**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington,D.C. 20549

**FORM 10-Q**

**(Mark One)**

| **x**      |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|--------|-----------------------------------------------------------------------------------------------|
| ** ** |   | ** **                                                                                    |
| ** ** |   | **For the quarterly period ended June 30, 2007**                                              |
| ** ** |   | ** **                                                                                    |
| ** ** |   | **or**                                                                                        |
| ** ** |   | ** **                                                                                    |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom              to              **

| **Commission  File Number** | ** ** | **Registrant,  State of Incorporation,  Address of Principal Executive Offices and Telephone Number** | ** ** | **I.R.S.  Employer  Identification  No.** |
|-----------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|
|                        |       |                                                                                                  |       |                                      |
| **333-112055**              |       | **VISANT  HOLDING CORP.**                                                                             |       | **90-0207875**                            |
|                        |       | (Incorporated in  Delaware)                                                                           |       |                                      |
|                        |       | **357  Main Street**                                                                                  |       | ** **                                |
|                        |       | **Armonk,  New York 10504**                                                                           |       | ** **                                |
|                        |       | Telephone:  **(914) 595-8200**                                                                   |       |                                      |
|                        |       |                                                                                                  |       |                                      |
| **333-120386**              |       | **VISANT  CORPORATION**                                                                               |       | **90-0207604**                            |
|                        |       | (Incorporated in  Delaware)                                                                           |       |                                      |
|                        |       |                                                                                                  |       |                                      |
|                        |       | **357  Main Street**                                                                                  |       | ** **                                |
|                        |       | **Armonk,  New York 10504**                                                                           |       | ** **                                |
|                        |       | Telephone:**(914) 595-8200**                                                                          |       |                                      |

 

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

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

Large accelerated filer  o    Acceleratedfiler  o    Non-acceleratedfiler  x

Indicate by check mark whether any of the registrantsis a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o   No  x

As of August 6, 2007, therewere 5,976,659 shares of Class A Common Stock, par value $.01 per share,and one share of Class C Common Stock, par value $.01 per share, of VisantHolding Corp. outstanding and 1,000 shares of common stock, par value $.01 pershare, of Visant Corporation outstanding (all of which are owned beneficiallyby Visant Holding Corp.).

Visant Corporation meets the conditions set forth in General Instruction(H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with thereduced disclosure format specified in General Instruction (H)(2) to Form 10-Q.

**FILINGFORMAT**

This Quarterly Report on Form 10-Q is a combined report being filedseparately by two registrants: Visant Holding Corp. (“Holdings”) and VisantCorporation, a wholly owned subsidiary of Holdings (“Visant”). Unless thecontext indicates otherwise, any reference in this report to the “Company”, “we”,“our”, “us” or “Holdings” refers to Visant Holding Corp., together with VisantCorporation and its consolidated subsidiaries.

 

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**TABLE OFCONTENTS**
|            | ** ** | ** **                                                                                                           | ** ** | **Page** |
|------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|----------|
|       |       | **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 June  30, 2007 and July 1, 2006. |       | 1        |
|       |       |                                                                                                                 |       |     |
|       |       | Condensed  Consolidated Balance Sheets as of June 30, 2007 and December 30, 2006                                     |       | 2        |
|       |       |                                                                                                                 |       |     |
|       |       | Condensed  Consolidated Statements of Cash Flows for the six months ended June 30, 2007  and July 1, 2006.           |       | 3        |
|       |       |                                                                                                                 |       |     |
|       | ** ** | **Visant Corporation and subsidiaries:**                                                                             |       |     |
|       |       |                                                                                                                 |       |     |
|       |       | Condensed  Consolidated Statements of Operations for the three and six months ended June  30, 2007 and July 1, 2006. |       | 4        |
|       |       |                                                                                                                 |       |     |
|       |       | Condensed  Consolidated Balance Sheets as of June 30, 2007 and December 30, 2006                                     |       | 5        |
|       |       |                                                                                                                 |       |     |
|       |       | Condensed  Consolidated Statements of Cash Flows for the six months ended June 30, 2007  and July 1, 2006.           |       | 6        |
|       |       |                                                                                                                 |       |     |
|       |       | Notes to  Condensed Consolidated Financial Statements                                                                |       | 7        |
|       |       |                                                                                                                 |       |     |
| ITEM 2.    |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                          |       | 30       |
|       |       |                                                                                                                 |       |     |
| ITEM 3.    |       | Quantitative  and Qualitative Disclosures About Market Risk                                                          |       | 41       |
|       |       |                                                                                                                 |       |     |
| ITEM 4.    |       | Controls and  Procedures                                                                                             |       | 41       |
|       |       |                                                                                                                 |       |     |
| ITEM 4T.   |       | Controls and  Procedures                                                                                             |       | 41       |
|       |       |                                                                                                                 |       |     |
|       | ** ** | **PART II – OTHER  INFORMATION**                                                                                |       |     |
|       | ** ** | ** **                                                                                                           |       |     |
| ITEM 1.    |       | Legal Proceedings                                                                                                    |       | 41       |
|       |       |                                                                                                                 |       |     |
| ITEM  1A.  |       | Risk  Factors                                                                                                        |       | 41       |
|       |       |                                                                                                                 |       |     |
| ITEM 2.    |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                                         |       | 42       |
|       |       |                                                                                                                 |       |     |
| ITEM 3.    |       | Defaults  Upon Senior Securities                                                                                     |       | 42       |
|       |       |                                                                                                                 |       |     |
| ITEM 4.    |       | Submission  of Matters to a Vote of Security Holders                                                                 |       | 42       |
|       |       |                                                                                                                 |       |     |
| ITEM 5.    |       | Other Information                                                                                                    |       | 42       |
|       |       |                                                                                                                 |       |     |
| ITEM  6.   |       | Exhibits                                                                                                             |       | 42       |
|       |       |                                                                                                                 |       |     |
| Signatures |       | 44                                                                                                                   |

 

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##### **PART I.   FINANCIAL INFORMATION**

###### **ITEM1.  FINANCIAL STATEMENTS**

**VISANT HOLDING CORP. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)**
| ** **                                       | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                       | ** ** | **June 30,**                | ** **  | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                            | ** ** | **2007**                         | ** **  | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Net sales**                                    | ** ** | **$**                            | **501,466** | ** **                     | **$**      | **469,492** | ** ** | **$** | **757,316** | ** ** | **$** | **697,478** | ** ** |
| Cost of products sold                            |       | 217,776                          |        | 211,792                        |       | 345,846 |   | 322,580 |   |
| **Gross  profit**                                | ** ** | **283,690**                      | ** **  | **257,700**                    | ** ** | **411,470** | ** ** | **374,898** | ** ** |
| Selling and  administrative expenses             |       | 129,400                          |        | 121,610                        |       | 233,142 |   | 213,555 |   |
| Loss (gain) on disposal  of fixed assets         |       | 229                              |        | (828                           | )          | 620 |   | (853 | ) |
| Special charges                                  |       | (41                              | )           | (150                           | )          | (41 | ) | 2,594 |   |
| **Operating  income**                            | ** ** | **154,102**                      | ** **  | **137,068**                    | ** ** | **177,749** | ** ** | **159,602** | ** ** |
| Interest expense, net                            |       | 42,694                           |        | 37,418                         |       | 81,202 |   | 68,396 |   |
| Income before income  taxes                      | ** ** | **111,408**                      | ** **  | **99,650**                     | ** ** | **96,547** | ** ** | **91,206** | ** ** |
| Provision for income  taxes                      |       | 41,436                           |        | 40,106                         |       | 36,187 |   | 36,040 |   |
| **Income  from continuing operations**           | ** ** | **69,972**                       | ** **  | **59,544**                     | ** ** | **60,360** | ** ** | **55,166** | ** ** |
| Income from  discontinued operations, net of tax |       | 102,529                          |        | 2,220                          |       | 110,902 |   | 5,462 |   |
| **Net income**                                   | ** ** | **$**                            | **172,501** | ** **                     | **$**      | **61,764** | ** ** | **$** | **171,262** | ** ** | **$** | **60,628** | ** ** |

 

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

1

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**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCESHEETS (UNAUDITED)**
| ** **                                                                                                                             | ** ** | **June 30,** | ** **    | **December 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-----------------------|------------|
| **In thousands, except share amounts**                                                                             | ** ** | **2007**          | ** **    | **2006**              | ** ** |
| **ASSETS**                                                                                                                             | ** ** | ** **        | ** **    | ** **            | ** ** |
| Cash and cash  equivalents                                                                                                             |       | $                 | 36,839        |                  | $          | 18,778 |   |
| Accounts receivable,  net                                                                                                              |       | 156,719           |          | 144,681               |       |
| Inventories, net                                                                                                                       |       | 82,534            |          | 105,333               |       |
| Salespersons  overdrafts, net of allowance of $10,219 and $13,165, respectively                                                        |       | 15,674            |          | 27,292                |       |
| Prepaid expenses and  other current assets                                                                                             |       | 13,149            |          | 19,791                |       |
| Income tax receivable                                                                                                                  |       | —            |          | 10,311                |       |
| Deferred income taxes                                                                                                                  |       | 12,330            |          | 11,850                |       |
| Current assets of  discontinued operations                                                                                             |       | —            |          | 56,649                |       |
| **Total  current assets**                                                                                                              | ** ** | **317,245**       | ** **    | **394,685**           | ** ** |
| Property, plant and  equipment                                                                                                         |       | 341,264           |          | 305,703               |       |
| Less accumulated  depreciation                                                                                                         |       | (160,519          | )             | (145,122              | )          |
| Property, plant  and equipment, net                                                                                                    |       | 180,745           |          | 160,581               |       |
| Goodwill                                                                                                                               |       | 932,909           |          | 919,638               |       |
| Intangibles, net                                                                                                                       |       | 534,254           |          | 530,669               |       |
| Deferred financing costs,  net                                                                                                         |       | 36,334            |          | 48,782                |       |
| Other assets                                                                                                                           |       | 12,842            |          | 13,181                |       |
| Long-term assets of  discontinued operations                                                                                           |       | —            |          | 265,519               |       |
| **Total  assets**                                                                                                                      | ** ** | **$**             | **2,014,329** | ** **            | **$**      | **2,333,055** | ** ** |
|                                                                                                                                   |       |              |          |                  |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                                               | ** ** | ** **        | ** **    | ** **            | ** ** |
| Accounts payable                                                                                                                       |       | $                 | 44,811        |                  | $          | 56,436 |   |
| Accrued employee  compensation and related taxes                                                                                       |       | 32,120            |          | 41,256                |       |
| Commissions payable                                                                                                                    |       | 49,541            |          | 21,671                |       |
| Customer deposits                                                                                                                      |       | 63,775            |          | 171,258               |       |
| Income taxes payable                                                                                                                   |       | 37,596            |          | —                |       |
| Interest payable                                                                                                                       |       | 12,230            |          | 13,227                |       |
| Other accrued  liabilities                                                                                                             |       | 27,454            |          | 23,637                |       |
| Current liabilities of  discontinued operations                                                                                        |       | 9,520             |          | 34,849                |       |
| **Total  current liabilities**                                                                                                         | ** ** | **277,047**       | ** **    | **362,334**           | ** ** |
|                                                                                                                                   |       |              |          |                  |       |
| Long-term debt                                                                                                                         |       | 1,381,114         |          | 1,770,657             |       |
| Deferred income taxes                                                                                                                  |       | 167,684           |          | 175,200               |       |
| Pension liabilities,  net                                                                                                              |       | 19,077            |          | 21,484                |       |
| Other noncurrent  liabilities                                                                                                          |       | 33,257            |          | 33,356                |       |
| Long-term liabilities  of discontinued operations                                                                                      |       | —            |          | 6,696                 |       |
| **Total  liabilities**                                                                                                                 | ** ** | **1,878,179**     | ** **    | **2,369,727**         | ** ** |
| ** **                                                                                                                             | ** ** | ** **        | ** **    | ** **            | ** ** |
| Mezzanine equity                                                                                                                       |       | 9,792             |          | 9,717                 |       |
|                                                                                                                                   |       |              |          |                  |       |
| Common stock:                                                                                                                          |       |              |          |                  |       |
| Class A $.01 par  value; authorized 7,000,000 shares; issued and outstanding: 5,976,659 at June  30, 2007 and December 30, 2006        |       |              |          |                  |       |
| Class B $.01 par  value; non-voting; authorized 2,724,759 shares; issued and outstanding: none  at June 30, 2007 and December 30, 2006 |       |              |          |                  |       |
| Class C $.01 par  value; authorized 1 share; issued and outstanding: 1 share at June 30, 2007 and  December 30, 2006                   |       | 60                |          | 60                    |       |
| Additional  paid-in-capital                                                                                                            |       | 175,608           |          | 175,427               |       |
| Accumulated deficit                                                                                                                    |       | (50,252           | )             | (222,993              | )          |
| Accumulated other  comprehensive income                                                                                                |       | 942               |          | 1,117                 |       |
| **Total  stockholders’ equity (deficit)**                                                                                         | ** ** | **126,358**       | ** **    | **(46,389**           | **)**      |
| **Total liabilities and  stockholders’ equity (deficit)**                                                                         | ** ** | **$**             | **2,014,329** | ** **            | **$**      | **2,333,055** | ** ** |

 

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

2

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**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**
| ** **                                                                         | ** ** | **Six months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** |
| **In thousands**                                                              | ** ** | **2007**                       | ** ** | **2006** | ** ** |
|                                                                               |       |                           |       |   |   |
| Net income                                                                         |       | $                              | 171,262    |   | $ | 60,628 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                           |       |   |   |
| Income from discontinued operations                                                |       | (110,902                       | )          | (5,462 | ) |
| Depreciation                                                                       |       | 17,779                         |       | 14,942 |   |
| Amortization of intangible assets                                                  |       | 24,058                         |       | 25,609 |   |
| Amortization of debt discount, premium and deferred  financing costs               |       | 22,931                         |       | 13,903 |   |
| Other amortization                                                                 |       | 335                            |       | 402 |   |
| Deferred income taxes                                                              |       | (12,685                        | )          | (12,271 | ) |
| Loss (gain) on sale of assets                                                      |       | 620                            |       | (853 | ) |
| Stock-based compensation                                                           |       | 254                            |       | 88 |   |
| Loss on asset impairments                                                          |       | —                         |       | 2,341 |   |
| Changes in assets and liabilities:                                                 |       |                           |       |   |   |
| Accounts receivable                                                                |       | (4,665                         | )          | (19,436 | ) |
| Inventories                                                                        |       | 28,443                         |       | 23,076 |   |
| Salespersons overdrafts                                                            |       | 11,736                         |       | 14,469 |   |
| Prepaid expenses and other current assets                                          |       | 7,163                          |       | 3,052 |   |
| Accounts payable and accrued expenses                                              |       | (21,391                        | )          | 7,504 |   |
| Customer deposits                                                                  |       | (108,116                       | )          | (99,703 | ) |
| Commissions payable                                                                |       | 27,297                         |       | 23,902 |   |
| Income taxes payable/ receivable                                                   |       | 47,907                         |       | 43,219 |   |
| Interest payable                                                                   |       | (997                           | )          | 2,655 |   |
| Other                                                                              |       | 2,228                          |       | 938 |   |
| **Net cash provided by operating activities of  continuing operations**            |       | 103,257                        |       | 99,003 |   |
| **Net cash provided by operating activities of  discontinued operations**          |       | 4,588                          |       | 2,036 |   |
| **Net cash provided by operating activities**                                      | ** ** | **107,845**                    | ** ** | **101,039** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (36,002                        | )          | (23,624 | ) |
| Proceeds from  sale of property and equipment                                      |       | 1,491                          |       | 1,299 |   |
| Acquisition of  businesses, net of cash acquired                                   |       | (51,749                        | )          | (13,590 | ) |
| Proceeds from  sale of business                                                    |       | 401,781                        |       | 64,092 |   |
| Other investing  activities, net                                                   |       | (8                             | )          | 9 |   |
| **Net cash provided by investing activities of  continuing operations**            |       | 315,513                        |       | 28,186 |   |
| **Net cash used in investing activities of  discontinued operations**              |       | (5,691                         | )          | (11,534 | ) |
| **Net cash provided by investing activities**                                      | ** ** | **309,822**                    | ** ** | **16,652** | ** ** |
| Principal  payments on long-term debt                                              |       | (400,000                       | )          | — |   |
| Proceeds from  issuance of long-term debt                                          |       | —                         |       | 350,000 |   |
| Distribution to  shareholders                                                      |       | —                         |       | (340,700 | ) |
| Debt financing  costs                                                              |       | —                         |       | (9,300 | ) |
| **Net cash used in financing activities of  continuing operations**                |       | (400,000                       | )          | — |   |
| **Net cash used in financing activities of  discontinued operations**              |       | —                         |       | — |   |
| **Net cash used in financing activities**                                          | ** ** | **(400,000**                   | **)**      | **—** | ** ** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 394                            |       | 91 |   |
| Increase in cash  and cash equivalents                                             |       | 18,061                         |       | 117,782 |   |
| Cash and cash  equivalents, beginning of period                                    |       | 18,778                         |       | 20,706 |   |
| **Cash and cash equivalents, end  of period**                                      | ** ** | **$**                          | **36,839** | ** ** | **$** | **138,488** | ** ** |

 

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

3

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**VISANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**
| ** **                                       | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|--------------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                       | ** ** | **June 30,**                | ** **  | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                            | ** ** | **2007**                         | ** **  | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Net  sales**                                   | ** ** | **$**                            | **501,466** | ** **                     | **$**      | **469,492** | ** ** | **$** | **757,316** | ** ** | **$** | **697,478** | ** ** |
| Cost of products  sold                           |       | 217,776                          |        | 211,792                        |       | 345,846 |   | 322,580 |   |
| **Gross profit**                                 | ** ** | **283,690**                      | ** **  | **257,700**                    | ** ** | **411,470** | ** ** | **374,898** | ** ** |
| Selling and  administrative expenses             |       | 129,204                          |        | 121,526                        |       | 232,761 |   | 213,392 |   |
| Loss (gain) on  disposal of fixed assets         |       | 229                              |        | (828                           | )          | 620 |   | (853 | ) |
| Special charges                                  |       | (41                              | )           | (150                           | )          | (41 | ) | 2,594 |   |
| **Operating income**                             | ** ** | **154,298**                      | ** **  | **137,152**                    | ** ** | **178,130** | ** ** | **159,765** | ** ** |
| Interest  expense, net                           |       | 29,333                           |        | 24,750                         |       | 54,568 |   | 50,920 |   |
| Income before  income taxes                      | ** ** | **124,965**                      | ** **  | **112,402**                    | ** ** | **123,562** | ** ** | **108,845** | ** ** |
| Provision for  income taxes                      |       | 46,160                           |        | 43,898                         |       | 45,866 |   | 41,828 |   |
| **Income from continuing operations**            | ** ** | **78,805**                       | ** **  | **68,504**                     | ** ** | **77,696** | ** ** | **67,017** | ** ** |
| Income from  discontinued operations, net of tax |       | 102,529                          |        | 2,220                          |       | 110,902 |   | 5,462 |   |
| **Net  income**                                  | ** ** | **$**                            | **181,334** | ** **                     | **$**      | **70,724** | ** ** | **$** | **188,598** | ** ** | **$** | **72,479** | ** ** |

 

