##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 o
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED February 24, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBERS 333-137067, 333-121479, 333-84294
 AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 AAC GROUP HOLDING CORP.
 AMERICAN ACHIEVEMENT CORPORATION
  DELAWARE 
DELAWARE 
DELAWARE
(State or other jurisdiction of incorporation or organization)
    
    20-4833998
20-1854833
13-4126506
(I.R.S. Employer Identification Number)
 7211 CIRCLE S ROAD
AUSTIN, TEXAS 78745   REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE (512) 444-0571
 o þ
  o o þ
 o þ




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##### 



FOR THE QUARTERLY PERIOD ENDED February 24, 2007
INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements and NotesCondensed Consolidated Balance Sheets (unaudited)  As of
February 24, 2007 and August 26, 2006
    
    
    3-5Condensed Consolidated Statements of Operations (unaudited)  For
the Three Months Ended February 24, 2007 and For the Three Months
ended February 25, 2006Condensed Consolidated Statement of Operations (unaudited)  For
the Six Months Ended February 24, 2007 and For the Six Months
Ended February 25, 2006
    
    
    6-8Condensed Consolidated Statements of Cash Flows (unaudited)  For
the Six Months Ended February 24, 2007 and For the Six Months
Ended February 25, 2006
    
    
    9-11Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    12-25Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    26-37Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    40Item 6. Exhibits
    
    
    40SIGNATURES
    
    
    41CEO Certification Pursuant to Section 302CFO Certification Pursuant to Section 302CEO Certification Pursuant to Section 906CFO Certification Pursuant to Section 906
  Explanatory Note
   2




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 
    Parent HoldingsFebruary 24,
    
    
    August 26,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,230
    
    
    $
    3,404Accounts receivable, net
    
    
    34,669
    
    
    
    40,226Inventories, net
    
    
    39,526
    
    
    
    31,438Deferred tax asset
    
    
    10,256
    
    
    
    5,582Prepaid expenses and other current assets, net
    
    
    21,471
    
    
    
    13,944Total current assets
    
    
    117,152
    
    
    
    94,594Property, plant and equipment, net
    
    
    75,060
    
    
    
    76,054Goodwill
    
    
    184,565
    
    
    
    184,565Other intangible assets, net
    
    
    141,096
    
    
    
    148,595Other assets
    
    
    6,190
    
    
    
    7,468Total assets
    
    $
    524,063
    
    
    $
    511,276LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Bank overdraft
    
    $
    1,236
    
    
    $
    2,147Accounts payable
    
    
    10,434
    
    
    
    13,585Customer deposits
    
    
    57,522
    
    
    
    11,392Accrued expenses
    
    
    22,991
    
    
    
    23,382Deferred revenue
    
    
    3,138
    
    
    
    2,617Accrued interest
    
    
    5,836
    
    
    
    5,997Current portion of long-term debt
    
    
    972
    
    
    
    1,090Total current liabilities
    
    
    102,129
    
    
    
    60,210Long-term debt, net of current portion
    
    
    520,009
    
    
    
    525,734Mandatory redeemable preferred stock, $.01 par value,
15,000 shares authorized, 7,500 shares issued and
outstanding
    
    
    7,500
    
    
    
    7,500Deferred tax liabilities
    
    
    19,885
    
    
    
    25,760Other long-term liabilities
    
    
    7,604
    
    
    
    6,858Total liabilities
    
    
    657,127
    
    
    
    626,062Commitments and contingencies (Note 6)Stockholders equity (deficit)Common stock, $.01 par value, 1,250,000 shares
authorized, 505,460 shares issued and outstanding
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    (124,045
    )
    
    
    (124,045
    )Accumulated earnings (deficit)
    
    
    (9,024
    )
    
    
    9,254Total stockholders equity (deficit)
    
    
    (133,064
    )
    
    
    (114,786
    )Total liabilities and stockholders equity (deficit)
    
    $
    524,063
    
    
    $
    511,276
  3




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate HoldingsFebruary 24, 2007
    
    
    August 26, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,950
    
    
    $
    2,904Accounts receivable, net
    
    
    34,669
    
    
    
    40,226Inventories, net
    
    
    39,526
    
    
    
    31,438Deferred tax asset
    
    
    10,256
    
    
    
    5,582Prepaid expenses and other current assets, net
    
    
    21,471
    
    
    
    13,944Total current assets
    
    
    116,872
    
    
    
    94,094Property, plant and equipment, net
    
    
    75,060
    
    
    
    76,054Goodwill
    
    
    184,565
    
    
    
    184,565Other intangible assets, net
    
    
    132,688
    
    
    
    139,592Other assets
    
    
    6,190
    
    
    
    7,468Total assets
    
    $
    515,375
    
    
    $
    501,773LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    1,236
    
    
    $
    2,147Accounts payable
    
    
    10,434
    
    
    
    13,585Customer deposits
    
    
    57,522
    
    
    
    11,392Accrued expenses
    
    
    22,967
    
    
    
    23,292Deferred revenue
    
    
    3,138
    
    
    
    2,617Accrued interest
    
    
    5,836
    
    
    
    5,997Current portion of long-term debt
    
    
    972
    
    
    
    1,090Total current liabilities
    
    
    102,105
    
    
    
    60,120Long-term debt, net of current portion
    
    
    355,882
    
    
    
    371,537Deferred tax liabilities
    
    
    24,984
    
    
    
    27,523Other long-term liabilities
    
    
    5,345
    
    
    
    5,879Total liabilities
    
    
    488,316
    
    
    
