** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

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

## ** **

## ****

 

## **FORM 10-Q**

 
| ý                                                                                                                                                                                                                        | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                          | ** ** | ** **                                                                                    |
| **For the  quarterly period ended April 1, 2006**                                                                                                                                                                             |
|                                                                                                                                                                                                                          | ** ** | ** **                                                                                    |
| **or**                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                          | ** ** | ** **                                                                                    |
| o                                                                                                                                                                                                                             | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                          | ** ** | ** **                                                                                    |
| **For the transition period from                   to                ** |
| ** **                                                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                    | ** ** | ** **                                                                                    | ** ** | **I.R.S.** |
| ** **                                                                                                                                                                                                                    | ** ** | ** **                                                                                    | ** ** | **Employer** |
| **Commission**                                                                                                                                                                                                                | ** ** | **Registrant, State of Incorporation**                                         | ** ** | **Identification** |
| **File Number**                                                                                                                                                                                                          | ** ** | **Address and Telephone Number**                                               | ** ** | **Number** |
|                                                                                                                                                                                                                          |       |                                                                                          |   |   |
| **333-112055**                                                                                                                                                                                                                | ** ** | **VISANT HOLDING CORP.**                                                                      | ** ** | **90-0207875** |
|                                                                                                                                                                                                                          |       | (Incorporated in  Delaware)                                                                   |   |   |
|                                                                                                                                                                                                                          | ** ** | **357  Main Street**                                                                          |   |   |
| ** **                                                                                                                                                                                                                    | ** ** | **Armonk,  New York 10504**                                                                   | ** ** | ** ** |
|                                                                                                                                                                                                                          |       | Telephone:**(914) 595-8200**                                                                  | ** ** | ** ** |
|                                                                                                                                                                                                                          |       |                                                                                          |   |   |
| **333-120386**                                                                                                                                                                                                                | ** ** | **VISANT CORPORATION**                                                                        | ** ** | ** ** |
| ** **                                                                                                                                                                                                                    | ** ** | (Incorporated in  Delaware)                                                                   | ** ** | **90-0207604** |
|                                                                                                                                                                                                                          |       | **357  Main Street**                                                                          |   |   |
|                                                                                                                                                                                                                          | ** ** | **Armonk  New York 10504**                                                                    |   |   |
| ** **                                                                                                                                                                                                                    | ** ** | Telephone: **(914) 595-8200**                                                                 | ** ** | ** ** |
|                                                                                                                                                                                                                               |            |                                                                                               |  |  |  |  |

 

Indicate by check mark whether each registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject to suchfiling requirement for the past 90 days.  Yes ý     No o

 

Indicate by check mark whether any of the registrants is a largeaccelerated filer, an accelerated filer, or non-accelerated filer. (Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act).

 

Large accelerated filer o      Accelerated filer o  Non-accelerated filer ý

 

Indicate by check mark whether any of the registrants is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).

 

Yes o     No ý

 

As of May 10, 2006, there were 5,973,659 shares of Class A CommonStock, par value $.01 per share, and one share of Class C Common Stock, parvalue $.01 per share, of Visant Holding Corp. outstanding and 1,000 shares ofcommon stock, par value $.01 per share, of Visant Corporation outstanding (allof which are owned beneficially by Visant Holding Corp.).

 

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

 

 

----

 

**FILING FORMAT**

 

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

 

----

 

**TABLE OFCONTENTS**

 

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

##### ** **

----

 

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

###### ** **

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

 

**VISANT HOLDING CORP. AND SUBSIDIARIES**

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

 
| ** **                          | ** ** | **Three months ended** | ** **  |
|-------------------------------------|------------|------------------------|-------------|
| **In thousands**               | ** ** | **April 1,  2006**     | ** **  | **April 2,  2005** | ** ** |
| **Net sales**                       | ** ** | **$**                  | **312,591** | ** ** | **$** | **309,120** | ** ** |
| Cost of products sold               |       | 180,244                |        | 189,514 |   |
| Gross profit                        |       | **132,347**            | ** **  | **119,606** | ** ** |
| Selling and administrative expenses |       | 101,462                |        | 103,186 |   |
| Gain on disposal of fixed assets    |       | (20                    | )           | (9 | ) |
| Transaction costs                   |       | —                 |        | 884 |   |
| Special charges                     |       | 2,799                  |        | 2,952 |   |
| **Operating  income**               | ** ** | **28,106**             | ** **  | **12,593** | ** ** |
| Interest expense, net               |       | 31,070                 |        | 30,568 |   |
| Loss before income taxes            | ** ** | **(2,964**             | **)**       | **(17,975** | **)** |
| Benefit from income taxes           |       | (1,828                 | )           | (7,446 | ) |
| **Net  loss**                       | ** ** | **$**                  | **(1,136**  | **)** | **$** | **(10,529** | **)** |

 

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

 

1

----

 

**VISANTHOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| ** **

**In thousands, except share amounts**                                                                                                    | ** ** | **April 1,  2006** | ** **    | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                                | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Cash and cash  equivalents                                                                                                                                                |       | $                       | 47,694        |                    | $          | 27,893                      |       | $ | 20,706 |   |
| Accounts  receivable, net                                                                                                                                                 |       | 168,157                 |          | 167,219                 |       | 164,340                     |       |
| Inventories, net                                                                                                                                                          |       | 167,391                 |          | 169,862                 |       | 130,782                     |       |
| Salespersons  overdrafts, net of allowance of $15,269, $13,258 and $14,659, respectively                                                                                  |       | 39,386                  |          | 39,494                  |       | 36,663                      |       |
| Prepaid expenses  and other current assets                                                                                                                                |       | 21,258                  |          | 16,479                  |       | 16,938                      |       |
| Deferred income  taxes                                                                                                                                                    |       | 12,976                  |          | 60,600                  |       | 12,376                      |       |
| Receivable from  issuance of debt                                                                                                                                         |       | 342,125                 |          | —                  |       | —                      |       |
| **Total  current assets**                                                                                                                                                 | ** ** | **798,987**             | ** **    | **481,547**             | ** ** | **381,805**                 | ** ** |
| Property, plant  and equipment                                                                                                                                            |       | 561,183                 |          | 536,039                 |       | 550,509                     |       |
| Less accumulated  depreciation                                                                                                                                            |       | (324,234                | )             | (295,024                | )          | (314,610                    | )          |
| Property, plant  and equipment, net                                                                                                                                       | ** ** | **236,949**             | ** **    | **241,015**             | ** ** | **235,899**                 | ** ** |
| Goodwill                                                                                                                                                                  |       | 1,108,401               |          | 1,108,462               |       | 1,108,401                   |       |
| Intangibles, net                                                                                                                                                          |       | 562,877                 |          | 595,445                 |       | 576,739                     |       |
| Deferred  financing costs, net                                                                                                                                            |       | 57,635                  |          | 60,200                  |       | 50,400                      |       |
| Other assets                                                                                                                                                              |       | 13,457                  |          | 11,039                  |       | 12,075                      |       |
| **Total  assets**                                                                                                                                                         | ** ** | **$**                   | **2,778,306** | ** **              | **$**      | **2,497,708**               | ** ** | **$** | **2,365,319** | ** ** |
|                                                                                                                                                                      |       |                    |          |                    |       |                        |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                             | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Short-term  borrowings                                                                                                                                                    |       | $                       | 11,868        |                    | $          | 9,130                       |       | $ | 11,868 |   |
| Accounts payable                                                                                                                                                          |       | 60,618                  |          | 54,405                  |       | 56,611                      |       |
| Accrued employee  compensation and related taxes                                                                                                                          |       | 34,837                  |          | 43,355                  |       | 41,594                      |       |
| Commissions  payable                                                                                                                                                      |       | 29,397                  |          | 24,570                  |       | 20,955                      |       |
| Customer  deposits                                                                                                                                                        |       | 213,484                 |          | 213,231                 |       | 166,321                     |       |
| Other accrued  liabilities                                                                                                                                                |       | 62,609                  |          | 37,862                  |       | 48,825                      |       |
| **Total  current liabilities**                                                                                                                                            | ** ** | **412,813**             | ** **    | **382,553**             | ** ** | **346,174**                 | ** ** |
|                                                                                                                                                                      |       |                    |          |                    |       |                        |       |
| Long-term debt -  less current maturities                                                                                                                                 |       | 1,855,938               |          | 1,627,827               |       | 1,501,246                   |       |
| Deferred income  taxes                                                                                                                                                    |       | 212,753                 |          | 245,928                 |       | 219,164                     |       |
| Pension  liabilities, net                                                                                                                                                 |       | 24,429                  |          | 27,094                  |       | 25,112                      |       |
| Other noncurrent  liabilities                                                                                                                                             |       | 18,241                  |          | 6,799                   |       | 18,338                      |       |
| **Total  liabilities**                                                                                                                                                    | ** ** | **2,524,174**           | ** **    | **2,290,201**           | ** ** | **2,110,034**               | ** ** |
| ** **                                                                                                                                                                | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Mezzanine equity                                                                                                                                                          |       | 9,411                   |          | —                  |       | —                      |       |
|                                                                                                                                                                      |       |                    |          |                    |       |                        |       |
| Common stock:                                                                                                                                                             |       |                    |          |                    |       |                        |       |
| Class A $.01 par  value; authorized 7,000,000 shares; issued and outstanding: 5,973,659 shares at  April 1, 2006 and December 31, 2005; 5,971,577 shares at April 2, 2005 |       |                    |          |                    |       |                        |       |
| Class B $.01 par  value; non-voting; authorized 2,724,759 shares; issued and outstanding: none at  April 1, 2006, April 2, 2005 and December 31, 2005                     |       |                    |          |                    |       |                        |       |
| Class C $.01 par  value; authorized 1 share; issued and outstanding: 1 share at April 1, 2006,  April 2, 2005 and December 31, 2005                                       |       | 60                      |          | 60                      |       | 60                          |       |
|                                                                                                                                                                      |       |                    |          |                    |       |                        |       |
| Additional  paid-in-capital                                                                                                                                               |       | 516,222                 |          | 524,359                 |       | 525,593                     |       |
| Accumulated  deficit                                                                                                                                                      |       | (272,104                | )             | (318,146                | )          | (270,968                    | )          |
| Accumulated  other comprehensive income                                                                                                                                   |       | 543                     |          | 1,234                   |       | 600                         |       |
| **Total  stockholders’ equity**                                                                                                                                      | ** ** | **244,721**             | ** **    | **207,507**             | ** ** | **255,285**                 | ** ** |
| **Total  liabilities and stockholders’ equity**                                                                                                                      | ** ** | **$**                   | **2,778,306** | ** **              | **$**      | **2,497,708**               | ** ** | **$** | **2,365,319** | ** ** |

 

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

 

2

----

 

**VISANTHOLDING CORP. AND SUBSIDIARIES**

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

 
| ** **                                                                         | ** ** | **Three months ended**  | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------|------------|
| **In thousands**                                                              | ** ** | **April 1,  2006** | ** ** | **April 2,  2005** | ** ** |
| Net loss                                                                           |       | $                       | (1,136     | ) | $ | (10,529 | ) |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                    |       |   |   |
| Depreciation                                                                       |       | 11,397                  |       | 15,192 |   |
| Amortization of  intangible assets                                                 |       | 12,853                  |       | 11,760 |   |
| Amortization of  debt discount, premium and deferred financing costs               |       | 6,759                   |       | 8,305 |   |
| Other  amortization                                                                |       | 201                     |       | 193 |   |
| Deferred income  taxes                                                             |       | (7,008                  | )          | (8,194 | ) |
| Gain on sale of  assets                                                            |       | (20                     | )          | (9 | ) |
| Stock-based  compensation                                                          |       | 40                      |       | — |   |
| Other                                                                              |       | 2,341                   |       | (153 | ) |
| Changes in  assets and liabilities:                                                |       |                    |       |   |   |
| Accounts  receivable                                                               |       | (3,795                  | )          | (9,329 | ) |
| Inventories                                                                        |       | (36,630                 | )          | (40,378 | ) |
| Accounts payable  and accrued expenses                                             |       | 10,261                  |       | 5,598 |   |
| Customer  deposits                                                                 |       | 47,202                  |       | 56,668 |   |
| Other                                                                              |       | 4,386                   |       | (13,040 | ) |
| **Net  cash provided by operating activities**                                     | ** ** | **46,851**              | ** ** | **16,084** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (19,959                 | )          | (15,345 | ) |
| Proceeds from  the sale of assets                                                  |       | 92                      |       | 117 |   |
| Other investing  activities, net                                                   |       | (2                      | )          | (979 | ) |
| **Net  cash used in investing activities**                                         | ** ** | **(19,869**             | **)**      | **(16,207** | **)** |
| Net short-term  borrowings                                                         |       | —                  |       | 800 |   |
| Principal  payments on long-term debt                                              |       | —                  |       | (63,600 | ) |
| Proceeds from  issuance of common stock                                            |       | —                  |       | 5,946 |   |
| Other                                                                              |       | —                  |       | (134 | ) |
| **Net  cash used in financing activities**                                         | ** ** | **—**              | ** ** | **(56,988** | **)** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 6                       |       | 40 |   |
| Increase  (decrease) in cash and cash equivalents                                  |       | 26,988                  |       | (57,071 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 20,706                  |       | 84,964 |   |
| **Cash  and cash equivalents, end of period**                                      | ** ** | **$**                   | **47,694** | ** ** | **$** | **27,893** | ** ** |
|                                                                                    |            |                         |            |  |  |  |  |  |

 
| ***Summary  of Non Cash Financing Items:***   | *** *** | *** *** | *** *** |
|-----------------------------------------------|--------------|--------------|--------------|
| *Receivable  from issuance of long-term debt* | * *     | *(342,125*   | *)*          |
| *Deferred  financing costs*                   | * *     | *(9,300*     | *)*          |
| *Payables  related to financing costs*        | * *     | *1,425*      | * *     |
| *Issuance  of long-term debt*                 | * *     | *350,000*    | * *     |
| ***Non  cash items, net***                    | *** *** | ***—*** | *** *** |

 

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

 

3

----

 