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

4

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**VISANTCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**
| ** **                                                                                                                                     | ** ** | **June 30,** | ** **    | **December 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-----------------------|------------|
| **In thousands, except share amounts**                                                                                     | ** ** | **2007**          | ** **    | **2006**              | ** ** |
| **ASSETS**                                                                                                                                     | ** ** | ** **        | ** **    | ** **            | ** ** |
| Cash and cash  equivalents                                                                                                                     |       | $                 | 36,023        |                  | $          | 18,043 |   |
| Accounts  receivable, net                                                                                                                      |       | 156,719           |          | 144,681               |       |
| Inventories, net                                                                                                                               |       | 82,534            |          | 105,333               |       |
| Salespersons  overdrafts, net of allowance of $10,219 and $13,165, respectively                                                                |       | 15,674            |          | 27,292                |       |
| Prepaid expenses  and other current assets                                                                                                     |       | 13,420            |          | 20,309                |       |
| Income tax  receivable                                                                                                                         |       | —            |          | 1,097                 |       |
| Deferred income  taxes                                                                                                                         |       | 12,330            |          | 11,850                |       |
| Current assets  of discontinued operations                                                                                                     |       | —            |          | 56,649                |       |
| **Total current assets**                                                                                                                       | ** ** | **316,700**       | ** **    | **385,254**           | ** ** |
| Property, plant  and equipment                                                                                                                 |       | 341,264           |          | 305,703               |       |
| Less accumulated  depreciation                                                                                                                 |       | (160,519          | )             | (145,122              | )          |
| Property, plant and equipment, net                                                                                                             |       | 180,745           |          | 160,581               |       |
| Goodwill                                                                                                                                       |       | 932,909           |          | 919,638               |       |
| Intangibles, net                                                                                                                               |       | 534,254           |          | 530,669               |       |
| Deferred  financing costs, net                                                                                                                 |       | 24,018            |          | 35,557                |       |
| Other assets                                                                                                                                   |       | 12,842            |          | 13,181                |       |
| Long-term assets  of discontinued operations                                                                                                   |       | —            |          | 265,519               |       |
| **Total assets**                                                                                                                               | ** ** | **$**             | **2,001,468** | ** **            | **$**      | **2,310,399** | ** ** |
|                                                                                                                                           |       |              |          |                  |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**                                                                                                  | ** ** | ** **        | ** **    | ** **            | ** ** |
| Accounts payable                                                                                                                               |       | $                 | 44,811        |                  | $          | 56,436 |   |
| Accrued employee  compensation and related taxes                                                                                               |       | 32,120            |          | 41,256                |       |
| Commissions  payable                                                                                                                           |       | 49,541            |          | 21,671                |       |
| Customer  deposits                                                                                                                             |       | 63,775            |          | 171,258               |       |
| Income taxes  payable                                                                                                                          |       | 39,484            |          | —                |       |
| Interest payable                                                                                                                               |       | 9,695             |          | 10,650                |       |
| Other accrued  liabilities                                                                                                                     |       | 27,454            |          | 23,637                |       |
| Current liabilities  of discontinued operations                                                                                                |       | 9,520             |          | 34,849                |       |
| **Total current liabilities**                                                                                                                  | ** ** | **276,400**       | ** **    | **359,757**           | ** ** |
|                                                                                                                                           |       |              |          |                  |       |
| Long-term debt                                                                                                                                 |       | 816,500           |          | 1,216,500             |       |
| Deferred income  taxes                                                                                                                         |       | 191,202           |          | 194,925               |       |
| Pension  liabilities, net                                                                                                                      |       | 19,077            |          | 21,484                |       |
| Other noncurrent  liabilities                                                                                                                  |       | 33,257            |          | 33,356                |       |
| Long-term  liabilities of discontinued operations                                                                                              |       | —            |          | 6,696                 |       |
| **Total liabilities**                                                                                                                          | ** ** | **1,336,436**     | ** **    | **1,832,718**         | ** ** |
| ** **                                                                                                                                     | ** ** | ** **        | ** **    | ** **            | ** ** |
| Preferred stock  $.01 par value; authorized 300,000 shares; none issued and outstanding at  June 30, 2007 and December 30, 2006, respectively. |       | —            |          | —                |       |
| Common stock  $.01 par value; authorized 1,000 shares; 1,000 shares issued and outstanding  at June 30, 2007 and December 30, 2006             |       | —            |          | —                |       |
| Additional  paid-in-capital                                                                                                                    |       | 646,048           |          | 648,599               |       |
| Retained  earnings (accumulated deficit)                                                                                                       |       | 18,042            |          | (172,035              | )          |
| Accumulated  other comprehensive income                                                                                                        |       | 942               |          | 1,117                 |       |
| **Total stockholder’s equity**                                                                                                            | ** ** | **665,032**       | ** **    | **477,681**           | ** ** |
| **Total  liabilities and stockholder’s equity**                                                                                           | ** ** | **$**             | **2,001,468** | ** **            | **$**      | **2,310,399** | ** ** |

 

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

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**VISANT CORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**
| ** **                                                                         | ** ** | **Six months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** |
| **In thousands**                                                              | ** ** | **2007**                       | ** ** | **2006** | ** ** |
|                                                                               |       |                           |       |   |   |
| Net income                                                                         |       | $                              | 188,598    |   | $ | 72,479 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                           |       |   |   |
| Income from discontinued operations                                                |       | (110,902                       | )          | (5,462 | ) |
| Depreciation                                                                       |       | 17,779                         |       | 14,942 |   |
| Amortization of intangible assets                                                  |       | 24,058                         |       | 25,609 |   |
| Amortization of debt discount, premium and deferred  financing costs               |       | 11,565                         |       | 3,888 |   |
| Other amortization                                                                 |       | 335                            |       | 402 |   |
| Deferred income taxes                                                              |       | (8,892                         | )          | (8,770 | ) |
| Loss (gain) on sale of assets                                                      |       | 620                            |       | (853 | ) |
| Loss on asset impairments                                                          |       | —                         |       | 2,341 |   |
| Changes in assets and liabilities:                                                 |       |                           |       |   |   |
| Accounts receivable                                                                |       | (4,665                         | )          | (19,436 | ) |
| Inventories                                                                        |       | 28,443                         |       | 23,076 |   |
| Salespersons overdrafts                                                            |       | 11,736                         |       | 14,469 |   |
| Prepaid expenses and other current assets                                          |       | 7,163                          |       | 3,052 |   |
| Accounts payable and accrued expenses                                              |       | (21,391                        | )          | 6,880 |   |
| Customer deposits                                                                  |       | (108,116                       | )          | (99,703 | ) |
| Commissions payable                                                                |       | 27,297                         |       | 23,902 |   |
| Income taxes payable/ receivable                                                   |       | 40,581                         |       | 45,506 |   |
| Interest payable                                                                   |       | (955                           | )          | 36 |   |
| Other                                                                              |       | 2,474                          |       | 630 |   |
| **Net cash provided by operating activities of  continuing operations**            |       | 105,728                        |       | 102,988 |   |
| **Net cash provided by operating activities of  discontinued operations**          |       | 4,588                          |       | 2,036 |   |
| **Net cash provided by operating activities**                                      | ** ** | **110,316**                    | ** ** | **105,024** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (36,002                        | )          | (23,624 | ) |
| Proceeds from  sale of property and equipment                                      |       | 1,491                          |       | 1,299 |   |
| Acquisition of  business, net of cash acquired                                     |       | (51,749                        | )          | (13,590 | ) |
| Proceeds from  sale of business                                                    |       | 401,781                        |       | 64,092 |   |
| Other investing  activities, net                                                   |       | (8                             | )          | 9 |   |
| **Net cash provided by investing activities of  continuing operations**            |       | 315,513                        |       | 28,186 |   |
| **Net cash used in investing activities of  discontinued operations**              |       | (5,691                         | )          | (11,534 | ) |
| **Net cash provided by investing activities**                                      | ** ** | **309,822**                    | ** ** | **16,652** | ** ** |
| Principal  payments on long-term debt                                              |       | (400,000                       | )          | — |   |
| Distribution to  shareholders                                                      |       | (2,552                         | )          | (4,849 | ) |
| **Net cash used in financing activities of continuing  operations**                |       | (402,552                       | )          | (4,849 | ) |
| **Net cash used in financing activities of  discontinued operations**              |       | —                         |       | — |   |
| **Net cash used in financing activities**                                          | ** ** | **(402,552**                   | **)**      | **(4,849** | **)** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 394                            |       | 91 |   |
| Increase in cash  and cash equivalents                                             |       | 17,980                         |       | 116,918 |   |
| Cash and cash  equivalents, beginning of period                                    |       | 18,043                         |       | 19,874 |   |
| **Cash and cash equivalents, end  of period**                                      | ** ** | **$**                          | **36,023** | ** ** | **$** | **136,792** | ** ** |

 

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

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**VISANT HOLDING CORP.VISANT CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**1.     Overviewand Basis of Presentation**

***Overview***

The Company is amarketing and publishing services enterprise servicing the school affinity,direct marketing, fragrance and cosmetics sampling and educational publishingmarket segments.  The Company was formedthrough the October 2004 consolidation of Jostens, Inc. (“Jostens”), VonHoffmann Holdings Inc. (“Von Hoffmann” including The Lehigh Press, Inc. subsidiary(“Lehigh”)) and AHC I Acquisition Corp. (“Arcade”).  Jostens, Arcade and Lehigh are currentlyintegrated into three reportable segments: Scholastic, Yearbook and Marketing and Publishing Services.  Von Hoffmann was sold in May 2007.

***Basis of Presentation***

Theunaudited condensed consolidated financial statements included herein are thoseof:

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

·                  Visantand its wholly-owned subsidiaries.

Thereare no significant differences between the results of operations and financialcondition of Visant Corporation and those of Visant Holding Corp., other thancertain indebtedness of Holdings. Holdings has 10.25% senior discount notes due 2013, which had anaccreted value of $214.6 million and $204.2 million as of June 30, 2007 andDecember 30, 2006, respectively, and $350.0 million principal amount of 8.75%senior notes due 2013 as of June 30, 2007 and December 30, 2006.

Allintercompany balances and transactions have been eliminated in consolidation.

Theaccompanying unaudited condensed consolidated financial statements of Holdingsand Visant, and their respective subsidiaries, are presented pursuant to therules and regulations of the U.S. Securities and Exchange Commission (the “SEC”)in accordance with disclosure requirements for the quarterly report on Form10-Q.  In the opinion of management, alladjustments (consisting of normal recurring adjustments) considered necessaryfor a fair presentation have been included. Operating results for the interim periods presented are not necessarilyindicative of the results that may be expected for the full year.  These financial statements should be read inconjunction with the consolidated financial statements and footnotes includedin Holdings’ and Visant’s Annual Report on Form 10-K for the fiscal year endedDecember 30, 2006.

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

**2.****              SignificantAccounting Policies**

***Revenue Recognition***

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

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***Cost of Products Sold***

Cost of products sold primarily include the cost ofpaper and other materials, direct and indirect labor and related benefit costs,depreciation of production assets and shipping and handling costs.

***Shipping and Handling***

Net sales include amounts billed to customers forshipping and handling costs. Costs incurred for shipping and handling arerecorded in cost of products sold.

***Selling and Administrative Expenses***

Selling and administrative expenses primarily includesalaries and related benefits of sales and administrative personnel, salescommissions, amortization of intangibles and professional fees such as auditand consulting fees.

***Advertising***

The Company expenses advertising costs asincurred.  Selling and administrativeexpenses included advertising expense of $1.1 million for the quarter endedJune 30, 2007 and $0.9 million for the quarter ended July 1, 2006.  Advertising expense totaled $3.1 million forthe six months ended June 30, 2007 and $2.2 for the six months ended July 1,2006.

***Warranty Costs***

Provisions for warranty costs related to Jostens’scholastic products, particularly class rings due to their lifetime warranty,are recorded based on historical information and current trends inmanufacturing costs.  The provisionrelated to the lifetime warranty is based on the number of rings manufacturedin the prior school year consistent with industry standards. The provision forthe lifetime warranty on rings was less than $0.1 million and $0.1 million forthe quarters ended June 30, 2007 and July 1, 2006, respectively.  For the six months ended June 30, 2007 andJuly 1, 2006, the provision for the warranty was $0.1 million for both periods.  Warranty repair costs for rings manufacturedin the current school year are expensed as incurred. Accrued warranty costsincluded in the condensed consolidated balance sheets were approximately $0.6million for both June 30, 2007 and December 30, 2006.

***Stock-based Compensation***

Effective January1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”)SFAS No. 123R (revised 2004), *Share Based Payment*(“SFAS 123R”), which requires the recognition of compensation expense relatedto all equity awards granted including awards modified, repurchased, orcancelled based on the fair values of the awards at the grant date.  For the three-month periods ended June 30,2007 and July 1, 2006, the Company recognized total compensation expense relatedto stock options of $0.1 million and less than $0.1 million, respectively,which is included in selling, general and administrative expenses.  Stock-based compensation expense totaled $0.3million and $0.1 million for the six-month periods ended June 30, 2007 and July1, 2006, respectively.  Refer to Note 15,*Stock-based Compensation*, for furtherdetails.

***MezzanineEquity***

Certain managementstockholder agreements contain a repurchase feature whereby Holdings isobligated, under certain circumstances such as death and disability (as definedin the agreements), to repurchase the common equity from the holder and settleamounts in cash.  In accordance with SABNo. 107, *Share-Based Payment*, such equityinstruments are considered temporary equity and have been classified asmezzanine equity in the balance sheets as of June 30, 2007 and December 30,2006.

***Recent Accounting Pronouncements***

Effective at thebeginning of fiscal 2007, we adopted FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes* (“FIN 48”), whichclarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with SFAS No. 109, *Accounting for Income Taxes*. FIN 48 requires applying a “more likely than not” threshold to therecognition and derecognition of tax positions. In connection with the adoption of FIN 48, effective at

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the beginning of thefirst quarter of 2007, the Company made a change in accounting principle forthe classification of interest income on tax refunds.  In addition, since the adoption of FIN 48,all interest and penalties on income tax assessments have been recorded asincome tax expense and included as part of the Company’s unrecognized taxbenefit liability.  Refer to Note 13, *Income Taxes,*for further details.

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS No. 157”), which establishes a framework for measuring fair value andrequires enhanced disclosures about fair value measurements. SFAS No. 157requires companies to disclose the fair value of their financial instrumentsaccording to a fair value hierarchy as defined in the standard.  SFAS No. 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. We are currently assessing the impact of SFAS No. 157 on our financialstatements.

In September 2006,the FASB issued SFAS No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans* (“SFAS No.158”)*.* SFAS No. 158 requires: the recognition of the funded status of abenefit plan in the balance sheet; the recognition in other comprehensiveincome of gains or losses and prior service costs or credits arising during theperiod but which are not included as components of periodic benefit cost; the measurementof defined benefit plan assets and obligations as of the balance sheet date;and disclosure of additional information about the effects on periodic benefitcost for the following fiscal year arising from delayed recognition in thecurrent period. In addition, SFAS No. 158 amends SFAS No. 87, *Employers’ Accounting for Pensions*, and SFAS No. 106, *Employers’ Accounting for Postretirement Benefits Other Than Pensions*,to include guidance regarding selection of assumed discount rates for use inmeasuring the benefit obligation.  Thenew guidance will be effective for us for the first fiscal year ending afterJune 15, 2007.  We are currentlyassessing the impact of SFAS No. 158 on our financial statements.

InFebruary 2007, the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities* (“SFASNo. 159”).  SFAS No. 159 permits entitiesto measure many financial assets and financial liabilities at fair value.  Unrealized gains and losses on items forwhich the fair value option has been elected are reported in earnings.  SFAS No. 159 is effective for fiscal yearsbeginning after November 15, 2007.  Weare currently assessing the impact of SFAS No. 159 on our financial statements.

**3.     TheTransactions**

On October 4, 2004, an affiliate of Kohlberg KravisRoberts & Co. L.P. (“KKR”) and affiliates of DLJ Merchant BankingPartners completed a series of transactions which created a marketing andpublishing services enterprise, servicing the school affinity, directmarketing, fragrance and cosmetics sampling and educational publishing marketsegments through the consolidation of Jostens, Von Hoffmann and Arcade (the “Transactions”).

Prior to the Transactions, Von Hoffmann and Arcade were each controlledby affiliates of DLJ Merchant Banking Partners II, L.P. (“DLJMBP II”), and DLJMerchant Banking Partners III, L.P. (“DLJMBP III”) owned approximately 82.5% ofHoldings’ outstanding equity, with the remainder held by other co-investors andcertain members of management.  Uponconsummation of the Transactions, an affiliate of KKR invested$256.1 million and was issued equity interests representing approximately49.6% of the voting interest and 45.0% of the economic interest of Holdings,and affiliates of DLJMBP III held equity interests representing approximately41.0% of the voting interest and 45.0% of the economic interest of Holdings,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 June 30, 2007,affiliates of KKR and DLJMBP III (the “Sponsors”) held approximately 49.0% and41.0%, respectively, of the voting interest of Holdings, while each continuedto hold approximately 44.6% of the economic interest of Holdings.  As of June 30, 2007, the other co-investorsheld approximately 8.4% of the voting interest and 9.1% of the economicinterest of Holdings, and members of management held approximately 1.6% of thevoting interest and approximately 1.7% of the economic interest of Holdings.

**4.     RestructuringActivity and Other Special Charges**

***RestructuringActivity***

Special chargesfor the second quarter and six months ended June 30, 2007 represent a reversalof less than $0.1 million for severance and related benefit costs associatedwith headcount reductions in the Scholastic and Yearbook segments.

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Special chargesfor the second quarter of 2006 represents a net reversal of $0.2 million ofspecial charges.  The Company reduced itsrestructuring accrual by $0.2 million for amounts related to the 2004 closureof Jostens’ Red Wing, Minnesota facility. The Marketing and Publishing Services segment recorded $0.1 million ofseverance costs and related benefits associated with the reduction of threeemployees.

Special chargesfor the six-month period ended July 1, 2006 included $2.3 million relating toan impairment loss to reduce the value of the former Jostens corporate officebuildings, which were later sold, and approximately $0.3 million of specialcharges for severance and related benefit costs.  These special charges included $0.1 millionrelated to Scholastic, less than $0.1 million related to Yearbook, and $0.2million related to the Marketing and Publishing Services segment for severancecosts and related benefits.  Headcountreductions associated with these activities were eight for Scholastic, two forYearbook, and three for Marketing and Publishing Services.

Restructuringaccruals of $0.6 million and $1.4 million as of June 30, 2007 and December 30,2006, respectively, are included in other accrued liabilities in the condensedconsolidated balance sheets.  Theaccruals include amounts provided for severance related to reductions incorporate and administrative employees from the Scholastic, Yearbook andMarketing and Publishing Services segments.

On a cumulativebasis through June 30, 2007, the Company incurred $17.5 million of employeeseverance costs related to initiatives during the period from 2004 to June 30,2007, which affected an aggregate of 254 employees.  As of June 30, 2007, the Company had paid$16.8 million in cash related to these initiatives.

Changes in the restructuring accruals during the first six months of 2007were as follows:
| In thousands             | ** ** | **2006  Initiatives** | ** ** | **2005  Initiatives** | ** ** | **2004  Initiatives** | ** ** | **Total** | ** ** |
|-------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------|------------|
| Balance at  December 30, 2006 |       | $                     | 513        |                  | $          | 111                   |       | $         | 755        |   | $ | 1,379 |   |
| Restructuring charges         |       | (41                   | )          | —                |       | —                |       | (41       | )          |
| Severance paid                |       | (324                  | )          | (72                   | )          | (314                  | )          | (710      | )          |
| Balance at June 30,  2007     | ** ** | **$**                 | **148**    | ** **            | **$**      | **39**                | ** ** | **$**     | **441**    | ** ** | **$** | **628** | ** ** |

 

The Company expects the majority of the remainingseverance related to the 2004, 2005 and 2006 initiatives to be paid during theremainder of 2007.

**5.****              Acquisitions**

On March 16, 2007, the Company acquired all of theoutstanding capital stock of Neff Holding Company and its wholly owned subsidiaryNeff Motivation, Inc. (“Neff”) for approximately $30.5 million in cash,including cash on hand of $3.0 million. Neff is a leading single source provider of custom award programsand apparel, including chenille letters and letter jackets, to the scholasticmarket segment.

On June 14, 2007, the Company acquired all ofthe outstanding capital stock of Visual Systems, Inc. (“VSI”), a leadingsupplier in the overhead transparency and book component business.  TheCompany acquired VSI for approximately $25.1 million (including a payment to bemade in 2009) and subject to a working capital adjustment.  VSI isa market leader in providing overhead transparencies for a variety ofpublishers, including through key relationships in the educational marketsegment.  VSI also provides a variety ofother visual communication products, including cover components, teaching aidsand inserts and overlays.

The acquisitions were accounted for as purchases inaccordance with the provisions of SFAS No. 141, *BusinessCombinations* (“SFAS 141”). The costs of the acquisitions were allocated to the tangible andintangible assets acquired and liabilities assumed based upon their relativefair values as of the date of the acquisition. The estimates utilized to determine the purchase price allocation aresubject to change due to certain working capital adjustments.

The results of these acquired operations have beenincluded in the Condensed Consolidated Financial Statements since therespective date of acquisition.

