<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 JULY 4,1998

                                       OR

     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 1-5064



                                  JOSTENS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


         Minnesota                                    41-0343440
---------------------------------       ---------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)


  5501 Norman Center Drive, Minneapolis, Minnesota                     55437
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)


                                  612-830-3300
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)



--------------------------------------------------------------------------------
      (Former name, address and fiscal year, if changed since last report)

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
requirements for the past 90 days. Yes [X] No[ ]

The number of shares outstanding of the registrant's only class of common stock
on August 11, 1998 was 36,831,206.


                                       1
<PAGE>
 
                                  JOSTENS, INC.

                                      INDEX




Part I.  Financial Information
------------------------------

Item 1. Financial Statements (Unaudited):

     Condensed Consolidated Balance Sheets as of July 4, 1998, June 28, 1997,
     and January 3, 1998

     Condensed Consolidated Statements of Operations for the Three and Six
     Months Ended July 4, 1998, and June 28, 1997

     Condensed Consolidated Statements of Cash Flows for the Six Months Ended
     July 4, 1998, and June 28, 1997

     Notes to Condensed Consolidated Financial Statements


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Part II.  Other Information
---------------------------

Item 1.   Legal Proceedings
Item 6.   Exhibits and Reports on Form 8-K



Signatures
----------

                                       2
<PAGE>
 
                         JOSTENS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per-share data)
<TABLE>
<CAPTION>
                                                        (Unaudited)
                                                --------------------------
                                                  July 4,        June 28,       January 3,
                                                   1998            1997            1998
                                                ----------      ----------      -----------
<S>                                             <C>             <C>             <C>      
CURRENT ASSETS:
    Short-term investments                      $  11,415       $  18,536       $   6,068
    Accounts receivable, net                      119,947         138,503         108,697
    Inventories:
      Finished products                            22,252          24,065          38,122
      Work-in-process                              31,462          30,480          29,388
      Materials and supplies                       28,833          22,177          24,552
                                                ---------       ---------       ---------
                                                   82,547          76,722          92,062

    Deferred income taxes                          15,543          14,928          15,543
    Prepaid expenses                                4,133           2,469           4,679
    Other receivables                              13,841          12,218          25,495
                                                ---------       ---------       ---------
                                                  247,426         263,376         252,544

OTHER ASSETS:
    Intangibles, net                               29,498          34,826          30,749
    Note receivable, net                           12,925          12,925          12,925
    Deferred income taxes                           7,743          11,393           7,743
    Other                                          12,453          12,990          12,631
                                                ---------       ---------       ---------
                                                   62,619          72,134          64,048

PROPERTY AND EQUIPMENT                            248,801         217,790         231,747
    Accumulated depreciation                     (168,439)       (151,999)       (157,609)
                                                ---------       ---------       ---------
                                                   80,362          65,791          74,138
                                                ---------       ---------       ---------

                                                $ 390,407       $ 401,301       $ 390,730
                                                =========       =========       =========

CURRENT LIABILITIES:
    Notes payable                               $  69,920       $  70,424       $  49,974
    Accounts payable                               22,256          18,088          30,553
    Salary, benefits and commissions               59,575          63,020          38,668
    Customer deposits                              51,417          43,746          98,659
    Other liabilities                              19,473          12,442          17,281
    Income taxes                                   24,416          24,031          11,098
                                                ---------       ---------       ---------
                                                  247,057         231,751         246,233

OTHER NON-CURRENT LIABILITIES                      17,784          19,586          17,404

SHAREHOLDERS' INVESTMENT:
    Preferred shares, $1.00 par value:
      Authorized 4,000 shares, none issued             --              --              --
    Common shares, $.33 1/3 par value:
      Authorized 100,000 shares,
      Issued -  37,007, 38,780
      and 38,422 shares, respectively              12,382          13,002          12,853
    Capital surplus                                    --           7,776              --
    Retained earnings                             118,879         132,875         119,378
    Accumulated other comprehensive income         (5,695)         (3,689)         (5,138)
                                                ---------       ---------       ---------
                                                  125,566         149,964         127,093
                                                ---------       ---------       ---------

                                                $ 390,407       $ 401,301       $ 390,730
                                                =========       =========       =========
</TABLE>

See notes to condensed consolidated financial statements

                                       3
<PAGE>
 
                         JOSTENS, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per-share data)
<TABLE>
<CAPTION>
                                          Three Months Ended             Six Months Ended
                                        -----------------------      -----------------------
                                         July 4,       June 28,       July 4,       June 28,
                                          1998           1997          1998          1997
                                        ---------      --------      --------      ---------
<S>                                      <C>           <C>           <C>           <C>     
Net Sales                                $298,879      $297,316      $467,156      $447,753

Cost of products sold                     142,559       146,291       211,232       210,687
                                         --------      --------      --------      --------

                                          156,320       151,025       255,924       237,066

Selling and administrative expenses        91,743        84,633       172,268       152,097
                                         --------      --------      --------      --------

Operating Income                           64,577        66,392        83,656        84,969

Net interest expense                        1,331         1,440         2,622         3,144
                                         --------      --------      --------      --------

                                           63,246        64,952        81,034        81,825

Income taxes                               25,614        26,629        32,906        33,548
                                         --------      --------      --------      --------

Net Income                               $ 37,632      $ 38,323      $ 48,128      $ 48,277
                                         ========      ========      ========      ========

Basic Earnings Per Common Share          $   1.02      $   0.99      $   1.29      $   1.25
                                         ========      ========      ========      ========

Basic average shares outstanding           37,002        38,826        37,368        38,761
                                         ========      ========      ========      ========

Diluted Earnings Per Common Share        $   1.01      $   0.98      $   1.28      $   1.24
                                         ========      ========      ========      ========

Diluted average shares outstanding         37,202        39,109        37,551        38,995
                                         ========      ========      ========      ========

Dividends declared per common share      $   0.22      $   0.22      $   0.44      $   0.44
                                         ========      ========      ========      ========
</TABLE>

See notes to condensed consolidated financial statements



                                       4
<PAGE>
 
                         JOSTENS, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                           Six Months Ended
                                       -------------------------
                                        July 4,         June 28,
                                         1998            1997
                                       ---------       ---------
<S>                                     <C>            <C>     
OPERATING ACTIVITIES

Net income                              $ 48,128       $ 48,277

Depreciation and amortization             12,314         10,248

Changes in assets and liabilities         (8,366)         4,807

Other                                        650             --
                                        --------       --------

                                          52,726         63,332
                                        --------       --------

INVESTING ACTIVITIES

Capital expenditures                     (17,576)        (7,763)

Advance on business acquisition               --         (8,500)
                                        --------       --------

                                         (17,576)       (16,263)
                                        --------       --------

FINANCING ACTIVITIES

Short-term borrowing                      19,946        (20,488)

Cash dividends                           (16,565)       (17,089)

Stock options                              1,534          6,410

Share repurchases                        (34,714)            --

Other                                         (4)            (5)
                                        --------       --------

                                         (29,803)       (31,172)
                                        --------       --------

INCREASE IN SHORT-TERM INVESTMENTS      $  5,347       $ 15,897
                                        ========       ========
</TABLE>

See notes to condensed consolidated financial statements






                                       5
<PAGE>
 
JOSTENS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.

