**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

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

 

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## **FORM 10-Q**

 

**ý****                    ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the Quarterly Period Ended July 2, 2005**

 

### **or**

 

o                      **TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

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

 

Securities RegisteredPursuant to Section 12(b) of the Act: **None**

 

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

 

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 an acceleratedfiler (as defined in Rule 12b-2 of the Act).

Yes o   No ý

 

As of August 12, 2005, there were 5,971,577 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.

 

 

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**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 references in this report to the “Company”, “we”, “our”,“us” or “Holdings” refers to Visant Holding Corp., together with VisantCorporation and its consolidated subsidiaries. 

 

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**TABLE OFCONTENTS**

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

 

----

 

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

 

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

 

**VISANT HOLDING CORP. AND SUBSIDIARIES**

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

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

1

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**VISANT HOLDING CORP. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

2

----

 

**VISANT HOLDING CORP. AND SUBSIDIARIES**

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

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

3

----

 

**VISANT CORPORATION AND SUBSIDIARIES**

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

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

4

----

 

**VISANT CORPORATION AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

5

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**VISANT CORPORATION AND SUBSIDIARIES**

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

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

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements.*

 

6

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**Notesto Condensed Consolidated Financial Statements (Unaudited)**

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

 

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

 

***Basis of Presentation***

 

The unaudited condensed consolidated financialstatements included herein are those of:

 

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

•                  Visantand its wholly-owned subsidiaries.

 

All significant intercompany balances and transactionshave been eliminated in consolidation.

 

As a result of the 2004 Transactions as discussed inNote 2, the condensed consolidated financial statements include theconsolidation of Jostens, Inc. (“Jostens”), Von Hoffmann Holdings, Inc. (“VonHoffmann”) and AHC I Acquisition Corp. (“Arcade”), entities under commoncontrol since July 30, 2003.

 

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01 of RegulationS-X.  Accordingly, they do not include allof the information and footnotes required by accounting principles generallyaccepted in the United States for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring adjustments) considered necessary for a fairpresentation have been included. Operating results for the interim periods presented are not necessarilyindicative of the results that may be expected for the full year.  These financial statements should be read inconjunction with the consolidated financial statements and footnotes includedin our Form 10-K for the fiscal year ended January 1, 2005 (“2004 Form 10-K”).

 

The preparation of our financial statements inconformity with accounting principles generally accepted in the United Statesrequires us to make estimates and assumptions that affect the amounts reportedin the financial statements and accompanying notes.  Actual results could differ from thoseestimates.

 

***Stock-Based Compensation***

We apply theintrinsic method prescribed by Accounting Principles Board Opinion (“APB”) 25, *Accounting for Stock Issued to Employees,*andrelated interpretations in accounting for stock options granted to employeesand non-employee directors.  Accordingly,since all options are granted at or above fair value, no compensation cost istypically reflected in net income (loss) for these plans.  Our pro forma net income incorporating theamortization of the stock-based compensation expense determined under the fairvalue recognition provisions of Statement of Financial Accounting Standards (“SFAS”)123, *Accounting for Stock-BasedCompensation,*would not have been materially different from thereported net income in the statements of operations for the periods presented.

 

***Recent Accounting Pronouncements***

 

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

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

 

***FSP 109-2 – Accounting and Disclosure Guidance for theForeign Earnings Repatriation Provision within the American Jobs Creation Actof 2004.***

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

 

7

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creates, among other things, a temporary incentivefor U.S. multinational companies to repatriate accumulated income earnedoutside the U.S. at a favorable rate of tax. In December 2004, the FASB issued Staff Position (FSP) 109-2, whichprovides accounting and disclosure guidance for the repatriationprovision.  Although weintend to repatriate earnings from our Canadian subsidiary in an amount thatcould range from $8 million to $13 million, we have not yet completed ouranalysis of the tax effect of such a distribution.  Due to the complexity of the calculations, weanticipate that our analysis of the tax benefit of repatriation will becompleted by the fourth quarter of 2005 and that the effect on the Company’seffective annual rate will be recorded at that time.