**VISANT CORPORATION AND SUBSIDIARIES**

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

 
| **In thousands**                     | ** ** | **Three months ended** | ** **  |
|-------------------------------------------|------------|------------------------|-------------|
| **April 1,  2006**                        | ** ** | **April 2,  2005**     |
| **Net sales**                             | ** ** | **$**                  | **312,591** | ** ** | **$** | **309,120** | ** ** |
| Cost of products sold                     |       | 180,244                |        | 189,514 |   |
| Gross profit                              |       | **132,347**            | ** **  | **119,606** | ** ** |
| Selling and administrative expenses       |       | 101,383                |        | 103,142 |   |
| Gain on disposal of fixed assets          |       | (20                    | )           | (9 | ) |
| Transaction costs                         |       | —                 |        | 884 |   |
| Special charges                           |       | 2,799                  |        | 2,952 |   |
| **Operating  income**                     | ** ** | **28,185**             | ** **  | **12,637** | ** ** |
| Interest expense, net                     |       | 26,262                 |        | 26,233 |   |
| Income (loss) before income taxes         | ** ** | **1,923**              | ** **  | **(13,596** | **)** |
| Provision for (benefit from) income taxes |       | 168                    |        | (5,507 | ) |
| **Net  income (loss)**                    | ** ** | **$**                  | **1,755**   | ** ** | **$** | **(8,089** | **)** |

 

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

 

4

----

 

**VISANTCORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| **In thousands, except share amounts**                                                                                             | ** ** | **April 1,  2006** | ** **    | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                             | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Cash and cash  equivalents                                                                                                                             |       | $                       | 46,863        |                    | $          | 18,235                      |       | $ | 19,874 |   |
| Accounts  receivable, net                                                                                                                              |       | 168,157                 |          | 167,219                 |       | 164,340                     |       |
| Inventories, net                                                                                                                                       |       | 167,391                 |          | 169,862                 |       | 130,782                     |       |
| Salespersons overdrafts,  net of allowance of $15,269, $13,258 and $14,659, respectively                                                               |       | 39,386                  |          | 39,494                  |       | 36,663                      |       |
| Prepaid expenses  and other current assets                                                                                                             |       | 21,258                  |          | 16,479                  |       | 16,973                      |       |
| Deferred income  taxes                                                                                                                                 |       | 12,976                  |          | 60,600                  |       | 12,376                      |       |
| **Total  current assets**                                                                                                                              | ** ** | **456,031**             | ** **    | **471,889**             | ** ** | **381,008**                 | ** ** |
| Property, plant  and equipment                                                                                                                         |       | 561,183                 |          | 536,039                 |       | 550,509                     |       |
| Less accumulated  depreciation                                                                                                                         |       | (324,234                | )             | (295,024                | )          | (314,610                    | )          |
| Property, plant  and equipment, net                                                                                                                    | ** ** | **236,949**             | ** **    | **241,015**             | ** ** | **235,899**                 | ** ** |
| Goodwill                                                                                                                                               |       | 1,108,401               |          | 1,108,462               |       | 1,108,401                   |       |
| Intangibles, net                                                                                                                                       |       | 562,877                 |          | 595,445                 |       | 576,739                     |       |
| Deferred  financing costs, net                                                                                                                         |       | 43,488                  |          | 54,859                  |       | 45,430                      |       |
| Other assets                                                                                                                                           |       | 13,457                  |          | 11,039                  |       | 12,075                      |       |
| **Total  assets**                                                                                                                                      | ** ** | **$**                   | **2,421,203** | ** **              | **$**      | **2,482,709**               | ** ** | **$** | **2,359,552** | ** ** |
|                                                                                                                                                   |       |                    |          |                    |       |                        |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                                                                         | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Short-term  borrowings                                                                                                                                 |       | $                       | 11,868        |                    | $          | 9,130                       |       | $ | 11,868 |   |
| Accounts payable                                                                                                                                       |       | 59,193                  |          | 54,401                  |       | 56,611                      |       |
| Accrued employee  compensation and related taxes                                                                                                       |       | 34,837                  |          | 43,355                  |       | 41,594                      |       |
| Commissions  payable                                                                                                                                   |       | 29,397                  |          | 24,570                  |       | 20,955                      |       |
| Customer deposits                                                                                                                                      |       | 213,484                 |          | 213,231                 |       | 166,321                     |       |
| Other accrued  liabilities                                                                                                                             |       | 63,264                  |          | 38,400                  |       | 49,285                      |       |
| **Total  current liabilities**                                                                                                                         | ** ** | **412,043**             | ** **    | **383,087**             | ** ** | **346,634**                 | ** ** |
|                                                                                                                                                   |       |                    |          |                    |       |                        |       |
| Long-term debt -  less current maturities                                                                                                              |       | 1,316,500               |          | 1,456,400               |       | 1,316,500                   |       |
| Deferred income  taxes                                                                                                                                 |       | 227,343                 |          | 253,854                 |       | 232,019                     |       |
| Pension  liabilities, net                                                                                                                              |       | 24,429                  |          | 27,094                  |       | 25,112                      |       |
| Other noncurrent  liabilities                                                                                                                          |       | 18,241                  |          | 6,799                   |       | 18,338                      |       |
| **Total  liabilities**                                                                                                                                 | ** ** | **1,998,556**           | ** **    | **2,127,234**           | ** ** | **1,938,603**               | ** ** |
| ** **                                                                                                                                             | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Commitments and  contingencies                                                                                                                         |       |                    |          |                    |       |                        |       |
|                                                                                                                                                   |       |                    |          |                    |       |                        |       |
| Common stock:                                                                                                                                          |       |                    |          |                    |       |                        |       |
| Common stock  $.01 par value; authorized: 2,000,000 shares; issued and oustanding: 1,000  shares at April 1, 2006, April 2, 2005 and December 31, 2005 |       | —                  |          | —                  |       | —                      |       |
| Additional  paid-in-capital                                                                                                                            |       | 668,758                 |          | 658,839                 |       | 668,758                     |       |
| Accumulated  deficit                                                                                                                                   |       | (246,654                | )             | (304,598                | )          | (248,409                    | )          |
| Accumulated  other comprehensive income                                                                                                                |       | 543                     |          | 1,234                   |       | 600                         |       |
| **Total  stockholder’s equity**                                                                                                                   | ** ** | **422,647**             | ** **    | **355,475**             | ** ** | **420,949**                 | ** ** |
| **Total  liabilities and stockholder’s equity**                                                                                                   | ** ** | **$**                   | **2,421,203** | ** **              | **$**      | **2,482,709**               | ** ** | **$** | **2,359,552** | ** ** |
|                                                                                                                                                        |            |                         |               |                         |            |                             |            |  |  |  |  |  |  |

 

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

 

5

----

 

**VISANTCORPORATION AND SUBSIDIARIES**

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

 
| ** **                                                                         | ** ** | **Three months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|
| **In thousands**                                                              | ** ** | **April 1,  2006**     | ** ** | **April 2,  2005** | ** ** |
| Net income  (loss)                                                                 |       | $                      | 1,755      |   | $ | (8,089 | ) |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                   |       |   |   |
| Depreciation                                                                       |       | 11,397                 |       | 15,192 |   |
| Amortization of  intangible assets                                                 |       | 12,853                 |       | 11,760 |   |
| Amortization of  debt discount, premium and deferred financing costs               |       | 1,944                  |       | 3,951 |   |
| Other  amortization                                                                |       | 201                    |       | 193 |   |
| Deferred income  taxes                                                             |       | (5,273                 | )          | (6,623 | ) |
| Gain on sale of  assets                                                            |       | (20                    | )          | (9 | ) |
| Other                                                                              |       | 2,341                  |       | (153 | ) |
| Changes in  assets and liabilities:                                                |       |                   |       |   |   |
| Accounts  receivable                                                               |       | (3,795                 | )          | (9,329 | ) |
| Inventories                                                                        |       | (36,630                | )          | (40,378 | ) |
| Accounts payable  and accrued expenses                                             |       | 10,261                 |       | 4,538 |   |
| Customer  deposits                                                                 |       | 47,202                 |       | 56,668 |   |
| Other                                                                              |       | 4,616                  |       | (12,667 | ) |
| **Net  cash provided by operating activities**                                     | ** ** | **46,852**             | ** ** | **15,054** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (19,959                | )          | (15,345 | ) |
| Proceeds from  the sale of assets                                                  |       | 92                     |       | 117 |   |
| Other investing  activities, net                                                   |       | (2                     | )          | (979 | ) |
| **Net  cash used in investing activities**                                         | ** ** | **(19,869**            | **)**      | **(16,207** | **)** |
| Net short-term  borrowings                                                         |       | —                 |       | 800 |   |
| Principal  payments on long-term debt                                              |       | —                 |       | (63,600 | ) |
| Other                                                                              |       | —                 |       | (121 | ) |
| **Net  cash used in financing activities**                                         | ** ** | **—**             | ** ** | **(62,921** | **)** |
| Effect of  exchange rate changes on cash and cash equivalents                      |       | 6                      |       | 40 |   |
| Increase  (decrease) in cash and cash equivalents                                  |       | 26,989                 |       | (64,034 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 19,874                 |       | 82,269 |   |
| **Cash  and cash equivalents, end of period**                                      | ** ** | **$**                  | **46,863** | ** ** | **$** | **18,235** | ** ** |

 

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

 

6

----

 

**1.**                   Overview andBasis of Presentation

*** ***

***Overview***

 

The Company is a marketing and publishing services enterprise servicingthe school affinity, direct marketing, fragrance and cosmetics sampling andeducational publishing markets.  TheCompany was formed through the October 2004 consolidation of Jostens, Inc. (“Jostens”),Von Hoffmann Holdings Inc. (“Von Hoffmann”) and AHC I Acquisition Corp. (“Arcade”).  These subsidiaries operate in five reportablesegments:  Jostens Scholastic, JostensYearbook, Jostens Photo, Marketing and Publishing Services and EducationalTextbook.

*** ***

***Basis of Presentation***

 

The unaudited condensed consolidated financial statements includedherein are those of:

 

•                  Visant Holding Corp. and itswholly-owned subsidiaries (“Holdings”) which include Visant Corporation (“Visant”);and

•                  Visant and its wholly-ownedsubsidiaries.

 

There are no significant differences between the results of operationsand financial condition of Visant and those of Holdings other than the certainindebtedness of Holdings.  Holdings has 101⁄4% senior discount notes, which had an accreted value of $189.4 million and$171.4 million as of April 1, 2006 and April 2, 2005, respectively, and $350.0million principal amount of 8 3⁄4% Senior Notes.

 

All significant intercompany balances and transactions have beeneliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements ofHoldings and Visant, and their respective subsidiaries, are presented pursuantto the rules and regulations of the United States Securities ExchangeCommission (“SEC”) in accordance with disclosure requirements for the quarterlyreport on Form 10-Q.  In the opinion ofmanagement, all adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation have been included.  Operating results for the interim periodspresented are not necessarily indicative of the results that may be expectedfor the full year.  These financialstatements should be read in conjunction with the consolidated financialstatements and footnotes included in Holdings’ and Visant’s Annual Report on Form10-K for the fiscal year ended December 31, 2005.

 

The preparation of the financial statements in conformity withaccounting principles generally accepted in the United States requires theCompany to make estimates and assumptions that affect the amounts reported inthe financial statements and accompanying notes.  Actual results could differ from thoseestimates.

 

**2.**                   SignificantAccounting Policies

 

***Revenue Recognition***

 

The SEC’s Staff Accounting Bulletin (“SAB”) No. 104, “RevenueRecognition”, provides guidance on the application of accounting principlesgenerally accepted in the United States to selected revenue recognition issues.In accordance with SAB No. 104, the Company recognizes revenue when theearnings process is complete, evidenced by an agreement between the Company andthe customer, delivery and acceptance has occurred, collectibility is probableand pricing is fixed or determinable. Revenue is recognized when (1) productsare shipped (if shipped FOB shipping point), (2) products are delivered (ifshipped FOB destination) or (3) as services are performed as determined bycontractual agreement, but in all cases only when risk of loss has transferredto the customer and the Company has no further performance obligations.

 

7

----

 

***Cost of Products Sold***

*** ***

Cost of products sold primarily include the cost of paper and othermaterials, direct and indirect labor and related benefit costs, depreciation ofproduction assets and shipping and handling costs.

 

***Shipping and Handling***

*** ***

Net sales include amounts billed to customers for shipping and handlingcosts. Costs incurred for shipping and handling are recorded in cost ofproducts sold.

 

***Selling and Administrative Expenses***

*** ***

Selling and administrative expenses primarily include salaries andrelated benefits of sales and administrative personnel, sales commissions,amortization of intangibles and professional fees such as audit and consultingfees.

 

***Advertising***

 

The Company expenses advertising costs as incurred.  Selling and administrative expenses includedadvertising expense of $1.4 million for each of the quarters ended April 1,2006 and April 2, 2005.

 

***Warranty Costs***

*** ***

Provisions for warranty costs related to Jostens’ scholastic products,particularly class rings, are recorded based on historical information andcurrent trends in manufacturing costs due to their lifetime warranty. Theprovision related to the lifetime warranty is based on the number of ringsmanufactured in the prior school year consistent with industry standards. Theprovision for the lifetime warranty on rings was less than $0.2 million for eachof the quarters ended April 1, 2006 and April 2, 2005. Warranty repair costsfor rings manufactured in the current school year are expensed as incurred.Accrued warranty costs included in the consolidated balance sheets wereapproximately $1.0 million as of April 1, 2006, April 2, 2005 andDecember 31, 2005.

 

***Share-based Compensation***

*** ***

Effective January 1, 2006, the Company adopted Statements of FinancialAccounting Standards (“SFAS”) 123 (revised 2004), “Share Based Payment” (“SFAS123R”), which requires the recognition of compensation expense related to allequity awards granted  including awardsmodified, repurchased, or cancelled based on the fair values of the awards atthe grant date.  For the three monthsended April 1, 2006, the Company recognized compensation expense related tostock options of $0.1 million, which is included in selling, general andadministrative expenses.  Refer to Note 13,*Stock-based Compensation*, for furtherdetails.