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The allocation of the aggregate purchase price forthe Neff and VSI acquisitions were as follows:
|                                | ** ** | **June 30,** | ** ** |
|--------------------------------|------------|-------------------|------------|
| **In thousands**          | ** ** | **2007**          | ** ** |
| Current assets                 |       | $                 | 16,045     |   |
| Property, plant  and equipment |       | 9,113             |       |
| Intangible  assets             |       | 26,800            |       |
| Goodwill                       |       | 15,404            |       |
| Long-term assets               |       | 131               |       |
| Current  liabilities           |       | (6,159            | )          |
| Long-term  liabilities         |       | (5,672            | )          |
|                           | ** ** | **$**             | **55,662** | ** ** |

 

In connection with the purchase accounting related to the acquisition ofNeff and VSI, the intangible assets and goodwill approximated $28.1 million and$14.1 million, respectively, which consisted of:
|                         | ** ** | **June 30,** | ** ** |
|-------------------------|------------|-------------------|------------|
| **In thousands**   | ** ** | **2007**          | ** ** |
| Customer  relationships |       | $                 | 16,840     |   |
| Tradenames              |       | 8,650             |       |
| Restrictive  covenants  |       | 1,310             |       |
| Goodwill                |       | 15,404            |       |
|                    | ** ** | **$**             | **42,204** | ** ** |

 

Customer relationships will be amortized over a ten-year period.  The restrictive covenants will be amortizedover the average life of the agreements, which is approximately two years.

The results of Neff operations are reported as part of the Scholasticsegment from the acquisition date, and as such, all of its goodwill will beallocated to that segment.  None of thegoodwill will be amortizable for tax purposes. The results of VSI areincluded in the Marketing and Publishing services segment from the acquisitiondate and substantially all of the goodwill will be fully amortizable for taxpurposes.

These acquisitions, both individually and in the aggregate, were notmaterial to the Company’s operations, financial positions or cash flows.

**6.     DiscontinuedOperations**

During the second quarter of 2006, the Company consummated the sale ofits Jostens Photography businesses, which previously comprised a reportablesegment.

In May 2007, theCompany completed the sale of its Von Hoffmann Holdings Inc., Von HoffmannCorporation and Anthology, Inc. businesses (“Von Hoffmann businesses”)which had previously been classified as assets held for sale. Von Hoffmannpreviously comprised the Educational Textbook segment and a portion of theMarketing and Publishing Services segment. The operations of the Von Hoffmannbusinesses, through the date of sale, are reported as discontinued operationsin the condensed consolidated financial statements for all periods presented.  TheCompany recognized net proceeds of $401.8 million, subject to a working capitaladjustment, and a gain of $98.4 million on the transaction during the secondquarter of 2007.

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The results of theJostens Photography and the Von Hoffmann businesses have been reclassified onthe condensed consolidated statement of operations and are included in thecaption titled “Income from discontinued operations, net of tax.” Previously the results of these businesses included certain allocated corporatecosts, which have been reallocated to the remaining continuing operations.

Included in income from discontinued operations in the condensedconsolidated statements of operations are the following:
|                                                      | ** ** | **Three months ended** | ** **  | **Six months ended** | ** ** |
|------------------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                           | ** ** | **June 30,**                | ** **  | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                                | ** ** | **2007**                         | ** **  | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net sales from  discontinued operations              |       | $                                | 37,620      |                           | $          | 93,861 |   | $ | 109,351 |   | $ | 178,914 |   |
|                                                 |       |                             |        |                           |       |   |   |   |   |
| Pretax income  from discontinued operations          |       | 6,593                            |        | 3,906                          |       | 20,397 |   | 9,386 |   |
| Income tax  provision from discontinued operations   |       | 2,494                            |        | 1,487                          |       | 7,925 |   | 3,725 |   |
| Net operating  income from discontinued operations   |       | 4,099                            |        | 2,419                          |       | 12,472 |   | 5,661 |   |
| Gain (loss) on  sale of businesses, net of tax       |       | 98,430                           |        | (199                           | )          | 98,430 |   | (199 | ) |
| **Income from discontinued  operations, net of tax** | ** ** | **$**                            | **102,529** | ** **                     | **$**      | **2,220** | ** ** | **$** | **110,902** | ** ** | **$** | **5,462** | ** ** |

 

The Jostens Photography and Von Hoffmann businesseshave been classified in the condensed consolidated balance sheets asdiscontinued operations. The major classes of assets and liabilities of thediscontinued operations are summarized as follows:
|                                                           | ** ** | **June 30,** | ** ** | **December 30,** | ** ** |
|-----------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| **In thousands**                                     | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| **Assets:**                                               | ** ** | ** **        | ** ** | ** **            | ** ** |
| Accounts receivable, net                                  |       | $                 | —     |                  | $          | 32,338 |   |
| Inventories, net                                          |       | —            |       | 22,809                |       |
| Prepaid expenses and other current assets                 |       | —            |       | 1,502                 |       |
| **Total current assets of discontinued operations**       |       | —            | ** ** | **56,649**            | ** ** |
|                                                      |       |              |       |                  |       |
| Property, plant and equipment, net                        |       | —            |       | 91,567                |       |
| Goodwill                                                  |       | —            |       | 173,952               |       |
| **Total assets of discontinued operations**               | ** ** | **$**             | **—** | ** **            | **$**      | **322,168** | ** ** |
|                                                      |       |              |       |                  |       |
| **Liabilities:**                                          | ** ** | ** **        | ** ** | ** **            | ** ** |
| Accounts payable                                          |       | $                 | —     |                  | $          | 13,641 |   |
| Accrued employee compensation and related taxes           |       | —            |       | 5,797                 |       |
| Commissions payable                                       |       | —            |       | 456                   |       |
| Customer deposits                                         |       | —            |       | 1,291                 |       |
| Other accrued liabilities                                 |       | 9,520             |       | 13,664                |       |
| **Total current liabilities of discontinued  operations** |       | 9,520             |       | 34,849                |       |
|                                                      |       |              |       |                  |       |
| Other noncurrent liabilities                              |       | —            |       | 6,696                 |       |
| **Total  liabilities of discontinued operations**         | ** ** | **$**             | **9,520**  | ** **            | **$**      | **41,545** | ** ** |

 

AtDecember 30, 2006, other accrued liabilities included $1.7 million related tothe Jostens Recognition business, which was discontinued in 2001.  InMarch 2007, the Company determined that based on the nature of the liabilities,it is not likely to have any further ongoing obligations, therefore there areno amounts related to the Jostens Recognition businesses.

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**7.     Comprehensive Income**

The following amounts were included in determining comprehensive incomefor Holdings as of the dates indicated:
|                                              | ** ** | **Three Months Ended** | ** **  | **Six Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                   | ** ** | **June 30,**                | ** **  | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                        | ** ** | **2007**                         | ** **  | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                                   |       | $                                | 172,501     |                           | $          | 61,764 |   | $ | 171,262 |   | $ | 60,628 |   |
| Change in  cumulative translation adjustment |       | (179                             | )           | 305                            |       | (175 | ) | 248 |   |
| Comprehensive income                         | ** ** | **$**                            | **172,322** | ** **                     | **$**      | **62,069** | ** ** | **$** | **171,087** | ** ** | **$** | **60,876** | ** ** |

 

The following amounts wereincluded in determining comprehensive income for Visant as of the datesindicated:
|                                              | ** ** | **Three Months Ended** | ** **  | **Six Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|-------------|--------------------------------|------------|
| ** **                                   | ** ** | **June 30,**                | ** **  | **July 1,**               | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                        | ** ** | **2007**                         | ** **  | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                                   |       | $                                | 181,334     |                           | $          | 70,724 |   | $ | 188,598 |   | $ | 72,479 |   |
| Change in  cumulative translation adjustment |       | (179                             | )           | 305                            |       | (175 | ) | 248 |   |
| Comprehensive  income                        | ** ** | **$**                            | **181,155** | ** **                     | **$**      | **71,029** | ** ** | **$** | **188,423** | ** ** | **$** | **72,727** | ** ** |

 

**8.****              Accounts Receivableand Inventories**

Accountsreceivable, net, was comprised of the following:
|                                  | ** ** | **June 30,** | ** **  | **December 30,** | ** ** |
|----------------------------------|------------|-------------------|-------------|-----------------------|------------|
| **In thousands**            | ** ** | **2007**          | ** **  | **2006**              | ** ** |
| Trade  receivables               |       | $                 | 171,663     |                  | $          | 154,685 |   |
| Allowance for  doubtful accounts |       | (2,866            | )           | (2,726                | )          |
| Allowance for  sales returns     |       | (12,078           | )           | (7,278                | )          |
| Accounts receivable,  net        | ** ** | **$**             | **156,719** | ** **            | **$**      | **144,681** | ** ** |

 

Net inventories werecomprised of the following:
|                             | ** ** | **June 30,** | ** ** | **December 30,** | ** **  |
|-----------------------------|------------|-------------------|------------|-----------------------|-------------|
| **In thousands**       | ** ** | **2007**          | ** ** | **2006**              | ** **  |
| Raw materials  and supplies |       | $                 | 31,028     |                  | $           | 31,814 |   |
| Work-in-process             |       | 28,698            |       | 34,142                |        |
| Finished goods              |       | 22,800            |       | 39,369                |        |
|                        |       | 82,526            |       | 105,325               |        |
| LIFO reserve                |       | 8                 |       | 8                     |        |
| Inventories, net            | ** ** | **$**             | **82,534** | ** **            | **105,333** | ** ** |
|                             |            |                   |            |                       |             |  |  |

 

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***Precious Metals Consignment Arrangement***

The Company has aprecious metals consignment agreement with a major financial institutionwhereby it currently has the ability to obtain up to $32.5 million in consignedinventory.  As required by the terms of the consignment agreement, theCompany does not take title to consigned inventory until payment. Accordingly, the Company does not include the value of consigned inventory orthe corresponding liability in its financial statements.  The value ofconsigned inventory at June 30, 2007 and December 30, 2006, was $17.7 millionand $16.4 million, respectively.  Theconsignment agreement does not have a stated term and can be terminated byeither party upon 60 days written notice. Additionally, the Company expensed consignment fees related to thisfacility of $0.1 million and $0.2 million for the three months ended June 30, 2007 and July 1, 2006,respectively.  The consignment feesexpensed for the six months ended June 30, 2007 and July 1, 2006 were $0.2million and $0.4 million, respectively.

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

The change in the carrying amount of goodwill is as follows:
|                                      | ** ** | **June 30,** | ** **  |
|--------------------------------------|------------|-------------------|-------------|
| **In thousands**                | ** ** | **2007**          | ** **  |
| Balance at  beginning of period      |       | $                 | 919,638     |   |
| Goodwill  acquired during the period |       | 15,432            |        |
| Reduction in  goodwill               |       | (2,258            | )           |
| Currency  translation                |       | 97                |        |
|                                 | ** ** | **$**             | **932,909** | ** ** |

 

Goodwill acquired duringthe six months ended June 30, 2007 primarily relates to the acquisition of Nefffor approximately $12.5 million and the acquisition of VSI for approximately$2.9 million.  Neff’s results areincluded in the Scholastic reporting segment from the date of acquisition, andVSI’s results are included in the Marketing and Publishing Services reportingsegment from the date of acquisition. The reduction in goodwill of $2.3 million resulted from the adoption ofFIN 48 for a pre-acquisition tax uncertainty in connection with the Jostensmerger transaction in July 2003.

As of June 30,2007, goodwill had been allocated to reporting segments as follows:
|                                    | ** ** | **June 30,** | ** **  |
|------------------------------------|------------|-------------------|-------------|
| **In thousands**              | ** ** | **2007**          | ** **  |
| Scholastic                         |       | $                 | 305,803     |   |
| Yearbook                           |       | 391,954           |        |
| Marketing and  Publishing Services |       | 235,152           |        |
|                               | ** ** | **$**             | **932,909** | ** ** |

 

Information regarding other intangible assets, net as of the datesindicated, is as follows:

14

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|                                 | ** ** | ** **           | ** ** | **June 30, 2007** | ** **  | **December 30, 2006** | ** ** |
|---------------------------------|------------|----------------------|------------|-----------------------------|-------------|---------------------------------|------------|
| ** **                      | ** ** | ** **           | ** ** | **Gross**                   | ** **  | ** **                      | ** ** | ** ** | ** ** | **Gross** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | **Estimated**        | ** ** | **carrying**                | ** **  | **Accumulated**                 | ** ** | ** ** | ** ** | **carrying** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| **In thousands**           | ** ** | **useful life** | ** ** | **amount**                  | ** **  | **amortization**                | ** ** | **Net** | ** ** | **amount** | ** ** | **amortization** | ** ** | **Net** | ** ** |
| School  relationships           |       | 10  years            |       | $                           | 330,000     |                            | $          | (129,598 | ) | $ | 200,402 |   | $ | 330,000 |   | $ | (113,161 | ) | $ | 216,839 |   |
| Internally  developed software  |       | 2  to 5 years        |       | 12,200                      |        | (11,363                         | )          | 837 |   | 12,200 |   | (10,454 | ) | 1,746 |   |
| Patented/unpatented  technology |       | 3  years             |       | 19,774                      |        | (15,512                         | )          | 4,262 |   | 19,767 |   | (15,109 | ) | 4,658 |   |
| Customer  relationships         |       | 4  to 40 years       |       | 53,349                      |        | (11,049                         | )          | 42,300 |   | 36,509 |   | (9,746 | ) | 26,763 |   |
| Other                           |       | 3  to 10 years       |       | 63,984                      |        | (30,361                         | )          | 33,623 |   | 61,410 |   | (24,927 | ) | 36,483 |   |
|                            |       |                 |       | 479,307                     |        | (197,883                        | )          | 0281,424 |   | 459,886 |   | (173,397 | ) | 286,489 |   |
| Tradenames                      |       | Indefinite           |       | 252,830                     |        |                            |       | 252,830 |   | 244,180 |   | — |   | 244,180 |   |
|                            | ** ** | ** **           | ** ** | **$**                       | **732,137** | ** **                      | **$**      | **(197,883** | **)** | **$** | **534,254** | ** ** | **$** | **704,066** | ** ** | **$** | **(173,397** | **)** | **$** | **530,669** | ** ** |

 

Amortizationexpense related to other intangible assets was $12.2 million and $12.9 millionfor the three months ended June 30, 2007 and July 1, 2006, respectively. For the six months ended June 30, 2007 and July 1, 2006, amortization expenserelated to other intangible assets was $24.1 million and $25.6 million,respectively.

Based onintangible assets in service as of June 30, 2007, estimated amortizationexpense for the remainder of 2007 and each of the five succeeding fiscal yearsis $24.4 million, $46.4 million, $42.0 million, $40.9 million, $39.1 million,and $40.8 million, respectively.

**10.****                               Long-TermDebt**

Long-term debt consistsof the following:
|                                                                                                                                                                                                                                                                        | ** ** | **June 30,** | ** **    | **December 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|---------------|-----------------------|------------|
| **In thousands**                                                                                                                                                                                                                                                  | ** ** | **2007**          | ** **    | **2006**              | ** ** |
| **Holdings:**                                                                                                                                                                                                                                                          |       |              |          |                  |       |
| Senior discount notes, 10.25% fixed rate, net of  discount of $32,586 and $43,043 at June 30, 2007 and December 30, 2006,  respectively, with semi-annual interest accretion through December 1, 2008,  thereafter semi-annual and payable at maturity - December 2013 |       | $                 | 214,614       |                  | $          | 204,157 |   |
| Senior notes, 8.75% fixed rate, with semi-annual  interest payments of $15.3 million, principal due and payable at maturity - December  2013                                                                                                                           |       | 350,000           |          | 350,000               |       |
| **Visant:**                                                                                                                                                                                                                                                            | * *   | * *          | * *      | * *              | * *   |
| Borrowings under our senior secured credit facility:                                                                                                                                                                                                                   |       |              |          |                  |       |
| Term Loan C, variable rate, 7.33% at June 30, 2007 and  7.37% at December 30, 2006, with semi-annual principal and interest payments  through October 1, 2011                                                                                                          |       | 316,500           |          | 716,500               |       |
| Senior subordinated notes, 7.625% fixed rate, with semi-annual  interest payments of $19.1 million, principal due and payable at maturity -  October 2012                                                                                                              |       | 500,000           |          | 500,000               |       |
|                                                                                                                                                                                                                                                                   | ** ** | **1,381,114**     | ** **    | **1,770,657**         | ** ** |
| Less current portion                                                                                                                                                                                                                                                   |       | —            |          | —                |       |
| ** **                                                                                                                                                                                                                                                             | ** ** | **$**             | **1,381,114** | ** **            | **$**      | **1,770,657** | ** ** |

 

Inconnection with the Transactions, Visant entered into senior secured creditfacilities, providing for an aggregate amount of $1,270 million, including a $250 millionrevolving credit facility, and issued$500 million aggregate principal amount of 7.625% senior subordinatednotes.   Also in connection with theTransactions, Jostens, Von Hoffmann and Arcade repaid their existingindebtedness having an aggregate face value of $1,392.6 million, including theredemption value of certain remaining redeemable preferred stock.

Visant’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 of Visant,and by Visant’s material current and future domestic subsidiaries.  The obligations of Visant’s principalCanadian operating subsidiary under the senior secured credit facilities areunconditionally and irrevocably guaranteed jointly and severally by

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Visant SecondaryHoldings Corp., Visant, Visant’s material current and future domesticsubsidiaries and 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 futuredomestic subsidiaries, including but not limited to:

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

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

The obligations ofJostens Canada Ltd. under the senior secured credit facilities, and theguarantees of those obligations, are secured by the collateral referred to inthe prior paragraph and substantially all of the tangible and intangible assetsof Jostens Canada Ltd. and each of Visant’s other current and future Canadiansubsidiaries.

Amounts borrowed under the term loan facilitiesthat are repaid or prepaid may not be reborrowed.  Visant’s senior secured facilities allow us,subject to certain conditions, to incur additional term loans under the termloan C facility, or under a new term facility, in either case in an aggregateprincipal amount of up to $300 million, which additional term loans will havethe same security and guarantees as the term C loan facility.

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

The dividendrestrictions under the Visant senior secured credit facilities apply only toVisant and Visant Secondary Holdings Corp., and essentially prohibit alldividends other than (1) for dividends paid on or after April 30, 2009 and usedby Holdings to make regularly-scheduled cash interest payments on its seniordiscount notes, subject to compliance with the interest coverage covenant aftergiving effect to such dividends, (2) for other dividends so long as the amountthereof does not exceed $50 million plus an additional amount based on Visant’snet income and the amount of any capital contributions received by Visant afterOctober 4, 2004, and (3) pursuant to other customary exceptions, includingredemptions of stock made with other, substantially similar stock or withproceeds of concurrent issuances of substantially similar stock.

The indentures governingVisant’s senior subordinated notes and Holdings’ senior discount notes andsenior notes also contain numerous covenants including, among other things,restrictions on the ability to: incur or guarantee additional indebtedness orissue disqualified or preferred stock; pay dividends or make other equitydistributions; repurchase or redeem capital stock; make investments or otherrestricted payments; sell assets or consolidate or merge with or into othercompanies; create limitations on the ability of restricted subsidiaries to makedividends or distributions to its parent company; engage in transactions withaffiliates; and create liens.

Visant’s senior subordinated notes areguaranteed, jointly and severally, on a senior subordinated unsecured basis, byeach of Visant’s material current and future domestic subsidiaries. Theindenture governing Visant’s senior subordinated notes restricts Visant and itsrestricted subsidiaries from paying dividends or making any other distributionson account of Visant’s or any restricted subsidiary’s equity interests(including any dividend or distribution payable in connection with any mergeror consolidation) other than (1) dividends or distributions by Visant payablein equity interests of Visant or in options, warrants or other rights topurchase equity interests or (2) dividends or distributions by a restrictedsubsidiary, subject to certain exceptions.

The indentures governingHoldings’ senior discount notes and senior notes restrict Holdings and itsrestricted subsidiaries from declaring or paying dividends or making any otherdistribution (including any payment by Holdings or any restricted subsidiary ofHoldings in connection with any merger or consolidation involving Holdings orany of its restricted subsidiaries) on account of Holdings’ or any of itsrestricted subsidiaries’ equity interests (other than dividends ordistributions payable in certain equity interests and dividends payable toHoldings or any restricted subsidiary of Holdings), subject to certainexceptions.

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Visant’s senior securedcredit facilities and the Visant and Holdings notes contain certaincross-default and cross-acceleration provisions whereby a default under oracceleration of other debt obligations would cause a default under oracceleration of the senior secured credit facilities and the notes.

A failure tocomply with the covenants under the senior secured credit facilities, subjectto certain grace periods, would constitute a default under the senior securedcredit facilities, which could result in an acceleration of the loans and otherobligations owing thereunder.  As of June30, 2007, the Company was in compliance with all covenants under its materialdebt obligations.

