##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2004 OR /   /
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 333-84294 AMERICAN ACHIEVEMENT CORPORATION (Exact name of registrant as specified in its charter) DELAWARE
(State or other jurisdiction of
incorporation or organization)
    
    13-4126506
(I.R.S. Employer Identification Number)
 7211 CIRCLE S ROAD
AUSTIN, TEXAS 78745
(Address of principal executive offices) (Zip Code) REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE (512) 444-0571 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 [ ]. Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]. 809,775 SHARES OF COMMON STOCK
(Number of shares outstanding as of February 28, 2004)




---



AMERICAN ACHIEVEMENT
CORPORATIONFOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2004INDEX PAGEPART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial Statements and
NotesCondensed
Consolidated Balance Sheets--As of
February 28, 2004 (unaudited) and August 30, 2003
    
    
    3Condensed
Consolidated Statements of Operations--For the
Three Months Ended February 28, 2004 (unaudited) and March 1, 2003 (unaudited)
    
    
    4Condensed
Consolidated Statements of Operations--For the Six
Months Ended February 28, 2004 (unaudited) and March 1, 2003 (unaudited)
    
    
    5Condensed
Consolidated Statements of Cash Flows--For the Six
Months Ended February 28, 2004 (unaudited) and March 1, 2003 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7-15Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    16-21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    23PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    24Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    24SIGNATURES
    
    
    
    
    25CEO Certification Pursuant to Section 302CFO Certification Pursuant to Section 302CEO Certification Pursuant to Section 906CFO Certification Pursuant to Section 906
  2




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 Condensed Consolidated Balance Sheets February 28,
    
    August 30,2004
    
    2003(unaudited)(Dollars in thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,192
    
    
    $
    1,735Accounts receivable, net of allowance for doubtful accounts of $3,381 and $3,242
    
    
    38,788
    
    
    
    44,193Inventories, net
    
    
    37,643
    
    
    
    23,310Prepaid expenses and other current assets, net
    
    
    28,455
    
    
    
    30,317Total current assets
    
    
    114,078
    
    
    
    99,555Property, plant and equipment, net of accumulated depreciation of $52,161 and $46,315
    
    
    70,189
    
    
    
    65,307Trademarks
    
    
    41,855
    
    
    
    41,855Goodwill
    
    
    166,444
    
    
    
    162,059Other assets, net of accumulated amortization of $9,928 and $8,057
    
    
    26,091
    
    
    
    26,725Total assets
    
    $
    418,657
    
    
    $
    395,501LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    3,979
    
    
    $
    4,877Accounts payable
    
    
    3,286
    
    
    
    6,564Customer deposits
    
    
    58,076
    
    
    
    21,393Accrued expenses
    
    
    31,435
    
    
    
    26,856Deferred revenue
    
    
    2,653
    
    
    
    5,123Accrued interest
    
    
    3,885
    
    
    
    4,231Total current liabilities
    
    
    103,314
    
    
    
    69,044Long-term debt, net of current portion
    
    
    217,351
    
    
    
    226,710Other long-term liabilities
    
    
    11,469
    
    
    
    9,854Total liabilities
    
    
    332,134
    
    
    
    305,608Redeemable minority interest in subsidiary
    
    
    18,650
    
    
    
    18,050Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value, 1,200,000 shares authorized Series A,
1,007,366 shares issued and outstanding; liquidation preference of
approximately $100,737
    
    
    10
    
    
    
    10Common stock, $.01 par value, 1,250,000 shares authorized, 809,775 shares
issued and outstanding
    
    
    8
    
    
    
    8Additional paid-in capital
    
    
    95,350
    
    
    
    95,350Accumulated deficit
    
    
    (22,379
    )
    
    
    (18,375
    )Accumulated other comprehensive loss
    
    
    (5,116
    )
    
    
    (5,150
    )Total stockholders equity
    
    
    67,873
    
    
    