 

**3.**                   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 marketing andpublishing services enterprise, servicing the school affinity products, directmarketing, fragrance and cosmetics sampling and educational markets comprisedof the operations of Jostens, Von Hoffmann, 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 voting interest and 45.0% of economicinterest of the Company and affiliates of DLJMBP III held equity interestsrepresenting approximately 41.0% of voting interest and 45.0% of economicinterest, with the remainder held by other co-investors and certain members ofmanagement.  In connection with theTransactions, approximately $175.6 million of the proceeds were distributed tocertain shareholders, and certain

 

8

----

 

treasury stock held by Von Hoffmann was redeemed.    After giving effect to the issuance ofequity to additional members of management, as of May 10, 2006, affiliates ofKKR and DLJMBP III (the “Sponsors”) held approximately 49.1% and 41.0%,respectively, of the voting interests of the Company, while each continued tohold approximately 44.6% of economic interests. As of May 10, 2006, the other co-investors held approximately 8.4% ofthe voting interests and 9.1% of the economic interests of the Company, andmembers of management held approximately 1.6% of the voting interests andapproximately 1.7% of the economic interests.

 

**4.**                   RestructuringActivity and Other Special Charges

 

***Restructuring Activity***

 

During the first quarter of 2006, the Company recorded $0.5 million ofspecial charges relating to severance payments and related benefits associated withon-going initiatives.  The Companyrecorded $0.1 million in each Jostens segment related to severance payments andrelated benefits associated with the reduction in headcount of eight JostensScholastic, two Jostens Yearbook and five Jostens Photo employees,respectively, and $0.2 million related to severance payments and relatedbenefits associated with the reduction in headcount of three employees of theMarketing and Publishing Services segment.

 

During the first quarter of 2005, the Company recorded $3.0 million ofspecial charges, including $1.8 million, $0.4 million and $0.1 million relatedto severance payments and related benefits associated with the reduction inheadcount of 17 Jostens Scholastic, four Jostens Yearbook and three JostensPhoto employees, respectively.  TheCompany recorded severance of $0.5 million related to the reduction in the Marketingand Publishing Services segment’s personnel as well as $0.3 million of costsrelated to a withdrawal liability under a union retirement plan that is payablein connection with the consolidation of certain operations.  The Company also recorded severance of $0.2million related to the reduction in the Educational Textbook segment’s personnel.

 

Restructuring accruals of $2.8 million, $6.1 million and $3.3 millionas of April 1, 2006, April 2, 2005 and December 31, 2005, respectively, areincluded in other accrued liabilities in the condensed consolidated balancesheets.  The accruals as of December 31,2005 include amounts provided for severance related to reductions in corporateand administrative employees from Jostens and the Marketing and Services segment,as well as the consolidation of the Marketing and Service segment’s one- andtwo-color print operations.

 

On a cumulative basis through April 1, 2006, the Company incurred $20.8million of employee severance costs related to initiatives that began in 2004,which affected an aggregate of 513 employees. As of April 1, 2006, the Company has paid $18.3 million in cash relatedto these initiatives.

 

Changes in the restructuring accruals during the first quarter of 2006were as follows:

 
| **In thousands**         | ** ** | **2006 Initiatives**                 | ** ** | **2005 Initiatives** | ** **                           | **2004 Initiatives** | ** ** | **Total**                            | ** ** |
|-------------------------------|------------|--------------------------------------|------------|----------------------|--------------------------------------|----------------------|------------|--------------------------------------|------------|
| **Amount**                    | ** ** | **No. of  employees  affected** | **Amount** | ** **           | **No. of  employees  affected** | **Amount**           | ** ** | **No. of  employees  affected** | **Amount** | ** ** | **No. of  employees  affected** | ** ** |
| Balance at  January 1, 2005   |       | $                                    | —     |                 | —                               |                 | $          | —                               |       | — |   | $ | 8,121 |   | 162 |   | $ | 8,121 |   | 162 |   |
| Restructuring  charges        |       | —                               |       | —               |                                 | 6,948                |       | 185                                  |       | — |   | — |   | 6,948 |   | 185 |   |
| Severance paid                |       | —                               |       | —               |                                 | (5,691               | )          | (181                                 | )          | (6,094 | ) | (162 | ) | (11,785 | ) | (343 | ) |
| Balance at  December 31, 2005 | ** ** | **—**                           | ** ** | **—**           | ** **                           | **1,257**            | ** ** | **4**                                | ** ** | **2,027** | ** ** | **—** | ** ** | **3,284** | ** ** | **4** | ** ** |
| Restructuring  charges        |       | 458                                  |       | 18                   |                                 | —               |       | —                               |       |   |   | — |   | 458 |   | 18 |   |
| Severance paid                |       | (171                                 | )          | (18                  | )                                    | (702                 | )          | (4                                   | )          | (372 | ) | — |   | (1,245 | ) | (22 | ) |
| Balance at April  1, 2006     | ** ** | **$**                                | **287**    | ** **           | **—**                           | ** **           | **$**      | **555**                              | ** ** | **—** | ** ** | **$** | **1,655** | ** ** | **—** | ** ** | **$** | **2,497** | ** ** | **—** | ** ** |
|                               |            |                                      |            |                      |                                      |                      |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The Company expects the remaining severance related to the 2004 and2005 initiatives to be paid during 2006.

 

9

----

 

***Other SpecialCharges***

 

During the first quarter of 2006, the Company recognized an impairmentloss related to the pending sale of its Jostens headquarters building.  As a result of the pending sale, the Company determinedthe carrying value of the building was not recoverable and subsequently reducedthe carrying value by $2.3 million to its estimated fair value.  The impairment loss was allocated amongst allthree Jostens segments.

 

**5.**                   ComprehensiveIncome (Loss)

 

The following amounts were included in determining comprehensive loss forHoldings as of the dates indicated:

 
| **In thousands**                        | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|
| **April 1,  2006**                           | ** ** | **April 2,  2005**     |
| **Holdings:**                                | ** ** | ** **             | ** ** | ** ** | ** ** |
| Net loss                                     |       | $                      | (1,136     | ) | $ | (10,529 | ) |
| Change in  cumulative translation adjustment |       | (57                    | )          | (225 | ) |
| Comprehensive  loss                          |       | **$**                  | **(1,193** | **)** | **$** | **(10,754** | **)** |
|                                              |            |                        |            |  |  |  |  |  |

 

The following amounts were included in determining comprehensive income(loss) for Visant Corporation as of the dates indicated:

 
| **In thousands**                        | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|
| **April 1,  2006**                           | ** ** | **April 2,  2005**     |
| **Visant:**                                  | ** ** | ** **             | ** ** | ** ** | ** ** |
| Net income  (loss)                           |       | $                      | 1,755      |   | $ | (8,089 | ) |
| Change in  cumulative translation adjustment |       | (57                    | )          | (225 | ) |
| Comprehensive  income (loss)                 |       | **$**                  | **1,698**  | ** ** | **$** | **(8,314** | **)** |

 

**6.**                   AccountsReceivable and Inventories

 

Accounts receivable, net, was comprised of the following:

 
| **In thousands**            | ** ** | **April 1,  2006** | ** **  | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------|------------|-------------------------|-------------|-------------------------|------------|-----------------------------|------------|
| Trade  receivables               |       | $                       | 180,864     |                    | $          | 179,685                     |       | $ | 174,683 |   |
| Allowance for  doubtful accounts |       | (4,166                  | )           | (3,852                  | )          | (4,409                      | )          |
| Allowance for  sales returns     |       | (8,541                  | )           | (8,614                  | )          | (5,934                      | )          |
| Accounts  receivable, net        | ** ** | **$**                   | **168,157** | ** **              | **$**      | **167,219**                 | ** ** | **$** | **164,340** | ** ** |
|                                  |            |                         |             |                         |            |                             |            |  |  |  |  |  |

 

10

----

 

Net inventories were comprised of the following:

 
| **In thousands**       | ** ** | **April 1,  2006** | ** **  | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------|------------|--------------------|-------------|--------------------|------------|------------------------|------------|
| Raw materials  and supplies |       | $                  | 52,816      |               | $          | 47,223                 |       | $ | 53,263 |   |
| Work-in-process             |       | 79,688             |        | 82,104             |       | 50,540                 |       |
| Finished goods              |       | 36,789             |        | 42,707             |       | 28,881                 |       |
|                        |       | 169,293            |        | 172,034            |       | 132,684                |       |
| LIFO reserve                |       | (1,902             | )           | (2,172             | )          | (1,902                 | )          |
| Inventories, net            | ** ** | **$**              | **167,391** | ** **         | **$**      | **169,862**            | ** ** | **$** | **130,782** | ** ** |
|                             |            |                    |             |                    |            |                        |            |  |  |  |  |  |

 

***Precious Metals Consignment Arrangement***

 

The Company has a precious metals consignment arrangement with a majorfinancial institution whereby it currently has the ability to obtain up to$32.5 million in consigned inventory.  As required by the terms of the consignmentagreement, the Company does not take title to consigned inventory untilpayment.  Accordingly, the Company does not include the value of consignedinventory or the corresponding liability in the financial statements.  Thevalue of consigned inventory at April 1, 2006, April 2, 2005 and December 31,2005, was $19.5 million, $20.6 million and $26.1 million, respectively.  The consignment agreement does not have astated term, and therefore it can be terminated by either party upon 60 dayswritten notice.  Additionally, theCompany expensed consignment fees related to this facility of $0.2 million and$0.1 million for the three months ended April 1, 2006 and April 2, 2005,respectively.

 

**7.**                   Goodwill andOther Intangible Assets, net

 

The changes in the carrying amount of goodwill were as follows:

 
| **In thousands**               | ** ** | **April 1,  2006** | ** **    | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|-------------------------|---------------|-------------------------|------------|-----------------------------|------------|
| Balance at beginning of period      |       | $                       | 1,108,401     |                    | $          | 1,108,445                   |       | $ | 1,108,445 |   |
| Goodwill acquired during the period |       | —                  |          | 17                      |       | 23                          |       |
| Purchase price adjustments          |       | —                  |          | —                  |       | (113                        | )          |
| Currency translation                |       | —                  |          | —                  |       | 46                          |       |
| Balance at end of period            | ** ** | **$**                   | **1,108,401** | ** **              | **$**      | **1,108,462**               | ** ** | **$** | **1,108,401** | ** ** |
|                                     |            |                         |               |                         |            |                             |            |  |  |  |  |  |

 

As of April 1, 2006, goodwill had been allocated to reporting segmentsas follows:

 

11

----

 
| **In thousands**              | ** ** | ** ** | ** **    |       |
|------------------------------------|------------|------------|---------------|------------|
| Jostens  Scholastic                |       | $          | 296,356       |       |   |
| Jostens Yearbook                   |       | 395,662    |          |       |
| Jostens Photo                      |       | 25,270     |          |       |
| Marketing and Publishing  Services |       | 278,729    |          |       |
| Educational  Textbook              |       | 112,384    |          |       |
| Goodwill                           | ** ** | **$**      | **1,108,401** | ** ** |

 

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

 
| **In thousands**           | ** **                  | ** **    | ** **                    | **April 1,  2006** | ** **  | **April 2,  2005** | ** **                  | **December  31, 2005** | ** **                    |
|---------------------------------|-----------------------------|---------------|-------------------------------|--------------------|-------------|--------------------|-----------------------------|------------------------|-------------------------------|
| **Estimated  useful life** | **Gross  carrying  amount** | ** **    | **Accumulated  amortization** | ** **         | **Net**     | ** **         | **Gross  carrying  amount** | ** **             | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| School  relationships           |                        | 10 years      |                          | $                  | 330,000     |               | $                           | (88,506                | )                             | $ | 241,494 |   | $ | 330,000 |   | $ | (55,632 | ) | $ | 274,368 |   | $ | 330,000 |   | $ | (80,288 | ) | $ | 249,712 |   |
| Order backlog                   |                        | 1.5 years     |                          | 49,394             |        | (49,394            | )                           | —                 |                          | 49,394 |   | (49,394 | ) | — |   | 49,394 |   | (49,394 | ) | — |   |
| Internally  developed software  |                        | 2 to 5 years  |                          | 12,200             |        | (8,725             | )                           | 3,475                  |                          | 12,200 |   | (5,786 | ) | 6,414 |   | 12,200 |   | (8,055 | ) | 4,145 |   |
| Patented/unpatented  technology |                        | 3 years       |                          | 19,752             |        | (13,314            | )                           | 6,438                  |                          | 19,668 |   | (8,868 | ) | 10,800 |   | 19,752 |   | (12,201 | ) | 7,551 |   |
| Customer  relationships         |                        | 4 to 40 years |                          | 35,455             |        | (11,099            | )                           | 24,356                 |                          | 36,455 |   | (8,521 | ) | 27,934 |   | 35,455 |   | (10,446 | ) | 25,009 |   |
| Other                           |                        | 3 years       |                          | 38,708             |        | (16,174            | )                           | 22,534                 |                          | 16,619 |   | (5,270 | ) | 11,349 |   | 39,717 |   | (13,975 | ) | 25,742 |   |
|                            |                        | 485,509       |                          | (187,212           | )           | 298,297            |                        | 464,336                |                          | (133,471 | ) | 330,865 |   | 486,518 |   | (174,359 | ) | 312,159 |   |   |   |
| Trademarks                      |                        | Indefinite    |                          | 264,580            |        | —             |                        | 264,580                |                          | 264,580 |   | — |   | 264,580 |   | 264,580 |   | — |   | 264,580 |   |
|                            | ** **                  |          | ** **                    | **$**              | **750,089** | ** **         | **$**                       | **(187,212**           | **)**                         | **$** | **562,877** | ** ** | **$** | **728,916** | ** ** | **$** | **(133,471** | **)** | **$** | **595,445** | ** ** | **$** | **751,098** | ** ** | **$** | **(174,359** | **)** | **$** | **576,739** | ** ** |

 

Amortization expense related to other intangible assets was $12.9million and $11.8 million for the three months ended April 1, 2006 and April 2,2005, respectively.

 

Based on intangible assets in service as of April 1, 2006, estimatedamortization expense for the remainder of 2006 and each of the five succeedingfiscal years is $36.6 million, $44.5 million, $41.5 million, $36.6 million,$36.0 million and $35.1 million, respectively.

