant a change in rate.

 

***Net Income***

As a result of theaforementioned items, net income increased $21.9 million, or 69.0%, to $53.5million for the three months ended July 2, 2005 from $31.7 million for the sameprior year period.

 

**Six Months Ended July 2, 2005Compared to the Six Months Ended July 3, 2004**

 

The following table sets forthselected information derived from Holdings’ condensed consolidated statementsof operations for the six-month periods ended July 2, 2005 and July 3, 2004.

 

28

----

 
| ** **                           | ** ** | **Six months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|--------------------------------------|------------|----------------------|------------|-------------|------------|-------------------|------------|
| ** **                           | ** ** | **July 2,**          | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                     | ** ** | **2005**             | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                            |       | $                    | 871,639    |        | $          | 857,795           |       | $ | 13,844 |   | 1.6 | % |
| Cost of products  sold               |       | 492,716              |       | 516,807     |       | (24,091           | )          | (4.7 | %) |
| Gross profit                         |       | 378,923              |       | 340,988     |       | 37,935            |       | 11.1 | % |
| *%  of net sales*                    | * *   | ***43.5***           | ***%***    | ***39.8***  | ***%***    |              |       |   |   |
|                                 |       |                 |       |        |       |              |       |   |   |
| Selling and  administrative expenses |       | 238,392              |       | 241,905     |       | (3,513            | )          | (1.5 | %) |
| *%  of net sales*                    | * *   | ***27.3***           | ***%***    | ***28.2***  | ***%***    | *** ***      | * *   | * * | * * |
| * *                             | * *   | * *             | * *   | * *    | * *   | * *          | * *   | * * | * * |
| Transaction  costs                   |       | 1,324                |       | —      |       | 1,324             |       | NM |   |
| Special charges                      |       | 4,807                |       | 1,120       |       | 3,687             |       | NM |   |
| Operating income                     |       | 134,400              |       | 97,963      |       | 36,437            |       | 37.2 | % |
| *%  of net sales*                    | * *   | ***15.4***           | ***%***    | ***11.4***  | ***%***    | * *          | * *   | * * | * * |
| * *                             | * *   | * *             | * *   | * *    | * *   | * *          | * *   | * * | * * |
| Loss on  redemption of debt          |       | —               |       | 420         |       | (420              | )          | NM |   |
| Interest  expense, net               |       | 61,027               |       | 85,729      |       | (24,702           | )          | (28.8 | %) |
| Income before  income taxes          |       | 73,373               |       | 11,814      |       | 61,559            |       |   |   |
| Provision for  income taxes          |       | 30,376               |       | 7,696       |       | 22,680            |       | 294.7 | % |
| Net income                           |       | $                    | 42,997     |        | $          | 4,118             |       | $ | 38,879 |   | 944.1 | % |
|                                      |            |                      |            |             |            |                   |            |  |  |  |  |  |  |

 

----

NM = Not meaningful

 

The following table setsforth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the six-month periods ended July 2,2005 and July 3, 2004.  For additionalfinancial information about our operating segments, see Note 13 of the Notes toCondensed Consolidated Financial Statements.

 
| ** **                  | ** ** | **Six months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|-----------------------------|------------|----------------------|------------|-------------|------------|-------------------|------------|
| ** **                  | ** ** | **July 2,**          | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**            | ** ** | **2005**             | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                   |       |                 |       |        |       |              |       |   |   |
| Jostens                     |       | $                    | 536,550    |        | $          | 519,271           |       | $ | 17,279 |   | 3.3 | % |
| Print Group                 |       | 336,347              |       | 338,524     |       | (2,177            | )          | (0.6 | %) |
| Inter-segment  eliminations |       | (1,258               | )          | —      |       | (1,258            | )          | NM |   |
|                        |       | $                    | 871,639    |        | $          | 857,795           |       | $ | 13,844 |   | 1.6 | % |
| Operating income            |       |                 |       |        |       |              |       |   |   |
| Jostens                     |       | $                    | 89,908     |        | $          | 56,862            |       | $ | 33,046 |   | 58.1 | % |
| Print Group                 |       | 44,492               |       | 41,101      |       | 3,391             |       | 8.3 | % |
|                        |       | $                    | 134,400    |        | $          | 97,963            |       | $ | 36,437 |   | 37.2 | % |

 

----

NM - notmeaningful

 

***NetSales***

Consolidated net salesincreased $13.8 million, or 1.6%, to $871.6 million for the six months endedJuly 2, 2005 from $857.8 million for the same prior year period.