    71,843Total liabilities and stockholders equity
    
    $
    418,657
    
    
    $
    395,501
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 3




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 Condensed Consolidated Statements of Operations
(unaudited) For the three months endedFebruary 28,
    
    March 1,2004
    
    2003(Dollars in thousands)Net sales
    
    $
    58,518
    
    
    $
    59,407Cost of sales
    
    
    21,538
    
    
    
    23,955Gross profit
    
    
    36,980
    
    
    
    35,452Selling, general and administrative expenses
    
    
    31,910
    
    
    
    31,427Operating income
    
    
    5,070
    
    
    
    4,025Interest expense, net
    
    
    6,917
    
    
    
    7,171Loss before income taxes
    
    
    (1,847
    )
    
    
    (3,146
    )Benefit for income taxes
    
    
    
    
    
    
    (18
    )Net loss
    
    
    (1,847
    )
    
    
    (3,128
    )Preferred dividends
    
    
    (300
    )
    
    
    (300
    )Net loss applicable to common stockholders
    
    $
    (2,147
    )
    
    $
    (3,428
    )
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 4




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 Condensed Consolidated Statements of Operations
(unaudited) For the six months endedFebruary 28,
    
    March 1,2004
    
    2003(Dollars in thousands)Net sales
    
    $
    126,446
    
    
    $
    134,442Cost of sales
    
    
    51,582
    
    
    
    57,772Gross profit
    
    
    74,864
    
    
    
    76,670Selling, general and administrative expenses
    
    
    64,370
    
    
    
    65,037Operating income
    
    
    10,494
    
    
    
    11,633Interest expense, net
    
    
    13,898
    
    
    
    14,543Loss before income taxes
    
    
    (3,404
    )
    
    
    (2,910
    )Provision for income taxes
    
    
    
    
    
    
    Net loss
    
    
    (3,404
    )
    
    
    (2,910
    )Preferred dividends
    
    
    (600
    )
    
    
    (600
    )Net loss applicable to common stockholders
    
    $
    (4,004
    )
    
    $
    (3,510
    )
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 5




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 Condensed Consolidated Statements of Cash Flows
(unaudited) For the six months endedFebruary 28,
    
    March 1,2004
    
    2003(Dollars in thousands)Cash flows from operating activities:Net loss
    
    $
    (3,404
    )
    
    $
    (2,910
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    7,380
    
    
    
    7,302Amortization of debt discount and deferred financing fees
    
    
    1,025
    
    
    
    1,040Provision for doubtful accounts
    
    
    139
    
    
    
    366Changes in assets and liabilities:Decrease in accounts receivable
    
    
    5,266
    
    
    
    4,107Increase in inventories, net
    
    
    (13,729
    )
    
    
    (12,818
    )Decrease in prepaid expenses and other current assets, net
    
    
    1,862
    
    
    
    4,643Increase in other assets
    
    
    (1,238
    )
    
    
    (445
    )Increase in customer deposits
    
    
    36,683
    
    
    
    28,476Decrease in deferred revenue
    
    
    (2,470
    )
    
    
    (2,649
    )Increase in accounts payable, accrued expenses, and other long-term liabilities
    
    
    2,575
    
    
    
    1,180Net cash provided by operating activities
    
    
    34,089
    
    
    
    28,292Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (11,234
    )
    
    
    (7,006
    )Acquisition, net of cash acquired
    
    
    (5,000
    )
    
    
    Net cash used in investing activities
    
    
    (16,234
    )
    
    
    (7,006
    )Cash flows from financing activities:Payments on Revolver, net
    
    
    (9,500
    )
    
    
    (18,676
    )Decrease of bank overdraft
    
    
    (898
    )
    
    
    (944
    )Net cash used in financing activities
    
    
    (10,398
    )
    
    
    (19,620
    )Net increase in cash and cash equivalents
    
    
    7,457
    
    
    
    1,666Cash and cash equivalents, beginning of period
    
    
    1,735
    
    
    
