VISANT CORP - FORM 10-Q - August 12, 2014

VISANT CORP - FORM 10-Q - August 12, 2014

Attached files

Attached files

VISANT CORP Reports

file	filename
EX-31.1 - EX-31.1 - VISANT CORP	d761301dex311.htm
EXCEL - IDEA: XBRL DOCUMENT - VISANT CORP	Financial_Report.xls
EX-31.2 - EX-31.2 - VISANT CORP	d761301dex312.htm
EX-32.2 - EX-32.2 - VISANT CORP	d761301dex322.htm
EX-32.1 - EX-32.1 - VISANT CORP	d761301dex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number	Registrant, State of Incorporation, Address of Principal Executive Offices and Telephone Number	I.R.S. Employer Identification No.
333-120386		90-0207604

VISANT CORPORATION

(Incorporated in Delaware)

357 Main Street

Armonk, New York 10504

Telephone: (914) 595-8200

Indicate by check mark whether the 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 the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 5, 2014, there were 1,000 shares of common stock, par value $.01 per share, of Visant Corporation outstanding (all of which are indirectly, beneficially owned by Visant Holding Corp.).

The registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months.

FILING FORMAT

This Quarterly Report on Form 10-Q is being filed by Visant Corporation (“Visant”). Unless the context indicates otherwise, any reference in this report to the “Company”, “we”, “our” or “us” refers to Visant together with its consolidated subsidiaries.

TABLE OF CONTENTS


		Page

	PART I – FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 28, 2014 and June 29, 2013		1

	Condensed Consolidated Balance Sheets as of June 28, 2014 and December 28, 2013		2

	Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2014 and June 29, 2013		3

	Notes to Condensed Consolidated Financial Statements		4

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		40

ITEM 4.	Controls and Procedures		40

	PART II – OTHER INFORMATION

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41

ITEM 5.	Other Information		41

ITEM 6.	Exhibits		41

Signatures

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

VISANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)


	Three months ended					Six months ended
	June 28,			June 29,		June 28,			June 29,
In thousands	2014			2013		2014			2013
Net sales	$	444,325		$	448,536	$	687,919		$	693,472
Cost of products sold		185,543			189,614		307,564			310,506

Gross profit		258,782			258,922		380,355			382,966
Selling and administrative expenses		110,612			118,952		207,754			229,049
(Gain) loss on disposal of fixed assets		(144	)		4		(347	)		27
Special charges		4,253			2,673		6,000			3,530

Operating income		144,061			137,293		166,948			150,360
Interest expense, net		38,644			38,394		77,439			77,774

Income before income taxes		105,417			98,899		89,509			72,586
Provision for income taxes		41,276			42,179		35,269			30,801

Net income	$	64,141		$	56,720	$	54,240		$	41,785

Comprehensive income	$	64,584		$	58,187	$	55,299		$	43,929

The accompanying notes are an integral part of the condensed consolidated financial statements.

VISANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 28,			December 28,
In thousands, except share amounts	2014			2013
ASSETS
Cash and cash equivalents	$	127,744		$	96,042
Accounts receivable, net		130,539			108,201
Inventories		69,620			104,349
Salespersons overdrafts, net of allowance of $9,555 and $9,174, respectively		13,108			24,321
Prepaid expenses and other current assets		14,876			18,770
Income tax receivable		1,299			3,462
Deferred income taxes		16,598			21,053

Total current assets		373,784			376,198

Property, plant and equipment		550,468			543,063
Less accumulated depreciation		(371,362	)		(353,972	)

Property, plant and equipment, net		179,106			189,091
Goodwill		927,203			926,823
Intangibles, net		360,999			367,567
Deferred financing costs, net		28,242			33,118
Deferred income taxes		2,342			2,316
Other assets		14,634			11,162

Total assets	$	1,886,310		$	1,906,275

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDER’S DEFICIT
Accounts payable	$	43,889		$	45,867
Accrued employee compensation and related taxes		27,768			35,391
Commissions payable		26,675			10,908
Customer deposits		67,939			169,919
Income taxes payable		30,492			3,310
Current portion of long-term debt and capital leases		3,903			4,778
Interest payable		33,785			33,702
Other accrued liabilities		29,451			29,194

Total current liabilities		263,902			333,069

Long-term debt and capital leases—less current maturities		1,870,382			1,868,147
Deferred income taxes		144,371			147,059
Pension liabilities, net		46,909			51,926
Other noncurrent liabilities		39,270			38,812

Total liabilities		2,364,834			2,439,013

Mezzanine equity		11			11
Preferred stock $.01 par value; authorized 300,000 shares; none issued and outstanding at June 28, 2014 and December 28, 2013		—			—
Common stock $.01 par value; authorized 1,000 shares; 1,000 shares issued and outstanding at June 28, 2014 and December 28, 2013		—			—
Additional paid-in-capital		61,019			60,983
Accumulated deficit		(499,899	)		(553,018	)
Accumulated other comprehensive loss		(39,655	)		(40,714	)

Total stockholder’s deficit		(478,535	)		(532,749	)

Total liabilities, mezzanine equity and stockholder’s deficit	$	1,886,310		$	1,906,275

The accompanying notes are an integral part of the condensed consolidated financial statements.

VISANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six months ended
	June 28,			June 29,
In thousands	2014			2013
Net income	$	54,240		$	41,785
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		24,420			25,616
Amortization of intangible assets		8,998			26,193
Amortization of debt discount, premium and deferred financing costs		6,690			6,743
Other amortization		153			167
Deferred income taxes		1,142			(3,331	)
(Gain) loss on disposal of fixed assets		(347	)		27
Stock-based compensation		—			6
Excess tax benefit from share based arrangements		(36	)		—
Loss on asset impairments		209			666
Changes in assets and liabilities:
Accounts receivable		(21,892	)		(19,009	)
Inventories		34,791			27,587
Salespersons overdrafts		8,959			8,949
Prepaid expenses and other current assets		3,024			3,328
Accounts payable and accrued expenses		(9,351	)		(15,399	)
Customer deposits		(102,075	)		(106,360	)
Commissions payable		15,757			15,375
Income taxes payable/receivable		29,372			30,931
Interest payable		83			(432	)
Other operating activities, net		(4,071	)		3,439

Net cash provided by operating activities		50,066			46,281

Purchases of property, plant and equipment		(14,761	)		(17,231	)
Proceeds from sale of property and equipment		419			70
Acquisition of business, net of cash acquired		(184	)		—
Additions to intangibles		(94	)		(106	)

Net cash used in investing activities		(14,620	)		(17,267	)

Repayment of long-term debt and capital lease obligations		(2,793	)		(14,463	)
Proceeds from issuance of long-term debt and capital leases		159			644
Excess tax benefit from share based arrangements		36			—
Distribution to stockholder		(1,121	)		—

Net cash used in financing activities		(3,719	)		(13,819	)

Effect of exchange rate changes on cash and cash equivalents		(25	)		(615	)

Increase in cash and cash equivalents		31,702			14,580
Cash and cash equivalents, beginning of period		96,042			60,196

Cash and cash equivalents, end of period	$	127,744		$	74,776

The accompanying notes are an integral part of the condensed consolidated financial statements.

VISANT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Overview and Basis of Presentation

Overview

The Company is a leading marketing and publishing services enterprise servicing the school affinity, direct marketing, fragrance, cosmetic and personal care sampling and packaging, and educational and trade publishing segments. The Company sells products and services to end customers through several different sales channels including independent sales representatives and dedicated employed sales forces. Sales and results of operations are impacted by a number of factors, including general economic conditions, seasonality, cost of raw materials, school population trends, the availability of school funding, product and service offerings and quality and price.

On October 4, 2004, an affiliate of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) and affiliates of DLJ Merchant Banking Partners III, L.P. (“DLJMBP III”) completed a series of transactions which created a marketing and publishing services enterprise (the “Transactions”) through the combination of Jostens, Inc. (“Jostens”), Von Hoffmann Corporation (“Von Hoffmann”) and AKI, Inc. and its subsidiaries (“Arcade”).

As of June 28, 2014, affiliates of KKR and DLJMBP III (collectively, the “Sponsors”) held approximately 49.3% and 41.1%, respectively, of Visant Holding Corp.’s (“Holdco”) voting interest, while each held approximately 44.8% of Holdco’s economic interest. As of June 28, 2014, the other co-investors held approximately 8.4% of the voting interest and approximately 9.2% of the economic interest of Holdco, and members of management held approximately 1.2% of the voting interest and approximately 1.2% of the economic interest of Holdco (exclusive of exercisable options). Visant is an indirect wholly-owned subsidiary of Holdco.

Basis of Presentation

The unaudited condensed consolidated financial statements included herein are for Visant and its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements of Visant and its 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 Visant’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013 and Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2014.

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 Company recognizes revenue when the earnings process is complete, evidenced by an agreement with the respective customer, delivery and acceptance has occurred, collectability is probable and pricing is fixed or determinable. Revenue is recognized (1) when products are shipped (if shipped free on board “FOB” shipping point), (2) when 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.

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.

Cost of Products Sold

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

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 total net warranty costs on rings was $1.3 million as of each of the three-month periods ended June 28, 2014 and June 29, 2013. The provision for the total net warranty costs on rings was $2.2 million and $2.3 million for the six-month periods ended June 28, 2014 and June 29, 2013, 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 $0.8 million as of each of June 28, 2014 and December 28, 2013.

Selling and Administrative Expenses

Selling and administrative expenses are expensed as incurred. These costs 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 $1.6 million and $2.2 million for the quarters ended June 28, 2014 and June 29, 2013, respectively. Advertising expense totaled $2.3 million for the six months ended June 28, 2014 and $4.5 million for the six months ended June 29, 2013.

Derivative Financial Instruments

The Company recognizes all derivatives on the balance sheet at fair value. Changes in the fair value of derivatives are either recorded in earnings or other comprehensive income (loss), based on whether the instrument qualifies for and is designated as part of a hedging relationship. Gains or losses on derivative instruments reported in other comprehensive income (loss) are reclassified into earnings in the period in which earnings are affected by the underlying hedged item. The ineffective portion, if any, of a derivative’s change in fair value is recognized in earnings in the current period. Refer to Note 11, Derivative Financial Instruments and Hedging Activities, for further details.

Stock-Based Compensation

The Company recognizes 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. Visant recognized total stock-based compensation expense of $0.5 million and $0.2 million for the three months ended June 28, 2014 and June 29, 2013, respectively. Visant recognized total stock-based compensation expense of $0.9 million and $0.1 million for the six months ended June 28, 2014 and June 29, 2013, respectively. Stock-based compensation is included in selling and administrative expenses. Refer to Note 15, Stock-Based Compensation, for further details.

Mezzanine Equity

Certain management stockholder agreements contain a purchase feature pursuant to which, in the event the holder’s employment terminates as a result of the death or permanent disability (as defined in the agreement) of the holder, the holder (or his/her estate, in the case of death) has the option to require that the common shares or vested options be purchased from the holder (estate) and settled in cash. These equity instruments are considered temporary equity and have been classified as mezzanine equity on the Condensed Consolidated Balance Sheets as of June 28, 2014 and December 28, 2013, respectively.

Recently Adopted Accounting Pronouncements

On January 31, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2013-01 (“ASU 2013-01”), which clarifies the scope of the offsetting disclosure requirements. Under ASU 2013-01, the disclosure requirements would apply to derivative instruments accounted for in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement. ASU 2013-01 became effective for interim and annual periods beginning on or after January 1, 2013. Retrospective application is required for all comparative periods presented. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On February 5, 2013, the FASB issued Accounting Standards Update 2013-02 (“ASU 2013-02”), which amends existing guidance by requiring additional disclosure either on the face of the income statement or in the notes to the financial statements of significant amounts reclassified out of accumulated other comprehensive income. ASU 2013-02 became effective for interim and annual periods beginning on or after December 15, 2012, to be applied on a prospective basis. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On February 28, 2013, the FASB issued Accounting Standards Update 2013-04 (“ASU 2013-04”), which requires entities to measure obligations resulting from joint and several liability arrangements, for which the total amount of the obligation is fixed at the reporting date, as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Required disclosures include a description of the joint and several arrangement and the total outstanding amount of the obligation for all joint parties. ASU 2013-04 is effective for interim and annual periods beginning on or after December 15, 2013 and should be applied retrospectively to obligations with joint and several liabilities existing at the beginning of an entity’s fiscal year of adoption, with early adoption permitted. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On March 4, 2013, the FASB issued Accounting Standards Update 2013-05 (“ASU 2013-05”), which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been (1) the sale of a subsidiary or group of net assets within a foreign entity, and the sale represents the substantially complete liquidation of the investment in the foreign entity, (2) a loss of controlling financial interest in an investment in a foreign entity or (3) a step acquisition for a foreign entity. ASU 2013-05 does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On July 17, 2013, the FASB issued Accounting Standards Update 2013-10 (“ASU 2013-10”), which amends ASC 815 to allow entities to use the federal funds effective swap rate, in addition to U.S. Treasury rates and LIBOR, as a benchmark interest rate in accounting for fair value and cash flow hedges in the United States. ASU 2013-10 also eliminates the provision in ASC 815 which prohibited the use of different benchmark rates for similar hedges except in rare and justifiable circumstances. ASU 2013-10 is effective prospectively for qualifying new hedging relationships entered into on or after July 17, 2013 and for hedging relationships redesignated on or after that date. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On July 18, 2013, the FASB issued Accounting Standards Update 2013-11 (“ASU 2013-11”), which provides guidance on the financial statement presentation of unrecognized tax benefits (“UTB”) when a net operating loss (“NOL”) carryforward, a similar tax loss or a tax credit carryforward exists. Under ASU 2013-11, an entity must present a UTB, or a portion of a UTB, in its financial statements as a reduction to a deferred tax asset (“DTA”) for a NOL carryforward, a similar tax loss or a tax credit carryforward, except when (1) a NOL carryforward, a similar tax loss or a tax credit carryforward is not available as of the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position or (2) the entity does not intend to use the DTA for this purpose. If either of these conditions exists, an entity should present a UTB in the financial statements as a liability and should not net the UTB with a DTA. This guidance is effective for fiscal years beginning after December 15, 2013, with early adoption permitted. The amendment should be applied to all UTBs that exist as of the effective date. Entities may choose to apply the amendments retrospectively to each prior reporting period presented. The Company’s adoption of this guidance did not have a material impact on its financial statements.

