**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM10-Q**

 
| ** ** | **ý** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|------------|------------|------------------------------------------------------------------------------------------------|
|       |       |                                                                                           |
| ** ** | ** ** | **For the Quarterly Period Ended October 1,  2005**                                            |
| ** ** | ** ** | ** **                                                                                     |
| ** ** | ** ** | **or**                                                                                         |
|       |       |                                                                                           |
| ** ** | **o**      | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |

 
| **Commission  File Number** | ** ** | **Registrant, State of Incorporation  Address and Telephone Number**                                                   | ** ** | **I.R.S.  Employer  Identification  Number** |
|-----------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|
|                        |       |                                                                                                                   |       |                                         |
| **333-112055**              | ** ** | **VISANT  HOLDING CORP.**                                                                                              | ** ** | **90-0207875**                               |
|                        |       | **(Incorporated in Delaware)****One Byram Brook Place, Suite 202  Armonk, New York 10504  Telephone: (914) 595-8200**  |       |                                         |
|                        |       |                                                                                                                   |       |                                         |
| **333-120386**              | ** ** | **VISANT  CORPORATION**                                                                                                | ** ** | **90-0207604**                               |
| ** **                  | ** ** | **(Incorporated in Delaware)****One Byram Brook Place, Suite  202  Armonk, New York 10504  Telephone: (914) 595-8200** | ** ** | ** **                                   |

 

Indicateby check mark whether each registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirement for the past 90 days.  Yes ý     Noo

 

Indicateby check mark whether any of the registrants is an accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).Yes o  No ý

 

Indicateby check mark whether any of the registrants is a shell company (as defined inRule 12b-2 of the Exchange Act).

Yeso  No ý

 

Asof November 11, 2005, there were 5,973,659 shares of Class A Common Stock, parvalue $.01 per share, and one share of Class C Common Stock, par value $.01 pershare, of Visant Holding Corp. outstanding and 1,000 shares of common stock,par value $.01 per share, of Visant Corporation outstanding (all of which areowned beneficially by Visant Holding Corp.).

 

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

 

**FILING FORMAT**

 

ThisQuarterly Report on Form 10-Q is a combined report being filed separately bytwo registrants:  Visant Holding Corp. (“Holdings”)and Visant Corporation, a wholly owned subsidiary of Holdings (“Visant”).  Unless the context indicates otherwise, anyreferences in this report to the “Company”, “we”, “our”, “us” or “Holdings”refers to Visant Holding Corp., together with Visant Corporation and itsconsolidated subsidiaries.

 

 

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**TABLE OF CONTENTS**

 
| ** ** | **PART I – FINANCIAL INFORMATION**                                                                                  |   |
|------------|--------------------------------------------------------------------------------------------------------------------------|--------|
|       |                                                                                                                     |   |
| ITEM 1.    | Financial Statements (Unaudited)                                                                                         |   |
|       |                                                                                                                     |   |
|       | **Visant Holding Corp. and subsidiaries:**                                                                               |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Statements of Operations for  the three and nine months ended October 1, 2005 and October 2, 2004 |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Balance Sheets as of October 1,  2005, October 2, 2004 and January 1, 2005                        |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Statements of Cash Flows for  the nine months ended October 1, 2005 and October 2, 2004           |   |
|       |                                                                                                                     |   |
|       | **Visant Corporation and subsidiaries:**                                                                                 |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Statements of Operations for  the three and nine months ended October 1, 2005 and October 2, 2004 |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Balance Sheets as of October 1,  2005, October 2, 2004 and January 1, 2005                        |   |
|       |                                                                                                                     |   |
|       | Condensed Consolidated Statements of Cash Flows for  the nine months ended October 1, 2005 and October 2, 2004           |   |
|       |                                                                                                                     |   |
|       | Notes  to Condensed Consolidated Financial Statements                                                                    |   |
|       |                                                                                                                     |   |
| ITEM 2.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                              |   |
|       |                                                                                                                     |   |
| ITEM 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                                              |   |
|       |                                                                                                                     |   |
| ITEM 4.    | Controls and Procedures                                                                                                  |   |
|       |                                                                                                                     |   |
| ** ** | **PART  II – OTHER INFORMATION**                                                                                    |   |
|       |                                                                                                                     |   |
| ITEM 1.    | Legal Proceedings                                                                                                        |   |
|       |                                                                                                                     |   |
| ITEM 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                                                             |   |
|       |                                                                                                                     |   |
| ITEM 3.    | Defaults  Upon Senior Securities                                                                                         |   |
|       |                                                                                                                     |   |
| ITEM 4.    | Submission  of Matters to a Vote of Security Holders                                                                     |   |
|       |                                                                                                                     |   |
| ITEM 5.    | Other Information                                                                                                        |   |
|       |                                                                                                                     |   |
| ITEM 6.    | Exhibits                                                                                                                 |   |
|       |                                                                                                                     |   |
| Signatures |                                                                                                                     |   |

 

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**PART I.   FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)**

 
| ** **                                 | ** ** | **Three months ended** | ** **  | **Nine months ended** | ** ** |
|--------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                 | ** ** | **October 1,**         | ** **  | **October 2,**        | ** ** | **October 1,** | ** ** | **October 2,** | ** ** |
| **In thousands**                           | ** ** | **2005**               | ** **  | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Net  sales**                             | ** ** | **$**                  | **288,067** | ** **            | **$**      | **284,517** | ** ** | **$** | **1,159,706** | ** ** | **$** | **1,142,312** | ** ** |
| Cost of  products sold                     |       | 192,870                |        | 204,310               |       | 685,586 |   | 721,117 |   |
| Gross profit                               | ** ** | **95,197**             | ** **  | **80,207**            | ** ** | **474,120** | ** ** | **421,195** | ** ** |
| Selling and  administrative expenses       |       | 85,266                 |        | 86,702                |       | 323,411 |   | 328,651 |   |
| (Gain) loss  on disposal of fixed assets   |       | (3,725                 | )           | 30                    |       | (3,478 | ) | (14 | ) |
| Transaction  costs                         |       | —                 |        | 14                    |       | 1,324 |   | 14 |   |
| Special  charges                           |       | 2,610                  |        | 4,687                 |       | 7,417 |   | 5,807 |   |
| **Operating income (loss)**                | ** ** | **11,046**             | ** **  | **(11,226**           | **)**      | **145,446** | ** ** | **86,737** | ** ** |
| Loss on  redemption of debt                |       | —                 |        | —                |       | — |   | 420 |   |
| Interest  expense, net                     |       | 31,896                 |        | 44,179                |       | 92,923 |   | 129,908 |   |
| (Loss)  income before income taxes         | ** ** | **(20,850**            | **)**       | **(55,405**           | **)**      | **52,523** | ** ** | **(43,591** | **)** |
| (Benefit  from) provision for income taxes |       | (9,472                 | )           | (10,683               | )          | 20,904 |   | (2,987 | ) |
| **Net (loss) income**                      | ** ** | **$**                  | **(11,378** | **)**                 | **$**      | **(44,722** | **)** | **$** | **31,619** | ** ** | **$** | **(40,604** | **)** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

1

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**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| ** **                                                                                                                                                                                     | ** ** | **October 1,** | ** **    | **October 2,** | ** ** | **January 1,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|---------------|----------------|------------|----------------|------------|
| **In thousands, except share  amounts**                                                                                                                                                        | ** ** | **2005**       | ** **    | **2004**       | ** ** | **2005**       | ** ** |
| **ASSETS**                                                                                                                                                                                     |       |           |          |           |       |           |       |
| Cash and cash equivalents                                                                                                                                                                      |       | $              | 14,967        |           | $          | 33,942         |       | $ | 84,964 |   |
| Accounts receivable, net                                                                                                                                                                       |       | 175,803        |          | 161,793        |       | 158,243        |       |
| Inventories, net                                                                                                                                                                               |       | 120,288        |          | 113,756        |       | 129,450        |       |
| Salespersons overdrafts, net of allowance  of $13,906, $10,579 and $12,722, respectively                                                                                                       |       | 41,113         |          | 37,205         |       | 35,415         |       |
| Prepaid expenses and other current assets                                                                                                                                                      |       | 8,301          |          | 13,245         |       | 13,639         |       |
| Deferred income taxes                                                                                                                                                                          |       | 32,021         |          | 16,309         |       | 58,892         |       |
| **Total current assets**                                                                                                                                                                       | ** ** | **392,493**    | ** **    | **376,250**    | ** ** | **480,603**    | ** ** |
| Property, plant and equipment                                                                                                                                                                  |       | 539,288        |          | 508,153        |       | 521,284        |       |
| Less accumulated depreciation                                                                                                                                                                  |       | (308,574       | )             | (262,599       | )          | (280,161       | )          |
| Property, plant and equipment, net                                                                                                                                                             | ** ** | **230,714**    | ** **    | **245,554**    | ** ** | **241,123**    | ** ** |
| Goodwill                                                                                                                                                                                       |       | 1,108,386      |          | 1,119,404      |       | 1,108,445      |       |
| Intangibles, net                                                                                                                                                                               |       | 572,760        |          | 621,672        |       | 606,195        |       |
| Deferred financing costs, net                                                                                                                                                                  |       | 53,850         |          | 37,413         |       | 64,127         |       |
| Other assets                                                                                                                                                                                   |       | 11,118         |          | 10,978         |       | 10,904         |       |
| **Total assets**                                                                                                                                                                               | ** ** | **$**          | **2,369,321** | ** **     | **$**      | **2,411,271**  | ** ** | **$** | **2,511,397** | ** ** |
|                                                                                                                                                                                           |       |           |          |           |       |           |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                 |       |           |          |           |       |           |       |
| Book overdrafts                                                                                                                                                                                |       | $              | 5,136         |           | $          | 3,912          |       | $ | — |   |
| Short-term borrowings                                                                                                                                                                          |       | 49,935         |          | 109,643        |       | 8,300          |       |
| Accounts payable                                                                                                                                                                               |       | 48,173         |          | 47,202         |       | 53,505         |       |
| Accrued employee compensation and related  taxes                                                                                                                                               |       | 40,896         |          | 40,244         |       | 46,860         |       |
| Commissions payable                                                                                                                                                                            |       | 9,793          |          | 8,575          |       | 16,694         |       |
| Customer deposits                                                                                                                                                                              |       | 45,191         |          | 44,280         |       | 156,511        |       |
| Current portion of long-term debt                                                                                                                                                              |       | —         |          | 150            |       | 19,950         |       |
| Other accrued liabilities                                                                                                                                                                      |       | 56,747         |          | 81,703         |       | 44,486         |       |
| **Total current liabilities**                                                                                                                                                                  | ** ** | **255,871**    | ** **    | **335,709**    | ** ** | **346,306**    | ** ** |
|                                                                                                                                                                                           |       |           |          |           |       |           |       |
| Long-term debt - less current maturities                                                                                                                                                       |       | 1,596,707      |          | 1,406,243      |       | 1,667,231      |       |
| Redeemable preferred stock                                                                                                                                                                     |       | —         |          | 264,170        |       | —         |       |
| Deferred income taxes                                                                                                                                                                          |       | 232,944        |          | 238,690        |       | 252,414        |       |
| Pension liabilities, net                                                                                                                                                                       |       | 26,276         |          | 27,381         |       | 27,489         |       |
| Other noncurrent liabilities                                                                                                                                                                   |       | 7,924          |          | 5,657          |       | 5,643          |       |
| **Total liabilities**                                                                                                                                                                          | ** ** | **2,119,722**  | ** **    | **2,277,850**  | ** ** | **2,299,083**  | ** ** |
|                                                                                                                                                                                           |       |           |          |           |       |           |       |
| Commitments and contingencies                                                                                                                                                                  |       |           |          |           |       |           |       |
|                                                                                                                                                                                           |       |           |          |           |       |           |       |
| Common stock:                                                                                                                                                                                  |       |           |          |           |       |           |       |
| Class A $.01 par value; authorized  7,000,000 shares; issued and outstanding: 5,971,577 shares at October 1,  2005; 504,584 shares at October 2, 2004 and 5,909,844 shares at January 1,  2005 |       |           |          |           |       |           |       |
| Class B $.01 par value; non-voting;  authorized 2,724,759 shares; issued and outstanding: none at October 1, 2005  and January 1, 2005; 2,724,759 shares at October 2, 2004                    |       |           |          |           |       |           |       |
| Class C $.01 par value; authorized 1 share;  issued and outstanding: 1 share at October 1, 2005 and January 1, 2005; none  at October 2, 2004                                                  |       | 60             |          | 32             |       | 59             |       |
| Additional paid-in-capital                                                                                                                                                                     |       | 524,436        |          | 380,377        |       | 518,413        |       |
| Accumulated deficit                                                                                                                                                                            |       | (275,998       | )             | (247,524       | )          | (307,617       | )          |
| Accumulated other comprehensive income                                                                                                                                                         |       | 1,101          |          | 1,102          |       | 1,459          |       |
| Officer notes receivable                                                                                                                                                                       |       | —         |          | (566           | )          | —         |       |
| **Total stockholders’ equity**                                                                                                                                                            | ** ** | **249,599**    | ** **    | **133,421**    | ** ** | **212,314**    | ** ** |
| **Total liabilities and stockholders’ equity**                                                                                                                                            | ** ** | **$**          | **2,369,321** | ** **     | **$**      | **2,411,271**  | ** ** | **$** | **2,511,397** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

2

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**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**

 
| ** **                                                                         | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **October 1,**        | ** ** | **October 2,** | ** ** |
| **In thousands**                                                                   | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Net income  (loss)                                                                 |       | $                     | 31,619     |   | $ | (40,604 | ) |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                  |       |   |   |
| Depreciation                                                                       |       | 41,351                |       | 49,043 |   |
| Amortization of intangible assets                                                  |       | 35,222                |       | 78,623 |   |
| Amortization of debt discount, premium and  deferred financing costs               |       | 23,651                |       | 17,152 |   |
| Other amortization                                                                 |       | 581                   |       | 636 |   |
| Accrued interest on redeemable preferred  stock                                    |       | —                |       | 37,819 |   |
| Deferred income taxes                                                              |       | 7,401                 |       | (38,438 | ) |
| Loss on redemption of debt                                                         |       | —                |       | 420 |   |
| Gain on sale of assets                                                             |       | (3,478                | )          | (14 | ) |
| Other                                                                              |       | 79                    |       | 47 |   |
| Changes in assets and liabilities:                                                 |       |                  |       |   |   |
| Accounts receivable                                                                |       | (17,672               | )          | (19,991 | ) |
| Inventories                                                                        |       | 11,342                |       | 953 |   |
| Accounts payable and accrued expenses                                              |       | (5,175                | )          | 1,714 |   |
| Customer deposits                                                                  |       | (113,437              | )          | (108,171 | ) |
| Other                                                                              |       | (719                  | )          | 8,202 |   |
| **Net cash provided by (used in) operating  activities**                           | ** ** | **10,765**            | ** ** | **(12,609** | **)** |
| Purchases of  property, plant and equipment                                        |       | (37,023               | )          | (28,634 | ) |
| Proceeds  from the sale of assets                                                  |       | 9,566                 |       | 6,147 |   |
| Other  investing activities, net                                                   |       | (1,808                | )          | (141 | ) |
| **Net cash used in investing activities**                                          | ** ** | **(29,265**           | **)**      | **(22,628** | **)** |
| Net book  overdrafts                                                               |       | 5,136                 |       | 3,912 |   |
| Net  short-term borrowings                                                         |       | 41,199                |       | 66,807 |   |
| Principal  payments on long-term debt                                              |       | (103,500              | )          | (48,366 | ) |
| Redemption  of senior subordinated notes                                           |       | —                |       | (5,800 | ) |
| Proceeds  from issuance of long-term debt                                          |       | —                |       | 4,000 |   |
| Proceeds  from issuance of common stock                                            |       | 5,933                 |       | — |   |
| Other                                                                              |       | (326                  | )          | (496 | ) |
| **Net cash (used in) provided by financing  activities**                           | ** ** | **(51,558**           | **)**      | **20,057** | ** ** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 61                    |       | 10 |   |
| Decrease in  cash and cash equivalents                                             |       | (69,997               | )          | (15,170 | ) |
| Cash and  cash equivalents, beginning of period                                    |       | 84,964                |       | 49,112 |   |
| **Cash and  cash equivalents, end of period**                                      | ** ** | **$**                 | **14,967** | ** ** | **$** | **33,942** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