    1,562Cash and cash equivalents, end of period
    
    $
    9,192
    
    
    $
    3,228Supplemental disclosureCash paid during the period for:Interest
    
    $
    13,504
    
    
    $
    13,414Income taxes
    
    $
    178
    
    
    $
    112Supplemental Disclosure of noncash financing activitiesAccrued preferred stock dividends
    
    $
    600
    
    
    $
    600
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 6




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 Notes to Condensed Consolidated Financial Statements
(Dollars in thousands)
(unaudited) 1. Summary of Significant Accounting Policies Consolidation The condensed consolidated financial statements include the accounts of
American Achievement Corporation (the Company) and its direct and indirect
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. The 11 5/8% Senior Unsecured Notes Due 2007 (the Unsecured Notes) are
guaranteed by every direct and indirect domestic subsidiary of the Company. The
guarantees by the guarantor subsidiaries are full, unconditional, and joint and
several. All of the guarantor subsidiaries are wholly owned, with the exception
of Commemorative Brands, Inc. (CBI), which is majority owned. American
Achievement Corporation is a holding company with no independent assets or
operations other than its investment in its subsidiaries. The accompanying condensed consolidated financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures are adequate to make
the information presented not misleading. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations for the
periods presented have been included. Operating results for the six months
ended February 28, 2004 are not necessarily indicative of the results that may
be expected for the fiscal year ending August 28, 2004. Effective January 30, 2004, the Company acquired the assets of C-B Graduation Announcements, LLC,
a producer of personalized graduation announcements and related accessories (the C-B Announcements Acquisition). The maximum purchase price payable in connection with this acquisition is approximately $5.9 million in cash,
of which approximately $5.0 million was paid at closing (including $1.0 million placed in escrow), with the escrowed amount and balance of the purchase price to be paid pending a post-closing
purchase price adjustment. The C-B Announcements Acquisition was accounted for using the purchase method of accounting. Stock-Based Compensation The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 (SFAS 123), Accounting for
Stock-Based Compensation, as amended by SFAS No. 148 (SFAS 148), Accounting
for Stock-Based Compensation  Transition and Disclosure an amendment of FASB
Statement No. 123. The Company accounts for stock-based employee compensation
arrangements in accordance with the provisions of Accounting Principles Board
Opinion No. 25 (APB No. 25), Accounting for Stock Issued to Employees and
complies with the disclosure provisions of SFAS 123, as amended by SFAS 148. Had compensation expense for the employee stock plans been determined
based on the fair value at the grant date for options granted consistent with
the provisions of SFAS 123, as amended by SFAS 148, the pro forma net income
(loss) would have been reported as follows: For the three months ended
    
    For the six months endedFebruary 28,
    
    March 1,
    
    February 28,
    
    March 1,2004
    
    2003
    
    2004
    
    2003Net loss
    
    $
    (1,847
    )
    
    $
    (3,128
    )
    
    $
    (3,404
    )
    
    $
    (2,910
    )Less: stock-based compensation expense, net of related taxes
    
    
    4
    
    
    
    4
    
    
    
    8
    
    
    
    8Net loss  pro forma
    
    $
    (1,851
    )
    
    $
    (3,132
    )
    
    $
    (3,412
    )
    
    $
    (2,918
    )
 The fair value of each option grant is estimated at the date of grant
using the Black-Scholes pricing model with the following weighted average
assumptions for grants in the fiscal year ended 2003: 2003Risk-free interest rate
    
    
    3.93
    %Expected life
    
    10 yearsVolatility
    
    
    25
    %Dividend yield
    
    
    
 No options were granted during the six months ended February 28, 2004. 7




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 2. Trademarks, Goodwill and Other Intangible Assets The Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142), which revised the
accounting for purchased goodwill and intangible assets with indefinite lives,
effective September 1, 2002; and thus, goodwill and trademarks are no longer
amortized. The Company includes other intangible assets subject to amortization in
other assets on the balance sheet. The other intangible assets subject to
amortization are as follows: Gross
    