During the secondquarter of 2007, the Company voluntarily prepaid $400.0 million of term loansunder its senior secured credit facilities, including all originally scheduledprincipal payments due under its term loan C facility for 2006-2011.  With these prepayments, the outstandingbalance under the term loan C facility was reduced to $316.5 million.

As of June 30, 2007,there was $15.4 million outstanding in the form of letters of credit, leaving$234.6 million available under the Visant $250 million revolving creditfacility.

**11.****                               DerivativeFinancial Instruments and Hedging Activities**

The Company may enter into or purchase derivative financial instrumentsprincipally to manage interest rate, foreign currency exchange and commoditiesexposures.  Forward foreign currencyexchange contracts may be used to hedge the impact of currency fluctuationsprimarily on inventory purchases denominated in Euros.  At June 30, 2007, there were no contractsrelated to these activities outstanding.

**12.****                               Commitmentsand Contingencies**

***Forward Purchase Contracts***

The Company is subject to market risk associated withchanges in the price of precious metals. To mitigate the commodity price risk,the Company may from time to time enter into forward contracts to purchasegold, platinum and silver based upon the estimated ounces needed to satisfyprojected customer demand. The purchase commitment at June 30, 2007 was $13.6million with delivery dates occurring throughout 2007.  These forward purchase contracts areconsidered normal purchases and therefore not subject to the requirements ofSFAS No. 133, *Accounting for Derivatives and HedgingActivities*. The fair market value of the open precious metal forwardcontracts at June 30, 2007 was $13.5 million based on quoted futures prices foreach contract.

***Environmental***

Our operations are subject to a wide variety offederal, state, local and foreign laws and regulations governing emissions toair, discharges to water, the generation, handling, storage, transportation,treatment and disposal of hazardous substances and other materials, andemployee health and safety matters. Compliance with such laws and regulations has become more stringent and,accordingly, more costly over time.

Also, as an owner and operator of real property or agenerator of hazardous substances, we may be subject to environmental cleanupliability, regardless of fault, pursuant to the Comprehensive EnvironmentalResponse, Compensation and Liability Act or analogous state laws, as well as toclaims for harm to health or property or for natural resource damages arisingout of contamination or exposure to hazardous substances.  Some of our current or past operations haveinvolved metalworking and plating, printing, and other activities that haveresulted in environmental conditions that have given rise to liabilities.

As part of our environmental management program, wehave been involved in environmental remediation on a property formerly ownedand operated by Jostens for jewelry manufacturing.  Although Jostens no longer owns the site,Jostens managed the remediation project, which began in 2000.  As of June 30, 2007, Jostens had madepayments totaling $8.1 million for remediation at this site.  During 2001, Jostens received reimbursementfrom its insurance carrier in the amount of $2.7 million, net of legalcosts.  In July 2006, the State ofIllinois Environmental Protection Agency issued a “No Further Remediation”letter with respect to this site. Jostens has certain ongoing monitoring obligations.  We do not expect the cost of such ongoingmonitoring to be material.

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

***Legal Proceedings***

In communications with U.S. Customs and BorderProtection (“Customs”), we learned of an alleged inaccuracy of the tariffclassification for certain of Jostens’ imports from Mexico.  Jostens promptly filed with Customs avoluntary disclosure to limit its monetary exposure.  The effect of these tariff classificationerrors is that back duties and fees (or “loss of revenue”) may be owed oncertain imports.  Additionally, Customsmay impose interest on the loss of revenue, if any is determined.  A review of Jostens’ import practices hasrevealed that during the relevant period, the subject merchandise qualified forduty-free tariff treatment under the North American Free Trade Agreement (“NAFTA”),in which case there should be no loss of revenue or interest payment owed toCustoms. However, Customs’ allegations indicate that Jostens committed atechnical oversight in the classification used by Jostens in claiming thepreferential tariff treatment.  Throughits prior disclosure to Customs, Jostens addressed this technical oversight andasserted that the merchandise did in fact qualify for duty-free tarifftreatment under NAFTA and that there is no associated loss of revenue.  In a series of communications received fromCustoms in December 2006, Jostens learned that Customs was disputing thevalidity of Jostens’ prior disclosure and asserting a loss of revenue in theamount of $2.9 million for duties owed on entries made in 2002 and 2003 and ina separate pre-penalty notice was advised that Customs was contemplating a monetarypenalty in the amount of approximately $5.8 million (two times the alleged lossof revenue).  In order to obtain thebenefits of the orderly continuation and conclusion of administrativeproceedings, Jostens agreed to a two-year waiver of the statute of limitationswith respect to the entries made in 2002 and 2003 that otherwise would haveexpired at the end of 2007 and 2008, respectively.  Jostens elected to continue to address thismatter by filing a petition in response to the pre-penalty notice in January2007, disputing Customs’ claims and advancing its arguments to support theposition that no loss of revenue or penalty should be issued against theCompany, or in the alternative, that any penalty based on a purely technicalviolation should be reduced to a nominal fixed amount reflective of the natureof the violation.  In May 2007, Customsissued a penalty notice assessing a loss of revenue (plus interest) and penaltyas described above based on asserted negligence by Jostens.  In July 2007, Jostens filed a petition inresponse to the penalty notice challenging Customs’ findings and asserting thatthere has been no loss of revenue and that no penalty should be issued againstJostens or that, in the alternative, any penalty should be reduced to a nominalfixed amount reflective of the nature of the violation or mitigated on thebasis that the imports at issue are nonetheless duty free. At this stage of theproceedings, the matter will be further evaluated by Customs.  Jostens intends to continue to vigorouslydefend its position and has recorded no accrual for any potential liabilitypending further communication with Customs. Jostens has the opportunity to extend an offer in compromise to Customsin an effort to settle this matter in advance of a final administrativedecision.  If Jostens were to do so, itwould be required to tender the amount offered to Customs at the time.  It is not clear what Customs’ final positionwill be with respect to the alleged tariff classification errors or that Jostenswill not be foreclosed from receiving NAFTA benefits for the subject imports.Jostens may not be successful in its defense, and the disposition of thismatter may have a material effect on our business, financial condition andresults of operations.

We are also a party to other litigation arising in thenormal course of business. We regularly analyze current information and, asnecessary, provide accruals for probable liabilities on the eventualdisposition of these matters. We do not believe the effect on our business,financial condition and results of operations, if any, for the disposition ofthese matters will be material.

**13.****                               IncomeTaxes**

The Company hasrecorded income tax provisions for the six months ended June 30, 2007 based onits best estimate of the consolidated effective tax rate applicable for theentire 2007 year.  The estimated 2007full-year consolidated effective tax rates were 37.2% and 36.9% for Holdingsand Visant, respectively, before consideration of the effect of $0.3 million oftax and interest accruals for unrecognized tax benefits net of other income taxadjustments considered a period expense or benefit.  The combined effect of the annual estimatedconsolidated tax rates and the net current period tax adjustments resulted ineffective tax rates of 37.5% and 37.1% for Holdings and Visant, respectively,for the six-month period ended June 30, 2007. The annual estimated effective tax rates for 2007 were favorablyaffected by an increase in the rate of deduction for the U.S. domesticmanufacturing deduction and by certain favorable state income tax effectsresulting from the Company’s business acquisition and disposition activities.

For the comparablesix-month period ended July 1, 2006, the effective rates of income tax expensefor Holdings and Visant were 39.5% and 38.4%, respectively.  These rates were greater than the comparablerates for the 2007 period due

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largely to the effect ofa smaller rate of deduction in 2006 for the U.S. domestic manufacturingdeduction and larger provisions for state income taxes during the comparable2006 period.

In June 2006, theFASB issued FIN 48 which requires application of a “more likely than not”threshold to the financial statement recognition and derecognition of taxpositions taken by the Company in its income tax filings.  Using the more likely than not standard undercurrent tax law, FIN 48 requires that tax benefit recognition be adjusted toreflect the largest amount of benefit that is greater than 50% likely of beingrealized upon ultimate settlement.

In connection withthe adoption of FIN 48, the Company made a change in accounting principle forthe classification of interest income on tax refunds and tax-related interestexpense and penalties.  Under the previouspolicy, the Company recorded interest income on tax refunds as interestincome.   Under the new policy, anyinterest income in connection with income tax refunds is recorded as areduction of income tax expense. In addition, the Company’s previous accountingpolicy was to report tax-related interest expense and penalties either asincome tax expense in the case of uncertain tax positions or as interestexpense in the case of routine tax assessments. Upon adoption of FIN 48, all interest and penalties on income taxassessments is recorded as income tax expense and included as part of theCompany’s unrecognized tax benefit liability.

The unrecognizedtax benefit liability at December 31, 2006, the date of the Company’s adoptionof FIN 48, was $12.4 million including $1.9 million of gross interest andpenalty accruals.  In connection withsuch adoption, the Company recorded a $1.4 million increase to beginningretained earnings and a $2.3 million decrease to goodwill, with a correspondingreduction of $3.7 million in the existing reserve balance for uncertain taxpositions.  These adjustments wererequired to adjust from the Company’s previous method of accounting for incometax loss contingencies under SFAS No. 5 to the method prescribed under FIN48.  The adjustment to goodwill relatesto a pre-acquisition tax uncertainty in connection with the Jostens mergertransaction in July 2003.  As of December31, 2006, the date of adoption of FIN 48, the amount of the Company’sunrecognized tax benefits that, if recognized, would affect the effective taxrate was $6.1 million excluding gross interest and penalty accruals of $1.9million.  During the six months endedJune 30, 2007, there were no material changes to the unrecognized tax benefitliability recorded at the time FIN 48 was adopted.

As of the date ofadoption of FIN 48, the Company’s income tax filings for 2003 to 2006 weresubject to examination in the U.S federal tax jurisdiction.  The Internal Revenue Service is examining twopre-acquisition tax filings for one of the Company’s subsidiaries for periodsin 2004 and the Company’s tax filing for 2005. The Company is also subject to examination in state and foreign taxjurisdictions for the 2002 to 2006 period, none of which was individuallymaterial.  The Company has filed appealsfor a Canadian federal examination of tax years 1996 and 1997.  Though subject to uncertainty, the Companybelieves it has made appropriate provisions for all outstanding issues for allopen years and in all applicable jurisdictions. During the next twelve months it is possible that the unrecognized taxbenefit liability, excluding interest accruals of $1.1 million, could decreaseby approximately $4.4 million if the 2003 tax year is not examined.  The tax uncertainty relates to apre-acquisition tax period, and the tax portion of any such adjustment woulddecrease goodwill.

**14.          Pension and Other PostretirementBenefit Plans**

Net periodicbenefit cost for pension and other postretirement benefit plans is presentedbelow:
|                                          | ** ** | **Pension benefits**        | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **Three months ended** | ** ** | **Three months ended** | ** ** |
| ** **                               | ** ** | **June 30,**                | ** ** | **July 1,**                 | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                    | ** ** | **2007**                         | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service cost                             |       | $                                | 1,602      |                             | $          | 1,651 |   | $ | 3 |   | $ | 5 |   |
| Interest cost                            |       | 3,903                            |       | 3,747                            |       | 38 |   | 49 |   |
| Expected return  on plan assets          |       | (6,044                           | )          | (5,653                           | )          | — |   | — |   |
| Amortization of  prior year service cost |       | (199                             | )          | (120                             | )          | (69 | ) | (70 | ) |
| Amortization of  net actuarial loss      |       | —                           |       | 1                                |       | 9 |   | 24 |   |
| Net periodic benefit  (income) expense   | ** ** | **$**                            | **(738**   | **)**                            | **$**      | **(374** | **)** | **$** | **(19** | **)** | **$** | **8** | ** ** |

 

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|                                          | ** ** | **Pension benefits**      | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **Six months ended** | ** ** | **Six months ended**   | ** ** |
| ** **                               | ** ** | **June 30,**              | ** ** | **July 1,**                 | ** ** | **June 30,** | ** ** | **July 1,** | ** ** |
| **In thousands**                    | ** ** | **2007**                       | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service cost                             |       | $                              | 3,204      |                             | $          | 3,302 |   | $ | 6 |   | $ | 10 |   |
| Interest cost                            |       | 7,806                          |       | 7,494                            |       | 76 |   | 98 |   |
| Expected return on  plan assets          |       | (12,088                        | )          | (11,306                          | )          | — |   | — |   |
| Amortization of  prior year service cost |       | (398                           | )          | (240                             | )          | (138 | ) | (140 | ) |
| Amortization of  net actuarial loss      |       | —                         |       | 2                                |       | 18 |   | 48 |   |
| Net periodic benefit  (income) expense   | ** ** | **$**                          | **(1,476** | **)**                            | **$**      | **(748** | **)** | **$** | **(38** | **)** | **$** | **16** | ** ** |

 

Asof December 31, 2006, the Company did not expect to contribute to its qualifiedpension plans in 2007 due to the funded status of the plans.  This estimate has not changed as of June 30,2007.  For the six months ending June 30,2007, the Company did not make any contributions to the qualified pension plansand contributed $1.0 million and $0.1 million to its nonqualified pension plansand postretirement welfare plans, respectively. These payments to the nonqualified and postretirement welfare plans areconsistent with the expected amounts disclosed as of December 31, 2006.

**15.****                               Stock-basedCompensation**

The 2003 Stock Incentive Plan (the “2003 Plan”) wasapproved by the Board of Directors and effective as of October 30, 2003.The 2003 Plan permits us to grant key employees and certain other persons stockoptions and stock awards and provides for a total of 288,023 shares of commonstock for issuance of options and awards to employees of the Company and atotal of 10,000 shares of common stock for issuance of options and awards todirectors and other persons providing services to the Company. The maximumgrant to any one person shall not exceed in the aggregate 70,400 shares.  We do not currently intend to make anyadditional grants under the 2003 Plan. Option grants consist of “time options”, which vest and becomeexercisable in annual installments over the first five years following the dateof grant and/or “performance options”, which vest and become exercisable overthe first five years following the date of grant at varying levels based on theachievement of certain EBITDA targets, and in any event by the eighthanniversary of the date of grant.  Theperformance vesting includes certain carryforward provisions if targets are notachieved in a particular fiscal year and performance in a subsequent fiscalyear satisfies cumulative performance targets, subject to certain conditions.Upon the occurrence of a “change in control” (as defined in the 2003 Plan), theunvested portion of any time option will immediately become vested andexercisable, and the vesting and exercisability of the unvested portion of anyperformance option may accelerate depending on the timing of the change ofcontrol and return on the equity investment by DLJMBP III in the Company asprovided under the 2003 Plan.  A “changein control” under the 2003 Plan is defined as: (i) any person or other entity(other than any of Holdings’ subsidiaries), including any “person” as definedin Section 13(d)(3) of the Exchange Act, other than certain of the DLJMBP Fundsor affiliated parties thereof becoming the beneficial owner, directly orindirectly, in a single transaction or a series of related transactions, by wayof merger, consolidation or other business combination, of securities ofHoldings representing more than 51% of the total combined voting power of allclasses of capital stock of Holdings (or its successor) normally entitled tovote for the election of directors of Holdings or (ii) the sale of all orsubstantially all of the property or assets of Holdings to any unaffiliatedperson or entity other than one of Holdings’ subsidiaries, is consummated.  The Transactions did not constitute a changeof control under the 2003 Plan. Options issued under the 2003 Plan expire onthe tenth anniversary of the grant date. The shares underlying the options aresubject to certain transfer and other restrictions set forth in that certainStockholders Agreement dated July 29, 2003, by and among the Company andcertain holders of the capital stock of the Company. Participants under the2003 Plan also agree to certain restrictive covenants with respect toconfidential information of the Company and non-competition in connection withtheir receipt of options.

All outstanding options to purchase Holdings’ commonstock continued following the closing of the Transactions. In connection withthe Transactions, all outstanding options to purchase Von Hoffmann and Arcadecommon stock were cancelled and extinguished. Consideration paid in respect ofthe Von Hoffmann options was an amount equal to the difference between the pershare merger consideration in the Transactions and the exercise price therefor.No consideration was paid in respect of the Arcade options.

In connection with theclosing of the Transactions, we established the 2004 Stock Option Plan, whichpermits us to grant key employees and certain other persons of the Company andits subsidiaries various equity-based awards, including stock

20

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options and restrictedstock. The plan, currently known as the Third Amended and Restated 2004 StockOption Plan for Key Employees of Visant Holding Corp. and Subsidiaries (the “2004Plan”), provides for the issuance of a total of 510,230 shares of HoldingsClass A Common Stock. As of June 30, 2007 there were 54,626 sharesavailable for grant under the 2004 Plan. Shares related to grants that are forfeited, terminated, cancelled orexpire unexercised become available for new grants. Under his employmentagreement, Mr. Marc L. Reisch, the Chairman of our Board of Directors andour Chief Executive Officer and President, received awards of stock options andrestricted stock under the 2004 Plan. Additional members of management havealso received grants under the 2004 Plan. Option grants consist of “timeoptions”, which vest and become exercisable in annual installments through2009, and/or “performance options”, which vest and become exercisable followingthe date of grant based upon the achievement of certain EBITDA and otherperformance targets, and in any event by the eighth anniversary of the date ofgrant.  The performance vesting includescertain carryforward provisions if targets are not achieved in a particularfiscal year and performance in a subsequent fiscal year satisfies cumulativeperformance targets. Upon the occurrence of a “change in control” (as definedunder the 2004 Plan), the unvested portion of any time option will immediatelybecome vested and exercisable, and the vesting and exercisability of theunvested portion of any performance option may accelerate if certain EBITDA or otherperformance measures have been satisfied. A “change in control” under the 2004Plan is defined as: (i) the sale (in one or a series of transactions) of all orsubstantially all of the assets of Holdings to an unaffiliated person; (ii) asale (in one transaction or a series of transactions) resulting in more than50% of the voting stock of Holdings being held by an unaffiliated person; (iii)a merger, consolidation, recapitalization or reorganization of Holdings with orinto an unaffiliated person; if and only if any such event listed in (i)through (iii) above results in the inability of the Sponsors, or any member ormembers of the Sponsors, to designate or elect a majority of the Board (or theboard of directors of the resulting entity or its parent company). The optionexercise period is determined at the time of grant of the option but may notextend beyond the end of the calendar year that is ten calendar years after thedate the option is granted.  All options,restricted shares and any common stock for which such equity awards areexercised or with respect to which restrictions lapse are governed by amanagement stockholders’ agreement and sale participation agreement.  As of June 30, 2007, there were 182,677options and restricted shares vested under the 2004 Plan and 172,693 optionsand restricted shares subject to vesting.  In addition, there were 100,234shares issued under the 2004 Plan owned outright by certain employees.

Effective January 1, 2006, the Company adopted SFASNo. 123R, which requires the recognition of compensation expense related to allequity awards based on the fair values of the awards at the grant date.  Prior to the adoption of SFAS No. 123R, theCompany used the minimum value method in its SFAS No. 123 pro forma disclosureand therefore applied the prospective transition method as of the effectivedate.  Under the prospective transitionmethod, the Company would recognize compensation expense for equity awardsgranted, modified and canceled subsequent to the date of adoption.

On April 4, 2006,the Company declared and paid a special cash dividend of $57.03 per share tothe common stockholders of Holdings.  Inconnection with the special cash dividend, on April 4, 2006, the exerciseprices of issued and outstanding options as of April 4, 2006 under the 2003Plan and the 2004 Plan were reduced by an amount equal to the dividend.  The 2003 and 2004 Plans and underlying stockoption agreements contain provisions that provide for anti-dilutive protectionin the case of certain extraordinary corporate transactions, such as thespecial dividend, and the incremental compensation cost, defined as thedifference in the fair value of the modified award immediately before and afterthe modification, was calculated as zero. As a result of the above modification, all stock option awardspreviously accounted for under APB No. 25 will be prospectively accounted forunder SFAS No. 123R.  Accordingly, noincremental compensation cost was recognized as a result of the modification.

For the three-monthperiods ended June 30, 2007 and July 1, 2006, the Company recognized totalcompensation expense related to stock options of $0.1 million and less than$0.1 million, respectively, which is included in selling, general andadministrative expenses.  Stock-basedcompensation expense totaled $0.3 million and $0.1 million for the six-monthperiods ended June 30, 2007 and July 1, 2006, respectively.  For the three-month period ended June 30,2007, no options were exercised or cancelled and an insignificant amount ofoptions vested.  For the three-monthperiod ended July 1, 2006, no options were granted or exercised.

