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2008-049s:\nur documents\ordinances\08\jostens 380 ord.doc ORDINANCE NO. OQr1 Q AN ORDINANCE ESTABLISHING AN ECONOMIC DEVELOPMENT PROGRAM UNDER CHAPTER 380 OF THE LOCAL GOVERNMENT CODE FOR MAKING GRANTS OF PUBLIC MONEY TO PROMOTE ECONOMIC DEVELOPMENT AND TO STIMULATE BUSINESS ACTIVITY IN THE CITY OF DENTON; APPROVING AN ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT WITH JOSTENS, INC. REGARDING'' THE EXPANSION OF AN APPROXIMATE 13,000 SQUARE FEET TO THE EXISTING BUILDING LOCATED AT 3500 I-35E IN THE CITY OF DENTON, TEXAS; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Jostens, Inc. ("Jostens") has made a request of the City of Denton to establish an economic development program under Chapter 380 of the Texas Local Government ("Chapter 380") to stimulate the development of commercial property within the City of Denton; and WHEREAS, the City Council by this ordinance is establishing an economic development program under Chapter 380 which will stimulate business activity in the City and promote the public interest (the "program"); WHEREAS, to effectuate the Program, the City and Jostens have negotiated an Economic Development Grant Agreement (the "Agreement"), a copy of which is attached hereto and made a part hereof by reference; and WHEREAS, the City Council finds that the Program and Agreement promote economic development and will stimulate commercial activity within the City of Denton for the benefit of the public; NOW, THEREFORE; THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The recitals and findings contained in the preamble of this ordinance are incorporated into the body of this ordinance. SECTION 2. The City Manager, or his designee, is hereby authorized to execute the Agreement on behalf of the City of Denton and to carry out the City's responsibilities and rights under the Agreement, including without limitation the authorization to make the expenditures set forth in the Agreement. SECTION 3. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the ./9L -k day of 2008. PE R. oMcNMAYOR s \our documents\ordinances\08\jostens 380 ord.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: Q~ APPR ED A _TO LEGAL FORM: EDWIN M. SNYDER, CITY ATTORNEY BY: Page 2 0.b , d"cu tskont tsM\josims 380 a3cdoc ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT WITH JOSTENS, INC. This Economic Development Program Grant Agreement ("Agreement") is made and entered into as of the effective date provided for below, by and JOSTENS, INC., a Minnesota corporation, and the CITY OF DENTON (the "City"), a Texas municipal corporation, for the purposes and considerations stated below: WHEREAS, this Agreement is authorized by and made pursuant to the economic development program provisions of Chapter 380 of the Texas Local Government Code (the "Act") to promote local economic development and to stimulate business and commercial activity in the City of Denton; and WHEREAS, Jostens, Inc. is contemplating the development of that certain real property located within the city limits of the City as more particularly described in Exhibit "A" attached hereto and made a part hereof by reference (the "Property"); and WHEREAS, on the 9h day of January, 2008, Jostens, Inc. submitted an application for economic development incentives with various attachments to the City concerning the contemplated use and development of the Property, which is on file in the City's Office of Economic Development, a copy of which is attached hereto and made a part hereof by reference as Exhibit "B" (the "Application for Economic Development Incentives); and WHEREAS, the City Council finds that the contemplated use and development of the Property, the proposed improvements provided for herein and the other terms and conditions of this Agreement will promote economic development and will stimulate development activity within the City of Denton for the benefit of the public; NOW, THEREFORE, the City and Jostens, Inc. for and in consideration of the preen ses and the promises contained herein do hereby contract, covenant and agree as follows: CONDITIONS OF THE GRAdNT The City's obligations under this Agreement are subject to the fulfillment of the following conditions (the "Grant Conditions"): A. No later than December 31, 2008 (subject to force majeure delays not to exceed 180 days), Jostens, Inc. shall make a capital investment of at least $4 million for the construction, equipping and furnishing of a building or buildings and other improvements to be constructed or placed on the Property as more particularly described in the Application for Economic Development (the "Improvements"). The Improvements s9our documentsNcon1mctsk0Mjmtens 380 agcdoc include the obligation of Jostens, Inc. to: (i) construct an addition to their current facility located at 3500 I-35E of at least 13,000 square feet, with an estimated capital investment of $2 million (the 'Building"); and (ii) purchase or relocate and install tangible personal property valued at approximately $2 million, for a total increased capital investment value of approximately $4 million. The Improvements shall be substantially completed no later than December 31, 2008 (subject to force majeure and other reasonable delays not to exceed 180 days). The Building, once completed and furnished, shall be occupied by Jostens, Inc. or an affiliate as a jewelry manufacturing facility, for the duration of the Term of this Agreement. Throughout the Term of this Agreement, the Building shall be continuously operated and maintained as a jewelry manufacturing facility (with appurtenant space for other purposes as reasonably necessary) so that the uses of the Property shall be consistent with the general purpose of encouraging development or redevelopment of the City of Denton, except as otherwise authorized or modified by this Agreement. B. Jostens, Inc. shall satisfy all of the provisions and requirements for the project as set forth in the Application for Economic Development Incentives including the requirement that the Improvements shall be used in accordance with the description of the project set forth in the Application for Economic Development Incentives; and IT. GENERAL PROVISION A. In the event of any conflict between the City zoning ordinances, or other City ordinances or regulations, and this Agreement, such ordinances or regulations shall control, provided however the City shall not diminish the benefits to Jostens, Inc. under this Agreement through ordinances or regulations (whether now or hereafter in effect). III. TERMS AND CONDITIONS OF GRANT A. Subject to the terms and conditions of this Agreement, the City hereby agrees to pay to Jostens, Inc. annually, after the first assessment following receipt by Jostens, Inc. of the certificate of occupancy for the Building, an amount equal to 75% of the difference between: (a) the City ad valorem taxes for the Property and the hmprovements, over, (b) City ad valorem taxes payable for the Property as of January 1, 2008 (with the resulting payments known as the "Annual Payments"), such Annual Payments to be subject to the following terms and conditions provided, however, that such amount shall not exceed $151,000 or the expiration of seven (7) years whichever event occurs first. B. Jostens, Inc. shall have the right to protest and contest any or all appraisals or assessments by the Denton County Appraisal District for the Property, the Improvements or any other tangible personal property owned by Jostens, Inc. and located on the Property. All calculations in this Agreement shall be based upon final assessed values after any such protest or contest. s9our docum=t :ontncts\ogljostens 380 agr.doc C. .The Annual Payments shall be for a term not to exceed seven (7) years with the first payment being due and payable on or before 60 days after the City is in receipt of all City ad valorem taxes due and payable for the Property and Improvements as of January 1 of the year following the calendar year in which a certificate of occupancy is issued by the City for the Building (the `Beginning Date"), and, unless sooner terminated as herein provided, shall end after the seventh Annual Payment or until such time that the total Annual Payments paid to Jostens, Inc. hereunder equal $151,000. All subsequent Annual Payments shall be due and payable on or before 60 days after the City is in receipt of all ad valorem taxes due and payable for the Property and Improvements as of Januay I for the respective subsequent years. IV. RECORDS, AUDITS, AND EVALUATION OF PROJECT A. The Jostens, Inc. shall provide access and authorize inspection of the property by City employees and allow sufficient inspection of financial information to insure that the improvements are made and the threshold has been met according to the specifications and conditions of this Agreement. Such inspections shall be done in a way that will not interfere with Jostens, Inc, business operations. City shall annually (or such other times deemed appropriate by the City) evaluate the Project to ensure compliance with this Agreement. Jostens, Inc. shall provide information to the City on a form provided by the City for the evaluation. The information shall include, without limitation, an inventory listing the Rind, number, and location of and the total investment value of all improvements to the property, including the value of all buildings and other structures and permanent improvements installed, renovated, repaired or located on the Premises. V. FAILURE TO MEET CONDITIONS In the event (i) Jostens, Inc. allows its ad valorem real property taxes owed to the City with respect to the Property or Building, or its ad valorem taxes owed to the City with respect to any tangible personal property owned by JOSTENS, INC. which are located in the Building, to become delinquent and fails to timely and properly follow the legal procedures for protest and/or contest of any such ad valorem real property or tangible personal property taxes; or, (ii) any other material conditions of this Agreement are not substantially met, including the Grant Conditions, then a "Condition Failure" shall be deemed to have occurred. It is understood that a Condition Failure shall not be deemed to occur merely because at a particular time it cannot be determined whether such condition will be met, but shall occur only if at a particular time it can be determined that such condition will not be met after notice and reasonable opportunity by Jostens, Inc. to cure such failure. In the event that a Condition Failure occurs, the City shall give Jostens, Inc. written notice of such Condition Failure and if the Condition Failure has not been cured or satisfied within ninety (90) days of said written notice, this Agreement may be siour docum=\commcCS108\iosta13 3802,8 doo terminated by the City; provided, however, that if such Condition Failure is not reasonably susceptible of cure or satisfaction within such ninety (90) day period and JOSTENS; INC. has commenced and is pursuing the cure or satisfaction of same, then after first advising the City of efforts to cure or satisfy same, Jostens, Inc. may utilize such additional time as may be reasonably required to cure such Condition Failure, but not less than ninety (90) days nor more than one hundred eighty (180) days. Time in addition to the foregoing may be authorized by the City Council. If a Condition Failure is not cured or satisfied after the expiration of the applicable notice and cure or satisfaction periods ("Condition Failure Default"), as City's sole and exclusive remedy, the Annual Payments shall be terminated with respect to the year in which notice of the Condition Failure is given and for all future years, and Jostcns, Inc. shall repay to the City portions of the Annual Payments previously paid in accordance with the following criteria: In the event of a Condition Failure Default after receipt of the first Annual Payment, Jostens, Inc. shall repay to the City 80% of the Annual Payment received; for a Condition Failure Default after receipt of the second Annual Payment, Jostens, Inc. shall repay to the City 70% of the Annual Payments previously received; after receipt of the third, 60%; after receipt of the fourth, 50%; after receipt of the fifth, 40%; after receipt of the sixth, 30%; after receipt of the seventh, 20%; and thereafter no repayment is required. VT, ASSIGNMENT This Agreement and Jostens, Inc.'s rights and obligations hereunder may not be assigned without prior notice to the City, unless such notice is prohibited by contract or applicable law in which case notice shall be provided as soon as allowable. In the event that the plant is closed, is utilized for a primary purpose other than a jewelry manufacturing facility, this Agreement shall terminate and all obligations of the City, as set forth herein, shall terminate and be of no further force and effect. VII. NOTICE All notices called for or required by this Agreement shall be addressed to the following, or such other party or address as either party designated in writing, by certified mail postage prepaid or by hand delivery: JOSTENS, INC.: General Counsel 3601 Minnesota Drive Suite 400 Minneapolis, Minnesota 55435 4 s:bur docurrcntskonnc31081jostcns 380 ag.doc CITY: City Manager City of Denton 215 E. McKinney Denton, Texas 76201 VIII. CITY COUNCIL AUTHORIZATION This Agreement is authorized by tine City Council at its meeting on the day of , 2008, authorizing the City Manager to execute this Agreement on behalf of the City. IX. BOARD OF DIRECTORS AUTHORIZATION Jostens, Inc. represents that this Agreement is entered into by Jostens, Inc. pursuant to authority granted by its Board of Directors to its President. A certificate of the secretary of Jostens, Inc. supporting this representation is attached hereto and made a part hereof as Exhibit C. X. SE VERABITLTY In the event any section, subsection, paragraph, sentence, or phrase is held invalid, illegal or unconstitutional, the balance of this Agreement shall stand, shall be enforceable and shall be read as if the parties intended at all times to delete said invalid, illegal or unconstitutional provision. Xt. ESTOPPEL CERTIFICATE Any party hereto may request an estoppel certificate from another party hereto so long as the certificate is requested in connection with a bona fide business purpose. The certificate, which if requested will be addressed to Jostens, Inc., shall include, but not necessarily be limited to, statements that this Agreement is in full force and effect without default (or if default exists the nature of default and curative action, which should be undertaken to cure same), the remaining Temn of this Agreement, the levels and remaining Tenn of the Annual Payments in effect, and such other matters reasonably requested by the party(ies) to receive the certificates. s:bur documcnts\contr CL0J08Vjostens 380 ae .,1oc XII. JOSTENS, INC. STANDING Jostens, Inc., as a party to this Agreement, shall be deemed a proper and necessary party in any litigation questioning or challenging the validity of this Agreement or any of the underlying ordinances, resolutions, or City Council actions authorizing same and Jostens, Inc. shall be entitled to intervene in said litigation. XIII. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas. Venue for any action under this Agreement shall be the appropriate court serving Denton County, Texas. This Agreement is fully performable in Denton County, Texas. XIV. RECORDATION OF AGREEMENT A fully executed original counterpart of this Agreement or a Memorandum of Agrcement, in recordable form, shall be recorded in the Deed Records of Denton County, Texas. XV. AMENDMENT This Agreement is the entire agreement of the parties and may only be modified by a written instrument executed by both parties. XVI. EFFECTIVE DATE This Agreement is effective as of the 4 y ofk~al 2008. CITY OF DENTON, TEXAS BY: _ G.~ GEORGE C. CAMPBELL CITY MANAGER s9our docuuicnis\eonncis\08\jostens 380 agr.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO FORM: EDWIN M. SNYDER, CITY ATTORNEY BY: JOSTENS, INC. BY: cAdocuments and settings\butkwar\loasl settings\temporary internet files\olkAjostens 380 agr_I (3).doc ACKNOWLEDGMENTS STATE OF TEXAS COUNTY OF DENTON The foregoing E ono is Development Program Agreement was executed before me on th%day of~ 2008 by George C. Campbell, City Manager of the City of Denton, exas, a Texas municipal corporation, on behalf of said municipal corporation. d- cr•uJy JANE E. RICHARDSON ame: Notary Public, State of Texas i ` My Commission Expires Notary Public in and for the June 27, 2009 _ State of Texas ..........ems STATE OF NEW YORK COUNTY OF WESTCHESTER The foregoing Economic Development Program Agreement was executed before me on the i9°day of 2008 by -2r Vice President of Jostens, Inc., a Minne ota corporation, on behalf of said corporation. Name: Notary Public in and for the State of New York BRIAN JAY HARTMAt: Notary Public, Stole of New York No. 01 HA6109720 Qualified in Westchester County Certificate Filed in New York County Cnmmisoinn Expires Moo 17, 20 o P - • ' 37457 •Page -1 -of 1• I N anZ Exhibit A [Q) [ r 031451 dG~ ' ~ J W ~ ~ FR W f[ E e 0 •ee _ • MMOC w.] 1 ' - F F r v 4 ?9 am- 9 t POB~ r 3 49'n + » ' a S n --irs .ten 4 I - 8+ . LOT 2 5 • BLOCK A.' X p 10,796 ACRES ' _ . ~ ~ " n d I oD..aD_ ' ® MEIROR-E% fMilNEFATN6 LONSULLNt4 • BRIERCLIFF ORrvE - 4~ r [/9IlLGIK' [IIMTd AIIKII.q M• PMV ~ ~ a n ' ' LM.t- ♦l . -i pm 11 . JOSTENS ADDITION' _ , ' , 'R r.vvel.' UxiFA. _ -.~L. : ~y yn. dL. lLT Z RKM • • ' - V LLP M w ~ ~ ppebe]II~IS}[ _ ~ t1%r-- a•w~ p GLW ~e G.:[ v.P. P.,~ IMING] 4!1 [Y ' y .roL' u x m - ~ 1W! tea. ~ ~ ' _ cur - yTF.. JC M.- ~0l.- VVUW. [~L. q I. , • LL 1• -lee" i01N Ol 'LMY~1 o[[wv. _ d c . ^ 4 December 2005 Tax Abatement Policy Exhibit B APPLICATION FOR TAX ABATEMENT CITY OF DENTON, TEXAS 1. Property Owner Jostens, Inc. Company or Project Name Jostens Mailing Address 357 Main St. Armonk, NY 10504 Telephone 914-595-8206 Fax No. 914-595-8238 Website www.jostens.com Contact Name Rodney Buckwalter John Bibeault Title Senior Director Mailing Address 357 Main St. - Armonk, NY 10504 Telephone 914-595-8206 Fax No. 914-595-8238 Email Address rodney.buckwatter@visant.net 2. Provide a chronology of plant openings, closing and relocations over the past 15 years. --Closed Red Wing, MN diploma cover plant in 2004-relocated operations to existing facilities. --Announced closure of Attleboro, MA jewelry plant to take place in 2008 Since Visant has owned Jostens-10/04 3. Provide a record of mergers and financial restructuring during the past 15 years.** Jostens has not done any mergers or financial restructurings. V isant has done several acquisitions and dispositions since 2004-- those related to Jostens included the sale of Jostens' photo business and the acquisition of the assets of Publishing Enterprises, Incorporated-a memory book manufacturing company. **Since Visant has owned Jostens-10/04 4. Will the occupants of the project be owner or lessee? If lessee, are occupancy commitments already existing? Owner. December 2005 Tax Abatement Policy 5. Is the project a relocation of existing facility or a new facility to expand operations? If relocation, give current location. Expansion of existing facility. 6. If an existing Denton business, will project result in abandonment of existing facility? If so, the value of the existing facility will be subtracted from the value of the new facility to arrive at total project value. No. 7. Property Description. - Attach a copy of the legal description detailing property's metes and bounds. Attached - Attach map of project including all roadways, land use and zoning within 500 feet of site. Attached 8. Current Value. Attach copy of latest property tax statement from the Denton County Central Appraisal District (include both real and personal property). $14,256,960 Statements attached. 9. Increased Value/Estimated Total Cost of Project. Structures $2,226,000 Site Development $ TBD Personal Property $2,068,000 Other Improvements $ TBD 10. Indicate amount of tax abatement and number of years requested for each taxing entity. City of Denton 100% 10 years Denton County 100% 10 years List any other financial incentives this project will request/receive Estimated Freeport Exemption $ 113,000 Estimated Electric Utility Industrial Development Rider $ TBD Estimated Water/Wastewater Infrastructure Assistance $ N/A 11. Give a brief description of the activities to be performed at this location, including a description of products to be produced and/or services to be provided. Manufacture of class rings for the high school, college and championship markets. December 2005 Tax Abatement Policy 12. Project Construction Phase A. Estimate percentage of project development and construction dollars to be spent with Denton based contractors or sub-contractors. Construction costs $ 1,365,000 Percentage local contractors 45 % **All construction work will be let for bid-it is anticipated that significant portion of sub-contractors will be Denton based. B. Construction Employment Estimates: Start Date (Mo/Yr) 3/08 Completion Date (Mo/Yr) 7/08 No. of Construction Jobs 142 Estimated Total Construction Payroll $891,000 C. Describe any off-site infrastructure requirements: None anticipated. • Water • Wastewater • Streets • Drainage • Other December 2005 Tax Abatement Policy 13. Project Operation Phase. Provide employment information for the number of years tax abatement is requested. At Project Start Existing Date (mo/yr) At Term of Employment Information Operation _03-/_08- Abatement (if applicable) _ A. Total number of permanent, full-time jobs 283 283 413 B. Employees transferred from outside Denton 1 C. Net permanent full-time jobs (A. minus B.) 412 E. Total annual payroll for all permanent, full-time 9,512,000 14,012,640 jobs (A.) Jostens also employs seasonal employees and anticipates having 100 such employees during 2008-2009. F. Types of jobs created. List the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Operators-124 positions-Ave. Wage $14.00/hr Maintenance Supv.