Certain balances on the condensed consolidated balance sheet as of June 28,
1997, and condensed statement of cash flows for the period ended June 28, 1997,
have been reclassified to conform to the July 4, 1998, presentation.

Because of the seasonal nature of the Company's business, the results of
operations for the six months ended July 4, 1998, are not necessarily indicative
of the results for the entire year ending January 2, 1999.

For further information, refer to the consolidated financial statements and
footnotes in the Company's Form 10-K for the year ended January 3, 1998.


INCOME TAXES
The Company provides for income taxes in interim periods based on the estimated
effective income tax rate for the complete fiscal year.


EARNINGS PER COMMON SHARE
The adoption of Statement of Financial Accounting Standard (SFAS) No. 128 in
1997 resulted in disclosure of both "basic" and "diluted" earnings per share.
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
computed by dividing net income by the average number of common shares
outstanding, including the dilutive effects of options, restricted stock and
contingently issuable shares. Unless otherwise noted, references are to diluted
earnings per share. The following table sets forth the computation of basic and
diluted earnings per share (millions):

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED JULY 4, 1998        THREE MONTHS ENDED JUNE 28, 1997
                                    ------------------------------------  -------------------------------------------
                                                              PER SHARE                                     PER SHARE
                                     INCOME       SHARES       AMOUNT        INCOME           SHARES         AMOUNT
                                    ---------    --------     ---------   -------------     -----------     ---------
<S>                                 <C>           <C>          <C>           <C>               <C>            <C>   
BASIC EPS
Net income available                $ 37,632      37,002       $ 1.02        $ 38,323          38,826         $ 0.99
--------------------------------------------------------------------------------------------------------------------

EFFECT OF DILUTIVE SECURITIES
Options                                              160                                          233
Awards                                                40                                           50
--------------------------------------------------------------------------------------------------------------------

DILUTED EPS

Net income available                $ 37,632      37,202       $ 1.01       $ 38,323           39,109         $ 0.98
====================================================================================================================
</TABLE>



                                       6
<PAGE>
 
<TABLE>
<CAPTION>

                                           SIX MONTHS ENDED JULY 4, 1998         SIX MONTHS ENDED JUNE 28, 1997
                                         -----------------------------------   -----------------------------------
                                                                   PER SHARE                           PER SHARE
                                          INCOME        SHARES       AMOUNT      INCOME       SHARES     AMOUNT
                                         ---------     --------    ---------   ----------    --------- ----------
<S>                                      <C>            <C>          <C>        <C>            <C>         <C>   
BASIC EPS
Net income available                     $ 48,128       37,368       $ 1.29     $ 48,277       38,761      $ 1.25
-----------------------------------------------------------------------------------------------------------------

EFFECT OF DILUTIVE SECURITIES
Options                                                    152                                   185
Awards                                                      31                                    49
-----------------------------------------------------------------------------------------------------------------

DILUTED EPS

Net income available                     $ 48,128       37,551       $ 1.28    $ 48,277       38,995      $ 1.24
=================================================================================================================

</TABLE>


COMPREHENSIVE INCOME
As of January 4, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, this statement has no impact
on the Company's net income or shareholders' investment. SFAS 130 requires
minimum pension liability adjustments and foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
investment, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
For the second quarter of 1998 and 1997, total comprehensive income was $36,803
and $38,043, respectively. For the six-month period ended July 4, 1998, and June
28, 1997, total comprehensive income was $47,571 and $48,030, respectively.


DIVIDENDS
Dividends of 22 cents per share were declared and paid in the second quarter in
both 1998 and 1997.

In addition, the Company's Board of Directors declared a dividend of 22 cents
per share on July 23, 1998, which will be paid in September 1998.


COMMITMENTS AND CONTINGENCIES
Litigation. Taylor Publishing Company filed a civil suit against Jostens on
January 14, 1997, in U.S. District Court for the Eastern District of Texas. In
the suit, Taylor alleged that the Company violated federal antitrust laws with
respect to the yearbook publishing market, interfered with Taylor's sales
representatives and improperly sought trade secrets. Taylor, citing the loss of
school accounts over the last four years, argued that such loss of business
resulted directly from the Company's attempt to monopolize the yearbook
business. On June 15, 1998, a judgment was entered following a jury verdict that
awarded Taylor $25.25 million on the antitrust claims, including attorneys'
fees. Post-trial motions have been filed and are pending before the court. The
Company intends to vigorously pursue reversal of the decision and is therefore
unable to estimate the potential loss, if any. Accordingly, no amount was
accrued as of July 4, 1998.


                                       7
<PAGE>
 
Environmental. As part of its continuing environmental management program,
Jostens is involved in various environmental improvement activities. As sites
are identified and assessed in this program, the Company determines potential
environmental liability. Factors considered in assessing this liability include,
among others, the following: whether the Company has been designated as a
potentially responsible party, the number of other potentially responsible
parties designated at the site, the stage of the proceedings and available
environmental technology. As of July 4, 1998, the Company had identified three
sites requiring further investigation. However, the Company had not been
designated as a potentially responsible party at these sites.

Management has assessed the likelihood that a loss has been incurred at these
sites as probable and, based on findings included in remediation reports,
estimates the potential loss to range from $1 million to $9 million; $6.6
million had been accrued in December, 1996. As of July 4, 1998, the Company had
made payments of $1.9 million, bringing the reserve balance to $4.7 million. The
current portion of the reserve ($680,000) is included with "other liabilities"
on the consolidated balance sheets, while the long-term portion ($4 million) is
included with "other non-current liabilities."

While Jostens may have a right of contribution or reimbursement under insurance
policies, amounts that may be recoverable from other entities by the Company
with respect to a particular site are not considered until recoveries are deemed
to be probable. No assets for potential recoveries were established as of July
4, 1998.