During the quarterended June 30, 2007, the Company granted 5,546 options under the 2004 Plan tocertain employees of the Company or its subsidiaries.  The per-share weighted-average fair value ofstock options granted during the quarter ended June 30, 2007 was $40.73 on thedate of grant using the Black-Scholes option pricing model.  The following key assumptions were used tovalue options issued:

21

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|                         | ** ** | **2007**  | ** ** |
|-------------------------|------------|-----------|------------|
| Expected Life           |       | 6.0 years |       |
| Expected  Volatility    |       | 29.7      | %          |
| Dividend yield          |       | —    |       |
| Risk-free interest rate |       | 4.6       | %          |

 

The following tablesummarizes stock option activity for Holdings:
|                                              | ** ** | ** ** | ** ** | **Weighted -**     | ** ** |
|----------------------------------------------|------------|------------|------------|-------------------------|------------|
| ** **                                   | ** ** | ** ** | ** ** | **average**             | ** ** |
| **Shares in thousands**            | ** ** | **Shares** | ** ** | **exercise price** | ** ** |
| Outstanding at  December 30, 2006            |       | 397        |       | $                       | 41.21      | * |
| Granted                                      |       | 5          |       | $                       | 169.15     |   |
| Forfeited                                    |       | (3         | )          | $                       | 56.80      |   |
| Cancelled                                    |       | (2         | )          | $                       | 43.73      |   |
| Outstanding at  June 30, 2007                |       | 397        |       | $                       | 42.85      |   |
|                                         |       |       |       |                    |       |
| Vested or  expected to vest at June 30, 2007 |       | 397        |       | $                       | 42.85      |   |
|                                         |       |       |       |                    |       |
| Exercisable at June 30,  2007                |       | 225        |       | $                       | 37.95      |   |

 

----

* Weighted average exercise price at December 30, 2006 has beenadjusted to reflect the special dividend declared in April 2006.

The weighted average remaining contractual life ofoutstanding options at June 30, 2007 was approximately 8.1 years.

**16.          Business Segments**

On March 16, 2007,the Company acquired all of the outstanding capital stock of Neff HoldingCompany and its wholly owned subsidiary Neff Motivation, Inc. Neff is a leadingsingle source provider of custom award programs and apparel, including chenilleletters and letter jackets, to the scholastic market segment.  Neff operates as a direct subsidiary ofVisant under the Neff brand name and its results are reported as part of theScholastic segment from the date of acquisition.

In May 2007, theCompany completed its sale of its Von Hoffmann businesses to R.R. Donnelley& Sons Company pursuant to a Stock Purchase Agreement entered into inJanuary 2007.  The Von Hoffmannbusinesses, which had previously comprised the Educational Textbook segment anda portion of the Marketing and Publishing Services segment, had been classifiedas assets for sale since December 2006.  Theoperations of the Von Hoffmann businesses are reported as discontinuedoperations in the condensed consolidated financial statements for all periodspresented. (see Note 6 ).

On June 14, 2007,the Company acquired all of the outstanding capital stock of VSI.  VSI is a leading supplier in the overheadtransparency and book component business for the educational market.  Results of VSI are included in the Marketingand Publishing services segment from such date.

Our threereportable segments consist of:

·                  *Scholastic—*provides services related to the marketing, saleand production of class rings and an array of graduation products and otherscholastic products to students and administrators primarily in high schools,colleges, and other post-secondary institutions;

·                  *Yearbook—*provides services related to the publication,marketing, sale and production of school yearbooks; and

22

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·                  *Marketing and Publishing Services—*produces multi-sensory andinteractive advertising sampling systems, primarily for the fragrance,cosmetics and personal care market segments, and provides innovative productsand services to the direct marketing sector. The group also produces bookcovers and other components for educational publishers.

The following table presents information of Holdingsby business segment:
|                                   | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|-----------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                        | ** ** | **June 30,**                | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**             | ** ** | **2007**                         | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                         |       |                             |       |             |       |              |       |   |   |
| Scholastic                        |       | $                                | 136,096    |             | $          | 129,854           |       | $ | 6,242 |   | 4.8 | % |
| Yearbook                          |       | 264,524                          |       | 254,339          |       | 10,185            |       | 4.0 | % |
| Marketing and Publishing Services |       | 100,962                          |       | 85,299           |       | 15,663            |       | 18.4 | % |
| Inter-segment eliminations        |       | (116                             | )          | —           |       | (116              | )          | NM |   |
| Net sales                         |       | $                                | 501,466    |             | $          | 469,492           |       | $ | 31,974 |   | 6.8 | % |
|                              |       |                             |       |             |       |              |       |   |   |
| Operating income                  |       |                             |       |             |       |              |       |   |   |
| Scholastic                        |       | $                                | 24,978     |             | $          | 21,837            |       | $ | 3,141 |   | 14.4 | % |
| Yearbook                          |       | 112,067                          |       | 100,311          |       | 11,756            |       | 11.7 | % |
| Marketing and Publishing Services |       | 17,057                           |       | 14,920           |       | 2,137             |       | 14.3 | % |
| Operating income                  |       | $                                | 154,102    |             | $          | 137,068           |       | $ | 17,034 |   | 12.4 | % |
|                              |       |                             |       |             |       |              |       |   |   |
| Depreciation and  amortization    |       |                             |       |             |       |              |       |   |   |
| Scholastic                        |       | $                                | 6,295      |             | $          | 6,688             |       | $ | (393 | ) | (5.9 | )% |
| Yearbook                          |       | 9,584                            |       | 9,419            |       | 165               |       | 1.8 | % |
| Marketing and Publishing Services |       | 5,433                            |       | 4,506            |       | 927               |       | 20.6 | % |
| Depreciation and  amortization    |       | $                                | 21,312     |             | $          | 20,613            |       | $ | 699 |   | 3.4 | % |

 

----

NM= Not meaningful

23

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|                                   | ** ** | **Six months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|-----------------------------------|------------|--------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                        | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**             | ** ** | **2007**                       | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                         |       |                           |       |             |       |              |       |   |   |
| Scholastic                        |       | $                              | 276,401    |             | $          | 264,237           |       | $ | 12,164 |   | 4.6 | % |
| Yearbook                          |       | 272,375                        |       | 262,634          |       | 9,741             |       | 3.7 | % |
| Marketing and Publishing Services |       | 209,013                        |       | 170,659          |       | 38,354            |       | 22.5 | % |
| Inter-segment eliminations        |       | (473                           | )          | (52              | )          | (421              | )          | NM |   |
| Net sales                         |       | $                              | 757,316    |             | $          | 697,478           |       | $ | 59,838 |   | 8.6 | % |
|                              |       |                           |       |             |       |              |       |   |   |
| Operating income                  |       |                           |       |             |       |              |       |   |   |
| Scholastic                        |       | $                              | 47,470     |             | $          | 41,890            |       | $ | 5,580 |   | 13.3 | % |
| Yearbook                          |       | 94,948                         |       | 86,300           |       | 8,648             |       | 10.0 | % |
| Marketing and Publishing Services |       | 35,331                         |       | 31,412           |       | 3,919             |       | 12.5 | % |
| Operating income                  |       | $                              | 177,749    |             | $          | 159,602           |       | $ | 18,147 |   | 11.4 | % |
|                              |       |                           |       |             |       |              |       |   |   |
| Depreciation and  amortization    |       |                           |       |             |       |              |       |   |   |
| Scholastic                        |       | $                              | 13,215     |             | $          | 13,987            |       | $ | (772 | ) | (5.5 | )% |
| Yearbook                          |       | 18,061                         |       | 17,978           |       | 83                |       | 0.5 | % |
| Marketing and Publishing Services |       | 10,896                         |       | 8,988            |       | 1,908             |       | 21.2 | % |
| Depreciation and  amortization    |       | $                              | 42,172     |             | $          | 40,953            |       | $ | 1,219 |   | 3.0 | % |

 

----

NM = Notmeaningful

**17.****                               RelatedParty Transactions**

***ManagementServices Agreement***

In connection with the Transactions, we entered into amanagement services agreement with the Sponsors pursuant to which the Sponsorsprovide certain structuring, consulting and management advisory services to us.Under the Agreement, during the term thereof the Sponsors receive an annualadvisory fee of $3.0 million, that is payable quarterly and which increases by3% per year.  The Company paid $0.8million as advisory fees to the Sponsors for both the three months ended June30, 2007 and July 1, 2006.  For the sixmonths periods ended June 30, 2007 and July 1, 2006, the Company paid $1.6million and $1.5 million, respectively, as advisory fees to the Sponsors.  The management services agreement alsoprovides that we will indemnify the Sponsors and their affiliates, directors,officers and representatives for losses relating to the services contemplatedby the management services agreement and the engagement of the Sponsorspursuant to, and the performance by the Sponsors of the services contemplatedby, the management services agreement.

**18.          Condensed Consolidating GuarantorInformation**

As discussed inNote 10, *Long-Term Debt*, Visant’s obligationsunder the senior secured credit facilities and the 7.625% senior subordinatednotes are guaranteed by certain of its 100% wholly-owned subsidiaries on afull, unconditional and joint and several basis.  The following tables present condensedconsolidating financial information for Visant, as issuer, and its guarantorand non-guarantor subsidiaries.

24

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**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Three months ended June 30, 2007**
| ** **                                              | ** ** | ** ** | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|------------|-------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                   | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                          | ** ** | **$**      | **—**  | ** **     | **$**      | **491,270**    | ** ** | **$**            | **18,939** | ** **  | **$**      | **(8,743** | **)** | **$** | **501,466** | ** ** |
| Cost of products  sold                                  |       | (1,975     | )           | 218,429        |       | 10,268         |       | (8,946           | )          | 217,776     |       |
| Gross profit                                            |       | 1,975      |        | 272,841        |       | 8,671          |       | 203              |       | 283,690     |       |
| Selling and administrative  expenses                    |       | 181        |        | 124,586        |       | 4,437          |       | —           |       | 129,204     |       |
| Loss on sale of  assets                                 |       | —     |        | 229            |       | —         |       | —           |       | 229         |       |
| Special charges                                         |       | —     |        | (41            | )          | —         |       | —           |       | (41         | )          |
| **Operating income**                                    | ** ** | **1,794**  | ** **  | **148,067**    | ** ** | **4,234**      | ** ** | **203**          | ** ** | **154,298** | ** ** |
| Net interest  expense                                   |       | 24,750     |        | 25,354         |       | 56             |       | (20,827          | )          | 29,333      |       |
| Equity earnings  in subsidiary, net of tax              |       | (83,338    | )           | (2,718         | )          | —         |       | 86,056           |       | —      |       |
| Income before  income taxes                             |       | 60,382     |        | 125,431        |       | 4,178          |       | (65,026          | )          | 124,965     |       |
| (Benefit from)  provision for income taxes              |       | (1,572     | )           | 46,215         |       | 1,437          |       | 80               |       | 46,160      |       |
| Income from  continuing operations                      |       | 61,954     |        | 79,216         |       | 2,741          |       | (65,106          | )          | 78,805      |       |
| Income (loss)  from discontinued operations, net of tax |       | 98,430     |        | 4,122          |       | (23            | )          | —           |       | 102,529     |       |
| **Net income**                                          | ** ** | **$**      | **160,384** | ** **     | **$**      | **83,338**     | ** ** | **$**            | **2,718**  | ** **  | **$**      | **(65,106** | **)** | **$** | **181,334** | ** ** |

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Three months ended July 1, 2006**
| ** **                                              | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                   | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                          | ** ** | **$**      | **—** | ** **     | **$**      | **460,197**    | ** ** | **$**            | **15,943** | ** **  | **$**      | **(6,648** | **)** | **$** | **469,492** | ** ** |
| Cost of products  sold                                  |       | (1,971     | )          | 210,934        |       | 9,423          |       | (6,594           | )          | 211,792     |       |
| Gross profit                                            |       | 1,971      |       | 249,263        |       | 6,520          |       | (54              | )          | 257,700     |       |
| Selling and  administrative expenses                    |       | 791        |       | 116,539        |       | 4,196          |       | —           |       | 121,526     |       |
| Gain on sale of  assets                                 |       | —     |       | (824           | )          | (4             | )          | —           |       | (828        | )          |
| Special charges                                         |       | —     |       | (150           | )          | —         |       | —           |       | (150        | )          |
| **Operating income**                                    | ** ** | **1,180**  | ** ** | **133,698**    | ** ** | **2,328**      | ** ** | **(54**          | **)**      | **137,152** | ** ** |
| Net interest  expense (income)                          |       | 25,517     |       | 25,741         |       | (78            | )          | (26,430          | )          | 24,750      |       |
| Equity  (earnings) loss in subsidiary, net of tax       |       | (70,114    | )          | 4,366          |       | —         |       | 65,748           |       | —      |       |
| Income before  income taxes                             |       | 45,777     |       | 103,591        |       | 2,406          |       | (39,372          | )          | 112,402     |       |
| Provision for income  taxes                             |       | 1,451      |       | 41,629         |       | 840            |       | (22              | )          | 43,898      |       |
| Income from  continuing operations                      |       | 44,326     |       | 61,962         |       | 1,566          |       | (39,350          | )          | 68,504      |       |
| Income (loss)  from discontinued operations, net of tax |       | —     |       | 8,152          |       | (5,932         | )          | —           |       | 2,220       |       |
| **Net income (loss)**                                   | ** ** | **$**      | **44,326** | ** **     | **$**      | **70,114**     | ** ** | **$**            | **(4,366** | **)**       | **$**      | **(39,350** | **)** | **$** | **70,724** | ** ** |

 

25

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**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Six months ended June 30, 2007**
| ** **                                              | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                   | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                          | ** ** | **$**      | **—** | ** **     | **$**      | **743,558**    | ** ** | **$**            | **29,304** | ** **  | **$**      | **(15,546** | **)** | **$** | **757,316** | ** ** |
| Cost of products  sold                                  |       | (4,209     | )          | 349,014        |       | 16,601         |       | (15,560          | )          | 345,846     |       |
| Gross profit                                            |       | 4,209      |       | 394,544        |       | 12,703         |       | 14               |       | 411,470     |       |
| Selling and  administrative expenses                    |       | (38        | )          | 225,348        |       | 7,451          |       | —           |       | 232,761     |       |
| Gain on sale of  assets                                 |       | —     |       | 620            |       | —         |       | —           |       | 620         |       |
| Special charges                                         |       | —     |       | (41            | )          | —         |       | —           |       | (41         | )          |
| **Operating income**                                    | ** ** | **4,247**  | ** ** | **168,617**    | ** ** | **5,252**      | ** ** | **14**           | ** ** | **178,130** | ** ** |
| Net interest  expense                                   |       | 89,360     |       | 54,125         |       | 72             |       | (88,989          | )          | 54,568      |       |
| Equity earnings  in subsidiary, net of tax              |       | (85,622    | )          | (3,367         | )          | —         |       | 88,989           |       | —      |       |
| Income before  income taxes                             |       | 509        |       | 117,859        |       | 5,180          |       | 14               |       | 123,562     |       |
| (Benefit from)  provision for income taxes              |       | (662       | )          | 44,732         |       | 1,790          |       | 6                |       | 45,866      |       |
| Income from  continuing operations                      |       | 1,171      |       | 73,127         |       | 3,390          |       | 8                |       | 77,696      |       |
| Income (loss)  from discontinued operations, net of tax |       | 98,430     |       | 12,495         |       | (23            | )          | —           |       | 110,902     |       |
| **Net income**                                          | ** ** | **$**      | **99,601** | ** **     | **$**      | **85,622**     | ** ** | **$**            | **3,367**  | ** **  | **$**      | **8** | ** ** | **$** | **188,598** | ** ** |

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Six months ended July 1, 2006**
| ** **                                              | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                   | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                          |       | **$**      | **—** | ** **     | **$**      | **682,779**    | ** ** | **$**            | **24,897** | ** **  | **$**      | **(10,198** | **)** | **$** | **697,478** | ** ** |
| Cost of products  sold                                  |       | (3,093     | )          | 320,881        |       | 14,979         |       | (10,187          | )          | 322,580     |       |
| Gross profit                                            |       | 3,093      |       | 361,898        |       | 9,918          |       | (11              | )          | 374,898     |       |
| Selling and  administrative expenses                    |       | (142       | )          | 205,913        |       | 7,621          |       | —           |       | 213,392     |       |
| Loss (gain) on  sale of assets                          |       | 5          |       | (858           | )          | —         |       | —           |       | (853        | )          |
| Special charges                                         |       | —     |       | 2,594          |       | —         |       | —           |       | 2,594       |       |
| **Operating income**                                    | ** ** | **3,230**  | ** ** | **154,249**    | ** ** | **2,297**      | ** ** | **(11**          | **)**      | **159,765** | ** ** |
| Net interest  expense                                   |       | 50,138     |       | 53,561         |       | 112            |       | (52,891          | )          | 50,920      |       |
| Equity  (earnings) loss in subsidiary, net of tax       |       | (68,925    | )          | 4,384          |       | —         |       | 64,541           |       | —      |       |
| Income before  income taxes                             |       | 22,017     |       | 96,304         |       | 2,185          |       | (11,661          | )          | 108,845     |       |
| Provision for  income taxes                             |       | 2,423      |       | 38,612         |       | 798            |       | (5               | )          | 41,828      |       |
| Income from  continuing operations                      |       | 19,594     |       | 57,692         |       | 1,387          |       | (11,656          | )          | 67,017      |       |
| Income (loss)  from discontinued operations, net of tax |       | —     |       | 11,233         |       | (5,771         | )          | —           |       | 5,462       |       |
| **Net income (loss)**                                   | ** ** | **$**      | **19,594** | ** **     | **$**      | **68,925**     | ** ** | **$**            | **(4,384** | **)**       | **$**      | **(11,656** | **)** | **$** | **72,479** | ** ** |

 

26

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**June 30, 2007**
| ** **                                           | ** ** | ** **  | ** **    | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|-------------|---------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| **In thousands**                                | ** ** | **Visant**  | ** **    | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           | ** ** | ** **  | ** **    | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **    | ** ** |
| Cash and cash  equivalents                           |       | $           | 21,894        |           | $          | 2,304          |       | $                | 11,825     |          | $          | — |   | $ | 36,023 |   |
| Accounts  receivable, net                            |       | 1,637       |          | 141,754        |       | 13,328         |       | —           |       | 156,719       |       |
| Inventories, net                                     |       | —      |          | 80,182         |       | 2,526          |       | (174             | )          | 82,534        |       |
| Salespersons  overdrafts, net                        |       | —      |          | 14,730         |       | 944            |       | —           |       | 15,674        |       |
| Prepaid expenses  and other current assets           |       | 1,624       |          | 10,087         |       | 1,438          |       | —           |       | 13,149        |       |
| Intercompany  receivable                             |       | 12,344      |          | 27,718         |       | —         |       | (39,791          | )          | 271           |       |
| Deferred income  taxes                               |       | (943        | )             | 13,198         |       | 75             |       |             |       | 12,330        |       |
| **Total current assets**                             | ** ** | **36,556**  | ** **    | **289,973**    | ** ** | **30,136**     | ** ** | **(39,965**      | **)**      | **316,700**   | ** ** |
| Property, plant,  and equipment, net                 |       | 1,150       |          | 179,455        |       | 140            |       | —           |       | 180,745       |       |
| Goodwill                                             |       | —      |          | 910,816        |       | 22,093         |       | —           |       | 932,909       |       |
| Intangibles, net                                     |       | —      |          | 524,464        |       | 9,790          |       | —           |       | 534,254       |       |
| Deferred  financing costs, net                       |       | 24,018      |          | —         |       | —         |       | —           |       | 24,018        |       |
| Intercompany  receivable                             |       | 655,504     |          | 21,804         |       | 258            |       | (677,566         | )          | —        |       |
| Other assets                                         |       | 40          |          | 12,730         |       | 72             |       | —           |       | 12,842        |       |
| Investment in  subsidiaries                          |       | 720,552     |          | —         |       | —         |       | (720,552         | )          | —        |       |
| **Total assets**                                     | ** ** | **$**       | **1,437,820** | ** **     | **$**      | **1,938,362**  | ** ** | **$**            | **62,489** | ** **    | **$**      | **(1,438,083** | **)** | **$** | **2,001,468** | ** ** |
|                                                 |       |        |          |           |       |           |       |             |       |          |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**       | ** ** | ** **  | ** **    | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **    | ** ** |
| Accounts payable                                     |       | $           | 2,342         |           | $          | 38,137         |       | $                | 4,332      |          | $          | — |   | $ | 44,811 |   |
| Accrued employee  compensation                       |       | 5,580       |          | 24,810         |       | 1,730          |       | —           |       | 32,120        |       |
| Customer  deposits                                   |       | —      |          | 59,393         |       | 4,382          |       | —           |       | 63,775        |       |
| Commissions payable                                  |       | —      |          | 48,565         |       | 976            |       | —           |       | 49,541        |       |
| Income taxes  payable                                |       | (11,502     | )             | 47,795         |       | 3,258          |       | (67              | )          | 39,484        |       |
| Interest payable                                     |       | 9,456       |          | 231            |       | 8              |       | —           |       | 9,695         |       |
| Intercompany  payable                                |       | —      |          | 31,522         |       | 7,342          |       | (38,864          | )          | —        |       |
| Other accrued  liabilities                           |       | 2,308       |          | 22,003         |       | 3,143          |       | —           |       | 27,454        |       |
| Current  liabilities of discontinued operations      |       | 9,520       |          | —         |       | —         |       | —           |       | 9,520         |       |
| **Total current liabilities**                        | ** ** | **17,951**  | ** **    | **272,456**    | ** ** | **25,171**     | ** ** | **(38,930**      | **)**      | **276,400**   | ** ** |
| Long-term debt,  less current maturities             |       | 816,500     |          | 658,563        |       | —         |       | (658,563         | )          | 816,500       |       |
| Intercompany  payable (receivable)                   |       | 22,631      |          | (2,702         | )          | —         |       | (19,929          | )          | —        |       |
| Deferred income  taxes                               |       | (1,679      | )             | 193,351        |       | (470           | )          | —           |       | 191,202       |       |
| Pension  liabilities, net                            |       | (630        | )             | 19,707         |       | —         |       | —           |       | 19,077        |       |
| Other noncurrent  liabilities                        |       | 13,258      |          | 19,999         |       | —         |       | —           |       | 33,257        |       |
| **Total liabilities**                                | ** ** | **868,031** | ** **    | **1,160,494**  | ** ** | **24,701**     | ** ** | **(717,423**     | **)**      | **1,336,436** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **570,036** | ** **    | **777,868**    | ** ** | **37,788**     | ** ** | **(720,660**     | **)**      | **665,032**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**       | **1,437,820** | ** **     | **$**      | **1,938,362**  | ** ** | **$**            | **62,489** | ** **    | **$**      | **(1,438,083** | **)** | **$** | **2,001,468** | ** ** |