On April 10, 2014, the FASB issued Accounting Standards Update 2014-08 (“ASU 2014-08”), which amends the definition of a discontinued operation in ASC 205-20, Discontinued Operations (“ASC 205-20”), and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. ASU 2014-08 limits classification of a discontinued operation to a component or group of components disposed of or classified as held for sale which represents a strategic shift that has or will have a major impact on an entity’s operations or financial results. ASU 2014-08 also requires entities to reclassify assets and liabilities of a discontinued operation for all comparative periods presented in the statement of financial position. Before these amendments, ASC 205-20 neither required nor prohibited such presentation. ASU 2014-08 is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. The Company is currently evaluating the impact and disclosure under this guidance on its financial statements.

On May 28, 2014, the FASB issued Accounting Standards Update 2014-09 (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB codification. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016 for public entities. Early adoption is not permitted. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance of ASU 2014-09. The Company is currently evaluating the impact and disclosure under this guidance on its financial statements.

On June 19, 2014, the FASB issued Accounting Standards Update 2014-12 (“ASU 2014-12”), which clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. ASU 2014-12 is effective for all entities for reporting periods (including interim periods) beginning after December 15, 2015, with early adoption permitted. All entities will have the option of applying the guidance either prospectively (i.e., only to awards granted or modified on or after the effective date of ASU 2014-12) or retrospectively. The Company is currently evaluating the impact and disclosure under this guidance on its financial statements.

3. Restructuring Activity and Other Special Charges

For the three months ended June 28, 2014, the Company recorded $2.2 million and $0.5 million of restructuring costs in the Scholastic and Memory Book segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the three months ended June 28, 2014 were $1.6 million of non-cash asset impairment charges associated with facility consolidations in the Scholastic segment. The associated employee headcount reductions related to the above actions were 122 and four in the Scholastic and Memory Book segments, respectively.

For the six-month period ended June 28, 2014, the Company recorded $3.0 million, $0.6 million and $0.5 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the six months ended June 28, 2014 were $1.9 million of non-cash asset impairment charges associated with facility consolidations in the Scholastic segment. The associated employee headcount reductions related to the above actions were 185, 22 and six in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

For the three months ended June 29, 2013, the Company recorded $1.6 million, $0.3 million and $0.1 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the second fiscal quarter ended June 29, 2013 was approximately $0.7 million of non-cash asset impairment charges in the Memory Book segment associated with the consolidation of Jostens’ Topeka, Kansas facility, which was substantially completed in early 2013. The associated employee headcount reductions related to the above actions were 96, six and four in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

For the six-month period ended June 29, 2013, the Company recorded $1.8 million, $0.8 million and $0.2 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the six months ended June 29, 2013 was approximately $0.7 million of non-cash asset impairment charges in the Memory Book segment associated with the consolidation of Jostens’ Topeka, Kansas facility. The associated employee headcount reductions related to the above actions were 103, 17 and seven in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

Restructuring accruals of $7.5 million as of each of June 28, 2014 and December 28, 2013 are included in other accrued liabilities in the Condensed Consolidated Balance Sheets. These accruals included amounts provided for the termination in July 2013 of a multi-year marketing and sponsorship arrangement entered into by Jostens in 2007 (the “Multi-Year Marketing and Sponsorship Arrangement”) and severance and related benefits related to reductions in force in each of the Company’s reportable segments.

On a cumulative basis through June 28, 2014, the Company incurred $25.8 million of costs related to the termination of the Multi-Year Marketing and Sponsorship Arrangement and employee severance and related benefit costs related to the 2014, 2013 and 2012 initiatives, which affected an aggregate of 852 employees. The Company had paid $18.3 million in cash related to these initiatives as of June 28, 2014.

Changes in the restructuring accruals during the first six months of fiscal 2014 were as follows:


In thousands	2014 Initiatives			2013 Initiatives			2012 Initiatives			Total
Balance at December 28, 2013	$	—		$	7,367		$	129		$	7,496
Restructuring charges		3,661			360			39			4,060
Severance, benefits and other payments		(1,186	)		(2,733	)		(168	)		(4,087	)

Balance at June 28, 2014	$	2,475		$	4,994		$	—		$	7,469

The majority of the remaining severance and related benefits associated with all of these initiatives are expected to be paid by the end of fiscal 2015 and the costs associated with the termination of the Multi-Year Marketing and Sponsorship Arrangement are expected to be paid by the end of 2016.

4. Acquisitions

On July 1, 2013, the Company announced the acquisition of SAS Carestia (“Carestia”), a leading producer of fragrance blotter cards, for a total purchase price of $16.9 million, net of cash, subject to certain subsequent post-closing adjustments. The acquisition was completed through Arcade’s subsidiary, Arcade Europe SAS. The results of the acquired Carestia operations are reported as part of the Marketing and Publishing Services segment from the date of acquisition.

The aggregate cost of the acquisition was 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 final allocation of the purchase price for the Carestia acquisition is as follows:


In thousands
Current assets	$	10,303
Property, plant and equipment		5,025
Intangible assets		8,954
Goodwill		7,683
Long-term assets		120
Current liabilities		(4,853	)
Long-term liabilities		(4,811	)

	$	22,421

In connection with the purchase accounting related to the acquisition of Carestia, the intangible assets and goodwill approximated $16.6 million and consisted of:


In thousands
Customer relationships	$	6,058
Non-compete agreements		262
Trademarks (definite lived)		2,634
Goodwill		7,683

	$	16,637

5. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss (“AOCL”), by component, for the three months ended June 28, 2014 were as follows:


In thousands	Fair Value of Derivatives			Foreign Currency Translation		Pension and Postretirement Plans			Total
Balance as of March 29, 2014	$	(3,021	)	$	3,837	$	(40,914	)	$	(40,098	)
Change in fair value of derivatives, net of tax of $(0.3) million		(519	)		—		—			(519	)
Change in cumulative translation adjustment		—			102		—			102
Change in pension and other postretirement benefit plans, net of tax of $0.2 million		—			—		358			358
Amounts reclassified from AOCL, net of tax of $0.3 million		502			—		—			502

Balance as of June 28, 2014	$	(3,038	)	$	3,939	$	(40,556	)	$	(39,655	)

The changes in AOCL, by component, for the six months ended June 28, 2014 were as follows:


In thousands	Fair Value of Derivatives			Foreign Currency Translation		Pension and Postretirement Plans			Total
Balance as of December 28, 2013	$	(3,371	)	$	3,929	$	(41,272	)	$	(40,714	)
Change in fair value of derivatives, net of tax of $(0.4) million		(670	)		—		—			(670	)
Change in cumulative translation adjustment		—			10		—			10
Change in pension and other postretirement benefit plans, net of tax of $0.5 million		—			—		716			716
Amounts reclassified from AOCL, net of tax of $0.6 million		1,003			—		—			1,003

Balance as of June 28, 2014	$	(3,038	)	$	3,939	$	(40,556	)	$	(39,655	)

6. Accounts Receivable

Net accounts receivable were comprised of the following:


	June 28,			December 28,
In thousands	2014			2013
Trade receivables	$	145,196		$	119,559
Allowance for doubtful accounts		(4,976	)		(5,040	)
Allowance for sales returns		(9,681	)		(6,318	)

Accounts receivable, net	$	130,539		$	108,201

7. Inventories

Inventories were comprised of the following:


	June 28,		December 28,
In thousands	2014		2013
Raw materials and supplies	$	29,582	$	36,035
Work-in-process		21,592		40,828
Finished goods		18,446		27,486

Inventories	$	69,620	$	104,349

Precious Metals Consignment Arrangement

Jostens is a party to a precious metals consignment agreement with a major financial institution under which it currently has the ability to obtain up to the lesser of a certain specified quantity of precious metals and $57.0 million in dollar value in consigned inventory. Under these arrangements, Jostens does not take title to consigned inventory until payment. Accordingly, Jostens does not include the value of consigned inventory or the corresponding liability in its consolidated financial statements. The value of consigned inventory was $23.7 million and $15.6 million as of each of June 28, 2014 and December 28, 2013, respectively. The agreement does not have a stated term, and it can be terminated by either party upon 60 days written notice. Additionally, Jostens incurred expenses for consignment fees related to this facility of $0.2 million as of each of the three-month periods ended June 28, 2014 and June 29, 2013. The consignment fees expensed for the six months ended June 28, 2014 and June 29, 2013 were $0.3 million and $0.5 million, respectively. The obligations under the consignment agreement are guaranteed by Visant.

8. Fair Value Measurements

The Company measures fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk.

The disclosure requirements around fair value establish a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

•

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

•

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

The Company does not have financial assets or financial liabilities that are currently measured and reported on the balance sheet on a fair value basis except as noted in Note 11, Derivative Financial Instruments and Hedging Activities.

In addition to such financial assets and liabilities that are recorded at fair value on a recurring basis, the Company used Level 2 inputs to estimate the fair value of its financial instruments which are not recorded at fair value on the balance sheet as of each of June 28, 2014 and December 28, 2013.

As of June 28, 2014, the fair value of Visant’s 10.00% senior notes due 2017 (the “Senior Notes”), with an aggregate principal amount outstanding of $736.7 million, approximated $698.9 million at such date. As of June 28, 2014, the fair value of the term loan B facility maturing in 2016 (the “Term Loan Credit Facility”), with an aggregate principal amount outstanding of $1,140.4 million, approximated $1,135.4 million at such date.

As of December 28, 2013, the fair value of Visant’s 10.00% Senior Notes with an aggregate principal amount outstanding of $736.7 million, approximated $713.9 million at such date. As of December 28, 2013, the fair value of the Term Loan Credit Facility with an aggregate principal amount outstanding of $1,140.4 million, approximated $1,127.6 million at such date.

Each of the Senior Notes and the Term Loan Credit Facility was classified within Level 2 of the valuation hierarchy as of each of June 28, 2014 and December 28, 2013.

9. Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill is as follows:


In thousands	Scholastic		Memory Book		Marketing and Publishing Services			Total
Balance at December 28, 2013	$	300,857	$	391,178	$	234,788		$	926,823
Goodwill additions during the period		—		—		450			450
Reduction in goodwill		—		—		—			—
Currency translation		24		—		(94	)		(70	)

Balance at June 28, 2014	$	300,881	$	391,178	$	235,144		$	927,203

Information regarding other intangible assets is as follows:


		June 28, 2014							December 28, 2013
In thousands	Estimated useful life	Gross carrying amount		Accumulated amortization			Net		Gross carrying amount		Accumulated amortization			Net
School relationships	10 years	$	330,000	$	(330,000	)	$	—	$	330,000	$	(330,000	)	$	—
Internally developed software	2 to 5 years		8,600		(8,600	)		—		8,600		(8,600	)		—
Patented/unpatented technology	3 to 20 years		15,084		(13,069	)		2,015		15,085		(12,820	)		2,265
Customer relationships	4 to 15 years		166,005		(77,043	)		88,962		165,552		(71,636	)		93,916
Trademarks (definite lived)	10 to 20 years		3,140		(393	)		2,747		3,228		(241	)		2,987
Restrictive covenants	3 to 10 years		42,291		(28,296	)		13,995		40,411		(25,292	)		15,119

			565,120		(457,401	)		107,719		562,876		(448,589	)		114,287
Trademarks	Indefinite		253,280		—			253,280		253,280		—			253,280

		$	818,400	$	(457,401	)	$	360,999	$	816,156	$	(448,589	)	$	367,567

Amortization expense related to other intangible assets was $4.5 million and $13.0 million for the three months ended June 28, 2014 and June 29, 2013, respectively. For the six months ended June 28, 2014 and June 29, 2013, amortization expense related to other intangible assets was $9.0 million and $26.2 million, respectively. During the first six months of fiscal 2013, approximately $11.0 million of fully amortized restrictive covenants were written off.

Based on intangible assets in service as of June 28, 2014, estimated amortization expense for the remainder of fiscal 2014 and each of the five succeeding fiscal years is $8.9 million for the remainder of fiscal 2014, $16.1 million for 2015, $14.0 million for 2016, $10.5 million for 2017, $9.2 million for 2018 and $8.5 million for 2019.