 

**2.****              2004 Transactions**

 

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

 

Priorto the 2004 Transactions, Von Hoffmann and Arcade were each controlled byaffiliates 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 2004 Transactions,an affiliate of KKR invested $256.1 million and was issued equity interestsrepresenting approximately 49.6% of Holdings’ voting interest and 45% ofHoldings’ economic interest.  Approximately $175.6 million of the proceeds were distributed to certainshareholders, and certain treasury stock held by Von Hoffmann wasredeemed.  As a result of the 2004Transactions, affiliates of DLJMBP III held equity interests representingapproximately 41% of our voting interest and 45% of our economic interest, withthe remainder held by other co-investors and certain members ofmanagement.  After giving effect to theissuance of equity to additional members of management, as of May 13, 2005affiliates of KKR and DLJMBP III held approximately 49.1% and 41%,respectively, of the voting interests of Holdings, while each continues to holdapproximately 45% of Holdings’ economic interest.

 

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

 

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

 

Thefollowing amounts were included in determining comprehensive income forHoldings:

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

 

8

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The following amountswere included in determining comprehensive income for Visant:

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

 

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

 

Accounts receivable, net were comprised of the following:

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

 

Net inventories were comprised of thefollowing:

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

 

9

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

 

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

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

 

As of July 2, 2005, $717.2million and $391.1 million of goodwill has been allocated to Jostens and thePrint Group, respectively.

 

During the first sixmonths of 2004, purchase price adjustments primarily related to a reduction inthe fair value of Jostens’ redeemable preferred stock.

 

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

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

 

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

 

Based on intangible assets in service as of July 2, 2005, estimatedamortization expense for the remainder of 2005 and each of the five succeedingfiscal years is $23.2 million, $44.4 million, $40.6 million, $38.8 million,$34.9 million and $34.7 million, respectively.

 

10

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

 

During the second quarter of 2005, werecorded $1.9 million of special charges relating to severance payments and relatedbenefits associated with on-going initiatives at Jostens and the PrintGroup.  Jostens recorded $1.6 million relatingto a headcount reduction of 19 employees while the Print Group recorded $0.3million related to severance costs reducing headcount by four employees.

 

For the six months ended June 2005, we incurred$4.8 million of special charges, including $3.8 million related to severance costsand related benefits associated with the reduction in headcount of 44 Jostensemployees.  The Print Group recordedseverance of $0.7 million related to a reduction in personnel of fiveemployees, as well as $0.3 million of costs related to a withdrawal liabilityunder a union retirement plan that is payable in connection with theconsolidation of certain operations.  Asof July 2, 2005, we have paid $2.4 million related to initiatives begun in 2005(“2005 initiatives”), which have affected 49 employees.

 

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

 

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

 

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

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

 

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

 

11

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

 

Long-term debt consistsof the following:

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

 

During the six months ended July 2, 2005, Visantvoluntarily prepaid $103.5 million of its term loans under its senior securedcredit facilities, including all originally scheduled principal payments due underits term loans A and C in 2005 through most of 2009.  As of July 2, 2005, there was $9.0 millionoutstanding in the form of short-term borrowings at our Canadian subsidiary ata

 

12

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weighted average interest rate of 5.1% and anadditional $15.8 million outstanding in the form of letters of credit, leaving$225.2 million available under the revolving credit facility.

 

In conjunction with the 2004 Transactions as describedin Note 2, we repaid the existing indebtedness of Jostens, Von Hoffmann andArcade in full.