3

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**VISANT CORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)**

 
| ** **                                | ** ** | **Three months ended** | ** **  | **Nine months ended** | ** ** |
|-------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                | ** ** | **October 1,**         | ** **  | **October 2,**        | ** ** | **October 1,** | ** ** | **October 2,** | ** ** |
| **In thousands**                          | ** ** | **2005**               | ** **  | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Net sales**                             | ** ** | **$**                  | **288,067** | ** **            | **$**      | **284,517** | ** ** | **$** | **1,159,706** | ** ** | **$** | **1,142,312** | ** ** |
| Cost of products sold                     |       | 192,870                |        | 204,310               |       | 685,586 |   | 721,117 |   |
| Gross profit                              | ** ** | **95,197**             | ** **  | **80,207**            | ** ** | **474,120** | ** ** | **421,195** | ** ** |
| Selling and administrative expenses       |       | 85,179                 |        | 86,709                |       | 323,264 |   | 328,549 |   |
| (Gain) loss on disposal of fixed assets   |       | (3,725                 | )           | 30                    |       | (3,478 | ) | (14 | ) |
| Transaction costs                         |       | —                 |        | 14                    |       | 1,324 |   | 14 |   |
| Special charges                           |       | 2,610                  |        | 4,687                 |       | 7,417 |   | 5,807 |   |
| **Operating income (loss)**               | ** ** | **11,133**             | ** **  | **(11,233**           | **)**      | **145,593** | ** ** | **86,839** | ** ** |
| Loss on redemption of debt                |       | —                 |        | —                |       | — |   | 420 |   |
| Interest expense, net                     |       | 27,321                 |        | 40,011                |       | 79,620 |   | 117,770 |   |
| (Loss) income before income taxes         | ** ** | **(16,188**            | **)**       | **(51,244**           | **)**      | **65,973** | ** ** | **(31,351** | **)** |
| (Benefit from) provision for income taxes |       | (7,546                 | )           | (2,911                | )          | 25,729 |   | 3,319 |   |
| **Net (loss) income**                     | ** ** | **$**                  | **(8,642**  | **)**                 | **$**      | **(48,333** | **)** | **$** | **40,244** | ** ** | **$** | **(34,670** | **)** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

4

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**VISANT CORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| ** **                                                                                       | ** ** | **October 1,** | ** **    | **October 2,** | ** ** | **January 1,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------|---------------|----------------|------------|----------------|------------|
| **In thousands, except share  amounts**                                                          | ** ** | **2005**       | ** **    | **2004**       | ** ** | **2005**       | ** ** |
| **ASSETS**                                                                                       |       |           |          |           |       |           |       |
| Cash and cash equivalents                                                                        |       | $              | 14,273        |           | $          | 30,665         |       | $ | 82,269 |   |
| Accounts receivable, net                                                                         |       | 175,803        |          | 161,793        |       | 158,243        |       |
| Inventories, net                                                                                 |       | 120,288        |          | 113,756        |       | 129,450        |       |
| Salespersons overdrafts, net of allowance  of $13,06, $10,579 and $12,722, respectively          |       | 41,113         |          | 37,205         |       | 35,415         |       |
| Prepaid expenses and other current assets                                                        |       | 8,301          |          | 13,245         |       | 13,639         |       |
| Deferred income taxes                                                                            |       | 31,800         |          | 16,309         |       | 58,892         |       |
| **Total current assets**                                                                         | ** ** | **391,578**    | ** **    | **372,973**    | ** ** | **477,908**    | ** ** |
| Property, plant and equipment                                                                    |       | 539,288        |          | 503,237        |       | 521,284        |       |
| Less accumulated depreciation                                                                    |       | (308,574       | )             | (262,455       | )          | (280,161       | )          |
| Property, plant and equipment, net                                                               | ** ** | **230,714**    | ** **    | **240,782**    | ** ** | **241,123**    | ** ** |
| Goodwill                                                                                         |       | 1,108,386      |          | 1,119,404      |       | 1,108,445      |       |
| Intangibles, net                                                                                 |       | 572,760        |          | 621,672        |       | 606,195        |       |
| Deferred financing costs, net                                                                    |       | 48,761         |          | 31,861         |       | 58,679         |       |
| Other assets                                                                                     |       | 11,118         |          | 10,978         |       | 10,904         |       |
| **Total assets**                                                                                 | ** ** | **$**          | **2,363,317** | ** **     | **$**      | **2,397,670**  | ** ** | **$** | **2,503,254** | ** ** |
|                                                                                             |       |           |          |           |       |           |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                   |       |           |          |           |       |           |       |
| Book overdrafts                                                                                  |       | $              | 5,136         |           | $          | 3,912          |       | $ | — |   |
| Short-term borrowings                                                                            |       | 49,935         |          | 109,643        |       | 8,300          |       |
| Accounts payable                                                                                 |       | 48,172         |          | 47,617         |       | 53,505         |       |
| Accrued employee compensation and related  taxes                                                 |       | 40,896         |          | 40,244         |       | 46,860         |       |
| Commissions payable                                                                              |       | 9,793          |          | 8,575          |       | 16,694         |       |
| Customer deposits                                                                                |       | 45,191         |          | 44,280         |       | 156,511        |       |
| Current portion of long-term debt                                                                |       | —         |          | 150            |       | 19,950         |       |
| Other accrued liabilities                                                                        |       | 56,710         |          | 83,651         |       | 45,707         |       |
| **Total current liabilities**                                                                    | ** ** | **255,833**    | ** **    | **338,072**    | ** ** | **347,527**    | ** ** |
|                                                                                             |       |           |          |           |       |           |       |
| Long-term debt - less current maturities                                                         |       | 1,416,500      |          | 1,239,285      |       | 1,500,050      |       |
| Redeemable preferred stock                                                                       |       | —         |          | 264,170        |       | —         |       |
| Deferred income taxes                                                                            |       | 244,110        |          | 243,526        |       | 258,769        |       |
| Pension liabilities, net                                                                         |       | 26,276         |          | 27,381         |       | 27,489         |       |
| Other noncurrent liabilities                                                                     |       | 7,924          |          | 5,657          |       | 5,643          |       |
| **Total liabilities**                                                                            | ** ** | **1,950,643**  | ** **    | **2,118,091**  | ** ** | **2,139,478**  | ** ** |
|                                                                                             |       |           |          |           |       |           |       |
| Commitments and contingencies                                                                    |       |           |          |           |       |           |       |
|                                                                                             |       |           |          |           |       |           |       |
| Common stock $.01 par value; authorized:  2,000,000 shares; issued and outstanding: 1,000 shares |       | —         |          | —         |       | —         |       |
| Additional paid-in-capital                                                                       |       | 667,838        |          | 519,815        |       | 658,826        |       |
| Accumulated deficit                                                                              |       | (256,265       | )             | (240,772       | )          | (296,509       | )          |
| Accumulated other comprehensive income                                                           |       | 1,101          |          | 1,102          |       | 1,459          |       |
| Officer notes receivable                                                                         |       | —         |          | (566           | )          | —         |       |
| **Total stockholder’s equity**                                                              | ** ** | **412,674**    | ** **    | **279,579**    | ** ** | **363,776**    | ** ** |
| **Total liabilities and stockholder’s equity**                                              | ** ** | **$**          | **2,363,317** | ** **     | **$**      | **2,397,670**  | ** ** | **$** | **2,503,254** | ** ** |

 

*See accompanying Notes to the Condensed Consolidated FinancialStatements.*

 

5

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**VISANT CORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**

 
| ** **                                                                         | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **October 1,**        | ** ** | **October 2,** | ** ** |
| **In thousands**                                                                   | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Net income (loss)                                                                  |       | $                     | 40,244     |   | $ | (34,670 | ) |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                  |       |   |   |
| Depreciation                                                                       |       | 41,351                |       | 48,899 |   |
| Amortization of intangible assets                                                  |       | 35,222                |       | 78,623 |   |
| Amortization of debt discount, premium and  deferred financing costs               |       | 10,266                |       | 5,066 |   |
| Other amortization                                                                 |       | 581                   |       | 636 |   |
| Accrued interest on redeemable preferred  stock                                    |       | —                |       | 37,819 |   |
| Deferred income taxes                                                              |       | 12,433                |       | (34,077 | ) |
| Loss on redemption of debt                                                         |       | —                |       | 420 |   |
| Gain on sale of assets                                                             |       | (3,478                | )          | (14 | ) |
| Other                                                                              |       | —                |       | 47 |   |
| Changes in assets and liabilities:                                                 |       |                  |       |   |   |
| Accounts receivable                                                                |       | (17,672               | )          | (19,991 | ) |
| Inventories                                                                        |       | 11,342                |       | 953 |   |
| Accounts payable and accrued expenses                                              |       | (5,175                | )          | 2,603 |   |
| Customer deposits                                                                  |       | (113,437              | )          | (108,171 | ) |
| Other                                                                              |       | (1,978                | )          | 10,145 |   |
| **Net cash provided by (used in) operating  activities**                           | ** ** | **9,699**             | ** ** | **(11,712** | **)** |
| Purchases of property, plant and equipment                                         |       | (37,023               | )          | (23,718 | ) |
| Proceeds from the sale of assets                                                   |       | 9,566                 |       | 6,147 |   |
| Other investing activities, net                                                    |       | (1,808                | )          | (141 | ) |
| **Net cash used in investing activities**                                          | ** ** | **(29,265**           | **)**      | **(17,712** | **)** |
| Net book overdrafts                                                                |       | 5,136                 |       | 3,912 |   |
| Net short-term borrowings                                                          |       | 41,199                |       | 66,807 |   |
| Principal payments on long-term debt                                               |       | (103,500              | )          | (48,250 | ) |
| Redemption of senior subordinated notes                                            |       | —                |       | (5,800 | ) |
| Contribution from Visant Holding Corp.                                             |       | 9,000                 |       | — |   |
| Other                                                                              |       | (326                  | )          | (321 | ) |
| **Net cash (used in) provided by financing  activities**                           | ** ** | **(48,491**           | **)**      | **16,348** | ** ** |
| Effect of exchange rate changes on cash and  cash equivalents                      |       | 61                    |       | 10 |   |
| Decrease in cash and cash equivalents                                              |       | (67,996               | )          | (13,066 | ) |
| Cash and cash equivalents, beginning of  period                                    |       | 82,269                |       | 43,731 |   |
| **Cash and cash equivalents, end of period**                                       | ** ** | **$**                 | **14,273** | ** ** | **$** | **30,665** | ** ** |

 

*See accompanying Notes to the Condensed ConsolidatedFinancial Statements.*

 

6

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**Notes to Condensed Consolidated Financial Statements (Unaudited)**

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

 

**1.****             ****Significant Accounting Policies**

 

***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.

 

Allsignificant intercompany balances and transactions have been eliminated inconsolidation.

 

Asa result of the Transactions as discussed in Note 2, the condensed consolidatedfinancial statements include the consolidation of Jostens, Inc. (“Jostens”),Von Hoffmann Holdings Inc. (“Von Hoffmann”) and AHC I Acquisition Corp. (“Arcade”),entities under common control since July 30, 2003.

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States for interim financial information and with the instructions toForm 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation have been included.  Operating results for the interim periodspresented are not necessarily indicative of the results that may be expectedfor the full year.  These financialstatements should be read in conjunction with the consolidated financialstatements and footnotes included in our Form 10-K for the fiscal year endedJanuary 1, 2005 (“2004 Form 10-K”).

 

Thepreparation of our financial statements in conformity with accountingprinciples generally accepted in the United States requires us to makeestimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. Actual results could differ from those estimates.

 

***Revenue Recognition***

TheSEC’s Staff Accounting Bulletin, or SAB, No. 104, *RevenueRecognition*, provides guidance on the application of accountingprinciples generally accepted in the United States to selected revenuerecognition issues.  In accordance withSAB No. 104, the Company recognizes revenue when the earnings process iscomplete, evidenced by an agreement between the Company and the customer,delivery and acceptance has occurred, collectibility is probable and pricing isfixed or determinable.  Revenue isrecognized when (i) products are shipped (if shipped FOB shipping point), (ii)products are delivered (if shipped FOB destination) or (iii) as services areperformed as determined by contractual agreement,  but in all cases only when risk of loss hastransferred to the customer and when we have no further performanceobligations.

 

***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 freight costs.

 

***Selling and Administrative Expenses***

Selling and administrative expenses primarilyinclude salaries and related benefits of sales and administrative personnel,sales commissions, amortization of intangibles and professional fees such asaudit and consulting fees.

 

7

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***Advertising***

Holdings expenses advertising costs as incurred.  Selling and administrative expenses includeadvertising expense of $2.6 million for the quarter ended October 1, 2005 and$1.8 million for the prior year comparable quarter.  Advertising expense totaled $5.1 million forthe nine months ended October 1, 2005 and $5.7 million for the same period lastyear.

 

***Stock-Based Compensation***

Holdings applies the intrinsic methodprescribed by Accounting Principles Board Opinion (“APB”) 25, *Accounting for Stock Issued to Employees,*andrelated interpretations in accounting for stock options granted to employeesand non-employee directors.  Accordingly,since all options are granted at or above fair value, no compensation cost istypically reflected in net income (loss) for these plans.  Our pro forma net income (loss) incorporatingthe amortization of the stock-based compensation expense determined under thefair value recognition provisions of Statement of Financial AccountingStandards (“SFAS”) 123, *Accounting forStock-Based Compensation,*would not have been materially differentfrom the reported net income (loss) in the statements of operations for theperiods presented.

 

***Recent AccountingPronouncements***

 

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

In December 2004, the FinancialAccounting Standards Board (“FASB”) issued a revision of SFAS 123.  This statement eliminates the alternative touse the intrinsic value method of accounting that was permitted under SFAS 123as originally issued and will require recognition of compensation expenserelated to all equity awards granted after the required effective date and toawards modified, repurchased, or cancelled after that date based on the grantdate fair values of the awards.  This statementis effective for us as of the first interim or annual reporting period thatcommences after December 15, 2005 and is not expected to have a significantimpact on our financial statements.

 

**FSP 109-*****2 – Accounting and DisclosureGuidance for the Foreign Earnings Repatriation Provision within the AmericanJobs Creation Act of 2004.***

In October 2004, the American JobsCreation Act of 2004 (the “AJC Act”) was signed into law.  This legislation creates, among other things,a temporary incentive for U.S. multinational companies to repatriate accumulatedincome earned outside the United States at a favorable rate of tax.  In December 2004, the FASB issued StaffPosition (“FSP”) 109-2, which provides accounting and disclosure guidance forthe repatriation provision.

 

Holdings intends to repatriate earningsfrom our foreign subsidiaries in an amount that could range from $10 million to$13 million.  We estimate that thebenefit of the repatriation dividend will be in a range from $1.8 million to$2.0 million.

 

**2.****             ****The Transactions**

 

On October 4, 2004, an affiliate of Kohlberg Kravis Roberts & Co.L.P. (“KKR”) and affiliates of DLJ Merchant Banking Partners completedtransactions (collectively, the “Transactions”) which created a specialtyprinting, marketing and school-related affinity products and servicesorganization comprised of the operations of Jostens, Von Hoffmann, includingVon Hoffmann’s subsidiary, The Lehigh Press, Inc., and Arcade.

 

Priorto the Transactions, Von Hoffmann and Arcade were each controlled by affiliatesof DLJ Merchant Banking Partners II, L.P. (“DLJMBP II”) and DLJ MerchantBanking 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 millionand was issued equity interests representing approximately 49.6% of Holdings’voting interest and 45% of Holdings’ economic interest,   affiliates of DLJMBP III held equityinterests representing approximately 41% of Holdings’ voting interest and 45%of Holdings’ economic interest, with the remainder held by other co-investorsand certain members of management.  Inconnection with the Transactions, approximately $175.6 million of the proceedswere distributed to certain shareholders, and certain treasury stock held byVon Hoffmann was redeemed.  After givingeffect to the issuance

 

8

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ofequity to additional members of management, as of October 1, 2005 affiliates ofKKR and DLJMBP III held approximately 49.1% and 41%, respectively, of thevoting interests of Holdings, while each continues to hold approximately 45%of  Holdings’ economic interest.  As of such date the other co-investors heldapproximately 8.4% of the voting interest and 9.1% of the economic interests ofHoldings, and members of management held 1.5% of the voting interest and 1.7%of the economic interests of Holdings.