 

Jostens’ net salesincreased $17.3 million, or 3.3%, to $536.6 million for the current periodcompared to $519.3 million for the same prior year period.  The increase in Jostens’ net sales wasprimarily attributable to higher yearbook sales.

 

29

----

 

Print Group net sales decreased $2.2 million, or 0.6%,to $336.3 million for the current period compared to $338.5 million for thesame prior year period.  The decrease inPrint Group net sales was primarily attributable to the lower sales in thesecond quarter of 2005 as well as lower paper sales in the first quarter of2005, offset by strong revenues from direct marketing and sampling products inthe first quarter.

 

***GrossProfit***

Gross profit increased$37.9 million, or 11.1%, to $378.9 million for the six months ended July 2,2005 from $341.0 million for the same prior year period.  As a percentage of net sales, gross profitmargin increased to 43.5% for the current six-month period from 39.8% for thesame period last year.

 

The increased grossprofit as a percent of sales was primarily a result of approximately $33.7million of less purchase accounting depreciation and amortization than thefirst half of 2004 relating to Jostens.  Thisamortization was primarily related to order backlog intangible assetsassociated with the accounting of the purchase of Jostens in July 2003.  Excluding the impact of these adjustments,gross profit decreased to 44.0% from an adjusted gross margin of 44.2%.  This decrease was primarily due to thediploma costs incurred at Jostens which was mostly offset by margin improvementin Jostens’ yearbook printing and favorable mix within the Print Group relatingto increased volume from higher margin products.

 

***Sellingand Administrative Expenses***

Selling andadministrative expenses decreased $3.5 million, or 1.5%, to $238.4 million forthe six months ended July 2, 2005 from $241.9 million for the same prior yearperiod.  As a percentage of net sales,selling and administrative expenses decreased to 27.3% for the currentsix-month period from 28.2% for the same period last year.  The $3.5 million decrease was primarily dueto the impact of administrative headcount reductions.

 

***SpecialCharges***

Duringthe first six months of 2005, we recorded $4.8 million of special charges,including $3.8 million related to severance payments and related benefitsassociated with the reduction in headcount of 44 Jostens employees.  We also recorded severance of $0.7 millionrelated to the reduction in headcount of five Print Group employees as well as$0.3 million of costs related to a withdrawal liability under a union retirementplan that is payable in connection with the consolidation of certainoperations.

 

***Operating Income***

Consolidated operatingincome increased $36.4 million, or 37.2%, to $134.4 million for the six monthsended July 2, 2005 from $98.0 million for the same prior year period.  As a percentage of net sales, operatingincome increased to 15.4% for the current six-month period from 11.4% for thesame period last year.

 

Jostens operating incomeincreased $33.0 million, or 58.1%, to $89.9 million for the current six-monthperiod compared to $56.9 million for the same period last year.  The increase in Jostens’ operating income wasprimarily a result of approximately $33.7 million of less purchase accountingdepreciation and amortization than the first half of 2004 as well as theimplementation of cost reduction initiatives, offset by approximately $12million of incremental diploma costs.

 

Print Group operatingincome increased $3.4 million, or 8.3%, to $44.5 million for the six monthsended July 2, 2005 from $41.1 million for the same prior year period primarilyas a result of favorable product mix.

 

30

----

 