PLANT CONSOLIDATION
In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility and the transfer of all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
recorded a charge to operations of $2.5 million in the second quarter of 1998,
primarily to accrue for severance and other employee-related costs. As of July
4, 1998, the Company had made payments of $300,000, bringing the reserve balance
to $2.2 million.

                                       8
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The Company occasionally may make statements regarding its business and markets,
such as projections of future performance, statements of management's plans and
objectives, forecasts of market trends and other matters. To the extent such
statements are not historical fact, they may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Statements containing the words or phrases "will likely result," "are
expected to," "will continue," "anticipates," "believes," "estimate,"
"projected," or similar expressions are intended to identify forward-looking
statements. Forward-looking statements may appear in this document or other
documents, reports, press releases and written or oral presentations made by
officers of the Company to shareholders, analysts, news organizations or others.
All such forward-looking statements speak only as of the date on which the
statements are made. Actual results could be affected by one or more factors,
which could cause the results to differ materially. Therefore, all
forward-looking statements are qualified in their entirety by such factors,
including the factors listed below. Such factors may be more fully discussed
periodically in the Company's subsequent filings with the Securities and
Exchange Commission (SEC).

Any change in the following factors may impact the achievement of results in
forward-looking statements: the price of gold; the Company's access to students
and consumers in schools; the seasonality of the Company's business; regulatory
and accounting rules with respect to the Company's independent sales force; the
Company's relationship with its sales force; fashion and demographic trends; the
general economy, especially during peak buying seasons for the Company's
products and services; the ability of the Company to respond to customer change
orders and delivery schedules; competitive pricing and program changes;
continued success improving operating efficiencies; the impact of year-2000
readiness on computer-based systems of the Company and its external
relationships; and the costs and impact of the Company's information systems
implementations.

The foregoing factors are not exhaustive, and new factors may emerge or changes
to the foregoing factors may occur that would impact the Company's business.


RESULTS OF OPERATIONS

Net sales for the three and six months ended July 4, 1998, were $298.9 million
and $467.2 million, respectively, representing an increase of .5 percent and 4.3
percent, over the comparable prior-year periods. During the first quarter, the
Company succeeded in a planned effort to shift about $6 million of announcement
production and deliveries to the first quarter from the peak second quarter,
resulting in reduced net sales for the second quarter from the comparable prior
year. The six-month sales improvement was driven by increased consumer demand in
the Company's three largest business lines -- Printing & Publishing, Jewelry and
Graduation Products.

Cost of products sold was $142.6 million and $211.2 million, respectively, for
the three and six months ended July 4, 1998. Costs as a percentage of sales for
the three- and six-month periods were 47.7 percent and 45.2 percent, compared
with 49.2 percent and 47.1 percent in the same periods last year. The decrease
was primarily the result of manufacturing efficiency initiatives. The
second-quarter cost improvements included: decreased cycle time and costs
through consistent processes and procedures in Printing & Publishing; better
efficiencies as a result of producing all graduation announcements in one
facility; and lower costs in Recognition's two main facilities.


                                       9
<PAGE>
 
Selling and administrative expenses were $91.7 million and $172.3 million,
respectively, for the three- and six-month periods ended July 4, 1998. As a
percentage of sales, selling and administrative expenses for the three- and
six-month periods were 30.7 percent and 36.9 percent, compared with 28.5 percent
and 34 percent in the same periods last year. The increase in second-quarter
selling and administrative expenses was primarily the result of investment in
information systems and certain expensed year-2000 readiness costs. Selling and
administrative expenses also increased over the prior-year second quarter due to
spending for consumer research and future marketing programs.

Net interest expense for the three and six months ended July 4, 1998, was $1.3
million and $2.6 million, respectively, compared with $1.4 million and $3.1
million in the prior-year periods. The decrease in net interest expense
corresponded with a decrease in average borrowings under the Company's notes
payable and commercial paper program due principally to increased customer
deposit collections.


LIQUIDITY AND CAPITAL RESOURCES

Cash generated from operating activities and short-term borrowings were Jostens'
principal sources of liquidity during the six-month period. Cash generated from
these activities was used primarily for dividends, capital expenditures and
share repurchases.

Operating activities provided cash of $52.7 million for the six months ended
July 4, 1998, primarily due to net income ($48.1 million). The change in assets
and liabilities for the six months used $8.4 million of cash, as increases in
salary, benefits and commissions ($20.9 million) and income taxes payable ($13.3
million) and decreases in overdrafts ($11.6 million) were offset by decreases in
customer deposits ($47.2 million) and accounts payable ($8.3 million). These
fluctuations reflect the seasonality of the business, evident when comparing the
December and June month-end balances.

Comparing the six months ended July 4, 1998, with the six months ended June 28,
1997, the Company generated $10.6 million less cash from operating activities.
This reduction was due partially to an increase in gold inventory for the
Jewelry business. In addition, customer deposits reduced cash flow $15.0 million
due to a significant increase in the beginning year balance ($22.6 million) as a
result of a new payment plan implemented in 1997. However, customer deposits are
$7.6 million above 1997 levels. These cash flow reductions were partially offset
by accounts receivable decreases of $20.0 million from the prior-year period
which were due to solid collection and policy compliance programs.

Because most of the Company's sales volume occurs in the second and fourth
quarters, Jostens usually requires additional interim financing of inventories
and receivables. To provide the necessary financing, the Company maintains a
bank credit agreement that is reduced by commercial paper outstanding. The
Company has a $180 million five-year bank agreement that expires in December
2000. At July 4, 1998, $110.1 million was available under the bank credit
agreement as a result of $69.9 million in outstanding borrowings. In addition,
the Company had unsecured demand facilities with three banks totaling $84.6
million, none of which was outstanding at July 4, 1998. These demand facilities
are renegotiated periodically based on the anticipated seasonal needs for
short-term financing. Commercial paper borrowings were included in notes payable
in the consolidated balance sheet.

Management believes that cash expected to be generated from operating
activities, together with credit available under the bank credit agreement and
demand facilities, will be sufficient to fund planned capital expenditures,
share repurchases, dividends and any incremental working capital requirements in
1998.


                                       10
<PAGE>
 
SHARE REPURCHASE

In July 1997, Jostens' board of directors authorized the repurchase of up to
$100 million in shares of the Company's common stock. Under the authorization,
shares may be repurchased periodically in the open market and through privately
negotiated transactions. The repurchase is to be funded from the Company's cash
and short-term investment balance, as well as short-term borrowings. As of July
4, 1998, the Company had repurchased $55 million in common shares, including
$5.5 million in the second quarter of 1998, and $34.7 million in the six-month
period ended July 4, 1998.