 

**8.**                   Long-Term Debt

 

Long-term debt consists of the following:

 

12

----

 
| **In thousands**                                                                                                                                                                                                                                                                                                                          | ** ** | **April 1,  2006** | ** **    | **April 2,  2005** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|---------------|-------------------------|------------|-----------------------------|------------|
| **Holdings:**                                                                                                                                                                                                                                                                                                                                  | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Senior discount  notes, 10.25% fixed rate, net of discount of $57,762 at April 1, 2006,  $75,773 at April 2, 2005 and $62,454 at December 31, 2005, with semi-annual  interest accretion through December 1, 2008, thereafter semi-annual interest  payments of $12.7 million, accreted principal due and payable at maturity -  December 2013 |       | $                       | 189,438       |                    | $          | 171,427                     |       | $ | 184,746 |   |
| Senior notes,  8.75% fixed rate, with semi-annual interest payments of $15.3 million, principal  due and payable at maturity - December 2013                                                                                                                                                                                                   |       | 350,000                 |          | —                  |       | —                      |       |
| **Visant:**                                                                                                                                                                                                                                                                                                                                    | ** ** | ** **              | ** **    | ** **              | ** ** | ** **                  | ** ** |
| Borrowings under  our senior secured credit facility:                                                                                                                                                                                                                                                                                          |       |                    |          |                    |       |                        |       |
| Term Loan A,  variable rate, 5.62 at April 2, 2005, paid in full at December 31, 2005                                                                                                                                                                                                                                                          |       | —                  |          | 112,500                 |       | —                      |       |
| Term Loan C,  variable rate, 7.32% at April 1, 2006, 5.37% at April 2, 2005 and 6.78% at  December 31, 2005 with semi-annual principal and interest payments through October  1, 2011                                                                                                                                                          |       | 816,500                 |          | 843,900                 |       | 816,500                     |       |
| Senior  subordinated notes, 7.625% fixed rate, with semi-annual interest payments of  $19.1 million, principal due and payable at maturity - October 2012                                                                                                                                                                                      |       | 500,000                 |          | 500,000                 |       | 500,000                     |       |
|                                                                                                                                                                                                                                                                                                                                           | ** ** | **1,855,938**           | ** **    | **1,627,827**           | ** ** | **1,501,246**               | ** ** |
| Less current  portion                                                                                                                                                                                                                                                                                                                          |       | —                  |          | —                  |       | —                      |       |
|                                                                                                                                                                                                                                                                                                                                           | ** ** | **$**                   | **1,855,938** | ** **              | **$**      | **1,627,827**               | ** ** | **$** | **1,501,246** | ** ** |

 

In connection with the Transactions, Visant entered into senior securedcredit 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 million,including the redemption value of certain remaining redeemable preferred stock.

 

Visant’s obligations under the senior secured credit facilities areunconditionally 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:

 

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

•                  substantially all of Visant’smaterial existing and future domestic subsidiaries’ tangible and intangibleassets.

 

13

----

 

The obligations of Jostens Canada Ltd. under the senior secured creditfacilities, and the guarantees of those obligations, are secured by thecollateral referred to in the prior paragraph and substantially all of thetangible and intangible assets of Jostens Canada Ltd. and each of Visant’sother current and future Canadian subsidiaries.

 

Amounts borrowed under the term loan facilities that are repaid orprepaid may not be reborrowed.  Visant’ssenior secured facilities allow us, subject to certain conditions, to incuradditional term loans under the term loan C facility, or under a new termfacility, in either case in an aggregate principal amount of up to $300million, which additional term loans will have the same security and guaranteesas the term A and C loan facilities.

 

The senior secured credit facilities require Visant to meet a maximumtotal leverage 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 the business, amend the terms of Visant’ssubordinated 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 dividend restrictions under the Visant senior secured creditfacilities apply only to Visant and Visant Secondary Holdings Corp., andessentially prohibit all dividends other than (1) for dividends paid on orafter April 30, 2009 and used by Holdings to make regularly-scheduled cashinterest payments on its senior discount notes, subject to compliance with theinterest coverage covenant after giving effect to such dividends, (2) for otherdividends so long as the amount thereof does not exceed $50 million plus anadditional amount based on Visant’s net income and the amount of any capitalcontributions received by Visant after October 4, 2005 and (3) pursuant toother customary exceptions, including redemptions of stock made with other,substantially similar stock or with proceeds of concurrent issuances ofsubstantially similar stock.

 

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

 

The indenture governing the Visant notes restricts Visant and itsrestricted subsidiaries from paying dividends or making any other distributionson account of Visant’s or any restricted subsidiary’s equity interests(including any dividend or distribution payable in connection with any mergeror consolidation) other than (1) dividends or distributions by Visant payablein equity interests of Visant or in options, warrants or other rights topurchase equity interests or (2) dividends or distributions by a restrictedsubsidiary, subject to certain conditions.

 

The indentures governing the Holdings’ senior discount notes and seniornotes restricts Holdings and its restricted subsidiaries from declaring orpaying dividends or making any other distribution (including any payment byHoldings or any restricted subsidiary of Holdings in connection with any mergeror consolidation 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).

 

Visant’s senior secured credit facilities and senior subordinated notescontain certain cross-default and cross-acceleration provisions whereby adefault under or acceleration of other material debt obligations would cause adefault under or acceleration of the senior secured credit facilities and theVisant senior subordinated notes.

 

Any failure to comply with the covenants under the senior secured creditfacilities would constitute a default under the senior secured creditfacilities, which could result in an acceleration of the loans and otherobligations owing thereunder.  As of April1, 2006, after giving effect to the incurrence of the $350.0 million principalamount of 8 3⁄4% Senior Notes, the Company was in compliance with all covenantsunder its material debt obligations.

 

14

----

 

As of April 1, 2006, there was $28.6 million outstanding in the form ofshort-term borrowings under the senior secured credit facilities, including$11.9 million at the Jostens’ Canadian subsidiary, at a weighted averageinterest rate of 7.00%, and an additional $16.7 million outstanding in the formof letters of credit, leaving $221.4 million available under the $250 millionrevolving credit facility.

 

At the end of the first quarter of 2006, Holdings privately placed,$350.0 million of 8 3⁄4% Senior Notes due 2013, subject to settlement on April 4,2006.  The senior unsecured notes are notguaranteed by any of the Company’s subsidiaries. As a result, on April 4, 2006,the Company received proceeds net of $9.3 million of deferred financing costs.  All net proceeds from the offering were usedto fund a dividend to stockholders, which was paid on April 4, 2006.

 

**9.**                   DerivativeFinancial Instruments and Hedging Activities

 

The Company’s involvement with derivative financial instruments islimited principally to managing well-defined interest rate and foreign currencyexchange risks.  Forward foreign currencyexchange contracts may be used to hedge the impact of currency fluctuationsprimarily on inventory purchases denominated in euros.  At April 1, 2006, there were no contracts relatedto these activities outstanding.

 

**10.**            Commitments andContingencies

 

The Company is subject to market risk associated with changes in theprice of precious metals.  To mitigatethe commodity price risk, the Company may from time to time enter into forwardcontracts to purchase gold, platinum and silver based upon the estimated ouncesneeded to satisfy projected customer demand. The purchase commitment at April 1, 2006 was $2.7 million with deliverydates occurring throughout this year. These forward purchase contracts are considered normal purchases andtherefore not subject to the requirements of SFAS 133.  The fair market value of the open preciousmetal forward contracts at April 1, 2006 was $2.9 million, calculated byvaluing each contract at quoted futures prices.

*** ***

***Environmental***

*** ***

The Company’s operations are subject to a wide variety of federal,state, local and foreign laws and regulations governing emissions to air,discharges to waters, the generation, handling, storage, transportation,treatment and disposal of hazardous substances and other materials, andemployee health and safety matters. Costs incurred to comply with such laws andregulations have become more stringent over time.

 

Also, as an owner and operator of real property or a generator ofhazardous substances, the Company may be subject to environmental cleanupliability, regardless of fault, pursuant to the Comprehensive EnvironmentalResponse, Compensation and Liability Act or analogous state laws, as well as toclaims for harm to health or property or for natural resource damages arisingout of contamination or exposure to hazardous substances. Some of the Company’scurrent or past operations have involved metalworking and plating, printing,and other activities that have resulted in environmental conditions that havegiven rise to liabilities.

 

As part of the environmental management program, the Company iscurrently involved in environmental remediation at several properties.Principal among them is a property formerly owned and operated by Jostens forjewelry manufacturing. Although Jostens no longer owns the site, Jostenscontinues to manage the remediation project, which began in 2000. As of April1, 2006, Jostens had made payments totaling $7.8 million for remediationat this site. During 2001, Jostens received reimbursement from its insurancecarrier in the amount of $2.7 million, net of legal costs. Based onfindings included in remediation reports, the Company estimates that thecost required to finish addressing environmental conditions is not material. TheCompany has properly accrued this amount in the consolidated balance sheet asof April 1, 2006.  Additionally, Jostens has ongoing monitoringobligations following the completion of remediation. The Company does notexpect the cost of such ongoing monitoring to be material.

 

15

----

 

While Jostens may havean additional right of contribution or reimbursement under insurance policies,amounts recoverable from other entities with respect to a particular site arenot considered until recoveries are deemed probable.

 

***Legal Proceedings***

*** ***

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

 

Jostens brought a demurrer and motion to strike the plaintiff’scomplaint on June 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.

 

On August 25, 2004, the plaintiff filed an amended complaint whichcontained substantially the same allegations regarding “stones” while droppingthe claims regarding SilverElite® with platinum. On September 29, 2004,Jostens filed another demurrer/motion to strike, challenging the legalsufficiency of plaintiff’s amended complaint. On November 24, 2004, theSuperior Court again sustained Jostens’ demurrer with leave to amend. Theplaintiff filed a second amended complaint dated December 16, 2004. Thecourt dismissed the action on January 26, 2005. The plaintiff appealed thecourt’s decision and oral arguments were heard on March 15, 2006. TheCourt of Appeals of the State of California affirmed the trial court’s judgmentin favor of Jostens in early May 2006.

 

In communications with U.S. Customs and Border Protection (“Customs”),the Company learned of an alleged inaccuracy of the tariff classification forcertain of Jostens’ imports from Mexico. Jostens promptly filed with Customs avoluntary disclosure to limit its monetary exposure. The effect of thesealleged tariff classification errors is that back duties and fees (or “loss ofrevenue”) may be owed on imports dating back five years. Additionally, Customsmay impose interest on the loss of revenue, if any is determined. Presently, noformal notice of, or demand for, any alleged loss of revenue has been issued byCustoms. A review of Jostens’ import practices has revealed that during therelevant five-year period, Jostens’ merchandise qualified for duty-free tarifftreatment under the North American Free Trade Agreement (“NAFTA”), in whichcase there should be no loss of revenue or interest payment owed Customs.However, Customs’ allegations indicate that Jostens committed a technicaloversight in claiming the preferential tariff treatment. Through its priordisclosure to Customs, Jostens has addressed this technical oversight andasserted that the merchandise did in fact qualify for duty-free tarifftreatment under NAFTA and that there is no associated loss of revenue. Jostensis in the early stages of administrative review of this matter, and it is notclear what Customs’ position will be with respect to the alleged tariffclassification errors or that Jostens will not be foreclosed under statute frommaking post-entry NAFTA claims for those imports made prior to 2004. Jostensintends to vigorously defend its position and has recorded no accrual for anypotential liability. However, there can be no assurance that Jostens will besuccessful in its defense or that the disposition of this matter will not havea material effect on the business, financial condition and results ofoperations of the Company.

 

The Company is also a party to other litigation arising in the normalcourse of business. The Company regularly analyzes current information and, asnecessary, provides accruals for probable liabilities on the eventual dispositionof these matters. The Company believes the effect on the business, financialcondition and results of operations, if any, for the disposition of thesematters will not be material, however, there can be no assurance in thisregard.

 

16

----

 

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

 

The Company has provided an income tax (benefit) provision based on itsbest estimate of the consolidated effective tax rate applicable for the entireyear. The estimated consolidated effective tax rates were 41.4% and 40.0% forHoldings and Visant, respectively. During the quarter ended April 1, 2006, theCompany reduced its deferred tax valuation allowance by $0.6 million becausethe Company estimates that a portion of the tax benefit attributable to capitalloss carryforwards will be realized as a result of anticipated propertydispositions during the year. The combined effect of reducing the valuationallowance by $0.6 million and applying the consolidated effective tax ratesresulted in effective tax rates of 61.7% and 8.7%, respectively, for Holdingsand Visant.

 

For the comparable three-month period ended April 2, 2005, theeffective rates of income tax benefit for Holdings and Visant were 41.4% and40.5%, respectively.

 

During April 2006, Holdings was notified by the Internal RevenueService that the congressional Joint Committee on Taxation had approved a claimfor refund by Jostens for the taxable years 2000 and 2001. The Company receiveda refund of Federal tax of approximately $7.6 million, including $1.2 millionof interest. A substantial portion of the refund represents a reduction ofgoodwill, as the Company did not previously record any tax benefit since theamount of the refund, net of costs, was subject to significant uncertainty. Theuncertain portion of the claim was attributable to transaction expensesincurred in connection with Jostens’ merger and recapitalization transaction ofMay 2000. The net tax benefit had been subject to significant uncertainty atthe time Jostens revalued its assets and liabilities in connection with theJuly 2003 merger transaction with DLJ Merchant Banking Partners III, L.P. andcertain of its affiliated funds.

 

**12.****    Pension andOther Postretirement Benefit Plans**

 

Net periodic benefit cost for pension and other postretirement benefitplans is presented below:

 

 
| ** **                               | ** ** | **Pension benefits**   | ** ** | **Postretirement benefits** | ** ** |
|------------------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Three months ended** | ** ** | **Three months ended**      | ** ** |
| **In thousands**                         | ** ** | **April 1,  2006**     | ** ** | **April 2,  2005**          | ** ** | **April 1,  2006** | ** ** | **April 2,  2005** | ** ** |
| Service cost                             |       | $                      | 1,549      |                        | $          | 1,825 |   | $ | 5 |   | $ | 10 |   |
| Interest cost                            |       | 3,747                  |       | 3,711                       |       | 49 |   | 78 |   |
| Expected return  on plan assets          |       | (5,653                 | )          | (5,314                      | )          | — |   | — |   |
| Administrative  expenses                 |       | 102                    |       | 179                         |       | — |   | — |   |
| Amortization of  prior year costs/losses |       | (119                   | )          | 13                          |       | (46 | ) | — |   |
| Net periodic  benefit expense            | ** ** | **$**                  | **(374**   | **)**                       | **$**      | **414** | ** ** | **$** | **8** | ** ** | **$** | **88** | ** ** |

 

As of December 31, 2005, the Company did not expect to contribute toits qualified pension plans in 2006 due to the funded status and this estimatehas not changed as of April 1, 2006. For the three months ended April 1, 2006, theCompany did not make any contributions to the qualified pension plan and contributed$0.6 million and $0.1 million to its nonqualified pension plans and to thepostretirement welfare plans, respectively.