    465,059Commitments and contingencies (Note 6)Stockholders equity:Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    24,144
    
    
    
    24,144Retained earnings
    
    
    2,915
    
    
    
    12,570Total stockholders equity
    
    
    27,059
    
    
    
    36,714Total liabilities and stockholders equity
    
    $
    515,375
    
    
    $
    501,773
  4




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AACFebruary 24, 2007
    
    
    August 26, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,415
    
    
    $
    2,381Accounts receivable, net
    
    
    34,669
    
    
    
    40,226Inventories, net
    
    
    39,526
    
    
    
    31,438Deferred tax asset
    
    
    10,256
    
    
    
    5,582Prepaid expenses and other current assets, net
    
    
    21,471
    
    
    
    13,944Total current assets
    
    
    116,337
    
    
    
    93,571Property, plant and equipment, net
    
    
    75,060
    
    
    
    76,054Goodwill
    
    
    184,565
    
    
    
    184,565Other intangible assets, net
    
    
    130,203
    
    
    
    136,884Other assets
    
    
    6,190
    
    
    
    7,468Total assets
    
    $
    512,355
    
    
    $
    498,542LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    1,236
    
    
    $
    2,147Accounts payable
    
    
    10,434
    
    
    
    13,585Customer deposits
    
    
    57,522
    
    
    
    11,392Accrued expenses
    
    
    22,965
    
    
    
    23,290Deferred revenue
    
    
    3,138
    
    
    
    2,617Accrued interest
    
    
    5,836
    
    
    
    5,997Current portion of long-term debt
    
    
    972
    
    
    
    1,090Total current liabilities
    
    
    102,103
    
    
    
    60,118Long-term debt, net of current portion
    
    
    243,591
    
    
    
    264,720Deferred tax liabilities
    
    
    34,307
    
    
    
    34,307Other long-term liabilities
    
    
    5,317
    
    
    
    5,851Total liabilities
    
    
    385,318
    
    
    
    364,996Commitments and contingencies (Note 6)Stockholders equity:Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    109,046
    
    
    
    109,046Retained earnings
    
    
    17,991
    
    
    
    24,500Total stockholders equity
    
    
    127,037
    
    
    
    133,546Total liabilities and stockholders equity
    
    $
    512,355
    
    
    $
    498,542
  5




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 
    Parent Holdings
 For the three months ended
    
    
    For the six months endedFebruary 24,
    
    
    February 25,
    
    
    February 24,
    
    
    February 25,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    57,677
    
    
    $
    59,196
    
    
    $
    110,435
    
    
    $
    117,569Cost of sales
    
    
    21,706
    
    
    
    21,731
    
    
    
    49,240
    
    
    
    46,770Gross profit
    
    
    35,971
    
    
    
    37,465
    
    
    
    61,195
    
    
    
    70,799Selling, general and administrative
expenses
    
    
    31,692
    
    
    
    31,400
    
    
    
    60,612
    
    
    
    64,898Operating income
    
    
    4,279
    
    
    
    6,065
    
    
    
    583
    
    
    
    5,901Interest expense, net of interest
income
    
    
    14,350
    
    
    
    8,481
    
    
    
    28,971
    
    
    
    17,032Loss before benefit for income taxes
    
    
    (10,071
    )
    
    
    (2,416
    )
    
    
    (28,388
    )
    
    
    (11,131
    )Benefit for income taxes
    
    
    (3,451
    )
    
    
    (1,069
    )
    
    
    (10,110
    )
    
    
    (4,811
    )Net loss
    
    $
    (6,620
    )
    
    $
    (1,347
    )
    
    $
    (18,278
    )
    
    $
    (6,320
    )
  6




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate Holdings
 For the three months ended
    
    
    For the six months endedFebruary 24,
    
    
    February 25,
    
    
    February 24,
    
    
    February 25,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    57,677
    
    
    $
    59,196
    
    
    $
    110,435
    
    
    $
    117,569Cost of sales
    
    
    21,706
    
    
    
    21,731
    
    
    
    49,240
    
    
    
    46,770Gross profit
    
    
    35,971
    
    
    
    37,465
    
    
    
    61,195
    
    
    
    70,799Selling, general and
administrative expenses
    
    
    31,692
    
    
    
    31,400
    
    
    
    60,612
    
    
    
    64,898Operating income
    
    
    4,279
    
    
    
    6,065
    
    
    
    583
    
    
    
    5,901Interest expense, net
of interest income
    
    
    8,298
    
    
    
    8,481
    
    
    
    17,012
    
    
    
    17,032Loss before benefit for
income taxes
    
    
    (4,019
    )
    
    
    (2,416
    )
    
    
    (16,429
    )
    
    
    (11,131
    )Benefit for income taxes
    
    
    (1,676
    )
    
    
    (1,069
    )
    
    
    (6,774
    )
    
    
    (4,811
    )Net loss
    
    $
    (2,343
    )
    
    $
    (1,347
    )
    
    $
    (9,655
    )
    
    $
    (6,320
    )
  7




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AAC
 For the three months ended
    
    
    For the six months endedFebruary 24,
    
    
    February 25,
    
    
    February 24,
    
    
    February 25,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    57,677
    
    
    $
    59,196
    
    
    $
    110,435
    
    
    $
    117,569Cost of sales
    
    
    21,706
    
    
    
    21,731
    
    
    
    49,240
    
    
    
    46,770Gross profit
    
    
    35,971
    
    
    
    37,465
    
    
    
    61,195
    
    
    