CAPITAL EXPENDITURES, PRODUCT DEVELOPMENT AND ACQUISITION

Year-to-date capital expenditures through July 4, 1998, were $17.6 million,
approximately $9.8 million higher than the comparable period in 1997. The
increase resulted primarily from costs incurred due to the replacement of School
Products, Recognition and corporate management information systems and to plant
consolidation efforts.


YEAR 2000 CONVERSION COSTS

Management has initiated a companywide program to prepare the Company's
information systems infrastructure, microprocessor-driven equipment, external
relationships and customers for the year 2000. Both internal and external
resources are being utilized to implement the program. Systems that will not be
replaced before the year 2000 are being modified to achieve year-2000
functionality. The total year-2000 program cost is estimated at approximately
$50 million, which includes $35 million to purchase and implement new software
that will be capitalized as part of the companywide systems replacement program
and $15 million that will be expensed as incurred. As of July 4, 1998, the
Company had incurred approximately $20.9 million ($15.1 million capitalized),
primarily to assess year-2000 issues, develop a strategic plan, complete several
major code remediation initiatives and purchase new hardware and software.

The program is estimated to be completed no later than October 1999, which is
prior to any anticipated impact on its operating systems. The Company believes
that with modifications to existing software and conversions to new software,
the year-2000 issue will not pose significant operational problems for its
computer systems. However, if such modifications and conversions are not made on
time, the year-2000 issue could have a material impact on the operations of the
Company.

The costs of the project and the date when the Company believes it will complete
the year-2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, the impact of year-2000 compliance on computer based
systems of the Company's external relationships and similar uncertainties.

                                       11
<PAGE>
 
SALE OF JOSTENS LEARNING CORPORATION (JLC)

In June 1995, Jostens sold its JLC curriculum software subsidiary to a group led
by Bain Capital, Inc. for $50 million in cash; a $36 million unsecured,
subordinated note maturing in eight years with a stated interest rate of 11
percent; and a separate $4 million note with a stated interest rate of 8.3
percent convertible into 19 percent of the equity of Jostens Learning, subject
to dilution in certain events. The notes were recorded at fair value, using an
estimated 20 percent discount rate on the $36 million note, resulting in a
discount of $9.9 million.

In October 1995, the Company sold its Wicat Systems business to Wicat
Acquisition Corp., a private investment group. Wicat Systems was the small,
computer-based aviation training subsidiary of JLC that was retained in the sale
of JLC but held for sale. The Company received $1.5 million in cash plus a
promissory note for approximately $150,000 from the sale.

A transaction gain of $11.1 million ($5.8 million after tax) was originally
recorded at the time of the JLC sale and deferred in accordance with the SEC
Staff Accounting Bulletin No. 81, Gain Recognition on the Sale of a Business or
Operating Assets to a Highly Leveraged Entity. In October 1995, the deferred
gain increased to $17.2 million ($9.7 million after tax) as a result of the sale
of Wicat ($5.3 million) and some accrual settlements ($800,000).

In conjunction with its efforts to raise additional equity capital for ongoing
cash requirements, JLC requested that the Company restructure its interests in
JLC. In November 1996, the Company restructured terms of its $36 million,
unsecured, subordinated note from JLC in conjunction with a third-party equity
infusion into JLC. Terms of the restructuring resulted in the exchange of the
$36 million unsecured, subordinated note and accrued interest for a new $57.2
million unsecured, subordinated note maturing June 30, 2003, with a stated
interest rate of 6 percent and rights to early redemption discounts. The early
redemption discounts, exercisable only in whole at JLC's option, adjust
periodically and range from a 60 percent discount on the face value if redeemed
by December 31, 1998, to 40 percent if redeemed by March 31, 2003. The new note
was recorded at fair value using an estimated 20 percent discount rate on the
$57.2 million note, resulting in a discount of $35.1 million. The restructuring
had no impact on the net carrying value of Jostens' investment in JLC, since the
$4 million reduction in the note receivable's carrying value was offset by a
corresponding reduction in the deferred gain to $13.2 million ($7.3 million
after tax).

The adjusted $13.2 million gain and interest on the notes receivable will be
deferred until cash flows from the operating activities of JLC are sufficient to
fund debt service, dividend or any other covenant requirements. The deferred
gain is presented in the condensed consolidated balance sheets as an offset to
notes receivable. The notes receivable balance represents amounts owed by JLC
related to the sale of JLC net of a $35.1 million discount and the deferred
gain. Despite the equity infusion and restructuring of Jostens' interests in
JLC, there is no guarantee that JLC will be able to repay the note. JLC incurred
losses in the first two quarters of 1998 and all of fiscal years 1997, 1996, and
1995; however, the Company believes that such carrying value is not impaired
based on current facts and circumstances.


PLANT CONSOLIDATION

In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility and the transfer of all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
recorded a charge to operations of $2.5 million in the second quarter of 1998,
primarily to accrue for severance and other employee-related costs. As of July
4, 1998 the Company had made payments of $300,000, bringing the reserve balance
to $2.2 million.


                                      12
<PAGE>
 
PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings

Taylor Publishing Company filed a civil suit against Jostens on January 14,
1997, in the U.S. District Court for the Eastern District of Texas. In the suit,
Taylor alleged that the Company violated federal antitrust laws with the respect
to the yearbook publishing market, interfered with Taylor's sales
representatives and improperly sought trade secrets. Taylor, citing the loss of
school accounts over the last four years, argued that such loss of business
resulted directly from the Company's attempt to monopolize the yearbook
business. On June 15, 1998, a judgment was entered following a jury verdict that
awarded Taylor $25.25 million on the antitrust claims, including attorneys'
fees. Post-trial motions have been filed and are pending before the court. The
Company intends to vigorously pursue reversal of the decision through the
post-trial and appellate processes.

There are no other material pending or threatened legal, governmental,
administrative or other proceedings to which the Company or any other subsidiary
as a defendant or plaintiff is subject.


Item 6.  Exhibits and reports on Form 8-K

         (a)   Exhibit 27 Financial Data Schedule

         (b)   Reports on Form 8-K: No reports on Form 8-K were filed during the
               quarter for which this report is filed.




                                   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.


                                  JOSTENS, INC.