 

**13.****    Stock-basedCompensation**

 

Prior to January1, 2006, the Company applied the intrinsic method under Accounting PrinciplesBoard Opinion (“APB”) 25, “*Accounting for StockIssued to Employees*.”  Sinceall options previously granted were at fair value, no compensation cost wasreflected in net income (loss). For the quarter ended April 2, 2005, theCompany’s pro forma net income (loss) incorporating the stock-basedcompensation expense provisions under SFAS 123 would not have been materiallydifferent than reported net income (loss).

 

17

----

 

Effective January1, 2006, the Company adopted SFAS 123R, which requires the recognition ofcompensation expense related to all equity awards based on the fair values ofthe awards at the grant date. The Company used the minimum value method in itsSFAS 123 pro forma disclosure and therefore applied the prospective transitionmethod as of the effective date. Under the prospective transition method, theCompany would recognize compensation expense for equity awards granted,modified and canceled subsequent to the date of adoption.

 

The Company hadgranted non-employee awards to certain related parties, as disclosed in Note15, *Related-Party Transactions,*prior toJanuary 1, 2006, for which compensation expense has been recorded during thefirst quarter of 2006. For the quarter ended April 1, 2006, the Companyrecognized compensation expense related to stock options of $0.1 million whichis included in selling, general and administrative expenses.

 

During the firstquarter of 2006, the Company did not grant, cancel or have any equity awardsexercised or forfeited. As of April 1, 2006 there were approximately 388,000stock options outstanding of which 132,000 are exercisable.

 

Certain optionsgranted prior to the adoption of SFAS 123R contain a repurchase feature wherebythe company is obligated, under certain circumstances such as death anddisability, to repurchase the option from the holder and settle amounts incash. In accordance with SEC’s Staff Accounting Bulletin (“SAB”) No. 107, “*Share-Based Payment*”, such equity awards are consideredtemporary equity and have been reclassified from additional paid-in-capital tomezzanine equity in the balance sheet as of April 1, 2006.

 

**14.****    BusinessSegments**

 

The Company operates in five reportable segments.

 

*Jostens Scholastic* segment providesservices related to the marketing, sale and production of class rings and anarray of graduation products.

 

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

 

*Jostens Photo* segment providesphotography services.

 

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

 

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

 

The following table presents information of Holdings by businesssegment:

 

18

----

 

| ** **                           | ** **   | **Three months ended** | ** **   |
|--------------------------------------|--------------|------------------------|--------------|
| **In thousands**                     | ** **   | **April 1,  2006**     | ** **   | **April 2,  2005** | ** ** |
| ***Net  sales***                     | *** *** | *** ***           | *** *** | *** *** | *** *** |
| Jostens  Scholastic                  |         | $                      | 134,383      |   | $ | 123,581 |   |
| Jostens Yearbook                     |         | 8,295                  |         | 7,972 |   |
| Jostens Photo                        |         | 7,450                  |         | 8,185 |   |
| Marketing and  Publishing Services   |         | 121,675                |         | 127,756 |   |
| Educational  Textbook                |         | 42,782                 |         | 44,070 |   |
| Inter-segment  eliminations          |         | (1,994                 | )            | (2,444 | ) |
| ** **                           | ** **   | **$**                  | **312,591**  | ** ** | **$** | **309,120** | ** ** |
|                                 |         |                   |         |   |   |
| ***Operating  income (loss)***       | *** *** | *** ***           | *** *** | *** *** | *** *** |
| Jostens  Scholastic                  |         | $                      | 21,260       |   | 11,109 |   |
| Jostens Yearbook                     |         | (13,962                | )            | (16,695 | ) |
| Jostens Photo                        |         | (3,790                 | )            | (4,342 | ) |
| Marketing and  Publishing Services   |         | 20,827                 |         | 17,860 |   |
| Educational  Textbook                |         | 3,771                  |         | 4,661 |   |
| ** **                           | ** **   | **$**                  | **28,106**   | ** ** | **$** | **12,593** | ** ** |
| ** **                           | ** **   | ** **             | ** **   | ** ** | ** ** |
| ***Depreciation  and amortization*** | *** *** | *** ***           | *** *** | *** *** | *** *** |
| Jostens  Scholastic                  |         | $                      | 7,252        |   | $ | 8,582 |   |
| Jostens Yearbook                     |         | 8,555                  |         | 9,261 |   |
| Jostens Photo                        |         | 636                    |         | 957 |   |
| Marketing and  Publishing Services   |         | 5,948                  |         | 6,435 |   |
| Educational  Textbook                |         | 2,060                  |         | 1,910 |   |
| ** **                           | ** **   | **$**                  | **24,451**   | ** ** | **$** | **27,145** | ** ** |

 

**15.****    Related PartyTransactions**

 

***Management Services Agreement***

 

In connection with the Transactions, the Company entered into amanagement services agreement with the Sponsors pursuant to which the Sponsorsagreed to provide certain structuring, consulting and management advisoryservices. Under the agreement, the Sponsors receive an annual advisory fee of$3.0 million that is payable quarterly and which increases by 3% per year. The Companypaid $0.8 million associated with the advisory fees from the Sponsors for boththe three month periods ended April 1, 2006 and April 2, 2005. The agreementalso provides for certain indemnification by the Company from the Sponsors andtheir affiliates, directors, officers and representatives.

 

***Other***

*** ***

The Company retained Capstone Consulting (“Capstone”) in 2004 toprovide consulting services to certain segments primarily to identify andadvise on potential opportunities to improve operating efficiencies. During thefirst quarter of 2006, Capstone did not provide consulting services to theCompany. Although neither KKR nor any

 

19

----

 

entity affiliatedwith KKR owns any of the equity of Capstone, KKR has provided financing toCapstone. In March 2005, an affiliate of Capstone invested $1.3 million inthe Company’s Class A Common Stock and has been granted 13,527 options topurchase Class A Common Stock under the 2004 Stock Option Plan.

 

**16.****   ****Condensed Consolidating Guarantor Information**

 

As discussed in Note 8, *Long-Term Debt*,Visant’s obligations under the senior secured credit facilities and the75⁄8% senior subordinated notes are guaranteed by certain of itswholly-owned subsidiaries on a full, unconditional and joint and several basis.The following tables present condensed consolidating financial information forVisant, as issuer, and its guarantor and non-guarantor subsidiaries.

 

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Threemonths ended April 1, 2006**

 
| **In thousands**                                  | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------------|------------|------------------|------------|------------|------------|
| **Net  sales**                                    |       | $          | —      | ** **     | **$**      | **302,765**          | ** ** | **$**            | **13,824** | ** ** | **$**      | **(3,998** | **)** | **$** | **312,591** | ** ** |
| Cost of products  sold                            |       | (1,597     | )           | 179,075        |       | 6,807                |       | (4,041           | )          | 180,244    |       |
| Gross profit                                      |       | 1,597      |        | 123,690        |       | 7,017                |       | 43               |       | 132,347    |       |
| Selling and  administrative expenses              |       | (458       | )           | 95,148         |       | 6,693                |       | —           |       | 101,383    |       |
| Gain on sale of  assets                           |       | 5          |        | (29            | )          | 4                    |       | —           |       | (20        | )          |
| Special charges                                   |       | —     |        | 2,799          |       | —               |       | —           |       | 2,799      |       |
| **Operating  income**                             | ** ** | **2,050**  | ** **  | **25,772**     | ** ** | **320**              | ** ** | **43**           | ** ** | **28,185** | ** ** |
| Net interest  expense                             |       | 24,621     |        | 27,820         |       | 282                  |       | (26,461          | )          | 26,262     |       |
| Equity loss  (earnings) in subsidiary, net of tax |       | 1,189      |        | 18             |       | —               |       | (1,207           | )          | —     |       |
| (Loss) income  before income taxes                |       | (23,760    | )           | (2,066         | )          | 38                   |       | 27,711           |       | 1,923      |       |
| Provision for  (benefit from) income taxes        |       | 972        |        | (877           | )          | 56                   |       | 17               |       | 168        |       |
| **Net  (loss) income**                            | ** ** | **$**      | **(24,732** | **)**          | **$**      | **(1,189**           | **)**      | **$**            | **(18**    | **)**      | **$**      | **27,694** | ** ** | **$** | **1,755** | ** ** |

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Threemonths ended April 2, 2005**

 
| ***In thousands***                                | ** ** | **Visant** | ** **  | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|---------------------------------------------------|------------|------------|-------------|----------------|------------|----------------------|------------|------------------|------------|------------|------------|
| **Net  sales**                                    |       | $          | —      | ** **     | **$**      | **299,051**          | ** ** | **$**            | **13,871** | ** ** | **$**      | **(3,802** | **)** | **$** | **309,120** | ** ** |
| Cost of products  sold                            |       | —     |        | 186,577        |       | 6,741                |       | (3,804           | )          | 189,514    |       |
| Gross profit                                      |       | —     |        | 112,474        |       | 7,130                |       | 2                |       | 119,606    |       |
| Selling and  administrative expenses              |       | (452       | )           | 97,111         |       | 6,483                |       | —           |       | 103,142    |       |
| Gain on sale of  assets                           |       | —     |        | (9             | )          | —               |       | —           |       | (9         | )          |
| Transaction costs                                 |       | 99         |        | 785            |       | —               |       | —           |       | 884        |       |
| Special charges                                   |       | —     |        | 2,694          |       | 258                  |       | —           |       | 2,952      |       |
| **Operating  income**                             | ** ** | **353**    | ** **  | **11,893**     | ** ** | **389**              | ** ** | **2**            | ** ** | **12,637** | ** ** |
| Net interest  expense                             |       | 25,625     |        | 26,479         |       | 191                  |       | (26,062          | )          | 26,233     |       |
| Equity loss  (earnings) in subsidiary, net of tax |       | 8,650      |        | (149           | )          | —               |       | (8,501           | )          | —     |       |
| (Loss) income  before income taxes                |       | (33,922    | )           | (14,437        | )          | 198                  |       | 34,565           |       | (13,596    | )          |
| (Benefit from)  provision for income taxes        |       | (10,235    | )           | (5,787         | )          | 49                   |       | 10,466           |       | (5,507     | )          |
| **Net  (loss) income**                            | ** ** | **$**      | **(23,687** | **)**          | **$**      | **(8,650**           | **)**      | **$**            | **149**    | ** ** | **$**      | **24,099** | ** ** | **$** | **(8,089** | **)** |

 

20

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**April1, 2006**

 
| **In thousands**                                     | ** ** | **Visant**    | ** **    | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
|------------------------------------------------------|------------|---------------|---------------|----------------|------------|----------------------|------------|------------------|------------|---------------|------------|
| **ASSETS**                                           | ** ** | ** **    | ** **    | ** **     | ** ** | ** **           | ** ** | ** **       | ** ** | ** **    | ** ** |
| Cash and cash  equivalents                           |       | $             | 39,298        |           | $          | 822                  |       | $                | 6,743      |          | $          | — |   | $ | 46,863 |   |
| Accounts  receivable, net                            |       | 2,030         |          | 158,859        |       | 7,268                |       | —           |       | 168,157       |       |
| Inventories, net                                     |       | —        |          | 163,202        |       | 4,228                |       | (39              | )          | 167,391       |       |
| Salespersons  overdrafts, net                        |       | —        |          | 29,794         |       | 9,592                |       | —           |       | 39,386        |       |
| Prepaid expenses  and other current assets           |       | 1,854         |          | 18,494         |       | 735                  |       | —           |       | 21,083        |       |
| Deferred income  taxes                               |       | (607          | )             | 13,508         |       | 75                   |       | —           |       | 12,976        |       |
| Intercompany  receivable (payable)                   |       | 15,585        |          | 507            |       | —               |       | (15,917          | )          | 175           |       |
| **Total  current assets**                            | ** ** | **58,160**    | ** **    | **385,186**    | ** ** | **28,641**           | ** ** | **(15,956**      | **)**      | **456,031**   | ** ** |
| Property, plant,  and equipment, net                 |       | 1,327         |          | 232,195        |       | 3,427                |       | —           |       | 236,949       |       |
| Goodwill                                             |       | —        |          | 1,053,996      |       | 54,405               |       | —           |       | 1,108,401     |       |
| Intangibles, net                                     |       | —        |          | 562,877        |       | —               |       | —           |       | 562,877       |       |
| Deferred  financing costs, net                       |       | 43,488        |          | —         |       | —               |       | —           |       | 43,488        |       |
| Other assets                                         |       | 40            |          | 13,372         |       | 45                   |       | —           |       | 13,457        |       |
| Intercompany  receivable (payable)                   |       | 1,308,854     |          | 106,022        |       | 431                  |       | (1,415,307       | )          | —        |       |
| Investment in  subsidiaries                          |       | 416,309       |          | 70,077         |       | —               |       | (486,386         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**         | **1,828,178** | ** **     | **$**      | **2,423,725**        | ** ** | **$**            | **86,949** | ** **    | **$**      | **(1,917,649** | **)** | **$** | **2,421,203** | ** ** |
|                                                 |       |          |          |           |       |                 |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        | ** ** | ** **    | ** **    | ** **     | ** ** | ** **           | ** ** | ** **       | ** ** | ** **    | ** ** |
| Short-term  borrowings                               |       | $             | —        |           | $          | —               |       | $                | 11,868     |          | $          | — |   | $ | 11,868 |   |
| Accounts payable                                     |       | 4,280         |          | 52,784         |       | 2,120                |       | 9                |       | 59,193        |       |
| Accrued employee  compensation                       |       | 4,744         |          | 28,099         |       | 1,994                |       | —           |       | 34,837        |       |
| Commissions  payable                                 |       | —        |          | 26,987         |       | 2,410                |       | —           |       | 29,397        |       |
| Customer  deposits                                   |       | —        |          | 205,785        |       | 7,699                |       | —           |       | 213,484       |       |
| Other accrued  liabilities                           |       | 23,365        |          | 34,606         |       | 5,311                |       | (18              | )          | 63,264        |       |
| Intercompany  payable (receivable)                   |       | —        |          | 15,136         |       | 790                  |       | (15,926          | )          | —        |       |
| **Total  current liabilities**                       | ** ** | **32,389**    | ** **    | **363,397**    | ** ** | **32,192**           | ** ** | **(15,935**      | **)**      | **412,043**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,316,500     |          | —         |       | —               |       | —           |       | 1,316,500     |       |
| Deferred income  taxes                               |       | (1,612        | )             | 222,248        |       | 6,707                |       | —           |       | 227,343       |       |
| Pension  liabilities, net                            |       | (150          | )             | 24,579         |       | —               |       | —           |       | 24,429        |       |
| Other noncurrent  liabilities                        |       | 300           |          | 17,600         |       | 341                  |       | —           |       | 18,241        |       |
| Intercompany  payable (receivable)                   |       | 200,959       |          | 1,379,592      |       | (22,368              | )          | (1,558,183       | )          | —        |       |
| **Total  liabilities**                               | ** ** | **1,548,386** | ** **    | **2,007,416**  | ** ** | **16,872**           | ** ** | **(1,574,118**   | **)**      | **1,998,556** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **279,792**   | ** **    | **416,309**    | ** ** | **70,077**           | ** ** | **(343,531**     | **)**      | **422,647**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**         | **1,828,178** | ** **     | **$**      | **2,423,725**        | ** ** | **$**            | **86,949** | ** **    | **$**      | **(1,917,649** | **)** | **$** | **2,421,203** | ** ** |