 

Visant’s obligationsunder the senior secured credit facilities are unconditionally and irrevocablyguaranteed jointly and severally by Visant Secondary Holdings Corp., a directwholly-owned subsidiary of Holdings and the direct parent of Visant, and byVisant’s material current and future domestic subsidiaries.  The obligations of Visant’s principalCanadian operating subsidiary under the senior secured credit facilities areunconditionally and irrevocably guaranteed jointly and severally by VisantSecondary Holdings Corp., by Visant, by Visant’s material current and futuredomestic subsidiaries and by 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 ofVisant’s capital stock and the capital stock of each of Visant’s existing andfuture direct and indirect subsidiaries, except that with respect to foreignsubsidiaries such lien and pledge is limited to 65% of the capital stock of “first-tier”foreign subsidiaries; and

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

 

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

 

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

 

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

 

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

 

As of July 2, 2005, wewere in compliance with all covenants under our material debt obligations.

 

**8.****              Redeemable PreferredStock**

 

In conjunction with the 2004 Transactionsas described in Note 2, all outstanding shares of redeemable preferred stock ofJostens and Arcade, together with accrued dividends, were redeemed in full.

 

13

----

 

**9.****              Derivative FinancialInstruments and Hedging Activities**

 

Our involvement with derivative financialinstruments is limited principally to managing well-defined interest rate andforeign currency exchange risks.  Forwardforeign currency exchange contracts may be used to hedge the impact of currencyfluctuations primarily on inventory purchases denominated in euros.  At July 2, 2005, there were no contractsoutstanding.

 

**10.  Commitments**

 

We are subject to market risk associated withchanges in the price of precious metals. To mitigate our commodity price risk, we enter into forward contracts topurchase gold, platinum and silver based upon the estimated ounces needed tosatisfy projected customer demand.  Ourpurchase commitment at July 2, 2005 was $8.3 million with delivery datesoccurring throughout 2005.  These forwardpurchase contracts are considered normal purchases and therefore subject to ascope exclusion of the requirements of SFAS 133, *Accounting for Derivative Instruments and Hedging Activities. *The fair market value of our openprecious metal forward contracts as of July 2, 2005 was $8.4 million and wascalculated by valuing each contract at quoted futures prices.

 

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

 

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

 

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

 

The consolidated effective tax rates remained the same for the sixmonth period ended July 2, 2005 as they were for the three month period ended April2, 2005, since there have not been any significant events that would warrant achange in rate.

 

14

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**12.****       Pension and Other PostretirementBenefit Plans**

 

Net periodicbenefit cost for our pension and other postretirement benefit plans ispresented below:

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

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

 

For the six months ended July 2, 2005, wemade contributions totaling $1.5 million to the pension plans and $0.4 millionto the postretirement welfare plans. This is consistent with our projected contributions for 2005 of $2.7million to the pension plans and $0.7 million to the postretirement benefitplans as disclosed in our 2004 Form 10-K.

 

15

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

 

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

 

The following tables present information ofHoldings by business segment.

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

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

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

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

 

16

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14.         **Condensed Consolidating Guarantor Information**

 

As discussed in Note 7, Visant’s obligationsunder the senior secured credit facilities and the 75/8%senior subordinated notes are guaranteed by certain of its wholly-ownedsubsidiaries on a full unconditional and joint and several basis.  The following tables present condensedconsolidating financial information for Visant, as issuer, and its guarantorsubsidiaries.

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Threemonths ended July 2, 2005**

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

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Six monthsended July 2, 2005**

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

 

17

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**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Threemonths ended July 3, 2004**

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

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**Sixmonths ended July 3, 2004**

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

 

18

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**July 2,2005**

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

 

19

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**July 3,2004**

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

 

20

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**January1, 2005**

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

 

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

**Sixmonths ended July 2, 2005**

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

 

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

**Sixmonths ended July 3, 2004**

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

 

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

 

Except where otherwiseindicated, management’s discussion and analysis of financial condition andresults of operations is provided with respect to Holdings, which has materiallythe same as the financial condition and results of operations as Visant.  This discussion and analysis should be readin conjunction with our condensed consolidated financial statements and notesthereto.