    70,799Selling, general
and administrative
expenses
    
    
    31,692
    
    
    
    31,400
    
    
    
    60,612
    
    
    
    64,898Operating income
    
    
    4,279
    
    
    
    6,065
    
    
    
    583
    
    
    
    5,901Interest expense,
net of interest
income
    
    
    5,409
    
    
    
    5,752
    
    
    
    11,327
    
    
    
    11,758Income (loss)
before benefit for
income taxes
    
    
    (1,130
    )
    
    
    313
    
    
    
    (10,744
    )
    
    
    (5,857
    )Provision (benefit)
for income taxes
    
    
    (447
    )
    
    
    122
    
    
    
    (4,235
    )
    
    
    (2,323
    )Net income (loss)
    
    $
    (683
    )
    
    $
    191
    
    
    $
    (6,509
    )
    
    $
    (3,534
    )
  8




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 
    Parent HoldingsFor the six months endedFebruary 24, 2007
    
    
    February 25, 2006Cash flows from operating activities:Net loss
    
    $
    (18,278
    )
    
    $
    (6,320
    )Adjustments to reconcile net loss to net cash provided
by operating activities:Depreciation and amortization
    
    
    12,877
    
    
    
    13,015Deferred income taxes
    
    
    (10,549
    )
    
    
    (5,139
    )Amortization of debt discount and deferred financing fees
    
    
    1,746
    
    
    
    975Accretion of interest on 10.25% senior discount notes
    
    
    5,474
    
    
    
    4,954Accretion of 12.75% PIK notes
    
    
    9,930
    
    
    
    Provision for doubtful accounts
    
    
    (106
    )
    
    
    (339
    )Changes in assets and liabilities:Accounts receivable
    
    
    5,663
    
    
    
    3,330Inventories, net
    
    
    (8,088
    )
    
    
    (13,171
    )Prepaid expenses and other current assets, net
    
    
    (7,527
    )
    
    
    (846
    )Other assets
    
    
    1,278
    
    
    
    (481
    )Customer deposits
    
    
    46,130
    
    
    
    42,828Deferred revenue
    
    
    521
    
    
    
    1,033Accounts payable, accrued expenses, and other long-term
liabilities
    
    
    (3,205
    )
    
    
    (7,808
    )Net cash provided by operating activities
    
    
    35,866
    
    
    
    32,031Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (5,703
    )
    
    
    (5,442
    )Net cash used in investing activities
    
    
    (5,703
    )
    
    
    (5,442
    )Cash flows from financing activities:Payments on revolving credit facility
    
    
    (24,150
    )
    
    
    (16,050
    )Proceeds from revolving credit facility
    
    
    14,850
    
    
    
    16,050Payments on term loan
    
    
    (11,947
    )
    
    
    (16,024
    )Proceeds from stock issuance
    
    
    
    
    
    
    7,500Deferred financing fees
    
    
    (179
    )
    
    
    (269
    )Change in bank overdraft
    
    
    (911
    )
    
    
    2,540Net cash used in financing activities
    
    
    (22,337
    )
    
    
    (6,253
    )Net increase in cash and cash equivalents
    
    
    7,826
    
    
    
    20,336Cash and cash equivalents, beginning of period
    
    
    3,404
    
    
    
    4,324Cash and cash equivalents, end of period
    
    $
    11,230
    
    
    $
    24,660Supplemental disclosureCash paid during the period for:Interest
    
    $
    10,794
    
    
    $
    11,066Income taxes
    
    $
    178
    
    
    $
    302
  9




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate HoldingsFor the six months endedFebruary 24, 2007
    
    
    February 25, 2006Cash flows from operating activities:Net loss
    
    $
    (9,655
    )
    
    $
    (6,320
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    12,877
    
    
    
    13,015Deferred income taxes
    
    
    (7,213
    )
    
    
    (5,139
    )Amortization of debt discount and deferred financing fees
    
    
    988
    
    
    
    975Accretion of interest on 10.25% senior discount notes
    
    
    5,474
    
    
    
    4,954Provision for doubtful accounts
    
    
    (106
    )
    
    
    (339
    )Changes in assets and liabilities:Accounts receivable
    
    
    5,663
    
    
    
    3,330Inventories, net
    
    
    (8,088
    )
    
    
    (13,171
    )Prepaid expenses and other current assets, net
    
    
    (7,527
    )
    
    
    (846
    )Other assets
    
    
    1,278
    
    
    
    (481
    )Customer deposits
    
    
    46,130
    
    
    
    42,828Deferred revenue
    
    
    521
    
    
    
    1,033Accounts payable, accrued expenses, and other long-term liabilities
    
    
    (4,419
    )
    
    
    (7,808
    )Net cash provided by operating activities
    
    
    35,923
    
    
    
    32,031Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (5,703
    )
    
    
    (5,442
    )Net cash used in investing activities
    
    
    (5,703
    )
    
    
    (5,442
    )Cash flows from financing activities:Payments on revolving credit facility
    
    
    (24,150
    )
    
    
    (16,050
    )Proceeds from revolving credit facility
    
    
    14,850
    
    
    
    16,050Payments on term loan
    
    
    (11,947
    )
    
    
    (16,024
    )Proceeds from stock issuance
    
    
    
    
    
    
    7,500Deferred financing fees
    
    
    (16
    )
    
    
    (269
    )Change in bank overdraft
    
    
    (911
    )
    
    
    2,540Net cash used in financing activities
    
    
    (22,174
    )
    