 

Inconnection with the Transactions, Visant entered into new senior secured creditfacilities, providing for an aggregate amount of $1,270 million, including a$250 million revolving credit facility, and issued $500 million aggregateprincipal amount of 75⁄8% senior subordinated notes.   Also in connection with the Transactions,Jostens, Von Hoffmann and Arcade repaid their existing indebtedness having anaggregate face value of $1,392.6 million including the redemption value ofcertain remaining redeemable preferred stock.

 

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

 

The following amounts wereincluded in determining comprehensive income for Holdings:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **October 1,**         | ** ** | **October 2,**        | ** ** | **October 1,** | ** ** | **October 2,** | ** ** |
| **In thousands**                             | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net (loss)  income                           |       | $                      | (11,378    | )                     | $          | (44,722 | ) | $ | 31,619 |   | $ | (40,604 | ) |
| Change in  cumulative translation adjustment |       | 162                    |       | (90                   | )          | (358 | ) | 196 |   |
| Comprehensive  (loss) income                 |       | $                      | (11,216    | )                     | $          | (44,812 | ) | $ | 31,261 |   | $ | (40,408 | ) |

 

The following amounts were included in determiningcomprehensive income for Visant:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **October 1,**         | ** ** | **October 2,**        | ** ** | **October 1,** | ** ** | **October 2,** | ** ** |
| **In thousands**                             | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net (loss)  income                           |       | $                      | (8,642     | )                     | $          | (48,333 | ) | $ | 40,244 |   | $ | (34,670 | ) |
| Change in  cumulative translation adjustment |       | 162                    |       | (90                   | )          | (358 | ) | 196 |   |
| Comprehensive  (loss) income                 |       | $                      | (8,480     | )                     | $          | (48,423 | ) | $ | 39,886 |   | $ | (34,474 | ) |

 

**4.****             ****Accounts Receivable andInventories**

 

Accountsreceivable, net were comprised of the following:

 
| ** **                       | ** ** | **October 1,** | ** **  | **October 2,** | ** ** | **January 1,** | ** ** |
|----------------------------------|------------|----------------|-------------|----------------|------------|----------------|------------|
| **In thousands**                 | ** ** | **2005**       | ** **  | **2004**       | ** ** | **2005**       | ** ** |
| Trade  receivables               |       | $              | 184,773     |           | $          | 170,467        |       | $ | 167,663 |   |
| Allowance  for doubtful accounts |       | (4,110         | )           | (3,786         | )          | (3,621         | )          |
| Allowance  for sales returns     |       | (4,860         | )           | (4,888         | )          | (5,799         | )          |
| Accounts  receivable, net        | ** ** | **$**          | **175,803** | ** **     | **$**      | **161,793**    | ** ** | **$** | **158,243** | ** ** |

 

9

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Net inventories were comprisedof the following:

 
| ** **                  | ** ** | **October 1,** | ** **  | **October 2,** | ** ** | **January 1,** | ** ** |
|-----------------------------|------------|----------------|-------------|----------------|------------|----------------|------------|
| **In thousands**            | ** ** | **2005**       | ** **  | **2004**       | ** ** | **2005**       | ** ** |
| Raw  materials and supplies |       | $              | 56,255      |           | $          | 54,585         |       | $ | 44,989 |   |
| Work-in-process             |       | 38,620         |        | 34,431         |       | 47,695         |       |
| Finished goods              |       | 27,585         |        | 25,974         |       | 38,938         |       |
|                        |       | 122,460        |        | 114,990        |       | 131,622        |       |
| LIFO reserve                |       | (2,172         | )           | (1,234         | )          | (2,172         | )          |
| Inventories,  net           | ** ** | **$**          | **120,288** | ** **     | **$**      | **113,756**    | ** ** | **$** | **129,450** | ** ** |

 

***Precious Metals Consignment Arrangement***

 

Wehave a precious metals consignment arrangement with a major financialinstitution whereby we currently have the ability to obtain up to $30 millionin consigned inventory.  We expensed consignment fees related to thisfacility of $0.1 million for the three months ended October 1, 2005 and thecomparable prior year quarter.  For the nine months ended October 1, 2005and the comparable prior year period consignment fees were $0.4 million.  As required by the terms of our goldconsignment agreement, we do not take title to consigned inventory until we payfor it.  Accordingly, we do not include the value of consigned inventorynor the corresponding liability in our financial statements.  The value ofconsigned inventory as of October 1, 2005 and October 2, 2004 was $20.0 millionand $16.9 million, respectively.  Thegold consignment agreement does not have a stated term, and it can beterminated by either party upon 60 days written notice.

 

**5.****              Goodwill and OtherIntangible Assets, net**

 

The changes in the carryingamount of goodwill were as follows:

 
| ** **                           | ** ** | **Nine months ended** | ** **    |
|--------------------------------------|------------|-----------------------|---------------|
| ** **                           | ** ** | **October 1,**        | ** **    | **October 2,** | ** ** |
| **In thousands**                     | ** ** | **2005**              | ** **    | **2004** | ** ** |
| Balance at  beginning of year        |       | $                     | 1,108,445     |   | $ | 1,138,664 |   |
| Goodwill  acquired during the period |       | 23                    |          | 32 |   |
| Purchase  price adjustments          |       | (113                  | )             | (19,322 | ) |
| Currency  translation                |       | 31                    |          | 30 |   |
| Balance at  end of period            | ** ** | **$**                 | **1,108,386** | ** ** | **$** | **1,119,404** | ** ** |

 

As of October 1, 2005, $717.3 million and $391.1million of goodwill has been allocated to Jostens and the Print Group,respectively.

 

During the first nine months of 2004, purchase priceadjustments primarily related to a reduction in the fair value of Jostens’redeemable preferred stock.

 

10

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

 
| ** **                     | ** ** | ** **      | ** ** | **October 1, 2005** | ** **  | **October 2, 2004** | ** ** |
|--------------------------------|------------|-----------------|------------|---------------------|-------------|---------------------|------------|
| ** **                     | ** ** | ** **      | ** ** | **Gross**           | ** **  | ** **          | ** ** | ** ** | ** ** | **Gross** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | **Estimated**   | ** ** | **carrying**        | ** **  | **Accumulated**     | ** ** | ** ** | ** ** | **carrying** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| **In thousands**               | ** ** | **useful life** | ** ** | **amount**          | ** **  | **amortization**    | ** ** | **Net** | ** ** | **amount** | ** ** | **amortization** | ** ** | **Net** | ** ** |
| School relationships           |       | 10 years        |       | $                   | 330,000     |                | $          | (72,069 | ) | $ | 257,931 |   | $ | 330,000 |   | $ | (39,195 | ) | $ | 290,805 |   |
| Order backlog                  |       | 1.5 years       |       | 48,700              |        | (48,700             | )          | — |   | 49,394 |   | (45,604 | ) | 3,790 |   |
| Internally developed software  |       | 2 to 5 years    |       | 12,200              |        | (7,386              | )          | 4,814 |   | 12,200 |   | (4,051 | ) | 8,149 |   |
| Patented/unpatented technology |       | 3 years         |       | 19,696              |        | (11,090             | )          | 8,606 |   | 19,618 |   | (6,642 | ) | 12,976 |   |
| Customer relationships         |       | 4 to 40 years   |       | 37,205              |        | (9,976              | )          | 27,229 |   | 35,455 |   | (7,184 | ) | 28,271 |   |
| Other                          |       | 3 years         |       | 16,619              |        | (7,019              | )          | 9,600 |   | 16,619 |   | (3,518 | ) | 13,101 |   |
|                           |       |            |       | 464,420             |        | (156,240            | )          | 308,180 |   | 463,286 |   | (106,194 | ) | 357,092 |   |
| Trademarks                     |       | Indefinite      |       | 264,580             |        | —              |       | 264,580 |   | 264,580 |   | — |   | 264,580 |   |
| ** **                     | ** ** | ** **      | ** ** | **$**               | **729,000** | ** **          | **$**      | **(156,240** | **)** | **$** | **572,760** | ** ** | **$** | **727,866** | ** ** | **$** | **(106,194** | **)** | **$** | **621,672** | ** ** |

 

Amortization expense relatedto other intangible assets was $11.7 million and $21.9 million for the threemonths ended October 1, 2005 and October 2, 2004, respectively.  For the nine months ended October 1, 2005 andOctober 2, 2004, amortization expense related to other intangible assets was$35.2 and $78.6 million, respectively.

 

Based on intangible assetsin service as of October 1, 2005, estimated amortization expense for theremainder of 2005 and each of the five succeeding fiscal years is $11.7million, $44.6 million, $40.8 million, $38.9 million, $34.9 million and $34.7million, respectively.

 

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

 

During the third quarter of 2005, we recorded $2.6million of special charges relating to severance payments and related benefitsassociated with on-going initiatives at Jostens and the Print Group.  Jostens recorded $1.6 million of specialcharges relating to a headcount reduction of 32 employees while the Print Grouprecorded $1.0 million of special charges related to severance costs reducingheadcount by 61 employees.

 

For the nine months ended October 1, 2005, weincurred $7.4 million of special charges, including $5.4 million related toseverance costs and related benefits associated with the reduction in headcountof 76 Jostens employees.  The Print Grouprecorded severance costs of $1.7 million related to a reduction in personnel of66 employees, as well as $0.3 million of costs related to a withdrawalliability under a union retirement plan that is payable in connection with theconsolidation of certain operations.  Asof October 1, 2005, we have paid $4.5 million related to initiatives begun in2005 (“2005 initiatives”), which have affected 142 employees.

 

Restructuringaccruals of $5.1 million as of October 1, 2005 and $8.1 million as of January1, 2005 are included in other accrued liabilities in the condensed consolidatedbalance sheets.  The accruals as ofJanuary 1, 2005 include amounts provided for severance related to reductions incorporate and administrative employees from both Jostens and the Print Group,as well as the consolidation of our Print Group’s one- and two-color printoperations.

 

On a cumulative basis through October 1, 2005, weincurred $13.4 million of employee severance costs related to initiatives begunin 2004 (“2004 initiatives”), which affected 310 employees.  To date, we have paid $11.0 million in cashrelated to these initiatives.

 

11

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Changes in the restructuring accruals during thenine months of 2005 were as follows:

 
| ** **                  | ** ** | **2004 Initiatives** | ** ** | **2005 Initiatives** | ** ** | **Total**  | ** ** |
|-----------------------------|------------|----------------------|------------|----------------------|------------|------------|------------|
| ** **                  | ** ** | ** **           | ** ** | **No. of**           | ** ** | ** ** | ** ** | **No. of** | ** ** | ** ** | ** ** | **No. of** | ** ** |
| ** **                  | ** ** | ** **           | ** ** | **employees**        | ** ** | ** ** | ** ** | **employees** | ** ** | ** ** | ** ** | **employees** | ** ** |
| **In thousands**            | ** ** | **Amount**           | ** ** | **affected**         | ** ** | **Amount** | ** ** | **affected** | ** ** | **Amount** | ** ** | **affected** | ** ** |
| Balance at  January 1, 2005 |       | $                    | 8,121      |                 | 162        |       | $          | — |   | — |   | $ | 8,121 |   | 162 |   |
| Restructuring charges       |       | —               |       | —               |       | 7,184      |       | 142 |   | 7,184 |   | 142 |   |
| Severance paid              |       | (5,680               | )          | (162                 | )          | (4,530     | )          | (140 | ) | (10,210 | ) | (302 | ) |
| Balance at  October 1, 2005 | ** ** | **$**                | **2,441**  | ** **           | **—** | ** ** | **$**      | **2,654** | ** ** | **2** | ** ** | **$** | **5,095** | ** ** | **2** | ** ** |

 

We expect the majority of the remaining severancerelated to the 2004 and 2005 Initiatives to be paid during 2005 and the firstquarter of 2006.

 

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

 

Long-term debt consists of thefollowing:

 

12

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| ** **                                                                                                                                                                                                                                                                                                                                             | ** ** | **October 1,** | ** **    | **October 2,** | ** ** | **January 1,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|---------------|----------------|------------|----------------|------------|
| **In thousands**                                                                                                                                                                                                                                                                                                                                       | ** ** | **2005**       | ** **    | **2004**       | ** ** | **2005**       | ** ** |
| **Visant:**                                                                                                                                                                                                                                                                                                                                            | ** ** | ** **     | ** **    | ** **     | ** ** | ** **     | ** ** |
| Borrowings under our senior secured credit  facility:                                                                                                                                                                                                                                                                                                  |       |           |          |           |       |           |       |
| Term Loan A, variable rate, 6.44 percent at  October 1, 2005 and 4.90 percent at January 1, 2005 with semi-annual  principal and interest payments through October 2010                                                                                                                                                                                |       | $              | 90,000        |           | $          | —         |       | $ | 150,000 |   |
| Term Loan C, variable rate, 5.94 percent at  October 1, 2005 and 4.65 percent at January 1, 2005 with semi-annual  principal and interest payments through October 2011                                                                                                                                                                                |       | 826,500        |          | —         |       | 870,000        |       |
| Senior subordinated notes, 7.625 percent  fixed rate, with semi-annual interest payments of $19.1 million, principal  due and payable at maturity - October 2012                                                                                                                                                                                       |       | 500,000        |          | —         |       | 500,000        |       |
| Term loan - Jostens, variable rate, 6.25  percent at October 2, 2004, paid in full October 2004                                                                                                                                                                                                                                                        |       |           |          | 412,705        |       | —         |       |
| Senior subordinated notes - Jostens, 12.75  percent fixed rate, including premium of $20,217 at October 2, 2004, paid in  full October 2004                                                                                                                                                                                                            |       | —         |          | 224,202        |       | —         |       |
| Senior notes - Von Hoffmann, 10.25 percent  fixed rate, including premium of $2,353 at October 2, 2004, paid in full  October 2004                                                                                                                                                                                                                     |       | —         |          | 277,353        |       | —         |       |
| Senior subordinated notes - Von Hoffmann,  10.375 percent fixed rate, paid in full October 2004                                                                                                                                                                                                                                                        |       | —         |          | 100,000        |       | —         |       |
| Subordinated exchange debentures - Von  Hoffmann, 13.5 percent fixed rate, paid in full October 2004                                                                                                                                                                                                                                                   |       | —         |          | 45,758         |       | —         |       |
| Senior notes - Arcade, 10.5 percent fixed  rate, paid in full October 2004                                                                                                                                                                                                                                                                             |       | —         |          | 103,510        |       | —         |       |
| Amended and restated notes - Arcade, 16.0  percent fixed rate, net of discount of $478 at October 2, 2004, paid in full  October 2004                                                                                                                                                                                                                  |       | —         |          | 75,907         |       | —         |       |
| ** **                                                                                                                                                                                                                                                                                                                                             | ** ** | **1,416,500**  | ** **    | **1,239,435**  | ** ** | **1,520,000**  | ** ** |
| Less current portion                                                                                                                                                                                                                                                                                                                                   |       | —         |          | 150            |       | 19,950         |       |
| ** **                                                                                                                                                                                                                                                                                                                                             | ** ** | **1,416,500**  | ** **    | **1,239,285**  | ** ** | **1,500,050**  | ** ** |
|                                                                                                                                                                                                                                                                                                                                                   |       |           |          |           |       |           |       |
| **Holdings:**                                                                                                                                                                                                                                                                                                                                          |       |           |          |           |       |           |       |
| Senior discount notes, 10.25 percent fixed  rate, net of discount of $66,993 at October 1, 2005, $84,126 at October 2, 2004  and $80,019 at January 1, 2005, with semi-annual interest accretion through December  1, 2008, thereafter semi-annual interest payments of $12.7 million, accreted  principal due and payable at maturity - December 2013 |       | 180,207        |          | 163,074        |       | 167,181        |       |
| Promissory note, variable rate, 4.19  percent at October 2, 2004, paid in full December 2004                                                                                                                                                                                                                                                           |       | —         |          | 3,884          |       | —         |       |
| ** **                                                                                                                                                                                                                                                                                                                                             | ** ** | **$**          | **1,596,707** | ** **     | **$**      | **1,406,243**  | ** ** | **$** | **1,667,231** | ** ** |

 

Duringthe nine months ended October 1, 2005, Visant voluntarily prepaid $103.5million of its term loans under its senior secured credit facilities, includingall originally scheduled principal payments due under its term loans A and C in2005 through most of 2009.  As of October1, 2005, there was $49.9 million outstanding in the form of short-term borrowings,including $11.0 million at our Canadian subsidiary, at a weighted averageinterest rate of 6.6%, and an additional $15.8 million outstanding in the formof letters of credit, leaving $184.3 million available under the $250 millionrevolving credit facility.