Date   August 17, 1998                /s/ Robert C. Buhrmaster
     ------------------               ----------------------------------------
                                      Robert C. Buhrmaster
                                      Chairman, President and Chief Executive
                                      Officer

                                      /s/ William N. Priesmeyer
                                      -----------------------------------------
                                      William N. Priesmeyer
                                      Senior Vice President and Chief Financial
                                      Officer




                                       13
[{"type": "10-Q", "sequence": "1", "description": "FORM 10-Q", "secsgml_size_bytes": 40505}]
{"company-data": {"conformed-name": "JOSTENS INC", "cik": "0000054050", "assigned-sic": "3911", "irs-number": "410343440", "state-of-incorporation": "MN", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-05064", "film-number": "98693175"}, "business-address": {"street1": "5501 NORMAN CTR DR", "city": "MINNEAPOLIS", "state": "MN", "zip": "55437", "phone": "6128303300"}, "mail-address": {"street1": "5501 NORMAN CENTER DRIVE", "city": "MINNEAPOLIS", "state": "MN", "zip": "55437"}}
SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 JULY 4,1998

                                       OR

     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 1-5064

                                  JOSTENS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Minnesota                                    41-0343440
---------------------------------       ---------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)

  5501 Norman Center Drive, Minneapolis, Minnesota                     55437
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

                                  612-830-3300
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

--------------------------------------------------------------------------------
      (Former name, address and fiscal year, if changed since last report)

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
requirements for the past 90 days. Yes [X] No[ ]

The number of shares outstanding of the registrant's only class of common stock
on August 11, 1998 was 36,831,206.

                                       1
JOSTENS, INC.

                                      INDEX

Part I.  Financial Information
------------------------------

Item 1. Financial Statements (Unaudited):

     Condensed Consolidated Balance Sheets as of July 4, 1998, June 28, 1997,
     and January 3, 1998

     Condensed Consolidated Statements of Operations for the Three and Six
     Months Ended July 4, 1998, and June 28, 1997

     Condensed Consolidated Statements of Cash Flows for the Six Months Ended
     July 4, 1998, and June 28, 1997

     Notes to Condensed Consolidated Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Part II.  Other Information
---------------------------

Item 1.   Legal Proceedings
Item 6.   Exhibits and Reports on Form 8-K

Signatures
----------

                                       2
JOSTENS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per-share data)
(Unaudited)
                                                --------------------------
                                                  July 4,        June 28,       January 3,
                                                   1998            1997            1998
                                                ----------      ----------      -----------
CURRENT ASSETS:
    Short-term investments                      $  11,415       $  18,536       $   6,068
    Accounts receivable, net                      119,947         138,503         108,697
    Inventories:
      Finished products                            22,252          24,065          38,122
      Work-in-process                              31,462          30,480          29,388
      Materials and supplies                       28,833          22,177          24,552
                                                ---------       ---------       ---------
                                                   82,547          76,722          92,062

    Deferred income taxes                          15,543          14,928          15,543
    Prepaid expenses                                4,133           2,469           4,679
    Other receivables                              13,841          12,218          25,495
                                                ---------       ---------       ---------
                                                  247,426         263,376         252,544

OTHER ASSETS:
    Intangibles, net                               29,498          34,826          30,749
    Note receivable, net                           12,925          12,925          12,925
    Deferred income taxes                           7,743          11,393           7,743
    Other                                          12,453          12,990          12,631
                                                ---------       ---------       ---------
                                                   62,619          72,134          64,048

PROPERTY AND EQUIPMENT                            248,801         217,790         231,747
    Accumulated depreciation                     (168,439)       (151,999)       (157,609)
                                                ---------       ---------       ---------
                                                   80,362          65,791          74,138
                                                ---------       ---------       ---------

                                                $ 390,407       $ 401,301       $ 390,730
                                                =========       =========       =========

CURRENT LIABILITIES:
    Notes payable                               $  69,920       $  70,424       $  49,974
    Accounts payable                               22,256          18,088          30,553
    Salary, benefits and commissions               59,575          63,020          38,668
    Customer deposits                              51,417          43,746          98,659
    Other liabilities                              19,473          12,442          17,281
    Income taxes                                   24,416          24,031          11,098
                                                ---------       ---------       ---------
                                                  247,057         231,751         246,233

OTHER NON-CURRENT LIABILITIES                      17,784          19,586          17,404

SHAREHOLDERS' INVESTMENT:
    Preferred shares, $1.00 par value:
      Authorized 4,000 shares, none issued             --              --              --
    Common shares, $.33 1/3 par value:
      Authorized 100,000 shares,
      Issued -  37,007, 38,780
      and 38,422 shares, respectively              12,382          13,002          12,853
    Capital surplus                                    --           7,776              --
    Retained earnings                             118,879         132,875         119,378
    Accumulated other comprehensive income         (5,695)         (3,689)         (5,138)
                                                ---------       ---------       ---------
                                                  125,566         149,964         127,093
                                                ---------       ---------       ---------

                                                $ 390,407       $ 401,301       $ 390,730
                                                =========       =========       =========
See notes to condensed consolidated financial statements

                                       3
JOSTENS, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per-share data)
Three Months Ended             Six Months Ended
                                        -----------------------      -----------------------
                                         July 4,       June 28,       July 4,       June 28,
                                          1998           1997          1998          1997
                                        ---------      --------      --------      ---------
Net Sales                                $298,879      $297,316      $467,156      $447,753

Cost of products sold                     142,559       146,291       211,232       210,687
                                         --------      --------      --------      --------

                                          156,320       151,025       255,924       237,066

Selling and administrative expenses        91,743        84,633       172,268       152,097
                                         --------      --------      --------      --------

Operating Income                           64,577        66,392        83,656        84,969

Net interest expense                        1,331         1,440         2,622         3,144
                                         --------      --------      --------      --------

                                           63,246        64,952        81,034        81,825

Income taxes                               25,614        26,629        32,906        33,548
                                         --------      --------      --------      --------

Net Income                               $ 37,632      $ 38,323      $ 48,128      $ 48,277
                                         ========      ========      ========      ========

Basic Earnings Per Common Share          $   1.02      $   0.99      $   1.29      $   1.25
                                         ========      ========      ========      ========

Basic average shares outstanding           37,002        38,826        37,368        38,761
                                         ========      ========      ========      ========

Diluted Earnings Per Common Share        $   1.01      $   0.98      $   1.28      $   1.24
                                         ========      ========      ========      ========

Diluted average shares outstanding         37,202        39,109        37,551        38,995
                                         ========      ========      ========      ========

Dividends declared per common share      $   0.22      $   0.22      $   0.44      $   0.44
                                         ========      ========      ========      ========
See notes to condensed consolidated financial statements

                                       4
JOSTENS, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
Six Months Ended
                                       -------------------------
                                        July 4,         June 28,
                                         1998            1997
                                       ---------       ---------
OPERATING ACTIVITIES