***NetInterest Expense***

Net interest expense iscomprised of the following:

 
| ** **                                                                                        | ** ** | **Six months ended** | ** ** | ** **  | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------|------------|-------------------|------------|
| ** **                                                                                        | ** ** | **July 2,**          | ** ** | **July 3,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                                                  | ** ** | **2005**             | ** ** | **2004**    | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                                                       |       |                 |       |        |       |              |       |   |   |
| Interest expense                                                                                  |       | $                    | 46,018     |        | $          | 49,743            |       | $ | (3,725 | ) | (7.5 | %) |
| Accrued interest  on mandatorily redeemable preferred stock and subordinated exchange  debentures |       | —               |       | 24,563      |       | (24,563           | )          | NM |   |
| Amortization of  debt discount, premium and deferred financing costs                              |       | 7,158                |       | 3,649       |       | 3,509             |       | 96.2 | % |
| Interest income                                                                                   |       | (877                 | )          | (196        | )          | (681              | )          | NM |   |
|                                                                                              |       | **52,299**           | ** ** | **77,759**  | ** ** | **(25,460**       | **)**      | (32.7 | %) |
| **Holdings:**                                                                                     |       |                 |       |        |       |              |       |   |   |
| Interest expense                                                                                  |       | —               |       | 250         |       | (250              | )          | NM |   |
| Amortization of  debt discount, premium and deferred financing costs                              |       | 8,806                |       | 7,733       |       | 1,073             |       | 13.9 | % |
| Interest income                                                                                   |       | (78                  | )          | (13         | )          | (65               | )          | NM |   |
|                                                                                              |       | **8,728**            | ** ** | **7,970**   | ** ** | **758**           | ** ** | 9.5 | % |
|                                                                                              |       | **$**                | **61,027** | ** **  | **$**      | **85,729**        | ** ** | **$** | **(24,702** | **)** | (28.8 | %) |

 

----

NM = Not meaningful

 

Net interest expensedecreased $24.7 million, or 28.8%, to $61.0 million for the six months endedJuly 2, 2005 as compared to $85.7 million for the same prior year period.  The decrease was the result of our new debtstructure at lower interest rates upon the consummation of the 2004Transactions.

 

***IncomeTaxes***

Consistentwith the provisions of APB 28, *InterimFinancial Reporting*, we have provided an income tax provision basedon our best estimate of the consolidated effective tax rate applicable for theentire year.  Based on those estimates,for the six months ended July 2, 2005, we provided an income tax provisionat a consolidated effective rate of 41.4% and 40.5% for Holdings and Visant,respectively.  The annual effective taxrate does not include any anticipated benefit attributable to the dividendrepatriation provisions under the American Jobs Creation Act of 2004.  Due to the complexity of the calculations, weanticipate that our analysis of the tax benefit of repatriation will becompleted by the fourth quarter of 2005 and that the effect on the Company’seffective annual rate will be recorded at that time.  However, our preliminary evaluationanticipates that the benefit of the repatriation would result in an effectivetax rate for the year between 39% and 40%.

 

For the comparablesix-month period ended July 3, 2004, the effective income tax rate forHoldings and Visant was 65.1% and 31.3%, respectively.  These tax rates reflect the combined effectof separately reported effective tax rates for Holdings and our acquiredcompanies prior to the 2004 Transactions. Accordingly, these tax rates are not intended to reflect a combinedeffective tax rate that would have been reported if the 2004 Transactions hadoccurred at the beginning of the 2004 fiscal period.

 

The consolidatedeffective tax rates have remained the same for the six month period ended July2, 2005 as they were for the three month period ended April 2, 2005, sincethere have not been any significant events that would warrant a change in rate.

 

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***Net Income***

As a result of theaforementioned items, net income increased $38.9 million, or 944.1%, to $43.0million for the three months ended July 2, 2005 from $4.1 million for the sameprior year period.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The following tablepresents cash flow activity of Holdings for the six months of fiscal 2005 and2004 and should be read in conjunction with our condensed consolidatedstatements of cash flows.

 
| ** **                                 | ** ** | **Six months ended** | ** **  |
|--------------------------------------------|------------|----------------------|-------------|
| ** **                                 | ** ** | **July 2,**          | ** **  | **July 3,** | ** ** |
| **In thousands**                           | ** ** | **2005**             | ** **  | **2004** | ** ** |
| Net cash  provided by operating activities |       | $                    | 54,765      |   | $ | 47,035 |   |
| Net cash used in  investing activities     |       | (30,093              | )           | (14,066 | ) |
| Net cash used in  financing activities     |       | (97,094              | )           | (49,794 | ) |
| Effect of  exchange rate change on cash    |       | 5                    |        | (62 | ) |
| Net change in  cash and cash equivalents   |       | **$**                | **(72,417** | **)** | **$** | **(16,887** | **)** |