    
    (6,253
    )Net increase in cash and cash equivalents
    
    
    8,046
    
    
    
    20,336Cash and cash equivalents, beginning of period
    
    
    2,904
    
    
    
    4,324Cash and cash equivalents, end of period
    
    $
    10,950
    
    
    $
    24,660Supplemental disclosureCash paid during the period for:Interest
    
    $
    10,794
    
    
    $
    11,066Income taxes
    
    $
    178
    
    
    $
    302
  10




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AACFor the six months endedFebruary 24, 2007
    
    
    February 25, 2006Cash flows from operating activities:Net income loss
    
    $
    (6,509
    )
    
    $
    (3,534
    )Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    12,877
    
    
    
    13,015Deferred income taxes
    
    
    (4,674
    )
    
    
    (2,651
    )Amortization of debt discount and deferred financing fees
    
    
    765
    
    
    
    748Provision for doubtful accounts
    
    
    (106
    )
    
    
    (339
    )Changes in assets and liabilities:Accounts receivable
    
    
    5,663
    
    
    
    3,330Inventories, net
    
    
    (8,088
    )
    
    
    (13,171
    )Prepaid expenses and other current assets, net
    
    
    (7,527
    )
    
    
    (846
    )Other assets
    
    
    1,278
    
    
    
    (481
    )Customer deposits
    
    
    46,130
    
    
    
    42,828Deferred revenue
    
    
    521
    
    
    
    1,033Accounts payable, accrued expenses, and other long-term liabilities
    
    
    (4,419
    )
    
    
    (7,936
    )Net cash provided by operating activities
    
    
    35,911
    
    
    
    31,996Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (5,703
    )
    
    
    (5,442
    )Net cash used in investing activities
    
    
    (5,703
    )
    
    
    (5,442
    )Cash flows from financing activities:Payments on revolving credit facility
    
    
    (24,150
    )
    
    
    (16,050
    )Proceeds from revolving credit facility
    
    
    14,850
    
    
    
    16,050Payments on term loan
    
    
    (11,947
    )
    
    
    (16,024
    )Deferred financing fees
    
    
    (16
    )
    
    
    Change in bank overdraft
    
    
    (911
    )
    
    
    2,540Net cash used in financing activities
    
    
    (22,174
    )
    
    
    (13,484
    )Net increase in cash and cash equivalents
    
    
    8,034
    
    
    
    13,070Cash and cash equivalents, beginning of period
    
    
    2,381
    
    
    
    4,093Cash and cash equivalents, end of period
    
    $
    10,415
    
    
    $
    17,163Supplemental disclosureCash paid during the period for:Interest
    
    $
    10,794
    
    
    $
    11,066Income taxes
    
    $
    178
    
    
    $
    302
  11




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
    1. Summary of Organization and Significant Accounting Policies
 Registrants
  Description of Business
  Consolidation
    12




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
   Use of Estimates
  2. Inventories, Net
 February 24, 2007
    
    
    August 26, 2006Raw materials
    
    $
    13,798
    
    
    $
    17,759Work in process
    
    
    17,865
    
    
    
    6,473Finished goods
    
    
    8,735
    
    
    
    7,400Less  reserves
    
    
    (872
    )
    
    
    (194
    )$
    39,526
    
    
    $
    31,438
  3. Prepaid Expenses and Other Current Assets, Net
  4.
Goodwill by Segment and Other Intangible Assets
 February 24, 2007
    
    
    August 26, 2006GoodwillClass Rings
    
    $
    71,792
    
    
    $
    71,792Yearbooks
    
    
    65,241
    
    
    
    65,241Graduation Products
    
    
    23,781
    
    
    
    23,781Achievement Publications
    
    
    11,693
    
    
    
    11,693Other
    
    
    12,058
    
    
    
    12,058Total
    
    $
    184,565
    
    
    $
    184,565
 13




---



##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Other Intangible Assets
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetParent Holdings
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt February 24, 2007Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    24,263
    
    
    
    (6,491
    )
    
    
    17,772Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,294
    )
    
    
    6,023Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (33,310
    )
    
    
    67,206Total
    
    
    
    
    
    $
    182,191
    
    
    $
    (41,095
    )
    
    $
    141,096
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetParent Holdings
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    24,084
    
    
    
    (4,745
    )
    
    
    19,339Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    
    
    $
    182,012
    
    
    $
    (33,417
    )
    
    $
    148,595
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetIntermediate Holdings
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt February 24, 2007Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    14,771
    
    
    
    (5,407
    )
    
    
    9,364Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,294
    )
    
    
    6,023Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (33,310
    )
    
    
    67,206Total
    
    
    
    
    
    $
    172,699
    
    
    $
    (40,011
    )
    
    $
    132,688
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetIntermediate Holdings
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    14,755
    
    
    
    (4,419
    )
    
    
    10,336Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    
    
    $
    172,683
    
    
    $
    (33,091
    )
    
    $
    139,592
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetAAC
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt February 24, 2007Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    11,263
    
    
    
    (4,384
    )
    
    
    6,879Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,294
    )
    
    
    6,023Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (33,310
    )
    
    
    67,206Total
    
    
    
    
    
    $
    169,191
    
    
    $
    (38,988
    )
    
    $
    130,203
 14




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetAAC
    
    Useful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs
    
    
    7 to 8 years
    
    
    
    11,247
    
    
    
    (3,619
    )
    
    
    7,628Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    
    
    $
    169,175
    
    
    $
    (32,291
    )
    