-2 positions-Ave. Wage $21,00/hr Supervisors-3 positions-Ave. Wage $60,000 annually Technician-I position-Ave. Wage $40,000 annually G. Estimate annual utility usage for project: Electric $135,000 Water $30,000 Wastewater $30,000 Gas $168,000 14. Describe any other direct benefits to the City of Denton as a result of this project (e.g., sales tax revenue or project elements identified in Tax Abatement Policy, Section 111). It is anticipated that a majority of the new employees will be Denton residents. 15. Is property zoned appropriately? Yeg No Current zoning. RCC-D Zoning required for proposed TBD project. Anticipated variances. None anticipated December 2005 Tax Abatement Policy 16. Is property platted? Yes No Will replatting be necessary Yes No 17. Discuss any environmental impacts created by the project. A. List any permits for which applicant must apply. Applicant will be required to provide City with copies of all applications for environmental permits upon completion of application(s). No environmental permits are required to our knowledge B. Provide record of compliance to all environmental regulations for the past five years. N/A 18. Provide specific detail of any businesses/residents that will be displaced and assistance that will be available from the requesting company. None. 19. Provide description of any historically significant area included within the project's area as determined by the Historic preservation Officer. If any, give detail of how the historically significant area will be preserved. None 20. Justification for Tax Abatement Request: Substantiate and more fully describe the justification for this request. Include the amount of the abatement requested and show how it will contribute to the financial viability of the project. Submit attachments if necessary. See Attachment. 21. List additional abatement factors to be considered for this project as outlined on pages 3 and 4 of the Tax Abatement Policy. December 2005 Tax Abatement Policy See Attachment. 22. Financial Information: Attach a copy of the latest audited financial statement or, in the case of a new project, a business plan. Form 10-Q for Visant Holding Corp. and Visant Corporation attached. Additional filings are available at www.visant.net. Note that the jewelry operations are included in the "Scholastic" business segment. This tax abatement application is submitted with the acknowledgement that additional certified financial information may be required. Au orized Sigt tore ~nB Date: Jostens, Inc. was incorporated in 1897 and has been providing products, services and programs that help people celebrate important moments, recognize achievements and build affiliations for over 100 years. The company's products include yearbooks, class rings, graduation products, and products for athletic champions and their fans. Jostens has operated its jewelry manufacturing operations out of two locations, Denton, TX and Attleboro, MA, for a long period of time. Jostens opened its Denton facility in 1970. Initially it was 40,000 square feet and had a total of 180 employees in both seasonal and full time status. Over the years it has grown to 56,000 square feet and 283 full time and 185 seasonal employees. With the proposed 13,000 square fee addition employment would be projected to increase to 413 full time and 100 seasonal employees. The consolidation will allow the company to convert a significant number of seasonal positions to full time status. As a result of significant quality and productivity gains over the past years Jostens has made the decision to consolidate its Attleboro operation into its Denton operations. The current Denton facility is not large enough to accommodate the combined operations and as a result the company has been considering all viable options including expansion and relocation in the Denton area, both within and outside of Denton. After considering all options the company has determined that the preferred option is to expand the existing Denton facility and to make Denton its jewelry headquarters for all jewelry production. While expansion is the preferred option, the company is still analyzing the expansion alternative as compared to'relocation of the operations and the availability of tax and financial incentives will play a significant factor in the final decision. As reflected in the application the consolidation will result in approximately 130 new full time positions. In addition to attractive wages the company also offers medical, dental and vision benefit coverage. Approximately 60% of the current Denton employees live in Denton and we would anticipate that approximately the same percentage of the new employees would be Denton residents. A significant portion of the $5 million in additional annual payroll expected to be added to the combined operations will undoubtedly be spent with local merchants and service providers. Jostens has enjoyed its longstanding relationship with the Denton community and looks forward to continuing to grow and prosper with Denton. PROPERTY DESCRIPTION: PERSONAL PROPERTY- RING MFG PLANT LOCATION: 3500135E S, DENTON Denton County, Texas 2007 TAX STATEMENT '0179763 S1 JOSTEN'S INC ATTN: RE DEPT ` 357 MAIN ST ARMONK NY 10504-1808 TAXES IND SCH DIST DENTON SALES TAX REDUCED YOUR LEVY "6340.19 001 359525AA.072 712 DSNrON: 0179763 1111111111111 111118 Make checkpayable m: STEVE MOSSMAN - DEMON COUNTY TAX ASS ESSOR/COLLECTOR P.O. BOX 90223 DEMON, TEXAS 762025223 1-9404693500 METRO: 972434-8835 Office Hours: 8:00 AM to 430 PM Monday an Friday (Except Holidays) CREDIT CARD PAYMENTS Now Avz&ble by Iatemetor Phone Only Credit Card Paymana Not Arxepud is Once trww.4:.dmtamomtymm Visit er (856) 549-1010 ® Use Buren Code 7777777 .I~a~(atk ©y Rave your ax motored and cmdu cad evailwa. A Convenience Pee oft %AppBar to Credit Card lhyeae IF YOU ARE 65 YEARS OF AGE OR OLDER OR ARE DISABLED AND THE PROPERTY DESCRIBED IN THIS DOCUMENT IS YOUR RESIDENT HOMESTEAD, YOU SHOULD CONTACT THE APPRAISAL DISTRICT REGARDING ANY ENTITLEMENT YOU MAY HAVE TO A POSTPONEMENT IN THE PAYMENT OF THESE TAXES. The Dmtm Central Appraisal District phone amber is 940-349-3800- Delinquent Tax Penalty and Interest -Taxes Not Paid by January 31, 2008 will be delinquent and will be assessed the following Penalty end Interest Rates: Nate: Panatyandlmmrsa enotpaldby 01137(2708 Amoum Dmby0191rZ008 129,89835 x Paid In Penalty Rafe Interest Rate P & I Amount Amomd Dire Fab. 08 6% 1% 9089.88 139,098.13 Mar. 08 7% 2% 1,169995 141,698.10 'Penalty and Interest Was Increase on the not day of own month based on the unpaM bounce. Loge! cods and fees may become due at any brae after de0lquency and a soft to coiled may be filed. t This Pardon And Yaor Cancelled Cheek Will Serve As Your Receipt t MSIRev.IA07 D.nC_Sennt ~ Refurn Tlur Portico With Your Paymene 4 NOTE PENALTY AND INTEREST IF NOT WE W. 011912008 PAID BY: 012tTAra 132Aa PAID N P& I PENALTY AMOUNT U eb. 7% 9099.68 139,098.1 ar. 9% 1,1699.8 141,698.1 TAXES DUE ON RECEIPT AO Carmctlon Rayuata JOSTENS INC ATrN: RE DEPT 357 MAIN ST ARMONK NY 105D4 PROPERTY ACCOUNT NUMBER STATEMENTNUMBER P0903162 176374 NOTE FOR EACH . 53000ED CHEC'i' I~1117~I~I~~Y11~11~~~1~~ RETURNED CHECK STEVE MOSSMAN - DENTON COUNTY TAX ASSESSOR COLLECTOR P.O. BOX 90223 DENTON, TEXAS 76202-5223 IL„hlh,,,LllhntJ,LhLrt LhtLLdhtdd all„II„I t/rCR1T UCb,Mt` 11Vn: MVDUH MGY 6 YRH, I I U1 17, ACRES 3.735, OLD DCAD TR 5B(3) Denton County, Texas 2007 TAX STATEMENT 13034 2 MB 0.485 •0197425 53 JOSTEN'S INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 105041808 h.,IIILu,IddLrrJrdr,,lllul,llrul„InIJJud,ull I RECEIPT PROP TYPE-FIFi RATIO OF ASSESSMENT. 100% -ON IND SCH DIST OF DENTON SALES TAX REDUCED YOUR LEVY ^•370.79 `r % Jsas.: 1.4340000 4,666.1 .6665200 2,168.A 7,602.4 CREDIT CARD PAYMENTS Now Avallableby Internetor Phone Only Credit Csm Psymems Not Accepted in Office visit www.hu.dentoncuunty.com or (866) 549-1010 Use Butow Code 7777777 Millie . cash V H.veyaar rex ete¢mevt evd m9di1 cud ntileble. A Coovevima Fee or33Y. Appae b Crt4a hrd Payroe IF YOU ARE 65 YEARS OF AGE OR OLDER OR ARE DISABLED AND THE PROPERTY DESCRIBED IN THIS DOCUMENT IS YOUR RESIDENT HOMESTEAD, YOU SHOULD CONTACT THE APPRAISAL DISTRICT REGARDING ANY ENTITLEMENT YOU MAY HAVE TO A POSTPONEMENT IN THE PAYMENT OF THESE TAXES. The Denton Central Appraisal District phone number is 940-349-3800. Delinquent Tax Penalty and Interest 'Taxes Not Pald by January 31, 2008 will be delinquent and will be assessed the following Penalty and Interest Rffis: Nate: Penebandlnmheattnotpardby 01212008 Amoum DrabY01A120011 7.80249 R Paid In PenaltyRate Interest Rate P&IAmount Amount Due Feb. 08 532.18 11 8,134.67 Mar, OB 7% 2% 684.231 8,286.72 'Panay am Interest Mm increeae on the tmt day of each month based on the unpaid balance. Legal costs and fees may became due at any time aterde6hhpuenry, and awl to ctRecl may be tied. + This Pordon And Your CaneeRed Check WW Serve As Your Receipt 1 + Return NOTE PENN.TYAND INTEREST IF NOT DUE BY: 01r1120oe PAID BY. 04312009 7'suas9 ffift ~AID N P & I PENALTY AMOUNT U eb. 7% 532.16 8,134.67 ar: 9Yo I 684.23 8,286.72 TAXES DUE ON RECEIPT Ad4eas CwreeOOn Ra yro#el JOSTENS INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 10504 I PROPERTY ACCOUNT NUMBER STATEMENT NUMBER R0039195 176375 NOTE I~tlttO0 BpI~p~9pgp~~I~n~~Ip~~~I~~ I~IpaBp~Ipaa't~ I~fIO'I'IO~I FOREACH' IIII3NON IIIOtl~I1100I1 'I $3000-DCHEC IINIIII~IIOIII~YIIIIIY1111~1lllll~ RETURNED CHECK STEVE MOSSMAN - DENTON COUNTY TAX ASSESSOR COLLECTOR P.O. BOX 90223 DENTON, TEXAS 76202-5223 I hu IdLrul rill rr.„LL LI rrr L Ld dui LrrL I1, Ihrlhrl 6II3099IInI'CII%II..013''713 DtlAmE''NTON: 0,'n1I97425 ~~11111~1111~911111 1111770 Make cheek payee& to: STEVE MOSSMAN - DENTON COUNTY TAX ASSESSOR/COLLECTOR P.O. BOX 90223 DENTON, TEXAS 762023223 1-940-349-3500 METRO: 972-4348835 Office Hours: 8:00 AM d 4:30 PM Monday W Friday (Except Holidays) I . .ni r uvrv: Ova, cna nu n,a wnA LOT 2, ACRES 10.796 Denton County, Texas 2007 TAX STATEMENT 1-940349-3500 METRO: 972434-8835 Make chmkp.>.bk wa STEVE MOSSMAN - DENTON COUNTY TAX ASSESSOR/COLLECTOR P.O. BOX 90223 DENTON, TEXAS 782025223 `0197425 S3 JOSTEWS INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 10504-1808 ON IND SCH DIST OF DENTON SALES TAX REDUCED YOUR LEVY °2823.70 Office Hours: 8:00 AM to 4:30 PM Monday to Friday (Except Holidays) 2478,024 1.4340000 2478,024 .6665200 COUAI~ 1846; b31U1CX.013 713 DMTON: 0197425 CREDIT CARD PAYMENTS Now Aval ableby IntemetorPhone Only Credit Cant Payments Not Aoxpbd W Office whit www.but Beaton xu ntyrnm or(886)549-1010 Use Bureau Code 7777777 CaE v Nave Yaw ea euumest ®d credit and awi46lc A C4aveaTma Pa e(23X Applle ro Credo CW Paymevb IF YOU ARE 65 YEARS OF AGE OR OLDER OR ARE DISABLED AND THE PROPERTY DESCRIBED IN THIS DOCUMENT IS YOUR RESIDENT HOMESTEAD, YOU SHOULD CONTACT THE APPRAISAL DISTRICT REGARDING ANY ENTITLEMENT YOU MAY HAVE TO A POSTPONEMENT IN THE PAYMENT OF THESE TAXES. The Denton Central Appraisal District phone number is 940-349-3800. Delinquent Tax Penalty and Interest 'Taxes Not Paid by January 31,200B will be delinquent and will be assessed the following Penalty and Interest Rates: Note: PenellyandbnterealsrntpaMby oinlr2ow Amount Doe try01rd1/2000 57,090.80 0 Peid In Penalty Rate Interest Rate P & I Amount Amount Due Feb. 08 6% 1% 4052.77 61,949.57 Mar. 08 7% 2% 5210.72 63,107.52 `Penally and Interest rates Increase on the first day of each month based on the unpaid balance. Legal coats and has may became due at any time after delinquency and a wft 10 Idled may be flied. Ret. NOTE: PENALTY AND INTEREST IF NOT WE BY: 0151ra100 PAID BY.. 01/1120/19 "AN." PAID IN P & I PENALTY MOUNT DUE iin~ fbb. 7% 4652. 61,949.5 ar. 9% 5210.7"' 63,107.5 TAXESDUE ON RECEIPT AONUa tansc0on Reverted JOSTEN'S INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 10504 T Thh Portion And Your Ca..rHed Cheek Will Serve As Your Receipt ? MSI Rev.1 9107 PROPERTY ACCOUNT NUMBER STATEMENTNUMBER R0162646 176376 NOTE- E d C FOREACH - - ' rURN D fiEC RfTURNEO GHECK - STEVE MOSSMAN-DENTON COUNTY TAX ASSESSOR COLLECTOR P.O. BOX 90223 DENTON, TEXAS 76202-5223 I I r r r I, I I„„I r l l l r I, I, I, I,,, I, I, r 1, l„11,,,1,1 „I I ,.I I, r I crarnn, uw~i 16, ACRES 1.579. OLD DCAD TR 20 M Denton County, Texas 2007 TAX STATEMENT eaiwux.ms r'a ucnavrv: Uleian Make check payable to. STEVE MOSSMAN - DENTON COUNTY TAX ASSESSORICOLLECTOR P.O. BOX 90223 DENTON, TEXAS 76202.5223 •0197425 S 12 3 JOSTENS INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 105041808 -ON IND $CH DIST OF DENTON i-NO349-3500 METRO: 972-4348835 Office Hours: 8:00 AM to 4:30 PM Mondaym Friday(ExceptHoUdays) 137,562 1 A3400D0 137,562 .6666200 CREDIT CARD PAYMENTS Now AvaOableby InteraetorPhom Only C.cdit Cw Peymeou Not Accepa l in OBim wish wW W.lai.deaasaeomry.wm or(066)549-1010 Use Bureau Code 7777777 7SA Meat I©1 y HaveY. res stelm'at cod cm4t card enilebla ACaaveai FeeofL%Appa mCRaaCw Psyaa IF YOU ARE 65 YEARS OF AGE OR OLDER OR ARE DISABLED AND THE PROPERTY DESCRIBED IN THIS DOCUMENT IS YOUR RESIDENT HOMESTEAD, YOU SHOULD CONTACT THE APPRAISAL DISTRICT REGARDING ANY ENTITLEMENT YOU MAY HAVE TO A POSTPONEMEN'T' IN THE PAYMENT OF THESE TAXES. The Denton Central Appraisal District phone amber is 940-349-3800. Delinquent Tax Penalty and Interest `Taxes Not Paid by January 31, 2008 will be delinquent and will be assessed the follovAng Penalty and Interest Rates; Naas: PanvlryaMlnteeaarelpaidby 01x31=8 Araoutd OuebY0113WON 3,21442 M Paid In Penally Rate Interest Rate P & I Amount Amount Due Feb. 08 6% 1% 224.99 3,439.01 Mar. 08 7% 2% 28926 3,50328 'Penally ant Itdersst rotes Incroase an the fist day of each month based an as unpaid balance. Legal toss sM fees =Y be a due m any ame after delinquency ant a sub to collect may be filed. n +rha Pardon And YOU' Cancelled Check Will Serve As Your Receipt+ MSI Rev. 1907 NOTE PENALTY AND INTEREST IF NOT DUE BY: 01/312008 PAID BY. minces 3214.02 PAID IN P & I NALTY AMOUNT DUE Feb. 7% 224.99 3,439.01 Mar. 9% 289.26 3,503.2 TAXES DUE ON RECEIPT A ddnus CmwYlon Rep.end JOSTEN'S INC ATTN TAX DEPT 357 MAIN ST ARMONK NY 10504 PROPERTY ACCOUNT NUMBER STATEMENT NUMBER R0162862 176377 NOTE:~~-'. HAR S .00 E E FOR EACH 'Blt'' 'NN'ryry ' TUB D CH RETURNED CHECK II'' , IAIWAIIIBIIIII~iiIWIIItliiiIIi'' , IWIiiIiVVIIII OYll - STEVE MOSSMAN-DENTON COUNTY TAX ASSESSOR COLLECTOR P.O. BOX 90223 DENTON, TEXAS 76202-5223 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ® QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2007 or ❑ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to I.R.S. Commission Registrant, State of Iamrpotation, Employer identification File Number _ Address orPrindpd E=ative Offices and Tdeobone Number Na. 333-112055 VISANT HOLDING CORP. 90-0207875 (Incorporated in Delaware) 357 Main Street Armonk, New York 10504 Telephone: (914)595.8200 333-120386 VISANT CORPORATION 90-0207604 (Incorporated in Delaware) 357 Main Street Armonk, New York 10504 Telephone: (914) 595-8200 Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ® No ❑ Indicate by check mark whether any of the registrants is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act). (Check one): Large accelerated filer ❑ Accelerated filer ❑ Non-accelerated filer Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ❑ No As of November 5, 2007, there were 5,976,659 shares of Class A Common Stock, par value $.01 per share, and one share of Class C Common Stock, par value $.01 per share, of Visant Holding Corp. outstanding and 1,000 shares of common stock, par value $.01 per share, of Visant Corporation outstanding (all of which are beneficially owned by Visant Holding Corp.). Visant Corporation meets the conditions set forth in General Instruction (11)(1)(a) and (b) of Form 10-Q and is therefore filing this Form ]0-Q with the reduced disclosure format specified in General Instruction (11)(2) to Form 10-Q. FILING FORMAT This Quarterly Report on Form 10-Q is a combined report being filed separately by two registrants: Visant Holding Corp. ("Holdings") and Visant Corporation, a wholly owned subsidiary of Holdings ("Visant"). Unless the context indicates otherwise, any reference in this report to the "Company", "we", `bur", "us" or "Holdings" refers to Visant Holding Corp., together with Visant Corporation and its consolidated subsidiaries. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ITEM 1. Financial Statements (Unaudited) Visant Holding Corp. and subsidiaries: Condensed Consolidated Statements of Operations for the three and nine months ended September 29, 2007 and September 30, 2006 1 Condensed Consolidated Balance Sheets as of September 29, 2007 and December 30, 2006............ 2 Condensed Consolidated Statements of Cash Flows for the nine months ended September 29, 2007 and September 30, 2006 3 Visant Corporation and subsidiaries: Condensed Consolidated Statements of Operations for the three and nine months ended September 29, 2007 and September 30, 2006 4 Condensed Consolidated Balance Sheets as of September 29, 2007 and December 30, 2006............ 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 29, 2007 and September 30, 2006 6 Notes to Condensed Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 30 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 41 ITEM 4. Controls and Procedures 42 ITEM 4T. Controls and Procedures 42 PART H - OTHER INFORMATION ITEM 1. Legal Proceedings 42 ITEM IA. Risk Factors 42 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 42 PI'EM 3. Defaults Upon Senior Securities 42 ITEM 4. Submission of Matters to a Vote of Security Holders 42 ITEM 5. Other Information 42 ITEM 6. Exhibits 43 Signatures 3 PART L FINANCIAL INFORMATION ITEM 1. In thousands FINANCIAL STATEMENTS VISANT HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three mmtlu ended September 29, September 30, 2007 2006 $ 238,396 $ 215,710 136,033 124,741 Net sales Cost of products sold Gross profit Selling and administrative expenses (Gain) loss on disposal of fixed assets Special charges Operating income Interest expense, net (Loss) income before income taxes (Benefit from) provision for income taxes (Loss) income from continuing operations Income from discontinued operations, net of tax.... Net (loss) income 102,363 90,969 86,918 77,459 (65) (788) 236 - 15,274 14,298 31,210 41,109 (15,936) (26,811) (5,131) (11,242) (10,805) (15,569) - 3,523 Nine montht ended September 29, September 30, 2007 2006 $ 995,712 $ 913,188 481,879 447,321 513,833 465,867 320,060 291,014 555 (1,641) 195 2,594 193,023 173,900 112,412 109,505 80,611 64,395 31,056 24,798 49,555 39,597 110,902 8,985 $ (10,805) $ (12,046) $ 160,457 $ 48,582 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 VLSANT HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) In thouWas, areptAM muaunn September 29, 2007 December 30, 2006 ASSETS Cash and cash equivalents $ 21.505 $ 18,778 Accounts receivable, net 143,959 144,681 Inventories, net 90,885 105,333 Salespersons overdrafts, net of allowance of $9,625 and $12,621, respectively 30,082 27,292 Prepaid expenses and other current assets 12,824 19,791 Income tax receivable - 10.311 Deferred income taxes 12,825 11,850 Current assets of discontinued operations - 56,649 Total current assets _ 312,080 394,685 Property, plant and equipment 352,892 305,703 Less accumulated depreciation (168,841) (145,122) Property, plant and equipment, net 184,051 160,581 Goodwill 929,158 919,638 Intangibles, net 525,796 530,669 Deferred financing costs, net.. 34,450 48,782 Other assets 12,432 13.181 Long-term assets of discontinued operations - 265,519 Total assets.._ $ 1,997,967 $ 2,333,055 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Book overdrafts $ 2,423 $ - Short-term borrowings 77,500 - Accounts payable 49,943 56,436 Accrued employee compensation and related taxes 34,407 41,256 Commissions payable 10.968 21,671 Customer deposits 40,157 171,258 Income taxes payable 4,740 - Interest payable 29,473 13,227 Other accrued liabilities 22,279 23,637 Current liabilities of discontinued operations 693 34,849 Total current liabilities 272,583 362,334 Long-term debt 1,386,564 1,770.657 Deferred income taxes 162,514 175,200 Pension liabilities, net 17,935 21,484 Other noncurrent liabilities 32,759 33,356 Long-term liabilities of discontinued operations - 6.696 Total liabilities 1872 355 2,369,727 Mezzanine equity 9,830 9,717 Common stock: Class A $.01 par value; authorized 7,000,000 shares; issued and outstanding: 5,976,659 at September 29, 2007 and December 30, 2006 Class B $.01 par value; non-voting; authorized 2,724,759 shares; issued and outstanding:.. none at September 29, 2007 and December 30, 2006 Class C $.01 par value; authorized 1 share; issued and outstanding: I share at September 29, 2007 and December 30, 2006 60 60 Additional paid-in-capital 175,705 175.427 Accumulated deficit (61,057) (222,993) In thousands, esceptslwre amarmu September 29, December 30, 2007 2006 Accumulated other comprehensive income 1,074 1,117 Total stockholders' equity (deficit)._ 115,782 (46,389) Total liabilities and stockholders' equity (deficit) $ 1,997,967 $ 2,333,055 The accompanying notes are an integral part of the condensed consolidated financial statements. 6 VISANT HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nice months ended In thoneonds September 29, September30, 2007 2006 Net income Adjustments to reconcile net income to net cash provided by operating activities: $ 160,457 $ 48,582 Income from discontinued operations (110,902) (8,985) Depreciation 26995 22367 Amortization of intangible assets Amortization of debt discount, premium and deferred financing costs Other amortization Deferred income taxes Loss (gain) on sale of assets Stock-based compensation Loss on asset impairments Changes in assets and liabilities: Accounts receivable Inventories Salespersons overdrafts Prepaid expenses and other current assets Accounts payable and accrued expenses Customer deposits Commissions oavable Income taxes payable/ receivable Interest payable Other Net cash provided by operating activities of continuing operations......„ Net cash (used in) provided by operating activities of discontinued operations Net cash provided by operating activities Purchases of property, plant and equipment Proceeds from sale of property and equipment Acquisition of businesses, net of cash acquired Additions to intangibles Proceeds from disposal of discontinued operations Other investing activities, net Net cash provided by (used in) investing activities of continuing operations......