Net income                              $ 48,128       $ 48,277

Depreciation and amortization             12,314         10,248

Changes in assets and liabilities         (8,366)         4,807

Other                                        650             --
                                        --------       --------

                                          52,726         63,332
                                        --------       --------

INVESTING ACTIVITIES

Capital expenditures                     (17,576)        (7,763)

Advance on business acquisition               --         (8,500)
                                        --------       --------

                                         (17,576)       (16,263)
                                        --------       --------

FINANCING ACTIVITIES

Short-term borrowing                      19,946        (20,488)

Cash dividends                           (16,565)       (17,089)

Stock options                              1,534          6,410

Share repurchases                        (34,714)            --

Other                                         (4)            (5)
                                        --------       --------

                                         (29,803)       (31,172)
                                        --------       --------

INCREASE IN SHORT-TERM INVESTMENTS      $  5,347       $ 15,897
                                        ========       ========
See notes to condensed consolidated financial statements

                                       5
JOSTENS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.

Certain balances on the condensed consolidated balance sheet as of June 28,
1997, and condensed statement of cash flows for the period ended June 28, 1997,
have been reclassified to conform to the July 4, 1998, presentation.

Because of the seasonal nature of the Company's business, the results of
operations for the six months ended July 4, 1998, are not necessarily indicative
of the results for the entire year ending January 2, 1999.

For further information, refer to the consolidated financial statements and
footnotes in the Company's Form 10-K for the year ended January 3, 1998.

INCOME TAXES
The Company provides for income taxes in interim periods based on the estimated
effective income tax rate for the complete fiscal year.

EARNINGS PER COMMON SHARE
The adoption of Statement of Financial Accounting Standard (SFAS) No. 128 in
1997 resulted in disclosure of both "basic" and "diluted" earnings per share.
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
computed by dividing net income by the average number of common shares
outstanding, including the dilutive effects of options, restricted stock and
contingently issuable shares. Unless otherwise noted, references are to diluted
earnings per share. The following table sets forth the computation of basic and
diluted earnings per share (millions):
THREE MONTHS ENDED JULY 4, 1998        THREE MONTHS ENDED JUNE 28, 1997
                                    ------------------------------------  -------------------------------------------
                                                              PER SHARE                                     PER SHARE
                                     INCOME       SHARES       AMOUNT        INCOME           SHARES         AMOUNT
                                    ---------    --------     ---------   -------------     -----------     ---------
BASIC EPS
Net income available                $ 37,632      37,002       $ 1.02        $ 38,323          38,826         $ 0.99
--------------------------------------------------------------------------------------------------------------------

EFFECT OF DILUTIVE SECURITIES
Options                                              160                                          233
Awards                                                40                                           50
--------------------------------------------------------------------------------------------------------------------

DILUTED EPS

Net income available                $ 37,632      37,202       $ 1.01       $ 38,323           39,109         $ 0.98
====================================================================================================================
6
SIX MONTHS ENDED JULY 4, 1998         SIX MONTHS ENDED JUNE 28, 1997
                                         -----------------------------------   -----------------------------------
                                                                   PER SHARE                           PER SHARE
                                          INCOME        SHARES       AMOUNT      INCOME       SHARES     AMOUNT
                                         ---------     --------    ---------   ----------    --------- ----------
BASIC EPS
Net income available                     $ 48,128       37,368       $ 1.29     $ 48,277       38,761      $ 1.25
-----------------------------------------------------------------------------------------------------------------

EFFECT OF DILUTIVE SECURITIES
Options                                                    152                                   185
Awards                                                      31                                    49
-----------------------------------------------------------------------------------------------------------------

DILUTED EPS

Net income available                     $ 48,128       37,551       $ 1.28    $ 48,277       38,995      $ 1.24
=================================================================================================================
COMPREHENSIVE INCOME
As of January 4, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, this statement has no impact
on the Company's net income or shareholders' investment. SFAS 130 requires
minimum pension liability adjustments and foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
investment, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
For the second quarter of 1998 and 1997, total comprehensive income was $36,803
and $38,043, respectively. For the six-month period ended July 4, 1998, and June
28, 1997, total comprehensive income was $47,571 and $48,030, respectively.

DIVIDENDS
Dividends of 22 cents per share were declared and paid in the second quarter in
both 1998 and 1997.

In addition, the Company's Board of Directors declared a dividend of 22 cents
per share on July 23, 1998, which will be paid in September 1998.

COMMITMENTS AND CONTINGENCIES
Litigation. Taylor Publishing Company filed a civil suit against Jostens on
January 14, 1997, in U.S. District Court for the Eastern District of Texas. In
the suit, Taylor alleged that the Company violated federal antitrust laws with
respect to the yearbook publishing market, interfered with Taylor's sales
representatives and improperly sought trade secrets. Taylor, citing the loss of
school accounts over the last four years, argued that such loss of business
resulted directly from the Company's attempt to monopolize the yearbook
business. On June 15, 1998, a judgment was entered following a jury verdict that
awarded Taylor $25.25 million on the antitrust claims, including attorneys'
fees. Post-trial motions have been filed and are pending before the court. The
Company intends to vigorously pursue reversal of the decision and is therefore
unable to estimate the potential loss, if any. Accordingly, no amount was
accrued as of July 4, 1998.

                                       7
Environmental. As part of its continuing environmental management program,
Jostens is involved in various environmental improvement activities. As sites
are identified and assessed in this program, the Company determines potential
environmental liability. Factors considered in assessing this liability include,
among others, the following: whether the Company has been designated as a
potentially responsible party, the number of other potentially responsible
parties designated at the site, the stage of the proceedings and available
environmental technology. As of July 4, 1998, the Company had identified three
sites requiring further investigation. However, the Company had not been
designated as a potentially responsible party at these sites.

Management has assessed the likelihood that a loss has been incurred at these
sites as probable and, based on findings included in remediation reports,
estimates the potential loss to range from $1 million to $9 million; $6.6
million had been accrued in December, 1996. As of July 4, 1998, the Company had
made payments of $1.9 million, bringing the reserve balance to $4.7 million. The
current portion of the reserve ($680,000) is included with "other liabilities"
on the consolidated balance sheets, while the long-term portion ($4 million) is
included with "other non-current liabilities."

While Jostens may have a right of contribution or reimbursement under insurance
policies, amounts that may be recoverable from other entities by the Company
with respect to a particular site are not considered until recoveries are deemed
to be probable. No assets for potential recoveries were established as of July
4, 1998.