 

13

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Inconjunction with the Transactions as described in Note 2, we repaid theexisting indebtedness of Jostens, Von Hoffmann and Arcade in full.

 

Visant’s obligations under the senior secured credit facilitiesare unconditionally and irrevocably guaranteed jointly and severally by VisantSecondary Holdings Corp., a direct wholly-owned subsidiary of Holdings and thedirect parent of Visant, and by Visant’s material current and future domesticsubsidiaries.  The obligations of Visant’sprincipal Canadian operating subsidiary under the senior secured creditfacilities are unconditionally and irrevocably guaranteed jointly and severallyby Visant Secondary Holdings Corp., Visant, Visant’s material current andfuture domestic subsidiaries and Visant’s other current and future Canadiansubsidiaries.  Visant’s obligations underthe senior secured credit facilities, and the guarantees of those obligations,are secured by substantially all of Visant’s assets and substantially all ofthe assets of Visant Secondary Holdings Corp. and Visant’s material current andfuture domestic subsidiaries, including but not limited to:

 

•                  allof Visant’s capital stock and the capital stock of each of Visant’s existingand future direct and indirect subsidiaries, except that with respect toforeign subsidiaries such lien and pledge is limited to 65% of the capitalstock of “first-tier” foreign subsidiaries; and

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

 

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

 

Thesenior secured credit facilities require Visant to meet a maximum totalleverage ratio, a minimum interest coverage ratio and a maximum capitalexpenditures limitation.  In addition,the senior secured credit facilities contain certain restrictive covenantswhich will, among other things, limit Visant’s and its subsidiaries’ ability toincur additional indebtedness, pay dividends, prepay subordinated debt, makeinvestments, merge or consolidate, change our business, amend the terms of oursubordinated debt and engage in certain other activities customarily restrictedin such agreements.  It also containscertain customary events of default, subject to grace periods, as appropriate.

 

The indentures governing Visant’s senior subordinatednotes and Holdings’ senior discount notes also contain numerous covenantsincluding, among other things, restrictions on our 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 our restricted subsidiaries tomake dividends or distributions to us; engage in transactions with affiliates;and create liens.

 

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

 

The indenture governing the Holdings’ notes restrictsHoldings and its restricted subsidiaries from declaring or paying dividends ormaking any other distribution (including any payment by Holdings or anyrestricted subsidiary of Holdings in connection with any merger orconsolidation involving Holdings or any of its restricted subsidiaries) onaccount of Holdings’ or any of its restricted subsidiaries’ equity interests(other than dividends or distributions payable in certain equity interests anddividends payable to Holdings or any restricted subsidiary of Holdings).

 

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

 

14

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exceptions, including redemptions of stock made withother, substantially similar stock or with proceeds of concurrent issuances ofsubstantially similar stock.

 

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

 

Anyfailure to comply with the covenants under the senior secured credit facilitieswould constitute a default under the senior secured credit facilities, whichcould result in an acceleration of the loans and other obligations owing thereunder.  As of October 1, 2005, we were in compliancewith all covenants under our material debt obligations.

 

**8.****             ****Redeemable Preferred Stock**

 

In conjunction with the Transactions as described in Note 2, alloutstanding shares of redeemable preferred stock of Jostens and Arcade,together with accrued dividends, were redeemed in full.

 

**9.****             ****Derivative Financial Instrumentsand Hedging Activities**

 

Our involvement with derivative financialinstruments is limited principally to managing well-defined interest rate andforeign currency exchange risks.  Forwardforeign currency exchange contracts may be used to hedge the impact of currencyfluctuations primarily on inventory purchases denominated in euros.  At October 1, 2005, there were no contractsoutstanding.

 

**10.  Commitments**

 

We are subject to market risk associated withchanges in the price of precious metals. To mitigate our commodity price risk, we enter into forward contracts topurchase gold, platinum and silver based upon the estimated ounces needed tosatisfy projected customer demand.  Ourpurchase commitment at October 1, 2005 was $4.2 million with delivery datesoccurring throughout 2005.  These forwardpurchase contracts are considered normal purchases and therefore subject to ascope exclusion of the requirements of SFAS 133, *Accounting for Derivative Instruments and Hedging Activities. *The fair market value of our openprecious metal forward contracts as of October 1, 2005 was $4.7 million and wascalculated by valuing each contract at quoted futures prices.

 

**11.****      ****Income Taxes**

 

Consistentwith the provisions of APB 28, *InterimFinancial Reporting*, we have provided an income tax provision basedon our best estimate of the consolidated effective tax rate applicable for theentire year.  Based on those estimates,for the nine months ended October 1, 2005, we provided an income tax provisionat a consolidated effective rate of 39.8% and 39.0% for Holdings and Visant,respectively.  The annual effective taxrate includes an anticipated benefit attributable to the dividend repatriationprovisions under the American Jobs Creation Act of 2004 as discussed in Note1.  The annual consolidated effective taxrates decreased by 1.6% and 1.5% for Holdings and Visant, respectively, due tothe anticipated benefits from the repatriation dividends, less adjustments tothe Company’s tax reserves.

 

Forthe comparable nine-month period ended October 2, 2004, the effective incometax rate for Holdings and Visant was 6.9% and (10.6)%, respectively.  These tax rates reflect the combined effectof separately reported effective tax rates for Holdings and our acquiredcompanies prior to the 2004 Transactions. Accordingly, these tax rates are not intended to reflect a combinedeffective tax rate that would have been reported if the 2004 Transactions hadoccurred at the beginning of the 2004 fiscal period.

 

15

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**12.****      ****Pension and Other Postretirement Benefit Plans**

 

Net periodic benefit cost for our pension andother postretirement benefit plans is presented below:

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

 
| ** **                               | ** ** | **Pension benefits**  | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Nine months ended** | ** ** | **Nine months ended**       | ** ** |
| ** **                               | ** ** | **October 1,**        | ** ** | **October 2,**              | ** ** | **October 1,** | ** ** | **October 2,** | ** ** |
| **In thousands**                         | ** ** | **2005**              | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                             |       | $                     | 5,475      |                        | $          | 5,473 |   | $ | 30 |   | $ | 31 |   |
| Interest  cost                           |       | 11,132                |       | 10,620                      |       | 233 |   | 261 |   |
| Expected  return on plan assets          |       | (15,941               | )          | (14,741                     | )          | — |   | — |   |
| Administrative  expenses                 |       | 537                   |       | 286                         |       | — |   | — |   |
| Amortization  of prior year service cost |       | 40                    |       | 36                          |       | — |   | — |   |
| Net periodic  benefit expense            | ** ** | **$**                 | **1,243**  | ** **                  | **$**      | **1,674** | ** ** | **$** | **263** | ** ** | **$** | **292** | ** ** |

 

For the nine months ended October 1, 2005, we made contributionstotaling $2.3 million to the pension plans and $0.5 million to thepostretirement welfare plans.  This isconsistent with our projected contributions for 2005 of $2.7 million to thepension plans and $0.7 million to the postretirement benefit plans as disclosedin our 2004 Form 10-K.

 

16

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**13.****      ****Business Segments**

 

Our reportable segmentsconsist of Jostens and our Print Group.  Jostensis a leading provider of school-related affinity products and services thathelp people celebrate important moments, recognize achievements and buildaffiliation.  Jostens’ products includeyearbooks, class rings, graduation products and school photography.  Visant’s Print Group includes the productionof four-color case bound and soft-cover educational textbooks and textbookcovers, standardized test materials and related components for majoreducational publishers in the United States. The Print Group also producesbusiness-to-business catalogues and multi-sensory and interactive advertisingsampling systems for the fragrance, cosmetics and personal care markets, aswell as other consumer product markets, and a range of innovative printingproducts and services to the direct marketing sector.

 

The following tables present information of Holdingsby business segment.

 
| ** **                       | ** ** | **Three months ended October 1, 2005** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|
| ** **                       | ** ** | ** **                             | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                            | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                      | 113,939    |   | $ | 174,128 |   | $ | — |   | $ | 288,067 |   |
| Inter-segment  net sales         |       | —                                 |       | 822 |   | (822 | ) | — |   |
| Operating  income                |       | (13,934                                | )          | 24,980 |   | — |   | 11,046 |   |
| Depreciation  and amortization   |       | 14,704                                 |       | 7,927 |   | — |   | 22,631 |   |
|                                  |            |                                        |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Three months ended October 2, 2004** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|
| ** **                       | ** ** | ** **                             | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                            | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                      | 105,296    |   | $ | 179,221 |   | $ | — |   | $ | 284,517 |   |
| Operating  income                |       | (32,385                                | )          | 21,159 |   | — |   | (11,226 | ) |
| Depreciation  and amortization   |       | 26,086                                 |       | 15,020 |   | — |   | 41,106 |   |
|                                  |            |                                        |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Nine months ended October 1, 2005** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | ** **                            | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                           | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                     | 650,489    |   | $ | 509,217 |   | $ | — |   | $ | 1,159,706 |   |
| Inter-segment  net sales         |       | —                                |       | 2,080 |   | (2,080 | ) | — |   |
| Operating  income                |       | 75,974                                |       | 69,472 |   | — |   | 145,446 |   |
| Depreciation  and amortization   |       | 52,210                                |       | 24,944 |   | — |   | 77,154 |   |
|                                  |            |                                       |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                       | ** ** | **Nine months ended October 2, 2004** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | ** **                            | ** ** | **Print** | ** ** | **Intersegment** | ** ** | **Consolidated** | ** ** |
| **In thousands**                 | ** ** | **Jostens**                           | ** ** | **Group** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
| Net sales to  external customers |       | $                                     | 624,567    |   | $ | 517,745 |   | $ | — |   | $ | 1,142,312 |   |
| Operating  income                |       | 24,477                                |       | 62,260 |   | — |   | 86,737 |   |
| Depreciation  and amortization   |       | 95,770                                |       | 32,532 |   | — |   | 128,302 |   |
|                                  |            |                                       |            |  |  |  |  |  |  |  |  |  |  |

 

17

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**14.****      ****Condensed Consolidating Guarantor Information**

 

As discussed in Note 7, Visant’s obligations underthe senior secured credit facilities and the 75/8% seniorsubordinated notes are guaranteed by certain of its wholly-owned subsidiarieson a full, unconditional and joint and several basis.  The following tables present condensedconsolidating financial information for Visant, as issuer, and its guarantorand non-guarantor subsidiaries.

 

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS(UNAUDITED)**

**Three months ended October 1, 2005**

 
| ** **                                        | ** ** | ** ** | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------|------------|------------------|------------|------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
| **Net sales**                                     |       | $          | —      | ** **     | **$**      | **280,476**    | ** ** | **$**            | **16,759** | ** ** | **$**      | **(9,168** | **)** | **$** | **288,067** | ** ** |
| Cost of products sold                             |       | (5,804     | )           | 197,859        |       | 9,812          |       | (8,997           | )          | 192,870    |       |
| Gross profit                                      |       | 5,804      |        | 82,617         |       | 6,947          |       | (171             | )          | 95,197     |       |
| Selling and administrative expenses               |       | (162       | )           | 78,800         |       | 6,541          |       | —           |       | 85,179     |       |
| Gain on disposal of fixed assets                  |       | —     |        | (3,725         | )          | —         |       | —           |       | (3,725     | )          |
| Transaction costs                                 |       | —     |        | —         |       | —         |       | —           |       | —     |       |
| Special charges                                   |       | —     |        | 2,610          |       | —         |       | —           |       | 2,610      |       |
| **Operating income**                              | ** ** | **5,966**  | ** **  | **4,932**      | ** ** | **406**        | ** ** | **(171**         | **)**      | **11,133** | ** ** |
| Net interest expense                              |       | 24,070     |        | 27,978         |       | 203            |       | (24,930          | )          | 27,321     |       |
| Equity (earnings) loss in subsidiary, net  of tax |       | 12,878     |        | (66            | )          | —         |       | (12,812          | )          | —     |       |
| Income (loss) before income taxes                 |       | (30,982    | )           | (22,980        | )          | 203            |       | 37,571           |       | (16,188    | )          |
| Provision for (benefit from) income taxes         |       | 2,473      |        | (10,102        | )          | 137            |       | (54              | )          | (7,546     | )          |
| **Net (loss) income**                             | ** ** | **$**      | **(33,455** | **)**          | **$**      | **(12,878**    | **)**      | **$**            | **66**     | ** ** | **$**      | **37,625** | ** ** | **$** | **(8,642** | **)** |

 

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Nine months ended October 1, 2005**

 
| ** **                                        | ** ** | ** ** | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net sales**                                     |       | $          | —      | ** **     | **$**      | **1,125,792**  | ** ** | **$**            | **51,598** | ** **  | **$**      | **(17,684** | **)** | **$** | **1,159,706** | ** ** |
| Cost of products sold                             |       | (10,987    | )           | 688,278        |       | 25,810         |       | (17,515          | )          | 685,586     |       |
| Gross profit                                      |       | 10,987     |        | 437,514        |       | 25,788         |       | (169             | )          | 474,120     |       |
| Selling and administrative expenses               |       | (325       | )           | 302,135        |       | 21,454         |       | —           |       | 323,264     |       |
| Gain on disposal of fixed assets                  |       | —     |        | (3,478         | )          | —         |       | —           |       | (3,478      | )          |
| Transaction costs                                 |       | 539        |        | 785            |       | —         |       | —           |       | 1,324       |       |
| Special charges                                   |       | —     |        | 7,159          |       | 258            |       | —           |       | 7,417       |       |
| **Operating income**                              | ** ** | **10,773** | ** **  | **130,913**    | ** ** | **4,076**      | ** ** | **(169**         | **)**      | **145,593** | ** ** |
| Net interest expense                              |       | 70,295     |        | 80,786         |       | 583            |       | (72,044          | )          | 79,620      |       |
| Equity (earnings) loss in subsidiary, net  of tax |       | (30,767    | )           | (2,243         | )          | —         |       | 33,010           |       | —      |       |
| Income (loss) before income taxes                 |       | (28,755    | )           | 52,370         |       | 3,493          |       | 38,865           |       | 65,973      |       |
| Provision for (benefit from) income taxes         |       | 2,934      |        | 21,603         |       | 1,250          |       | (58              | )          | 25,729      |       |
| **Net (loss) income**                             | ** ** | **$**      | **(31,689** | **)**          | **$**      | **30,767**     | ** ** | **$**            | **2,243**  | ** **  | **$**      | **38,923** | ** ** | **$** | **40,244** | ** ** |

 

18

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**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS(UNAUDITED)**

**Three months ended October 2, 2004**

 
| ** **                                        | ** ** | ** ** | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| **Net  sales**                                    | ** ** | **$**      | **—**  | ** **     | **$**      | **275,677**    | ** ** | **$**            | **13,174** | ** **  | **$**      | **(4,334** | **)** | **$** | **284,517** | ** ** |
| Cost of  products sold                            |       | —     |        | 201,014        |       | 7,526          |       | (4,230           | )          | 204,310     |       |
| Gross profit                                      |       | —     |        | 74,663         |       | 5,648          |       | (104             | )          | 80,207      |       |
| Selling and  administrative expenses              |       | 168        |        | 80,478         |       | 6,063          |       | —           |       | 86,709      |       |
| Loss on  disposal of fixed assets                 |       | —     |        | 30             |       | —         |       | —           |       | 30          |       |
| Special  charges                                  |       | —     |        | 4,701          |       | —         |       | —           |       | 4,701       |       |
| **Operating income**                              | ** ** | **(168**   | **)**       | **(10,546**    | **)**      | **(415**       | **)**      | **(104**         | **)**      | **(11,233** | **)**      |
| Net interest  expense                             |       | —     |        | 39,742         |       | 269            |       | —           |       | 40,011      |       |
| Equity  (earnings) loss in subsidiary, net of tax |       | 48,161     |        | 757            |       | —         |       | (48,918          | )          | —      |       |
| Income  (loss) before income taxes                |       | (48,329    | )           | (51,045        | )          | (684           | )          | 48,814           |       | (51,244     | )          |
| Provision  for (benefit from) income taxes        |       | (62        | )           | (2,884         | )          | 73             |       | (38              | )          | (2,911      | )          |
| **Net  (loss)**                                   | ** ** | **$**      | **(48,267** | **)**          | **$**      | **(48,161**    | **)**      | **$**            | **(757**   | **)**       | **$**      | **48,852** | ** ** | **$** | **(48,333** | **)** |