10. Debt

Debt obligations as of June 28, 2014 and December 28, 2013 consisted of the following:


	June 28,		December 28,
In thousands	2014		2013
Senior secured term loan facilities, net of original issue discount of $10.0 million and $11.9 million, Term Loan B, variable rate, 5.25% at June 28, 2014 and December 28, 2013, respectively, with quarterly interest payments, principal due and payable at maturity—December 2016	$	1,130,358	$	1,128,544
Senior notes, 10.00% fixed rate, with semi-annual interest payments of $36.8 million in April and October, principal due and payable at maturity—October 2017		736,670		736,670

		1,867,028		1,865,214
Equipment financing arrangements		4,823		3,806
Capital lease obligations		2,434		3,905

Total debt	$	1,874,285	$	1,872,925

Senior Secured Credit Facilities

In connection with the refinancing consummated by Visant on September 22, 2010 (the “Refinancing”), Visant entered into senior secured credit facilities among Visant, as borrower, Jostens Canada Ltd. (“Jostens Canada”), as Canadian borrower, Visant Secondary Holdings Corp. (“Visant Secondary”), as guarantor, the lenders from time to time parties thereto, Credit Suisse AG, Cayman Islands Branch, as administrative agent, and Credit Suisse AG, Toronto Branch, as Canadian administrative agent, for the Term Loan Credit Facility and a revolving credit facility expiring in 2015 consisting of a $165.0 million U.S. revolving credit facility available to Visant and its subsidiaries and a $10.0 million Canadian revolving credit facility available to Jostens Canada (the “Revolving Credit Facility” and together with the Term Loan Credit Facility, the “Credit Facilities”). The borrowing capacity under the Revolving Credit Facility can also be used for the issuance of up to $35.0 million of letters of credit (inclusive of a Canadian letter of credit facility). On March 1, 2011, Visant announced the completion of the repricing of the Term Loan Credit Facility (the “Repricing”). The amended Term Loan Credit Facility provides for an interest rate for each term loan based upon LIBOR or an alternative base rate (“ABR”) plus a spread of 4.00% or 3.00%, respectively, with a 1.25% LIBOR floor. In connection with the amendment, Visant was required to pay a prepayment premium of 1.00% of the outstanding principal amount of the Term Loan Credit Facility along with certain other fees and expenses. The Credit Facilities allow Visant, subject to certain conditions, to incur additional term loans under the Term Loan Credit Facility in either case in an aggregate principal amount of up to $300.0 million, which additional term loans will have the same security and guarantees as the Term Loan Credit Facility. Amounts borrowed under the Term Loan Credit Facility that are repaid or prepaid may not be reborrowed.

Visant’s obligations under the Credit Facilities are unconditionally and irrevocably guaranteed jointly and severally by Visant Secondary and all of Visant’s material current and future wholly-owned domestic subsidiaries (the “U.S. Subsidiary Guarantors”). The obligations of Jostens Canada under the Credit Facilities are unconditionally and irrevocably guaranteed jointly and severally by Visant Secondary, Visant, the U.S. Subsidiary Guarantors and by any future Canadian subsidiaries of Visant. Visant’s obligations under the Credit Facilities and the guarantees are secured by substantially all of Visant’s assets and substantially all of the assets of Visant Secondary and the U.S. Subsidiary Guarantors. The obligations of Jostens Canada under the Credit Facilities and the guarantees are also secured by substantially all of the tangible and intangible assets of Jostens Canada and any future Canadian subsidiaries of Visant.

The Credit Facilities require that Visant not exceed a maximum total leverage ratio, that it meet a minimum interest coverage ratio and that it abide by a maximum capital expenditure limitation. In addition, the Credit Facilities contain certain restrictive covenants which, among other things, limit Visant’s and its subsidiaries’ ability to incur additional indebtedness and liens, pay dividends, prepay subordinated and senior unsecured debt, make investments, merge or consolidate, change the business, amend the terms of its subordinated and senior unsecured debt, engage in certain dispositions of assets, enter into sale and leaseback transactions, engage in certain transactions with affiliates and engage in certain other activities customarily restricted in such agreements. It also contains certain customary events of default, subject to applicable grace periods, as appropriate.

As of June 28, 2014, the annual interest rate under the Revolving Credit Facility was LIBOR plus 5.25% or an ABR plus 4.25% (or, in the case of Canadian dollar denominated loans, the bankers’ acceptance discount rate plus 5.25% or the Canadian prime rate plus 4.25% (subject to a floor of the one-month Canadian Dealer Offered Rate plus 1.00%)), in each case, with step-downs based on the total leverage ratio. To the extent that the interest rates on the borrowings under the Revolving Credit Facility are determined by reference to LIBOR, the LIBOR component of such interest rates is subject to a LIBOR floor of 1.75%.

As of June 28, 2014, there was $20.8 million outstanding in the form of letters of credit, leaving $154.2 million available for borrowing under the Revolving Credit Facility. Visant is obligated to pay commitment fees of 0.75% on the unused portion of the Revolving Credit Facility, with a step-down to 0.50% if the total leverage ratio is below 5.00 to 1.00.

Senior Notes

In connection with the issuance of the Senior Notes in aggregate principal amount of $750.0 million, as part of the Refinancing, Visant and the U.S. Subsidiary Guarantors entered into an Indenture among Visant, the U.S. Subsidiary Guarantors and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes are guaranteed on a senior unsecured basis by the U.S. Subsidiary Guarantors. Interest on the notes accrues at the rate of 10.00% per annum and is payable semi-annually in arrears on April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15.

The Senior Notes are senior unsecured obligations of Visant and the U.S. Subsidiary Guarantors and rank (i) equally in right of payment with any existing and future senior unsecured indebtedness of Visant and the U.S. Subsidiary Guarantors; (ii) senior to all of Visant’s and the U.S. Subsidiary Guarantors’ existing, and any of Visant’s and the U.S. Subsidiary Guarantors’ future, subordinated indebtedness; (iii) effectively junior to all of Visant’s existing and future secured obligations and the existing and future secured obligations of the U.S. Subsidiary Guarantors, including indebtedness under the Credit Facilities, to the extent of the value of the assets securing such obligations; and (iv) structurally subordinated to all liabilities of Visant’s existing and future subsidiaries that do not guarantee the Senior Notes. The Senior Notes are redeemable, in whole or in part, under certain circumstances. Upon the occurrence of certain change of control events, the holders have the right to require Visant to offer to purchase the Senior Notes at 101% of their principal amount, plus accrued and unpaid interest and additional interest, if any.

The Indenture contains restrictive covenants that limit, among other things, the ability of Visant and its restricted subsidiaries to (i) incur additional indebtedness or issue certain preferred stock, (ii) pay dividends on or make other distributions or repurchase capital stock or make other restricted payments, (iii) make investments, (iv) limit dividends or other payments by restricted subsidiaries to Visant or other restricted subsidiaries, (v) create liens on pari passu or subordinated indebtedness without securing the notes, (vi) sell certain assets or merge with or into other companies or otherwise dispose of all or substantially all of Visant’s assets, (vii) enter into certain transactions with affiliates and (viii) designate Visant’s subsidiaries as unrestricted subsidiaries. The Indenture also contains customary events of default, including the failure to make timely payments on the Senior Notes or other material indebtedness, the failure to satisfy certain covenants and specified events of bankruptcy and insolvency.

11. Derivative Financial Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its management of interest rate risk. During the three and six months ended June 28, 2014, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. As of June 28, 2014, the Company had three outstanding interest rate derivatives with an outstanding aggregate notional amount of $500.0 million.

The effective portion of changes in the fair value of derivatives which qualify as and are designated as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is

recognized directly in earnings. As of June 28, 2014, there was no ineffectiveness on the outstanding interest rate derivatives. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company estimates that $2.9 million will be reclassified as an increase to interest expense through the second fiscal quarter of 2015.

The fair value of outstanding derivative instruments as of June 28, 2014 and December 28, 2013 was as follows:

Classification in the Consolidated Balance Sheets


*In thousands*		June 28, 2014		December 28, 2013
*Liability Derivatives:*
Derivatives designated as hedging instruments
Interest rate swaps	Other accrued liabilities	$	2,931	$	3,088
Interest rate swaps	Other noncurrent liabilities		1,920		2,294

Total		$	4,851	$	5,382

The following table summarizes the activity of derivative instruments that qualify for hedge accounting as of December 28, 2013 and June 28, 2014, and the impact of such derivative instruments on accumulated other comprehensive loss for the six months ended June 28, 2014:


*In thousands*	December 28, 2013			Amount of loss recognized in Accumulated Other Comprehensive Loss on derivatives (effective portion)			Amount of loss reclassified from Accumulated Other Comprehensive Loss to interest expense (effective portion)		June 28, 2014
Interest rate swaps designated as cash flow hedges	$	(5,382	)	$	(1,071	)	$	1,602	$	(4,851	)

The following table provides the location in the Company’s financial statements of the recognized gain or loss related to such derivative instruments:


	Three months ended
*In thousands*	June 28, 2014		June 29, 2013
Interest rate swaps designated as cash flow hedges recognized in interest expense	$	801	$	881


	Six months ended
*In thousands*	June 28, 2014		June 29, 2013
Interest rate swaps designated as cash flow hedges recognized in interest expense	$	1,602	$	1,762

Based on an evaluation of the inputs used, the Company has categorized its derivative instruments to be within Level 2 of the fair value hierarchy. Any transfer into or out of a level of the fair value hierarchy is recognized based on the value of the derivative instruments at the end of the applicable reporting period.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign exchange rate movements but do not meet the hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of each of June 28, 2014 and June 29, 2013, the Company did not have any derivatives outstanding that were not designated as hedges.

Credit-risk-related Contingent Features

The Company has an agreement with each of its derivative counterparties that contains a provision whereby the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on such indebtedness.

As of June 28, 2014, the termination value of derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $5.8 million. As of June 28, 2014, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 28, 2014, it could have been required to settle its obligations under the agreements at their termination value of $5.8 million.

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 Company had purchase commitment contracts totaling $14.3 million outstanding as of June 28, 2014 with delivery dates occurring through 2015. The forward purchase contracts are considered normal purchases and therefore are not subject to the requirements of derivative accounting. As of June 28, 2014, the fair market value of open precious metal forward contracts was $14.7 million based on quoted future prices for each contract.

13. Income Taxes

Visant and its subsidiaries are included in the consolidated federal income tax filing of its indirect parent company, Holdco, and its consolidated subsidiaries. The Company determines and allocates its income tax provision under the separate-return method except for the effects of certain provisions of the U.S. tax code which are accounted for on a consolidated group basis. Income tax amounts payable or receivable among members of the controlled group are settled based on the filing of income tax returns and the cash requirements of the respective members of the consolidated group.

In connection with the taxable loss incurred by Holdco in 2010 as a result of the Refinancing and the related deduction of $97.2 million for previously tax-deferred original issue discount, Holdco derived certain income tax benefits that have since been fully utilized. The utilization of these tax benefits resulted in unsettled intra-group income taxes receivable and payable balances at Holdco and Visant, respectively. During 2013, these balances were settled when Holdco contributed approximately $60.5 million of income tax receivables to Visant.

The Company recorded an income tax provision for the six months ended June 28, 2014 based on its best estimate of the consolidated effective tax rate applicable for the entire 2014 fiscal year. After adjustments for jurisdictions for which a current tax benefit is not recorded, the estimated full-year consolidated effective tax rate for fiscal 2014 is 39.5% before taking into account the impact of less than $0.4 million of accruals considered a current period tax benefit. The combined effect of the annual estimated consolidated effective tax rate and the net current period tax adjustments resulted in an effective rate of tax benefit of 39.4% for the six-month period ended June 28, 2014.

For the comparable six-month period ended June 29, 2013, the effective income tax rate was 42.4%. The decrease in tax rate for the six-month period ended June 28, 2014 compared to the six-month period ended June 29, 2013 was due primarily to the favorable effect of the domestic manufacturing deduction, which is expected to become available to the Company in 2014 because the Company anticipates that the remaining net operating loss from 2011 will be fully utilized during 2014.

For the six-month period ended June 28, 2014, the Company provided net tax and interest accruals for unrecognized tax benefits of approximately $0.1 million. At June 28, 2014, the Company’s unrecognized tax benefit liability totaled $11.3 million, including interest and penalty accruals totaling $3.3 million. At December 28, 2013, the Company’s unrecognized tax benefit liability totaled $11.2 million, including interest and penalty accruals totaling $3.1 million. Substantially all of these liabilities were included in noncurrent liabilities for the respective periods.

Holdco’s income tax filings for 2005 to 2012 are subject to examination in the U.S federal tax jurisdiction. In connection with an examination of Holdco’s income tax filings for 2005 and 2006, the Internal Revenue Service (“IRS”) proposed certain transfer price adjustments with which Holdco disagreed in order to preserve its right to seek relief from double taxation with the applicable U.S. and the French tax authorities. During 2013, the IRS and French tax authorities agreed to a settlement with respect to transfer price adjustments for the 2005 and 2006 tax periods. The settlement for the 2005 and 2006 tax periods was consistent with the terms of an advance pricing agreement entered into in 2013 between Holdco and the IRS for the tax periods 2007 through 2011. Both agreements were consistent with the Company’s expectations, resulting in only minor adjustments required to be made to the Company’s existing reserves. The U.S. statute of limitations for years 2005 through 2010 remains open with signed waivers. The Company is also subject to examination in certain state jurisdictions for the 2007 to 2012 periods, none of which was individually material. During 2013, the French tax authorities concluded their examination of tax filings for 2010 and 2011 with only minor adjustments. 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. Due primarily to the potential for resolution of the Company’s current U.S. federal examination and the expiration of the related statute of limitations, it is reasonably possible that the Company’s gross unrecognized tax benefit liability could change within the next twelve months by a range of zero to $7.4 million.