PLANT CONSOLIDATION
In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility and the transfer of all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
recorded a charge to operations of $2.5 million in the second quarter of 1998,
primarily to accrue for severance and other employee-related costs. As of July
4, 1998, the Company had made payments of $300,000, bringing the reserve balance
to $2.2 million.

                                       8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company occasionally may make statements regarding its business and markets,
such as projections of future performance, statements of management's plans and
objectives, forecasts of market trends and other matters. To the extent such
statements are not historical fact, they may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Statements containing the words or phrases "will likely result," "are
expected to," "will continue," "anticipates," "believes," "estimate,"
"projected," or similar expressions are intended to identify forward-looking
statements. Forward-looking statements may appear in this document or other
documents, reports, press releases and written or oral presentations made by
officers of the Company to shareholders, analysts, news organizations or others.
All such forward-looking statements speak only as of the date on which the
statements are made. Actual results could be affected by one or more factors,
which could cause the results to differ materially. Therefore, all
forward-looking statements are qualified in their entirety by such factors,
including the factors listed below. Such factors may be more fully discussed
periodically in the Company's subsequent filings with the Securities and
Exchange Commission (SEC).

Any change in the following factors may impact the achievement of results in
forward-looking statements: the price of gold; the Company's access to students
and consumers in schools; the seasonality of the Company's business; regulatory
and accounting rules with respect to the Company's independent sales force; the
Company's relationship with its sales force; fashion and demographic trends; the
general economy, especially during peak buying seasons for the Company's
products and services; the ability of the Company to respond to customer change
orders and delivery schedules; competitive pricing and program changes;
continued success improving operating efficiencies; the impact of year-2000
readiness on computer-based systems of the Company and its external
relationships; and the costs and impact of the Company's information systems
implementations.

The foregoing factors are not exhaustive, and new factors may emerge or changes
to the foregoing factors may occur that would impact the Company's business.

RESULTS OF OPERATIONS

Net sales for the three and six months ended July 4, 1998, were $298.9 million
and $467.2 million, respectively, representing an increase of .5 percent and 4.3
percent, over the comparable prior-year periods. During the first quarter, the
Company succeeded in a planned effort to shift about $6 million of announcement
production and deliveries to the first quarter from the peak second quarter,
resulting in reduced net sales for the second quarter from the comparable prior
year. The six-month sales improvement was driven by increased consumer demand in
the Company's three largest business lines -- Printing & Publishing, Jewelry and
Graduation Products.

Cost of products sold was $142.6 million and $211.2 million, respectively, for
the three and six months ended July 4, 1998. Costs as a percentage of sales for
the three- and six-month periods were 47.7 percent and 45.2 percent, compared
with 49.2 percent and 47.1 percent in the same periods last year. The decrease
was primarily the result of manufacturing efficiency initiatives. The
second-quarter cost improvements included: decreased cycle time and costs
through consistent processes and procedures in Printing & Publishing; better
efficiencies as a result of producing all graduation announcements in one
facility; and lower costs in Recognition's two main facilities.

                                       9
Selling and administrative expenses were $91.7 million and $172.3 million,
respectively, for the three- and six-month periods ended July 4, 1998. As a
percentage of sales, selling and administrative expenses for the three- and
six-month periods were 30.7 percent and 36.9 percent, compared with 28.5 percent
and 34 percent in the same periods last year. The increase in second-quarter
selling and administrative expenses was primarily the result of investment in
information systems and certain expensed year-2000 readiness costs. Selling and
administrative expenses also increased over the prior-year second quarter due to
spending for consumer research and future marketing programs.

Net interest expense for the three and six months ended July 4, 1998, was $1.3
million and $2.6 million, respectively, compared with $1.4 million and $3.1
million in the prior-year periods. The decrease in net interest expense
corresponded with a decrease in average borrowings under the Company's notes
payable and commercial paper program due principally to increased customer
deposit collections.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated from operating activities and short-term borrowings were Jostens'
principal sources of liquidity during the six-month period. Cash generated from
these activities was used primarily for dividends, capital expenditures and
share repurchases.

Operating activities provided cash of $52.7 million for the six months ended
July 4, 1998, primarily due to net income ($48.1 million). The change in assets
and liabilities for the six months used $8.4 million of cash, as increases in
salary, benefits and commissions ($20.9 million) and income taxes payable ($13.3
million) and decreases in overdrafts ($11.6 million) were offset by decreases in
customer deposits ($47.2 million) and accounts payable ($8.3 million). These
fluctuations reflect the seasonality of the business, evident when comparing the
December and June month-end balances.

Comparing the six months ended July 4, 1998, with the six months ended June 28,
1997, the Company generated $10.6 million less cash from operating activities.
This reduction was due partially to an increase in gold inventory for the
Jewelry business. In addition, customer deposits reduced cash flow $15.0 million
due to a significant increase in the beginning year balance ($22.6 million) as a
result of a new payment plan implemented in 1997. However, customer deposits are
$7.6 million above 1997 levels. These cash flow reductions were partially offset
by accounts receivable decreases of $20.0 million from the prior-year period
which were due to solid collection and policy compliance programs.

Because most of the Company's sales volume occurs in the second and fourth
quarters, Jostens usually requires additional interim financing of inventories
and receivables. To provide the necessary financing, the Company maintains a
bank credit agreement that is reduced by commercial paper outstanding. The
Company has a $180 million five-year bank agreement that expires in December
2000. At July 4, 1998, $110.1 million was available under the bank credit
agreement as a result of $69.9 million in outstanding borrowings. In addition,
the Company had unsecured demand facilities with three banks totaling $84.6
million, none of which was outstanding at July 4, 1998. These demand facilities
are renegotiated periodically based on the anticipated seasonal needs for
short-term financing. Commercial paper borrowings were included in notes payable
in the consolidated balance sheet.

Management believes that cash expected to be generated from operating
activities, together with credit available under the bank credit agreement and
demand facilities, will be sufficient to fund planned capital expenditures,
share repurchases, dividends and any incremental working capital requirements in
1998.

                                       10
SHARE REPURCHASE

In July 1997, Jostens' board of directors authorized the repurchase of up to
$100 million in shares of the Company's common stock. Under the authorization,
shares may be repurchased periodically in the open market and through privately
negotiated transactions. The repurchase is to be funded from the Company's cash
and short-term investment balance, as well as short-term borrowings. As of July
4, 1998, the Company had repurchased $55 million in common shares, including
$5.5 million in the second quarter of 1998, and $34.7 million in the six-month
period ended July 4, 1998.