„ Net cash used in investing activities of discontinued operations.............. Net cash provided by (used in) investing activities _ Net book overdrafts Net short-term borrt Principal payments on long-tern debt Proceeds from issuance of long-tern debt Distribution to stockholders Debt financing costs 36,545 37,743 30,281 23,429 502 603 (18,351) (21,625) 555 (1,641) 389 113 - 2,341 7,539 (11,921) 20,145 7,038 (2,582) 314 7,477 980 (14,242) 14,109 (131,918) (120,944) (11,311) (8,971) 16,049 12,793 16,246 20,245 (5,220) (6,245) 28,654 10,325 (4,284) 11,071 24,370 21,3% (49,010) (38,449) 1,837 10,415 (51,801) (53,557) (245) - 401,781 64,092 57 - 302,619 (17,499) (5,691) (14,652) 296,928 (32,151) 2,423 - 77,500 105,971 (400,000) (100,000) - 350,000 - (340,700) - (9,473) Net cash (used in) provided by financing activities of continuing operations._ (320,077) 5,798 Net cash used in financing activities of discontinued operations - - Net cash (used in) provided by financing activities (320,077) 5,798 Effect of exchange rate changes on cash and cash equivalents 1,506 (436) Nice months ended September 29, September30, In lMuraMs 2007 2006 Increase (decrease) in cash and cash equivalents 2,727 (5,393) Cash and cash equivalents, beginning of period 18,778 20,706 Cash and cash equivalents, end of period $ 21,505 $ 15,313 The accompanying notes are an integral pan of the condensed consolidated financial statements. VISANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) In dwasands Net sales Cost of products sold Gross profit _ . Selling and administrative expenses (Gain) loss on disposal of fixed assets Special charges Operating Interest expense, (Loss) income before income taxes........... Provision for (benefit from) income taxes (Loss) income from continuing op Income from discontinued operations, net Net (loss) The accompanying notes are an Three months ended Nix mouths ended September29, September 30, September 29, September 30, 2007 2006 2007 2005 $ 238,396 $ 215,710 $ 995,712 $ 913,188 136,033 124,741 481,879 447,321 102,363 90,969 513,833 465,867 86,773 77,421 319,534 290,813 (65) (788) 555 (1,641) 236 - 195 2,594 15,419 14,336 193,549 174,101 17,666 28,114 72,234 79,034 (2,247) (13,778) 121,315 95,067 548 (5,979) 46,414 35,849 (2,795) (7,799) 74,901 59,218 - 3,523 110,902 8,985 $ (2,795) $ (4,276) $ 185,803 $ 68,203 part of the condensed consolidated financial statements. VISANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) In thommd., weep[shmra was September 2%, 2007 DettmberM, 2006 ASSETS Cash and cash equivalents $ 20,970 $ 18,043 Accounts receivable, net 143,959 144,681 Inventories, net 90,885 105,333 Salespersons overdrafts, net of allowance of $9,625 and $12,621, respectively 30,082 27,292 Prepaid expenses and other current assets., 12,824 20,309 Income tax receivable - 1,097 Deferred income taxes 12,825 11,850 Current assets of discontinued operations - 56,649 Total current assets _ 311,545 385,254 Property, plant and equipment 352,892 305,703 Less accumulated depreciation (168,841) (145,122) Property, plant and equipment, net 184,051 160,581 Goodwill 929,158 919,638 Intangibles, net 525,796 530,669 Deferred financing costs, net 22,594 35.557 Other assets 12.432 13,181 Long-term assets of discontinued operations - 265,519 Total assets $ 1,985,576 $ 2,310,399 LIABILITIES AND STOCKHOLDER'S EQUITY Book overdrafts Short-term borrowings Accounts payable Accrued employee compensation and related taxes Commissions payable Customer deposits Income taxes payable Interest payable Other accrued liabilities Current liabilities of discontinued operations Total current liabilities Long-term debt Deferred income taxes Pension liabilities, net Other noncurrent liabilities Long-term liabilities of discontinued operations Total liabilities $ 2,423 77,500 49,943 34,407 10,968 40,157 9,911 19,303 22,279 693 56,436 41,256 21,671 171,258 10,650 23,637 34,849 267,584 359,757 816,500 1,216,500 188,428 194,925 17,935 21,484 32,759 33,356 6,696 1,323,206 1,832,718 Preferred stock $.01 par value; authorized 300,000 shares; none issued and outstanding at September 29, 2007 and December 30, 2006, respectively Common stock $.01 par value; authorized 1,000 shares; 1,000 shares issued and outstanding at September 29, 2007 and December 30, 2006 - - Additional paid-in-capital 646,049 648,599 Retained earnings (accumulated deficit) 15,247 (172,035) Accumulated other comprehensive income 1,074 1,117 Total stockholder's equity 662,370 477,681 Total liabilities and stockholder's equity $ 1,985,576 $ 2,310,399 10 The accompanying notes are an integral part of the condensed consolidated financial statements. 11 VLSANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Niue months ended in thousands September 29, 2007 September 30, 2006 Net income $ 185,803 $ 68,203 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations (110,902) (8,985) Depreciation 26,995 22,367 Amortization of intangible assets 36,545 37,743 Amortization of debt discount, premium and deferred financing costs 13,005 8,038 Other amortization 502 603 Deferred income taxes (12,162) (16,299) Loss (gain) on sale of assets 555 (1,641) Loss on asset impairments - 2,341 Changes in assets and liabilities: Accounts receivable 7,539 (11,921) Inventories 20,145 7,038 Salespersons overdrafts (2,582) 314 Prepaid expenses and other current assets 7,477 980 Accounts payable and accrued expenses (14,242) 14,056 Customer deposits (131,918) (120,944) Commissions payable (11,311) (8,971) Income taxes payable/ receivable 12,006 18,518 Interest payable 8,653 91991 Other (4,702) (6,496) Net cash provided by operating activities of continuing operations......... 31,406 14,935 Net cash (used in) provided by operating activities of discontinued operations (4,284) 11,071 Net cash provided by operating activities 27,122 26,006 Purchases of property, plant and equipment (49,010) (38,449) Proceeds from sale of property and equipment 1,837 10,415 Acquisition of business, net of cash acquired (51,801) (53,557) Additions to intangibles (245) - Proceeds from disposal of discontinued operations 401,781 64,092 Other investing activities, net 57 - Net cash provided by (used in) investing activities of continuing operations 302,619 (17,499) Net cash used in investing activities of discontinued operations (5,691) (14,652) Net cash provided by (used in) investing activities 296,928 (32,151) Net book overdrafts 2.423 - Net short-term borrowings 77.500 105,971 Principal payments on long-term debt (400,000) (100,000) Distribution to stockholders (2,552) (4,849) Net cash (used in) provided by financing activities of continuing operations (322,629) 1,122 Net cash used in financing activities of discontinued operations - - Net cash (used in) provided by financing activities (322,629) 1,122 Effect of exchange rate changes on cash and cash equivalents 1,506 (436) Increase (decrease) in cash and cash equivalents 2,927 (5,459) Cash and cash equivalents, beginning of period 18,043 19.874 Cash and cash equivalents, end of period 20,970 $ 14,415 12 In thonsends Nice months ended September 29, September30, 2007 2006 The accompanying notes are an integral part of the condensed consolidated financial statements. 13 VISANT HOLDING CORP. VISANT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Overview and Basis of Presentation Overview The Company is a marketing and publishing services enterprise servicing the school affinity, direct marketing, fragrance and cosmetics, and educational market segments. The Company was formed through the October 2004 consolidation of Jostens, Inc. ("Jostens"), Von Hoffmann Holdings Inc. ("Von Hoffmann" including The Lehigh Press, Inc. ("Lehigh")) and AHC I Acquisition Corp. ("Arcade"). Jostens, Arcade and Lehigh are currently integrated into three reportable segments: Scholastic, Memory Books (formerly known as Yearbook) and Marketing and Publishing Services. Von Hoffmann was sold in May 2007. In 2007 we changed the name of our Yearbook segment to Memory Books to reflect our diversified offering of custom yearbooks, memory books and related products that help people tell their stories and chronicle important events. Basis of Presentation The unaudited condensed consolidated financial statements included herein are those of: Visant Holding Corp. and its wholly-owned subsidiaries ("Holdings") which include Visant Corporation ("Visant"); and - Visant and its wholly-owned subsidiaries. There are no significant differences between the results of operations and financial condition of Visant Corporation and those of Visant Holding Corp., other than certain indebtedness of Holdings. Holdings has 10.25% senior discount notes due 2013, which had an accreted value of $220.1 million and $204.2 million as of September 29, 2007 and December 30, 2006, respectively, and $350.0 million principal amount of 8.75% senior notes due 2013. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of Holdings and Visant, and their respective subsidiaries, are presented pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") in accordance with disclosure requirements for the quarterly report on Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and footnotes included in Holdings' and Visant's Annual Report on Form 10-K for the fiscal year ended December 30, 2006. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. Significant Accounting Policies Revenue Recognition The SEC's Staff Accounting Bulletin ("SAB") SAB No. 104, Revenue Recognition, provides guidance on the application of accounting principles generally accepted in the United States to selected revenue recognition issues. In accordance with SAB No. 104, the Company recognizes revenue when the earnings process is complete, evidenced by an agreement between the Company and the customer, delivery and acceptance has occurred, collectibility is probable and pricing is fixed or determinable. Revenue is recognized when (1) products are shipped (if shipped FOB shipping point), (2) products are delivered (if shipped FOB destination) or (3) as services are performed as determined by contractual agreement, but in all cases only when risk of loss has transferred to the customer and the Company has no further performance obligations. Cost of Products Sold Cost of products sold primarily include the cost of paper and other materials, direct and indirect labor and related benefit costs, depreciation of production assets and shipping and handling costs. 14 Shipping and Handling Net sales include amounts billed to customers for shipping and handling costs. Costs incurred for shipping and handling are recorded in cost of products sold. Soling and Administrative Expenses Selling and administrative expenses primarily include salaries and related benefits of sales and administrative personnel, sales commissions, amortization of intangibles and professional fees such as audit and consulting fees. Advertising The Company expenses advertising costs as incurred. Selling and administrative expenses included advertising expense of $3.0 million for the quarter ended September 29, 2007 and $2.5 million for the quarter ended September 30, 2006. Advertising expense totaled $6.0 million for the nine months ended September 29, 2007 and $4.7 million for the nine months ended September 30, 2006. warranty Costs Provisions for warranty costs related to Jostens' scholastic products, particularly class rings due to their lifetime warranty, are recorded based on historical information and current trends in manufacturing costs. The provision related to the lifetime warranty is based on the number of rings manufactured in the prior school year, consistent with industry standards. The provision for the lifetime warranty on rings was $0.1 million and $0.4 million for the quarters ended September 29, 2007 and September 30, 2006, respectively. For the nine months ended September 29, 2007 and September 30, 2006, the provision for the warranty was $0.2 million and $1.0 million respectively. Warranty repair costs for rings manufactured in the current school year are expensed as incurred. Accrued warranty costs included in the condensed consolidated balance sheets were approximately $0.6 million for both September 29, 2007 and December 30, 2006. Stock-based Compensation Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards ("SFAS") SFAS No. 123R (revised 2004), Share-Based Payment ("SFAS 123R"), which requires the recognition of compensation expense related to all equity awards granted including awards modified, repurchased, or cancelled based on the fair values of the awards at the grant date. For the three-month periods ended September 29, 2007 and September 30, 2006, the Company recognized total compensation expense related to stock options of $0.1 million and less than $0.1 million, respectively, which is included in selling, general and administrative expenses. Stock-based compensation expense totaled $0.4 million and $0.1 million for the nine-month periods ended September 29, 2007 and September 30, 2006, respectively. Refer to Note 15, Stock- based Compensation, for further details. Mezzanine Equity Certain management stockholder agreements contain a repurchase feature whereby Holdings is obligated, under certain circumstances such as death and disability (as defined in the agreements), to repurchase the common equity from the holder and settle amounts in cash. In accordance with SAB No. 107, Share-Based Payment, such equity instruments are considered temporary equity and have been classified as mezzanine equity in the balance sheets as of September 29, 2007 and December 30, 2006. Recent Accounting Pronouncements Effective at the beginning of fiscal 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, Accounting forIncome Taxes. FIN 48 requires applying a "more likely than not" threshold to the recognition and derecognition of tax positions. In connection with the adoption of FIN 48, the Company made a change in accounting principle for the classification of interest income on tax refunds. Under the previous policy, the Company recorded interest income on tax refunds as interest income. Under the new policy, any interest income in connection with income tax refunds is recorded as a reduction of income tax expense. In addition, since the adoption of FIN 48, all interest and penalties on income tax assessments have been recorded as income tax expense and included as part of the Company's unrecognized tax benefit liability. The unrecognized tax benefit liability at December 31, 2006, the date of adoption of FIN 48, was $12.4 million including $1.9 million of gross interest and penalty accruals. Refer to Note 13, Income Taxes, for further details. 15 In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"), which establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS No. 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. SFAS No. 157 is effective as of the beginning of the Company's 2008 fiscal year. The Company is currently assessing the impact of SFAS No. 157 in the financial statements. In September 2006, the FASB issued SFAS No. 158, Employers' Accounting far Defined Benefit Pension and Other Postretiremem Plans ("SFAS No. 158"). SFAS No. 158 requires: the recognition of the funded status of a benefit plan in the balance sheet; the recognition in other comprehensive income of gains or losses and prior service costs or credits arising during the period but which are not included as components of periodic benefit cost; the measurement of defined benefit plan assets and obligations as of the balance sheet date; and disclosure of additional information about the effects on periodic benefit cost for the following fiscal year arising from delayed recognition in the current period. In addition, SFAS No. 158 amends SFAS No. 87, Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, to include guidance regarding selection of assumed discount rates for use in measuring the benefit obligation. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2007. The requirement to measure the plan assets and benefit obligations as of the balance sheet date is effective for fiscal years ending after December 15, 2008. The Company is currently evaluating the impact of SFAS No. 158 in the financial results, however, based on the funded status of the Company's pension and postretirement plans and the pension assumptions as of the measurement date, the Company anticipates that it will record an increase to prepaid pension asset of approximately $51 million, an increase to deferred income tax liability of approximately $18 million and an increase of approximately $33 million in Accumulated Other Comprehensive Income at the end of fiscal 2007. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS No. 159 permits entities to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective as of the beginning of the Company's 2008 fiscal year. The Company is currently assessing the impact of SFAS No. 159 in the financial statements. 3. The Transactions On October 4, 2004, an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR") and affiliates of DLI Merchant Banking Partners completed a series of transactions which created a marketing and publishing services enterprise, servicing the school affinity, direct marketing, fragrance and cosmetics sampling and educational publishing market segments through the consolidation of Jostens, Von Hoffmann and Arcade (the "Transactions"). Prior to the Transactions, Von Hoffmann and Arcade were each controlled by affiliates of DLJ Merchant Banking Partners 11, L.P. ("DLIMBP Ir'), and DLJ Merchant Banking Partners III, L.P. ("DLIMBP III") owned approximately 82.5% of Holdings' outstanding equity, with the remainder held by other co-investors and certain members of management. Upon consummation of the Transactions, an affiliate of KKR invested $256.1 million and was issued equity interests representing approximately 49.6% of the voting interest and 45.0% of the economic interest of Holdings, and affiliates of DLTMBP III held equity interests representing approximately 41.0% of the voting interest and 45.0% of the economic interest of Holdings, with the remainder held by other co-investors and certain members of management. After giving effect to the issuance of equity to additional members of management, as of September 29, 2007, affiliates of KKR and DLTMBP III (the "Sponsors") held approximately 49.0% and 41.0%, respectively, of the voting interest of Holdings, while each continued to hold approximately 44.6% of the economic interest of Holdings. As of September 29, 2007, the other co-investors held approximately 8.4% of the voting interest and 9.1%a of the economic interest of Holdings, and members of management held approximately 1.6% of the voting interest and approximately 1.7% of the economic interest of Holdings. 4. Restructuring Activity and Other Special Charges Restructuring Activity Special charges for the third quarter ended September 29, 2007 represent $0.2 million of severance and related benefits for headcount reductions of eight employees in the Marketing and Publishing Services segment. Special charges for the nine months ended September 29, 2007 represent $0.2 million of severance and related benefits offset by a reversal of less than $0.1 million for severance and related benefit costs associated with headcount reductions in the Scholastic and Memory Books segments. The headcount reductions associated with these charges were eight employees in the Marketing and Publishing Services segment. 16 Special charges for the nine months ended September 30, 2006 included $2.3 million relating to an impairment loss to reduce the carrying value of the former Jostens' corporate office buildings, which were sold, and approximately $0.3 million of special charges for severance and related benefit costs associated with headcount reductions. Headcount reductions associated with these charges were eight employees for Scholastic, two employees for Memory Books and three employees for the Marketing and Publishing Services segment. Restructuring accruals of $0.7 million and $1_4 million as of September 29, 2007 and December 30, 2006, respectively, are included in other accrued liabilities in the condensed consolidated balance sheets. The accruals include amounts provided for severance related to reductions in corporate and administrative employees from the Scholastic, Memory Books and the Marketing and Publishing Services segments. On a cumulative basis through September 29, 2007, the Company incurred $17.7 million of employee severance costs related to initiatives during the period from 2004 to September 29, 2007, which affected an aggregate of 262 employees. As of September 29, 2007, the Company had paid $17.0 million in cash related to these initiatives. Changes in the restructuring accruals during the first nine months of 2007 were as follows: 2007 2006 2005 2004 In thaumnds Initiatives Idtiatives Initiatives Initiativcs Tote) Balance at December 30, 2006 $ - $ 513 $ 111 $ 755 $ 1,379 Restructuring charges 236 (41) - - 195 Severance paid (154) (372) (72) (324) (922) Balance at September 29, 2007 $ 82 $ 100 $ 39 $ 431 $ 652 The Company expects the majority of the remaining severance related to the 2004, 2005, 2006 and 2007 initiatives to be paid by the end of 2008. 5. Acquisitions On March 16, 2007, the Company acquired all of the outstanding capital stock of Neff Holding Company and its wholly owned subsidiary Neff Motivation, Inc. (`Neff') for approximately $30.5 million in cash, including cash on hand of $3.0 million. Neff is a leading single source provider of custom award programs and apparel, including chenille letters and letterjackets, to the scholastic market segment. On June 14, 2007, the Company acquired all of the outstanding capital stock of Visual Systems, Inc. ("VSI"), a leading supplier in the overhead transparency and book component business. The Company acquired VSI for approximately $25.1 million (including a payment of $0.9 million to be made in 2009). VSI is a market leader in providing overhead transparencies for a variety of publishers, including through key relationships in the educational market segment. VSI also provides a variety of other visual communication products, including cover components, teaching aids and inserts and overlays. VSI does business under the name of Lehigh Milwaukee. The acquisitions were accounted for as purchases in accordance with the provisions of SFAS No. 141, Business Combinations ("SFAS 141"). The costs of the acquisitions were allocated to the tangible and intangible assets acquired and liabilities assumed based upon their relative fair values as of the date of the acquisition. The results of these acquired operations have been included in the condensed consolidated financial statements since the respective dates of acquisition. 