14. Benefit Plans

Pension and Other Postretirement Benefit Plans

Net periodic benefit (income) expense for pension and other postretirement benefit plans is presented below:


	Pension benefits						Postretirement benefits
	Three months ended						Three months ended
In thousands	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Service cost	$	332		$	280		$	—		$	1
Interest cost		4,468			4,103			11			10
Expected return on plan assets		(5,907	)		(5,489	)		—			—
Amortization of prior service cost		—			—			(69	)		(69	)
Amortization of net actuarial loss		652			1,107			11			13

Net periodic benefit (income) expense	$	(455	)	$	1		$	(47	)	$	(45	)


	Pension benefits						Postretirement benefits
	Six months ended						Six months ended
In thousands	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Service cost	$	664		$	560		$	—		$	2
Interest cost		8,935			8,206			22			20
Expected return on plan assets		(11,814	)		(10,978	)		—			—
Amortization of prior service cost		—			—			(138	)		(138	)
Amortization of net actuarial loss		1,304			2,214			22			26

Net periodic benefit (income) expense	$	(911	)	$	2		$	(94	)	$	(90	)

As of December 28, 2013, the Company estimated that it would be required to make contributions under its qualified pension plans in 2014 in an aggregate amount of $5.3 million. For the six months ended June 28, 2014, the Company contributed $1.6 million, $1.3 million and less than $0.1 million to its qualified pension plans, non-qualified pension plans and postretirement welfare plans, respectively. The payments made during the six months ended June 28, 2014 were consistent with the amounts anticipated by the Company as of December 28, 2013.

15. Stock-Based Compensation

2003 Stock Incentive Plan

The 2003 Stock Incentive Plan (the “2003 Plan”) was approved by Holdco’s Board of Directors and was effective as of October 30, 2003. The 2003 Plan permitted Holdco to grant to key employees and certain other persons stock options and stock awards. As of July 29, 2013, no further grants may be made under the 2003 Plan in accordance with its terms. The 4,180 options issued under the 2003 Plan in January 2004 that remained outstanding as of December 28, 2013 were exercised in January 2014 prior to their expiration in January 2014.

2004 Stock Option Plan

In connection with the closing of the Transactions, Holdco established a new stock option plan, which permits Holdco to grant to key employees and certain other persons of Holdco 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 Class A Common Stock. Options granted under the 2004 Plan may consist of time vesting options or performance vesting options. 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. Options granted under the 2004 Plan will begin expiring in late 2014. As of June 28, 2014, there were 151,237 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. As of June 28, 2014, there were 236,147 vested options outstanding under the 2004 Plan and no options unvested and subject to future vesting.

Jostens Long-Term Incentives

Certain key Jostens employees participate in Jostens long-term incentive programs. The programs provide for the grant of phantom shares to the participating employee, which are subject to vesting and other terms and conditions and restrictions of the share award, which may include meeting certain performance metrics and continued employment. The grants will be settled in cash in a lump sum amount based on the fair market value of the Class A Common Stock and the number of shares in which the employee has vested. In connection with the program put into place in 2012 (the “2012 LTIP”), the grants will be settled following the end of fiscal year 2014 (which occurs on January 3, 2015). In the case of a limited number of certain senior executives of Jostens, absent a change of control prior to January 3, 2015, payment with respect to a portion of the lump sum payment in respect of the performance award in which the executive vests as of the end of fiscal year 2014 will not be due until the earlier of a change in control or early 2016 (and not later than March 15, 2016). The awards provide for certain vesting and settlement of the vested award following the occurrence of certain termination of employment events prior to January 3, 2015, as described therein. Shares not vested as of the end of fiscal year 2014, including if the respective performance target is not achieved, are forfeited without payment. The awards are also subject to certain agreements by the employee as to confidentiality, non-competition and non-solicitation to which the employee is bound during his or her employment and for two years following a separation of service.

Certain key Jostens employees received an extraordinary long-term phantom share incentive grant in April 2013 (the “April 2013 Special LTIP”). The grants of phantom shares to the participating employees were made on terms similar to the 2012 LTIP, including that such shares are subject to vesting based on continued employment. The shares vested under the grants will be settled in cash in a lump sum amount based on the fair market value of the Class A Common Stock and the number of shares in which the employee has vested, following the end of fiscal year 2015 (which occurs on January 2, 2016). The awards provide for certain vesting and settlement of the vested award following the occurrence of certain termination of employment events prior to January 2, 2016, as described therein.

During the third quarter of 2013, Jostens implemented a long-term phantom share incentive program with certain of Jostens’ key employees (the “Jostens 2013 LTIP”). The grants of phantom shares to the participating employees were made on terms similar to the 2012 LTIP and the April 2013 Special LTIP, provided that, with certain limited exceptions, the shares are subject to vesting based solely on continued employment. The shares vested under the grants will be settled in cash in a lump sum amount based on the fair market value of the Class A Common Stock and the number of shares in which the employee has vested, following the end of fiscal year 2015 (which occurs on January 2, 2016). The awards provide for certain vesting and settlement of the vested award following the occurrence of certain termination of employment events prior to January 2, 2016, as described therein.

The Company has issued and may from time to time issue phantom equity in the form of phantom shares or earned appreciation rights to certain employees of its other subsidiaries for the purpose of assuring retention of talent aligned with long-term performance and strategic objectives.

Common Stock

Visant is an indirect, wholly-owned subsidiary of Holdco. The Sponsors hold shares of the Class A Common Stock of Holdco, and additionally Visant’s equity-based incentive compensation plans are based on the value of the Class A Common Stock. There is no established public market for the Class A Common Stock. The fair market value of the Class A Common Stock is established pursuant to the terms of the 2004 Plan and is determined by a third party valuation, and the methodology to determine the fair market value under the equity incentive plans does not give effect to any premium for control or discount for minority interests or restrictions on transfers. Fair value includes any premium for control or discount for minority interests or restrictions on transfers. Holdco used a discounted cash flow analysis and selected public company analysis to determine the enterprise value and share price for the Class A Common Stock.

For the three months ended June 28, 2014 and June 29, 2013, Visant recognized total stock-based compensation expense of $0.5 million and $0.2 million, respectively. For the six months ended June 28, 2014 and June 29, 2013, Visant recognized total stock-based compensation expense of $0.9 million and $0.1 million, respectively. Stock-based compensation is included in selling and administrative expenses.

For the six-month periods ended June 28, 2014 and June 29, 2013, there were no issuances of restricted shares or stock options.

As of June 28, 2014, there was no unrecognized stock-based compensation expense related to restricted shares expected to be recognized.

Stock Options

The following table summarizes stock option activity for the Company:


Options in thousands	Options			Weighted - average exercise price
Outstanding at December 28, 2013		241		$	41.21
Exercised		(4	)	$	30.09
Granted		—		$	—
Forfeited/expired		—		$	—
Cancelled		(1	)	$	130.45

Outstanding at June 28, 2014		236		$	41.10

Vested or expected to vest at June 28, 2014		236		$	41.10

Exercisable at June 28, 2014		236		$	41.10

The weighted-average remaining contractual life of outstanding options at June 28, 2014 was approximately 0.5 years. As of June 28, 2014, there was no unrecognized stock-based compensation expense related to stock options expected to be recognized.

LTIPs

The following table summarizes the LTIP award activity for the Company:


Units in thousands	2014 Activity
Outstanding at December 28, 2013		132
Granted		14
Forfeited/Expired		—
Settled/Paid		(2	)
Cancelled		(17	)

Outstanding at June 28, 2014		127

Vested or expected to vest at June 28, 2014		105

As of June 28, 2014, there was $2.7 million of unrecognized stock-based compensation expense related to the long-term incentive plans to be recognized over a weighted-average period of 1.5 years.

16. Business Segments

The Company’s three reportable segments consist of:

•

Scholastic — provides services in conjunction with the marketing, sale and production of class rings and an array of graduation products and other scholastic affinity products to students and administrators primarily in high schools, colleges and other post-secondary institutions;

•

Memory Book — provides services in conjunction with 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 — provides services in conjunction with the development, marketing, sale and production of multi-sensory and interactive advertising sampling systems and packaging, primarily for the fragrance, cosmetic and personal care segments, and provides innovative products and related services to the direct marketing sector. The group also produces book components primarily for the educational and trade publishing segments.

The following table presents information of the Company by business segment.


	Three months ended
In thousands	June 28, 2014			June 29, 2013			$ Change			% Change
*Net sales*
Scholastic	$	127,152		$	127,149		$	3			0.0	%
Memory Book		240,241			247,785			(7,544	)		(3.0	%)
Marketing and Publishing Services		77,179			73,673			3,506			4.8	%
Inter-segment eliminations		(247	)		(71	)		(176	)		NM

	$	444,325		$	448,536		$	(4,211	)		(0.9	%)

*Operating income*
Scholastic	$	23,434		$	22,880		$	554			2.4	%
Memory Book		117,884			112,358			5,526			4.9	%
Marketing and Publishing Services		2,743			2,055			688			33.5	%

	$	144,061		$	137,293		$	6,768			4.9	%

*Depreciation and Amortization*
Scholastic	$	2,882		$	6,866		$	(3,984	)		(58.0	%)
Memory Book		6,523			11,156			(4,633	)		(41.5	%)
Marketing and Publishing Services		7,357			7,799			(442	)		(5.7	%)

	$	16,762		$	25,821		$	(9,059	)		(35.1	%)

NM = Not meaningful


	Six months ended
In thousands	June 28, 2014			June 29, 2013			$ Change			% Change
*Net sales*
Scholastic	$	266,265		$	272,723		$	(6,458	)		(2.4	%)
Memory Book		245,624			253,419			(7,795	)		(3.1	%)
Marketing and Publishing Services		176,521			167,565			8,956			5.3	%
Inter-segment eliminations		(491	)		(235	)		(256	)		NM

	$	687,919		$	693,472		$	(5,553	)		(0.8	%)

*Operating income*
Scholastic	$	43,065		$	43,800		$	(735	)		(1.7	%)
Memory Book		108,917			97,696			11,221			11.5	%
Marketing and Publishing Services		14,966			8,864			6,102			68.8	%

	$	166,948		$	150,360		$	16,588			11.0	%

*Depreciation and Amortization*
Scholastic	$	8,888		$	16,420		$	(7,532	)		(45.9	%)
Memory Book		9,713			19,417			(9,704	)		(50.0	%)
Marketing and Publishing Services		14,970			16,139			(1,169	)		(7.2	%)

	$	33,571		$	51,976		$	(18,405	)		(35.4	%)

NM = Not meaningful

17. Related Party Transactions

Management Services Agreement

In connection with the Transactions, Holdco entered into a management services agreement with the Sponsors pursuant to which the Sponsors provide certain structuring, consulting and management advisory services. Under the management services agreement, during the term the Sponsors receive an annual advisory fee of $3.0 million that is payable quarterly and which increases by 3% per year. Holdco incurred advisory fees from the Sponsors of $1.0 million and $0.9 million for the three-month periods ended June 28, 2014 and June 29, 2013, respectively. The Company incurred advisory fees from the Sponsors of $2.0 million and $1.8 million for the six-month periods ended June 28, 2014 and June 29, 2013, respectively. The management services agreement also provides that Holdco 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.

Other

KKR Capstone is a team of operational professionals who work exclusively with KKR’s investment professionals and portfolio company management teams to enhance and strengthen operations in KKR’s portfolio companies. The Company has retained KKR Capstone from time to time to provide certain of its businesses with consulting services primarily to help identify and implement operational improvements and other strategic efforts within its businesses. The Company incurred less than $0.1 million of charges during the three months ended June 28, 2014 and did not incur any charges during the three months ended June 29, 2013 for services provided by KKR Capstone. The Company incurred $0.1 million of charges during the six months ended June 28, 2014 and did not incur any charges during the six months ended June 29, 2013 for services provided by KKR Capstone. Capstone Equity Investors LLC has an ownership interest in Holdco.

Certain of the lenders under the Credit Facilities and their affiliates have engaged, and may in the future engage, in investment banking, commercial banking and other financial advisory and commercial dealings with Visant and its affiliates. Such parties have received (or will receive) customary fees and commissions for these transactions.

Affiliates of Credit Suisse Securities (USA) LLC and KKR Capital Markets LLC act as lenders and/or as agents under the Credit Facilities and were initial purchasers of the Senior Notes, for which they received and will receive customary fees and expenses and are indemnified by the Company against certain liabilities. KKR Capital Markets LLC is an affiliate of one of the Sponsors. Until March 31, 2014, Credit Suisse Securities (USA) LLC was an affiliate of one of the Company’s Sponsors.

The Company is party to an agreement with CoreTrust Purchasing Group (“CoreTrust”), a group purchasing organization, pursuant to which the Company avails itself of the terms and conditions of the CoreTrust purchasing organization for certain purchases, including its prescription drug benefit program. KKR Capstone is party to an agreement with CoreTrust which permits certain KKR portfolio companies, including Visant, the benefit of utilizing the CoreTrust group purchasing program. CoreTrust receives payment of fees for administrative and other services provided by CoreTrust from certain vendors based on the products and services purchased by the Company and other parties, and CoreTrust shares a portion of such fees with KKR Capstone.

The Company has participated in providing integrated marketing programs with an affiliate of First Data Corporation, a company which is owned and controlled by affiliates of KKR. This collaborative arrangement was terminated during the quarter ended September 29, 2012, subject to certain residual revenue received during 2013. There was no such revenue for the three- and six- month periods ended June 28, 2014.