CAPITAL EXPENDITURES, PRODUCT DEVELOPMENT AND ACQUISITION

Year-to-date capital expenditures through July 4, 1998, were $17.6 million,
approximately $9.8 million higher than the comparable period in 1997. The
increase resulted primarily from costs incurred due to the replacement of School
Products, Recognition and corporate management information systems and to plant
consolidation efforts.

YEAR 2000 CONVERSION COSTS

Management has initiated a companywide program to prepare the Company's
information systems infrastructure, microprocessor-driven equipment, external
relationships and customers for the year 2000. Both internal and external
resources are being utilized to implement the program. Systems that will not be
replaced before the year 2000 are being modified to achieve year-2000
functionality. The total year-2000 program cost is estimated at approximately
$50 million, which includes $35 million to purchase and implement new software
that will be capitalized as part of the companywide systems replacement program
and $15 million that will be expensed as incurred. As of July 4, 1998, the
Company had incurred approximately $20.9 million ($15.1 million capitalized),
primarily to assess year-2000 issues, develop a strategic plan, complete several
major code remediation initiatives and purchase new hardware and software.

The program is estimated to be completed no later than October 1999, which is
prior to any anticipated impact on its operating systems. The Company believes
that with modifications to existing software and conversions to new software,
the year-2000 issue will not pose significant operational problems for its
computer systems. However, if such modifications and conversions are not made on
time, the year-2000 issue could have a material impact on the operations of the
Company.

The costs of the project and the date when the Company believes it will complete
the year-2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, the impact of year-2000 compliance on computer based
systems of the Company's external relationships and similar uncertainties.

                                       11
SALE OF JOSTENS LEARNING CORPORATION (JLC)

In June 1995, Jostens sold its JLC curriculum software subsidiary to a group led
by Bain Capital, Inc. for $50 million in cash; a $36 million unsecured,
subordinated note maturing in eight years with a stated interest rate of 11
percent; and a separate $4 million note with a stated interest rate of 8.3
percent convertible into 19 percent of the equity of Jostens Learning, subject
to dilution in certain events. The notes were recorded at fair value, using an
estimated 20 percent discount rate on the $36 million note, resulting in a
discount of $9.9 million.

In October 1995, the Company sold its Wicat Systems business to Wicat
Acquisition Corp., a private investment group. Wicat Systems was the small,
computer-based aviation training subsidiary of JLC that was retained in the sale
of JLC but held for sale. The Company received $1.5 million in cash plus a
promissory note for approximately $150,000 from the sale.

A transaction gain of $11.1 million ($5.8 million after tax) was originally
recorded at the time of the JLC sale and deferred in accordance with the SEC
Staff Accounting Bulletin No. 81, Gain Recognition on the Sale of a Business or
Operating Assets to a Highly Leveraged Entity. In October 1995, the deferred
gain increased to $17.2 million ($9.7 million after tax) as a result of the sale
of Wicat ($5.3 million) and some accrual settlements ($800,000).

In conjunction with its efforts to raise additional equity capital for ongoing
cash requirements, JLC requested that the Company restructure its interests in
JLC. In November 1996, the Company restructured terms of its $36 million,
unsecured, subordinated note from JLC in conjunction with a third-party equity
infusion into JLC. Terms of the restructuring resulted in the exchange of the
$36 million unsecured, subordinated note and accrued interest for a new $57.2
million unsecured, subordinated note maturing June 30, 2003, with a stated
interest rate of 6 percent and rights to early redemption discounts. The early
redemption discounts, exercisable only in whole at JLC's option, adjust
periodically and range from a 60 percent discount on the face value if redeemed
by December 31, 1998, to 40 percent if redeemed by March 31, 2003. The new note
was recorded at fair value using an estimated 20 percent discount rate on the
$57.2 million note, resulting in a discount of $35.1 million. The restructuring
had no impact on the net carrying value of Jostens' investment in JLC, since the
$4 million reduction in the note receivable's carrying value was offset by a
corresponding reduction in the deferred gain to $13.2 million ($7.3 million
after tax).

The adjusted $13.2 million gain and interest on the notes receivable will be
deferred until cash flows from the operating activities of JLC are sufficient to
fund debt service, dividend or any other covenant requirements. The deferred
gain is presented in the condensed consolidated balance sheets as an offset to
notes receivable. The notes receivable balance represents amounts owed by JLC
related to the sale of JLC net of a $35.1 million discount and the deferred
gain. Despite the equity infusion and restructuring of Jostens' interests in
JLC, there is no guarantee that JLC will be able to repay the note. JLC incurred
losses in the first two quarters of 1998 and all of fiscal years 1997, 1996, and
1995; however, the Company believes that such carrying value is not impaired
based on current facts and circumstances.

PLANT CONSOLIDATION

In April 1998, the Company announced the closing of its Webster, N.Y., photo
processing facility and the transfer of all operations to the Company's photo
processing plant in Winnipeg, Manitoba, by August 1998. As a result, the Company
recorded a charge to operations of $2.5 million in the second quarter of 1998,
primarily to accrue for severance and other employee-related costs. As of July
4, 1998 the Company had made payments of $300,000, bringing the reserve balance
to $2.2 million.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

Taylor Publishing Company filed a civil suit against Jostens on January 14,
1997, in the U.S. District Court for the Eastern District of Texas. In the suit,
Taylor alleged that the Company violated federal antitrust laws with the respect
to the yearbook publishing market, interfered with Taylor's sales
representatives and improperly sought trade secrets. Taylor, citing the loss of
school accounts over the last four years, argued that such loss of business
resulted directly from the Company's attempt to monopolize the yearbook
business. On June 15, 1998, a judgment was entered following a jury verdict that
awarded Taylor $25.25 million on the antitrust claims, including attorneys'
fees. Post-trial motions have been filed and are pending before the court. The
Company intends to vigorously pursue reversal of the decision through the
post-trial and appellate processes.

There are no other material pending or threatened legal, governmental,
administrative or other proceedings to which the Company or any other subsidiary
as a defendant or plaintiff is subject.

Item 6.  Exhibits and reports on Form 8-K

         (a)   Exhibit 27 Financial Data Schedule

         (b)   Reports on Form 8-K: No reports on Form 8-K were filed during the
               quarter for which this report is filed.

                                   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.

                                  JOSTENS, INC.

Date   August 17, 1998                /s/ Robert C. Buhrmaster
     ------------------               ----------------------------------------
                                      Robert C. Buhrmaster
                                      Chairman, President and Chief Executive
                                      Officer

                                      /s/ William N. Priesmeyer
                                      -----------------------------------------
                                      William N. Priesmeyer
                                      Senior Vice President and Chief Financial
                                      Officer

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