 

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

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

 

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

 

We caution that the foregoing list of importantfactors is not exclusive.  Forward-lookingstatements speak only as of the date they are made and we undertake noobligation to update publicly or revise any of them in light of newinformation, future events or otherwise, except as required by law.

 

**GENERAL**

 

We generate asignificant portion of our net sales through the sale of specialty printing andmarketing products to the North American education sector.  Our printing and marketing products include,among others, yearbooks, educational materials, diplomas, announcements, directmarketing materials and commercial printing. We also manufacture and distribute non-print school-related affinityproducts and services, such as class rings, caps and gowns and schoolphotography.  We sell our products andservices to end customers through different sales channels, includingindependent sales representatives and dedicated sales forces.  Our sales and results of operations areimpacted by general economic conditions, seasonality, costs of raw materials,school population trends, product quality and service and price.

 

Our reportable segments consist of Jostensand the Print Group.  Jostens is aleading provider of school-related affinity products and services that helppeople celebrate important moments, recognize achievements and buildaffiliation.  Jostens’ products includeyearbooks, class rings, graduation products and school photography.

 

23

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

 

**2004 Transactions**

 

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

 

Priorto the 2004 Transactions, Von Hoffmann and Arcade were each controlled byaffiliates 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 2004 Transactions,an affiliate of KKR invested $256.1 million and was issued equity interestsrepresenting approximately 49.6% of Holdings’ voting interest and 45% ofHoldings’ economic interest.  Approximately $175.6 million of the proceeds were distributed to certainshareholders, and certain treasury stock held by Von Hoffmann wasredeemed.  As a result of the 2004Transactions, affiliates of DLJMBP III held equity interests representingapproximately 41% of our voting interest and 45% of our economic interest, withthe remainder held by other co-investors and certain members ofmanagement.  After giving effect to theissuance of equity to additional members of management, as of May 13, 2005affiliates of KKR and DLJMBP III held approximately 49.1% and 41%,respectively, of the voting interests of Holdings, while each continues to holdapproximately 45% of Holdings’ economic interest.

 

In connection withthe 2004 Transactions, Visant entered into new senior secured creditfacilities, providing for an aggregate amount of $1,270 million, including a $250 millionrevolving credit facility, and issued$500 million aggregate principal amount of 75/8%senior subordinated notes.   Also inconnection with the 2004 Transactions, Jostens, Von Hoffmann and Arcade repaidtheir existing indebtedness having an aggregate face value of $1,392.6 millionincluding redemption value of certain remaining redeemable preferred stock.

 

**CRITICAL ACCOUNTING POLICIES**

 

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

 

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

 

**RecentAccounting Pronouncements**

 

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

In December 2004, theFinancial Accounting Standards Board (“FASB”) issued a revision of SFAS123.  This statement eliminates thealternative to use the intrinsic value method of accounting that was permittedin SFAS 123 as originally issued and will require recognition of compensationexpense related to all equity awards granted after the required effective dateand to awards modified, repurchased, or cancelled after that date based on the grantdate fair values of the awards.  Thisstatement is effective for us as of the first interim or annual reportingperiod that

 

24

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commences after December 15,2005.  We have not yet determined theimpact of adopting this statement on our consolidated financial position,results of operations or cash flows.

 

***FSP 109-2 – Accounting and Disclosure Guidance for theForeign Earnings Repatriation Provision within the American Jobs Creation Actof 2004.***

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

 

**RESULTS OF OPERATIONS**

 

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

 

The following table sets forth selected informationderived from Holdings’ condensed consolidated statements of operations for thethree-month periods ended July 2, 2005 and July 3, 2004.

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

 

NM = Notmeaningful

 

The following table sets forth selected segmentinformation derived from Holdings’ condensed consolidated statements ofoperations for the three-month periods ended July 2, 2005 and July 3, 2004.  For additional financial information aboutour operating segments, see Note 13 of the Notes to Condensed ConsolidatedFinancial Statements.