 

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS(UNAUDITED)**

**Nine months ended October 2, 2004**

 
| ** **                                        | ** ** | ** ** | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------|------------|------------------|------------|------------|------------|
| **In thousands**                                  | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
| **Net sales**                                     | ** ** | **$**      | **—**  | ** **     | **$**      | **1,106,310**  | ** ** | **$**            | **48,616** | ** ** | **$**      | **(12,614** | **)** | **$** | **1,142,312** | ** ** |
| Cost of products sold                             |       | —     |        | 707,296        |       | 26,329         |       | (12,508          | )          | 721,117    |       |
| Gross profit                                      |       | —     |        | 399,014        |       | 22,287         |       | (106             | )          | 421,195    |       |
| Selling and administrative expenses               |       | 168        |        | 307,724        |       | 20,657         |       | —           |       | 328,549    |       |
| Gain on disposal of fixed assets                  |       | —     |        | (14            | )          | —         |       | —           |       | (14        | )          |
| Special charges                                   |       | —     |        | 5,821          |       | —         |       | —           |       | 5,821      |       |
| **Operating income (loss)**                       | ** ** | **(168**   | **)**       | **85,483**     | ** ** | **1,630**      | ** ** | **(106**         | **)**      | **86,839** | ** ** |
| Loss on redemption of debt                        |       | —     |        | 420            |       | —         |       | —           |       | 420        |       |
| Net interest expense                              |       | —     |        | 117,015        |       | 755            |       | —           |       | 117,770    |       |
| Equity (earnings) loss in subsidiary, net  of tax |       | 34,500     |        | (329           | )          | —         |       | (34,171          | )          | —     |       |
| Income (loss) before income taxes                 |       | (34,668    | )           | (31,623        | )          | 875            |       | 34,065           |       | (31,351    | )          |
| Provision for (benefit from) income taxes         |       | (62        | )           | 2,877          |       | 546            |       | (42              | )          | 3,319      |       |
| **Net (loss) income**                             | ** ** | **$**      | **(34,606** | **)**          | **$**      | **(34,500**    | **)**      | **$**            | **329**    | ** ** | **$**      | **34,107** | ** ** | **$** | **(34,670** | **)** |

 

19

----

 

**CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)**

**October 1, 2005**

** **
| ** **                                          | ** ** | ** **    | ** **    | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** **  | ** **    | ** ** |
|-----------------------------------------------------|------------|---------------|---------------|----------------|------------|----------------|------------|------------------|-------------|---------------|------------|
| **In thousands**                                    | ** ** | **Visant**    | ** **    | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** **  | **Total**     | ** ** |
| **ASSETS**                                          |       |          |          |           |       |           |       |             |        |          |       |
| Cash and cash equivalents                           |       | $             | 1,189         |           | $          | 2,262          |       | $                | 10,822      |          | $          | — |   | $ | 14,273 |   |
| Accounts receivable, net                            |       | 1,529         |          | 167,001        |       | 7,273          |       | —           |        | 175,803       |       |
| Inventories, net                                    |       | —        |          | 115,719        |       | 4,767          |       | (198             | )           | 120,288       |       |
| Salespersons overdrafts, net                        |       | —        |          | 31,385         |       | 9,728          |       | —           |        | 41,113        |       |
| Intercompany receivable (payable)                   |       | 16,409        |          | 157            |       | —         |       | (16,566          | )           | —        |       |
| Prepaid expenses and other current assets           |       | 107           |          | 7,501          |       | 693            |       | —           |        | 8,301         |       |
| Deferred income taxes                               |       | (2,862        | )             | 34,587         |       | 75             |       | —           |        | 31,800        |       |
| **Total current assets**                            | ** ** | **16,372**    | ** **    | **358,612**    | ** ** | **33,358**     | ** ** | **(16,764**      | **)**       | **391,578**   | ** ** |
| Property, plant, and equipment, net                 |       | 339           |          | 226,630        |       | 3,745          |       | —           |        | 230,714       |       |
| Goodwill                                            |       | —        |          | 1,068,907      |       | 39,479         |       | —           |        | 1,108,386     |       |
| Intangibles, net                                    |       | —        |          | 549,413        |       | 23,347         |       | —           |        | 572,760       |       |
| Deferred financing costs, net                       |       | 48,761        |          | —         |       | —         |       | —           |        | 48,761        |       |
| Intercompany receivable (payable)                   |       | 1,483,127     |          |           |       | —         |       | (1,483,127       | )           | —        |       |
| Other assets                                        |       | —        |          | 12,623         |       | 206            |       | (1,711           | )           | 11,118        |       |
| Investment in subsidiaries                          |       | 405,424       |          | 65,990         |       | —         |       | (471,414         | )           | —        |       |
| **Total assets**                                    | ** ** | **$**         | **1,954,023** | ** **     | **$**      | **2,282,175**  | ** ** | **$**            | **100,135** | ** **    | **$**      | **(1,973,016** | **)** | **$** | **2,363,317** | ** ** |
|                                                |       |          |          |           |       |           |       |             |        |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**       |       |          |          |           |       |           |       |             |        |          |       |
| Book overdrafts                                     |       | $             | —        |           | $          | 5,136          |       | $                | —      |          | $          | — |   | $ | 5,136 |   |
| Short-term borrowings                               |       | 38,970        |          | —         |       | 10,965         |       | —           |        | 49,935        |       |
| Accounts payable                                    |       | 3,064         |          | 42,021         |       | 3,087          |       | —           |        | 48,172        |       |
| Accrued employee compensation                       |       | 8,046         |          | 30,085         |       | 2,765          |       | —           |        | 40,896        |       |
| Commissions payable                                 |       | —        |          | 8,720          |       | 1,073          |       | —           |        | 9,793         |       |
| Customer deposits                                   |       | —        |          | 39,843         |       | 5,348          |       | —           |        | 45,191        |       |
| Intercompany payable (receivable)                   |       | —        |          | 16,852         |       | (286           | )          | (16,566          | )           | —        |       |
| Other accrued liabilities                           |       | 31,246        |          | 22,713         |       | 2,828          |       | (77              | )           | 56,710        |       |
| **Total current liabilities**                       | ** ** | **81,326**    | ** **    | **165,370**    | ** ** | **25,780**     | ** ** | **(16,643**      | **)**       | **255,833**   | ** ** |
| Long-term debt, less current maturities             |       | 1,416,500     |          | —         |       | —         |       | —           |        | 1,416,500     |       |
| Intercompany payable (receivable)                   |       | 131,048       |          | 1,441,384      |       | (429           | )          | (1,572,003       | )           | —        |       |
| Deferred income taxes                               |       | —        |          | 235,499        |       | 8,611          |       | —           |        | 244,110       |       |
| Pension liabilities, net                            |       | (481          | )             | 26,757         |       | —         |       | —           |        | 26,276        |       |
| Other noncurrent liabilities                        |       | —        |          | 7,741          |       | 183            |       | —           |        | 7,924         |       |
| **Total liabilities**                               | ** ** | **1,628,393** | ** **    | **1,876,751**  | ** ** | **34,145**     | ** ** | **(1,588,646**   | **)**       | **1,950,643** | ** ** |
| **Stockholder’s equity**                       | ** ** | **325,630**   | ** **    | **405,424**    | ** ** | **65,990**     | ** ** | **(384,370**     | **)**       | **412,674**   | ** ** |
| **Total liabilities and stockholder’s equity** | ** ** | **$**         | **1,954,023** | ** **     | **$**      | **2,282,175**  | ** ** | **$**            | **100,135** | ** **    | **$**      | **(1,973,016** | **)** | **$** | **2,363,317** | ** ** |

 

20

----

 

**CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)**

**October 2, 2004**

 
| ** **                                           | ** ** | ** **  | ** **  | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **    | ** ** |
|------------------------------------------------------|------------|-------------|-------------|----------------|------------|----------------|------------|------------------|------------|---------------|------------|
| **In thousands**                                     | ** ** | **Visant**  | ** **  | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
| **ASSETS**                                           |       |        |        |           |       |           |       |             |       |          |       |
| Cash and  cash equivalents                           |       | $           | —      |           | $          | 27,334         |       | $                | 3,331      |          | $          | — |   | $ | 30,665 |   |
| Accounts  receivable, net                            |       | —      |        | 153,431        |       | 8,362          |       | —           |       | 161,793       |       |
| Inventories,  net                                    |       | —      |        | 108,725        |       | 5,157          |       | (126             | )          | 113,756       |       |
| Salespersons  overdrafts, net                        |       | —      |        | 29,120         |       | 8,085          |       | —           |       | 37,205        |       |
| Prepaid  expenses and other current assets           |       | 629         |        | 11,576         |       | 1,040          |       | —           |       | 13,245        |       |
| Deferred  income taxes                               |       | —      |        | 16,234         |       | 75             |       | —           |       | 16,309        |       |
| **Total current assets**                             | ** ** | **629**     | ** **  | **346,420**    | ** ** | **26,050**     | ** ** | **(126**         | **)**      | **372,973**   | ** ** |
| Property,  plant, and equipment, net                 |       | —      |        | 236,128        |       | 4,654          |       | —           |       | 240,782       |       |
| Goodwill                                             |       | —      |        | 1,079,925      |       | 39,479         |       | —           |       | 1,119,404     |       |
| Intangibles,  net                                    |       | —      |        | 598,088        |       | 23,584         |       | —           |       | 621,672       |       |
| Deferred  financing costs, net                       |       | —      |        | 31,062         |       | 799            |       | —           |       | 31,861        |       |
| Other assets                                         |       | (797        | )           | 13,016         |       | 470            |       | (1,711           | )          | 10,978        |       |
| Investment  in subsidiaries                          |       | 281,473     |        | 60,233         |       | —         |       | (341,706         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**       | **281,305** | ** **     | **$**      | **2,364,872**  | ** ** | **$**            | **95,036** | ** **    | **$**      | **(343,543** | **)** | **$** | **2,397,670** | ** ** |
|                                                 |       |        |        |           |       |           |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        |       |        |        |           |       |           |       |             |       |          |       |
| Book  overdrafts                                     |       | $           | —      |           | $          | 3,912          |       | $                | —     |          | $          | — |   | $ | 3,912 |   |
| Short-term  borrowings                               |       | —      |        | 94,475         |       | 15,168         |       | —           |       | 109,643       |       |
| Accounts  payable                                    |       | 1           |        | 47,846         |       | (230           | )          | —           |       | 47,617        |       |
| Accrued  employee compensation                       |       | —      |        | 37,452         |       | 2,792          |       | —           |       | 40,244        |       |
| Commissions  payable                                 |       | —      |        | 8,414          |       | 161            |       | —           |       | 8,575         |       |
| Customer  deposits                                   |       | —      |        | 38,419         |       | 5,861          |       | —           |       | 44,280        |       |
| Current  portion of long-term debt                   |       | —      |        | 150            |       | —         |       | —           |       | 150           |       |
| Deferred  income taxes                               |       | —      |        | —         |       | —         |       | —           |       | —        |       |
| Intercompany  (receivable) payable                   |       | —      |        | —         |       | —         |       | —           |       | —        |       |
| Other  accrued liabilities                           |       | (63         | )           | 81,584         |       | 2,179          |       | (49              | )          | 83,651        |       |
| **Total current liabilities**                        | ** ** | **(62**     | **)**       | **312,252**    | ** ** | **25,931**     | ** ** | **(49**          | **)**      | **338,072**   | ** ** |
| Long-term  debt, less current maturities             |       | —      |        | 1,239,285      |       | —         |       | —           |       | 1,239,285     |       |
| Redeemable  preferred stock                          |       | —      |        | 264,170        |       | —         |       | —           |       | 264,170       |       |
| Deferred  income taxes                               |       | —      |        | 234,725        |       | 8,801          |       | —           |       | 243,526       |       |
| Pension  liabilities, net                            |       | —      |        | 27,381         |       | —         |       | —           |       | 27,381        |       |
| Other  noncurrent liabilities                        |       | —      |        | 5,586          |       | 71             |       | —           |       | 5,657         |       |
| **Total liabilities**                                | ** ** | **(62**     | **)**       | **2,083,399**  | ** ** | **34,803**     | ** ** | **(49**          | **)**      | **2,118,091** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **281,367** | ** **  | **281,473**    | ** ** | **60,233**     | ** ** | **(343,494**     | **)**      | **279,579**   | ** ** |
| **Total liabilities  and stockholder’s equity** | ** ** | **$**       | **281,305** | ** **     | **$**      | **2,364,872**  | ** ** | **$**            | **95,036** | ** **    | **$**      | **(343,543** | **)** | **$** | **2,397,670** | ** ** |

 

21

----

 

**CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)**

**January 1, 2005**

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

 

22

----

 

**CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS(UNUADITED)**

**Nine months ended October 1, 2005**

 
| ** **                                                    | ** ** | ** **   | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|--------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                              | ** ** | **Visant**   | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| Net income (loss)                                             |       | $            | (31,689    | )              | $          | 30,767         |       | $                | 2,243      |        | $          | 38,923 |   | $ | 40,244 |   |
| Other cash provided by (used in) operating  activities        |       | 79,892       |       | (74,752        | )          | 3,238          |       | (38,923          | )          | (30,545     | )          |
| **Net cash provided by operating activities**                 | ** ** | **48,203**   | ** ** | **(43,985**    | **)**      | **5,481**      | ** ** | **—**       | ** ** | **9,699**   | ** ** |
| Purchases of property, plant, and equipment                   |       | (301         | )          | (36,218        | )          | (504           | )          | —           |       | (37,023     | )          |
| Proceeds from asset sales                                     |       | —       |       | 9,566          |       | —         |       | —           |       | 9,566       |       |
| Other investing activities, net                               |       | —       |       | (1,786         | )          | (22            | )          | —           |       | (1,808      | )          |
| **Net cash used in investing activities**                     | ** ** | **(301**     | **)**      | **(28,438**    | **)**      | **(526**       | **)**      | **—**       | ** ** | **(29,265** | **)**      |
| Net increase in book overdrafts                               |       | —       |       | 5,136          |       | —         |       | —           |       | 5,136       |       |
| Net short-term borrowings                                     |       | 38,970       |       | —         |       | 2,229          |       | —           |       | 41,199      |       |
| Principal payments on long-term debt                          |       | (103,500     | )          | —         |       | —         |       | —           |       | (103,500    | )          |
| Intercompany (receivable) payable                             |       | (72,129      | )          | 72,129         |       | —         |       | —           |       | —      |       |
| Net contribution from Visant Holding Corp                     |       | 9,000        |       |           |       |           |       |             |       | 9,000       |       |
| Other financing activities, net                               |       | 13           |       | (339           | )          | —         |       | —           |       | (326        | )          |
| **Net cash (used in) provided by financing  activities**      | ** ** | **(127,646** | **)**      | **76,926**     | ** ** | **2,229**      | ** ** | **—**       | ** ** | **(48,491** | **)**      |
| Effect of exchange rate changes on cash and  cash equivalents |       | —       |       | —         |       | 61             |       | —           |       | 61          |       |
| (Decrease) increase in cash and cash  equivalents             |       | (79,744      | )          | 4,503          |       | 7,245          |       | —           |       | (67,996     | )          |
| Cash and cash equivalents, beginning of  period               |       | 80,933       |       | (2,241         | )          | 3,577          |       | —           |       | 82,269      |       |
| **Cash and cash equivalents, end of period**                  | ** ** | **$**        | **1,189**  | ** **     | **$**      | **2,262**      | ** ** | **$**            | **10,822** | ** **  | **$**      | **—** | ** ** | **$** | **14,273** | ** ** |

 

**CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS(UNUADITED)**

**Nine months ended October 2, 2004**

 
| ** **                                                    | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------|------------|----------------|------------|------------------|------------|-------------|------------|
| **In thousands**                                              | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
| Net income (loss)                                             |       | $          | (34,606    | )              | $          | (34,500        | )          | $                | 329        |        | $          | 34,107 |   | $ | (34,670 | ) |
| Other cash (used in) provided by operating  activities        |       | 34,606     |       | 26,596         |       | (4,137         | )          | (34,107          | )          | 22,958      |       |
| **Net cash provided by operating activities**                 | ** ** | **—** | ** ** | **(7,904**     | **)**      | **(3,808**     | **)**      | **—**       | ** ** | **(11,712** | **)**      |
| Purchases of property, plant, and equipment                   |       | —     |       | (22,677        | )          | (1,041         | )          | —           |       | (23,718     | )          |
| Proceeds from asset sales                                     |       | —     |       | 6,147          |       | —         |       | —           |       | 6,147       |       |
| Other investing activities, net                               |       | —     |       | (110           | )          | (31            | )          | —           |       | (141        | )          |
| **Net cash used in investing activities**                     | ** ** | **—** | ** ** | **(16,640**    | **)**      | **(1,072**     | **)**      | **—**       | ** ** | **(17,712** | **)**      |
| Net book overdraft borrowings (repayments)                    |       | —     |       | 3,912          |       |           |       | —           |       | 3,912       |       |
| Net short-term borrowings (repayments)                        |       | —     |       | 65,237         |       | 1,570          |       | —           |       | 66,807      |       |
| Principal payments on long-term debt                          |       | —     |       | (48,250        | )          | —         |       | —           |       | (48,250     | )          |
| Redemption of senior subordinated notes                       |       | —     |       | (5,800         | )          | —         |       | —           |       | (5,800      | )          |
| Other financing activities, net                               |       | —     |       | (321           | )          | —         |       | —           |       | (321        | )          |
| **Net cash (used in) provided by financing  activities**      | ** ** | **—** | ** ** | **14,778**     | ** ** | **1,570**      | ** ** | **—**       | ** ** | **16,348**  | ** ** |
| Effect of exchange rate changes on cash and  cash equivalents |       | —     |       | —         |       | 10             |       | —           |       | 10          |       |
| (Decrease) increase in cash and cash  equivalents             |       | —     |       | (9,766         | )          | (3,300         | )          | —           |       | (13,066     | )          |
| Cash and cash equivalents, beginning of  period               |       | —     |       | 37,100         |       | 6,631          |       | —           |       | 43,731      |       |
| **Cash and cash equivalents, end of period**                  | ** ** | **$**      | **—** | ** **     | **$**      | **27,334**     | ** ** | **$**            | **3,331**  | ** **  | **$**      | **—** | ** ** | **$** | **30,665** | ** ** |

 

23

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**15.****      ****Common Stock**

 

Holdings’common stock, $0.01 par value per share, consists of Class A and Class C commonstock.  Holdings’ charter also authorizesthe issuance of non-voting Class B common stock, but currently no such sharesare outstanding.  Holders of Class Acommon stock are entitled to one vote for each share held for any matter comingbefore the stockholders of Holdings.  Theholder of the share of Class C common stock is entitled to a number of votesfor any matter coming before the stockholders of Holdings equal to:

 

(i) initially, the excess of(x) 50% percent of all votes entitled to be cast by holders of outstandingcommon stock for any matter coming before the stockholders of Holdings, over(y) the percentage of all votes entitled to be cast by the initial holder ofthe share of Class C common stock together with any permitted transferees ofthe initial holder, for any matter coming before the stockholders of Holdingsby virtue of the shares of Class A common stock acquired by the initial holderpursuant to the Contribution Agreement, dated July 21, 2004, between Holdingsand the initial holder, such excess determined based on the shares of commonstock issued and outstanding immediately prior to October 4, 2004, givingeffect to any shares of common stock acquired by the initial holder pursuant tothe Contribution Agreement at the closing thereunder; and

 

(ii) thereafter, the numberof votes will be permanently reduced to an amount equal to the excess, if any,of (x) 50% percent of all votes entitled to be cast by holders of outstandingcommon stock for any matter coming before the stockholders of Holdings (as reducedby any shares of Class A common stock of Holdings issued on the date of the closingunder the Contribution Agreement or thereafter to any person other than theinitial holder), over (y) the percentage of all votes entitled to be cast bythe initial holder, together with its transferees, for any matter coming beforethe stockholders of Holdings by virtue of the shares of Class A common stockthen held by the initial holder, together with its transferees, not to exceedthe percentage voting interest attributed to such share pursuant to clause (i)above; and

 

(iii) if the share of ClassC common stock is transferred by the initial holder (or its permittedtransferee) to any person other than a permitted transferee of the initialholder, the share of Class C Common Stock will entitle the holder to the samevoting rights as the share of Class C common stock entitled the holderimmediately prior to the transfer.

 

The share of Class C commonstock will at all times entitle the holder to at least one vote on any mattercoming before the stockholders of Holdings. In addition, the share of Class C common stock will automaticallyconvert into one fully-paid and non-assessable share of Class A common stock(1) upon the consummation of an initial public offering or (2) upon the firstoccurrence that the share of Class C common stock is entitled to only one votefor any matter coming before the stockholders of Holdings, as more fullyprovided by the certificate of incorporation.

 

**16.****      ****Related Party Transactions**

 

***Transactions with Sponsors***

 

**The Transactions**

In connection with the Transactionsdiscussed in Note 2, DLJMBP II received total consideration of approximately$320 million in respect of the (i) acquisition by an affiliate of KKR of all ofDLJMBP II’s Von Hoffmann capital stock, (ii) repayment of Arcade’s Amended andRestated Notes held by DLJMBP II and (iii) acquisition by an affiliate of KKR ofArcade’s Mandatorily Redeemable Preferred Stock held by DLJMBP II.

 

24

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**Stockholders Agreement**

In connection with the Transactions, weentered into a stockholders agreement with an entity affiliated with KKR andentities affiliated with DLJMBP III (each an “Investor Entity” and together the“Investor Entities”) that provides for, among other things,

 

•      a right of each of the Investor Entitiesto designate a certain number of directors to our board of directors for solong as they hold a certain amount of our common stock;

•      certain limitations on transfer of ourcommon stock held by the Investor Entities for a period of four years after thecompletion of the Transactions, after which, if we have not completed aninitial public offering, any sale is subject to certain obligations of firstoffer, or in the case we have completed an initial public offering, any saleshall be made pursuant to the registration rights as described below;

•      a consent right for the Investor Entitieswith respect to certain corporate actions;

•      certain “tag-along” and “drag-along”rights under certain circumstances;

•      the right of the Investor Entities topurchase a pro rata portion of all or any part of any new securities offered byus; and

•      a restriction on the ability of theInvestor Entities and certain of their affiliates to own, operate or control abusiness that competes with us, subject to certain exceptions.

 

Pursuant to the Stockholders Agreement, anaggregate transaction fee of $25.0 million was paid to the sponsors upon theclosing of the Transactions.

 

**Management Services Agreement**

In connection with the Transactions, weentered into a management services agreement with the sponsors pursuant towhich the sponsors will provide certain structuring, consulting and managementadvisory services to us. The sponsors will receive an annual advisory fee of$3.0 million that is payable quarterly and which increases by 3% per year.  The agreement also provides for certainindemnification by us of the sponsors and their affiliates, directors, officersand representatives.

 

**Registration Rights Agreement**

In connection with the Transactions, weentered into a registration rights agreement with the Investor Entitiespursuant to which the Investor Entities are entitled to certain demand andpiggyback rights with respect to the registration and sale of our common stockheld by them.

 

**Other**

During 2004, we retainedCapstone Consulting LLC (“Capstone”) to provide certain of our businesses withconsulting services, primarily to identify and advise on potentialopportunities to improve operating efficiencies.   Although neither KKR nor any entityaffiliated with KKR owns any of the equity of Capstone, KKR has providedfinancing to Capstone.  In March 2005,an affiliate of Capstone invested $1.3 million in our parent’s Class ACommon Stock and has been granted 13,527 options to purchase our parent’s Class ACommon Stock, with an exercise price of $96.10401 per share under our SecondAmended and Restated 2004 Stock Option Plan for key employees.  Included in selling and administrativeexpenses in the condensed consolidated financial statements is an immaterialamount related to the cost of such stock-based compensation.

 

***Transactions with Other Co-Investors and Management***

 

**Syndicate Stockholders Agreement**

In September 2003, Holdings, Visant, DLJMBPIII and certain of its affiliated funds (collectively, the “DLJMB Funds”) andcertain of the DLJMB Funds’ co-investors entered into a stock purchase and

 

25

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stockholders’ agreement, or the SyndicateStockholders Agreement, pursuant to which the DLJMB Funds sold to theco-investors shares of: (1) our Class A Voting Common Stock, (2) our Class BNon-Voting Common Stock and (3) Visant’s 8% Senior Redeemable Preferred Stock,which has since been repurchased.

 

The Syndicate Stockholders Agreementcontains provisions which, among other things:

 

restrict the ability of the syndicatestockholders to make certain transfers;

grant the co-investors certain boardobservation and information rights;

provide for certain tag-along and drag-alongrights;

grant certain pro-rata preemptive rights tothe co-investors; and

grant certain piggyback registration rightsin the event of a public offering in which the DLJMB Funds sell shares.

 

**Management Stockholders Agreement**

In July 2003, Holdings, the DLJMB Funds andcertain members of management entered into a stockholders’ agreement thatcontains certain provisions which, among other things:

 

restrict the ability of the managementstockholders to transfer their shares;

provide for certain tag-along and drag-alongrights;

grant certain pro-rata preemptive rights tothe management stockholders;

grant the DLJMB Funds six demandregistration rights; and

grant certain piggyback registration rights.

 

**Other**

In addition to the agreements describedabove, Holdings also entered into other management stockholders agreements andsale participation agreements with certain individual members of management inconnection with the Transactions.

 

**ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS**

 

Except where otherwiseindicated, management’s discussion and analysis of financial condition andresults of operations is provided with respect to Holdings, which hasmaterially the same financial condition and results of operations asVisant.  This discussion and analysisshould be read in conjunction with our condensed consolidated financialstatements and notes thereto.

 

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This report may contain “forward-looking statements.”  The Private Securities Litigation Reform Actof 1995 provides a “safe harbor” for certain forward-looking statements so longas such information is identified as forward-looking and is accompanied bymeaningful cautionary statements identifying important factors that could causeactual results to differ materially from those projected in theinformation.  Forward-looking statementsare based on our current expectations or forecasts of future events.  Forward-looking statements generally can beidentified by the use of forward-looking terminology such as “may”, “might”, “will”,“should”, “estimate”, “project”, “plan”, “anticipate”, “expect”, “intend”, “outlook”,“continue”, “believe”, or the negative thereof or other similar expressions,which are intended to identify forward-looking statements and information.  Such forward-looking statements involve knownand unknown risks, uncertainties and other important factors that could causethe actual results, performance or achievements of the Company, or industryresults, to differ materially from historical results, any future results,performance or achievements expressed or implied by such forward-lookingstatements.   These forward-lookingstatements are based on estimates and assumptions by our management that, althoughwe believe are reasonable, are inherently uncertain and subject to a number ofrisks and uncertainties and you should not place undue reliance on them.

 

26

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Such risks and uncertainties include, but are notlimited to, the following: our substantial indebtedness; our inability toimplement our business strategy and achieve anticipated cost savings in atimely and effective manner; competition from other companies; the seasonalityof our businesses; the loss of significant customers or customer relationships;fluctuations in raw material prices; our reliance on a limited number ofsuppliers; our reliance on numerous complex information systems; the relianceof our businesses on limited production facilities; the amount of capitalexpenditures required at our businesses; labor disturbances; environmentalregulations; foreign currency fluctuations and foreign exchange rates; theoutcome of litigation; control by our controlling stockholders; the dependencyon the sale of school textbooks; the textbook adoption cycle and levels ofgovernment funding for education spending; Jostens’ reliance on independentsales representatives; and the failure of our sampling systems to comply withU.S. postal regulations.  These factorscould cause actual results to differ materially from historical results orthose anticipated or predicted by the forward-looking information.

 

Wecaution that the foregoing list of important factors is not exclusive.  Forward-looking statements speak only as ofthe date they are made and we undertake no obligation to update publicly orrevise any of them in light of new information, future events or otherwise,except as required by law.

 

**GENERAL**

 

We generate a significant portion of our netsales through the sale of specialty printing and marketing products to theNorth American education sector.  We sellour products and services to end customers through different sales channels,including independent sales representatives and dedicated sales forces.  Our sales and results of operations areimpacted by general economic conditions, seasonality, costs of raw materials,school population trends, product quality and service and price.

 

Ourreportable segments consist of Jostens and the Print Group.  Jostens is a leading provider ofschool-related affinity products and services that help people celebrateimportant moments, recognize achievements and build affiliation.  Jostens’ products include yearbooks, classrings, graduation products and school photography.

 

The Print Group includesthe production of four-color case bound and soft-cover educational textbooksand textbook covers, standardized test materials and related components formajor educational publishers in the United States. The Print Group alsoproduces business-to-business catalogues and multi-sensory and interactiveadvertising sampling systems for the fragrance, cosmetics and personal caremarkets, as well as other consumer product markets, and a range of innovativeprinting products and services to the direct marketing sector.

 

**The Transactions**

 

On October 4, 2004,an affiliate of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) andaffiliates of DLJ Merchant Banking Partners completed transactions(collectively, the “Transactions”) which created a specialty printing,marketing and school-related affinity products and services organizationcomprised of the operations of Jostens, Von Hoffmann, including Von Hoffmann’ssubsidiary, The Lehigh Press, Inc., and Arcade.

 

Prior to the Transactions, Von Hoffmann and Arcade were each controlledby affiliates of DLJ Merchant Banking Partners II, L.P. (“DLJMBP II”)and DLJ Merchant Banking Partners III, L.P. (“DLJMBP III”) ownedapproximately 82.5% of Holdings’ outstanding equity, with the remainder held byother co-investors and certain members of management.  Upon consummation of the Transactions, anaffiliate of KKR invested $256.1 million and was issued equity interestsrepresenting approximately 49.6% of Holdings’ voting interest and 45% ofHoldings’ economic interest,   affiliatesof DLJMBP III held equity interests representing approximately 41% ofHoldings’ voting interest and 45% of Holdings’ economic interest, with theremainder held by other co-investors and certain members of management.  In connection with the Transactions,approximately $175.6 million of the proceeds were distributed to certainshareholders, and certain treasury stock held by Von Hoffmann wasredeemed.    After giving effect to theissuance of equity to additional members of management, as of October 1,2005 affiliates of KKR and DLJMBP III held approximately 49.1% and 41%,respectively, of the voting interests of Holdings, while each continues to holdapproximately 45% of  Holdings’ economicinterest.  As of such date the other co-investorsheld approximately 8.4% of the voting interest and 9.1% of the economicinterests of Holdings, and members of management held 1.5% of the votinginterest and 1.7% of the economic interests of Holdings.

 

27

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In connection with the Transactions, Visant entered into new seniorsecured credit facilities, providing for an aggregate amount of $1,270 million,including a $250 million revolving credit facility, and issued$500 million aggregate principal amount of 75/8%senior subordinated notes.   Also inconnection with the Transactions, Jostens, Von Hoffmann and Arcade repaid theirexisting indebtedness having an aggregate face value of $1,392.6 millionincluding the redemption value of certain remaining redeemable preferred stock.

 

**CRITICALACCOUNTING POLICIES**

 

The preparation of interim financial statementsinvolves the use of certain estimates that differ from those used in thepreparation of the annual financial statements, the most significant of whichrelates to income taxes.  For purposes ofpreparing our interim financial statements, we utilize an estimated annualeffective tax rate based on estimates of the components that impact the taxrate.  Those components are re-evaluatedeach interim period and, if changes in our estimates are significant, we modifyour estimate of the annual effective tax rate and make any required adjustmentsin the interim period.

 

There have been no material changes to our criticalaccounting policies and estimates as described in Item 7 of our Form 10-K forthe fiscal year ended January 1, 2005 (“2004 Form 10-K”).

 

**Recent Accounting Pronouncements**

 

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

In December 2004, theFinancial Accounting Standards Board (“FASB”) issued a revision of SFAS123.  This statement eliminates thealternative to use the intrinsic value method of accounting that was permittedunder SFAS 123 as originally issued and will require recognition of compensationexpense related to all equity awards granted after the required effective dateand to awards modified, repurchased, or cancelled after that date based on thegrant date fair values of the awards. This statement is effective for us as of the first interim or annualreporting period that commences after December 15, 2005 and is not expected tohave a significant impact on our financial statements.