18. Condensed Consolidating Guarantor Information

As discussed in Note 10, Debt, Visant’s obligations under the Credit Facilities and the Senior Notes are guaranteed by certain of its 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.

Included in the presentation of “Equity (earnings) in subsidiary, net of tax” is the elimination of intercompany interest expense incurred by the guarantors in the amount of $32.8 million as of each of the three-month periods ended June 28, 2014 and June 29, 2013. The elimination of intercompany interest expense incurred by the guarantors was $66.0 million and $66.2 million for the six-month periods ended June 28, 2014 and June 29, 2013, respectively.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three months ended June 28, 2014


In thousands	Visant			Guarantors			Non- Guarantors		Eliminations			Total
Net sales	$	—		$	418,201		$	32,687	$	(6,563	)	$	444,325
Cost of products sold		—			170,195			21,928		(6,580	)		185,543

Gross profit		—			248,006			10,759		17			258,782
Selling and administrative expenses		2,332			101,546			6,734		—			110,612
Gain on disposal of assets		—			(144	)		—		—			(144	)
Special charges		—			4,099			154		—			4,253

Operating (loss) income		(2,332	)		142,505			3,871		17			144,061
Interest expense, net		38,244			33,009			226		(32,835	)		38,644

(Loss) income before income taxes		(40,576	)		109,496			3,645		32,852			105,417
(Benefit from) provision for income taxes		(2,483	)		42,545			1,205		9			41,276

(Loss) income from operations		(38,093	)		66,951			2,440		32,843			64,141
Earnings in subsidiary, net of tax		(102,234	)		(2,440	)		—		104,674			—

Net income	$	64,141		$	69,391		$	2,440	$	(71,831	)	$	64,141

Comprehensive income	$	64,584		$	69,749		$	2,542	$	(72,291	)	$	64,584

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three months ended June 29, 2013


In thousands	Visant			Guarantors			Non- Guarantors		Eliminations			Total
Net sales	$	—		$	430,634		$	23,703	$	(5,801	)	$	448,536
Cost of products sold		—			183,196			12,227		(5,809	)		189,614

Gross profit		—			247,438			11,476		8			258,922
Selling and administrative expenses		728			110,796			7,428		—			118,952
Loss on disposal of assets		—			4			—		—			4
Special charges		—			2,673			—		—			2,673

Operating (loss) income		(728	)		133,965			4,048		8			137,293
Interest expense, net		37,914			33,167			64		(32,751	)		38,394

(Loss) income before income taxes		(38,642	)		100,798			3,984		32,759			98,899
Provision for income taxes		2,529			38,338			1,308		4			42,179

(Loss) income from operations		(41,171	)		62,460			2,676		32,755			56,720
Earnings in subsidiary, net of tax		(97,891	)		(2,676	)		—		100,567			—

Net income	$	56,720		$	65,136		$	2,676	$	(67,812	)	$	56,720

Comprehensive income	$	58,187		$	65,771		$	2,146	$	(67,917	)	$	58,187

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Six months ended June 28, 2014


In thousands	Visant			Guarantors			Non- Guarantors		Eliminations			Total
Net sales	$	—		$	637,077		$	60,695	$	(9,853	)	$	687,919
Cost of products sold		—			274,715			42,936		(10,087	)		307,564

Gross profit		—			362,362			17,759		234			380,355
Selling and administrative expenses		(180	)		195,702			12,232		—			207,754
Gain on disposal of assets		—			(347	)		—		—			(347	)
Special charges		—			5,373			627		—			6,000

Operating income		180			161,634			4,900		234			166,948
Interest expense, net		76,672			66,373			420		(66,026	)		77,439

(Loss) income before income taxes		(76,492	)		95,261			4,480		66,260			89,509
(Benefit from) provision for income taxes		(1,882	)		35,412			1,647		92			35,269

(Loss) income from operations		(74,610	)		59,849			2,833		66,168			54,240
Earnings in subsidiary, net of tax		(128,850	)		(2,833	)		—		131,683			—

Net income	$	54,240		$	62,682		$	2,833	$	(65,515	)	$	54,240

Comprehensive income	$	55,299		$	63,398		$	2,843	$	(66,241	)	$	55,299

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Six months ended June 29, 2013


In thousands	Visant			Guarantors			Non- Guarantors		Eliminations			Total
Net sales	$	—		$	657,958		$	46,113	$	(10,599	)	$	693,472
Cost of products sold		—			295,401			25,882		(10,777	)		310,506

Gross profit		—			362,557			20,231		178			382,966
Selling and administrative expenses		(252	)		214,018			15,283		—			229,049
Loss on disposal of assets		—			27			—		—			27
Special charges		—			3,530			—		—			3,530

Operating income		252			144,982			4,948		178			150,360
Interest expense, net		76,759			67,091			97		(66,173	)		77,774

(Loss) income before income taxes		(76,507	)		77,891			4,851		66,351			72,586
Provision for income taxes		1,233			27,727			1,771		70			30,801

(Loss) income from operations		(77,740	)		50,164			3,080		66,281			41,785
Earnings in subsidiary, net of tax		(119,525	)		(3,080	)		—		122,605			—

Net income	$	41,785		$	53,244		$	3,080	$	(56,324	)	$	41,785

Comprehensive income	$	43,929		$	54,513		$	2,119	$	(56,632	)	$	43,929

CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)

June 28, 2014


In thousands	Visant			Guarantors		Non- Guarantors		Eliminations			Total
ASSETS
Cash and cash equivalents	$	115,272		$	3,160	$	9,312	$	—		$	127,744
Accounts receivable, net		1,665			107,929		20,945		—			130,539
Inventories		—			63,568		6,301		(249	)		69,620
Salespersons overdrafts, net		—			12,105		1,003		—			13,108
Prepaid expenses and other current assets		924			11,410		2,542		—			14,876
Income tax receivable		—			—		1,299		—			1,299
Intercompany receivable		20,509			3,680		29		(24,218	)		—
Deferred income taxes		2,039			14,254		305		—			16,598

Total current assets		140,409			216,106		41,736		(24,467	)		373,784
Property, plant and equipment, net		62			169,926		9,118		—			179,106
Goodwill		—			894,787		32,416		—			927,203
Intangibles, net		—			342,938		18,061		—			360,999
Deferred financing costs, net		28,242			—		—		—			28,242
Deferred income taxes		—			—		2,342		—			2,342
Intercompany receivable		506,574			100,593		57,734		(664,901	)		—
Other assets		1,212			12,660		762		—			14,634
Investment in subsidiaries		865,640			109,848		—		(975,488	)		—

	$	1,542,139		$	1,846,858	$	162,169	$	(1,664,856	)	$	1,886,310

LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Accounts payable	$	3,291		$	31,427	$	9,170	$	1		$	43,889
Accrued employee compensation and related taxes		5,287			18,023		4,458		—			27,768
Commissions payable		—			26,238		437		—			26,675
Customer deposits		—			62,134		5,805		—			67,939
Income taxes payable		(8,872	)		39,432		28		(96	)		30,492
Current portion of long-term debt and capital leases		10			3,502		391		—			3,903
Interest payable		33,726			59		—		—			33,785
Intercompany payable		—			14,738		9,481		(24,219	)		—
Other accrued liabilities		3,312			24,034		2,105		—			29,451

Total current liabilities		36,754			219,587		31,875		(24,314	)		263,902
Long-term debt and capital leases—less current maturities		1,867,038			2,928		416		—			1,870,382
Intercompany payable		85,393			564,461		15,200		(665,054	)		—
Deferred income taxes		1,802			138,786		3,783		—			144,371
Pension liabilities, net		15,490			31,419		—		—			46,909
Other noncurrent liabilities		14,186			24,037		1,047		—			39,270

Total liabilities		2,020,663			981,218		52,321		(689,368	)		2,364,834
Mezzanine equity		11			—		—		—			11
Stockholder’s (deficit) equity		(478,535	)		865,640		109,848		(975,488	)		(478,535	)

	$	1,542,139		$	1,846,858	$	162,169	$	(1,664,856	)	$	1,886,310

CONDENSED CONSOLIDATING BALANCE SHEET

December 28, 2013


In thousands	Visant			Guarantors		Non- Guarantors		Eliminations			Total
ASSETS
Cash and cash equivalents	$	83,633		$	2,695	$	9,714	$	—		$	96,042
Accounts receivable, net		1,070			88,352		18,779		—			108,201
Inventories		—			97,871		6,961		(483	)		104,349
Salespersons overdrafts, net		—			23,036		1,285		—			24,321
Prepaid expenses and other current assets		857			16,015		1,898		—			18,770
Income tax receivable		2,148			—		1,314		—			3,462
Intercompany receivable		6,487			3,665		8		(10,160	)		—
Deferred income taxes		6,526			14,220		307		—			21,053

Total current assets		100,721			245,854		40,266		(10,643	)		376,198
Property, plant and equipment, net		77			179,103		9,911		—			189,091
Goodwill		—			894,787		32,036		—			926,823
Intangibles, net		—			348,976		18,591		—			367,567
Deferred financing costs, net		33,118			—		—		—			33,118
Deferred income taxes		—			—		2,316		—			2,316
Intercompany receivable		519,772			55,526		57,972		(633,270	)		—
Other assets		1,211			9,476		475		—			11,162
Investment in subsidiaries		802,242			107,005		—		(909,247	)		—

	$	1,457,141		$	1,840,727	$	161,567	$	(1,553,160	)	$	1,906,275

LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Accounts payable	$	6,185		$	31,874	$	7,810	$	(2	)	$	45,867
Accrued employee compensation and related taxes		7,929			21,516		5,946		—			35,391
Commissions payable		—			163,205		6,714		—			169,919
Customer deposits		—			10,390		518		—			10,908
Income taxes payable		(892	)		3,183		1,207		(188	)		3,310
Current portion of long-term debt and capital leases		33,616			86		—		—			33,702
Interest payable		10			4,395		373		—			4,778
Intercompany payable		73			1,195		8,890		(10,158	)		—
Other accrued liabilities		3,003			23,741		2,450		—			29,194

Total current liabilities		49,924			259,585		33,908		(10,348	)		333,069
Long-term debt and capital leases—less current maturities		1,865,229			2,359		559		—			1,868,147
Intercompany payable		40,461			577,904		15,200		(633,565	)		—
Deferred income taxes		2,714			140,192		4,153		—			147,059
Pension liabilities, net		17,046			34,880		—		—			51,926
Other noncurrent liabilities		14,505			23,565		742		—			38,812

Total liabilities		1,989,879			1,038,485		54,562		(643,913	)		2,439,013
Mezzanine equity		11			—		—		—			11
Stockholder’s (deficit) equity		(532,749	)		802,242		107,005		(909,247	)		(532,749	)

	$	1,457,141		$	1,840,727	$	161,567	$	(1,553,160	)	$	1,906,275

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Six months ended June 28, 2014


In thousands	Visant			Guarantors			Non- Guarantors			Eliminations			Total
Net income	$	54,240		$	62,682		$	2,833		$	(65,515	)	$	54,240
Other cash (used in) provided by operating activities		(72,155	)		5,220			(2,754	)		65,515			(4,174	)

Net cash (used in) provided by operating activities		(17,915	)		67,902			79			—			50,066
Purchases of property, plant and equipment		—			(14,675	)		(86	)		—			(14,761	)
Additions to intangibles		—			(94	)		—			—			(94	)
Proceeds from sale of property and equipment		—			419			—			—			419
Intercompany payable (receivable)		5,575			(45,068	)		—			39,493			—
Acquisition of business, net of cash acquired		—			—			(184	)		—			(184	)

Net cash provided by (used in) investing activities		5,575			(59,418	)		(270	)		39,493			(14,620	)
Repayments of long-term debt and capital leases		(4	)		(2,603	)		(186	)		—			(2,793	)
Proceeds from issuance of long-term debt		—			159			—			—			159
Intercompany payable (receivable)		45,068			(5,575	)		—			(39,493	)		—
Excess tax benefit from share based arrangements		36			—			—			—			36
Distribution to shareholder		(1,121	)		—			—			—			(1,121	)

Net cash provided by (used in) financing activities		43,979			(8,019	)		(186	)		(39,493	)		(3,719	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(25	)		—			(25	)

Increase (decrease) in cash and cash equivalents		31,639			465			(402	)		—			31,702
Cash and cash equivalents, beginning of period		83,633			2,695			9,714			—			96,042

Cash and cash equivalents, end of period	$	115,272		$	3,160		$	9,312		$	—		$	127,744

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Six months ended June 29, 2013


In thousands	Visant			Guarantors			Non- Guarantors			Eliminations			Total
Net income	$	41,785		$	53,244		$	3,080		$	(56,324	)	$	41,785
Other cash (used in) provided by operating activities		(63,112	)		11,441			(154	)		56,321			4,496

Net cash (used in) provided by operating activities		(21,327	)		64,685			2,926			(3	)		46,281
Purchases of property, plant and equipment		(60	)		(15,661	)		(1,510	)		—			(17,231	)
Additions to intangibles		—			(106	)		—			—			(106	)
Proceeds from sale of property and equipment		—			70			—			—			70
Other investing activities, net		—			(1,005	)		1,005			—			—

Net cash used in investing activities		(60	)		(16,702	)		(505	)		—			(17,267	)
Repayments of long-term debt and capital leases		(12,002	)		(2,397	)		(64	)		—			(14,463	)
Proceeds from issuance of long-term debt		—			644			—			—			644
Intercompany payable (receivable)		29,733			(49,486	)		19,750			3			—

Net cash provided by (used in) financing activities		17,731			(51,239	)		19,686			3			(13,819	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(615	)		—			(615	)

(Decrease) increase in cash and cash equivalents		(3,656	)		(3,256	)		21,492			—			14,580
Cash and cash equivalents, beginning of period		48,590			3,286			8,320			—			60,196

Cash and cash equivalents, end of period	$	44,934		$	30		$	29,812		$	—		$	74,776

19. Subsequent Events

On July 15, 2014, the Company announced that it had sold substantially all of the assets of its The Lehigh Press LLC (“Lehigh”) subsidiary for $22.0 million. The Company applied the net proceeds from the sale to repayment of outstanding indebtedness under the Term Loan Credit Facility. As a result of the transaction Lehigh’s obligation to make contributions under a multi-employer pension plan ceased, triggering an obligation by Lehigh to pay a withdrawal liability under the plan. The amount and terms of payment have not been determined at this time.