 

Forthe six months ended July 2, 2005, operating activities generated cash of $54.8million compared with $47.0 million for the same prior year period.  The $7.7 million increase related toincreased earnings and lower cash paid for interest for the six months ended2005 compared to 2004.  Net cash used ininvesting activities for the six months ended July 2, 2005 was $30.1 million,compared with $14.1 million for the comparable 2004 period.  The $16.0 million increase related toadditional capital expenditures of $11.4 million in the current year as well asreduced proceeds from assets sales in 2005 compared to 2004.  Capital expenditures for the six months endedJuly 2, 2005 totaled $30.6 million.  Netcash used in financing activities for the six months ended July 2, 2005 was$97.1 million, an increase of $47.3 million, compared with $49.8 million for2004.  The increase related to higherdebt repayments for the six month period of 2005 compared to the prior year.

 

Forthe six months ended July 2, 2005, Visant voluntarily prepaid $103.5 million ofscheduled payments under its bank term loan facilities including all principalpayments due in 2005 through most of 2009.

 

Duringthe quarter ended July 2, 2005, Holdings contributed $9.0 million in cash toVisant which is reflected in Visant’s condensed consolidated statement of cashflows as a contribution from Holdings. These amounts eliminate in consolidation and have no impact on Holdingsconsolidated financial statements.

 

As of July 2,2005, we had cash and cash equivalents of $12.5 million.  Our principal sources of liquidity are cashflows from operating activities and borrowings under Visant’s senior securedcredit facilities, which included $225.2 million available under Visant’srevolving credit facility as of July 2, 2005. We use cash primarily for debt service obligations, capital expendituresand to fund working capital requirements. We intend to fund ongoing operations through cash generated byoperations and borrowings under the revolving credit facility.

 

Based upon the currentlevel of operations, we believe that cash flow from operations, available cashand short-term investments, together with borrowings available under Visant’ssenior secured credit facilities, are adequate to meet our future liquidityneeds for the next twelve months.

 

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

#### ** **

There havebeen no material changes in our exposure to market risk during the quarterended July 2, 2005.  For additionalinformation, refer to Item 7A of our 2004 Form 10-K.

 

#### **ITEM 4.**     CONTROLS AND PROCEDURES

#### ** **

As of the end of theperiod covered by this report, management, under the supervision of our ChiefExecutive Officer and Vice President, Finance, evaluated the effectiveness ofthe design and operation of the Company’s disclosure controls and proceduresthat are designed to ensure that information that is required to be disclosedin our quarterly report is recorded, processed and summarized within timeperiods specified in the Securities and Exchange Commission’s rules andregulations and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Vice President, Finance,as appropriate to allow timely decisions regarding required disclosures.  Any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achievingthe desired control objectives.  Basedupon that evaluation, our Chief Executive Officer and Vice President, Financeconcluded that these disclosure controls and procedures are effective, in allmaterial respects, in timely alerting them to material information relating tothe Company required to be included in our periodic reports filed under theSecurities Exchange Act of 1934, as amended.

 

During the Company’sfiscal quarter ended July 2, 2005, there were no changes in the Company’sinternal controls over financial reporting in connection with the abovedescribed evaluation that materially affected, or are reasonably likely tomaterially affect, these controls.

 

**PART II.****  OTHER INFORMATION**

 

#### **ITEM1.**  LEGAL PROCEEDINGS

 

On February 11,2004, plaintiff Christian Pocino filed a complaint against Jostens in theSuperior Court of California for the County of Los Angeles for alleged breachof express warranty (Cal. Comm. Code Section 2313), and for allegedviolation of California’s false advertising and unfair competition laws (Cal.Bus. & Prof. Code Sections 17500 and 17200).  Plaintiff alleged that Jostens violated theselaws by purportedly violating Federal Trade Commission “guides” with regard tothe marketing and sale of jewelry. Specifically, plaintiff contended that: (1) Jostens failed tocomply with the FTC guide that every use of the word “stone” be immediatelypreceded by the word “imitation”, “synthetic” or a similar term; and(2) Jostens failed to comply with a separate FTC guide relating to use ofthe word silver in connection with Jostens’ SilverElite® with platinumalloy.  Plaintiff sought equitable reliefand unspecified monetary damages on behalf of himself and a purported class ofsimilarly-situated consumers.