 

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

In October 2004, the American JobsCreation Act of 2004 (the “AJC Act”) was signed into law.  This legislation creates, among other things,a temporary incentive for U.S. multinational companies to repatriateaccumulated income earned outside the United States at a favorable rate oftax.  In December 2004, the FASBissued Staff Position (“FSP”) 109-2, which provides accounting and disclosureguidance for the repatriation provision.

 

We intend to repatriate earnings fromour foreign subsidiaries in an amount that could range from $10 million to $13million.  We estimate that the benefit ofthe repatriation dividend will be in a range from $1.8 to $2.0 million.

 

**RESULTSOF OPERATIONS**

 

**Three Months Ended October 1, 2005 Compared to theThree Months Ended October 2, 2004**

 

The following table sets forth selected informationderived from Holdings’ condensed consolidated statements of operations for thethree-month periods ended October 1, 2005 and October 2, 2004.

 

28

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| ** **                               | ** **   | **Three months ended** | ** **   | ** **     | ** **   | ** **        | ** **   |
|------------------------------------------|--------------|------------------------|--------------|----------------|--------------|-------------------|--------------|
| ** **                               | ** **   | **October 1,**         | ** **   | **October 2,** | ** **   | ** **        | ** **   | ** ** | ** ** |
| **In thousands**                         | ** **   | **2005**               | ** **   | **2004**       | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                                |         | $                      | 288,067      |           | $            | 284,517           |         | $ | 3,550 |   | 1.2 | % |
| Cost of  products sold                   |         | 192,870                |         | 204,310        |         | (11,440           | )            | (5.6 | )% |
| Gross profit                             |         | 95,197                 |         | 80,207         |         | 14,990            |         | 18.7 | % |
| *% of net sales*                         | *** *** | ***33.0***             | ***%***      | ***28.2***     | ***%***      |              |         |   |   |
|                                     |         |                   |         |           |         |              |         |   |   |
| Selling and  administrative expenses     |         | 85,266                 |         | 86,702         |         | (1,436            | )            | (1.7 | )% |
| *% of net sales*                         | *** *** | ***29.6***             | ***%***      | ***30.5***     | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                             | *** *** | *** ***           | *** *** | *** ***   | *** *** | *** ***      | *** *** | *** *** | *** *** |
| (Gain) loss  on disposal of fixed assets |         | (3,725                 | )            | 30             |         | (3,755            | )            | NM |   |
| Transaction  costs                       |         | —                 |         | 14             |         | (14               | )            | NM |   |
| Special  charges                         |         | 2,610                  |         | 4,687          |         | (2,077            | )            | NM |   |
| Operating  income (loss)                 |         | 11,046                 |         | (11,226        | )            | 22,272            |         | 198.4 | % |
| *% of net sales*                         | *** *** | ***3.8***              | ***%***      | ***-3.9***     | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                             | *** *** | *** ***           | *** *** | *** ***   | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Interest  expense, net                   |         | 31,896                 |         | 44,179         |         | (12,283           | )            | (27.8 | )% |
| Loss before  income taxes                |         | (20,850                | )            | (55,405        | )            | 34,555            |         |   |   |
| Benefit from  income taxes               |         | (9,472                 | )            | (10,683        | )            | 1,211             |         | 11.3 | % |
| Net loss                                 |         | $                      | (11,378      | )              | $            | (44,722           | )            | $ | 33,344 |   | 74.6 | % |

 

----

NM = not meaningful

 

The following table sets forth selected segmentinformation derived from Holdings’ condensed consolidated statements ofoperations for the three-month periods ended October 1, 2005 and October 2,2004.  For additional financialinformation about our operating segments, see Note 13 of the Notes to CondensedConsolidated Financial Statements.

 
| ** **                 | ** ** | **Three months ended** | ** ** | ** **     | ** ** | ** **        | ** ** |
|----------------------------|------------|------------------------|------------|----------------|------------|-------------------|------------|
| ** **                 | ** ** | **October 1,**         | ** ** | **October 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**           | ** ** | **2005**               | ** ** | **2004**       | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                  |       |                   |       |           |       |              |       |   |   |
| Jostens                    |       | $                      | 113,939    |           | $          | 105,296           |       | $ | 8,643 |   | 8.2 | % |
| Print Group                |       | 174,950                |       | 179,221        |       | (4,271            | )          | (2.4 | )% |
| Inter-segment eliminations |       | (822                   | )          | —         |       | (822              | )          | NM |   |
|                       |       | $                      | 288,067    |           | $          | 284,517           |       | $ | 3,550 |   | 1.2 | % |
| Operating income           |       |                   |       |           |       |              |       |   |   |
| Jostens                    |       | $                      | (13,934    | )              | $          | (32,385           | )          | $ | 18,451 |   | 57.0 | % |
| Print Group                |       | 24,980                 |       | 21,159         |       | 3,821             |       | 18.1 | % |
|                       |       | $                      | 11,046     |           | $          | (11,226           | )          | $ | 22,272 |   | 198.4 | % |

 

----

NM = not meaningful

 

29

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***Net Sales***

Consolidated net sales increased $3.6 million, or1.2%, to $288.1 million for the three months ended October 1, 2005 from $284.5million for the same prior year period.

 

Jostens’ net sales increased $8.6 million, or 8.2%, to$113.9 million for the three months ended October 1, 2005 from $105.3 millionfor the same prior year period.  Thisperiod over period increase was primarily attributable to stronger sales ofscholastic products and a modest shift of yearbook production into the thirdquarter from the fourth quarter as compared to the same period last year.

 

Print Group net sales decreased $4.3 million, or 2.4%,to $175.0 million for the three months ended October 1, 2005 compared to $179.2million for the same prior year period. The decrease was due primarily to lower book and book premedia salesattributable to lower pricing and reduced throughput in our four-color bookprint facility, $2.4 million less sales resulting from the closure of theFrederick, Maryland plant and lower sales of sampling materials due to a shiftin timing of production to earlier quarters in 2005.  These decreases were partially offset by a$9.0 million increase in the sale of paper to customers as well as higher salesof direct marketing materials, compared to the same period last year.

 

***Gross Profit***

Gross profit increased $15.0 million, or 18.7%, to$95.2 million for the three months ended October 1, 2005 from $80.2 million forthe same prior year period.  As apercentage of net sales, gross profit margin increased to 33.0% for the currentthree-month period from 28.2% for the same period last year.

 

The increased gross profit as a percent of sales inthe third quarter was primarily a result of approximately $10.2 million of lesspurchase accounting amortization than the third quarter of 2004 relating toJostens.  This amortization was primarilyrelated to order backlog intangible assets associated with the accounting ofthe purchase of Jostens in July 2003. Excluding the impact of this adjustment, gross profit increased to 33.1%from an adjusted gross margin of 31.8%. This increase was primarily due to margin improvement in Jostens’ yearbookprinting and lower depreciation expense within the Print Group.  This improvement was partially offset by $2.7million of incremental diploma costs incurred at Jostens as a result ofproduction issues associated with the relocation of its Red Wing manufacturingfacility to certain other facilities as well as the impact of increased lowmargin paper sales for the Print Group.

 

***Selling and AdministrativeExpenses***

Selling and administrative expenses decreased $1.4million, or 1.7%, to $85.3 million for the three months ended October 1, 2005from $86.7 million for the same prior year period.  As a percentage of net sales, selling andadministrative expenses decreased 0.9 percentage points to 29.6% for thecurrent three-month period from 30.5% for the same period last year.  The $1.4 million decrease was primarily dueto the impact of administrative headcount reductions and lower depreciation andamortization expense partially offset by higher commission expense related tohigher sales.

 

***Gain or Loss on Disposal of FixedAssets***

Gain on disposal of fixed assets approximated $3.7million for the three months ended October 1, 2005, primarily related to thesale of two buildings, in Frederick, Maryland and Red Wing, Minnesota,respectively, which were sites of operations that were previously shutdown.  In the same prior year period,loss on disposal of fixed assets was less than $0.1 million.

 

***Special Charges***

During the third quarter of 2005, we recorded $2.6million of special charges.  Of thisamount, $1.6 million related to severance payments and related benefitsassociated with the reduction in headcount of 32 Jostens employees.   We also recorded $1.0 million related toseverance payments and related benefits associated with the reduction inheadcount of 61 Print Group employees. During the third quarter of 2004, we recorded $4.7 million of specialcharges including $4.0 million related to severance payments and relatedbenefits associated with the termination of two executives at Jostens.  We also recorded $0.7 million related to thereduction in headcount of 9 Print Group employees.

 

30

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***Operating Income***

Consolidated operating income increased $22.3 million,or 198.4%, to $11.0 million for the three months ended October 1, 2005 from anoperating loss of $11.2 million for the same prior year period.  As a percentage of net sales, operatingincome increased to 3.8% for the current three-month period from an operatingloss of 3.9% for the same period last year.

 

Jostens’ operating loss decreased $18.5 million, or57.0%, to $13.9 million for the current three-month period compared to $32.4million for the same period last year.  The decrease in Jostens’ operating income was primarily a result ofapproximately $10.2 million of less purchase accounting amortization than thethird quarter of 2004 as well as the implementation of cost reductioninitiatives, offset somewhat by an additional $2.7 million of diploma costs.

 

The Print Group’s operating income increased $3.8 million,or 18.1%, to $25.0 million for the three months ended October 1, 2005 from$21.2 million for the same prior year period due to gains on the sale of assetsapproximating $2.9 million, primarily relating to the sale of the Frederick,Maryland facility.

 

***Net Interest Expense***

 

Net interest expense is comprised of the following:

 
| ** **                                                                                       | ** ** | **Three months ended** | ** ** | ** **     | ** ** | ** **        | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------|------------|-------------------|------------|
| ** **                                                                                       | ** ** | **October 1,**         | ** ** | **October 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                                                 | ** ** | **2005**               | ** ** | **2004**       | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                                                      |       |                   |       |           |       |              |       |   |   |
| Interest expense                                                                                 |       | $                      | 24,268     |           | $          | 25,405            |       | $ | (1,137 | ) | (4.5 | )% |
| Accrued interest on mandatorily redeemable preferred  stock and subordinated exchange debentures |       | —                 |       | 13,256         |       | (13,256           | )          | NM |   |
| Amortization of debt discount, premium and deferred  financing costs                             |       | 3,108                  |       | 1,417          |       | 1,691             |       | 119.3 | % |
| Interest income                                                                                  |       | (55                    | )          | (67            | )          | 12                |       | NM |   |
| ** **                                                                                       | ** ** | **27,321**             | ** ** | **40,011**     | ** ** | **(12,690**       | **)**      | (31.7 | )% |
| **Holdings:**                                                                                    |       |                   |       |           |       |              |       |   |   |
| Interest expense                                                                                 |       | —                 |       | (176           | )          | 176               |       | NM |   |
| Amortization of debt discount, premium and deferred  financing costs                             |       | 4,580                  |       | 4,353          |       | 227               |       | 5.2 | % |
| Interest income                                                                                  |       | (5                     | )          | (9             | )          | 4                 |       | NM |   |
| ** **                                                                                       | ** ** | **4,575**              | ** ** | **4,168**      | ** ** | **407**           |       | 9.8 | % |
| ** **                                                                                       | ** ** | **$**                  | **31,896** | ** **     | **$**      | **44,179**        | ** ** | **$** | **(12,283** | **)** | (27.8 | )% |

 

----

NM = Not meaningful

 

Net interest expense decreased $12.3 million, or27.8%, to $31.9 million for the three months ended October 1, 2005 as comparedto $44.2 million for the same prior year period.  The decrease was the result of our new debtarrangements at lower interest rates put in place in connection with theconsummation of the Transactions.

 

***Income Taxes***

Consistent with the provisions of APB 28, *Interim Financial Reporting*, we have provided an income taxprovision based on our best estimate of the consolidated effective tax rateapplicable for the entire year.  Based onthose

 

31

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estimates, for the three months ended October 1, 2005, we provided anincome tax benefit at a consolidated effective rate of 45.4% and 46.6% forHoldings and Visant, respectively.

 

For the comparable three-month period ended October 2, 2004, theeffective rate of income tax benefit for Holdings and Visant was 19.3% and5.7%, respectively.  These tax ratesreflect the combined effect of separately reported effective tax rates forHoldings and our acquired companies prior to the Transactions.  Accordingly, these tax rates are not intendedto reflect a combined effective tax rate that would have been reported if theTransactions had occurred at the beginning of the 2004 fiscal period.

 

***Net Income / Loss***

As a result of the aforementioned items, net lossdecreased $33.3 million, or 74.6%, to $11.4 million for the three months endedOctober 1, 2005 from $44.7 million for the same prior year period.

 

**Nine Months Ended October 1, 2005 Compared to theNine Months Ended October 2, 2004**

 

The following table sets forth selected informationderived from Holdings’ condensed consolidated statements of operations for thenine-month periods ended October 1, 2005 and October 2, 2004.

 
| ** **                                 | ** **   | **Nine months ended** | ** **   | ** **     | ** **   | ** **        | ** **   |
|--------------------------------------------|--------------|-----------------------|--------------|----------------|--------------|-------------------|--------------|
| ** **                                 | ** **   | **October 1,**        | ** **   | **October 2,** | ** **   | ** **        | ** **   | ** ** | ** ** |
| **In thousands**                           | ** **   | **2005**              | ** **   | **2004**       | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                                  |         | $                     | 1,159,706    |           | $            | 1,142,312         |         | $ | 17,394 |   | 1.5 | % |
| Cost of  products sold                     |         | 685,586               |         | 721,117        |         | (35,531           | )            | (4.9 | )% |
| Gross profit                               |         | 474,120               |         | 421,195        |         | 52,925            |         | 12.6 | % |
| *% of net sales*                           | *** *** | ***40.9***            | ***%***      | ***36.9***     | ***%***      |              |         |   |   |
|                                       |         |                  |         |           |         |              |         |   |   |
| Selling and  administrative expenses       |         | 323,411               |         | 328,651        |         | (5,240            | )            | (1.6 | )% |
| *% of net sales*                           | *** *** | ***27.9***            | ***%***      | ***28.8***     | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                               | *** *** | *** ***          | *** *** | *** ***   | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Gain on  disposal of fixed assets          |         | (3,478                | )            | (14            | )            | (3,464            | )            | NM |   |
| Transaction  costs                         |         | 1,324                 |         | 14             |         | 1,310             |         | NM |   |
| Special  charges                           |         | 7,417                 |         | 5,807          |         | 1,610             |         | NM |   |
| Operating  income                          |         | 145,446               |         | 86,737         |         | 58,709            |         | 67.7 | % |
| *% of net sales*                           | *** *** | ***12.5***            | ***%***      | ***7.6***      | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                               | *** *** | *** ***          | *** *** | *** ***   | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Loss on  redemption of debt                |         | —                |         | 420            |         | (420              | )            | NM |   |
| Interest  expense, net                     |         | 92,923                |         | 129,908        |         | (36,985           | )            | (28.5 | )% |
| Income  (loss) before income taxes         |         | 52,523                |         | (43,591        | )            | 96,114            |         |   |   |
| Provision for  (benefit from) income taxes |         | 20,904                |         | (2,987         | )            | 23,891            |         | 799.8 | % |
| Net income  (loss)                         |         | $                     | 31,619       |           | $            | (40,604           | )            | $ | 72,223 |   | 177.9 | % |

 

----

NM= Not meaningful

 

The following table sets forth selected segmentinformation derived from Holdings’ condensed consolidated statements ofoperations for the nine-month periods ended October 1, 2005 and October 2,2004.  For additional financialinformation about our operating segments, see Note 13 of the Notes to CondensedConsolidated Financial Statements.