17 The allocation of the aggregate purchase price for the Neff and VSI acquisitions were as follows: In fhaurandr Septmber 29, 2007 Current assets $ 16,031 Property, plant and equipment 9,173 Intangible assets 26,800 Goodwill 15,620 Long-term assets 131 Current liabilities (6,369) Long-term liabilities (5,672) $ 55,714 In connection with the purchase accounting related to the acquisition of Neff and VSI, the intangible assets and goodwill approximated $26.8 million and $15.6 million, respectively, which consisted of: !nJwuartd September 29. 2007 Customer relationships $ 16,840 Tradenames 8,650 Restrictive covenants 1,310 Goodwill 15,620 $ 42,420 Customer relationships will be amortized over a ten-year period. The restrictive covenants will be amortized over the average life of the respective agreements, of which the average term is two years. The results of Neff operations are reported as part of the Scholastic segment from the acquisition date, and as such, all of its goodwill will be allocated to that segment. None of the goodwill will be amortizable for tax purposes. The results of VSI are included in the Marketing and Publishing services segment from the acquisition date, and substantially all of the goodwill will he fully amortizable for tax purposes. These acquisitions, both individually and in the aggregate, were not material to the Company's operations, financial positions or cash flows. 6. Discontinued Operations During the second quarter of 2006, the Company consummated the sale of its Jostens Photography businesses, which previously comprised a reportable segment. The sale closed on June 30, 2006 with the Company recognizing an aggregate $0.2 million net loss on the transaction and aggregate net proceeds of $64.1 million. Accordingly, this business has been reported as discontinued operations for all periods presented. In May 2007, the Company completed the sale of its Von Hoffmann Holdings Inc., Von Hoffmann Corporation and Anthology, Inc. businesses ("Von Hoffmann businesses") which had previously been classified as assets heldfor sale. The Von Hoffmann businesses previously comprised the Educational Textbook segment and a portion of the Marketing and Publishing Services segment. The operations of the Von Hoffmann businesses, through the date of sale, are reported as discontinued operations in the condensed consolidated financial statements for all periods presented. The Company recognized net proceeds of $401.8 million and a gain of $98.4 million on the transaction during the second quarter of 2007. The results of the Jostens Photography and the Von Hoffmann businesses have been reclassified on the condensed consolidated statement of operations and are included in the caption titled "Income from discontinued operations, net of tax." Previously the results of these businesses included certain allocated corporate costs, which have been reallocated to the remaining continuing operations. 18 Included in income from discontinued operations in the condensed consolidated statements of operations are the following: In awalands Net sales from discontinued operations Pretax income from discontinued operations Income tax provision from discontinued operations........... Net operating income from discontinued operations (Loss) gain on sale of businesses, net of tax Income from discontinued operations, net of tax 11ree months ended Nine mootbe ended September 29, September 30, September 29, September 30, 2007 2006 200'1 2006 $ - $ 73,872 $ 109,351 $ 252,786 - 5,115 20,397 14,501 - 1,132 7,925 4,857 - 3,983 12,472 9,644 - (460) 98,430 (659) - $ 3,523 $ 110,902 $ 8,985 The Jostens Photography and Von Hoffmann businesses have been classified in the condensed consolidated balance sheets as discontinued operations. The major classes of assets and liabilities of the discontinued operations are summarized as follows: IN thousands Assets: Accounts receivable, Inventories, net........ Prepaid expenses and other current assets Total current assets of discontinued operations._ Property, plant and equipment, net Total assets of discontinued operations Liabilities: Accounts payable Accrued employee compensation and related taxes Commissions payable Customer deposits Other accrued liabilities Total current liabilities of discontinued operations Other noncurrent liabilities September 29, December 30, 2007 2006 $ - $ 32,338 - 22,809 - 1,502 - 56,649 - 91,567 - 173,952 $ - $ 322,168 693 693 Total liabilities of discontinued operations $ 693 13,641 5,797 456 1,291 13,664 34,849 6,696 $ 41,545 At December 30, 2006, other accrued liabilities included $1.7 million related to the Jostens Recognition business, which was discontinued in 2001. In March 2007, the Company determined that, based on the nature of the liabilities, it is not likely to have any further ongoing obligations, and therefore there are no amounts related to the Jostens Recognition businesses in the accompanying balance sheets as of September 29, 2007. 7. Comprehensive (Loss) Income The following amounts were included in determining comprehensive (loss) income for Holdings as of the dates indicated: In thousands Net (loss) income Change in cumulative translation adjustment Comprehensive (loss) income Three Months Ended Nice Moaths Ended September 29, September 30, September 29, September 30, 2007 2006 2007 2006 $ (10,805) $ (12,046) $ 160,457 $ 48,582 132 4 (43) 252 $ (10,673) $ (12,042) $ 160,414 $ 48,834 19 The following amounts were included in determining comprehensive (loss) income for Visant as of the dates indicated: Tbrse Months Forded Nine Months Forded September 29, September 30, September 29, September 30, In thoumnds 2007 2006 2007 2006 Net (loss) income $ (2,795) $ (4,276) $ 185,803 $ 68,203 Change in cumulative translation adjustment 132 4 (43) 252 Comprehensive (loss) income $ (2,663) $ (4,272) $ 185,760 $ 68,455 8. Accounts Receivable and Inventories Accounts receivable, net, was comprised of the following: In aimaands Trade receivables Allowance for doubtful accounts Allowance for sales returns........, Accounts receivable, net Net inventories were comprised of the following: Septmber29, December 30, 2007 2006 $ 152,691 $ 154,685 (3,298) (2,726) (5,434) (7,278) $ 143,959 $ 144,681 In thousands Raw materials and supplies $ Work-in-process Finished goods LIFO reserve Inventories, n Precious. Metals Consignment Arrangement September 29, 2007 Dermber30, 2006 27,573 $ 31,814 27,249 34,142 36,055 39,369 90,877 105,325 8 8 $ 90,885 105,333 The Company has a precious metals consignment agreement with a major financial institution whereby it currently has the ability to obtain up to $32.5 million in consigned inventory. As required by the terms of the consignment agreement, the Company does not take title to consigned inventory until payment. Accordingly, the Company does not include the value of consigned inventory or the corresponding liability in its financial statements. The value of consigned inventory at September 29, 2007 and December 30, 2006, was $25.3 million and $16.4 million, respectively. The consignment agreement does not have a stated term and can be terminated by either party upon 60 days written notice. Additionally, the Company expensed consignment fees related to this facility of $0.1 million and $0.2 million for the three months ended September 29, 2007 and September 30, 2006, respectively. The consignment fees expensed for the nine months ended September 29, 2007 and September 30, 2006 were $0.3 million and $0.5 million, respectively. 9. Goodwill and Other Intangible Assets The change in the carrying amount of goodwill is as follows: September 29, In diamonds 2007 Balance at beginning of period $ 919,638 Additions to goodwill 15,971 Reduction in goodwill (6,633) Currency translation 182 $ 929,158 20 Additions to goodwill during the nine months ended September 29, 2007 primarily relates to goodwill acquired in the acquisition of Neff of approximately $12.5 million and the goodwill acquired in the acquisition of VSI of approximately $3.1 million. NefFs results are included in the Scholastic reporting segment from the date of acquisition, and VSI's results are included in the Marketing and Publishing Services reporting segment from the date of acquisition. A reduction in goodwill of $2.3 million resulted from the adoption of FIN 48 for a pre-acquisition tax uncertainty in connection with the Jostens merger transaction in July 2003, and a further reduction in goodwill of $4.3 million related to a settlement of a pre-acquisition tax contingency. As of September 29, 2007, goodwill had been allocated to reporting segments as follows: September 29, In thouands 2007 Scholastic $ 303,922 Memory Books 389,545 Marketing and Publishing Services 235,691 $ 929,158 Information regarding other intangible assets, as of the dates indicated, is as follows: September 29, 2007 December 30, 2006 Gros Gros Estimated carrying Accomdated ®trying Aeeamulated In thousands usefat life amomt amortintion Net emoom amortintion et School relationships 10 years $ 330,000 $ (137,816) $ 192,184 $ 330,000 $ (113,161) $ 216,839 Internally developed software 2 to 5 years 12,200 (11,623) 577 12,200 (10,454) 1,746 Patented/unpatented technology.......... 3 years 19,774 (15,714) 4,060 19,767 (15,109) 4,658 Customer relationships 4 to 40 years 53535 (12,069) 41,466 36,509 (9,746) 26,763 Other.....: 3to10years 67,799 (33,120) 34,679 61,410 (24,927) 36,483 483,308 (210,342) 272,966 459,886 (173,397) 286,489 Tradenames Indefinite 252,830 - 252,830 244,180 - 244,180 $ 736,138 $ (210,342) $ 525,796 $ 704,066 $ (173,397) $ 530,669 Amortization expense related to other intangible assets was $12.4 trillion and $12.1 million for the three months ended September 29, 2007 and September 30, 2006, respectively. For the nine months ended September 29, 2007 and September 30, 2006, amortization expense related to other intangible assets was $36.5 million and $37.7 million, respectively. Based on intangible assets in service as of September 29, 2007, estimated amortization expense for the remainder of 2007 and each of the five succeeding fiscal years is $12.4 million, $47.3 million, $42.9 million, $41.4 trillion, $39.1 million, and $38.5 trillion, respectively. 21 10. Long-Term Debt Long-term debt consists of the following: September 29, December 30, In thousands 2007 2006 Holdings: Senior discount notes, 10.25% fixed rate, net of discount of $27,136 and $43,043 at September 29, 2007 and December 30, 2006, respectively, with semi-annual interest accretion through December 1, 2008, thereafter semi-annual and payable at maturity - December 2013 $ 220,064 $ 204,157 Senior notes, 8.75% fixed rate, with semi-annual interest payments of $15.3 million, principal due and payable at maturity - December 2013 350,000 350,000 Visant: Borrowings under our senior secured credit facility:........................................................ Term Loan C, variable rate, 7.19% at September 29, 2007 and 7.37% at December 30, 2006, with semi-annual principal and interest payments through October 1, 2011 316,500 716,500 Senior subordinated notes, 7.625% fixed rate, with semi-annual interest payments of $19.1 million, principal due and payable at maturity - October 2012 500,000 500,000 1,386,564 1,770,657 Less current portion - - $ 1,386,564 $ 1,770,657 In connection with the Transactions, Visant entered into senior secured credit facilities, providing for an aggregate amount of $1,270 million, including a $250 million revolving credit facility, and issued $500 million aggregate principal amount of 7.625% senior subordinated notes. Also in connection with the Transactions, Jostens, Von Hoffmann and Arcade repaid their existing indebtedness having an aggregate face value of $1,392.6 million, including the redemption value of certain remaining redeemable preferred stock. Visant's obligations under the senior secured credit facilities are unconditionally and irrevocably guaranteed jointly and severally by Visant Secondary Holdings Corp., a direct wholly-owned subsidiary of Holdings and the direct parent of Visant, and by Visant's material current and future domestic subsidiaries. The obligations of Visant's principal Canadian operating subsidiary under the senior secured credit facilities are unconditionally and irrevocably guaranteed jointly and severally by Visant Secondary Holdings Corp., Visant, Visant's material current and future domestic subsidiaries and Visant's other current and future Canadian subsidiaries. Visant's obligations under the senior secured credit facilities, and the guarantees of those obligations, are secured by substantially all of Visant's assets and substantially all of the assets of Visant Secondary Holdings Corp. and Visant's material current and future domestic subsidiaries, including but not limited to: all of Visant's capital stock and the capital stock of each of Visant's existing and future direct and indirect subsidiaries, except that with respect to foreign subsidiaries such lien and pledge is limited to 65% of the capital stock of "first-tier" foreign subsidiaries; and substantially all of Visant's material existing and future domestic subsidiaries' tangible and intangible assets. The obligations of Jostens Canada Ltd. under the senior secured credit facilities, and the guarantees of those obligations, are secured by the collateral referred to in the prior paragraph and substantially all of the tangible and intangible assets of Jostens Canada Ltd. and each of Visant's other current and future Canadian subsidiaries. Amounts borrowed under the term loan facilities that are repaid or prepaid may not be reborrowed. Visant's senior secured facilities allow us, subject to certain conditions, to incur additional term loans under the term loan C facility, or under a new term facility, in either case in an aggregate principal amount of up to $300 million, which additional term loans will have the same security and guarantees as the term C loan facility. The senior secured credit facilities require Visant to meet a maximum total leverage ratio, a minimum interest coverage ratio and a maximum capital expenditures limitation. In addition, the senior secured credit facilities contain certain restrictive covenants which will, among other things, limit Visant's and its subsidiaries' ability to incur additional indebtedness, pay dividends, prepay subordinated debt, make investments, merge or consolidate, change the business, amend the terms of 22 Visant's subordinated debt and engage in certain other activities customarily restricted in such agreements. It also contains certain customary events of default, subject to grace periods, as appropriate. The dividend restrictions under the Visant senior secured credit facilities apply only to Visant and Visant Secondary Holdings Corp., and essentially prohibit all dividends other than (1) for dividends paid on or after April 30, 2009 and used by Holdings to make regularly-scheduled cash interest payments on its senior discount notes, subject to compliance with the interest coverage covenant after giving effect to such dividends, (2) for other dividends so long as the amount thereof does not exceed $50 million plus an additional amount based on Visant's net income and the amount of any capital contributions received by Visant after October 4, 2004, and (3) pursuant to other customary exceptions, including redemptions of stock made with other, substantially similar stock or with proceeds of concurrent issuances of substantially similar stock. The indentures governing Visant's senior subordinated notes and Holdings' senior discount notes and senior notes also contain numerous covenants including, among other things, restrictions on the ability to: incur or guarantee additional indebtedness or issue disqualified or preferred stock; pay dividends or make other equity distributions; repurchase or redeem capital stock; make investments or other restricted payments; sell assets or consolidate or merge with or into other companies; create limitations on the ability of restricted subsidiaries to make dividends or distributions to its parent company; engage in transactions with affiliates; and create liens. Visant's senior subordinated notes are guaranteed, jointly and severally, on a senior subordinated unsecured basis, by each of Visant's material current and future domestic subsidiaries. The indenture governing Visant's senior subordinated notes restricts Visant and its restricted subsidiaries from paying dividends or making any other distributions on account of Visant's or any restricted subsidiary's equity interests (including any dividend or distribution payable in connection with any merger or consolidation) other than (1) dividends or distributions by Visant payable in equity interests of Visant or in options, warrants or other rights to purchase equity interests or (2) dividends or distributions by a restricted subsidiary, subject to certain exceptions. The indentures governing Holdings' senior discount notes and senior notes restrict Holdings and its restricted subsidiaries from declaring or paying dividends or making any other distribution (including any payment by Holdings or any restricted subsidiary of Holdings in connection with any merger or consolidation involving Holdings or any of its restricted subsidiaries) on account of Holdings' or any of its restricted subsidiaries' equity interests (other than dividends or distributions payable in certain equity interests and dividends payable to Holdings or any restricted subsidiary of Holdings), subject to certain exceptions. Visant's senior secured credit facilities and the Visant and Holdings notes contain certain cross-default and cross- acceleration provisions whereby a default under or acceleration of other debt obligations would cause a default under or acceleration of the senior secured credit facilities and the notes. A failure to comply with the covenants under the senior secured credit facilities, subject to certain grace periods, would constitute a default under the senior secured credit facilities, which could result in an acceleration of the loans and other obligations owing thereunder. As of September 29, 2007, the Company was in compliance with all covenants under its material debt obligations. During the second quarter of 2007, the Company voluntarily prepaid $400.0 million of term loans under its senior secured credit facilities, including all originally scheduled principal payments due under its term loan C facility for 2006- 2011. As of September 29, 2007, there was $77.5 million outstanding in the form of short-term borrowings under the senior secured credit facilities that relate to our revolving line of credit, at a weighted average interest rate of 7.5% and an additional $15.4 million outstanding in the form of letters of credit, leaving $157.1 million available under the Visant $250.0 million revolving credit facility. 11. Derivative Financial Instruments and Hedging Activities The Company may enter into or purchase derivative financial instruments principally to manage interest rate, foreign currency exchange and commodities exposures. Forward foreign currency exchange contracts may be used to hedge the impact of currency fluctuations primarily on inventory purchases denominated in Euros. At September 29, 2007, there were no contracts related to these activities outstanding. 