    $
    136,884
    5. Long-term Debt
 February 24, 2007
    
    
    August 26, 2006Parent Holdings12.75% Senior PIK Notes (including PIK
interest of $14,128 and $4,197,
respectively)
    
    $
    164,127
    
    
    $
    154,19710.25% Senior discount notes due 2012
(net of unamortized discount of $19,209
and $24,683, respectively)
    
    
    112,291
    
    
    
    106,8178.25% Senior subordinated notes due 2012
    
    
    150,000
    
    
    
    150,000Senior secured credit facilityRevolving credit facility due 2010
    
    
    
    
    
    
    9,300Term loan due 2011
    
    
    94,563
    
    
    
    106,510Total
    
    
    520,981
    
    
    
    526,824Less current portion of long-term debt
    
    
    (972
    )
    
    
    (1,090
    )Total long-term debt
    
    $
    520,009
    
    
    $
    525,734
 15




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 February 24, 2007
    
    
    August 26, 2006Intermediate Holdings10.25% Senior discount notes due 2012
(net of unamortized discount of $19,209
and $24,683, respectively)
    
    $
    112,291
    
    
    $
    106,8178.25% Senior subordinated notes due 2012
    
    
    150,000
    
    
    
    150,000Senior secured credit facilityRevolving credit facility due 2010
    
    
    
    
    
    
    9,300Term loan due 2011
    
    
    94,563
    
    
    
    106,510Total
    
    
    356,854
    
    
    
    372,627Less current portion of long-term debt
    
    
    (972
    )
    
    
    (1,090
    )Total long-term debt
    
    $
    355,882
    
    
    $
    371,537
 February 24, 2007
    
    
    August 26, 2006AAC8.25% Senior subordinated notes due 2012
    
    $
    150,000
    
    
    $
    150,000Senior secured credit facilityRevolving credit facility due 2010
    
    
    
    
    
    
    9,300Term loan due 2011
    
    
    94,563
    
    
    
    106,510Total
    
    
    244,563
    
    
    
    265,810Less current portion of long-term debt
    
    
    (972
    )
    
    
    (1,090
    )Total long-term debt
    
    $
    243,591
    
    
    $
    264,720
 12.75% Senior PIK Notes
     16




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
    Mandatory Redeemable Preferred Stock
    10.25% Senior Discount Notes
   17




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
    8.25% Senior Subordinated Notes
 pari passu pari passu
    Senior Secured Credit Facility
  18




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
            6. Commitments and Contingencies
 Pending Litigation
 th
 19




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
   Gold Consignment Agreement
  7. Income Taxes
  20




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 8. Postretirement Pension and Medical Benefits
   For the three months ended
    
    
    For the three months endedFebruary 24, 2007
    
    
    February 25, 2006CBI post-
    
    
    
    
    
    
    CBI post-Taylor pension
    
    
    retirement
    
    
    Taylor pension
    
    
    retirementService costs, benefits attributed to
Service during the period
    
    $
    20
    
    
    $
    
    
    
    $
    25
    
    
    $
    Interest cost
    
    
    225
    
    
    
    27
    
    
    
    211
    
    
    
    39Expected return on assets
    
    
    (247
    )
    
    
    
    
    
    
    (223
    )
    
    
    Amortization of unrecognized net loss (gain)
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (78
    )Amortization of unrecognized net prior
service costs
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    (39
    )Net periodic postretirement benefit
cost (income)
    
    $
    (2
    )
    
    $
    (98
    )
    
    $
    13
    
    
    $
    (78
    )
 For the six months ended
    
    
    For the six months endedFebruary 24, 2007
    
    
    February 25, 2006CBI post-
    
    
    
    
    
    
    CBI post-Taylor pension
    
    
    retirement
    
    
    Taylor pension
    
    
    retirementService costs, benefits attributed to Service during the period
    
    $
    40
    
    
    $
    
    
    
    $
    49
    
    
    $
    Interest cost
    
    
    450
    
    
    
    54
    
    
    
    422
    
    
    
    77Expected return on assets
    
    
    (494
    )
    
    
    
    
    
    
    (446
    )
    
    
    Amortization of unrecognized net loss (gain)
    
    
    
    
    
    
    (176
    )
    
    
    
    
    
    
    (155
    )Amortization of unrecognized net prior service costs
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    (77
    )Net periodic postretirement benefit cost (income)
    
    $
    (4
    )
    
    $
    (196
    )
    
    $
    25
    
    
    $
    (155
    )
 9. Related-Party Transactions
   21




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 10. Business Segments
  Parent HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 24,
2007Net sales
    
    $
    31,002
    
    
    $
    2,644
    
    
    $
    15,278
    
    
    $
    580
    
    
    $
    8,173
    
    
    $
    57,677Segment operating
income (loss)
    
    
    4,836
    
    
    
    (3,989
    )
    
    
    3,344
    
    
    
    (1,153
    )
    
    
    1,241
    
    
    $
    4,279Segment assets
    
    
    212,290
    
    
    
    173,965
    
    
    
    69,266
    
    
    
    33,416
    
    
    
    35,126
    
    
    $
    524,063
 Parent HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 25,
2006Net sales
    
    $
    33,681
    
    
    $
    2,684
    
    
    $
    15,598
    
    
    $
    860
    
    
    $
    6,373
    
    
    $
    59,196Segment operating
income (loss)
    
    
    6,043
    
    
    
    (2,553
    )
    
    
    2,468
    
    
    
    (876
    )
    
    
    983
    
    
    $
    6,065Segment assets
    
    
    216,762
    
    
    
    175,601
    
    
    
    70,025
    
    
    