 

27

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**December 30, 2006**
| ** **                                           | ** ** | ** **    | ** **    | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|---------------|---------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| **In thousands**                                | ** ** | **Visant**    | ** **    | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           | ** ** | ** **    | ** **    | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **    | ** ** |
| Cash and cash  equivalents                           |       | $             | 1,707         |           | $          | 4,275          |       | $                | 12,061     |          | —     |   | $ | 18,043 |   |
| Accounts  receivable, net                            |       | 1,943         |          | 128,162        |       | 14,576         |       | —           |       | 144,681       |       |
| Inventories, net                                     |       | —        |          | 103,411        |       | 2,111          |       | (189             | )          | 105,333       |       |
| Salespersons  overdrafts, net                        |       | —        |          | 26,431         |       | 861            |       | —           |       | 27,292        |       |
| Prepaid expenses  and other current assets           |       | 2,697         |          | 15,814         |       | 1,280          |       | —           |       | 19,791        |       |
| Income tax  receivable                               |       | 1,097         |          | —         |       | —         |       | —           |       | 1,097         |       |
| Intercompany  receivable                             |       | 36,180        |          | 9,881          |       | —         |       | (45,543          | )          | 518           |       |
| Deferred income  taxes                               |       | (963          | )             | 12,738         |       | 75             |       | —           |       | 11,850        |       |
| Current assets  of discontinued operations           |       | —        |          | 56,649         |       | —         |       |             |       | 56,649        |       |
| **Total current assets**                             | ** ** | **42,661**    | ** **    | **357,361**    | ** ** | **30,964**     | ** ** | **(45,732**      | **)**      | **385,254**   | ** ** |
| Property, plant,  and equipment, net                 |       | 1,279         |          | 159,227        |       | 75             |       | —           |       | 160,581       |       |
| Goodwill                                             |       | —        |          | 897,642        |       | 21,996         |       | —           |       | 919,638       |       |
| Intangibles, net                                     |       | —        |          | 520,713        |       | 9,956          |       | —           |       | 530,669       |       |
| Deferred  financing costs, net                       |       | 11,216        |          | 24,002.00      |       | 339.00         |       | —           |       | 35,557        |       |
| Intercompany  receivable                             |       | 1,256,090     |          | 106,377        |       | —         |       | (1,362,467       | )          | —        |       |
| Other assets                                         |       | 40            |          | 13,065         |       | 76             |       | —           |       | 13,181        |       |
| Investment in  subsidiaries                          |       | 728,781       |          | —         |       | —         |       | (728,781         | )          | —        |       |
| Long-term assets  of discontinued operations         |       | (80           | )             | 265,599        |       | —         |       |             |       | 265,519       |       |
| **Total assets**                                     | ** ** | **$**         | **2,039,987** | ** **     | **$**      | **2,343,986**  | ** ** | **$**            | **63,406** | ** **    | **$**      | **(2,136,980** | **)** | **$** | **2,310,399** | ** ** |
|                                                 |       |          |          |           |       |           |       |             |       |          |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**       | ** ** | ** **    | ** **    | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **    | ** ** |
| Accounts payable                                     |       | $             | 2,562         |           | $          | 48,249         |       | $                | 5,390      |          | $          | 235 |   | $ | 56,436 |   |
| Accrued employee  compensation                       |       | 6,759         |          | 32,931         |       | 1,566          |       | —           |       | 41,256        |       |
| Commissions  payable                                 |       | —        |          | 166,250        |       | 5,008          |       | —           |       | 171,258       |       |
| Customer  deposits                                   |       | —        |          | 20,605         |       | 1,066          |       | —           |       | 21,671        |       |
| Income taxes  payable                                |       | (8,664        | )             | 5,668          |       | 3,069          |       | (73              | )          | —        |       |
| Interest payable                                     |       | 9,987         |          | 663            |       | —         |       | —           |       | 10,650        |       |
| Intercompany  payable                                |       | 17,787        |          | 23,242         |       | 4,749          |       | (45,778          | )          | —        |       |
| Other accrued  liabilities                           |       | 2,025         |          | 18,497         |       | 3,115          |       | —           |       | 23,637        |       |
| Current  liabilities of discontinued operations      |       | 955           |          | 28,301         |       | 5,593          |       | —           |       | 34,849        |       |
| **Total current liabilities**                        | ** ** | **31,411**    | ** **    | **344,406**    | ** ** | **29,556**     | ** ** | **(45,616**      | **)**      | **359,757**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,216,500     |          | —         |       | —         |       | —           |       | 1,216,500     |       |
| Intercompany payable                                 |       | 119,172       |          | 1,243,295      |       | —         |       | (1,362,467       | )          | —        |       |
| Deferred income  taxes                               |       | (988          | )             | 196,195        |       | (282           | )          | —           |       | 194,925       |       |
| Pension  liabilities, net                            |       | —        |          | 21,484         |       | —         |       | —           |       | 21,484        |       |
| Other noncurrent  liabilities                        |       | 16,106        |          | 17,104         |       | 146            |       | —           |       | 33,356        |       |
| Long-term  liabilities of discontinued operations    |       | —        |          | 6,696          |       | —         |       |             |       | 6,696         |       |
| **Total liabilities**                                | ** ** | **1,382,201** | ** **    | **1,829,180**  | ** ** | **29,420**     | ** ** | **(1,408,083**   | **)**      | **1,832,718** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **657,786**   | ** **    | **514,806**    | ** ** | **33,986**     | ** ** | **(728,897**     | **)**      | **477,681**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**         | **2,039,987** | ** **     | **$**      | **2,343,986**  | ** ** | **$**            | **63,406** | ** **    | **$**      | **(2,136,980** | **)** | **$** | **2,310,399** | ** ** |

 

28

----

 

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)**

**Six months ended June 30, 2007**
| ** **                                                    | ** ** | ** **   | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **   | ** ** |
|---------------------------------------------------------------|------------|--------------|------------|----------------|------------|----------------|------------|------------------|------------|--------------|------------|
| **In thousands**                                         | ** ** | **Visant**   | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**    | ** ** |
| Net income                                                    |       | $            | 99,601     |           | $          | 85,622         |       | $                | 3,367      |         | $          | 8 |   | $ | 188,598 |   |
| Other cash (used  in) provided by operating activities        |       | (84,988      | )          | 6,100          |       | (3,910         | )          | (8               | )          | (82,870      | )          |
| Net cash  provided by (used in) discontinued operations       |       | 8,485        |       | (3,874         | )          | (23            | )          | —           |       | 4,588        |       |
| **Net cash provided by (used in) operating  activities**      | ** ** | **23,098**   | ** ** | **87,848**     | ** ** | **(566**       | **)**      | **—**       | ** ** | **110,316**  | ** ** |
| Purchases of  property, plant, and equipment                  |       | (19          | )          | (35,916        | )          | (67            | )          | —           |       | (36,002      | )          |
| Proceeds from  sale of property and equipment                 |       | —       |       | 1,491          |       | —         |       | —           |       | 1,491        |       |
| Acquisition of  business, net of cash acquired                |       | (54,782      | )          | 3,033          |       | —         |       | —           |       | (51,749      | )          |
| Proceeds from  sale of business                               |       | 401,781      |       | —         |       | —         |       | —           |       | 401,781      |       |
| Other investing  activities, net                              |       | —       |       | (8             | )          | —         |       | —           |       | (8           | )          |
| Net cash used in  discontinued operations                     |       | —       |       | (5,691         | )          | —         |       | —           |       | (5,691       | )          |
| **Net cash provided by (used in) investing  activities**      | ** ** | **346,916**  | ** ** | **(37,091**    | **)**      | **(67**        | **)**      | **—**       | ** ** | **309,822**  | ** ** |
| Principal  payments on long-term debt                         |       | (400,000     | )          | —         |       | —         |       | —           |       | (400,000     | )          |
| Intercompany  payable (receivable)                            |       | 52,725       |       | (52,725        | )          | —         |       | —           |       | —       |       |
| Distribution to  stockholder                                  |       | (2,552       | )          | —         |       | —         |       | —           |       | (2,552       | )          |
| **Net cash used in financing activities**                     | ** ** | **(349,827** | **)**      | **(52,725**    | **)**      | **—**     | ** ** | **—**       | ** ** | **(402,552** | **)**      |
| Effect of  exchange rate changes on cash and cash equivalents |       | —       |       | (4             | )          | 398            |       | —           |       | 394          |       |
| Increase  (decrease) in cash and cash equivalents             |       | 20,187       |       | (1,972         | )          | (235           | )          | —           |       | 17,980       |       |
| Cash and cash  equivalents, beginning of period               |       | 1,707        |       | 4,276          |       | 12,060         |       | —           |       | 18,043       |       |
| **Cash and cash equivalents, end  of period**                 | ** ** | **$**        | **21,894** | ** **     | **$**      | **2,304**      | ** ** | **$**            | **11,825** | ** **   | **$**      | **—** | ** ** | **$** | **36,023** | ** ** |

 

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)**

**Six months ended July 1, 2006**
| ** **                                                    | ** ** | ** **  | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|-------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                         | ** ** | **Visant**  | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| Net income  (loss)                                            |       | $           | 3,560      |           | $          | 73,327         |       | $                | (4,401     | )           | $          | (7 | ) | $ | 72,479 |   |
| Other cash (used  in) provided by operating activities        |       | (18,481     | )          | 13,392         |       | 35,590         |       | 8                |       | 30,509      |       |
| Net cash  provided by (used in) discontinued operations       |       | —      |       | 33,258         |       | (31,222        | )          | —           |       | 2,036       |       |
| **Net cash (used in) provided by operating  activities**      | ** ** | **(14,921** | **)**      | **119,977**    | ** ** | **(33**        | **)**      | **1**            | ** ** | **105,024** | ** ** |
| Purchases of  property, plant, and equipment                  |       | (951        | )          | (22,673        | )          | —         |       | —           |       | (23,624     | )          |
| Proceeds from  sale of property and equipment                 |       | 3           |       | 1,296          |       | —         |       | —           |       | 1,299       |       |
| Acquisition of  business, net of cash acquired                |       | (13,090     | )          | (500           | )          | —         |       | —           |       | (13,590     | )          |
| Proceeds from  sale of business                               |       | —      |       | 16,292         |       | 47,800         |       | —           |       | 64,092      |       |
| Other investing  activities, net                              |       | —      |       | 9              |       | —         |       | —           |       | 9           |       |
| Net cash used in  discontinued operations                     |       | —      |       | (10,965        | )          | (569           | )          | —           |       | (11,534     | )          |
| **Net cash (used in) provided by investing  activities**      | ** ** | **(14,038** | **)**      | **(16,541**    | **)**      | **47,231**     | ** ** | **—**       | ** ** | **16,652**  | ** ** |
| Intercompany  payable (receivable)                            |       | 98,384      |       | (98,383        | )          | —         |       | (1               | )          | —      |       |
| Distribution to  stockholders                                 |       | (4,849      | )          | —         |       | —         |       | —           |       | (4,849      | )          |
| **Net cash provided by (used in) financing  activities**      | ** ** | **93,535**  | ** ** | **(98,383**    | **)**      | **—**     | ** ** | **(1**           | **)**      | **(4,849**  | **)**      |
| Effect of  exchange rate changes on cash and cash equivalents |       | —      |       | —         |       | 91             |       | —           |       | 91          |       |
| Increase in cash  and cash equivalents                        |       | 64,576      |       | 5,053          |       | 47,289         |       | —           |       | 116,918     |       |
| Cash and cash  equivalents, beginning of period               |       | 13,029      |       | (1,454         | )          | 8,299          |       | —           |       | 19,874      |       |
| **Cash and cash equivalents, end  of period**                 | ** ** | **$**       | **77,605** | ** **     | **$**      | **3,599**      | ** ** | **$**            | **55,588** | ** **  | **$**      | **—** | ** ** | **$** | **136,792** | ** ** |

 

29

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

Except where otherwise indicated, management’s discussion and analysis offinancial condition and results of operations is provided with respect toHoldings, which has materially the same financial condition and results ofoperations as Visant, except for certain indebtedness of Holdings.  This discussion and analysis should be readin conjunction with our condensed consolidated financial statements and notesthereto.

**CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS**

This reportcontains forward-looking statements including, without limitation, statementsconcerning the conditions in our industry, expected cost savings, ouroperations, our economic performance and financial condition, including, inparticular, statements relating to our business and growth strategy and productdevelopment efforts. These forward-looking statements are not historical facts,but only predictions and generally can by identified by the use of statementsthat include such words as “may”, “might”, “should”, “estimate”, “project”, “plan”,“anticipate”, “expect”, “intend”, “outlook”, “believe” and other similar expressions that are intended toidentify forward-looking statements and information. These forward-lookingstatements are based on estimates and assumptions by our management that,although we believe to be reasonable, are inherently uncertain and subject to anumber of risks and uncertainties. These risks and uncertainties include, withoutlimitation, those identified under Item 1A. *Risk Factors*included in our Annual Report on Form 10-K for the fiscal year ended December30, 2006 and elsewhere in this report.

The following list represents some, butnot necessarily all, of the factors that could cause actual results to differfrom historical results or those anticipated or predicted by theseforward-looking statements:

·                  our substantial indebtedness;

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

·                  competition from other companies;

·                  the seasonality of our businesses;

·                  the loss of significant customers orcustomer relationships;

·                  fluctuations in raw material prices;

·                  our reliance on a limited number ofsuppliers;

·                  our reliance on numerous complexinformation systems;

·                  the reliance of our businesses onlimited production facilities;

·                  the amount of capital expendituresrequired for our businesses;

·                  labor disturbances;

·                  environmental regulations;

·                  foreign currency fluctuations andforeign exchange rates;

·                  the outcome of litigation;

·                  our dependency on the sale of schooltextbooks;

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·                  control by our stockholders;

·                  Jostens, Inc.’s reliance onindependent sales representatives;

·                  the failure of our sampling systemsto comply with U.S. postal regulations

·                  fluctuation in customers’ advertisingspending; and

·                  the textbook adoption cycle andlevels of government funding for education spending.

Wecaution you that the foregoing list of important factors is not exclusive. Inaddition, in light of these risks and uncertainties, the matters referred to inthe forward-looking statements contained in this report may not in fact occur.Forward-looking statements speak only as of the date they are made and weundertake no obligation to update publicly or revise any of them in light ofnew information, future events or otherwise, except as required by law.

**GENERAL**

Weare a leading marketing and publishing services enterprise servicing the schoolaffinity, direct marketing, fragrance and cosmetics sampling and educationalpublishing market segments. We were formed through the October 2004consolidation of Jostens, Von Hoffmann and Arcade (the “Transactions”). We sellour products and services to end customers through several different saleschannels including independent sales representatives and dedicated salesforces. Our sales and results of operations are impacted by general economicconditions, seasonality, cost of raw materials, school population trends, productquality and service and price.

Asof December 2006, our Von Hoffmann Holdings Inc., Von HoffmannCorporation and Anthology, Inc. businesses (the “Von Hoffmann businesses”)were held as assets for sale. On January 3, 2007, we entered into a StockPurchase Agreement (the “Von Hoffmann Stock Purchase Agreement”) with R.R.Donnelley & Sons Company providing for the sale of the Von Hoffmannbusinesses, which previously comprised the Educational Textbook segment and aportion of the Marketing and Publishing Services segment. We closed thetransaction on May 16, 2007. The operations of the Von Hoffmann businessesare reported as discontinued operations in the consolidated financialstatements for all periods presented.

On March 16, 2007, the Company acquired all of theoutstanding capital stock of Neff Holding Company and its wholly ownedsubsidiary Neff Motivation, Inc (“Neff”). Neff is a leading single sourceprovider of custom award programs and apparel, including chenille letters andletter jackets, to the scholastic market segment.  Neff operates as a direct subsidiary ofVisant under the Neff brand name and its results are reported as part of theScholastic segment from the date of acquisition.

On June 14, 2007, the Company acquired all of theoutstanding capital stock of Visual Systems, Inc. (“VSI”).  VSI is a leading supplier in the overheadtransparency and book component business. The acquisition of VSI complements our core publishing servicesbusinesses and affords us operational flexibility.  Results of VSI are included in theMarketing and Publishing Services segment from the date of acquisition.

Our threereportable segments as of June 30, 2007 consisted of:

·                  *Scholastic*—provides services related to the marketing, saleand production of class rings and an array of graduation products and otherscholastic products to students and administrators primarily in high schools,colleges and other post-secondary institutions;

·                  *Yearbook—*provides services related to the publication,marketing, sale and production of school yearbooks; and

·                  *Marketing and Publishing Services*—produces multi-sensory andinteractive advertising sampling systems, primarily for the fragrance,cosmetics and personal care market segments, and provides innovative productsand services to the direct marketing sector. The group also produces bookcovers and other components for educational publishers.

We areseeing delays and some softness in the placement of orders in our directmarketing and sampling businesses which we believe result from tighter economicand general market conditions affecting the timing of decisions and the extentof advertising spending by our customers. These conditions could impact thetiming of orders as well as the level of spending by our customers in directmarketing and sampling.

**CompanyBackground**

On October 4, 2004, an affiliate of Kohlberg KravisRoberts & Co. L.P. (“KKR”) and affiliates of DLJ Merchant BankingPartners completed a series of transactions which created a marketing andpublishing services enterprise, servicing the school

31

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affinity products, direct marketing, fragrance and cosmetics samplingand educational publishing market segments through the consolidation ofJostens, Von Hoffmann and Arcade (the “Transactions”).

Prior to the Transactions, Von Hoffmann and Arcade wereeach controlled by affiliates of DLJ Merchant Banking Partners II, L.P. (“DLJMBPII”), and DLJ Merchant Banking Partners III, L.P. (“DLJMBP III”) ownedapproximately 82.5% of our outstanding equity, with the remainder held by otherco-investors and certain members of management. Upon consummation of the Transactions, an affiliate of KKR invested$256.1 million and was issued equity interests representing approximately49.6% of our voting interest and 45.0% of our economic interest and affiliatesof DLJMBP III held equity interests representing approximately 41.0% ofHoldings’ voting interest and 45.0% of Holdings’ economic interest, with theremainder held by other co-investors and certain members of management.  After giving effect to the issuance of equityto additional members of management, as of August 6, 2007, affiliates of KKRand DLJMBP III (the “Sponsors”) held approximately 49.0% and 41.0%,respectively, of Holdings’ voting interest, while each continued to holdapproximately 44.6% of Holdings’ economic interest. As of August 6, 2007, theother co-investors held approximately 8.4% of the voting interest and 9.1% ofthe economic interest of Holdings and members of management held approximately1.6% of the voting interest and approximately 1.7% of the economic interest ofHoldings.