On July 25, 2014, the Company announced that it had entered into a definitive agreement with OCM Luxembourg Ileos Holdings S.à.r.l. and Tripolis Holdings S.à.r.l. to combine their respective Arcade Marketing and Bioplan businesses, to form a new strategic venture (the “Arcade Transaction”). The Arcade Transaction, which is subject to customary closing conditions and regulatory review, is expected to close by the beginning of the fourth quarter 2014. The Company expects to receive cash proceeds of approximately $325.0 million, which it intends to use for repayment of its outstanding indebtedness.

Also, on July 25, 2014, the Company announced that in connection with its expected delevering as a result of the proposed Arcade Transaction and in order to extend the current maturities of its senior secured credit facilities, it was launching a process to refinance its senior secured facilities, including its existing senior term loan and revolving credit facilities.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with 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, expectations with respect to future 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 rather predictions and generally can be identified by use of statements that include such words as “may”, “might”, “will”, “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. Actual results may differ materially from current expectations depending upon a number of factors affecting our businesses and the risks associated with the successful execution of the proposed Arcade Transaction and the proposed refinancing of our senior secured credit facilities. These factors include, without limitation, successful completion of the proposed transactions in the time period anticipated or at all, which is dependent on the parties’ ability to satisfy certain closing conditions, and the ability to implement the refinancing in the time period anticipated or at all and on favorable terms, and, those identified under, Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 28, 2013, in addition to those discussed elsewhere in this report.

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 and our ability to service the indebtedness;

•

our ability to implement our business strategy in a timely and effective manner;

•

competitive factors and pressures;

•

our ability to consummate acquisitions and dispositions on acceptable terms and to integrate acquisitions successfully and to achieve anticipated synergies;

•

global market and economic conditions;

•

levels of customers’ advertising and marketing spending, including as may be impacted by economic factors and general market conditions;

•

fluctuations in raw material prices;

•

our reliance on a limited number of suppliers;

•

the seasonality of our businesses;

•

developments in technology and related changes in consumer behavior;

•

the loss of significant customers or customer relationships;

•

Jostens’ reliance on independent sales representatives;

•

our reliance on numerous complex information systems and associated security risks;

•

the amount of capital expenditures required at our businesses;

•

risks associated with doing business outside the United States;

•

the reliance of our businesses on limited production facilities;

•

actions taken by the U.S. Postal Service and changes in postal standards and their effect on our marketing services business, including as such changes may impact competition for our sampling systems;

•

labor disturbances;

•

environmental obligations and liabilities;

•

adverse outcome of pending or threatened litigation;

•

the enforcement of intellectual property rights;

•

the impact of changes in applicable law and regulations, including tax legislation;

•

the application of privacy laws and other related obligations and liabilities for our business;

•

control by our stockholders;

•

changes in market value of the securities held in our pension plans; and

•

our dependence on members of senior management.

We caution you not to place undue reliance on these forward-looking statements, and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date they are made, are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements in light of new information, future events or otherwise, except as required by law. Comparisons of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

GENERAL

We are a leading marketing and publishing services enterprise servicing the school affinity, direct marketing, fragrance, cosmetic and personal care sampling and packaging, and educational and trade publishing segments. Our parent company was created in October 2004 when affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) and affiliates of DLJ Merchant Banking Partners III, L.P. (“DLJMBP III” and, together with KKR, the “Sponsors”) completed a series of transactions that combined Jostens, Von Hoffmann Corporation (“Von Hoffmann”) and Arcade (the “Transactions”). Visant was formed to create a platform of businesses with leading positions in attractive end market segments and to establish a highly experienced management team that could leverage a shared services infrastructure and capitalize on margin and growth opportunities. Since 2004, we have developed a unified marketing and publishing services organization with a leading and differentiated approach in each of our segments. Our management team has created and integrated central services and management functions and has reshaped the business to focus on the most attractive and highest growth market opportunities.

We sell our products and services to end customers through several different sales channels, including independent sales representatives and dedicated employed sales forces. Our sales and results of operations are impacted by a number of factors, including general economic conditions, seasonality, cost of raw materials, school population trends, the availability of school funding, product and service offerings and quality and price. Visant (formerly known as Jostens IH Corp.) was originally incorporated in Delaware in 2003.

Our business has expanded through a number of acquisitions. These acquisitions have most recently included the acquisition of the capital stock of SAS Carestia (“Carestia”) by Arcade on July 1, 2013. Headquartered in Grasse, France, Carestia is a producer of blotter cards, which are constructed for sampling fragrances, and other fragrance marketing solutions, as well as decorated packaging solutions.

We have demonstrated our ability over the last nine years since our inception to execute acquisitions and dispositions that have allowed us to complement and expand our core capabilities, accelerate into market segment adjacencies, as well as enabled us to divest non-core businesses and deleverage. We anticipate that we will continue to pursue this strategy of consummating complementary acquisitions to support expansion of our product offerings and services, including to address marketplace dynamics, developments in technology and changing consumer behaviors, broaden our geographic reach and capture opportunities for synergies, as well as availing ourselves of strategic opportunities and market conditions for transacting businesses in the Visant portfolio.

Recent Developments

On July 15, 2014, we announced that we had sold substantially all of the assets of our The Lehigh Press LLC (“Lehigh”) subsidiary for $22.0 million. We applied the net proceeds from the sale to repayment of outstanding indebtedness under the Term Loan Credit Facility. As a result of the transaction Lehigh’s obligation to make contributions under a multi-employer pension plan ceased, triggering an obligation by Lehigh to pay a withdrawal liability under the plan. The amount and terms of payment have not been determined at this time.

On July 25, 2014, we announced that we had entered into a definitive agreement to combine our Arcade Marketing business with the Bioplan business of OCM Luxembourg Ileos Holdings S.à.r.l. to form a new strategic venture (the “Arcade Transaction”). The Arcade Transaction, which is subject to customary closing conditions and regulatory review, is expected to close by the beginning of the fourth quarter 2014. We expect to receive cash proceeds of approximately $325.0 million, which we intend to use for repayment of our outstanding indebtedness.

Also on July 25, 2014, we announced that in connection with the expected delevering as a result of the proposed Arcade Transaction and in order to extend the current maturities of our senior secured credit facilities, we were launching a process to refinance our senior secured facilities, including our existing senior term loan and revolving credit facilities.

Our Segments

Our three reportable segments as of June 28, 2014 consisted of:

•

Scholastic—provides services in conjunction with the marketing, sale and production of class rings and an array of graduation products and other scholastic affinity products to students and administrators primarily in high schools, colleges and other post-secondary institutions;

•

Memory Book—provides services in conjunction with 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—provides services in conjunction with the development, marketing, sale and production of multi-sensory and interactive advertising sampling systems and packaging, primarily for the fragrance, cosmetic and personal care segments, and provides innovative products and related services to the direct marketing sector. The group also produces book components primarily for the educational and trade publishing segments.

We experience seasonal fluctuations in our net sales and cash flow from operations, tied primarily to the North American school year. In particular, Jostens generates a significant portion of its annual net sales in the second quarter in connection with the delivery of caps, gowns and diplomas for spring graduation ceremonies and spring deliveries of school yearbooks, and a significant portion of its annual cash flow in the fourth quarter is driven by the receipt of customer deposits in our Scholastic and Memory Book segments. The net sales of our sampling and direct mail and commercial printed products have also historically reflected seasonal variations, and we generate a majority of the annual net sales in these businesses during the third and fourth quarters, including based on the timing of customers’ advertising campaigns which have traditionally been concentrated prior to the Christmas and spring holiday seasons. Net sales of textbook 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 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 demand periods. Based on the seasonality of our cash flow, we traditionally borrow under our revolving credit facility during the third quarter to fund general working capital needs during this period of time when schools are generally not in session and orders are not being placed, and repay the amount borrowed for general working capital purposes in the fourth quarter when customer deposits in the Scholastic and Memory Book segments are received and customers’ advertising campaigns in anticipation of the holiday season generally increase.

Our net sales include sales to certain customers for whom we purchase paper. The price of paper, a primary material across most of our products and services, has been volatile over time and may cause swings in our net sales and cost of sales. We generally are able to pass on increases in the cost of paper to our customers across most of our product lines at the time we are impacted by such increases.

The price of gold and other precious metals has been highly volatile since 2009, and we anticipate continued volatility in the price of gold for the foreseeable future driven by numerous factors, such as changes in supply and demand and investor sentiment. The volatility of metal prices has impacted, and could further impact, our jewelry sales metal mix. We have seen a continuing shift in jewelry metal mix from gold to lesser priced metals over the past several years, which we believe is in part attributable to the impact of significantly higher precious metal costs on our jewelry prices. To mitigate any continued volatility of precious metal costs and the impact on our manufacturing costs, we have entered into purchase commitments for gold which we believe will cover our needs for gold for the remainder of fiscal 2014 and a portion of 2015.

The continued uncertainty in market conditions and excess capacity that exists in the print and related services industry, as well as the variety of other advertising media with which we compete, have amplified competitive and pricing pressures, which we anticipate will continue for the foreseeable future. We continue to see the impact of restrictions on school budgets, which affects spending at the state and local levels, resulting in reduced spending for our Memory Book, Scholastic and elementary/high school publishing services products and services and heightened pricing pressure on our core Memory Book

products and services. The continued cautious consumer spending environment also contributes to more constrained levels of spending on purchases in our Memory Book and Scholastic segments made directly by the student and parent. Funding constraints have impacted textbook adoption cycles, which are being extended in many states due to fiscal pressures, continuing to affect orders being placed by our Publishing Services customers and volume in our elementary/high school publishing services products and services. Trade book publishing has been impacted by the shift towards digital books, which has negatively impacted our publishing services business in terms of fewer printed copies of books as well as shorter print runs. However, we believe that this trend has stabilized over the last 12 months. To address changes in technology, consumer behavior and user preferences, we have continued to diversify, expand and improve our product and service offerings and the manner in which we sell our products and services, including through improved e-commerce tools.

We seek to distinguish ourselves based on our capabilities, innovative service offerings to our customers, quality and organizational and financial strength. In addition, to address the dynamics impacting our businesses, we have continued to implement efforts to reduce costs and drive operating efficiencies, including through the restructuring and integration of our operations and the rationalization of sales, administrative and support functions. We expect to initiate additional efforts focused on cost reduction and containment to address continued challenging marketplace conditions as well as competitive and pricing pressures demanding innovation and a lower cost structure.

For additional financial and other information about our operating segments, see Note 16, Business Segments, to our condensed consolidated financial statements included elsewhere herein.

Company Background

On October 4, 2004, an affiliate of KKR and affiliates of DLJMBP III completed the Transactions, which created a marketing and publishing services enterprise through the consolidation of Jostens, Von Hoffmann and Arcade. The Transactions were accounted for as a combination of interests under common control.

As of August 5, 2014, affiliates of KKR and DLJMBP III held approximately 49.3% and 41.1%, respectively, of Holdco’s voting interest, while each held approximately 44.8% of Holdco’s economic interest. As of August 5, 2014, the other co-investors held approximately 8.4% of the voting interest and approximately 9.1% of the economic interest of Holdco, and members of management held approximately 1.2% of the voting interest and approximately 1.3% of the economic interest of Holdco (exclusive of exercisable options). Visant is an indirect wholly-owned subsidiary of Holdco.

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 relate 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 Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.

Recently Adopted Accounting Pronouncements

On January 31, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2013-01 (“ASU 2013-01”), which clarifies the scope of the offsetting disclosure requirements. Under ASU 2013-01, the disclosure requirements would apply to derivative instruments accounted for in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement. ASU 2013-01 became effective for interim and annual periods beginning on or after January 1, 2013. Retrospective application is required for all comparative periods presented. Our adoption of this guidance did not have a material impact on our financial statements.

On February 5, 2013, the FASB issued Accounting Standards Update 2013-02 (“ASU 2013-02”), which amends existing guidance by requiring additional disclosure either on the face of the income statement or in the notes to the financial statements of significant amounts reclassified out of accumulated other comprehensive income. ASU 2013-02 became effective for interim and annual periods beginning on or after December 15, 2012, to be applied on a prospective basis. Our adoption of this guidance did not have a material impact on our financial statements.

On February 28, 2013, the FASB issued Accounting Standards Update 2013-04 (“ASU 2013-04”), which requires entities to measure obligations resulting from joint and several liability arrangements, for which the total amount of the obligation is fixed at the reporting date, as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Required disclosures include a description of the joint and several arrangement and the total outstanding amount of the obligation for all joint parties. ASU 2013-04 is effective for interim and annual periods beginning on or after December 15, 2013 and should be applied retrospectively to obligations with joint and several liabilities existing at the beginning of an entity’s fiscal year of adoption, with early adoption permitted. Our adoption of this guidance did not have a material impact on our financial statements.