 

32

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| ** **                 | ** ** | **Nine months ended** | ** ** | ** **     | ** ** | ** **        | ** ** |
|----------------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|
| ** **                 | ** ** | **October 1,**        | ** ** | **October 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**           | ** ** | **2005**              | ** ** | **2004**       | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                  |       |                  |       |           |       |              |       |   |   |
| Jostens                    |       | $                     | 650,489    |           | $          | 624,567           |       | $ | 25,922 |   | 4.2 | % |
| Print Group                |       | 511,297               |       | 517,745        |       | (6,448            | )          | (1.2 | )% |
| Inter-segment eliminations |       | (2,080                | )          | —         |       | (2,080            | )          | NM |   |
|                       |       | $                     | 1,159,706  |           | $          | 1,142,312         |       | $ | 17,394 |   | 1.5 | % |
| Operating income           |       |                  |       |           |       |              |       |   |   |
| Jostens                    |       | $                     | 75,974     |           | $          | 24,477            |       | $ | 51,497 |   | 210.4 | % |
| Print Group                |       | 69,472                |       | 62,260         |       | 7,212             |       | 11.6 | % |
|                       |       | $                     | 145,446    |           | $          | 86,737            |       | $ | 58,709 |   | 67.7 | % |

 

----

NM- not meaningful

 

***Net Sales***

Consolidated net sales increased $17.4 million, or1.5%, to $1,159.7 million for the nine months ended October 1, 2005 from$1,142.3 million for the same prior year period.

 

Jostens’ net sales increased $25.9 million, or 4.2%,to $650.5 million for the nine months ended October 1, 2005 compared to $624.6million for the same prior year period. The increase in Jostens’ net sales was primarily attributable to higheryearbook sales.

 

The Print Group’s net sales decreased $6.4 million, or1.2%, to $511.3 million for the nine months ended October 1, 2005 compared to$517.7 million for the same prior year period. The decrease in Print Group net sales was primarily attributable to $7.5million of less sales resulting from the closure of the Frederick, Marylandfacility and lower book and book premedia sales attributable to lower pricingof such work and reduced throughput in our four-color book print facilityoffset by strong direct marketing sales.

 

***Gross Profit***

Gross profit increased $52.9 million, or 12.6%, to$474.1 million for the nine months ended October 1, 2005 from $421.2 millionfor the same prior year period.  As apercentage of net sales, gross profit margin increased to 40.9% for the currentnine-month period from 36.9% for the same period last year.

 

The increased gross profit as a percent of sales wasprimarily a result of approximately $44.0 million of less purchase accountingdepreciation and amortization than the first nine months of 2004 relating toJostens.  This amortization was primarilyrelated to order backlog intangible assets associated with the accounting ofthe purchase of Jostens in July 2003. Excluding the impact of these adjustments, gross profit increasedslightly to 41.3% from an adjusted gross margin of 41.1%.  This increase was primarily due to marginimprovement in Jostens’ yearbook printing and favorable product mix within thePrint Group relating to increased volume from higher margin products offset by$14.7 million of incremental diploma costs incurred at Jostens.

 

***Selling and AdministrativeExpenses***

Selling and administrative expenses decreased $5.2million, or 1.6%, to $323.4 million for the nine months ended October 1, 2005from $328.7 million for the same prior year period.  As a percentage of net sales, selling andadministrative expenses decreased 0.9 percentage points to 27.9% for thecurrent nine-month period from 28.8% for the same period last year.  The $5.2 million decrease was primarily dueto the impact of administrative headcount reductions and lower depreciation andamortization expense.

 

***Gain on Disposal of Fixed Assets***

Gain on disposal of fixed assets approximated $3.5million for the nine months ended October 1, 2005, primarily related to thesale of two buildings, in Frederick, Maryland and Red Wing, Minnesota,respectively, which were sites

 

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of operations that were previously shut down.  In the same prior year period, gain ondisposal of fixed assets was less than $0.1 million.

 

***Special Charges***

During the first nine months of 2005, we recorded$7.4 million of special charges, including $5.4 million related to severancepayments and related benefits associated with the reduction in headcount of 76Jostens employees.  We also recordedseverance of $1.7 million related to the reduction in headcount of 66 PrintGroup employees as well as $0.3 million of costs related to a withdrawalliability under a union retirement plan that is payable in connection with theconsolidation of certain operations.  Forthe first nine months of 2004, we recorded $5.8 million of special chargesincluding $4.0 million related to severance payments and related benefitsassociated with the termination of two executives at Jostens.  We also recorded $1.8 million related to thereduction in headcount of 120 Print Group employees, primarily resulting from aconsolidation of facilities.

 

***Operating Income***

Consolidated operating income increased $58.7 million,or 67.7%, to $145.4 million for the nine months ended October 1, 2005 from$86.7 million for the same prior year period. As a percentage of net sales, operating income increased to 12.5% forthe current nine-month period from 7.6% for the same period last year.

 

Jostens’ operating income increased $51.5 million, or210.4%, to $76.0 million for the 2005 nine-month period compared to $24.5million for the same period last year.  The increase in Jostens’ operating income was primarily a result ofapproximately $44.0 million of less purchase accounting depreciation andamortization than the first nine of 2004 as well as the implementation of costreduction initiatives, offset by approximately $14.7 million of incrementaldiploma costs.

 

The Print Group’s operating income increased $7.2million, or 11.6%, to $69.5 million for the nine months ended October 1, 2005from $62.3 million for the same prior year period primarily as a result offavorable product mix and gains on the sale of assets approximating $2.7million, primarily relating to the sale of the Frederick, Maryland facility.

 

***Net Interest Expense***

Net interest expense is comprised of the following:

 

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| ** **                                                                                       | ** ** | **Nine months ended** | ** ** | ** **     | ** ** | ** **        | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|
| ** **                                                                                       | ** ** | **October 1,**        | ** ** | **October 2,** | ** ** | ** **        | ** ** | ** ** | ** ** |
| **In thousands**                                                                                 | ** ** | **2005**              | ** ** | **2004**       | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Visant:**                                                                                      |       |                  |       |           |       |              |       |   |   |
| Interest expense                                                                                 |       | $                     | 70,286     |           | $          | 75,148            |       | $ | (4,862 | ) | (6.5 | )% |
| Accrued interest on mandatorily redeemable preferred  stock and subordinated exchange debentures |       | —                |       | 37,819         |       | (37,819           | )          | NM |   |
| Amortization of debt discount, premium and deferred  financing costs                             |       | 10,266                |       | 5,066          |       | 5,200             |       | 102.6 | % |
| Interest income                                                                                  |       | (932                  | )          | (263           | )          | (669              | )          | NM |   |
| ** **                                                                                       | ** ** | **79,620**            | ** ** | **117,770**    | ** ** | **(38,150**       | **)**      | (32.4 | )% |
| **Holdings:**                                                                                    |       |                  |       |           |       |              |       |   |   |
| Interest expense                                                                                 |       | —                |       | 74             |       | (74               | )          | NM |   |
| Amortization of debt discount, premium and deferred  financing costs                             |       | 13,386                |       | 12,086         |       | 1,300             |       | 10.8 | % |
| Interest income                                                                                  |       | (83                   | )          | (22            | )          | (61               | )          | NM |   |
| ** **                                                                                       | ** ** | **13,303**            | ** ** | **12,138**     | ** ** | **1,165**         |       | 9.6 | % |
| ** **                                                                                       | ** ** | **$**                 | **92,923** | ** **     | **$**      | **129,908**       | ** ** | **$** | **(36,985** | **)** | (28.5 | )% |

 

----

NM= Not meaningful

 

Net interest expense decreased $37.0 million, or28.5%, to $92.9 million for the nine months ended October 1, 2005 as comparedto $129.9 million for the same prior year period.  The decrease was the result of our new debtstructure at lower interest rates upon the consummation of the Transactions.

 

***Income Taxes***

Consistent with the provisions of APB 28, *Interim Financial Reporting*, we have provided an income taxprovision based on our best estimate of the consolidated effective tax rateapplicable for the entire year.  Based onthose estimates, for the nine months ended October 1, 2005, we provided anincome tax provision at a consolidated effective rate of 39.8% and 39.0% forHoldings and Visant, respectively.

 

Forthe comparable nine-month period ended October 2, 2004, the effective incometax rate for Holdings and Visant was 6.9% and (10.6%), respectively.  These tax rates reflect the combined effectof separately reported effective tax rates for Holdings and our acquiredcompanies prior to the Transactions. Accordingly, these tax rates are not intended to reflect a combinedeffective tax rate that would have been reported if the Transactions hadoccurred at the beginning of the 2004 fiscal period.

 

Theannual consolidated effective tax rates decreased by 1.6% and 1.5% for Holdingsand Visant, respectively, due to the anticipated benefits from the repatriationdividends, less adjustments to the Company’s tax reserves.

 

***Net Income***

As a result of the aforementioned items, net incomeincreased $72.2 million, or 177.9%, to $31.6 million for the nine months endedOctober 1, 2005 from a loss of $40.6 million for the same prior year period.

 

35

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**LIQUIDITY AND CAPITAL RESOURCES**

 

The following table presents cash flow activity ofHoldings for the first nine months of fiscal 2005 and 2004 and should be readin conjunction with our condensed consolidated statements of cash flows.

 
| ** **                                           | ** ** | **Nine months ended** | ** **  |
|------------------------------------------------------|------------|-----------------------|-------------|
| ** **                                           | ** ** | **October 1,**        | ** **  | **October 2,** | ** ** |
| **In thousands**                                     | ** ** | **2005**              | ** **  | **2004** | ** ** |
| Net cash provided by (used in) operating  activities |       | $                     | 10,765      |   | $ | (12,609 | ) |
| Net cash used in investing activities                |       | (29,265               | )           | (22,628 | ) |
| Net cash used in financing activities                |       | (51,558               | )           | 20,057 |   |
| Effect of exchange rate change on cash               |       | 61                    |        | 10 |   |
| Net change in cash and cash equivalents              | ** ** | **$**                 | **(69,997** | **)** | **$** | **(15,170** | **)** |

 

For the nine months ended October 1, 2005, operating activitiesgenerated cash of $10.8 million compared with cash consumed by operatingactivities of $12.6 million for the same prior year period.  The $23.4 million increase related toincreased earnings and lower cash paid for interest for the nine months endedOctober 1, 2005 compared to the same prior year period.  Net cash used in investing activities for thenine months ended October 1, 2005 was $29.3 million, compared with $22.6million for the comparable 2004 period.  The $6.7 million increase related to additional capital expenditures of$8.4 million in the current year offset by increased proceeds from asset salesfor the first nine month compared to the same prior year period.  Capital expenditures for the nine monthsended October 1, 2005 totaled $37.0 million. Net cash used in financing activities for the nine months ended October1, 2005 was $51.6 million, an increase of $71.7 million, compared with cashgenerated by financing activities of $20.1 million for 2004.  The increase is related to higher debtrepayments for the nine month period of 2005 compared to the prior year.

 

For the nine months ended October 1, 2005, Visant voluntarily prepaid$103.5 million of scheduled payments under its bank term loan facilitiesincluding all principal payments due in 2005 through most of 2009.

 

During the second quarter of 2005, Holdings contributed $9.0 million incash to Visant which is reflected in Visant’s condensed consolidated statementof cash flows as a contribution from Holdings. These amounts eliminate in consolidation and have no impact on Holdings’consolidated financial statements.

 

As of October 1, 2005, we had cash and cashequivalents of $15.0 million.  Ourprincipal sources of liquidity are cash flows from operating activities andborrowings under Visant’s senior secured credit facilities, which included$184.3 million available under Visant’s revolving credit facility as of October1, 2005.  We use cash primarily for debtservice obligations, capital expenditures and to fund other working capitalrequirements.  We intend to fund ongoingoperations through cash generated by operations and borrowings under therevolving credit facility.

 

Asof October 1, 2005, we were in compliance with all covenants under our materialdebt obligations.

 

Basedupon the current level of operations, we believe that cash flow fromoperations, available cash and short-term investments, together with borrowingsavailable under Visant’s senior secured credit facilities, are adequate to meetour future liquidity needs for the next twelve months.

 

**ITEM 3.     QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Therehave been no material changes in our exposure to market risk during the quarterended October 1, 2005.  For additionalinformation, refer to Item 7A of our 2004 Form 10-K.

 

36

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**ITEM 4.     CONTROLS ANDPROCEDURES**

 

As of the end of the period covered by this report,management, under the supervision of our Chief Executive Officer and VicePresident, Finance, evaluated the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures that are designed to ensurethat information that is required to be disclosed in our quarterly report isrecorded, processed and summarized within time periods specified in theSecurities and Exchange Commission’s rules and regulations and that suchinformation is accumulated and communicated to our management, including ourChief Executive Officer and Vice President, Finance, as appropriate to allowtimely decisions regarding required disclosures.  Based upon that evaluation, our ChiefExecutive Officer and Vice President, Finance concluded that these disclosurecontrols and procedures are effective, in all material respects, in timelyalerting them to material information relating to the Company required to beincluded in our periodic reports filed under the Securities Exchange Act of1934, as amended.  Any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives.

 

During the Company’s fiscal quarter ended October 1,2005, there were no changes in the Company’s internal controls over financialreporting in connection with the above described evaluation that materiallyaffected, or are reasonably likely to materially affect, these controls.

 

**PART II.  OTHERINFORMATION**

 

**ITEM 1.       LEGALPROCEEDINGS**

 

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

 

Jostensbrought a demurrer and motion to strike the plaintiff’s complaint onJune 25, 2004, challenging the legal sufficiency of plaintiff’sallegations on the basis, inter alia, that the FTC guides are nonbinding andthat plaintiff’s allegations generally failed to state a claim on which reliefcould be granted.  On August 13,2004, the Superior Court sustained Jostens’ demurrer with leave to amend.

 

OnAugust 25, 2004, the plaintiff filed an amended complaint which containedsubstantially the same allegations regarding “stones” while dropping the claimsregarding SilverElite® with platinum.  OnSeptember 29, 2004, Jostens filed another demurrer/motion to strike,challenging the legal sufficiency of plaintiff’s amended complaint.  On November 24, 2004, the Superior Courtagain sustained Jostens’ demurrer with leave to amend.   The plaintiff filed a second amendedcomplaint dated December 16, 2004.  Thecourt dismissed the action on January 26, 2005. The plaintiff has appealed the court’s decision.  Jostens filed its appellate brief in lateOctober 2005, and it is anticipated that the appeal will be fully briefed bythe fourth quarter of 2005 and that arguments will occur thereafter.

 

Incommunications with U.S. Customs and Border Protection (“Customs”), the Companylearned of an alleged inaccuracy of the tariff classification for certain ofJostens’ imports from Mexico.  Jostenspromptly filed with Customs a voluntary disclosure to limit its monetaryexposure.  The effect of these allegedtariff classification errors is that back duties and fees (or “loss of revenue”)may be owed on imports dating back five years.  Additionally, Customs may impose interest on the loss of revenue, if anyis determined.  Presently, no formalnotice of, or demand for, any alleged loss of revenue has been issued byCustoms.  A review of Jostens’ importpractices has revealed that

 

37

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duringthe relevant five-year period, Jostens’ merchandise qualified for duty-freetariff treatment under the North American Free Trade Agreement (“NAFTA”), inwhich case there should be no loss of revenue or interest payment owedCustoms.  However, Customs’ allegationsindicate that Jostens committed a technical oversight in claiming thepreferential tariff treatment.  Throughits prior disclosure to Customs, Jostens has addressed this technical oversightand asserted that the merchandise did in fact qualify for duty-free tarifftreatment under NAFTA and that there is no associated loss of revenue.  Jostens is in the early stages ofadministrative review of this matter, and it is not clear what Customs’position will be with respect to the alleged tariff classification errors orthat Jostens will not be foreclosed under statute from making post-entry NAFTAclaims for those imports made prior to 2004. Jostens intends to vigorously defend its position and has recorded noaccrual for any potential liability. However, we cannot assure you that Jostens will be successful in itsdefense or that the disposition of this matter will not have a material effecton our business, financial condition and results of operations.

 

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

 

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

 

None

 

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

 

None

 

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

 

None

 

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

 

None

 

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

 

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

 

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

 

31.2                           Certificationof Vice President, Finance pursuant to Section 302 of the Sarbanes-Oxley Act of2002

 

32.1                           Certificationof Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of2002

 

32.2                           Certification of Vice President, Financepursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

38

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
| ** **               | **VISANT HOLDING CORP.**     |
|--------------------------|------------------------------|
| ** **               | **VISANT CORPORATION**       |
|                     |                         |
|                     |                         |
| Date:  November 15, 2005 | /s/ Marc L. Reisch           |
|                     | Marc L. Reisch               |
| * *                 | *President and*              |
| * *                 | *Chief Executive Officer*    |
|                     |                         |
|                     |                         |
| Date:  November 15, 2005 | /s/ Paul B. Carousso         |
|                     | Paul B. Carousso             |
| * *                 | *Vice President, Finance*    |
| * *                 | *(Chief Accounting Officer)* |

 

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