 

25

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

 

NM - Notmeaningful

 

***Net Sales***

Consolidated net sales increased $14.8 million, or 2.7%,to $562.5 million for the three months ended July 2, 2005 from $547.7 millionfor the same prior year period.

 

Jostens’ net sales increased $20.6 million, or 5.5%,to $396.8 million for the current period to $376.2 million for the same prioryear period.  Jostens’ second quarterrevenues are comprised primarily from the production and sale ofyearbooks.  The 5.5% increase from theprior year was primarily attributable to improved yearbook printing sales and,to a lesser extent, a shift of graduation product sales into the second quarterfrom the first quarter as compared to the same period last year due to the timingof deliveries.

 

Print Group netsales decreased $5.0 million, or 2.9%, to $166.6 million for the current periodcompared to $171.5 million for the same prior year period.  The decrease was due primarily to lower bookand premedia sales. The lower book sales were primarily attributable to themanufacture of fewer non-educational books resulting from the first quarterclosing of the Frederick, Maryland plant, and, to a lesser extent, lowerpricing for certain educational products and lower throughput in our four-colorfacility due primarily to the reduction in run length and increased complexityrelated to state-specific textbooks.

 

***Gross Profit***

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

 

The increased gross profit as a percent of sales inthe second quarter was primarily a result of approximately $33 million of lesspurchase accounting amortization than the second quarter of 2004 relating toJostens.  This amortization was primarilyrelated to order backlog intangible assets associated with the accounting ofthe purchase of Jostens in July 2003. Excluding the impact of this adjustment, gross profit decreased to 46.5%from an adjusted gross margin of 47.2%. This decrease was due mainly to an additional $10 million of incrementaldiploma costs incurred at Jostens as a result of production issues associatedwith the relocation of its Red Wing manufacturing facility to certain otherfacilities.  Jostens expects to incur anadditional $1 to $2 million of higher than planned diploma costs in the thirdquarter of 2005. Margins were also affected by slightly lower margins in thePrint Group for the quarter.  Thisreduction was partially offset by margin improvement in Jostens’ yearbookprinting.  

 

***Selling and AdministrativeExpenses***

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

 

26

----

 

***Special Charges***

During the second quarter of 2005, werecorded $1.9 million of special charges. Of this amount, $1.6 million related to severance payments and relatedbenefits associated with the reduction in headcount of 19 Jostensemployees.  We also recorded severance of$0.3 million related to Print Group personnel.

 

***Operating Income***

Consolidated operating income increased $33.6 million,or 38.2%, to $121.8 million for the three months ended July 2, 2005 from $88.2million for the same prior year period. As a percentage of net sales, operating income increased to 21.7% for thecurrent three-month period from 16.1% for the same period last year.

 

Jostens operating income increased $37.0 million, or 58.9%,to $99.8 million for the current three-month period compared to $62.8 millionfor the same period last year.   Theincrease in Jostens’ operating income was primarily a result of approximately$33 million of less purchase accounting amortization than the second quarter of2004 relating as well as the implementation of cost reduction initiatives,offset somewhat by an additional $10 million of diploma costs.

 

Print Group operating income decreased $3.4 million,or 13.3%, to $22.0 million for the three months ended July 2, 2005 from $25.3million for the same prior year period primarily due to lower book and premediasales.

 

***Net Interest Expense***

Net interest expense is comprised of the following:

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

 

NM = Notmeaningful

 

27

----

 

Net interest expense decreased $12.7 million, or29.5%, to $30.5 million for the three months ended July 2, 2005 as compared to$43.2 million for the same prior year period. The decrease was the result of our new debt arrangements at lowerinterest rates put in place in connection with the consummation of the 2004Transactions.

 

***Income Taxes***

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

 

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

 

The consolidated effective tax rates have remained the same for thethree month period ended July 2, 2005 as they were for the three month period endedApril 2, 2005, since there have not been any significant events that wouldwarrant a change in rate.

 

***Net Income***

As a result of the aforementioned items, net incomeincreased $21.9 million, or 69.0%, to $53.5 million for the three months ended July2, 2005 from $31.7 million for the same prior year period.