On March 4, 2013, the FASB issued Accounting Standards Update 2013-05 (“ASU 2013-05”), which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been (1) the sale of a subsidiary or group of net assets within a foreign entity, and the sale represents the substantially complete liquidation of the investment in the foreign entity, (2) a loss of controlling financial interest in an investment in a foreign entity or (3) a step acquisition for a foreign entity. ASU 2013-05 does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. Our adoption of this guidance did not have a material impact on our financial statements.

On July 17, 2013, the FASB issued Accounting Standards Update 2013-10 (“ASU 2013-10”), which amends ASC 815 to allow entities to use the federal funds effective swap rate, in addition to U.S. Treasury rates and LIBOR, as a benchmark interest rate in accounting for fair value and cash flow hedges in the United States. ASU 2013-10 also eliminates the provision in ASC 815 which prohibited the use of different benchmark rates for similar hedges except in rare and justifiable circumstances. ASU 2013-10 is effective prospectively for qualifying new hedging relationships entered into on or after July 17, 2013 and for hedging relationships redesignated on or after that date. Our adoption of this guidance did not have a material impact on our financial statements.

On July 18, 2013, the FASB issued Accounting Standards Update 2013-11 (“ASU 2013-11”), which provides guidance on the financial statement presentation of unrecognized tax benefits (“UTB”) when a net operating loss (“NOL”) carryforward, a similar tax loss or a tax credit carryforward exists. Under ASU 2013-11, an entity must present a UTB, or a portion of a UTB, in its financial statements as a reduction to a deferred tax asset (“DTA”) for a NOL carryforward, a similar tax loss or a tax credit carryforward, except when (1) a NOL carryforward, a similar tax loss or a tax credit carryforward is not available as of the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position or (2) the entity does not intend to use the DTA for this purpose. If either of these conditions exists, an entity should present a UTB in the financial statements as a liability and should not net the UTB with a DTA. This guidance is effective for fiscal years beginning after December 15, 2013, with early adoption permitted. The amendment should be applied to all UTBs that exist as of the effective date. Entities may choose to apply the amendments retrospectively to each prior reporting period presented. Our adoption of this guidance did not have a material impact on our financial statements.

On April 10, 2014, the FASB issued Accounting Standards Update 2014-08 (“ASU 2014-08”), which amends the definition of a discontinued operation in ASC 205-20, Discontinued Operations (“ASC 205-20”), and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. ASU 2014-08 limits classification of a discontinued operation to a component or group of components disposed of or classified as held for sale which represents a strategic shift that has or will have a major impact on an entity’s operations or financial results. ASU 2014-08 also requires entities to reclassify assets and liabilities of a discontinued operation for all comparative periods presented in the statement of financial position. Before these amendments, ASC 205-20 neither required nor prohibited such presentation. ASU 2014-08 is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. We are currently evaluating the impact and disclosure under this guidance on our financial statements.

customers except those that are within the scope of other topics in the FASB codification. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016 for public entities. Early adoption is not permitted. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance of ASU 2014-09. We are currently evaluating the impact and disclosure under this guidance on our financial statements.

On June 19, 2014, the FASB issued Accounting Standards Update 2014-12 (“ASU 2014-12”), which clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. ASU 2014-12 is effective for all entities for reporting periods (including interim periods) beginning after December 15, 2015, with early adoption permitted. All entities will have the option of applying the guidance either prospectively (i.e., only to awards granted or modified on or after the effective date of ASU 2014-12) or retrospectively. We are currently evaluating the impact and disclosure under this guidance on our financial statements.

RESULTS OF OPERATIONS

Three Months Ended June 28, 2014 Compared to the Three Months Ended June 29, 2013

The following table sets forth selected information derived from our Condensed Consolidated Statements of Operations and Comprehensive Income for the three-month periods ended June 28, 2014 and June 29, 2013. In the text below, amounts and percentages have been rounded and are based on the amounts in our condensed consolidated financial statements.


	Three months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change			% Change
Net sales	$	444,325		$	448,536		$	(4,211	)		(0.9	%)
Cost of products sold		185,543			189,614			(4,071	)		(2.1	%)

Gross profit		258,782			258,922			(140	)		(0.1	%)
% of net sales		*58.2*	%		*57.7*	%
Selling and administrative expenses		110,612			118,952			(8,340	)		(7.0	%)
% of net sales		*24.9*	%		*26.5*	%
(Gain) loss on disposal of fixed assets		(144	)		4			(148	)		NM
Special charges		4,253			2,673			1,580			NM

Operating income		144,061			137,293			6,768			4.9	%
% of net sales		32.4	%		30.6	%
Interest expense, net		38,644			38,394			250			0.7	%

Income before income taxes		105,417			98,899			6,518
Provision for income taxes		41,276			42,179			(903	)		(2.1	%)

Net income	$	64,141		$	56,720		$	7,421			13.1	%

NM = Not meaningful

Our business is managed on the basis of three reportable segments: Scholastic, Memory Book and Marketing and Publishing Services. The following table sets forth selected segment information derived from our Condensed Consolidated Statements of Operations and Comprehensive Income for the three-month periods ended June 28, 2014 and June 29, 2013. For additional financial information about our operating segments, see Note 16, Business Segments, to the condensed consolidated financial statements.


	Three months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change			% Change
Net sales
Scholastic	$	127,152		$	127,149		$	3			0.0	%
Memory Book		240,241			247,785			(7,544	)		(3.0	%)
Marketing and Publishing Services		77,179			73,673			3,506			4.8	%
Inter-segment eliminations		(247	)		(71	)		(176	)		NM

Net sales	$	444,325		$	448,536		$	(4,211	)		(0.9	%)

Operating income
Scholastic	$	23,434		$	22,880		$	554			2.4	%
Memory Book		117,884			112,358			5,526			4.9	%
Marketing and Publishing Services		2,743			2,055			688			33.5	%

Operating income	$	144,061		$	137,293		$	6,768			4.9	%

Depreciation and amortization
Scholastic	$	2,882		$	6,866		$	(3,984	)		(58.0	%)
Memory Book		6,523			11,156			(4,633	)		(41.5	%)
Marketing and Publishing Services		7,357			7,799			(442	)		(5.7	%)

Depreciation and amortization	$	16,762		$	25,821		$	(9,059	)		(35.1	%)

NM = Not meaningful

Net Sales. Consolidated net sales decreased $4.2 million, or 0.9%, to $444.3 million for the second fiscal quarter ended June 28, 2014 compared to $448.5 million for the second fiscal quarter ended June 29, 2013.

Net sales for the Scholastic segment were $127.2 million for the second fiscal quarter of 2014 compared to $127.1 million for the second fiscal quarter of 2013. This slight increase was primarily attributable to higher revenue from our professional championship products offset by lower volume in our base jewelry and announcement products.

Net sales for the Memory Book segment were $240.2 million for the second fiscal quarter of 2014 compared to $247.8 million for the second fiscal quarter of 2013. This decrease was primarily attributable to lower volume. Approximately $2.0 million of sales in the quarter was due to a shift in the timing of shipments from July 2014 into the second quarter of 2014.

Net sales for the Marketing and Publishing Services segment for the second fiscal quarter of 2014 increased $3.5 million to $77.2 million from $73.7 million for the second fiscal quarter of 2013. This increase included sales attributable to the Company’s acquisition of SAS Carestia (“Carestia”), a leader in fragrance sampling in Europe, which closed on July 1, 2013. Excluding the impact attributable to the acquisition of Carestia, sales decreased compared to the second fiscal quarter of 2013, primarily due to lower revenue in our direct mail operations, offset by higher revenues from our international base sampling operations.

Gross Profit. Consolidated gross profit decreased $0.1 million, or 0.1%, to $258.8 million for the three months ended June 28, 2014 from $258.9 million for the three months ended June 29, 2013. As a percentage of net sales, gross profit margin for the three months ended June 28, 2014 increased to 58.2% from 57.7% for the comparative period in 2013 primarily due to the impact of cost saving initiatives and other manufacturing efficiencies in the Memory Book segment.

Selling and Administrative Expenses. Selling and administrative expenses decreased $8.4 million, or 7.0%, to $110.6 million for the three months ended June 28, 2014 from $119.0 million for the comparative period in 2013. This decrease was primarily due to lower depreciation and amortization expense of approximately $8.4 million in the second fiscal quarter of 2014 compared to the prior year comparable period. Excluding the impact of the lower depreciation and amortization, selling and administrative expenses for the three months ended June 28, 2014 were $119.0 million, unchanged as compared to the three months ended June 29, 2013.

Special Charges. For the three months ended June 28, 2014, we recorded $2.2 million and $0.5 million of restructuring costs in the Scholastic and Memory Book segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the three months ended June 28, 2014 were $1.6 million of non-cash asset impairment charges associated with facility consolidations in the Scholastic segment. The associated employee headcount reductions related to the above actions were 122 and four in the Scholastic and Memory Book segments, respectively.

For the three months ended June 29, 2013, we recorded $1.6 million, $0.3 million and $0.1 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the second fiscal quarter ended June 29, 2013 was approximately $0.7 million of non-cash asset impairment charges in the Memory Book segment associated with the consolidation of our Topeka, Kansas facility, which was substantially completed in early 2013. The associated employee headcount reductions related to the above actions were 96, six and four in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

Operating Income. As a result of the foregoing, consolidated operating income increased $6.8 million to $144.1 million for the three months ended June 28, 2014 compared to $137.3 million for the comparable period in 2013. As a percentage of net sales, operating income increased to 32.4% for the second fiscal quarter of 2014 from 30.6% for the same period in 2013.

Net Interest Expense. Net interest expense was comprised of the following:


	Three months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change		% Change
Interest expense	$	35,285		$	35,250		$	35		0.1	%
Amortization of debt discount, premium and deferred financing costs		3,388			3,173			215		6.8	%
Interest income		(29	)		(29	)		—		NM

Interest expense, net	$	38,644		$	38,394		$	250		0.7	%

NM = Not meaningful

Net interest expense increased $0.2 million to $38.6 million for the three months ended June 28, 2014 compared to $38.4 million for the comparative 2013 period. This slight increase in interest expense was primarily due to higher non-cash amortization for the three months ended June 28, 2014 as compared to the three months ended June 29, 2013.

Income Taxes. We recorded an income tax provision for the three months ended June 28, 2014 based on our best estimate of the consolidated effective tax rate applicable for the entire 2014 fiscal year and giving effect to tax adjustments considered a period expense or benefit. The effective tax rates for the three months ended June 28, 2014 and June 29, 2013 were 39.2% and 42.6%, respectively. The decrease in tax rate for the second quarter of 2014 compared to the second quarter of 2013 was due primarily to the favorable effect of the domestic manufacturing deduction, which is expected to become available to the Company in 2014 because the Company anticipates that the remaining net operating loss from 2011 will be fully utilized during 2014.

Net Income. As a result of the aforementioned items, we reported net income of $64.1 million for the three months ended June 28, 2014 compared to net income of $56.7 million for the three months ended June 29, 2013.

Six Months Ended June 28, 2014 Compared to the Six Months Ended June 29, 2013

The following table sets forth selected information derived from our Condensed Consolidated Statements of Operations and Comprehensive Income for the six-month periods ended June 28, 2014 and June 29, 2013. In the text below, amounts and percentages have been rounded and are based on the amounts in our condensed consolidated financial statements.


	Six months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change			% Change
Net sales	$	687,919		$	693,472		$	(5,553	)		(0.8	%)
Cost of products sold		307,564			310,506			(2,942	)		(0.9	%)

Gross profit		380,355			382,966			(2,611	)		(0.7	%)
% of net sales		*55.3*	%		*55.2*	%
Selling and administrative expenses		207,754			229,049			(21,295	)		(9.3	%)
% of net sales		*30.2*	%		*33.0*	%
(Gain) loss on disposal of fixed assets		(347	)		27			(374	)		NM
Special charges		6,000			3,530			2,470			NM

Operating income		166,948			150,360			16,588			11.0	%
% of net sales		*24.3*	%		*21.7*	%
Interest expense, net		77,439			77,774			(335	)		(0.4	%)

Income before income taxes		89,509			72,586			16,923			23.3	%
Provision for income taxes		35,269			30,801			4,468			14.5	%

Net income	$	54,240		$	41,785		$	12,455			29.8	%

NM = Not meaningful

Our business is managed on the basis of three reportable segments: Scholastic, Memory Book and Marketing and Publishing Services. The following table sets forth selected segment information derived from our Condensed Consolidated Statements of Operations and Comprehensive Income for the six-month periods ended June 28, 2014 and June 29, 2013. For additional financial information about our operating segments, see Note 16, Business Segments, to the condensed consolidated financial statements.


	Six months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change			% Change
Net sales
Scholastic	$	266,265		$	272,723		$	(6,458	)		(2.4	%)
Memory Book		245,624			253,419			(7,795	)		(3.1	%)
Marketing and Publishing Services		176,521			167,565			8,956			5.3	%
Inter-segment eliminations		(491	)		(235	)		(256	)		NM

Net sales	$	687,919		$	693,472		$	(5,553	)		(0.8	%)

Operating income
Scholastic	$	43,065		$	43,800		$	(735	)		(1.7	%)
Memory Book		108,917			97,696			11,221			11.5	%
Marketing and Publishing Services		14,966			8,864			6,102			68.8	%

Operating income	$	166,948		$	150,360		$	16,588			11.0	%

Depreciation and amortization
Scholastic	$	8,888		$	16,420		$	(7,532	)		(45.9	%)
Memory Book		9,713			19,417			(9,704	)		(50.0	%)
Marketing and Publishing Services		14,970			16,139			(1,169	)		(7.2	%)

Depreciation and amortization	$	33,571		$	51,976		$	(18,405	)		(35.4	%)

NM = Not meaningful

Net Sales. Consolidated net sales decreased $5.6 million, or 0.8%, to $687.9 million for the six months ended June 28, 2014 compared to $693.5 million for the prior year comparable period.