    Accumulated
    
    NetAsset
    
    Amortization
    
    AssetAt February 28, 2004Deferred financing costs and other
    
    $
    10,550
    
    
    $
    (4,170
    )
    
    $
    6,380Customer lists and distribution contracts
    
    
    16,072
    
    
    
    (5,758
    )
    
    
    10,314Total intangible assets subject to amortization
    
    $
    26,622
    
    
    $
    (9,928
    )
    
    $
    16,694At
August 30, 2003Deferred financing costs and other
    
    $
    10,344
    
    
    $
    (3,286
    )
    
    $
    7,058Customer lists and distribution contracts
    
    $
    16,072
    
    
    $
    (4,771
    )
    
    $
    11,301Total intangible assets subject to amortization
    
    $
    26,416
    
    
    $
    (8,057
    )
    
    $
    18,359
 Total amortization on the other intangible assets above was $1,871 and
$1,640 for the six months ended February 28, 2004 and March 1, 2003,
respectively, of which amortization on deferred financing costs is recorded as
interest expense and amortization on customer lists and distribution contracts
is recorded as amortization expense. Deferred financing costs have a useful
life of 1-7 years and customer lists and distribution contracts have a useful
life of 10-12 years. Estimated annual amortization expense for fiscal years
ended 2004 through 2008 is approximately $3.7 million each year. 3. Comprehensive Income (Loss) Unrecognized losses on accrued minimum pension liabilities are included in
other comprehensive income (loss). The following amounts were included in
determining the Companys comprehensive income (loss) for the three and six
month periods ended February 28, 2004 and March 1, 2003. For the three months ended
    
    For the six months endedFebruary 28,
    
    March 1,
    
    February 28,
    
    March 1,2004
    
    2003
    
    2004
    
    2003Net loss
    
    $
    (1,847
    )
    
    $
    (3,128
    )
    
    $
    (3,404
    )
    
    $
    (2,910
    )Adjustment in minimum pension
liability
    
    
    17
    
    
    
    34
    
    
    
    34
    
    
    
    34Total comprehensive loss
    
    $
    (1,830
    )
    
    $
    (3,094
    )
    
    $
    (3,370
    )
    
    $
    (2,876
    )
 4. Inventories, Net A summary of inventories, net is as follows: February 28,
    
    August 30,2004
    
    2003Raw materials
    
    $
    9,197
    
    
    $
    7,876Work in process
    
    
    21,141
    
    
    
    8,043Finished goods
    
    
    7,606
    
    
    
    7,632Less  Reserves
    
    
    (301
    )
    
    
    (241
    )$
    37,643
    
    
    $
    23,310
 Cost of sales includes depreciation and amortization of $2,178 and $2,537
for the three months ended February 28, 2004 and March 1, 2003, respectively.
Cost of sales includes depreciation and amortization of $4,341 and $4,791 for
the six months ended February 28, 2004 and March 1, 2003, respectively. 8




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 5. Prepaid Expenses and Other Current Assets, Net Prepaid expenses and other current assets, net on the balance sheet,
include reserves on sales representative advances of $2,097 and $2,516 at
February 28, 2004 and August 30, 2003, respectively. 6. Long-term Debt Long-term debt consists of the following: February 28,
    
    August 30,2004
    
    200311 5/8% Senior unsecured notes due 2007 (net of unamortized discount of $1,004 and $1,145)
    
    $
    175,996
    
    
    $
    175,85511% Senior subordinated notes due 2007
    
    
    41,355
    
    
    
    41,355Senior secured credit facility
    
    $
    
    
    