**CRITICALACCOUNTING POLICIES**

The preparation of interim financial statements involves the use ofcertain estimates that differ from those used in the preparation of annualfinancial statements, the most significant of which relates to incometaxes.  For purposes of preparing ourinterim financial statements, we utilize an estimated annual effective tax ratebased on estimates of the components that impact the tax rate.  Those components are re-evaluated eachinterim period and, if changes in our estimates are significant, we modify ourestimate of the annual effective tax rate and make any required adjustments inthe interim period.

There have been no material changes to our critical accounting policiesand estimates as described in Item 7 of our Annual Report on Form 10-K for thefiscal year ended December 30, 2006.

**RecentAccounting Pronouncements**

Effectiveat the beginning of fiscal 2007, we adopted FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*(“FIN 48”), whichclarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 109, *Accounting for IncomeTaxes*.  FIN 48 requiresapplying a “more likely than not” threshold to the recognition andderecognition of tax positions.  Inconnection with the adoption of FIN 48, effective as of January 1, 2007, theCompany made a change in accounting principle for the classification ofinterest income on tax refunds.  Inaddition, since the adoption of FIN 48, all interest and penalties on incometax assessments have been recorded as income tax expense and included as partof the Company’s unrecognized tax benefit liability.  The unrecognized tax benefit liability atDecember 31, 2006, the date of adoption of FIN 48, was $12.4 million including$1.9 million of gross interest and penalty accruals.  During the six months ended June 30, 2007,there were no material changes to the unrecognized tax benefit liabilityrecorded at the time FIN 48 was adopted. Refer to Note 13.

In September 2006, the FASB issued SFAS No. 157, *Fair ValueMeasurements* (“SFAS No. 157), which establishes a framework formeasuring fair value and requires enhanced disclosures about fair valuemeasurements. SFAS No. 157 requires companies to disclose the fair value oftheir financial instruments according to a fair value hierarchy as defined inthe standard.  SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years.  We are currently assessing the impact of SFASNo. 157 on our financial statements.

InSeptember 2006, the FASB issued SFAS No. 158, *Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans*(“SFAS No. 158”)*.* SFAS No. 158 requires: the recognition of the funded status of abenefit plan in the balance sheet; the recognition in other comprehensiveincome of gains or losses and prior service costs or credits arising during theperiod but which are not included as components of periodic benefit cost; themeasurement of defined benefit plan assets and obligations as of the balancesheet date; and disclosure of additional information about the effects onperiodic benefit cost for the following fiscal year arising from delayedrecognition in the current period. In addition, SFAS No. 158 amends SFASNo. 87, *Employers’ Accounting for Pensions*,and SFAS No. 106, *Employers’ Accounting forPostretirement Benefits Other Than Pensions*, to include guidanceregarding selection of assumed discount rates for use in measuring the benefitobligation.  The new guidance will beeffective for us for the first fiscal year ending after June 15, 2007.  We are currently assessing the impact of SFASNo. 158 on our financial statements.

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In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities*(“SFAS No. 159”).  SFAS No. 159 permitsentities to measure many financial assets and financial liabilities at fairvalue.  Unrealized gains and losses onitems for which the fair value option has been elected are reported inearnings.  SFAS No. 159 is effective forfiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS No. 159 on our financialstatements.

**RESULTSOF OPERATIONS**

**ThreeMonths Ended June 30, 2007 Compared to the Three Months Ended July 1, 2006**

The followingtable sets forth selected information derived from Holdings’ condensedconsolidated statements of operations for the three-month periods ended June30, 2007 and July 1, 2006.
|                                                  | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|--------------------------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                       | ** ** | **June 30,**                | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                            | ** ** | **2007**                         | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                                        |       | $                                | 501,466    |             | $          | 469,492           |       | $ | 31,974 |   | 6.8 | % |
| Cost of products  sold                           |       | 217,776                          |       | 211,792          |       | 5,984             |       | 2.8 | % |
| Gross profit                                     |       | 283,690                          |       | 257,700          |       | 25,990            |       | 10.1 | % |
| *% of net sales*                                 | * *   | ***56.6***                       | ***%***    | ***54.9***       | ***%***    | * *          | * *   | * * | * * |
|                                             |       |                             |       |             |       |              |       |   |   |
| Selling and  administrative expenses             |       | 129,400                          |       | 121,610          |       | 7,790             |       | 6.4 | % |
| *% of net sales*                                 | * *   | ***25.8***                       | ***%***    | ***25.9***       | ***%***    | * *          | * *   | * * | * * |
|                                             |       |                             |       |             |       |              |       |   |   |
| Loss (gain) on  sale of fixed assets             |       | 229                              |       | (828             | )          | 1,057             |       | NM |   |
| Special charges                                  |       | (41                              | )          | (150             | )          | 109               |       | NM |   |
| Operating income                                 |       | 154,102                          |       | 137,068          |       | 17,034            |       | 12.4 | % |
| *% of net sales*                                 | * *   | ***30.7***                       | ***%***    | ***29.2***       | ***%***    | * *          | * *   | * * | * * |
|                                             |       |                             |       |             |       |              |       |   |   |
| Interest expense,  net                           |       | 42,694                           |       | 37,418           |       | 5,276             |       | 14.1 | % |
| Income before  income taxes                      |       | 111,408                          |       | 99,650           |       | 11,758            |       |   |   |
| Provision for  income taxes                      |       | 41,436                           |       | 40,106           |       | 1,330             |       | 3.3 | % |
| Income from  continuing operations               |       | 69,972                           |       | 59,544           |       | 10,428            |       | 17.5 | % |
| Income from  discontinued operations, net of tax |       | 102,529                          |       | 2,220            |       | 100,309           |       | NM |   |
| Net income                                       |       | $                                | 172,501    |             | $          | 61,764            |       | $ | 110,737 |   | 179.3 | % |

 

----

NM= Not meaningful

The followingtable sets forth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the three-month periods ended June30, 2007 and July 1, 2006.  Foradditional financial information about our operating segments, see Note 16, *Business Segments,* to the condensed consolidated financialstatements.

33

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|                                   | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|-----------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                        | ** ** | **June 30,**                | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**             | ** ** | **2007**                         | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                         |       |                             |       |             |       |              |       |   |   |
| Scholastic                        |       | $                                | 136,096    |             | $          | 129,854           |       | $ | 6,242 |   | 4.8 | % |
| Yearbook                          |       | 264,524                          |       | 254,339          |       | 10,185            |       | 4.0 | % |
| Marketing and Publishing Services |       | 100,962                          |       | 85,299           |       | 15,663            |       | 18.4 | % |
| Inter-segment eliminations        |       | (116                             | )          | —           |       | (116              | )          | NM |   |
| Net sales                         |       | $                                | 501,466    |             | $          | 469,492           |       | $ | 31,974 |   | 6.8 | % |
|                              |       |                             |       |             |       |              |       |   |   |
| Operating income                  |       |                             |       |             |       |              |       |   |   |
| Scholastic                        |       | $                                | 24,978     |             | $          | 21,837            |       | $ | 3,141 |   | 14.4 | % |
| Yearbook                          |       | 112,067                          |       | 100,311          |       | 11,756            |       | 11.7 | % |
| Marketing and Publishing Services |       | 17,057                           |       | 14,920           |       | 2,137             |       | 14.3 | % |
| Operating income                  |       | $                                | 154,102    |             | $          | 137,068           |       | $ | 17,034 |   | 12.4 | % |

 

----

NM=Not Meaningful

*NetSales. *Consolidatednet sales increased $32.0 million, or 6.8%, to $501.5 million for the threemonths ended June 30, 2007 from $469.5 million for the corresponding period in2006.

The net sales ofthe Scholastic segment increased $6.2 million, or 4.8%, to $136.1 million forthe second quarter of 2007 from $129.9 million for the second quarter of2006.  The increase was primarilyattributable to the acquisition of Neff during the first quarter of 2007 andthe impact of price increases largely driven by the cost of precious metalwhich increased significantly throughout 2006. This increase was partially offset by lower jewelry volume in thequarter compared to the same period in 2006. A significant portion of the lower jewelry volume resulted from the lossof certain professional championship ring orders in 2007.

Yearbook net salesincreased $10.2 million, or 4.0%, to $264.5 million for the quarter ended June30, 2007 compared to $254.3 million in the second quarter of 2006.  The increase was due mainly to account growthand increased prices driven by new product and service offerings in 2007compared to 2006.

The net sales ofthe continuing operations of the Marketing and Publishing Services segmentincreased $15.7 million, or 18.4%, to $101.0 million during the second quarterof 2007 from $85.3 million for the second quarter of 2006.  The increase was primarily attributable tohigher volume in both our sampling and direct marketing businesses, includingsales generated by the businesses acquired in 2006.  We also had increased volumes in oureducational book component business.

*GrossProfit.*  Gross profitincreased $26.0 million, or 10.1%, to $283.7 million for the three months endedJune 30, 2007 from $257.7 million for the same period in 2006.  As a percentage of net sales, gross profitmargin increased to 56.6% for the three months ended June 30, 2007 from 54.9%for the same period in 2006.  Theincrease was attributable to:

·                  the impact of price increases in theScholastic and Yearbook segments;

·                  cost reductions and continued productivityimprovements in our Yearbook facilities; and

·                  timing of certain Yearbook expenses.

These increases were partially offset by:

·                  changes in the mix of work in the Marketingand Publishing Services segment that included higher material costs in thesecond quarter of 2007; and

·                  volume attributable to our 2006 acquisitionscontributing a slightly lower margin than our historical sales.

*Sellingand Administrative Expenses.* Selling and administrative expenses increased $7.8 million, or 6.4%, to$129.4 million for the three months ended June 30, 2007 from $121.6 million forthe corresponding period in 2006.    Theincrease in selling and administrative expenses was the result of:

34

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·                  higher commissions in the Scholastic segmentassociated with increased net sales of graduation products, which have a highercommission structure than other Scholastic products;

·                  development costs across all segmentsrelated to growth initiatives;

·                  higher information technology costs in theScholastic and Yearbook segments; and

·                  expenses in 2007 associated with our 2006acquisitions.

These increaseswere partially offset by:

·                  our continued cost-cutting efforts; and

·                  the timing of certain expenses.

As a percentage ofnet sales, selling and administrative expenses decreased 0.1% to 25.8% for thesecond quarter of 2007 from 25.9% for the same period in 2006.

*Special Charges. *Duringthe three months ended June 30, 2007 and July 1, 2006, the Company recorded netreversals for severance and related benefits costs in the Scholastic andYearbook segments of $0.1 million and $0.2 million, respectively.

*OperatingIncome. *Consolidatedoperating income increased $17.0 million, or 12.4%, to $154.1 million for thethree months ended June 30, 2007 from $137.1 million for the comparable periodin 2006.  As a percentage of net sales,operating income increased to 30.7% for the second quarter of 2007 from 29.2%for the same period in 2006.  Thisincrease was mainly attributable to the price increases and improvements in theYearbook manufacturing process, partially offset by increased volume in ourMarketing and Publishing Services segment, which has comparatively lowermargins than our Scholastic and Yearbook segments.

*NetInterest Expense. *Netinterest expense was comprised of the following:
|                                                                      | ** ** | **Three months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                                           | ** ** | **June 30,**                | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                | ** ** | **2007**                         | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                          |       |                             |       |             |       |              |       |   |   |
| Interest expense                                                     |       | $                                | 20,088     |             | $          | 24,617            |       | $ | (4,529 | ) | (18.4 | )% |
| Amortization of debt discount, premium and deferred  financing costs |       | 9,716                            |       | 1,944            |       | 7,772             |       | 399.8 | % |
| Interest income                                                      |       | (471                             | )          | (1,811           | )          | 1,340             |       | NM |   |
| Visant interest expense, net                                         | ** ** | **29,333**                       | ** ** | **24,750**       | ** ** | **4,583**         |       | 18.5 | % |
| **Holdings:**                                                        |       |                             |       |             |       |              |       |   |   |
| Interest expense                                                     |       | 7,635                            |       | 7,468            |       | 167               |       | 2.2 | % |
| Amortization of debt discount, premium and deferred  financing costs |       | 5,728                            |       | 5,200            |       | 528               |       | 10.2 | % |
| Interest income                                                      |       | (2                               | )          | —           |       | (2                | )          | NM |   |
| Holdings interest expense, net                                       | ** ** | **13,361**                       | ** ** | **12,668**       | ** ** | **693**           |       | 5.5 | % |
| **Interest  expense, net**                                           | ** ** | **$**                            | **42,694** | ** **       | **$**      | **37,418**        | ** ** | **$** | **5,276** |   | 14.1 | % |

 

----

NM=Not meaningful

Net interest expense increased $5.3 million, or 14.1%,to $42.7 million for the three months ended June 30, 2007 as compared to $37.4million for the comparable prior year period.  The increase was due tohigher amortization expense of deferred financing costs caused by theprepayment of $400.0 million of the term loans under the term loan C facilityduring the second quarter of 2007, partially offset somewhat by lower averageborrowings due to such prepayments.

35

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*Income Taxes. *The Company has recorded income tax provisions for thethree months ended June 30, 2007 based on its best estimate of the consolidatedeffective tax rate applicable for the entire year plus tax adjustmentsconsidered a period expense or benefit. The effective tax rates for the three months ended June 30, 2007 were37.2% and 36.9% for Holdings and Visant, respectively.  For the comparable three-month period endedJuly 1, 2006, the effective tax rates were 40.2% and 39.1% for Holdings andVisant, respectively.  The effective taxrates for the 2007 period were less than the rates for the comparable 2006period due largely to the effect of an increase in the rate of the U.S.domestic manufacturing deduction and reduced state income tax provisions for2007.

*Incomefrom Discontinued Operations. *Duringthe second quarter of 2006, we consummated the sale of our Jostens Photographybusinesses, which previously comprised a reportable segment.  Results for the second quarter of 2007 andthe 2006 comparable period for the Jostens Photography businesses includedincome of $0.4 million and a loss of $3.3 million, respectively.

During the secondquarter of 2007, we consummated the sale of the Von Hoffmann businesses, whichpreviously comprised the Educational Textbook segment and a portion of theMarketing and Publishing Services segment. The sale closed on May 16, 2007 with the Company recognizing netproceeds of $401.8 million, subject to a working capital adjustment, and a gainof $98.4 million on the transaction during the second quarter of 2007.  Operations for the Von Hoffmann businesses resultedin income of $3.7 million and $5.6 million for the second quarter of 2007 and2006, respectively.

*NetIncome. *As a result of the aforementioned items, netincome increased $110.7 million, or 179.3%, to $172.5 million for thethree months ended June 30, 2007 compared to net income of $61.8million for the same period in 2006.

**Six Months Ended June 30, 2007Compared to the Six Months Ended July 1, 2006**

Thefollowing table sets forth selected information derived from Holdings’condensed consolidated statements of operations for the six-month periods endedJune 30, 2007 and July 1, 2006.
|                                                  | ** **   | **Six months ended** | ** **   | ** **       | ** **   | ** **        | ** **   |
|--------------------------------------------------|--------------|--------------------------------|--------------|------------------|--------------|-------------------|--------------|
| ** **                                       | ** **   | **June 30,**              | ** **   | **July 1,** | ** **   | ** **        | ** **   | ** ** | ** ** |
| **In thousands**                            | ** **   | **2007**                       | ** **   | **2006**         | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                                        |         | $                              | 757,316      |             | $            | 697,478           |         | $ | 59,838 |   | 8.6 | % |
| Cost of products  sold                           |         | 345,846                        |         | 322,580          |         | 23,266            |         | 7.2 | % |
| Gross profit                                     |         | 411,470                        |         | 374,898          |         | 36,572            |         | 9.8 | % |
| *% of net sales*                                 | *** *** | ***54.3***                     | ***%***      | ***53.8***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| * *                                         | * *     | * *                       | * *     | * *         | * *     | * *          | * *     | * * | * * |
| Selling and  administrative expenses             |         | 233,142                        |         | 213,555          |         | 19,587            |         | 9.2 | % |
| *% of net sales*                                 | *** *** | ***30.8***                     | ***%***      | ***30.6***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                     |         | —                         |         |             |         |              |         |   |   |
| Loss (gain) on  disposal of fixed assets         |         | 620                            |         | (853             | )            | 1,473             |         | NM |   |
| Transaction  costs                               |         | —                         |         | —           |         | —            |         | NM |   |
| Special charges                                  |         | (41                            | )            | 2,594            |         | (2,635            | )            | NM |   |
| Operating income                                 |         | 177,749                        |         | 159,602          |         | 18,147            |         | 11.4 | % |
| *% of net sales*                                 | *** *** | ***23.5***                     | ***%***      | ***22.9***       | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                                     | *** *** | *** ***                   | *** *** | *** ***     | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Interest  expense, net                           |         | 81,202                         |         | 68,396           |         | 12,806            |         | 18.7 | % |
| Income before  income taxes                      |         | 96,547                         |         | 91,206           |         | 5,341             |         |   |   |
| Provision for  income taxes                      |         | 36,187                         |         | 36,040           |         | 147               |         | 0.4 | % |
| Income from  continuing operations               |         | 60,360                         |         | 55,166           |         | 5,194             |         | 9.4 | % |
| Income from  discontinued operations, net of tax |         | 110,902                        |         | 5,462            |         | 105,440           |         | NM |   |
| Net income                                       |         | $                              | 171,262      |             | $            | 60,628            |         | $ | 110,634 |   | 182.5 | % |

 

----

NM = Not meaningful

The followingtable sets forth selected segment information derived from Holdings’ condensedconsolidated statements of operations for the six-month periods ended June 30,2007 and July 1, 2006.  For additionalfinancial information about our operating segments, see Note 16, *Business Segments,* to the condensed consolidated financialstatements.

36

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|                                   | ** ** | **Six months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|-----------------------------------|------------|--------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                        | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**             | ** ** | **2007**                       | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                         |       |                           |       |             |       |              |       |   |   |
| Scholastic                        |       | $                              | 276,401    |             | $          | 264,237           |       | $ | 12,164 |   | 4.6 | % |
| Yearbook                          |       | 272,375                        |       | 262,634          |       | 9,741             |       | 3.7 | % |
| Marketing and Publishing Services |       | 209,013                        |       | 170,659          |       | 38,354            |       | 22.5 | % |
| Inter-segment eliminations        |       | (473                           | )          | (52              | )          | (421              | )          | NM |   |
| Net sales                         |       | $                              | 757,316    |             | $          | 697,478           |       | $ | 59,838 |   | 8.6 | % |
|                              |       |                           |       |             |       |              |       |   |   |
| Operating income                  |       |                           |       |             |       |              |       |   |   |
| Scholastic                        |       | $                              | 47,470     |             | $          | 41,890            |       | $ | 5,580 |   | 13.3 | % |
| Yearbook                          |       | 94,948                         |       | 86,300           |       | 8,648             |       | 10.0 | % |
| Marketing and Publishing Services |       | 35,331                         |       | 31,412           |       | 3,919             |       | 12.5 | % |
| Operating income                  |       | $                              | 177,749    |             | $          | 159,602           |       | $ | 18,147 |   | 11.4 | % |

 

----

NM=Not Meaningful

*NetSales. *Consolidatednet sales increased $59.8 million, or 8.6%, to $757.3 million for the sixmonths ended June 30, 2007 from $697.5 million for the corresponding period in2006.

The net sales ofthe Scholastic segment increased $12.2 million, or 4.6%, to $276.4 million forthe first half of 2007 from $264.2 million for the first half of 2006.  The increase was primarily attributable tothe acquisition of Neff during the first quarter of 2007 and the impact ofprice increases largely driven by the cost of precious metal which increasedsignificantly throughout 2006.  This waspartially offset by lower volume in the first six months of 2007 compared to2006.  A significant contributor to thelower jewelry volume was the loss of certain professional championship ringorders.

Yearbook net salesincreased $9.7 million, or 3.7%, to $272.4 million for the six months endedJune 30, 2007 compared to $262.6 million in the comparable period of 2006.  The increase was due mainly to account growthand increased prices driven by new product and service offerings in 2007compared to 2006.

The net sales ofthe continuing operations of the Marketing and Publishing Services segment increased$38.4 million, or 22.5%, to $209.0 million during the first half of 2007 from$170.7 million for the first half of 2006. The increase was attributable primarily to sales generated by thebusinesses acquired in 2006 as well as increased volume in both our samplingand direct marketing businesses, as well as book components.