    38,448
    
    
    
    35,663
    
    
    $
    536,499
 Parent HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalSix Months
Ended February 24,
2007Net sales
    
    $
    64,369
    
    
    $
    13,205
    
    
    $
    18,037
    
    
    $
    1,290
    
    
    $
    13,534
    
    
    $
    110,435Segment operating
income (loss)
    
    
    8,723
    
    
    
    (7,870
    )
    
    
    1,039
    
    
    
    (2,027
    )
    
    
    718
    
    
    $
    583Segment assets
    
    
    212,290
    
    
    
    173,965
    
    
    
    69,266
    
    
    
    33,416
    
    
    
    35,126
    
    
    $
    524,063
 Parent HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalSix Months
Ended February 25,
2006Net sales
    
    $
    66,059
    
    
    $
    15,532
    
    
    $
    18,841
    
    
    $
    7,516
    
    
    $
    9,621
    
    
    $
    117,569Segment operating
income (loss)
    
    
    10,706
    
    
    
    (6,130
    )
    
    
    992
    
    
    
    156
    
    
    
    177
    
    
    $
    5,901Segment assets
    
    
    216,762
    
    
    
    175,601
    
    
    
    70,025
    
    
    
    38,448
    
    
    
    35,663
    
    
    $
    536,499
 22




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Intermediate HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 24,
2007Net sales
    
    $
    31,002
    
    
    $
    2,644
    
    
    $
    15,278
    
    
    $
    580
    
    
    $
    8,173
    
    
    $
    57,677Segment operating
income (loss)
    
    
    4,836
    
    
    
    (3,989
    )
    
    
    3,344
    
    
    
    (1,153
    )
    
    
    1,241
    
    
    $
    4,279Segment assets
    
    
    208,901
    
    
    
    170,885
    
    
    
    68,168
    
    
    
    32,864
    
    
    
    34,557
    
    
    $
    515,375
 Intermediate HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 25,
2006Net sales
    
    $
    33,681
    
    
    $
    2,684
    
    
    $
    15,598
    
    
    $
    860
    
    
    $
    6,373
    
    
    $
    59,196Segment operating
income (loss)
    
    
    6,043
    
    
    
    (2,553
    )
    
    
    2,468
    
    
    
    (876
    )
    
    
    983
    
    
    $
    6,065Segment assets
    
    
    216,762
    
    
    
    175,601
    
    
    
    70,025
    
    
    
    38,448
    
    
    
    35,663
    
    
    $
    536,499
 Intermediate HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalSix Months
Ended February 24,
2007Net sales
    
    $
    64,369
    
    
    $
    13,205
    
    
    $
    18,037
    
    
    $
    1,290
    
    
    $
    13,534
    
    
    $
    110,435Segment operating
income (loss)
    
    
    8,723
    
    
    
    (7,870
    )
    
    
    1,039
    
    
    
    (2,027
    )
    
    
    718
    
    
    $
    583Segment assets
    
    
    208,901
    
    
    
    170,885
    
    
    
    68,168
    
    
    
    32,864
    
    
    
    34,557
    
    
    $
    515,375
 Intermediate HoldingsClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalSix Months
Ended February 25,
2006Net sales
    
    $
    66,059
    
    
    $
    15,532
    
    
    $
    18,841
    
    
    $
    7,516
    
    
    $
    9,621
    
    
    $
    117,569Segment operating
income (loss)
    
    
    10,706
    
    
    
    (6,130
    )
    
    
    992
    
    
    
    156
    
    
    
    177
    
    
    $
    5,901Segment assets
    
    
    216,762
    
    
    
    175,601
    
    
    
    70,025
    
    
    
    38,448
    
    
    
    35,663
    
    
    $
    536,499
 23




---



##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AACClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 24,
2007Net sales
    
    $
    31,002
    
    
    $
    2,644
    
    
    $
    15,278
    
    
    $
    580
    
    
    $
    8,173
    
    
    $
    57,677Segment operating
income (loss)
    
    
    4,836
    
    
    
    (3,989
    )
    
    
    3,344
    
    
    
    (1,153
    )
    
    
    1,241
    
    
    $
    4,279Segment assets
    
    
    207,723
    
    
    
    169,815
    
    
    
    67,786
    
    
    
    32,672
    
    
    
    34,359
    
    
    $
    512,355
 AACClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalThree Months
Ended February 25,
2006Net sales
    
    $
    33,681
    
    
    $
    2,684
    
    
    $
    15,598
    
    
    $
    860
    
    
    $
    6,373
    
    
    $
    59,196Segment operating
income (loss)
    
    
    6,043
    
    
    
    (2,553
    )
    
    
    2,468
    
    
    
    (876
    )
    
    
    983
    
    
    $
    6,065Segment assets
    
    
    212,591
    
    
    
    171,811
    
    
    
    68,675
    
    
    
    37,769
    
    
    
    34,962
    
    
    $
    525,808
 AACClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalSix Months
Ended February 24,
2007Net sales
    
    $
    64,369
    
    
    $
    13,205
    
    
    $
    18,037
    
    
    $
    1,290
    
    
    $
    13,534
    
    
    $
    110,435Segment operating
income (loss)
    
    
    8,723
    
    
    
    (7,870
    )
    
    
    1,039
    
    
    
    (2,027
    )
    
    
    718
    
    
    $
    583Segment assets
    
    
    207,723
    
    
    
    169,815
    
    
    
    67,786
    
    
    
    32,672
    
    
    