    $
    9,500Total long-term debt
    
    $
    217,351
    
    
    $
    226,710
 11 5/8% Senior Unsecured Notes On February 20, 2002, the Company issued $177 million of senior unsecured
notes (the Unsecured Notes) due in 2007. The Unsecured Notes bear interest at
a stated rate of 11 5/8%. The Unsecured Notes were issued at a discount of
0.872% resulting in net proceeds of approximately $175.5 million before
considering financing costs. The effective rate of the Unsecured Notes after
discount is approximately 13.0%. The Unsecured Notes rank pari passu with the
Companys existing and future senior indebtedness, including obligations under
the Companys Senior Secured Credit Facility (as defined below). The Unsecured
Notes are guaranteed by the Companys domestic subsidiaries, and the guarantees
rank pari passu with the existing Senior Subordinated Notes and future senior
debt of the Company and its subsidiaries. The Unsecured Notes and the
guarantees on the Unsecured Notes are effectively subordinated to any of the
Companys secured debt. The Company may not redeem the Unsecured Notes until 2005, except that the
Company, in connection with a public equity offering, may redeem up to 35
percent of the Unsecured Notes before the third anniversary of the issue date
of the Unsecured Notes as long as (a) the Company pays a certain percentage of
the principal amount of the Unsecured Notes, plus interest, (b) the Company
redeems the Unsecured Notes within 90 days of completing a public equity
offering and (c) at least 65 percent of the aggregate principal amount of the
Unsecured Notes issued remains outstanding afterward. If a change in control as defined in the indenture relating to the
Unsecured Notes (the AAC Indenture) occurs, the Company must give the holders
of the Unsecured Notes the opportunity to sell their Unsecured Notes to the
Company at 101 percent of the principal amount of the Unsecured Notes, plus
accrued interest. The Unsecured Notes contain customary negative covenants and restrictions
on actions by the Company and its subsidiaries including, without limitation,
restrictions on additional indebtedness, investments, asset dispositions
outside the ordinary course of business, liens, and transactions with
affiliates, among other restrictions (as defined in the AAC Indenture). In
addition, the Unsecured Notes contain covenants, which restrict the declaration
or payment of dividends by the Company and/or its subsidiaries (as defined in
the AAC Indenture). The Unsecured Notes also require that the Company meet
certain financial covenants including a minimum fixed charge coverage ratio (as
defined in the AAC Indenture). The Company was in compliance with the Unsecured
Notes covenants as of February 28, 2004. 9




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 11% Senior Subordinated Notes CBIs 11% senior subordinated notes (the Subordinated Notes) mature on
January 15, 2007. The Subordinated Notes are redeemable at the option of CBI in
whole or in part, at any time on or after January 15, 2002, at specified
redemption prices ranging from 105.5 percent of the principal amount thereof if
redeemed during 2002 and declining to 100 percent of the principal amount
thereof if redeemed during the year 2005 or thereafter, plus accrued and unpaid
interest and Liquidated Damages as defined in the indenture relating to the
Subordinated Notes, as amended (the CBI Indenture), if any, thereon to the
date of redemption. The Company has not redeemed any of the Subordinated Notes
as of February 28, 2004. In the event of a change of control (as defined in the CBI Indenture),
each holder of the Subordinated Notes will have the right to require CBI to
purchase all or any part of such holders Subordinated Notes at a purchase
price in cash equal to 101 percent of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase. In the event of an asset sale (as defined in the CBI Indenture), CBI is
required to apply any Net Proceeds (as defined in the CBI Indenture) to
permanently reduce senior indebtedness, to acquire another business or
long-term assets or to make capital expenditures. To the extent such amounts
are not so applied within 365 days and the amount not applied exceeds $5.0
million, CBI is required to make an offer to all holders of the Subordinated
Notes to purchase an aggregate principal amount of Subordinated Notes equal to
such excess amount at a purchase price in cash equal to 100 percent of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase. The Subordinated Notes contain certain covenants that, among other things,
limit the ability of CBI to engage in certain business transactions such as
mergers, consolidations or sales of assets that would decrease the value of CBI
or cause an event of default. The Company was in compliance with the
Subordinated Notes covenants as of February 28, 2004. Senior Secured Credit Facility In conjunction with the issuance of the Unsecured Notes, on February 20,
2002, the Company entered into a $40 million senior revolving credit facility
(the Senior Secured Credit Facility) with various financial institutions,
with all of the Companys current domestic subsidiaries as guarantors. Loans
made pursuant to the Senior Secured Credit Facility are secured by a first
priority security interest in substantially all of the Companys and the
Companys domestic subsidiaries assets and in all of the Companys domestic
subsidiaries capital stock. Availability under the Senior Secured Credit Facility is restricted to the
lesser of (1) $40 million or (2) the Borrowing Base Amount as defined in the
credit agreement under the Senior Secured Credit Facility (the Credit
Agreement). Availability under the Senior Secured Credit Facility as of
February 28, 2004 was approximately $38.1 million with $0 borrowings
outstanding. The Senior Secured Credit Facility matures on February 20, 2006. Advances under the Senior Secured Credit Facility may be made as base rate
loans or LIBOR loans at the Companys election (except for the initial loans
which were base rate loans). Interest rates payable upon advances are based
upon the base rate or LIBOR depending on the type of loan the Company chooses,
plus an applicable margin based upon a consolidated leverage ratio of certain
outstanding indebtedness to EBITDA (to be calculated in accordance with the
terms specified in the Credit Agreement). The effective rate on borrowings for
the six months ended February 28, 2004 was 15.0%. 10