23 12. Commitments and Contingencies Forward Purchase Contracts The Company is subject to market risk associated with changes in the price of precious metals. To mitigate the commodity price risk, the Company may from time to time enter into forward contracts to purchase gold, platinum and silver based upon the estimated ounces needed to satisfy projected customer demand. The purchase commitment at September 29, 2007 was $13.6 million with delivery dates occurring throughout the remainder of 2007. These forward purchase contracts are considered normal purchases and therefore not subject to the requirements of SFAS No. 133, Accounting for Derivatives and Hedging Activities. The fair market value of the open precious metal forward contracts at September 29, 2007 was $15.3 million based on quoted futures prices for each contract. Environmental Our operations are subject to a wide variety of federal, state, local and foreign laws and regulations governing emissions to air, discharges to water, the generation, handling, storage, transportation, treatment and disposal of hazardous substances and other materials, and employee health and safety matters. Compliance with such laws and regulations has become more stringent and, accordingly, more costly over time. Also, as an owner and operator of real property or a generator of hazardous substances, we may be subject to environmental cleanup liability, regardless of fault, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act or analogous state laws, as well as to claims for harm to health or property or for natural resource damages arising out of contamination or exposure to hazardous substances. Some of our current or past operations have involved metalworking and plating, printing, and other activities that have resulted in environmental conditions that have given rise to liabilities. As part of our environmental management program, we have been involved in environmental remediation on a property formerly owned and operated by Jostens for jewelry manufacturing. Although Jostens no longer owns the site, Jostens managed the remediation project, which began in 2000. As of September 29, 2007, Jostens had made payments totaling $8.1 million for remediation at this site. During 2001, Jostens received reimbursement from its insurance carrier in the amount of $2.7 million, net of legal costs. In July 2006, the State of Illinois Environmental Protection Agency issued a "No Further Remediation" letter with respect to this site. Jostens has certain ongoing monitoring obligations. We do not expect the cost of such ongoing monitoring to be material. While Jostens may have an additional right of contribution or reimbursement under insurance policies, amounts recoverable from other entities with respect to a particular site are not considered until recoveries are deemed probable. Legal Proceedings In communications with U.S. Customs and Border Protection ("Customs"), we learned of an alleged inaccuracy of the tariff classification for certain of Jostens' imports from Mexico. Jostens promptly filed with Customs a voluntary disclosure to limit its monetary exposure. The effect of these tariff classification errors is that back duties and fees (or "loss of revenue") may be owed on certain imports. Additionally, Customs may impose interest on the loss of revenue, if any is determined. A review of Jostens' import practices has revealed that during the relevant period, the subject merchandise qualified for duty- free tariff treatment under the North American Free Trade Agreement ("NAFTA"), in which case there should be no loss of revenue or interest payment owed to Customs. However, Customs' allegations indicate that Jostens committed a technical oversight in the classification used by Jostens in claiming the preferential tariff treatment. Through its prior disclosure to Customs, Jostens addressed this technical oversight and asserted that the merchandise did in fact qualify for duty-free tariff treatment under NAFTA and that there is no associated loss of revenue. In a series of communications received from Customs in December 2006, Jostens learned that Customs was disputing the validity of Jostens' prior disclosure and asserting a loss of revenue in the amount of $2.9 million for duties owed on entries made in 2002 and 2003 and in a separate pre- penalty notice was advised that Customs was contemplating a monetary penalty in the amount of approximately $5.8 million (two times the alleged loss of revenue). In order to obtain the benefits of the orderly continuation and conclusion of administrative proceedings, Jostens agreed to a two-year waiver of the statute of limitations with respect to the entries made in 2002 and 2003 that otherwise would have expired at the end of 2007 and 2008, respectively. Jostens elected to continue to address this matter by filing a petition in response to the pre-penalty notice in January 2007, disputing Customs' claims and advancing its arguments to support the position that no loss of revenue or penalty should be issued against the Company, or in the alternative, that any penalty based on a purely technical violation should be reduced to a nominal fixed amount reflective of the nature of the violation. In May 2007, Customs issued a penalty notice assessing a loss of revenue (plus interest) and penalty as described above based on asserted negligence by Jostens. In July 2007, Jostens filed a petition in response to the penalty notice challenging Customs' findings and asserting that there has been no loss of revenue and that no 24 penalty should be issued against Jostens or that, in the alternative, any penalty should be reduced to a nominal fixed amount reflective of the nature of the violation or mitigated on the basis that the imports at issue are nonetheless duty free. At this stage of the proceedings, the matter is being evaluated by Customs. In October 2007, based on recent court rulings, Jostens presented additional arguments for Customs' consideration supporting that the subject imports at the time of entry were entitled to duty free status. Jostens intends to continue to vigorously defend its position and has recorded no accrual for any potential liability pending further communication with Customs. Jostens has the opportunity to extend an offer in compromise to Customs in an effort to settle this matter in advance of a final administrative decision. If Jostens were to do so, it would be required to tender the amount offered to Customs at the time. It is not clear what Customs' final position will be with respect to the alleged tariff classification errors or that Jostens will not be foreclosed from receiving duty free treatment for the subject imports. Jostens may not be successful in its defense, and the disposition of this matter may have a material effect on our business, financial condition and results of operations. We are also a party to other litigation arising in the normal course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. We do not believe the effect on our business, financial condition and results of operations, if any, for the disposition of these matters will be material. 13. Income Taxes The Company has recorded income tax provisions for the nine months ended September 29, 2007 based on its best estimate of the consolidated effective tax rate applicable for the entire 2007 fiscal year. The estimated 2007 fiscal year consolidated effective tax rates were 37.090 and 36.9% for Holdings and Visant, respectively, before consideration of the effect of $1.2 million of tax and interest accruals for unrecognized tax benefits and other income tax adjustments considered a period expense or benefit. The combined effect of the annual estimated consolidated tax rates and the net current period tax adjustments resulted in effective tax rates of 38.5% and 38.3% for Holdings and Visant, respectively, for the nine-month period ended September 29, 2007. The annual estimated effective tax rates for fiscal year 2007 were favorably affected by an increase in the rate of deduction for the U.S. domestic manufacturing deduction. Tax and interest accruals considered a period expense or benefit unfavorably affected the tax rate and included adjustments under FIN 48, adjustments to reflect the filing of the Company's 2006 income tax returns, and adjustments to reflect certain changes in state income tax laws. For the comparable nine-month period ended September 30, 2006, the effective rates of income tax expense for Holdings and Visant were 38.5% and 37.7%, respectively. These rates reflect a lower rate of deduction during the nine-month period in 2006 for the U.S. domestic manufacturing deduction and do not include the effect of period adjustments recorded in the comparable 2007 period. In June 2006, the FASB issued FIN 48 which requires application of a "more likely than not" threshold to the financial statement recognition and derecognition of tax positions taken by the Company in its income tax filings. Using the more likely than not standard under current tax law, FIN 48 requires that tax benefit recognition be adjusted to reflect the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. In connection with the adoption of FIN 48, the Company made a change in accounting principle for the classification of interest income on tax refunds and tax-related interest expense and penalties. Under the previous policy, the Company recorded interest income on tax refunds as interest income. Under the new policy, any interest income in connection with income tax refunds is recorded as a reduction of income tax expense. In addition, the Company's previous accounting policy was to report tax-related interest expense and penalties either as income tax expense in the case of uncertain tax positions or as interest expense in the case of routine tax assessments. Since the adoption of FIN 48, all interest and penalties on income tax assessments have been recorded as income tax expense and included as part of the Company's unrecognized tax benefit liability. The unrecognized tax benefit liability at December 31, 2006, the date of the Company's adoption of FIN 48, was $12.4 million, including $1.9 million of gross interest and penalty accruals. In connection with such adoption, the Company recorded a $1.4 million increase to beginning retained earnings and a $2.3 million decrease to goodwill, with a corresponding reduction of $3.7 million in the existing reserve balance for uncertain tax positions. These adjustments were required to adjust from the Company's previous method of accounting for income tax loss contingencies under SFAS No. 5, Accounting for Contingencies, to the method prescribed under FIN 48. The adjustment to goodwill relates to a pre-acquisition tax uncertainty in connection with the Jostens merger transaction in July 2003. As of December 31, 2006, the date of adoption of FIN 48, the amount of the Company's unrecognized tax benefit that, if recognized, would affect the effective tax rate, was $6.1 million excluding gross interest and penalty accruals of $1.9 million. During the three months ended September 29, 2007, the Company reduced its unrecognized tax benefit liability by $5.5 million. Approximately $4.3 million of the total decrease reduced goodwill because the tax position related to a pre-acquisition tax contingency. The remaining portion of the reduction represented gross interest accruals which decreased income tax expense by $0.6 million net of deferred income tax. 25 As of the date of adoption of FIN 48, the Company's income tax filings for 2004 to 2006 were subject to examination in the U.S federal tax jurisdiction. The Internal Revenue Service is examining two pre-acquisition tax filings for one of the Company's subsidiaries for periods in 2004 and the Company's consolidated tax filing for 2005. The Company is also subject to examinations in state and foreign tax jurisdictions for the 2002 to 2006 periods, none of which are expected to be material. The Company has filed appeals for a Canadian federal examination of tax years 1996 and 1997. Though subject to uncertainty, the Company believes it has made appropriate provisions for all outstanding issues for all open years and in all applicable jurisdictions. During the next twelve months, the Company does not expect that there will be a significant change in the unrecognized tax benefit liability. 14. Pension and Other Postretirement Benefit Plans Net periodic benefit cost for pension and other postretirement benefit plans is presented below: In thousands Service cost Interest cost Expected return on plan assets Amortization of prior year service cost Amortization of net actuarial loss Pension benefits Postre6rment benefits Three months ended Three months ended September 29, September3a, September 29, September 30, 2007 2006 2007 2006 $ 1,602 $ 1,651 $ 3 $ 5 3,903 3,747 38 49 (6,044) (5,653) - - (199) (120) (69) (70) - - 9 24 Net periodic benefit (income) expense $ (738) $ (375) $ (19) $ 8 In dmutands Service cost Interest cost Expected return on plan assets Amortization of prior year service cost Amortization of net actuarial loss Pension benefits Poshetirement bets Nine months ended Nme months ended Sept®ber29, September 30, September29, September30, 2007 2006 2007 2006 $ 4,806 $ 4,953 $ 9 $ 15 11,709 11,241 114 147 (18,132) (16,959) - - (597) (360) (207) (210) - - 27 72 Net periodic benefit (income) expense.. $ (2,214) $ (1,125) $ (57) $ 24 As of December 30, 2006, the Company did not expect to have an obligation to contribute to its qualified pension plans in 2007 due to the funded status of the plans. This estimate has not changed as of September 29, 2007. For the nine months ended September 29, 2007, the Company did not make any contributions to the qualified pension plans and contributed $1.4 million and $0.2 million to its non-qualified pension plans and postretirement welfare plans, respectively. These payments to the non-qualified pension and postretirement welfare plans are consistent with the expected amounts disclosed as of December 30, 2006. 15. Stock-based Compensation The 2003 Stock Incentive Plan (the "2003 Plan") was approved by the Board of Directors and effective as of October 30, 2003. The 2003 Plan permits us to grant key employees and certain other persons stock options and stock awards and provides for a total of 288,023 shares of common stock for issuance of options and awards to employees of the Company and a total of 10,000 shares of common stock for issuance of options and awards to directors and other persons providing services to the Company. The maximum grant to any one person shall not exceed in the aggregate 70,400 shares. We do not currently intend to make any additional grants under the 2003 Plan. Option grants consist of "time options", which vest and become exercisable in annual installments over the fast five years following the date of grant, and/or "performance options", which vest and become exercisable over the first five years following the date of grant at varying levels based on the achievement of certain EBITDA targets, and in any event by the eighth anniversary of the date of grant. The performance vesting includes certain cartyforward provisions if targets are not achieved in a particular fiscal year and performance in a subsequent fiscal year satisfies cumulative performance targets, subject to certain conditions. Upon the occurrence of a "change in control" (as defined in the 2003 Plan), the unvested portion of any time option will immediately become vested and exercisable, and the vesting and exercisability of the unvested portion of any performance option may accelerate depending on the timing of the change of control and return on the equity investment by DLIMBP III in the Company as 26 provided under the 2003 Plan. A "change in control" under the 2003 Plan is defined as: (1) any person or other entity (other than any of Holdings' subsidiaries), including any "person" as defined in Section 13(d)(3) of the Exchange Act, other than certain of the DLTMBP Funds or affiliated parties thereof becoming the beneficial owner, directly or indirectly, in a single transaction or a series of related transactions, by way of merger, consolidation or other business combination, of securities of Holdings representing more than 51% of the total combined voting power of all classes of capital stock of Holdings (or its successor) normally entitled to vote for the election of directors of Holdings or (2) the consummation of the sale of all or substantially all of the property or assets of Holdings to any unaffiliated person or entity other than one of Holdings' subsidiaries. The Transactions did not constitute a change of control under the 2003 Plan. Options issued under the 2003 Plan expire on the tenth anniversary of the grant date. The shares underlying the options are subject to certain transfer and other restrictions set forth in that certain Stockholders Agreement dated July 29, 2003, by and among the Company and certain holders of the capital stock of the Company. Participants under the 2003 Plan are also subject to certain restrictive covenants with respect to confidential information of the Company and non-competition in connection with their receipt of options. All outstanding options to purchase Holdings' common stock continued following the closing of the Transactions. In connection with the Transactions, all outstanding options to purchase Von Hoffmann and Arcade common stock were cancelled and extinguished. Consideration paid in respect of the Von Hoffmann options was an amount equal to the difference between the per share merger consideration in the Transactions and the exercise price therefor. No consideration was paid in respect of the Arcade options. In connection with the closing of the Transactions, we established the 2004 Stock Option Plan, which permits us to grant key employees and certain other persons of the Company and its subsidiaries various equity-based awards, including stock options and restricted stock. The plan, currently known as the Third Amended and Restated 2004 Stock Option Plan for Key Employees of Visant Holding Corp. and Subsidiaries (the "2004 Plan"), provides for the issuance of a total of 510,230 shares of Holdings Class A Common Stock. As of September 29,20(Y7 there were 54,626 shares available for grant under the 2004 Plan. Shares related to grants that are forfeited, terminated, cancelled or expire unexercised become available for new grants. Under his employment agreement, Mr. Marc L. Reisch, the Chairman of our Board of Directors and our Chief Executive Officer and President, received awards of stock options and restricted stock under the 2004 Plan. Additional members of management have also received grants under the 2004 Plan. Option grants consist of "time options", which vest and become exercisable in annual installments through 2009, and/or "performance options", which vest and become exercisable following the date of grant based upon the achievement of certain EBITDA and other performance targets, and in any event by the eighth anniversary of the date of grant. The performance vesting includes certain carryforward provisions if targets are not achieved in a particular fiscal year and performance in a subsequent fiscal year satisfies cumulative performance targets. Upon the occurrence of a "change in control" (as defined under the 2004 Plan), the unvested portion of any time option will immediately become vested and exercisable, and the vesting and exercisability of the unvested portion of any performance option may accelerate if certain EBITDA or other performance measures have been satisfied. A "change in control" under the 2004 Plan is defined as: (1) the sale (in one or a series of transactions) of all or substantially all of the assets of Holdings to an unaffiliated person; (2) a sale (in one transaction or a series of transactions) resulting in more than 5091v of the voting stock of Holdings being held by an unaffiliated person; (3) a merger, consolidation, recapitalization or reorganization of Holdings with or into an unaffiliated person; if and only if any such event listed in (1) through (3) above results in the inability of the Sponsors, or any member or members of the Sponsors, to designate or elect a majority of the Board (or the board of directors of the resulting entity or its parent company). The option exercise period is determined at the time of grant of the option but may not extend beyond the end of the calendar year that is ten calendar years after the date the option is granted. All options, restricted shares and any common stock for which such equity awards are exercised or with respect to which restrictions lapse are governed by a management stockholders' agreement and sale participation agreement. Participants under the 2004 Plan are also subject to certain restrictive covenants with respect to confidential information of the Company and non-competition in connection with their receipt of options. As of September 29, 2007, there were 182,677 options and restricted shares vested under the 2004 Plan and 172,693 options and restricted shares subject to vesting. In addition, there were 100,234 shares issued under the 2004 Plan owned outright by certain employees. Effective January 1, 2006, the Company adopted SFAS No. 123R, which requires the recognition of compensation expense related to all equity awards based on the fair values of the awards at the grant date. Prior to the adoption of SFAS No. 123R, the Company used the minimum value method in its SFAS No. 123 pro forma disclosure and therefore applied the prospective transition method as of the effective date. Under the prospective transition method, the Company would recognize compensation expense for equity awards granted, modified and canceled subsequent to the date of adoption. On April 4, 2006, the Company declared and paid a special cash dividend of $57.03 per share to the common stockholders of Holdings. In connection with the special cash dividend, on April 4, 2006, the exercise prices of issued and outstanding options as of April 4, 2006 under the 2003 Plan and the 2004 Plan were reduced by an amount equal to the dividend. The 2003 and 2004 Plans and underlying stock option agreements contain provisions that provide for anti-dilutive protection in the case of certain extraordinary corporate transactions, such as the special dividend, and the incremental 27 compensation cost, defined as the difference in the fair value of the modified award immediately before and after the modification, was calculated as zero. As a result of the above modification, all stock option awards previously accounted for under APB No. 25 will be prospectively accounted for under SFAS No. 123R. Accordingly, no incremental compensation cost was recognized as a result of the modification. For the three-month periods ended September 29, 2007 and September 30, 2006, the Company recognized total compensation expense related to stock options of $0.1 million and less than $0.1 million, respectively, which is included in selling, general and administrative expenses. Stock-based compensation expense totaled $0.4 million and $0.1 million for the nine-month periods ended September 29, 2007 and September 30, 2006, respectively. For the three-month period ended September 29, 2007, no options were granted, exercised or cancelled and an insignificant amount of options vested. For the three-month period ended September 30, 2006, no options were granted or exercised and an insignificant amount of options vested. The following table summarizes stock option activity for Holdings Shares in thaumnds Sham weighted - average exercise price Outstanding at December 30, 2006 397 $ 41.21 Granted 5 $ 169.15 Forfeited (3) $ 56.80 Cancelled (2) $ 43.73 Outstanding at September 29, 2007 397 $ 42.85 Vested or expected to vest at September 29, 2007 397 $ 42.85 Exercisable at September 29, 2007 226 $ 37.94 * Weighted average exercise price at December 30, 2006 has been adjusted to reflect the special dividend declared in April 2006. years. The weighted average remaining contractual life of outstanding options at September 29, 2007 was approximately 7.8 16. Business Segments On March 16, 2007, the Company acquired all of the outstanding capital stock of Neff. Neff is a leading single source provider of custom award programs and apparel, including chenille letters and letter jackets, to the scholastic market segment. Neff operates as a direct subsidiary of Visant under the Neff brand name and its results are reported as part of the Scholastic segment from the date of acquisition. In May 2007, the