    34,359
    
    
    $
    512,355
 AACClass
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    TotalSix Months
Ended February 25,
2006Net sales
    
    $
    66,059
    
    
    $
    15,532
    
    
    $
    18,841
    
    
    $
    7,516
    
    
    $
    9,621
    
    
    $
    117,569Segment operating
income (loss)
    
    
    10,706
    
    
    
    (6,130
    )
    
    
    992
    
    
    
    156
    
    
    
    177
    
    
    $
    5,901Segment assets
    
    
    212,591
    
    
    
    171,811
    
    
    
    68,675
    
    
    
    37,769
    
    
    
    34,962
    
    
    $
    525,808
 24




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 11. Recent Accounting Pronouncements
     12. Subsequent Event
  25




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Basis of Presentation
      Fiscal Year End
  General
 Whos Who The National Deans List
   26




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##### Table of Contents



Company Background
    27




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##### Table of Contents



28




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##### Table of Contents



Results of Operations
 Three Months Ended February 24, 2007 Compared to Three Months Ended February 25, 2006
  Parent HoldingsFor the Three
    
    
    % of
    
    
    For the Three
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    57,677
    
    
    
    100.0
    %
    
    $
    59,196
    
    
    
    100.0
    %Cost of sales
    
    
    21,706
    
    
    
    37.6
    %
    
    
    21,731
    
    
    
    36.7
    %Gross profit
    
    
    35,971
    
    
    
    62.4
    %
    
    
    37,465
    
    
    
    63.3
    %Selling, general and administrative expenses
    
    
    31,692
    
    
    
    55.0
    %
    
    
    31,400
    
    
    
    53.0
    %Operating income
    
    
    4,279
    
    
    
    7.4
    %
    
    
    6,065
    
    
    
    10.3
    %Interest expense
    
    
    14,350
    
    
    
    24.9
    %
    
    
    8,481
    
    
    
    14.3
    %Loss before income taxes
    
    
    (10,071
    )
    
    
    (17.5
    )%
    
    
    (2,416
    )
    
    
    (4.0
    )%Benefit for income taxes
    
    
    (3,451
    )
    
    
    (6.0
    )%
    
    
    (1,069
    )
    
    
    (1.8
    )%Net loss
    
    $
    (6,620
    )
    
    
    (11.5
    )%
    
    $
    (1,347
    )
    
    
    (2.2
    )%
 Intermediate HoldingsFor the Three
    
    
    % of
    
    
    For the Three
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    57,677
    
    
    
    100.0
    %
    
    $
    59,196
    
    
    
    100.0
    %Cost of sales
    
    
    21,706
    
    
    
    37.6
    %
    
    
    21,731
    
    
    
    36.7
    %Gross profit
    
    
    35,971
    
    
    
    62.4
    %
    
    
    37,465
    
    
    
    63.3
    %Selling, general and administrative expenses
    
    
    31,692
    
    
    
    55.0
    %
    
    
    31,400
    
    
    
    53.0
    %Operating income
    
    
    4,279
    
    
    
    7.4
    %
    
    
    6,065
    
    
    
    10.3
    %Interest expense
    
    
    8,298
    
    
    
    14.4
    %
    
    
    8,481
    
    
    
    14.3
    %Loss before income taxes
    
    
    (4,019
    )
    
    
    (7.0
    )%
    
    
    (2,416
    )
    
    
    (4.0
    )%Benefit for income taxes
    
    
    (1,676
    )
    
    
    (2.9
    )%
    
    
    (1,069
    )
    
    
    (1.8
    )%Net loss
    
    $
    (2,343
    )
    
    
    (4.1
    )%
    
    $
    (1,347
    )
    
    
    (2.2
    )%
 AACFor the Three
    
    
    % of
    
    
    For the Three
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    57,677
    
    
    
    100.0
    %
    
    $
    59,196
    
    
    
    100.0
    %Cost of sales
    
    
    21,706
    
    
    
    37.6
    %
    
    
    21,731
    
    
    
    36.7
    %Gross profit
    
    
    35,971
    
    
    
    62.4
    %
    
    
    37,465
    
    
    
    63.3
    %Selling, general and administrative expenses
    
    
    31,692
    
    
    
    55.0
    %
    
    
    31,400
    
    
    
    53.0
    %Operating income
    
    
    4,279
    
    
    
    7.4
    %
    
    
    6,065
    
    
    
    10.3
    %Interest expense
    
    
    5,409
    
    
    
    9.4
    %
    
    
    5,752
    
    
    
    9.8
    %Income (loss) before income taxes
    
    
    (1,130
    )
    
    
    (2.0
    )%
    
    
    313
    
    
    
    0.5
    %Provision (benefit) for income taxes
    
    
    (447
    )
    
    
    (0.8
    )%
    
    
    122
    
    
    
    0.2
    %Net income (loss)
    
    $
    (683
    )
    
    
    (1.2
    )%
    
    $
    191
    
    
    
    0.3
    %
 Net Sales.
  Class Rings.
 29




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##### Table of Contents



Yearbooks.
 Graduation Products.
 Achievement Publications.
 Other.
 Gross Profit.
 Selling, General and Administrative Expenses.
 Operating Income (Loss).
 Interest Expense, Net.
   30




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##### Table of Contents



Provision (benefit) for Income Taxes.
   Net Income (Loss).
   31




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##### Table of Contents



Six Months Ended February 24, 2007 Compared to Six Months Ended February 25, 2006
  Parent HoldingsFor the Six
    
    
    % of
    
    
    For the Six
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    110,435
    
    
    