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) The Credit Agreement contains customary negative covenants and
restrictions on actions by the Company and its subsidiaries including, without
limitation, restrictions on indebtedness, declaration or payment of dividends,
liens, and changing the provisions of the gold consignment agreement, among
other restrictions. In addition, the Credit Agreement requires that the Company
meet certain financial covenants, ratios and tests, including capital
expenditure limits, a maximum secured leverage ratio, a minimum interest
coverage ratio, and a minimum fixed charge coverage ratio. The Company was in
compliance with the Credit Agreement covenants as of February 28, 2004. The
Companys long-term debt outstanding as of February 28, 2004 matures as
follows: AmountFiscal year ending
    
    maturing2004
    
    $
    2005
    
    
    2006
    
    
    2007
    
    
    217,351Thereafter
    
    
    $
    217,351
 The weighted average interest rate on debt outstanding as of February 28,
2004 and August 30, 2003 was 11.9% and 12.3%, respectively. The Companys management believes the carrying amount of long-term debt
approximates fair value as of February 28, 2004 and August 30, 2003, based upon
current rates offered for debt with the same or similar debt terms. Subsequent to February 28, 2004, the Unsecured Notes, Subordinated Notes, and the Senior Secured Credit Facility were substantially paid off in connection with the
merger agreement discussed in Note 13. 7. Commitments and Contingencies Leases Certain Company facilities and equipment are leased under agreements
expiring at various dates through 2018. Certain Company facilities and
equipment are leased under agreements expiring at various dates through 2018.
The Companys commitments under the noncancellable portion of all operating and
capital leases for each of the five years ending after August 30, 2003 and
thereafter are approximately as follows: Fiscal Year Ending
    
    Operating Expense
    
    Capital2004 (remainder)
    
    $
    1,062
    
    
    $
    7412005
    
    
    1,822
    
    
    
    1,4092006
    
    
    1,511
    
    
    
    1,3632007
    
    
    1,124
    
    
    
    1,3392008
    
    
    817
    
    
    
    219Thereafter
    
    
    2,719
    
    
    
    Interest
    
    
    
    
    
    
    (504
    )$
    9,055
    
    
    $
    4,567
 Some of the Companys rental property leases contain options to renew the
leased space for periods up to an additional ten years. 11