 

 

21

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**April2, 2005**

 
| **In thousands**                                     | ** ** | **Visant**  | ** **  | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** **  | **Total**     | ** ** |
|------------------------------------------------------|------------|-------------|-------------|----------------|------------|----------------------|------------|------------------|-------------|---------------|------------|
| **ASSETS**                                           | ** ** | ** **  | ** **  | ** **     | ** ** | ** **           | ** ** | ** **       | ** **  | ** **    | ** ** |
| Cash and cash  equivalents                           |       | $           | 16,180      |           | $          | (4,178               | )          | $                | 6,233       |          | $          | — |   | $ | 18,235 |   |
| Accounts  receivable, net                            |       | 175         |        | 156,798        |       | 10,246               |       | —           |        | 167,219       |       |
| Inventories, net                                     |       | —      |        | 165,186        |       | 4,703                |       | (27              | )           | 169,862       |       |
| Salespersons  overdrafts, net                        |       | —      |        | 30,652         |       | 8,842                |       | —           |        | 39,494        |       |
| Prepaid expenses  and other current assets           |       | 1,103       |        | 14,557         |       | 819                  |       | —           |        | 16,479        |       |
| Deferred income  taxes                               |       | —      |        | 60,525         |       | 75                   |       | —           |        | 60,600        |       |
| **Total  current assets**                            | ** ** | **17,458**  | ** **  | **423,540**    | ** ** | **30,918**           | ** ** | **(27**          | **)**       | **471,889**   | ** ** |
| Property, plant,  and equipment, net                 |       | 184         |        | 237,013        |       | 3,818                |       | —           |        | 241,015       |       |
| Goodwill                                             |       | —      |        | 1,066,407      |       | 42,055               |       | —           |        | 1,108,462     |       |
| Intangibles, net                                     |       | —      |        | 574,535        |       | 20,910               |       | —           |        | 595,445       |       |
| Deferred  financing costs, net                       |       | 54,859      |        | —         |       | —               |       | —           |        | 54,859        |       |
| Other assets                                         |       | —      |        | 10,657         |       | 2,094                |       | (1,712           | )           | 11,039        |       |
| Intercompany  (payable) receivable                   |       | (42,209     | )           | 41,674         |       | 535                  |       | —           |        | —        |       |
| Investment in  subsidiaries                          |       | 366,140     |        | 63,896         |       | —               |       | (430,036         | )           | —        |       |
| **Total  assets**                                    | ** ** | **$**       | **396,432** | ** **     | **$**      | **2,417,722**        | ** ** | **$**            | **100,330** | ** **    | **$**      | **(431,775** | **)** | **$** | **2,482,709** | ** ** |
|                                                 |       |        |        |           |       |                 |       |             |        |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        | ** ** | ** **  | ** **  | ** **     | ** ** | ** **           | ** ** | ** **       | ** **  | ** **    | ** ** |
| Short-term  borrowings                               |       | $           | —      |           | $          | —               |       | $                | 9,130       |          | $          | — |   | $ | 9,130 |   |
| Accounts payable                                     |       | 1,080       |        | 51,186         |       | 2,135                |       | —           |        | 54,401        |       |
| Accrued employee  compensation                       |       | 6,357       |        | 34,539         |       | 2,459                |       | —           |        | 43,355        |       |
| Commissions  payable                                 |       | —      |        | 21,977         |       | 2,593                |       | —           |        | 24,570        |       |
| Customer  deposits                                   |       | —      |        | 205,122        |       | 8,109                |       | —           |        | 213,231       |       |
| Other accrued  liabilities                           |       | 5,243       |        | 30,292         |       | 2,875                |       | (10              | )           | 38,400        |       |
| Intercompany  payable (receivable)                   |       | 58,986      |        | (26,907        | )          | 359                  |       | (32,438          | )           | —        |       |
| **Total  current liabilities**                       | ** ** | **71,666**  | ** **  | **316,209**    | ** ** | **27,660**           | ** ** | **(32,448**      | **)**       | **383,087**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,456,400   |        | —         |       | —               |       | —           |        | 1,456,400     |       |
| Deferred income  taxes                               |       | —      |        | 245,205        |       | 8,649                |       | —           |        | 253,854       |       |
| Pension  liabilities, net                            |       | —      |        | 27,094         |       | —               |       | —           |        | 27,094        |       |
| Other noncurrent  liabilities                        |       | —      |        | 6,674          |       | 125                  |       | —           |        | 6,799         |       |
| Intercompany  (receivable) payable                   |       | (1,456,400  | )           | 1,456,400      |       | —               |       | —           |        | —        |       |
| **Total  liabilities**                               | ** ** | **71,666**  | ** **  | **2,051,582**  | ** ** | **36,434**           | ** ** | **(32,448**      | **)**       | **2,127,234** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **324,766** | ** **  | **366,140**    | ** ** | **63,896**           | ** ** | **(399,327**     | **)**       | **355,475**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**       | **396,432** | ** **     | **$**      | **2,417,722**        | ** ** | **$**            | **100,330** | ** **    | **$**      | **(431,775** | **)** | **$** | **2,482,709** | ** ** |

 

 

22

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET**

**December31, 2005**

 
| **In thousands**                                     | ** ** | **Visant**    | ** **    | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**     | ** ** |
|------------------------------------------------------|------------|---------------|---------------|----------------|------------|----------------------|------------|------------------|------------|---------------|------------|
| **ASSETS**                                           | ** ** | ** **    | ** **    | ** **     | ** ** | ** **           | ** ** | ** **       | ** ** | ** **    | ** ** |
| Cash and cash  equivalents                           |       | $             | 13,029        |           | $          | (1,454               | )          | $                | 8,299      |          | $          | — |   | $ | 19,874 |   |
| Accounts  receivable, net                            |       | 2,231         |          | 151,532        |       | 10,577               |       | —           |       | 164,340       |       |
| Inventories, net                                     |       | —        |          | 128,080        |       | 2,785                |       | (83              | )          | 130,782       |       |
| Salespersons  overdrafts, net                        |       | —        |          | 27,957         |       | 8,706                |       | —           |       | 36,663        |       |
| Prepaid expenses  and other current assets           |       | 3,361         |          | 12,876         |       | 701                  |       | —           |       | 16,938        |       |
| Intercompany  receivable (payable)                   |       | 2,076         |          | 416            |       | 130                  |       | (2,587           | )          | 35            |       |
| Deferred income  taxes                               |       | (1,207        | )             | 13,508         |       | 75                   |       | —           |       | 12,376        |       |
| **Total  current assets**                            | ** ** | **19,490**    | ** **    | **332,915**    | ** ** | **31,273**           | ** ** | **(2,670**       | **)**      | **381,008**   | ** ** |
| Property, plant,  and equipment, net                 |       | 517           |          | 231,676        |       | 3,706                |       | —           |       | 235,899       |       |
| Goodwill                                             |       | —        |          | 1,088,441      |       | 19,960               |       | —           |       | 1,108,401     |       |
| Intangibles, net                                     |       | —        |          | 542,207        |       | 34,532               |       | —           |       | 576,739       |       |
| Deferred  financing costs, net                       |       | 45,430        |          | —         |       | —               |       | —           |       | 45,430        |       |
| Other assets                                         |       | 40            |          | 11,805         |       | 230                  |       | —           |       | 12,075        |       |
| Intercompany  receivable (payable)                   |       | 1,357,771     |          | 38,392         |       | —               |       | (1,396,163       | )          | —        |       |
| Investment in  subsidiaries                          |       | 417,555       |          | 70,095         |       | —               |       | (487,650         | )          | —        |       |
| **Total  assets**                                    | ** ** | **$**         | **1,840,803** | ** **     | **$**      | **2,315,531**        | ** ** | **$**            | **89,701** | ** **    | **$**      | **(1,886,483** | **)** | **$** | **2,359,552** | ** ** |
|                                                 |       |          |          |           |       |                 |       |             |       |          |       |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**        | ** ** | ** **    | ** **    | ** **     | ** ** | ** **           | ** ** | ** **       | ** ** | ** **    | ** ** |
| Short-term  borrowings                               |       | $             | —        |           | $          | —               |       | $                | 11,868     |          | $          | — |   | $ | 11,868 |   |
| Accounts payable                                     |       | 5,098         |          | 45,589         |       | 5,923                |       | 1                |       | 56,611        |       |
| Accrued employee  compensation                       |       | 6,226         |          | 33,393         |       | 1,975                |       | —           |       | 41,594        |       |
| Commissions  payable                                 |       | —        |          | 18,400         |       | 2,555                |       | —           |       | 20,955        |       |
| Customer  deposits                                   |       | —        |          | 160,791        |       | 5,530                |       | —           |       | 166,321       |       |
| Other accrued  liabilities                           |       | 11,976        |          | 29,768         |       | 7,508                |       | (32              | )          | 49,220        |       |
| Intercompany  payable (receivable)                   |       | 2,679         |          | (26            | )          | —               |       | (2,588           | )          | 65            |       |
| **Total current  liabilities**                       | ** ** | **25,979**    | ** **    | **287,915**    | ** ** | **35,359**           | ** ** | **(2,619**       | **)**      | **346,634**   | ** ** |
| Long-term debt,  less current maturities             |       | 1,316,500     |          | —         |       | —               |       | —           |       | 1,316,500     |       |
| Deferred income  taxes                               |       | (1,612        | )             | 226,935        |       | 6,696                |       | —           |       | 232,019       |       |
| Pension  liabilities, net                            |       | —        |          | 25,112         |       | —               |       | —           |       | 25,112        |       |
| Other noncurrent  liabilities                        |       | —        |          | 17,986         |       | 352                  |       | —           |       | 18,338        |       |
| Intercompany  payable (receivable)                   |       | 195,355       |          | 1,340,028      |       | (22,801              | )          | (1,512,582       | )          | —        |       |
| **Total  liabilities**                               | ** ** | **1,536,222** | ** **    | **1,897,976**  | ** ** | **19,606**           | ** ** | **(1,515,201**   | **)**      | **1,938,603** | ** ** |
| **Stockholder’s  equity**                       | ** ** | **304,581**   | ** **    | **417,555**    | ** ** | **70,095**           | ** ** | **(371,282**     | **)**      | **420,949**   | ** ** |
| **Total  liabilities and stockholder’s equity** | ** ** | **$**         | **1,840,803** | ** **     | **$**      | **2,315,531**        | ** ** | **$**            | **89,701** | ** **    | **$**      | **(1,886,483** | **)** | **$** | **2,359,552** | ** ** |

 

 

23

----

 

 

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

**Threemonths ended April 1, 2006**

 
| **In thousands**                                              | ** ** | **Visant** | ** ** | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------|------------|----------------------|------------|------------------|------------|-------------|------------|
| Net (loss)  income                                            |       | $          | (24,732    | )              | $          | (1,189               | )          | $                | (18        | )           | $          | 27,694 |   | $ | 1,755 |   |
| Other cash  provided by operating activities                  |       | 21,839     |       | 52,474         |       | (1,521               | )          | (27,695          | )          | 45,097      |       |
| **Net  cash (used in) provided by operating activities**      | ** ** | **(2,893** | **)**      | **51,285**     | ** ** | **(1,539**           | **)**      | **(1**           | **)**      | **46,852**  | ** ** |
| Purchases of  property, plant, and equipment                  |       | (843       | )          | (19,092        | )          | (24                  | )          | —           |       | (19,959     | )          |
| Proceeds from  the sale of assets                             |       | 3          |       | 88             |       | 1                    |       |             |       | 92          |       |
| Other investing  activities, net                              |       | —     |       | (2             | )          | —               |       | —           |       | (2          | )          |
| **Net  cash used in investing activities**                    | ** ** | **(840**   | **)**      | **(19,006**    | **)**      | **(23**              | **)**      | **—**       | ** ** | **(19,869** | **)**      |
| Intercompany  payable (receivable)                            |       | 30,002     |       | (30,003        | )          | —               |       | 1                |       | —      |       |
| **Net  cash provided by (used in) financing activities**      | ** ** | **30,002** | ** ** | **(30,003**    | **)**      | **—**           | ** ** | **1**            | ** ** | **—**  | ** ** |
| Effect of  exchange rate changes on cash and cash equivalents |       | —     |       | —         |       | 6                    |       | —           |       | 6           |       |
| Increase  (decrease) in cash and cash equivalents             |       | 26,269     |       | 2,276          |       | (1,556               | )          | —           |       | 26,989      |       |
| Cash and cash  equivalents, beginning of period               |       |       | 13,029     |           |       | (1,454               | )          |             | 8,299      |        |       | — |   |   | 19,874 |   |
| **Cash  and cash equivalents, end of period**                 | ** ** | **$**      | **39,298** | ** **     | **$**      | **822**              | ** ** | **$**            | **6,743**  | ** **  | **$**      | **—** | ** ** | **$** | **46,863** | ** ** |