Net sales for the Scholastic segment for the six months ended June 28, 2014 decreased by $6.4 million to $266.3 million compared to $272.7 million for the six months ended June 29, 2013. This decrease was primarily attributable to lower volume in our base jewelry and announcement products.

Net sales for the Memory Book segment were $245.6 million for the six-month period ended June 28, 2014 compared to $253.4 million for the six-month period ended June 29, 2013. This decrease was primarily attributable to lower volume.

Net sales for the Marketing and Publishing Services segment increased to $176.5 million for the first six months of fiscal 2014 compared to $167.6 million during the first six months of fiscal 2013. Excluding the impact attributable to the acquisition of Carestia, sales decreased approximately $2.6 million compared to the six months ended June 29, 2013, primarily due to lower revenue in our direct mail operations, partially offset by higher revenues from our sampling and publishing services operations.

Gross Profit. Consolidated gross profit decreased $2.6 million, or 0.7%, to $380.4 million for the six months ended June 28, 2014 from $383.0 million for the six-month period ended June 29, 2013. This decrease was primarily due to lower sales volumes in our Scholastic segment. As a percentage of net sales, gross profit margin increased slightly to 55.3% for the six months ended June 28, 2014 from 55.2% for the comparative period in 2013.

Selling and Administrative Expenses. Selling and administrative expenses decreased $21.2 million, or 9.3%, to $207.8 million for the six months ended June 28, 2014 from $229.0 million for the corresponding period in 2013. This decrease was primarily due to lower depreciation and amortization expense of approximately $17.1 million for the six months ended June 28, 2014 compared to the prior year comparable period. Additionally, included in the first half of 2013 was an aggregate $6.3 million of non-recurring employment expense related to certain executive transitions. Excluding the impact of the lower depreciation and amortization and non-recurring employment expense, selling and administrative expenses for the six months ended June 28, 2014 increased approximately $2.1 million compared to the six months ended June 29, 2013, primarily due to non-recurring acquisition related costs.

Special Charges. During the six-month period ended June 28, 2014, we recorded $3.0 million, $0.6 million and $0.5 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the six months ended June 28, 2014 were $1.9 million of non-cash asset impairment charges associated with facility consolidations in the Scholastic segment. The associated employee headcount reductions related to the above actions were 185, 22 and six in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

During the six-month period ended June 29, 2013, we recorded $1.8 million, $0.8 million and $0.2 million of restructuring costs in the Scholastic, Memory Book and Marketing and Publishing Services segments, respectively. These restructuring costs were comprised of severance and related benefits associated with reductions in force. Also included in other special charges for the six months ended June 29, 2013 was approximately $0.7 million of non-cash asset impairment charges in the Memory Book segment associated with the consolidation of our Topeka, Kansas facility. The associated employee headcount reductions related to the above actions were 103, 17 and seven in the Scholastic, Marketing and Publishing Services and Memory Book segments, respectively.

Operating Income. As a result of the foregoing, consolidated operating income increased $16.5 million to $166.9 million for the six months ended June 28, 2014 compared to $150.4 million for the comparable period in 2013. As a percentage of net sales, operating income was 24.3% and 21.7% for the six-month periods ended June 28, 2014 and June 29, 2013, respectively.

Net Interest Expense. Net interest expense was comprised of the following:


	Six months ended
	June 28,			June 29,
In thousands	2014			2013			$ Change			% Change
Interest expense	$	70,817		$	71,065		$	(248	)		(0.3	%)
Amortization of debt discount, premium and deferred financing costs		6,690			6,743			(53	)		(0.8	%)
Interest income		(68	)		(34	)		(34	)		NM

Interest expense, net	$	77,439		$	77,774		$	(335	)		(0.4	%)

NM = Not meaningful

Net interest expense decreased $0.4 million to $77.4 million for the six months ended June 28, 2014 compared to $77.8 million for the comparative prior year period. This decrease in interest expense was primarily due to lower overall borrowings in the six months ended June 28, 2014 compared to the six months ended June 29, 2013.

Income Taxes. We recorded an income tax provision for the six months ended June 28, 2014 based on our best estimate of the consolidated effective tax rate applicable for the entire 2014 fiscal year and giving effect to tax adjustments considered a period expense or benefit. The effective tax rates for the six months ended June 28, 2014 and June 29, 2013 were 39.4% and 42.4%, respectively. The decrease in the tax rate for the six-month period ended June 28, 2014 was due primarily to the favorable effect of the domestic manufacturing deduction, which is expected to become available to the Company in 2014 because the Company anticipates that the remaining net operating loss from 2011 will be fully utilized during 2014.

Net Income. As a result of the above, net income increased $12.4 million to $54.2 million for the six months ended June 28, 2014 compared to net income of $41.8 million for the six months ended June 29, 2013.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents cash flow activity for the first six months of fiscal 2014 and 2013 and should be read in conjunction with our Condensed Consolidated Statements of Cash Flows.


	Six months ended
	June 28,			June 29,
In thousands	2014			2013
Net cash provided by operating activities	$	50,066		$	46,281
Net cash used in investing activities		(14,620	)		(17,267	)
Net cash used in financing activities		(3,719	)		(13,819	)
Effect of exchange rate changes on cash		(25	)		(615	)

Increase in cash and cash equivalents	$	31,702		$	14,580

For the six months ended June 28, 2014, cash provided by operating activities increased $3.8 million to $50.1 million compared to $46.3 million for the comparative 2013 period. The increase in cash provided by operating activities was primarily attributable to the timing of working capital requirements partially offset by lower cash earnings.

Net cash used in investing activities for the six months ended June 28, 2014 was $14.6 million compared with $17.3 million for the comparative 2013 period. This decrease was primarily driven by lower expenditures for property, plant and equipment. Our capital expenditures relating to purchases of property, plant and equipment were $14.8 million and $17.2 million for the six months ended June 28, 2014 and June 29, 2013, respectively.

Net cash used in financing activities for the six months ended June 28, 2014 was $3.7 million, compared with $13.8 million for the comparative 2013 period. Net cash used in financing activities for the six months ended June 28, 2014 primarily consisted of $2.8 million of repayments of long-term debt related to equipment financing arrangements and capital lease obligations. Visant also transferred approximately $1.1 million of cash through Visant Secondary to Holdco to allow Holdco to settle equity interests with certain former managers and pay normal operating expenses. Net cash used in financing activities for the six months ended June 29, 2013 included an aggregate payment of $12.0 million under the outstanding Term Loan Credit Facility, inclusive of a voluntary pre-payment of $1.3 million and a payment of $10.7 million under the excess cash flow provisions of the Term Loan Credit Facility, and $2.5 million of repayments of long-term debt related to equipment financing arrangements and capital lease obligations.

We use cash generated from operations primarily for debt service obligations and capital expenditures and to fund other working capital requirements. In assessing our liquidity, we review and analyze our current cash on-hand, the number of days our sales are outstanding and capital expenditure commitments. 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 operating performance. Future principal debt payments are expected to be paid out of cash flows from operations, cash on- hand and, if consummated, future financings. Based upon the current level of operations, management expects our cash flows from operations along with availability under the Credit Facilities will provide sufficient liquidity to fund our obligations, including our projected working capital requirements, debt service and retirement obligations and related costs, and capital spending for the foreseeable future. To the extent we make additional acquisitions, we may require additional term loan borrowings under the Credit Facilities or new sources of funding, including additional debt or equity financing or some combination thereof, subject to the limitations of our existing debt instruments.

Based on the seasonality of our cash flow, we traditionally borrow under our Revolving Credit Facility during the third quarter to fund general working capital needs during this period of time when schools are generally not in session and orders are not being placed, and repay the amount borrowed for general working capital purposes in the fourth quarter when customer deposits in the Scholastic and Memory Book segments are received and customers’ advertising campaigns in anticipation of the holiday season generally increase.

We have substantial debt service requirements and are highly leveraged. As of June 28, 2014, we had total indebtedness of $1,884.3 million, including $1,140.4 million outstanding under the Term Loan Credit Facility, $736.7 million aggregate principal amount of Senior Notes, $7.3 million of outstanding borrowings under capital lease and equipment financing arrangements and exclusive of $20.8 million of standby letters of credit outstanding and $10.0 million of original issue discount related to the Term Loan Credit Facility. Our cash and cash equivalents as of June 28, 2014 totaled $127.7 million. As of June 28, 2014, we were in compliance with the financial covenants under our outstanding material debt obligations, including our consolidated total debt to consolidated EBITDA covenant. Our principal sources of liquidity are cash flows from operating activities and available borrowings under the Credit Facilities, which included $154.2 million of available borrowings (net of standby letters of credit) under the $175.0 million Revolving Credit Facility as of June 28, 2014.

Our liquidity and our ability to fund our capital requirements will depend on the credit markets and our financial condition. The extent of any impact of credit market conditions on our liquidity and ability to fund our capital requirements or to undertake future financings will depend on several factors, including our operating cash flows, credit conditions, our credit ratings and credit capacity, the cost of financing and other general economic and business conditions that are beyond our control. If those factors significantly change or other unexpected factors adversely affect us, our business may not generate sufficient cash flows from operations or we may not be able to obtain future financings to meet our liquidity needs. Any refinancing of our debt could be on less favorable terms, including becoming subject to higher interest rates. In addition, the terms of our existing or future debt instruments, including the Credit Facilities or any replacement senior secured credit facilities and the indenture governing the Senior Notes, may restrict certain of our alternatives. We anticipate that, to the extent additional liquidity is necessary to fund our operations or make acquisitions, it would be funded through additional borrowings under our senior secured credit facilities, the incurrence of other indebtedness, additional equity issuances or a combination of these potential sources of liquidity. The possibility of consummating any such financing will be subject to conditions in the capital markets at such time. We may not be able to obtain this additional liquidity when needed on terms acceptable to us or at all.

As market conditions warrant, we and our Sponsors, including KKR and DLJMBP III and their affiliates, have and may from time to time in the future redeem or repurchase debt securities, in privately negotiated or open market transactions, by tender offer, exchange offer or otherwise subject to the terms of applicable contractual restrictions. We cannot give any assurance as to whether or when such repurchases or exchanges will occur and at what price.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our exposure to market risk during the quarter ended June 28, 2014. During the first six months of 2014, the price of gold remained volatile. To mitigate the continued volatility and the impact on our manufacturing costs, we have entered into purchase commitments which we believe will cover our needs for the remainder of fiscal 2014 and a portion of 2015. For additional information, refer to the discussion under Part I, Item 1, Note 12, Commitments and Contingencies and Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – General, elsewhere in this report and Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.

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 Senior Vice President, Chief Financial Officer, 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 our Senior Vice President, Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

During the quarter ended June 28, 2014, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Neither Visant’s nor Holdco’s equity securities are registered pursuant to Section 12 of the Exchange Act. For the second fiscal quarter ended June 28, 2014, neither we nor Holdco issued or sold any equity securities.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS



3.1(1)		Amended and Restated Certificate of Incorporation of Visant Corporation (f/k/a Ring IH Corp.).

3.2(2)		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Visant Corporation.

3.3(1)		By-Laws of Visant Corporation.

3.4(3)		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Visant Corporation.

10.1(4)		Termination agreement, dated April 17, 2014, terminating the Stock Purchase Agreement by and among Jostens, Inc., American Achievement Group Holding Corp. (“American Achievement”), Visant Corporation, each holder of outstanding equity interests of American Achievement and American Achievement Holdings LLC, in its capacity as Sellers’ Representative.

10.2(4)		Form of Director Indemnification Agreement.

10.3(5)		Omnibus Transaction Agreement by and among OCM Luxembourg Ileos Holdings S.à.r.l., Visant Corporation and Tripolis Holdings S.à.r.l., dated July 25, 2014.

31.1		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.

31.2		Certification of Senior Vice President, Chief Financial Officer 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 Corporation.

32.2		Certification of Senior Vice President, Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Visant Corporation.

101		The following materials from Visant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Operations and Comprehensive Loss (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to the Condensed Consolidated Financial Statements.

(1)	Incorporated by reference to Visant Corporation’s Form S-4 (File no. 333-120386), filed on November 12, 2004.

(2)	Incorporated by reference to Visant Holding Corp.’s Form 10-K, filed on April 1, 2005.

(3)	Incorporated by reference to Visant Corporation’s Form 10-K, filed on March 28, 2014.

(4)	Incorporated by reference to Visant Corporation’s Form 10-Q, filed on May 13, 2014.

(5)	Incorporated by reference to Visant Corporation’s Form 8-K filed on July 30, 2014.

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 CORPORATION

Date:August 12, 2014		/s/ Marc L. Reisch
		Marc L. Reisch
		President and
		Chief Executive Officer
		(principal executive officer)

Date:August 12, 2014		/s/ Paul B. Carousso
		Paul B. Carousso
		Senior Vice President, Chief Financial Officer
		(principal financial and accounting officer)

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