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) Employment Contracts The Company has employment agreements with its executive officers, the
terms of which expire at various times through August 2005. Unless terminated,
one executive officers employment agreement adds one day to the term for each
day that passes, and accordingly, there are always two years remaining on the
term. The remaining executive officers terms will be automatically extended for
an additional one year term. Such agreements, which have been revised from
time-to-time, provide for minimum salary levels, adjusted annually for
cost-of-living changes, as well as for incentive bonuses for a certain
executive that are payable if specific management goals are attained. The
aggregate commitment for future salaries as of February 28, 2004, excluding
bonuses, was approximately $2.6 million. Pending Litigation The Company is not a party to any pending legal proceedings other than
ordinary routine litigation incidental to its business. In managements
opinion, adverse decisions on legal proceedings, in the aggregate, would not
have a materially adverse impact on the Companys results of operations or
financial position. On February 11, 2004, Frederick Goldman, Inc. (the Licensee) filed an
arbitration claim against CBI alleging, among other things, that CBI had
improperly attempted to convert an exclusive license CBI granted to the
Licensee to a non-exclusive license. In addition, on February 10, 2004, the
Licensee commenced a lawsuit in federal district court in New York against CBI
alleging that CBI breached the license agreement by granting third parties
rights in violation of the Licensees exclusive rights under the license
agreement. The district court claim seeks injunctive and monetary relief. No
discovery has been conducted to date, therefore, at this time, it is not
possible to predict with certainty the outcome of these unresolved legal
matters or the range of possible loss or recovery. However, the Company
intends to defend itself vigorously in these proceedings. Gold Consignment Agreement Under the Companys gold consignment financing arrangement, the Company
has the ability to have on consignment the lowest of the dollar value of 27,000
troy ounces of gold, $10.1 million or a borrowing base, determined based upon a
percentage of gold located at the Companys facilities and other approved
locations, as specified by the agreement. For the three months ended February
28, 2004 and March 1, 2003, the Company expensed consignment fees of
approximately $87 and $74, respectively. For the six months ended February 28,
2004 and March 1, 2003, the Company expensed consignment fees of approximately
$154 and $142, respectively. Under the terms of the consignment arrangement,
the Company does not own the consigned gold nor does it have risk of loss
related to such inventory until the money is received by the bank from the
Company in payment for the gold purchased. Accordingly, the Company does not
include the value of consigned gold in its inventory or the corresponding
liability for financial statement purposes. As of February 28, 2004 and August
30, 2003, the Company held approximately 17,170 ounces and 17,780 ounces,
respectively, of gold valued at $6.9 million and $6.7 million, respectively, on
consignment. The gold consignment agreement must be renewed annually, during
February of each year. As of February 28, 2004, the Company had entered into
an agreement to extend the gold consignment agreement through April
19, 2004. See Note 13, Subsequent Event. 8. Income Taxes Other than the three months ended March 1, 2003, whereby the Company
recorded an $18 tax benefit, no tax provision or benefit has been recorded in
the financial statements presented. No net federal income tax benefit is
reflected in the statement of operations for net operating losses to be carried
forward since realization of the potential benefit of net operating loss
carry-forwards is not considered to be more likely than not. Although state
taxes are expected for each year end, no benefit has been recorded due to the
valuation allowance. 12