 

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

**Threemonths ended April 2, 2005**

 
| ***In thousands***                                            | ** ** | **Visant**  | ** ** | **Guarantors** | ** ** | **Non-  Guarantors** | ** ** | **Eliminations** | ** ** | **Total**   | ** ** |
|---------------------------------------------------------------|------------|-------------|------------|----------------|------------|----------------------|------------|------------------|------------|-------------|------------|
| Net (loss)  income                                            |       | $           | (23,687    | )              | $          | (8,650               | )          | $                | 149        |        | $          | 24,099 |   | $ | (8,089 | ) |
| Other cash  provided by operating activities                  |       | 34,071      |       | 11,488         |       | 1,683                |       | (24,099          | )          | 23,143      |       |
| **Net  cash provided by operating activities**                | ** ** | **10,384**  | ** ** | **2,838**      | ** ** | **1,832**            | ** ** | **—**       | ** ** | **15,054**  | ** ** |
| Purchases of  property, plant, and equipment                  |       | (122        | )          | (15,223        | )          | —               |       | —           |       | (15,345     | )          |
| Proceeds from  the sale of assets                             |       | —      |       | 117            |       | —               |       | —           |       | 117         |       |
| Other investing  activities, net                              |       | —      |       | (963           | )          | (16                  | )          | —           |       | (979        | )          |
| **Net cash  used in investing activities**                    | ** ** | **(122**    | **)**      | **(16,069**    | **)**      | **(16**              | **)**      | **—**       | ** ** | **(16,207** | **)**      |
| Net short-term  borrowings                                    |       | —      |       | —         |       | 800                  |       | —           |       | 800         |       |
| Principal  payments on long-term debt                         |       | (63,600     | )          | —         |       | —               |       | —           |       | (63,600     | )          |
| Intercompany  (receivable) payable                            |       | (11,294     | )          | 11,294         |       | —               |       | —           |       | —      |       |
| Other financing  activities, net                              |       | (121        | )          | —         |       | —               |       | —           |       | (121        | )          |
| **Net  cash (used in) provided by financing activities**      | ** ** | **(75,015** | **)**      | **11,294**     | ** ** | **800**              | ** ** | **—**       | ** ** | **(62,921** | **)**      |
| Effect of  exchange rate changes on cash and cash equivalents |       | —      |       | —         |       | 40                   |       | —           |       | 40          |       |
| (Decrease) increase  in cash and cash equivalents             |       | (64,753     | )          | (1,937         | )          | 2,656                |       | —           |       | (64,034     | )          |
| Cash and cash  equivalents, beginning of period               |       | 80,933      |       | (2,241         | )          | 3,577                |       | —           |       | 82,269      |       |
| **Cash  and cash equivalents, end of period**                 | ** ** | **$**       | **16,180** | ** **     | **$**      | **(4,178**           | **)**      | **$**            | **6,233**  | ** **  | **$**      | **—** | ** ** | **$** | **18,235** | ** ** |

 

 

24

----

 

**ITEM2.**        MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

** **

Except where otherwise indicated, management’s discussion and analysisof financial condition and results of operations is provided with respect toHoldings, which has materially the same financial condition and results ofoperations as Visant. This discussion and analysis should be read inconjunction with our condensed consolidated financial statements and notesthereto.

 

**CAUTIONARY NOTE REGARDING FORWARD-LOOKINGSTATEMENTS**

 

This report contains forward-looking statements including, withoutlimitation, statements concerning the conditions in our industry, expected costsavings, our operations, our economic performance and financial condition,including, in particular, statements relating to our business and growthstrategy and product development efforts. These forward-looking statements arenot historical facts, but only predictions and generally can by identified byuse of statements that include such words as “may”, “might”, “will”, “should”, “estimate”,“project”, “plan”, “anticipate”, “expect”, “intend”, “outlook”, “believe” andother similar expressions that are intended to identify forward-looking statementsand information. These forward-looking statements are based on estimates andassumptions by our management that, although we believe to be reasonable, areinherently uncertain and subject to a number of risks and uncertainties. Theserisks and uncertainties include, without limitation, those identified underItem 1A. *Risk Factors* included in our 2005 AnnualReport on Form 10-K and elsewhere in this report.

 

The following list represents some, but not necessarily all, of thefactors that could cause actual results to differ from historical results orthose anticipated or predicted by these forward-looking statements:

 

•    our substantial indebtedness;

 

•    our inability to implement our businessstrategy and achieve anticipated cost savings in a timely and effective manner;

 

•    competition from other companies;

 

•    the seasonality of our businesses;

 

•    the loss of significant customers orcustomer relationships;

 

•    fluctuations in raw material prices;

 

•    our reliance on a limited number ofsuppliers;

 

•    our reliance on numerous complexinformation systems;

 

•    the reliance of our businesses on limitedproduction facilities;

 

•    the amount of capital expendituresrequired for our businesses;

 

•    labor disturbances;

 

•    environmental regulations;

 

•    foreign currency fluctuations and foreignexchange rates;

 

•    the outcome of litigation;

 

•    control by our stockholders;

 

•    our dependency on the sale of schooltextbooks;

 

•    the textbook adoption cycle and levels ofgovernment funding for education spending;

 

•    Jostens, Inc.’s reliance onindependent sales representatives; and

 

•    the failure of our sampling systems tocomply with U.S. postal regulations.

 

25

----

 

We caution you that the foregoing list of important factors is not exclusive.In addition, in light of these risks and uncertainties, the matters referred toin the forward-looking statements contained in this report may not in factoccur. Forward-looking statements speak only as of the date they are made andwe undertake no obligation to update publicly or revise any of them in light ofnew information, future events or otherwise, except as required by law.

 

**GENERAL**

 

We are a leading marketing and publishing services enterprise servicingthe school affinity, direct marketing, fragrance and cosmetics sampling andeducational publishing markets. We were formed through the October 2004consolidation of Jostens, Von Hoffmann and Arcade.

 

We operate in five reportable segments, which consist of:

 

•    *Jostens Scholastic*—provides servicesrelated to the marketing, sale and production of class rings and graduationproducts;

 

•    *Jostens Yearbook*—providesservices related to the publication, marketing, sale and production of schoolyearbooks;

 

•    *Jostens Photo*—providesschool photography services;

 

•    *Marketing and Publishing Services*—producesmulti-sensory and interactive advertising sampling systems, primarily for thefragrance, cosmetics and personal care markets, and innovative products andservices to the direct marketing sector. The group also produces testing andsupplemental materials and related components for educational publishers; and

 

•    *Educational Textbook*—producesfour-color case-bound educational textbooks.

 

**The Transactions**

 

On October 4, 2004, an affiliate of KKR and affiliates of DLJ MerchantBanking Partners completed the Transactions which created a marketing andpublishing services enterprise, servicing the school affinity products, directmarketing, fragrance and cosmetics sampling and educational markets comprised ofthe operations of Jostens, Von Hoffmann, The Lehigh Press, Inc. and Arcade.

 

Prior to the Transactions, Von Hoffmann and Arcade were each controlledby affiliates of DLJMBP II and DLJ DLJMBP III owned approximately82.5% of Holdings’ outstanding equity, with the remainder held by otherco-investors and certain members of management. Upon consummation of theTransactions, an affiliate of KKR invested $256.1 million and was issued equityinterests representing approximately 49.6% of voting interest and 45.0% ofeconomic interest of Holdings and affiliates of DLJMBP III held equityinterests representing approximately 41.0% of voting interest and 45.0% ofeconomic interest, with the remainder held by other co-investors and certainmembers of management. In connection with the Transactions, approximately$175.6 million of the proceeds were distributed to certain shareholders, andcertain treasury stock held by Von Hoffmann was redeemed. After giving effectto the issuance of equity to additional members of management, as of May 10,2006, affiliates of KKR and DLJMBP III held approximately 49.1% and 41.0%,respectively, of the voting interests of Holdings, while each continued to holdapproximately 44.6% of economic interest. As of May 10, 2006, the otherco-investors held approximately 8.4% of the voting interest and 9.1% of theeconomic interests of Holdings, and members of management held approximately1.6% of the voting interest and approximately 1.7% of the economic interests.

 

26

----

 

**CRITICAL ACCOUNTING POLICIES**

 

The preparation of interim financial statements involves the use ofcertain estimates that differ from those used in the preparation of the annualfinancial statements, the most significant of which relates to income taxes. Forpurposes of preparing our interim financial statements, we utilize an estimatedannual effective tax rate based on estimates of the components that impact thetax rate. Those components are re-evaluated each interim period and, if changesin our estimates are significant, we modify our estimate of the annualeffective tax rate and make any required adjustments in the interim period.

 

There have been no material changes to our critical accounting policiesand estimates as described in Item 7 of our Form 10-K for the fiscal year endedDecember 31, 2005.

 

**Recent Accounting Pronouncements**

 

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

 

Effective January 1, 2006, we adopted SFAS 123R, which requires therecognition of compensation expense related to all equity awards granted,including awards modified, repurchased, or cancelled based on the fair valuesof the awards at the grant date. For the three months ended April 1, 2006, werecognized compensation expense related to stock options of $0.1 millionrelating to employee provided services. See Note 13, *Share-basedCompensation*, to the Condensed Consolidated Financial Statements forfurther discussion and details.

 

27

----

 

**RESULTS OF OPERATIONS**

 

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

 

The following table sets forth selected information derived fromHoldings’ condensed consolidated statements of operations for the three-monthperiods ended April 1, 2006 and April 2, 2005.

 
| ** **                           | ** **   | **Three months ended** | ** **   | ** **         | ** **   | ** **        | ** **   |
|--------------------------------------|--------------|------------------------|--------------|--------------------|--------------|-------------------|--------------|
| **Dollars in thousands**             | ** **   | **April 1,  2006**     | ** **   | **April 2,  2005** | ** **   | **$ Change** | ** **   | **% Change** | ** ** |
| Net sales                            | ** **   | **$**                  | **312,591**  | ** **         | **$**        | **309,120**       |         | $ | 3,471 |   | 1.1 | % |
| Cost of products  sold               |         | 180,244                |         | 189,514            |         | (9,270            | )            | (4.9 | )% |
| Gross profit                         | ** **   | **132,347**            | ** **   | **119,606**        |         | 12,741            |         | 10.7 | % |
| *% of  net sales*                    | *** *** | ***42.3***             | ***%***      | ***38.7***         | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| * *                             | * *     | * *               | * *     | * *           | * *     | * *          | * *     | * * | * * |
| Selling and  administrative expenses |         | 101,462                |         | 103,186            |         | (1,724            | )            | (1.7 | )% |
| *% of  net sales*                    | *** *** | ***32.5***             | ***%***      | ***33.4***         | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                         | *** *** | *** ***           | *** *** | *** ***       | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Gain on disposal  of fixed assets    |         | (20                    | )            | (9                 | )            | (11               | )            | NM |   |
| Transaction  costs                   |         | —                 |         | 884                |         | (884              | )            | NM |   |
| Special charges                      |         | 2,799                  |         | 2,952              |         | (153              | )            | NM |   |
| Operating income                     | ** **   | **28,106**             | ** **   | **12,593**         |         | 15,513            |         | 123.2 | % |
| *% of  net sales*                    | *** *** | ***9.0***              | ***%***      | ***4.1***          | ***%***      | *** ***      | *** *** | *** *** | *** *** |
| *** ***                         | *** *** | *** ***           | *** *** | *** ***       | *** *** | *** ***      | *** *** | *** *** | *** *** |
| Interest  expense, net               |         | 31,070                 |         | 30,568             |         | 502               |         | 1.6 | % |
| Loss before  income taxes            | ** **   | **(2,964**             | **)**        | **(17,975**        | )            | 15,011            |         |   |   |
| Benefit from  income taxes           |         | (1,828                 | )            | (7,446             | )            | 5,618             |         | 75.4 | % |
| Net loss                             | ** **   | **$**                  | **(1,136**   | **)**              | **$**        | **(10,529**       | )            | $ | 9,393 |   | 89.2 | % |

 

----

NM = Notmeaningful

 

The following table sets forth selected segment information derivedfrom Holdings’ condensed consolidated statements of operations for thethree-month periods ended April 1, 2006 and April 2, 2005. For additionalfinancial information about our operating segments, see Note 14, *Business Segments,* to the Condensed Consolidated FinancialStatements.

 

28

----

 
| ** **                         | ** ** | **Three months ended** | ** ** | ** **         | ** ** | ** **        | ** ** |
|------------------------------------|------------|------------------------|------------|--------------------|------------|-------------------|------------|
| **Dollars in thousands**           | ** ** | **April 1,  2006**     | ** ** | **April 2,  2005** | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Net sales                          |       |                   |       |               |       |              |       |   |   |
| Jostens Scholastic                 |       | $                      | 134,383    |               | $          | 123,581           |       | $ | 10,802 |   | 8.7 | % |
| Jostens Yearbook                   |       | 8,295                  |       | 7,972              |       | 323               |       | 4.1 | % |
| Jostens Photo                      |       | 7,450                  |       | 8,185              |       | (735              | )          | (9.0 | )% |
| Marketing and  Publishing Services |       | 121,675                |       | 127,756            |       | (6,081            | )          | (4.8 | )% |
| Educational  Textbook              |       | 42,782                 |       | 44,070             |       | (1,288            | )          | (2.9 | )% |
| Inter-segment  eliminations        |       | (1,994                 | )          | (2,444             | )          | 450               |       | NM |   |
|                               |       | $                      | 312,591    |               | $          | 309,120           |       | $ | 3,471 |   | 1.1 | % |
|                               |       |                   |       |               |       |              |       |   |   |
| Operating income                   |       |                   |       |               |       |              |       |   |   |
| Jostens  Scholastic                |       | 21,260                 |       | 11,109             |       | $                 | 10,151     |   | 91.4 | % |
| Jostens Yearbook                   |       | (13,962                | )          | (16,695            | )          | 2,733             |       | 16.4 | % |
| Jostens Photo                      |       | (3,790                 | )          | (4,342             | )          | 552               |       | 12.7 | % |
| Marketing and  Publishing Services |       | 20,827                 |       | 17,860             |       | 2,967             |       | 16.6 | % |
| Educational  Textbook              |       | 3,771                  |       | 4,661              |       | (890              | )          | (19.1 | )% |
|                               |       | $                      | 28,106     |               | $          | 12,593            |       | $ | 15,513 |   | 123.2 | % |

 

----

NM = notmeaningful

 

*Net Sales.*Consolidated net salesincreased $3.5 million, or 1.1%, to $312.6 million for the three months ended April1, 2006 from $309.1 million for the same period in 2005.