Company completed its sale of its Von Hoffmann businesses to R.R. Donnelley & Sons Company pursuant to a Stock Purchase Agreement entered into in January 2007. The Von Hoffmann businesses, which had previously comprised the Educational Textbook segment and a portion of the Marketing and Publishing Services segment, had been classified as assets for sale since December 2006. The operations of the Von Hoffmann businesses are reported as discontinued operations in the condensed consolidated financial statements for all periods presented. Refer to Note 6, Discontinued Operations, for further details. On June 14, 2007, the Company acquired all of the outstanding capital stock of VSI. VSI is a leading supplier in the overhead transparency and book component business for the educational market. VSI does business under the name of Lehigh Milwaukee. Results of VSI are included in the Marketing and Publishing services segment from such date. In 2007 we changed the name of our Yearbook segment to Memory Books to reflect our diversified offering of custom yearbooks, memory books and related products that help people tell their stories and chronicle important events. Our three reportable segments consist of. Scholastic-provides services related to the marketing, sale and production of class rings and an array of graduation products and other scholastic products to students and administrators primarily in high schools, colleges and other post-secondary institutions; Memory Books-provides services related to the publication, marketing, sale and production of school yearbooks, memory books and related products that help people tell their stories and chronicle important events; and 28 • Marketing and Publishing Services-produces multi-sensory and interactive advertising sampling systems, primarily for the flagrance, cosmetics and personal care market segments, and provides innovative products and services to the direct marketing sector. The group also produces covers components and overhead transaparencies primarily for educational publishers. The following table presents information of Holdings by business segment: Three months ended September 29, September30, In thousands 2007 2006 $Change % Change Net sales Scholastic $ 43,983 $ 34,081 $ 9,902 29.1% Memory Books 72,060 70,665 1,395 2.0% Marketing and Publishing Services 122,653 110,978 11,675 10.5% Inter-segment eliminations (300) (14) (286) NM Net sales $ 238,396 $ 215,710 $ 22,686 10.5% Operating income Scholastic $ (16,186) $ (15,069) $ (1,117) (7.4%) Memory Books 9,380 9,184 196 2.1% Marketing and Publishing Services 22,080 20,183 1,897 9.4% Operating income $ 15,274 $ 14,298 $ 976 6.8% Depreciation and amortization Scholastic $ 6,638 $ 6,387 $ 251 3.9% Memory Books 8,848 8,511 337 4.0% Marketing and Publishing Services 6,384 4,862 1,522 31.3% Depreciation and amortization $ 21,870 $ 19,760 $ 2,110 10.7% NM = Not meaningful in thomandr Net sales Scholastic Memory Books Marketing and Publishing Serv ices Inter-segment eliminations Net sales Operating income Scholastic Memory Books Marketing and Publishing Services Operating income Nine mmdhs ended September 29, September 30, 2007 2006 S Change % Change $ 320,384 $ 298,318 $ 22,066 7.4% 344,435 333,299 11,136 3.3% 331,666 281,637 50,029 17.8% (773) (66) (707) NM $ 995,712 $ 913,188 $ 82,524 9.0% $ 31,284 $ 26,821 $ 4,463 16.6% 104,328 95,484 8,844 9.3% 57,411 51,595 5,816 11.3% $ 193,023 $ 173,900 $ 19,123 11.0% Depreciation and amortization Scholastic Memory Books Marketing and Publishing Serv ices Depreciation and amortization NM = Not meaningful $ 19,853 $ 20,374 $ (521) (2.6%) 26,909 26,489 420 1.6% 17,280 13,850 3,430 24.8% $ 64,042 $ 60,713 $ 3,329 5.5% 29 17. Related Party Transactions Management Services Agreement In connection with the Transactions, we entered into a management services agreement with the Sponsors pursuant to which the Sponsors provide certain structuring, consulting and management advisory services to us. Under the management services agreement, during the term thereof, the Sponsors receive an annual advisory fee of $3.0 million, that is payable quarterly and which increases by 3% per year. The Company paid $0.8 million as advisory fees to the Sponsors for both the three months ended September 29, 2007 and September 30, 2006. For the nine months periods ended September 29, 2007 and September 30, 2006, the Company paid $2.4 million and $2.3 million, respectively, as advisory fees to the Sponsors. The management services agreement also provides that we will indemnify the Sponsors and their affiliates, directors, officers and representatives for losses relating to the services contemplated by the management services agreement and the engagement of the Sponsors pursuant to, and the performance by the Sponsors of the services contemplated by, the management services agreement. 18. Condensed Consolidating Guarantor Information As discussed in Note 10, Lang-Tenn Debt, Visant's obligations under the senior secured credit facilities and the 7.625% senior subordinated notes are guaranteed by certain of its 100% wholly-owned subsidiaries on a full, unconditional and joint and several basis. The following tables present condensed consolidating financial information for Visant, as issuer, and its guarantor and non-guarantor subsidiaries. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED) Three months ended September 29, 2007 in thousands Visant Guarantors Non. Guarantors Eaminations Net sales $ - $ 228,366 $ 16,184 $ (6,154) Cost of products sold (2,379) 135,639 8,900 (6,127) Gross profit 2,379 92,727 7,284 (27) Selling and administrative expenses (269) 83,168 3,874 - Gain on sale of assets - (65) - - Special charges - 236 - - Operating income 2,648 Net interest expense 17,104 Equity earnings (loss) in subsidiary, net of tax 1,728 (Loss) income before income taxes Provision for (benefit from) income taxes (Loss) income from continuing operations Income (loss) from discontinued operations, net of tax Net (loss) income (16,184) 1,161 (17,345) 9,388 3,410 15,082 12 (2,202) - (3,492) 3,398 (1,764) 1,196 (1,728) 2,202 Total $ 238,396 136,033 102,363 86,773 (65) 236 (27) 15,419 (14,532) 17,666 474 - 14,031 (2,247) (45) 548 14,076 (2,795) $ (17,345) $ (1,728) $ 2,202 $ 14,076 $ (2,795) 30 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED) Three months ended September 30, 2006 In thotcsandt visant Guarantors Non. GOana m Ffimimdow Told Net sales $ - $ 212,294 $ 11,228 $ (7,812) $ 215,710 Cost of products sold (270) 123,744 8,907 (7,640) 124,741 Gross profit 270 88,550 2,321 (172) 90,969 Selling and administrative expenses (671) 75,658 2,434 - 77,421 Gain on sale of assets - (788) - - (788) Special charges - - - - Operating income (loss)........»».._....»...»..........»... Net interest expense Equity loss (earnings) in subsidiary, net of tax (Loss) income before income taxes Provision for (benefit from) income taxes (Loss) from continuing operations Income from discontinued operations, net of tax Net (loss) income 941 13,680 (113) (172) 14,336 24,506 29,935 53 (26,380) 28,114 6,470 (1,045) - (5,425) - (30,035) (15,210) (166) 31,633 (13,778) 1,458 (7,267) (103) (67) (5,979) (31,493) (7,943) (63) 31,700 (7,799) 942 1,473 1,108 - 3,523 $ (30,551) $ (6,470) $ 1,045 $ 31,700 $ (4,276) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED) Nine months ended September 29, 2007 In tbousandi vi"W Net sales $ - Cost of products sold.. (6,588) Gross profit 6,588 Selling and administrative expenses (307) Loss on sale of assets - Special charges Operating income 6,895 Net interest expense 67,742 Equity earnings in subsidiary, net of tax (87,261) Income (loss) before income taxes 26,414 Provision for (benefit from) income taxes 499 Income from continuing operations 25,915 Income (loss) from discontinued operations, net of tax 98,430 Net income $ 124,345 31 Nom Gm ton GOarmtora $ 971,924 $ 45,488 484,653 25,501 487,271 19,987 308,516 11,325 555 - 195 FJimiaatiaas $ (21,700) $ (21,687) (13) - 178,005 8,662 (13; 65,840 84 (61,432; (5,569) - 92,830 117,734 8,578 (31,411) 42,968 2,986 (39) 74,766 5,592 (31,372) 12,495 (23) $ 87,261 $ 5,569 $ (31,372) TOW 995,712 481,879 513,833 319,534 555 195 193,549 72,234 121,315 46,414 74,901 110,902 $ 185,803 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED) Nine months ended September 30, 2006 in thousands Net sales Cost of products sold Gross profit Selling and administrative expenses Loss (gain) on sale of assets Special charges . Operating income Net interest expense Equity (earnings) loss in subsidiary, net of tax (Loss) income before income taxes Provision for income taxes (Loss) income from continuing operations Income (loss) from discontinued operations, net of tax..... Net (loss) income Non- Visant Go tme Gasrmtors Elimination Total $ - $ 895,073 $ 36,125 $ (18,010) $ 913,188 (3,363) 444,625 23,886 (17,827) 447,321 3,363 450,448 12,239 (183) 465,867 (813) 281,571 10,055 290,813 5 (1,646) - (1,641) - 2,594 - 2,594 4,171 167,929 2,184 (183) 174,101 74,644 83,496 165 (79,271) 79,034 (62,455) 3,339 - 59,116 - (8,018) 81,094 2,019 19,972 95,067 3,881 31,345 695 (72) 35,849 (11,899) 49,749 1,324 20,044 59,218 942 12,706 (4,663) - 8,985 $ (10,957) $ 62,455 $ (3,339) $ 20,044 $ 68,203 32 CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED) September 29, 2007 In thaaan& Vinnt ASSETS Cash and cash equivalents $ 786 Accounts receivable, net 1,523 Inventories, net - Salespersons overdrafts, net - Prepaid expenses and other current assets 845 Intercompany receivable 36,741 Deferred income taxes (448) Total current assets 39,447 Property, plant and equipment, net 1,079 Goodwill - Intangibles, net - Deferred financing costs, net 22,594 Intercompany receivable 746,250 Other assets 40 Investment in subsidiaries 575,261 Total assets $ 1,384,671 LIABILITIES AND STOCKHOLDER'S EQUITY Book overdrafts Short-term borrowings Accounts payable Accrued employee compensation Customer deposits Commissions payable Income taxes payable Interest payable Intercompany payable Other accrued liabilities Current liabilities of discontinued operations Total current liabilities Long-term debt less current maturities Intercompany payable (receivable) Deferred income taxes Pension liabilities, net Other noncurrent liabilities Total liabilities Stockholder's equity Total liabilities and stockholder's equity Now Gasrauton Gm tm Mmimdoju Total $ 9,264 $ 10,920 $ - $ 20,970 126,698 15,738 - 143,959 88,384 2,703 (202) 90,885 28,777 1,305 30,082 10,415 1,564 12,824 30,067 - (66,808) - 13,198 75 - 12,825 306,803 32,305 (67,010) 311,545 182,838 134 - 184,051 906,980 22,178 - 929,158 516,094 9,702 - 525,796 - - - 22,594 4,290 - (750,540) - 12,316 76 12,432 78,090 - (653,351) - $ 2,007,411 $ 64,395 $ (1,470,901) $ 1,985,576 $ - $ 2,423 $ - $ - $ 2,423 77,500 - - - 77,500 2,451 43,447 4,020 25 49,943 6,452 26,056 1,899 - 34,407 - 36,845 3,312 - 40,157 - 10,286 682 - 10,968 (12,407) 18,080 4,351 (113) 91911 19,268 35 - 19,303 - 62,570 - (62,570) - 2,517 14,679 5,083 22,279 693 - - - 693 96,474 214,421 19,347 (62,658) 267,584 816,500 - - - 816,500 82,897 986,257 (32,537) (1,036,617) - (153) 189,086 (505) - 188,428 (946) 18,881 - - 17,935 9,254 23,505 - - 32,759 1,004,026 1,432,150 (13,695) (11099,275) 1,323,206 380,645 575,261 78,090 (371,626) 662,370 $ 1,384,671 $ 2,007,411 $ 64,395 $ (1,470,901) $ 1,985,576 33 CONDENSED CONSOLIDATING BALANCE SHEET December 30, 2006 Noa- Indmusands visant Guarantors Ga ntors ASSETS Cash and cash equivalents $ 1,707 $ 4,275 $ Accounts receivable, net 1,943 128,162 Inventories, net - 103,411 Salespersons overdrafts, net - 26,431 Prepaid expenses and other current assets 2,697 15,814 Income tax receivable 1,097 - Intercompany receivable 36,180 9,881 Deferred income taxes (963) 12,738 Current assets of discontinued operations - 56,649 Total current assets Property, plant, and equipment, net Goodwill Intangibles, net Deferred financing costs, net Intercompany receivable Other assets Investment in subsidiaries Long-tern assets of discontinued operations Total assets LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable Accrued employee compensation Customer deposits Commissions payable Income taxes payable Interest payable Intercom an a able 42,661 357,361 1,279 159,227 - 897,642 - 520,713 35,557 - 1,256,090 106,377 40 13,065 489,114 72,521 (80) 265,599 $ 1,824,661 $ 2,392,505 12,061 $ 14,576 2,111 861 1,280 75 30,964 75 21,996 9,956 76 Eamimflms Total (189) (45,543) (45,732) (1,362,467) (561,635) $ 18,043 144,681 105,333 27,292 19,791 1,097 518 11,850 56,649 385,254 160,581 919,638 530,669 35,557 13,181 265,519 $ 63,067 $ (1,969,834) $ 2,310,399 2,562 48,249 5,390 235 56,436 6,759 32,931 1,566 - 41,256 - 166,250 5,008 - 171,258 - 20,605 1,066 - 21,671 (8,664) 5,668 3,069 (73) - 9,987 663 - - 10,650 P yp y , , , ( , 8) - Other accrued liabilities 2,025 18,497 3,115 - 23,637 Current liabilities of discontinued operations 955 28,301 5,593 - 34,849 Total current liabilities.......„ 31,411 344,406 29,556 (45,616) 359,757 Long-term debt, less current maturities 1,216,500 - - - 1,216,500 Intercompany payable 305,332 1,317,506 (38,874) (1,5839964) - Deferred income taxes (988) 196,195 (282) - 194,925 Pension liabilities, net - 21,484 - - 21,484 Other noncurrent liabilities 16,106 17,104 146 - 33,356 Long-term liabilities of discontinued operations 6,696 - - 6,696 Total liabilities 1,568,361 1,903,391 (9,454) (1,629,580) 1,832,718 Stockholder's equity 256,300 489,114 72,521 (340,254) 477,681 Total liabilities and stockholder's equity $ 1,824,661 $ 2,392,505 $ 63,067 $ (1,969,834) $ ]7 787 23 242 4 749 45 77 2,310,399 34 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED) Nine months ended September 29, 2007, in thou="& VISMA Gua tom Net income $ 12A,345 $ 87,261 Other cash used in operating activities (124,694) (53,659) Net cash used in discontinued operations (342) (3,942) Net cash (used in) provided by operating activities (691) 29,660 Purchases of property, plant, and equipment (23) (48,931) Additions to intangibles - (245) Proceeds from sale of property and equipment - 1,837 Acquisition of business, net of cash acquired (54,834) 3,033 Proceeds from disposal of discontinued operations 401,781 - Other investing activities, net - 57 Net cash used in discontinued operations - (5,691) Net cash provided by (used in) investing activities. 346,924 (49,940) Book overdrafts - 2,423 Net short-term borrowings 77,500 - Principal payments on long-term debt (400,000) - Intercompany payable (receivable) (22,102) 22,102 Distribution to stockholder (2,552) - Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period (347,154) 24,525 Nw. Go ton Etiminnfious TOW $ 5,569 $ (31,372) $ 185,803 (7,416) 31,372 (154,397) - - (4,284) (1,847) - 27,122 (56) - (49,010) - - (245) - - 1,837 - - (51,801) - - 401,781 - - 57 - - (5,691) (56) - 296,928 - - 2,423 - - 77,500 - - (400,000) - - (2,552) (322,629) 744 762 - 1,506 (921) 4,989 (1,141) - 2,927 1,707 4,275 12,061 - 18,043 $ 786 $ 9,264. $ 10,920 $ - $ 20,970 35 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED) Nine months ended September 30, 2006 In dwusan x yiwot Guarantors Non- Go ton Eamimtioos Total Net (loss) income $ (10,957) $ 62,455 $ (3,339) $ 20,044 $ 68,203 Other cash (used in) provided by operating activities (11,747) (26,377) 5,091 (20,235) (53,268) Net cash provided by (used in) discontinued operations 942 49,587 (39,458) - 11,071 Net cash (used in) provided by operating activities (21,762) 85,665 (37,706) (191) 26,006 Purchases of property, plant, and equipment (951) (37,498) - - (38,449) Proceeds from sale of property and equipment 3 10,412 - - 10,415 Acquisition of business, net of cash acquired (53,057) (500) - - (53,557) Proceeds from disposal of discontinued operations.... - 16,292 47,800 - 64,092 Net cash used in discontinued operations - (14,083) (569) - (14,652) Net cash (used in) provided by investing activities (54,005) (25,377) 47,231 (32,151) Net short-tern borrowings 115,200 - (9,229) - 105,971 Principal payments on long-term debt (100,000) - - - (100,000) Intercompany payable (receivable) 53,998 (54,189) - 191 - Distribution to stockholders (4,849) - - - (4,949) Net cash provided by (rued in) financing activities 64,349 (54,189) (9,229) 191 1,122 Effect of exchange rate changes on cash and cash equivalents - - (436) - (436) (Decrease) increase in cash and cash equivalents....... (11,418) 6,099 (140) - (5,459) Cash and cash equivalents, beginning of period......... 13,029 (1,454) 8,299 - 19,874 Cash and cash equivalents, end of period $ 1,611 $ 4,645 $ 81159 $ - $ 14,415 19. Subsequent Event On September 26, 2007, the Company announced that its wholly owned subsidiary, Memory Book Acquisition LLC, entered into an agreement to acquire substantially all of the assets and certain liabilities of Publishing Enterprises, Incorporated, a producer of school memory books and student planners (`PE"). The transaction closed on October 1 , 2007. The results of PE will be reported as part of the Memory Books segment from the date of acquisition. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except where otherwise indicated, management's discussion and analysis of financial condition and results of operations is provided with respect to Holdings, which has materially the same financial condition and results of operations as Visant, except for certain indebtedness of Holdings. This discussion and analysis should be read in conjunction w ith our condensed consolidated financial statements and notes thereto. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements including, without limitation, statements concerning the conditions in our industry, expected cost savings, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts. These forward-looking statements are not historical facts, but only predictions and generally can by identified by the use of statements that include such words as "may", "might', "should", "estimate", "project", "plan", "anticipate", "expect", "intend", "outlook", "believe" and other similar expressions that are intended to identify forward-looking statements and information. These forward- looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified under Item IA. Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2006 and elsewhere in this report. 36 The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements: • our substantial indebtedness; • our inability to implement our business strategy and achieve anticipated cost savings in a timely and effective manner; • competition from other companies; • the seasonality of our businesses; • the loss of significant customers or customer relationships; • fluctuations in raw material prices; • our reliance on a limited number of suppliers; • our reliance on numerous complex information systems; • the reliance of our businesses on limited production facilities; • the amount of capital expenditures required for our businesses; • labor disturbances; • environmental regulations; • foreign currency fluctuations and foreign exchange rates; • the outcome of litigation; • our dependency on the sale of school textbooks; • control by our stockholders; • Jostens, Inc.'s reliance on independent sales representatives; • the failure of our sampling systems to comply with U.S. postal regulations; • fluctuation in customers' advertising spending; and • the textbook adoption cycle and levels of government funding for education spending. We caution you that the foregoing list of important factors is not exclusive. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update publicly or revise any of them in light of new information, future events or otherwise, except as required by law. GENERAL We are a leading marketing and publishing services enterprise servicing the school affinity, direct marketing, fragrance and cosmetics, and educational market segments. We were formed through the October 2004 consolidation of Jostens, Von Hoffmann and Arcade (the `Transactions"). We sell our products and services to end customers through several different sales channels including independent sales representatives and dedicated sales forces. Our sales and results of operations are impacted by general economic conditions, seasonality, cost of raw materials, school population trends, product quality, service and price. As of December 2006, our Von Hoffmann Holdings Inc., Von Hoffmann Corporation and Anthology, Inc. businesses (the "Von Hoffmann businesses") were held as assets for sale. On January 3, 2007, we entered into a Stock Purchase Agreement (the "Von Hoffmann Stock Purchase Agreement") with R.R. Donnelley & Sons Company providing for the sale of the Von Hoffmann businesses, which previously comprised the Educational Textbook segment and a portion of the Marketing and Publishing Services segment. We closed the transaction on May 16, 2007. The operations of the Von Hoffmann businesses are reported as discontinued operations in the consolidated financial statements for all periods presented. On March 16, 2007, the Company acquired all of the outstanding capital stock of Neff Holding Company and is wholly owned subsidiary Neff Motivation, Inc ("Neff'). Neff is a leading single source provider of custom award programs and apparel, including chenille letters and letter jackets, to the scholastic market segment. Neff operates as a direct subsidiary of Visant under the Neff brand name and is results are reported as part of the Scholastic segment from the date of acquisition. 