 

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

 

The following table sets forth selected informationderived from Holdings’ condensed consolidated statements of operations for the six-monthperiods ended July 2, 2005 and July 3, 2004.

 

28

----

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

 

NM = Notmeaningful

 

The following table sets forth selected segmentinformation derived from Holdings’ condensed consolidated statements ofoperations for the six-month periods ended July 2, 2005 and July 3, 2004.  For additional financial information aboutour operating segments, see Note 13 of the Notes to Condensed ConsolidatedFinancial Statements.

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

 

NM - notmeaningful

 

***Net Sales***

Consolidated net sales increased $13.8 million, or 1.6%,to $871.6 million for the six months ended July 2, 2005 from $857.8 million forthe same prior year period.

 

Jostens’ net sales increased $17.3 million, or 3.3%,to $536.6 million for the current period compared to $519.3 million for thesame prior year period.  The increase inJostens’ net sales was primarily attributable to higher yearbook sales.

 

29

----

 

Print Group netsales decreased $2.2 million, or 0.6%, to $336.3 million for the current periodcompared to $338.5 million for the same prior year period.  The decrease in Print Group net sales was primarilyattributable to the lower sales in the second quarter of 2005 as well as lowerpaper sales in the first quarter of 2005, offset by strong revenues from directmarketing and sampling products in the first quarter.

 

***Gross Profit***

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

 

The increased gross profit as a percent of sales wasprimarily a result of approximately $33.7 million of less purchase accountingdepreciation and amortization than the first half of 2004 relating toJostens.  This amortization was primarilyrelated to order backlog intangible assets associated with the accounting ofthe purchase of Jostens in July 2003.  Excludingthe impact of these adjustments, gross profit decreased to 44.0% from anadjusted gross margin of 44.2%.  Thisdecrease was primarily due to the diploma costs incurred at Jostens which wasmostly offset by margin improvement in Jostens’ yearbook printing and favorablemix within the Print Group relating to increased volume from higher marginproducts.

 

***Selling and AdministrativeExpenses***

Selling and administrative expenses decreased $3.5million, or 1.5%, to $238.4 million for the six months ended July 2, 2005 from$241.9 million for the same prior year period. As a percentage of net sales, selling and administrative expensesdecreased to 27.3% for the current six-month period from 28.2% for the sameperiod last year.  The $3.5 milliondecrease was primarily due to the impact of administrative headcountreductions.

 

***Special Charges***

During the first six months of 2005, werecorded $4.8 million of special charges, including $3.8 million related toseverance payments and related benefits associated with the reduction in headcountof 44 Jostens employees.  We alsorecorded severance of $0.7 million related to the reduction in headcount of fivePrint Group employees as well as $0.3 million of costs related to a withdrawalliability under a union retirement plan that is payable in connection with theconsolidation of certain operations.

 

***Operating Income***

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

 

Jostens operating income increased $33.0 million, or 58.1%,to $89.9 million for the current six-month period compared to $56.9 million forthe same period last year.   The increasein Jostens’ operating income was primarily a result of approximately $33.7million of less purchase accounting depreciation and amortization than thefirst half of 2004 as well as the implementation of cost reduction initiatives,offset by approximately $12 million of incremental diploma costs.

 

Print Group operating income increased $3.4 million,or 8.3%, to $44.5 million for the six months ended July 2, 2005 from $41.1million for the same prior year period primarily as a result of favorableproduct mix.

 

30

----

 

***Net Interest Expense***

Net interest expense is comprised of the following:

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

 

NM = Notmeaningful

 

Net interest expense decreased $24.7 million, or 28.8%,to $61.0 million for the six months ended July 2, 2005 as compared to $85.7million for the same prior year period. The decrease was the result of our new debt structure at lower interestrates upon the consummation of the 2004 Transactions.