 

The net sales of the Jostens Scholastic segment increased $10.8million, or 8.7%, to $134.4 million for the first quarter of 2006 from $123.6million for the first quarter of 2005. The increase was primarily attributableto higher revenue from announcements and also higher first quarter diploma netsales due to improved production versus 2005’s first quarter. Jostens Yearbooknet sales increased $0.3 million, or 4.1%, to $8.3 million for the quarterended April 1, 2006 compared to $8.0 million in the first quarter of 2005. Netsales of the Jostens Photo segment decreased $0.7 million, or 9.0%, from $8.2million for the first three months of 2005 to $7.5 million for the same periodin 2006. The decrease reflects lower overall volume.

 

The net sales of the Marketing and Publishing Services segmentdecreased $6.1 million, or 4.8%, to $121.7 million during the first quarter of2006 from $127.8 million in the first quarter of 2005. This decrease wasprimarily attributable to lower volume in our sampling business, $1.6 millionof lower sales of paper to our customers and $1.2 million less revenueresulting from our shutdown of a facility in January 2005. The decrease waspartially offset by solid growth in our direct marketing business.

 

The net sales of the Educational Textbook business decreased $1.3million, or 2.9%, to $42.8 million in the first three months of 2006 from $44.1million in the first quarter of 2005 due to lower overall volume fromcustomers.

 

*Gross Profit. *Gross profitincreased $12.7 million, or 10.7%, to $132.3 million for the three months endedApril 1, 2006 from $119.6 million for the same period in 2005.  As apercentage of net sales, gross profit margin increased to 42.3% for the three monthsended April 1, 2006 from 38.7% for the same period last year.  Of the$12.7 million increase in gross profit for the three month period in 2006,approximately $2.2 million related to a reduction

 

29

----

 

in purchaseaccounting amortization compared to the prior year period.  The remainingincrease relates to improved business performance in Jostens Printing andScholastic segments as well as improved performance of our diploma business andcost savings realized from synergy programs that benefited all businesses.

 

*Selling and Administrative Expenses.*Sellingand administrative expenses decreased $1.7 million, or 1.7%, to $101.5 millionfor the three months ended April 1, 2006 from $103.2 million in 2005. As apercentage of net sales, selling and administrative expenses decreased 0.9% to 32.5%for the first quarter of 2006 from 33.4% for the same period last year. The $1.7million decrease was primarily due to the impact of administrative headcountreductions and lower depreciation and amortization expense partially offset byhigher commission expense related to higher sales.

 

*Special Charges.*During the firstquarter of 2006, we recorded $0.5 million of special charges relating toseverance payments and related benefits associated with on-going initiatives. Werecorded $0.1 million in each Jostens segment related to severance payments andrelated benefits associated with the reduction in headcount of eight JostensScholastic, two Jostens Yearbook and five Jostens Photo employees, respectively,and $0.2 million related to severance payments and related benefits associatedwith the reduction in headcount of three employees of the Marketing andPublishing Services segment.

 

During the first quarter of 2005, we recorded $3.0 million of specialcharges, including $1.8 million, $0.4 million and $0.1 million related toseverance payments and related benefits associated with the reduction inheadcount of 17 Jostens Scholastic, four Jostens Yearbook and three JostensPhoto employees, respectively. We recorded severance of $0.5 million related tothe reduction in the Marketing and Publishing Services segment’s personnel aswell as $0.3 million of costs related to a withdrawal liability under a unionretirement plan that is payable in connection with the consolidation of certainoperations. We also recorded severance of $0.2 million related to the reductionin the Educational Textbook segment’s personnel.

 

During the first quarter of 2006, we recognized an impairment lossrelated to the January 2006 pending sale of our Jostens headquarters building. Asa result of the pending sale, we determined the carrying value of the buildingwas not recoverable and subsequently reduced the carrying value by $2.3 millionto its estimated value.

 

*Operating Income. As a result of the aforementioneditems,*consolidated operating income increased $15.5 million,or 123.2%, to $28.1 million for the three months ended April 1, 2006 from $12.6million in 2005. As a percentage of net sales, operating income increased to 9.0%for the first quarter of 2006 from 4.1% for the same period in 2005.

 

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

 

30

----

 

 
| ** **                                                           | ** ** | **Three months ended** | ** ** | ** **         | ** ** | ** **        | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------|--------------------|------------|-------------------|------------|
| **Dollars in thousands**                                             | ** ** | **April 1,  2006**     | ** ** | **April 2,  2005** | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| **Holdings:**                                                        | ** ** | ** **             | ** ** | ** **         | ** ** | ** **        | ** ** | ** ** | ** ** |
| Amortization of  debt discount, premium and deferred financing costs |       | $                      | 4,815      |               | $          | 4,354             |       | $ | 461 |   | 10.6 | % |
| Interest income                                                      |       | (7                     | )          | (19                | )          | 12                |       | NM |   |
| Holdings  interest expense, net                                      | ** ** | ** **             | **4,808**  | ** **         | ** ** | **4,335**         | ** ** | **473** |   | 10.9 | % |
| **Visant:**                                                          | ** ** | ** **             | ** ** | ** **         | ** ** | ** **        | ** ** | ** ** | ** ** |
| Interest expense                                                     |       |                   | 24,690     |               |       | 22,857            |       |   | 1,833 |   | 8.0 | % |
| Amortization of  debt discount, premium and deferred financing costs |       | 1,944                  |       | 3,951              |       | (2,007            | )          | (50.8 | )% |
| Interest income                                                      |       | (372                   | )          | (575               | )          | 203               |       | NM |   |
| Visant interest  expense, net                                        | ** ** | **26,262**             | ** ** | **26,233**         | ** ** | **29**            |       | 0.1 | % |
| Interest expense                                                     | ** ** | **$**                  | **31,070** | ** **         | **$**      | **30,568**        | ** ** | **$** | **502** |   | 1.6 | % |

 

----

NM = Notmeaningful

 

Net interest expense increased $0.5 million, or 1.6%, to $31.1 millionfor the three months ended April 1, 2006 as compared to $30.6 million for thesame prior year period.  The increase was the result of higher interestrates on our variable rate term loan debt during the first three months of 2006compared to the same prior year period.

 

*Income taxes.*We have provided anincome tax (benefit) provision based on our best estimate of the consolidatedeffective tax rate applicable for the entire year. The estimated consolidatedeffective tax rates were 41.4% and 40.0% for Holdings and Visant, respectively.During the quarter ended April 1, 2006, we reduced our deferred tax valuationallowance by $0.6 million because we estimate that a portion of the tax benefitattributable to capital loss carryforwards will be realized as a result ofanticipated property dispositions during the year. The combined effect ofreducing the valuation allowance by $0.6 million and applying the consolidatedeffective tax rates resulted in effective tax rates of 61.7% and 8.7%,respectively, for Holdings and Visant.

 

For the comparable three-month period ended April 2, 2005, theeffective rates of income tax benefit for Holdings and Visant were 41.4% and40.5%, respectively.

 

During April 2006, Holdings was notified by the Internal RevenueService that the congressional Joint Committee on Taxation had approved a claimfor refund by Jostens for the taxable years 2000 and 2001. We received a refundof Federal tax of approximately $7.6 million, including $1.2 million ofinterest. A substantial portion of the refund represents a reduction ofgoodwill, as we did not previously record any tax benefit since the amount ofthe refund, net of costs, was subject to significant uncertainty. The uncertainportion of the claim was attributable to transaction expenses incurred inconnection with Jostens’ merger and recapitalization transaction of May 2000. Thenet tax benefit had been subject to significant uncertainty at the time Jostensrevalued its assets and liabilities in connection with the July 2003 mergertransaction with DLJ Merchant Banking Partners III, L.P. and certain of itsaffiliated funds.

 

*Net Loss. *As a result of theaforementioned items, net loss decreased $9.4 million, or 89.2%, to a netloss of $1.1 million for the three months ended April 1, 2006 comparedto a net loss of $10.5 million for the same period in 2005.

 

31

----

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The following table presents cash flow activity of Holdings for the firstthree months of fiscal 2006 and 2005 and should be read in conjunction with ourcondensed consolidated statements of cash flows.

 
| ** **                                 | ** ** | **Three months ended** | ** ** |
|--------------------------------------------|------------|------------------------|------------|
| **In thousands**                           | ** ** | **April 1,  2006**     | ** ** | **April 2,  2005** | ** ** |
| Net cash  provided by operating activities |       | $                      | 46,851     |   | $ | 16,084 |   |
| Net cash used in  investing activities     |       | (19,869                | )          | (16,207 | ) |
| Net cash used in  financing activities     |       | —                 |       | (56,988 | ) |
| Effect of  exchange rate change on cash    |       | 6                      |       | 40 |   |
| Net change in  cash and cash equivalents   | ** ** | **$**                  | **26,988** | ** ** | **$** | **(57,071** | **)** |

 

For the three months ended April 1, 2006, operating activitiesgenerated cash of $46.9 million compared with cash generated by operatingactivities of $16.1 million for the same prior year period.   The $30.8 million increase related to lower working capital requirements andincreased earnings for the three months ended 2006 compared to the same prioryear period.  Net cash used in investing activities for the three monthsended April 1, 2006 was $19.9 million, compared with $16.2 million for thecomparable 2005 period.  The $3.7 million increase related to additionalcapital expenditures in the current year compared to the same prior yearperiod.  There were no financing activities during the first quarter of2006 as compared to $57.0 million in the three month period of 2005, which was comprisedof debt prepayments of $63.6 million offset by $5.9 million from proceeds ofequity investments by certain members of management.

 

As of April 1, 2006, we had cash and cash equivalents of $47.7million.  Our principal sources of liquidity are cash flows from operatingactivities and borrowings under Visant’s senior secured credit facilities,which included $221.4 million available under Visant’s revolving creditfacility as of April 1, 2006.  We use cash primarily for debt serviceobligations, capital expenditures and to fund other working capitalrequirements.  We intend to fund ongoing operations through cash generatedby operations and borrowings under the revolving credit facility.

 

As of April 1, 2006, we were in compliance with all covenants under ourmaterial debt obligations.

 

Based upon the current level of operations, we believe that cash flowfrom operations, 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.**          QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

#### ** **

There have been no material changes in our exposure to market riskduring the quarter ended April 1, 2006. For additional information, refer toItem 7A of our 2005 Form 10-K.

 

**ITEM 4.**          CONTROLSAND PROCEDURES

#### ** **

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

 

32

----

 

*Framework.*Based upon that evaluation, our Chief Executive Officer andVice President, Finance concluded that these disclosure controls and proceduresare effective.

 

During the quarter ended April 1, 2006, there have been no changes inour internal controls over financial reporting in connection with the abovedescribed evaluation that materially affected, or are reasonably likely tomaterially affect, these controls.

 

**PART II. OTHER INFORMATION**

 

**ITEM 1.**          LEGALPROCEEDINGS

#### ** **

The following were developments during the three months ended April 1,2006 of material pending legal proceedings to which we or any of oursubsidiaries are a party.

 

None during the three months ended April 1, 2006, however in early May2006, the Court of Appeals of the State of California affirmed the trial court’sjudgment in favor of Jostens in previously pending litigation as described inNote 10, *Commitments and Contingencies*, to theCondensed Consolidated Financial Statements.

 

**ITEM 1A.**       RISKFACTORS

#### ** **

There has been no material changes in our risk factors during thequarter ended April 1, 2006. For additional information, refer to Item 1A ofour 2005 Annual Report on Form 10-K.

 

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

#### ** **

None.

 

**ITEM 3.**          DEFAULTSUPON SENIOR SECURITIES

#### ** **

None.

 

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

#### ** **

By Action of Stockholders by Written Consent on March 22, 2006, amajority of the stockholders approved the Third Amended and Restated 2004 StockOption Plan for Key employees of Visant Holding Corp.

 

By Action of Stockholders by Written Consent on March 29, 2006, amajority of stockholders approved the offering of $350 million Senior Notes byVisant Holding.

 

By Action of Stockholders by Written Consent on April 4, 2006, amajority of the stockholders approved the declaration and payment of a dividendon the common shares of Visant Holding from the net proceeds from the $350million offering of 8 3⁄4% Senior Notes due 2013 by Visant Holding.

 

**ITEM 5.**          OTHERINFORMATION

#### ** **

None.

 

33

----

 

**ITEM 6.**          EXHIBITS

#### ** **

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

 
| 31.1   |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|--------|-----------------------------------------------------------------------------------------------------|
|   |   |                                                                                                |
| 31.2   |   | Certification of Vice President, Finance pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                |
| 32.1   |   | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                |
| 32.2   |   | Certification of Vice  President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

34

----

 

**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrants have duly caused this report to be signed on their behalf bythe undersigned thereunto duly authorized.

 

 
| ** **         | **VISANT HOLDING CORP.**      | ** ** |
|--------------------|-------------------------------|------------|
| ** **         | **VISANT CORPORATION**        | ** ** |
|               |                          |       |
|               |                          |       |
| Date: May 16, 2006 | /s/ Marc L.  Reisch           |       |
|               | Marc L. Reisch                |       |
| * *           | *President  and*              | * *   |
| * *           | *Chief  Executive Officer*    | * *   |
|               |                          |       |
|               |                          |       |
| Date: May 16, 2006 | /s/ Paul B.  Carousso         |       |
|               | Paul B. Carousso              |       |
| * *           | *Vice  President, Finance*    | * *   |
| * *           | *(Chief  Accounting Officer)* | * *   |

 

35

----