37 On June 14, 2007, the Company acquired all of the outstanding capital stock of Visual Systems, Inc. ("VSI"). VSI is a leading supplier in the overhead transparency and book component business. The acquisition of VSI complements our core publishing services businesses and affords us operational flexibility. VSI does business under the name of Lehigh Milwaukee. Results of VSI are included in the Marketing and Publishing Services segment from the date of acquisition. In 2007 we changed the name of our Yearbook segment to Memory Books to reflect our diversified offering of custom yearbooks, memory books and related products that help people tell their stories and chronicle important events. Our three reportable segments as of September 29, 2007 are: Scholastic-provides services related to the marketing, sale and production of class rings and an array of graduation products and other scholastic products to students and administrators primarily in high schools, colleges and other post-secondary institutions; Memory Books-provides services related to the publication, marketing, sale and production of school yearbooks, memory books and related products that help people tell their stories and chronicle important events; and Marketing and Publishing Services-produces multi-sensory and interactive advertising sampling systems, primarily for the fragrance, cosmetics and personal care market segments, and provides innovative products and services to the direct marketing sector. The group also produces cover components and overhead transparencies primarily for educational publishers. We experience seasonal fluctuations in our net sales tied primarily to the North American school year and, accordingly, net sales in the third quarter when school is not in session are typically lower than in other quarters. Jostens generates a significant portion of its annual net sales in the second quarter. Deliveries of caps, gowns and diplomas for spring graduation ceremonies and spring deliveries of school yearbooks are the key drivers of Jostens' seasonality. The net sales of educational book components are impacted seasonally by state and local schoolbook purchasing schedules, which commence in the spring and peak in the summer months preceding the start of the school year. The net sales of sampling and other direct mail and commercial printed products have also historically reflected seasonal variations, and we expect these businesses to continue to generate a majority of their annual net sales during our third and fourth quarters for the foreseeable future. These seasonal variations are based on the tinting of customers' advertising campaigns, which have traditionally been concentrated prior to the Christmas and spring holiday seasons. The seasonality of each of our businesses requires us to allocate our resources to manage our manufacturing capacity, which often operates at full or near full capacity during peak seasonal demands. We continue to see softness in the placement of orders into the fourth quarter in our direct marketing and sampling businesses which we believe are the result of tighter economic and general market conditions affecting the timing of decisions and the extent of advertising spending by our customers. These conditions could impact the timing of orders as well as the level of spending by our customers in direct marketing and sampling. Company Background On October 4, 2004, an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR") and affiliates of DLI Merchant Banking Partners completed a series of transactions which created a marketing and publishing services enterprise, servicing the school affinity products, direct marketing, fragrance and cosmetics sampling and educational publishing market segments through the consolidation of Jostens, Von Hoffmann and Arcade. Prior to the Transactions, Von Hoffmann and Arcade were each controlled by affiliates of DLi Merchant Banking Partners B, L.P. ("DLJMBP Ir'), and DLI Merchant Banking Partners III, L.P. ("DLJMBP III") owned approximately 82.5% of our outstanding equity, with the remainder held by other co-investors and certain members of management. Upon consummation of the Transactions, an affiliate of KKR invested $256.1 million and was issued equity interests representing approximately 49.6% of our voting interest and 45.0% of our economic interest, and affiliates of DLJMBP III held equity interests representing approximately 41.0% of Holdings' voting interest and 45.0% of Holdings' economic interest, with the remainder held by other co-investors and certain members of management. After giving effect to the issuance of equity to additional members of management, as of November 5, 2007, affiliates of KKR and DLJMBP III (the "Sponsors") held approximately 49.0% and 41.0%, respectively, of Holdings' voting interest, while each continued to hold approximately 44.6% of Holdings' economic interest. As of November 5, 2007, the other co-investors held approximately 8.4% of the voting interest and 9.1 % of the economic interest of Holdings, and members of management held approximately 1.6% of the voting interest and approximately 1.7% of the economic interest of Holdings. 38 CRITICAL ACCOUNTING POLICIES The preparation of interim financial statements involves the use of certain estimates that differ from those used in the preparation of annual financial statements, the most significant of which relates to income taxes. For purposes of preparing our interim financial statements, we utilize an estimated annual effective tax rate based on estimates of the components that impact the tax rate. Those components are re-evaluated each interim period and, if changes in our estimates are significant, we modify our estimate of the annual effective tax rate and make any required adjustments in the interim period. There have been no material changes to our critical accounting policies and estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 30, 2006. Recent Accounting Pronouncements Effective at the beginning. of fiscal 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. FIN 48 requires applying a "more likely than not" threshold to the recognition and derecognition of tax positions. In connection with the adoption of FIN 48, the Company made a change in accounting principle for the classification of interest income on tax refunds. Under the previous policy, the Company recorded interest income on tax refunds as interest income. Under the new policy, any interest income in connection with income tax refunds is recorded as a reduction of income tax expense. In addition, since the adoption of FIN 48, all interest and penalties on income tax assessments have been recorded as income tax expense and included as part of the Company's unrecognized tax benefit liability. The unrecognized tax benefit liability at December 31, 2006, the date of adoption of FIN 48, was $12.4 million including $1.9 million of gross interest and penalty accruals. Refer to Note 13, Income Taxes, for further details. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157), which establishes a framework for measuring fain value and requires enhanced disclosures about fair value measurements. SFAS No. 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. SFAS No. 157 is effective as of the beginning of the Company's 2008 fiscal year. We are currently assessing the impact of SFAS No. 157 in our financial statements. In September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans ("SFAS No. 158"). SFAS No. 158 requires: the recognition of the funded status of a benefit plan in the balance sheet, the recognition in other comprehensive income of gains or losses and prior service costs or credits arising during the period but which are not included as components of periodic benefit cost; the measurement of defined benefit plan assets and obligations as of the balance sheet date; and disclosure of additional information about the effects on periodic benefit cost for the following fiscal year arising from delayed recognition in the current period. In addition, SFAS No. 158 amends SFAS No. 87, Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, to include guidance regarding selection of assumed discount rates for use in measuring the benefit obligation. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2007. The requirement to measure the plan assets and benefit obligations as of the balance sheet date is effective for fiscal years ending after December 15, 2008. The Company is currently evaluating the impact of SFAS No. 158 in the financial results, however based on the funded status of the Company's pension and postretirement plans and the pension assumptions as of the measurement date, the Company anticipates that it will record an increase to prepaid pension asset of approximately $51 million, an increase to deferred income tax liability of approximately $18 million and an increase of approximately $33 million in Accumulated Other Comprehensive Income at the end of fiscal 2007. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS No. 159 permits entities to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective as of the beginning of the Company's 2008 fiscal year. We are currently assessing the impact of SFAS No. 159 in our financial statements. 39 RESULTS OF OPERATIONS Three Months Ended September 29, 2007 Compared to the Three Months Ended September 30, 2006 The following table sets forth selected information derived from Holdings' condensed consolidated statements of operations for the three-month periods ended September 29, 2007 and September 30, 2006. Three months ended In thousands Sep 2W 29, Se 2W $ chsngc % Change Net sales $ 238,396 $ 215,710 $ 22,686 10.5% Cost of products sold 136,033 124,741 11,292 9.1% Gross profit % of net sales Selling and administrative expenses % of net sales Gain on sale of fixed assets Special charges Operating income % of net sales Interest expense, net Loss before income taxes Benefit from income taxes Loss from continuing operations Income from discontinued operations, net of tax Net loss 102,363 90,969 11,394 12.5% 42.9% 42.2% 86,918 77,459 9,459 12.2% 36.5% 35.9% (65) (788) 723 NM 236 - 236 NM 15,274 14,298 976 6.8% 6.4% 6.6% 31,210 41,109 (9,899) (24.1%) (15,936) (26,811) 10,875 (5,131) (11,242) 6,111 (54.4%) (10,805) (15,569) 4,764 30.6% - 3,523 (3,523) NM $ (10,805) $ (12,046) $ 1,241 10.3% NM = Not meaningful The following table sets forth selected segment information derived from Holdings' condensed consolidated statements of operations for the three-month periods ended September 29, 2007 and September 30, 2006. For additional financial information about our operating segments, see Note 16, Business Segments, to the condensed consolidated financial statements. - Three months ended In thousands Net sales Memory Books Marketing and Publishing Services Inter-segment eliminations Net sales Operating income Scholastic Memory Books Marketing and Publishing Services Operating income September29, September 30, 2007 2006 $ Change % Change $ 43,983 $ 34,081 $ 9,902 29.1% 72,060 70,665 1,395 2.0% 122,653 110,978 11,675 10.5% (300) (14) (286) NM $ 238,396 $ 215,710 $ 22,686 10.5% $ (16,186) $ (15,069) $ (1,117) (7.4%) 9,380 9,184 196 2.1% 22,080 20,183 1,897 9.4% $ 15,274 $ 14,298 $ 976 6.8% NM = Not meaningful Net Sales. Consolidated net sales increased $22.7 million, or 10.5%, to $238.4 million for the three months ended September 29, 2007 from $215.7 million for the corresponding period in 2006. 40 The net sales of the Scholastic segment increased $9.9 million, or 29.1 to $44.0 million for the third quarter of 2007 from $34.1 million for the third quarter of 2006. The increase was primarily attributable to incremental volume driven by the acquisition of Neff in the first quarter of 2007. Memory Books net sales increased $1.4 million, or 2.0%, to $72.1 million for the quarter ended September 29, 2007 compared to $70.7 million in the third quarter of 2006. The increase was due mainly to account growth and revenue driven by new product and service offerings. The net sales of the continuing operations of the Marketing and Publishing Services segment increased $11.7 million, or 10.5%, to $122.7 million during the third quarter of 2007 from $111.0 million for the third quarter of 2006. The increase was primarily attributable to higher volume in both our sampling and book component businesses, including sales generated from businesses that we acquired in 2006 and 2007. These increases were partially offset by lower sales in our direct marketing business. Gross Profit. Gross profit increased $11.4 million, or 12.5%, to $102.4 million for the three months ended September 29, 2007 from $91.0 million for the same period in 2006. Asa percentage of net sales, gross profit margin increased to 42.9% for the three months ended September 29, 2007 from 42.2% for the comparable period in 2006. The increase was attributable to: the impact of price increases in the Scholastic and Memory Books segments; continued productivity improvements in our Memory Books facilities; and a shift in volume in our Marketing and Publishing Services segment to higher margin sampling and book component work. These increases were partially offset by: lower volumes in our jewelry and direct mail businesses; and higher depreciation associated with the investments we have made in our facilities in the past year. Selling and Administrative Expenses. Selling and administrative expenses increased $9.5 million, or 12.2%, to $86.9 million for the three months ended September 29, 2007 from $77.5 million for the corresponding period in 2006. The increase in selling and administrative expenses was the result of: • higher marketing costs in the Scholastic and Memory Books segments associated with our continuing sales efforts; • development costs across all segments related to growth initiatives; • higher information technology costs in the Scholastic and Memory Books segments in connection with the continuation of the planned investments that began in the fourth quarter of 2006 related to growth initiatives; and • expenses associated with our acquisitions in 2007. These increases were partially offset by our continued cost-cutting efforts. As a percentage of net sales, selling and administrative expenses increased 0.6% to 36.5% for the third quarter of 2007 from 35.9% for the same period in 2006. Special Charges. During the three months ended September 29, 2007, the Company had special charges of $0.2 million related to severance and related benefits for headcount reductions of eight employees in the Marketing and Publishing Services segment. Operating Income. Consolidated operating income increased $1.0 million, or 6.8%, to $15.3 million for the three months ended September 29, 2007 from $14.3 million for the comparable period in 2006. As a percentage of net sales, operating income decreased to 6.4% for the third quarter of 2007 from 6.6% for the same period in 2006. This decrease was mainly attributable to increased volume in our Marketing and Publishing Services segment, which has comparatively lower margins than our Scholastic and Memory Books segments, and increased selling and marketing costs as well as higher research and development spending in all businesses. These decreases were partially offset by price increases and the impact of operational cost reductions from the market adoption of new technologies in our Memory Books segment. 41 Net Interest Expense. Net interest expense was comprised of the following: Three months =tied September 29, September30, In thousands 2007 2006 $ Change % Change Visant: Interest expense $ 16,460 $ 24,093 $ (7,633) (31.7%) Amortization of debt discount, premium and deferred financing costs 1,440 4,150 (2,710) (65.3%) Interest income (234) (129) (105) NM Visant interest expense, net 17,666 28,114 (10,448) (37.2%) Holdings: Interest expense 7,636 7,635 1 0.0% Amortization of debt discount, premium and deferred financing costs 5,910 5,376 534 9.9% Interest income (2) (16) 14 NM Holdings interest expense, net 13,544 12,995 549 4.2% Interest expense, net. $ 31,210 $ 41,109 $ (9,899) (24.1%) NM = Not meaningful Net interest expense decreased $9.9 million, or 24.1%, to $31.2 million for the three months ended September 29, 2007 as compared to $41.1 million for the comparable prior year period. The decrease was due to the prepayment of $400 million of the term loans under the term loan C facility during the second quarter of 2007 as well as lower amortization expense of deferred financing costs due to term loan repayment. Income Taxes. The Company has recorded income tax provisions for the three months ended September 29, 2007 based on its best estimate of the consolidated effective tax rate applicable for the entire year plus tax adjustments considered a period expense or benefit. The effective tax rates for the three months ended September 29, 2007 were 32.2% and (24.4%) for Holdings and Visant, respectively. For the comparable three-month period ended September 30, 2006, the effective tax rates were 41.9% and 43.4% for Holdings and Visant, respectively. The effective rate of tax benefit for the 2007 period was unfavorably affected by tax and interest accruals that are considered a net period expense, including adjustments under FIN 48, adjustments to reflect the filing of the Company's 2006 income tax returns, and adjustments to reflect certain changes in state income tax laws. The effective rate of tax benefit for the 2006 period was favorably affected by changes in the estimated tax effects of permanent differences used in the annual estimated effective tax rate. Income from Discontinued Operations. During the second quarter of 2006, we consummated the sale of our Jostens Photography businesses, which previously comprised a reportable segment. Results for the third quarter of 2006 for the Jostens Photography businesses included a loss of $0.6 million. During the second quarter of 2007, we consummated the sale of the Von Hoffmann businesses, which previously comprised the Educational Textbook segment and a portion of the Marketing and Publishing Services segment. Operations for the Von Hoffmann businesses resulted in income of $4.1 million for the third quarter of 2006. Net Loss. As a result of the aforementioned items, the net loss decreased $1.2 million, or 10.3%, to a loss of $10.8 million for the three months ended September 29, 2007 compared to a net loss of $12.0 million for the same period in 2006. 42 Nine Months Ended September 29, 2007 Compared to the Nine Months Ended September 30, 2006 The following table sets forth selected information derived from Holdings' condensed consolidated statements of operations for the nine-month periods ended September 29, 2007 and September 30, 2006. In thommurs Net sales Cost of products sold Gross profit % of net sales Selling and administrative expenses % of net sales Loss (gain) on disposal of fixed assets Special charges Operating income % of net sales Interest expense, net Income before income taxes Provision for income taxes Noe months ended September 29, September 30, 2007 2006 995,712 $ 913,188 481,879 447,321 513,833 465,867 51.6% 51.0% 320,060 291,014 32.1% 31.9% 555 (1,641) 195 2,594 193,023 173,900 19.4% 19.0% 112,412 109,505 80,611 64,395 31,056 24,798 $ Change % change $ 82,524 9.090 34,558 7.7% 47,966 10.3% 29,046 10.0% 2,196 (2,399) 19,123 2,907 Income from continuing operations 49,555 39,597 Income from discontinued operations, net of tax 110,902 8,985 Net income $ 160,457 $ 48,582 $ NM = Not meaningful 16,216 6,258 9,958 101,917 111,875 NM NM 11.0% 2.7% 25.2% 25.1% NM 230.3% The following table sets forth selected segment information derived from Holdings' condensed consolidated statements of operations for the nine-month periods ended September 29, 2007 and September 30, 2006. For additional financial information about our operating segments, see Note 16, Business Segments, to the condensed consolidated financial statements. Nose months ended In thoaraMr September 29, September 30, 2007 2006 $ Change % Change Net sales Scholastic Memory Books Marketing and Publishing Services. Inter-segment eliminations Net sales ..........................................Operating income Scholastic Memory Books Marketing and Publishing Services Operating income NM = Not meaningful $ 320,384 $ 298,318 $ 22,066 7.4% 344,435 333,299 11,136 3.3% 331,666 281,637 50,029 17.8% (773) (66) (707) NM $ 995,712 $ 913,188 $ 82,524 9.0% $ 31,284 $ 26,821 $ 4,463 16.6% 104,328 95,484 8,844 9.3% 57,411 51,595 5,816 11.3% $ 193,023 $ 173,900 $ 19,123 11.0% Net Sales. Consolidated net sales increased $82.5 million, or 9.0%, to $995.7 million for the nine months ended September 29, 2007 from $913.2 million for the corresponding period in 2006. The net sales of the Scholastic segment increased $22.1 million, or 7.4%, to $320.4 million for the nine-month period ended September 29, 2007 from $298.3 million for the first nine months of 2006. The increase was primarily attributable to 43 incremental volume driven by the acquisition of Neff, which occurred in the first quarter of 2007, and the impact of price increases, partially offset by towerjewelry volume. Memory Books net sales increased $11.1 million, or 3.3%, to $344.4 million for the nine months ended September 29, 2007 compared to $333.3 million in the comparable period of 2006. The increase was due mainly to account growth and increased price driven by new product and service offerings. The net sales of the continuing operations of the Marketing and Publishing Services segment increased $50.0 million, or 17.8%, to $331.7 million during the nine-month period ended September 29, 2007 from $281.6 million for the fast nine months of 2006. The increase was primarily attributable to higher sales volume in the sampling and book component businesses, including sales generated by businesses that we acquired in 2006 and 2007. Sales from our direct marketing business were relatively flat in the first nine months of fiscal year 2007 compared to the comparable period in 2006. Gross Profit. Gross profit increased $48.0 million, or 10.3%, to $513.8 million for the nine months ended September 29, 2007 from $465.9 million for the same period in 2006. As a percentage of net sales, gross profit margin increased to 51.6% for the nine months ended September 29, 2007 from 51.0% for the same period in 2006. The increase was attributable to: • cost savings realized from continued improvements in plant efficiency and cost reduction initiatives in our Memory Books and Marketing and Publishing Services segments; and • the impact of price increases in the Scholastic and Memory Books segments. These increases were partially offset by: • lower jewelry volumes; • increased volume in our Marketing and Publishing Services segment, which comparatively had lower margins than the Scholastic and Memory Books segments; and • higher depreciation expense in 2007 related to our continued investments in our Memory Books and Marketing and Publishing Services facilities. Selling and Administrative Expenses. Selling and administrative expenses increased $29.0 million, or 10.0%, to $320.1 million for the nine months ended September 29, 2007 from $291.0 million for the corresponding period in 2006. As a percentage of net sales, selling and administrative expenses increased 0.2% to 32.1% for the first nine months of fiscal year 2007 from 31.9% for the same period in 2006. The increase in selling and administrative expenses as a percentage of net sales was the result of. • higher commissions in the Scholastic segment associated with increased graduation products net sales, which have a higher commission structure than other Scholastic products; • higher marketing costs in the Scholastic and Memory Books segments, as we continue to drive sales in these businesses; • costs associated with the acquisitions we made in 2006 and 2007; • development costs across all segments related to growth initiatives; and • higher information technology costs in the Scholastic and Memory Books segments in connection with the continuation of the planned investments that began in the fourth quarter of 2006 related to growth initiatives. These increases were partially offset by lower amortization expense resulted from the completion of amortization of an asset established in the purchase accounting for the 2003 Jostens merger. Special Charges. During the nine months ended September 29, 2007, the Company incurred $0.2 million of severance and related benefits related to headcount reductions in the Marketing and Publishing Services segment. These costs were partially offset by a reversal of less than $0.1 million related to previous severance accruals in the Scholastic and Memory Books segments. The headcount reductions associated with these activities were eight employees in the Marketing and Publishing Services segment. Special charges for the nine months ended September 30, 2006 included $2.3 million relating to an impairment loss to reduce the carrying value of the former Jostens' corporate office buildings, which were later sold, and approximately $0.3 million of special charges for severance and related benefit costs associated with headcount reductions. Operating Income. Consolidated operating income increased $19.1 million, or 11.0%, to $193.0 million for the nine months ended September 29, 2007 from $173.9 million for the comparable period in 2006. As a percentage of net sales, 44 operating income increased to 19.4% for the first nine months of 2007 from 19.0% for the same period in 2006. This increase was mainly attributable to improved manufacturing efficiencies as well as general price increases, partially offset by higher marketing and selling costs, development costs and the impact of increased volume in our Marketing and Publishing Services segment, which comparatively has lower margins than our Scholastic and Memory Books segments. Net Interest Expense. Net interest expense was comprised of the following: Nice months ended September 29, September 30, In Woumads 2007 2006 $ change % Change Visant: Interest expense $ 60,146 $ 73,308 $ (13,162) (18.0%) Amortization of debt discount, premium and deferred financing costs 13,005 8,038 4,967 61.8% Interest income (917) (2,312) 1,395 NM Visant interest expense, net 72,234 79,034 (64800) (8.6%) Holdings: Interest expense 22,906 Amortization of debt discount, premium and deferred financing costs 17,276 Interest income (4) Holdings interest expense, net 40,178 Interest expense, net $ 112,412 NM = Not meaningful 15,103 7,803 51.7% 15,391 1,885 12.2% (23) 19 NM 30,471 9,707 31.9% $ 109,505 $ 2,907 2.7% Net interest expense increased $2.9 million, or 2.7%, to $112.4 million for the nine months ended September 29, 2007 as compared to $109.5 million for the comparable prior year period. The increase was due to higher amortization expense of deferred financing costs as a result of the prepayment of $400.0 million of our term loan C facility during the second quarter of 2007, as well as the Holdings senior notes being outstanding for the full first nine months of 2007 versus six months of 2006. These increases were offset somewhat by lower average borrowings due to the aforementioned prepayments. Income Taxes. The Company has recorded income tax provisions for the nine months ended September 29, 2007 based on its best estimate of the consolidated effective tax rate applicable for the entire year plus tax adjustments considered a period expense or benefit. The effective tax rates for the nine months ended September 29, 2007 were 38.5% and 38.3% for Holdings and Visant, respectively. For the comparable nine-month period ended September 30, 2006, the effective tax rates were 38.5% and 37.7% for Holdings and Visant, respectively. Our effective tax rates for 2007 were favorably affected by an increase in the rate of deduction for the U.S. domestic manufacturing deduction and unfavorably affected by tax and interest accruals that are considered a net period expense, including adjustments under FIN 48, adjustments to reflect the filing of the Company's 2006 income tax returns, and adjustments to reflect certain changes in state income tax laws. Our effective tax rates for the 2006 period reflected a smaller rate of deduction for the U.S. domestic manufacturing deduction and did not include the effects of period adjustments recorded in the 2007 period. , As described in Note 13, Income Taxes, to the condensed consolidated financial statements, the Company adopted FIN 48 as of the beginning of the current fiscal year. Upon adoption of FIN 48, all interest and penalties in connection with income tax assessments or refunds will be recorded as income tax expense or benefit, as applicable, and included as part of the Company's unrecognized tax benefit liability. For the nine-month period ended September 29, 2007, the Company provided $1.2 million of tax and interest accruals for unrecognized tax benefits and other income tax adjustments considered a period expense or benefit. Income from Discontinued Operations. During the second quarter of 2006, we consummated the sale of our Jostens Photography businesses, which previously comprised a reportable segment. Results for the nine months ended September 29, 2007 and the 2006 comparable period for the Jostens Photography businesses included income of $0.4 million and a loss of $6.0 million, respectively. During the second quarter of 2007, we consummated the sale of the Company's Von Hoffmann businesses, which previously comprised the Educational Textbook segment and a portion of the Marketing and Publishing Services segment. The sale closed on May 16, 2007, with the Company recognizing net proceeds of $401.8 million and a gain for financial 45 reporting purposes of $98.4 million on the transaction during the nine months ended September 29, 2007. Operations for the Von Hoffmann businesses resulted in income of $11.1 million and $15.0 million for the nine months ended September 29, 2007 and the 2006 comparable period, respectively. We also had income of $1.0 million, net of tax, for the nine months ended September 29, 2007 from the Jostens Recognition business, which was discontinued in 2001. The income in 2007 resulted from the reversal in March 2007 of an accrual for potential exposure for which the Company does not believe it is likely to have an ongoing liability, and therefore, there are no amounts related to Jostens Recognition at September 29, 2007. Net Income. As a result of the aforementioned items, net income increased $111.9 million, or 230.3%, to $160.5 million for the nine months ended September 29, 2007 compared to net income of $48.6 million for the same period in 2006. LIQUIDITY AND CAPITAL RESOURCES The following table presents cash flow activity of Holdings for the first nine months of fiscal 2007 and 2006 and should be read in conjunction with our condensed consolidated statements of cash flows. Mine months ended In Umnm+ds September 29, 2007 September30, 2006 Net cash provided by operating activities $ 24,370 $ 21,396 Net cash provided by (used in) investing activities 296,928 (32,151) Net cash (used in) provided by financing activities (320,077) 5,798 Effect of exchange rate change on cash 1,506 (436) Increase (decrease) in cash and cash equivalents $ 2,727 $ (5,393) For the nine months ended September 29, 2007, operating activities generated cash of $24.4 million compared with cash generated by operating activities of $21.4 million for the same prior year period. The increase of $2.9 million primarily related to higher earnings in the nine-month period ended September 29, 2007. Included in cash flows from operating activities was cash used by discontinued operations of $4.3 million and cash provided by discontinued operations of $11.1 million for the nine-month periods ended September 29, 2007 and September 30, 2006, respectively. Consequently, the cash provided by continuing operations was $28.7 million and $10.3 million for the respective nine-month periods of 2007 and 2006. Net cash provided by investing activities for the nine months ended September 29, 2007 was $296.9 million, compared with $32.2 million used in investing activities for the comparable 2006 period. Ile $329.0 million increase mainly related to the sale of the Von Hoffmann businesses, which generated proceeds of approximately $401.8 million during the nine months ended September 29, 2007, compared to proceeds generated from the sale of the Jostens Photography businesses of $64.1 million for the comparable nine-month period in 2006. Capital expenditures related to purchases of property, plant and equipment for the nine months ended September 29, 2007 and the comparable 2006 period were $49.0 million and $38.4 million, respectively. During the nine months ended September 29, 2007 and the comparable 2006 period, the Company acquired businesses, net of cash, totaling approximately $51.8 trillion and $53.6 million, respectively. Included in the cash flows from investing activities was cash used in discontinued operations of $5.7 million and $14.7 million for the nine-month periods ended September 29, 2007 and September 30, 2006, respectively. Consequently, the cash provided by continuing operations for the nine months ended September 29, 2007 was $302.6 million and cash used by continuing operations for the nine months ended September 30, 2006 was $17.5 million. Net cash used for financing activities for the nine months ended September 29, 2007 was $320.1 million, compared with net cash provided by financing activities of $5.8 million for the comparable 2006 period. The $325.9 million decrease primarily related to the Company's additional voluntary prepayment in the second quarter of 2007 of $400 million on its term loans under its senior secured credit facilities, including all originally scheduled principal payments due under its term loan C facility for 2007 through mid-2011. With these prepayments, the outstanding balance under the term loan C facility was reduced to $316.5 million. This was partially offset by increased borrowings under its revolving line of credit. During the nine months ended September 30, 2006, financing activities primarily consisted of proceeds from the issuance by Holdings of $350.0 million of senior notes with $9.5 million used for debt financing costs related to the notes and a distribution to Holdings' stockholders of $340.7 million. During the nine months ended September 29, 2007 and September 30, 2006, Visant transferred approximately $2.6 million and $4.8 million, respectively, of cash through Visant Secondary Holdings Corp. and to Holdings to allow Holdings to make scheduled interest payments on its $350 million 8.75% senior notes due 2013. This transfer is reflected in Visant's 46 condensed consolidated balance sheet as a return of capital and presented in the condensed consolidated statement of cash flows as a distribution to stockholder. These amounts eliminate in consolidation and have no impact on Holdings' consolidated financial statements. As of September 29, 2007, we had cash and cash equivalents of $21.5 million. Our principal sources of liquidity are cash flows from operating activities and available borrowings under Visant's senior secured credit facilities, which included $157.1 million of additional availability under Visant's revolving credit facility as of September 29, 2007. We use cash primarily for debt service obligations, capital expenditures and to fund other working capital requirements. We intend to fund ongoing operations through cash generated by operations and borrowings under the revolving credit facility. As market conditions warrant, we and our Sponsors, including KKR and DLJMBP III and their affiliates, may from time to time repurchase debt securities issued by Holdings or Visant in privately negotiated or open market transactions, by tender offer or otherwise. No assurance can be given as to whether or when such repurchases or exchanges will occur and at what price. As of September 29, 2007, we were in compliance with all covenants under our material debt obligations. Our ability to make scheduled payments of principal, or to pay the interest on, or to refinance our indebtedness, or to fund planned capital expenditures will depend on our future performance. Based upon the current level of operations, we believe that cash flows from operations, available cash and short-term investments, together with borrowings available under Visant's senior secured credit facilities, are adequate to meet our liquidity needs for the next twelve months. In addition, based on market and other considerations, we may decide to raise additional funds through debt or equity financings. Furthermore, to the extent we make future acquisitions, we may require new sources of funding, including additional debt or equity financings or some combination thereof. In October 2007, Standard & Poor's Ratings Services ("S&P") affirmed its B+ corporate credit rating on Holdings, assigned Holdings an outlook of developing and removed Holdings from CreditWatch with negative implications, where it had been placed in July 2007 in connection with the July 2007 announcement by the Company regarding strategic and capital market alternatives. On October 29, 2007, Moody's Investors Services ("Moody's") changed the outlook for Holdings to stable from developing, which developing outlook had been assigned in connection with the Company's July 2007 announcement regarding strategic and capital market alternatives. Moody's affirmed all existing ratings for Holdings and Visant. Each rating should be evaluated independently of any other rating. Reference is made to the S&P and Moody's announcements dated October 16, 2007 and October 29, 2007, respectively, for a full explanation of the considerations by each of S&P and Moody's. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in our exposure to market risk during the quarter ended September 29, 2007. For additional information, refer to Item 7A of our 2006 Annual Report on Form 10-K. ITEM 4. CONTROLS AND PROCEDURES Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our management, under the supervision of our Chief Executive Officer and Vice President, Finance, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Vice President, Finance concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report. During the quarter ended September 29, 2007, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affec4 our internal control over financial reporting. ITEM 4T. CONTROLS AND PROCEDURES Not applicable. 47 PART H. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the three months ended September 29, 2007, there were no developments regarding material pending legal proceedings to which we or any of our subsidiaries are a party. However, following the end of the fiscal 2007 third quarter, additional arguments were presented by Jostens for Customs' consideration in the pending proceeding as described in Note 12, Commitments and Contingencies, to the condensed consolidated financial statements, supporting that the subject imports at the time of entry were entitled to duty free status. ITEM IA. RISK FACTORS There have been no material changes in our risk factors during the quarter ended September 24, 2007. For additional information, refer to Item lA of our 2016 Annual Report on Form 10-K. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Our equity securities are not registered pursuant to Section 12 of the Exchange Act. For the quarter ended September 29, 2007, we did not issue or sell securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS By Action of Stockholders Taken by Written Consent dated as of September 24, 2007, a majority of the stockholders of Holdings approved the acquisition of substantially all of the assets and certain of the liabilities of Publishing Enterprises, Incorporated. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS 3.1(1)Second Amended and Restated Certificate of Incorporation of Visant Holding Corp. (f/k/a Jostens Holding Corp.) 3.2(2)Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of Visant Holding Corp. 3.3(3)By-Laws of Visant Holding Corp. 3.4(4)Amended and Restated Certificate of Incorporation of Visant Corporation (f/k/a Jostens IH Corp.) 3.5(2)Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Visant Corporation 3.6(4)By-Laws of Visant Corporation 31.1 Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. 31.2 Certification of Vice President, Finance pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. 31.3 Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation. 31.4 Certification of Vice President, Finance pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation. 32.1 Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. 32.2 Certification of Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Holding Corp. 48 32.3 Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation. 32.4 Certification of Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation. (1) Incorporated by reference to Visant Holding Corp.'s Form S-4/A (file no. 333-112055), filed on November 12, 2004. (2) Incorporated by reference to Visant Holding Corp.'s Form 10-K, filed April 1, 2005. (3) Incorporated by reference to Visant Holding Corp.'s Form S-41A (file no. 333-112055), filed on February 2, 2004. (4) Incorporated by reference to Visant Corporation's Form S-4 (file no. 333-120386), filed on November 12, 2004. 49 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 the undersigned thereunto duly authorized. VISANT HOLDING CORP. Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) Date: November 13, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial and accounting officer) 50 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 the undersigned thereunto duly authorized. VLSANT CORPORATION Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) Date: November 13, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial and accounting officer) 51 EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Marc L. Reisch, certify that: 1. I have reviewed this quarterly report on Form I O-Q of Visant Holding Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) 52 EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Paul B. Carousso, certify that: 1. I have reviewed this quarterly report on Form 1 O-Q of Visant Holding Corp. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial repotting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November l3, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial officer) 53 EXHIBIT 31.3 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Marc L. Reisch, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Visant Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) 54 EXHIBIT 31A CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Paul B. Carousso, certify that: I. I have reviewed this quarterly report on Form 10-Q of Visant Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial officer) 55 EXHIBIT 32.1 CERTIFICATION BY THE PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Visant Holding Corp. (the "Company") on Form 10-Q for the period ended September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marc L. Reisch, the President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) 56 EXHIBIT 32.2 CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Visant Holding Corp. (the "Company") on Form 10-Q for the period ended September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul B. Carousso, Vice President, Finance of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial officer) 57 EXHIBIT 32.3 CERTIFICATION BY THE PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES•OXLEY ACT OF 2002 In connection with the Quarterly Report of Visant Corporation (the "Company") on Form 10-Q for the period ended September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marc L. Reisch, the President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2007 /s/ Marc L. Reisch Marc L. Reisch President and Chief Executive Officer (principal executive officer) 58 EXHIBIT 32.4 CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Visant Corporation (the "Company") on Form 10-Q for the period ended September 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the `Report"), I, Paul B. Carousso, Vice President, Finance of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2007 /s/ Paul B. Carousso Paul B. Carousso Vice President, Finance (principal financial officer) 59 s:\our documents\contmas\08\jostens 380 agr.doc Exhibit "C" Secretary's Certificate The undersigned, Marie D. Hlavaty, Secretary for Jostens, Inc., hereby certifies the following: Attached as Exhibit 1 hereto is a true and correct copy of the resolution adopted by written consent by the Board of Directors of Jostens, Inc. on , authorizing the execution, delivery and performance of that certain Economic Development Program Grant Agreement with Jostens, Inc. and the City of Denton, and authorizing certain officers to take all action necessary, advisable or desirable to execute the agreement and perform the terms and conditions by Jostens, Inc. required thereunder. Set forth below is a true and correct signature of Timothy M. Larson, President of Jostens, Inc. IN WITNESS WHEREOF, the undersigned has executed this Secretary's Certificate as of this day of February, 2008. Jostens, Inc. By: Marie D. Hlavaty, Secretary