 

***Income Taxes***

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

 

For the comparable six-month period ended July 3, 2004, theeffective income tax rate for Holdings and Visant was 65.1% and 31.3%,respectively.  These tax rates reflectthe combined effect of separately reported effective tax rates for Holdings andour acquired companies prior to the 2004 Transactions.  Accordingly, these tax rates are not intendedto reflect a combined effective tax rate that would have been reported if the2004 Transactions had occurred at the beginning of the 2004 fiscal period.

 

The consolidated effective tax rates have remained the same for the sixmonth period ended July 2, 2005 as they were for the three month period ended April2, 2005, since there have not been any significant events that would warrant achange in rate.

 

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***Net Income***

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

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The following table presents cash flow activity ofHoldings for the six months of fiscal 2005 and 2004 and should be read inconjunction with our condensed consolidated statements of cash flows.

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

 

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

 

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

 

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

 

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

 

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

 

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#### **ITEM3.     QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

There have been no material changes in our exposure to market riskduring the quarter ended July 2, 2005. For additional information, refer to Item 7A of our 2004 Form 10-K.

 

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

 

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

 

During the Company’s fiscal quarter ended July 2,2005, there were no changes in the Company’s internal controls over financial reportingin connection with the above described evaluation that materially affected, orare reasonably likely to materially affect, these controls.

 

**PARTII.  OTHER INFORMATION**

 

#### **ITEM 1.          LEGAL PROCEEDINGS**

 

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

 

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

 

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

 

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

 

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Customs a voluntary disclosure to limit its monetary exposure.  The effect of these alleged tariffclassification errors is that back duties and fees (or “loss of revenue”) maybe owed on imports dating back five years.  Additionally, Customs may impose interest on the loss of revenue.  No formal notice of, or demand for, anyalleged loss of revenue has yet been issued by Customs.  A review of Jostens’ import practices hasrevealed that during the relevant five-year period, Jostens’ merchandisequalified for duty-free tariff treatment under the North American Free TradeAgreement (“NAFTA”), in which case there should be no loss of revenue orinterest payment owed Customs.  However,Customs’ allegations indicate that Jostens committed a technical oversight inclaiming the preferential tariff treatment. Through its prior disclosure to Customs, Jostens has addressed thistechnical oversight and asserted that the merchandise did in fact qualify forduty-free tariff treatment under NAFTA and that there is no associated loss ofrevenue.  Jostens is in the early stagesof administrative review of this matter, and it is not clear what Customs’position will be with respect to the alleged tariff classification errors orthat Jostens will not be foreclosed under statute from making post-entry NAFTAclaims for those imports made prior to 2004. Jostens intends to vigorously defend its position and has recorded noaccrual for any potential liability. However, we cannot assure you that Jostens will be successful in itsdefense or that the disposition of this matter will not have a material effecton our business, financial condition and results of operations.

 

We are also a party to other litigation arising in thenormal course of business.  We regularlyanalyze current information and, as necessary, provide accruals for probableliabilities on the eventual disposition of these matters.  We believe the effect on our business,financial condition and results of operations, if any, for the disposition ofthese matters will not be material, however, there can be no assurance in thisregard.

 

#### **ITEM2.          UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

Our equity securities are not registered pursuant to Section 12 of theExchange Act.  For the quarter ended July2, 2005, we did not issue or sell securities pursuant to offerings that werenot registered under the Securities Act of 1933, as amended (the “SecuritiesAct”), except that on May 5, 2005 Holdings issued to certain members ofmanagement an aggregate of 28,354 options to purchase Class A Common Stock withan exercise price of $96.10401 per share, in an offering and sale made underRegulation D of the Securities Act of 1933, as amended.

 

#### **ITEM3.          DEFAULTS UPON SENIORSECURITIES**

 

None

 

#### **ITEM4.          SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS**

 

None

 

#### **ITEM 5.          OTHER INFORMATION**

 

None

 

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

 

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

 

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

 

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

 

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

 

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

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

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

 

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