    100.0
    %
    
    $
    117,569
    
    
    
    100.0
    %Cost of sales
    
    
    49,240
    
    
    
    44.6
    %
    
    
    46,770
    
    
    
    39.8
    %Gross profit
    
    
    61,195
    
    
    
    55.4
    %
    
    
    70,799
    
    
    
    60.2
    %Selling, general and administrative expenses
    
    
    60,612
    
    
    
    54.9
    %
    
    
    64,898
    
    
    
    55.2
    %Operating income
    
    
    583
    
    
    
    0.5
    %
    
    
    5,901
    
    
    
    5.0
    %Interest expense
    
    
    28,971
    
    
    
    26.2
    %
    
    
    17,032
    
    
    
    14.5
    %Loss before income taxes
    
    
    (28,388
    )
    
    
    (25.7
    )%
    
    
    (11,131
    )
    
    
    (9.5
    )%Benefit for income taxes
    
    
    (10,110
    )
    
    
    (9.1
    )%
    
    
    (4,811
    )
    
    
    (4.1
    )%Net loss
    
    $
    (18,278
    )
    
    
    (16.6
    )%
    
    $
    (6,320
    )
    
    
    (5.4
    )%
 Intermediate HoldingsFor the Six
    
    
    % of
    
    
    For the Six
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    110,435
    
    
    
    100.0
    %
    
    $
    117,569
    
    
    
    100.0
    %Cost of sales
    
    
    49,240
    
    
    
    44.6
    %
    
    
    46,770
    
    
    
    39.8
    %Gross profit
    
    
    61,195
    
    
    
    55.4
    %
    
    
    70,779
    
    
    
    60.2
    %Selling, general and administrative expenses
    
    
    60,612
    
    
    
    54.9
    %
    
    
    64,898
    
    
    
    55.2
    %Operating income
    
    
    583
    
    
    
    0.5
    %
    
    
    5,901
    
    
    
    5.0
    %Interest expense
    
    
    17,012
    
    
    
    15.4
    %
    
    
    17,032
    
    
    
    14.5
    %Loss before income taxes
    
    
    (16,429
    )
    
    
    (14.9
    )%
    
    
    (11,131
    )
    
    
    (9.5
    )%Benefit for income taxes
    
    
    (6,774
    )
    
    
    (6.2
    )%
    
    
    (4,811
    )
    
    
    (4.1
    )%Net loss
    
    $
    (9,655
    )
    
    
    (8.7
    )%
    
    $
    (6,320
    )
    
    
    (5.4
    )%
 AACFor the Six
    
    
    % of
    
    
    For the Six
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetFebruary 24, 2007
    
    
    Sales
    
    
    February 25, 2006
    
    
    SalesNet sales
    
    $
    110,435
    
    
    
    100.0
    %
    
    $
    117,569
    
    
    
    100.0
    %Cost of sales
    
    
    49,240
    
    
    
    44.6
    %
    
    
    46,770
    
    
    
    39.8
    %Gross profit
    
    
    61,195
    
    
    
    55.4
    %
    
    
    70,799
    
    
    
    60.2
    %Selling, general and administrative expenses
    
    
    60,612
    
    
    
    54.9
    %
    
    
    64,898
    
    
    
    55.2
    %Operating income
    
    
    583
    
    
    
    0.5
    %
    
    
    5,901
    
    
    
    5.0
    %Interest expense
    
    
    11,327
    
    
    
    10.2
    %
    
    
    11,758
    
    
    
    10.0
    %Loss before income taxes
    
    
    (10,744
    )
    
    
    (9.7
    )%
    
    
    (5,857
    )
    
    
    (5.0
    )%Benefit for income taxes
    
    
    (4,235
    )
    
    
    (3.8
    )%
    
    
    (2,323
    )
    
    
    (2.0
    )%Net loss
    
    $
    (6,509
    )
    
    
    (5.9
    )%
    
    $
    (3,534
    )
    
    
    (3.0
    )%
 Net Sales.
  Class Rings.
 32




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##### Table of Contents



Yearbooks.
 Graduation Products.
 Achievement Publications. Whos Who Among American High School Students Whos Who Among American High School Students
 Other.
 Gross Profit.
 Selling, General and Administrative Expenses. Whos Who Among American High School Students
 Operating Income (Loss).
 Interest Expense, Net.
 33




---



##### Table of Contents



Income Taxes.
   Net Loss.
   34




---



##### Table of Contents



Liquidity and Capital Resources
 Operating Activities
  Investing Activities
  Financing Activities
    Capital Resources.
    35




---



##### Table of Contents



Off Balance-Sheet Obligations
 Gold Consignment Agreement.
  Seasonality
   36




---



##### Table of Contents



Recent Accounting Pronouncements
     37




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk.
 Semi-Precious Stones.
 Gold.
 38




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Internal Control  Integrated Framework.
  DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
   39




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  th
 
 ITEM 6. EXHIBITS
 EXHIBITNUMBER
    
    DESIGNATION31.1
    
    CEO Certification Accompanying Period Report Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    CFO Certification Accompanying Period Report Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    CEO Certification Accompanying Period Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    CFO Certification Accompanying Period Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 40




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 SIGNATURES
 
 AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATIONBy:
    /s/ DONALD J. PERCENTIDonald J. PercentiCHIEF EXECUTIVE OFFICER
(principal executive officer) By:
    /s/ SHERICE P. BENCHSherice P. BenchCHIEF FINANCIAL OFFICER
(principal financial officer) 41