 

Jostens brought ademurrer and motion to strike the plaintiff’s complaint on June 25, 2004,challenging the legal sufficiency of plaintiff’s allegations on the basis,inter alia, that the FTC guides are nonbinding and that plaintiff’s allegationsgenerally failed to state a claim on 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 an amended complaint which contained substantially the sameallegations regarding “stones” while dropping the claims regarding SilverElite®with platinum.  On September 29,2004, Jostens filed another demurrer/motion to strike, challenging the legalsufficiency of plaintiff’s amended complaint. On November 24, 2004, the Superior Court again sustained Jostens’demurrer with leave to amend.  Theplaintiff filed a second amended complaint dated December 16, 2004.  The court dismissed the action on January 26,2005.  The plaintiff has appealed thecourt’s decision.  It is anticipated thatthe appeal will be fully briefed by the fourth quarter of 2005 and thatarguments will occur thereafter.

 

In communications withU.S. Customs and Border Protection (“Customs”), the Company learned of analleged inaccuracy of the tariff classification for certain of Jostens’ importsfrom Mexico.  Jostens promptly filed with

 

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Customs a voluntarydisclosure to limit its monetary exposure.  The effect of these alleged tariffclassification errors is that back duties and fees (or “loss of revenue”) maybe owed on imports dating back five years. Additionally, Customs may impose interest on the loss of revenue.  No formal notice of, or demand for, anyalleged loss of revenue has yet been issued by Customs.  A review of Jostens’ import practices hasrevealed 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 that Jostens committed a technical oversight inclaiming the preferential tariff treatment. Through its prior disclosure to Customs, Jostens has addressed thistechnical oversight and asserted that the merchandise did in fact qualify forduty-free tariff treatment under NAFTA and that there is no associated loss ofrevenue.  Jostens is in the early stagesof administrative 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 vigorously defend its position and has recorded no accrualfor any potential liability.  However, wecannot assure you that Jostens will be successful in its defense or that thedisposition of this matter will not have a material effect on our business,financial condition and results of operations.

 

Weare also a party to other litigation arising in the normal course ofbusiness.  We regularly analyze currentinformation and, as necessary, provide accruals for probable liabilities on theeventual disposition of these matters. We believe the effect on our business, financial condition and resultsof operations, if any, for the disposition of these matters will not bematerial, however, there can be no assurance in this regard.

 

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

#### ** **

Our equity securities arenot registered pursuant to Section 12 of the Exchange Act.  For the quarter ended July 2, 2005, we didnot issue or sell securities pursuant to offerings that were not registeredunder the Securities Act of 1933, as amended (the “Securities Act”), exceptthat on May 5, 2005 Holdings issued to certain members of management anaggregate of 28,354 options to purchase Class A Common Stock with an exerciseprice of $96.10401 per share, in an offering and sale made under Regulation Dof the Securities Act of 1933, as amended.

 

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

#### ** **

None

 

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

#### ** **

None

 

#### **ITEM5.**  OTHER INFORMATION

#### ** **

None

 

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#### **ITEM6.**  EXHIBITS

#### ** **

**(a)****          **Exhibits

 

31.1         Certificationof Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002

 

31.2         Certification of Vice President, Financepursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1         Certification of Chief Executive Officerpursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2         Certificationof Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of2002

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 
| ** **            | **VISANT HOLDING CORP.**      | ** ** |
|-----------------------|-------------------------------|------------|
| ** **            | **VISANT CORPORATION**        | ** ** |
|                  |                          |       |
|                  |                          |       |
| Date: August 16, 2005 | /s/ Marc L. Reisch            |       |
|                  | Marc L. Reisch                |       |
| * *              | *President  and*              | * *   |
| * *              | *Chief  Executive Officer*    | * *   |
|                  |                          |       |
|                  |                          |       |
| Date: August 16, 2005 | /s/ Paul B.  Carousso         |       |
|                  | Paul B. Carousso              |       |
| * *              | *Vice  President, Finance*    | * *   |
| * *              | *(Chief  Accounting Officer)* | * *   |

 

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