*GrossProfit.*  Gross profitincreased $36.6 million, or 9.8%, to $411.5 million for the six months endedJune 30, 2007 from $374.9 million for the same period in 2006.  As a percentage of net sales, gross profitmargin increased to 54.3% for the six months ended June 30, 2007 from 53.8% forthe same period in 2006.  The increasewas attributable to:

·                  cost savings realized from continuedimprovements in plant efficiency and cost reduction initiatives, primarily inour Scholastic and Yearbook segments; and

·                  the impact of price increases in theScholastic and Yearbook segments.

These increases were partially offset by:

·                  lower jewelry volumes; and

·                  increased volume in our Marketing andPublishing Services segment, where margins are comparatively lower than in theScholastic and Yearbook segments.

*Sellingand Administrative Expenses.* Selling and administrative expenses increased $19.6 million, or 9.2%, to$233.1 million for the six months ended June 30, 2007 from $213.6 million forthe corresponding period in 2006.  As apercentage of net sales, selling and administrative expenses increased 0.2% to30.8% for the first six months of 2007 from 30.6% for the same period in2006.  The increase in selling andadministrative expenses as a percentage of net sales was the result of:

37

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·                  higher commissions in the Scholastic segmentassociated with increased graduation products net sales, which have a highercommission structure than other Scholastic products;

·                  development costs across all segmentsrelated to growth initiatives; and

·                  higher information technology costs in theScholastic and Yearbook segments.

These increaseswere partially offset by lower amortization expense from the 2003 Jostensmerger purchase accounting adjustments.

*Special Charges.*During the six months ended June 30,2007, the Company recorded a reversal of less than $0.1 million for severanceand related benefit costs associated with headcount reductions in the Scholasticand Yearbook segments during the first quarter of 2006.  For the six months ended July 1, 2006, theCompany recorded $2.6 million of special charges. These special chargesincluded $0.1 million related to Jostens Scholastic, less than $0.1 millionrelated to Jostens Yearbook, and $0.2 million related to the Marketing andPublishing Services segment for severance costs and related benefits.  Headcount reductions associated with theseactivities were eight for Jostens Scholastic, two for Jostens Yearbook andthree for Marketing and Publishing Services. Additionally, the Companyrecognized an impairment loss of $2.3 million related to the sale of itsJostens headquarters buildings.

*OperatingIncome. *Consolidatedoperating income increased $18.1 million, or 11.4%, to $177.7 million for thesix months ended June 30, 2007 from $159.6 million for the comparable period in2006.  As a percentage of net sales,operating income increased to 23.5% for the first six months of 2007 from 22.9%for the same period in 2006.  Thisincrease was mainly attributable to improved manufacturing efficiencies as wellas general price increases, partially offset by the impact of increased volumein our Marketing and Publishing Services segment, which comparatively has lowermargins than our Scholastic and Yearbook segments.

*NetInterest Expense. *Netinterest expense was comprised of the following:
|                                                                      | ** ** | **Six months ended** | ** ** | ** **       | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------|------------|------------------|------------|-------------------|------------|
| ** **                                                           | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                | ** ** | **2007**                       | ** ** | **2006**         | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                          |       |                           |       |             |       |              |       |   |   |
| Interest expense                                                     |       | $                              | 43,686     |             | $          | 49,215            |       | $ | (5,529 | ) | (11.2 | )% |
| Amortization of debt discount, premium and deferred  financing costs |       | 11,565                         |       | 3,888            |       | 7,677             |       | 197.5 | % |
| Interest income                                                      |       | (683                           | )          | (2,183           | )          | 1,500             |       | NM |   |
| Visant interest expense, net                                         | ** ** | **54,568**                     | ** ** | **50,920**       | ** ** | **3,648**         |       | 7.2 | % |
| **Holdings:**                                                        |       |                           |       |             |       |              |       |   |   |
| Interest expense                                                     |       | 15,270                         |       | 7,468            |       | 7,802             |       | 104.5 | % |
| Amortization of debt discount, premium and deferred  financing costs |       | 11,366                         |       | 10,015           |       | 1,351             |       | 13.5 | % |
| Interest income                                                      |       | (2                             | )          | (7               | )          | 5                 |       | NM |   |
| Holdings interest expense, net                                       | ** ** | **26,634**                     | ** ** | **17,476**       | ** ** | **9,158**         |       | 52.4 | % |
| **Interest  expense, net**                                           | ** ** | **$**                          | **81,202** | ** **       | **$**      | **68,396**        | ** ** | **$** | **12,806** |   | 18.7 | % |

 

----

NM = Notmeaningful

Net interest expense increased $12.8 million, or18.7%, to $81.2 million for the six months ended June 30, 2007 as compared to$68.4 million for the comparable prior year period.  The increase was dueto higher amortization expense of deferred financing costs as a result of theprepayment of $400.0 million of our Term Loan C during the second quarter of2007, offset somewhat by lower average borrowings due to such prepayments.

*Income Taxes.* The Company hasrecorded income tax provisions for the six months ended June 30, 2007 based onits best estimate of the consolidated effective tax rate applicable for theentire year plus tax adjustments considered a period expense or benefit.  The effective tax rates for the six monthsended June 30, 2007 were 37.5% and 37.1% for Holdings and

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Visant,respectively.  For the comparablesix-month period ended July 1, 2006, the effective tax rates were 39.5% and38.4% for Holdings and Visant, respectively. The effective tax rates for the 2007 period were less than the rates forthe comparable 2006 period due largely to the effect of an increase in the rateof the U.S. domestic manufacturing deduction and reduced state income taxprovisions for 2007.

Asdescribed in Note 13, *Income Taxes*,to the condensed consolidated financial statements, the Company adopted FIN 48as of the beginning of the 2007 fiscal year. Upon adoption of FIN 48, all interest and penalties in connection withincome tax assessments or refunds are recorded as income tax expense orbenefit, as applicable, and included as part of the Company’s unrecognized taxbenefit liability.  For the six-monthperiod ended June 30, 2007, the Company provided $0.3 million of tax andinterest accruals for unrecognizedre tax benefits net of other income taxadjustments considered a period expense or benefit.

*Incomefrom Discontinued Operations. *Duringthe second quarter of 2006, we consummated the sale of our Jostens Photographybusinesses, which previously comprised a reportable segment.  Results for the six months ended June 30,2007 and the 2006 comparable period for the Jostens Photography businessesincluded income of $0.4 million and a loss of $5.4 million, respectively.

During the secondquarter of 2007, we consummated the sale of the Company’s Von Hoffmannbusinesses, which previously comprised the Educational Textbook segment and aportion of the Marketing and Publishing Services segment.  The sale closed on May 16, 2007 with theCompany recognizing net proceeds of $401.8 million, subject to a workingcapital adjustment, and a gain for financial reporting purposes of $98.4million on the transaction during the six months ended June 30, 2007.  Operations for the Von Hoffmann businessesresulted in income of $11.1 million and $10.9 million for the six months endedJune 30, 2007 and the 2006 comparable period, respectively.

We also had incomeof $1.0 million, net of tax, for the six months ended June 30, 2007 from the JostensRecognition business, which was discontinued in 2001.  The income in 2007 resulted from the reversalof an accrual for potential exposure for which the Company does not believe itis likely to have an ongoing liability and therefore, there are no amountsrelated to Jostens Recognition at June 30, 2007.

*NetIncome. *As a result of the aforementioned items, netincome increased $110.6 million, or 182.5%, to $171.3 million for the sixmonths ended June 30, 2007 compared to net income of $60.6 million forthe same period in 2006.

**LIQUIDITY AND CAPITAL RESOURCES**

The followingtable presents cash flow activity of Holdings for the first six months offiscal 2007 and 2006 and should be read in conjunction with our condensedconsolidated statements of cash flows.
|                                            | ** ** | **Six months ended** | ** ** |
|--------------------------------------------|------------|--------------------------------|------------|
| ** **                                 | ** ** | **June 30,**              | ** ** | **July 1,** | ** ** |
| **In thousands**                      | ** ** | **2007**                       | ** ** | **2006** | ** ** |
| Net cash  provided by operating activities |       | $                              | 107,845    |   | $ | 101,039 |   |
| Net cash  provided by investing activities |       | 309,822                        |       | 16,652 |   |
| Net cash used in  financing activities     |       | (400,000                       | )          | — |   |
| Effect of  exchange rate change on cash    |       | 394                            |       | 91 |   |
| Increase in cash and  cash equivalents     | ** ** | **$**                          | **18,061** | ** ** | **$** | **117,782** | ** ** |

 

For the six monthsended June 30, 2007, operating activities generated cash of $107.8 millioncompared with cash generated by operating activities of $101.0 million for thesame prior year period.  The increase of$6.8 million primarily related to higher earnings in the six-month period endedJune 30, 2007.  Included in cash flowsfrom operating activities was cash provided by discontinued operations of $4.6million and $2.0 million for the six-month periods ended June 30, 2007 and July1, 2006, respectively.  Consequently, thecash provided by continuing operations was $103.3 million and $99.0 million forthe first six months of 2007 and 2006, respectively.

39

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Net cash providedby investing activities for the six months ended June 30, 2007 was $309.8million, compared with $16.7 million provided by investing activities for thecomparable 2006 period.  The $293.2million increase related to the sale of the Von Hoffmann businesses, whichgenerated proceeds of approximately $401.8 million, subject to a workingcapital adjustment, during the six months ended June 30, 2007, compared toproceeds generated from the sale of the Jostens Photography businesses of $64.1million for the comparable six-month period in 2006.  Capital expenditures related to purchases ofproperty, plant and equipment for the six months ended June 30, 2007 and thecomparable 2006 period were $36.0 and $23.6 million, respectively.  During the six months ended June 30, 2007 andthe comparable 2006 period, the Company acquired businesses, net of cash,totaling approximately $51.9 million and $13.6 million, respectively.  Included in the cash flows from investing activitieswas cash used in discontinued operations of $5.7 million and $11.5 million forthe six-month periods ended June 30, 2007 and July 1, 2006, respectively.  Consequently, the cash provided by continuingoperations was $315.5 million and $28.2 million for the six months of 2007 and2006, respectively.

Net cash used in financing activities for the six months ended June 30,2007 was $400.0 million due to the Company’s voluntary prepayment of its termloans under its senior secured credit facilities, including all originallyscheduled principal payments due under its term loan C facility for 2007through mid-2011.  During the six monthsended July 1, 2006, financing activities consisted of proceeds from theissuance by Holdings of $350.0 million of senior notes with $9.3 million usedfor debt financing costs related to the notes and a distribution to Holdings’stockholders of $340.7 million. Therefore, there was no net cash provided by or used in financingactivities in the first half of 2006.

During the six months ended June 30, 2007 and July 1, 2006, Visanttransferred approximately $2.6 million and $4.8 million, respectively, of cashto Holdings to allow Holdings to make scheduled interest payments on the $350million 8.75% Senior Notes due 2013. This transfer is reflected in Visant’s condensed consolidated balancesheet as a return of capital and presented in the condensed consolidatedstatement of cash flows as a distribution to stockholder.  These amounts eliminate in consolidation andhave no impact on Holdings’ consolidated financial statements.

During the second quarter of 2007, the Company voluntarily prepaid$400.0 million of term loans under its senior secured credit facilities,including all originally scheduled principal payments due under its term loan Cfacility for 2007 through mid-2011.  Withthese prepayments, the outstanding balance under the term loan C facility wasreduced to $316.5 million.

As of June 30, 2007, we had cash and cash equivalents of $36.8million.  Our principal sources of liquidity are cash flows from operatingactivities and available borrowings under Visant’s senior secured creditfacilities, which included $234.6 million of additional availability underVisant’s revolving credit facility as of June 30, 2007.  We use cashprimarily for debt service obligations, capital expenditures and to fund otherworking capital requirements.  We intend to fund ongoing operationsthrough cash generated by operations and borrowings under the revolving creditfacility.

As market conditionswarrant, we and our Sponsors, including KKR and DLJMBP III and theiraffiliates, may from time to time repurchase debt securities issued by Holdingsor Visant in privately negotiated or open market transactions, by tender offeror otherwise.  No assurance can be givenas to whether or when such repurchases or exchanges will occur and at whatprice.

As of June 30,2007, we were in compliance with all covenants under our material debtobligations.

Our ability tomake scheduled payments of principal, or to pay the interest on, or torefinance our indebtedness, or to fund planned capital expenditures will dependon our future performance.  Based uponthe current level of operations, we believe that cash flows from operations,available cash and short-term investments, together with borrowings availableunder Visant’s senior secured credit facilities, are adequate to meet ourliquidity needs for the next twelve months. In addition, based on market and other considerations, we may decide toraise additional funds through debt or equity financings.  Furthermore, to the extent we make futureacquisitions, we may require new sources of funding, including additional debtor equity financings or some combination thereof.

In July 2007,Moody’s Investors Service (“Moody’s”) affirmed the existing ratings forHoldings and changed the outlook to developing from positive, following ourannouncement that we are reviewing strategic and capital marketalternatives.  Moody’s affirmed allexisting ratings for Visant.  In responseto the Company’s announcement, Standard & Poor’s Ratings Services (“S&P”)placed its ratings on Holdings, including the B+ corporate credit rating, onCreditWatch with negative implications in consideration that strategicalternatives may result in leveraging transactions.  S&P, in the same release, observed recentimprovement in our financial profile as a result of our prepayment ofindebtedness under our senior

40

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secured facilities withproceeds from the sale of the Von Hoffmann businesses.  A security rating is not a recommendation tobuy, sell or hold securities and any rating may be revised or withdrawn at anytime by the assigning rating organization. Each rating should be evaluated independently of any other rating.Reference is made to the Moody’s and S&P announcements dated July 5, 2007and July 3, 2007, respectively, for a full explanation of the considerations byeach of Moody’s and S&P.

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

There have been nomaterial changes in our exposure to market risk during the quarter ended June30, 2007.  For additional information,refer to Item 7A of our 2006 Annual Report on Form 10-K.

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

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting, as defined inRule 13a-15(f) under the Securities Exchange Act of 1934, asamended (“the Exchange Act”).

Our management, under the supervision of our ChiefExecutive Officer and Vice President, Finance, evaluated the effectiveness ofour disclosure controls and procedures (as defined in Rule 13a-15(e) underthe Exchange Act) as of the end of the period covered by this report. Basedupon that evaluation, our Chief Executive Officer and Vice President, Financeconcluded that our disclosure controls and procedures are effective as of theend of the period covered by this report.

During the quarterended June 30, 2007, there was no change in our internal control over financialreporting that materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

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

Not applicable.

**PART II.  OTHER INFORMATION**

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

The following were developments during the threemonths ended June 30, 2007 of material pending legal proceedings to which we orany of our subsidiaries are a party.

In the pendingproceeding as described in Note 12, *Commitments andContingencies*, to the Condensed Consolidated Financial Statements,in May 2007, U.S. Customs and Border Protection (“Customs”) issued a penaltynotice assessing a loss of revenue in the amount of $2.9 million (plus interest)and a monetary penalty of $5.8 million as contemplated in communicationsreceived from Customs in December 2006 and previously disclosed byVisant.  In July 2007, following the end of the second quarter, Jostensfiled a petition in response to the penalty notice challenging Customs’findings and asserting that there has been no loss of revenue and that no penaltyshould be issued against Jostens or that, in the alternative, any penaltyshould be reduced to a nominal fixed amount reflective of the nature of theviolation or mitigated on the basis that the imports at issue are nonethelessduty free. At this stage of the proceedings, the matter will be furtherevaluated by Customs.  Jostens intends to continue to vigorously defendits position and has recorded no accrual for any potential liability pendingfurther communication with Customs.  Jostens has the opportunity to extendan offer in compromise to Customs in an effort to settle this matter in advanceof a final administrative decision.

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

There have been nomaterial changes in our risk factors during the quarter ended June 30,2007.  For additional information, referto Item 1A of our 2006 Annual Report on Form 10-K.

41

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

Ourequity securities are not registered pursuant to Section 12 of the ExchangeAct.  For the quarter ended June 30,2007, we did not issue or sell securities pursuant to offerings that were notregistered under the Securities Act of 1933, as amended (the “Securities Act”),except on April 30, 2007, Holdings granted an aggregate of 5,546 options topurchase Class A Common Stock with an exercise price of $169.15 per share tocertain employees of Visant and its subsidiaries under the 2004 Plan, inaccordance with Rule 506 of Regulation D promulgated under the Securities Act.

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

None.

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

By Action ofStockholders Taken by Written Consent dated as of May 31, 2007, a majority ofthe stockholders of Holdings approved the acquisition of VSI.

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

None.

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

**(a)****                                 **Exhibits
| 3.1(1) |   | Second Amended and Restated Certificate of  Incorporation of Visant Holding Corp. (f/k/a Jostens Holding Corp.)                             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                        |
| 3.2(2) |   | Certificate of Amendment of the Second Amended and  Restated Certificate of Incorporation of Visant Holding Corp.                           |
|   |   |                                                                                                                                        |
| 3.3(3) |   | By-Laws of Visant Holding Corp.                                                                                                             |
|   |   |                                                                                                                                        |
| 3.4(4) |   | Amended and Restated Certificate of Incorporation of  Visant Corporation (f/k/a Jostens IH Corp.)                                           |
|   |   |                                                                                                                                        |
| 3.5(2) |   | Certificate of Amendment of the Amended and Restated  Certificate of Incorporation of Visant Corporation                                    |
|   |   |                                                                                                                                        |
| 3.6(4) |   | By-Laws of Visant Corporation                                                                                                               |
|   |   |                                                                                                                                        |
| 31.1   |   | Certification of President and Chief Executive  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant  Holding Corp. |
|   |   |                                                                                                                                        |
| 31.2   |   | Certification of Vice President, Finance pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp.                |
|   |   |                                                                                                                                        |
| 31.3   |   | Certification of President and Chief Executive  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant  Corporation.  |
|   |   |                                                                                                                                        |
| 31.4   |   | Certification of Vice President, Finance pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.                 |
|   |   |                                                                                                                                        |
| 32.1   |   | Certification of President and Chief Executive  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant  Holding Corp. |
|   |   |                                                                                                                                        |
| 32.2   |   | Certification of Vice President, Finance pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp.                |

 

42

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| 32.3   |   | Certification of President and Chief Executive  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant  Corporation. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                       |
| 32.4   |   | Certification of Vice President, Finance pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.                |

 

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| (1)    |   | Incorporated by reference to Visant Holding Corp.’s  Form S-4/A (file no. 333-112055), filed on November 12,  2004. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                               |
| (2)    |   | Incorporated by reference to Visant Holding Corp.’s  Form 10-K, filed April 1, 2005.                                |
|   |   |                                                                                                                               |
| (3)    |   | Incorporated by reference to Visant Holding Corp.’s  Form S-4/A (file no. 333-112055), filed on February 2,  2004.  |
|   |   |                                                                                                                               |
| (4)    |   | Incorporated by reference to Visant Corporation’s  Form S-4 (file no. 333-120386), filed on November 12,  2004.     |

43

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                        | ** ** | **VISANT  HOLDING CORP.**                     |
|------------------------|------------|-----------------------------------------------|
|                   |       |                                          |
|                   |       |                                          |
| Date: August 13,  2007 |       | /s/ Marc L.  Reisch                           |
|                   |       | Marc L. Reisch                                |
|                   | * *   | *President  and*                              |
|                   | * *   | *Chief  Executive Officer*                    |
|                   |       | (principal  executive officer)                |
|                   |       |                                          |
| Date: August 13,  2007 |       | /s/ Paul B.  Carousso                         |
|                   |       | Paul B. Carousso                              |
|                   | * *   | *Vice  President, Finance*                    |
|                   |       | (principal  financial and accounting officer) |

 

**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                        | ** ** | **VISANT  CORPORATION**                       |
|------------------------|------------|-----------------------------------------------|
|                   |       |                                          |
|                   |       |                                          |
| Date: August 13,  2007 |       | /s/ Marc L.  Reisch                           |
|                   |       | Marc L. Reisch                                |
|                   | * *   | *President  and*                              |
|                   | * *   | *Chief  Executive Officer*                    |
|                   |       | (principal  executive officer)                |
|                   |       |                                          |
| Date: August 13,  2007 |       | /s/ Paul B.  Carousso                         |
|                   |       | Paul B. Carousso                              |
|                   | * *   | *Vice  President, Finance*                    |
|                   |       | (principal  financial and accounting officer) |

 

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