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 9. Stockholders Equity In the event of any liquidation, dissolution or winding up of the Company,
the holders of the Series A Preferred Stock are entitled to receive payment of
the liquidation value of $100 per share plus any accrued and unpaid dividends
prior to the payment of any distributions to the holders of the Common Stock of
the Company. The liquidation preference of the Series A Preferred Stock totaled
approximately $100,737 at February 28, 2004 and August 30, 2003, respectively. Incentive stock options for 93,615 shares and nonqualified stock options
for 3,289 shares of the Companys Common Stock were outstanding as of February
28, 2004. During the six-month period ended November 30, 2002, the Company granted
28,500 options to employees. These options have an exercise price of $6.02 per
share and, accordingly, the Company did not record any related compensation
expense based upon the market price of the stock on the date of grant. A
portion of the options, 10,000, vested on the grant date, with the remaining
options vesting ratably over a four year period. Pursuant to an employment agreement entered into between the Company and
its chief executive officer in July 1999, as amended on February 1, 2002, if
the Company achieves certain EBITDA targets as defined by the agreement at any
point from 2002 through 2004, the chief executive is entitled to receive up to
a total of $1 million in face value of the Companys Series A Preferred Stock.
In addition, the plan provided for the immediate issuance of an option to
purchase 12,500 shares of the Companys common stock, and pursuant to this plan, an option to purchase 12,500 shares was granted in
fiscal 2002. The executive is also entitled to receive
discretionary bonuses as directed by the Board of Directors up to $300
annually, of which $150 is accrued as of February 28, 2004. 10. Related-Party Transactions The Company entered into a management agreement on March 30, 2001 with
Castle Harlan, Inc., its majority shareholder, (the Manager), pursuant to
which the Manager agreed to provide business and organization strategy,
financial and investment management and merchant and investment banking
services to the Company and its subsidiaries. The Company has agreed to
indemnify the Manager against liabilities, costs, charges and expenses relating
to the Managers performance of its duties, other than such of the foregoing
resulting from the Managers gross negligence or willful misconduct. The
agreement is for a term of 10 years, renewable automatically from year to year
unless Castle Harlan Partners III, L.P. or Castle Harlan Partners II, L.P.,
affiliates of the Manager, shall own less than 5 percent of the then
outstanding capital stock of the Company. As part of the agreement, the Company
is charged a management fee equal to $3.0 million, unless otherwise prohibited
by the Companys Credit Agreement. Amounts paid under the management agreement
totaled approximately $750 and $0 for the three months ended February 28, 2004
and March 1, 2003, respectively. Amounts paid under the management agreement
totaled approximately $1,500 and $750 for the six months ended February 28,
2004 and March 1, 2003, respectively. As of February 28, 2004 and August 30,
2003, the Company had accrued management fees of approximately $750,
respectively. 13




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 11. Business Segments The Company operates in two reportable business segments: scholastic
products and recognition and affinity products. The principal products sold in
the scholastic segment are class rings, yearbooks and graduation products,
which include fine paper products and graduation accessories. The scholastic
segment primarily serves the high school and college markets. The recognition
and affinity segment includes publications that recognize the academic
achievement of top students at the high school and college levels, jewelry
commemorating family events, fan affinity jewelry and related products, and
professional sports championship rings. RecognitionScholastic
    
    and Affinity
    
    TotalThree Months Ended February 28, 2004Net sales
    
    $
    52,516
    
    
    $
    6,002
    
    
    $
    58,518Interest expense, net
    
    
    6,225
    
    
    
    692
    
    
    
    6,917Depreciation and amortization
    
    
    3,370
    
    
    
    212
    
    
    
    3,582Segment operating income
    
    
    4,940
    
    
    
    130
    
    
    
    5,070Capital expenditures
    
    
    3,441
    
    
    
    1,240
    
    
    
    4,681Trademarks
    
    
    24,708
    
    
    
    17,147
    
    
    
    41,855Goodwill
    
    
    119,021
    
    
    
    47,423
    
    
    
    166,444Other intangible assets, net
    
    
    14,966
    
    
    
    1,728
    
    
    
    16,694Segment assets
    
    
    327,053
    
    
    
    91,604
    
    
    
    418,657Three Months Ended March 1, 2003Net sales
    
    $
    53,161
    
    
    $
    6,246
    
    
    $
    59,407Interest expense, net
    
    
    6,442
    
    
    
    729
    
    
    
    7,171Depreciation and amortization
    
    
    3,449
    
    
    
    383
    
    
    
    3,832Segment operating income
    
    
    4,130
    
    
    
    (105
    )
    
    
    4,025Capital expenditures
    
    
    1,964
    
    
    
    226
    
    
    
    2,190Trademarks
    
    
    24,708
    
    
    
    17,147
    
    
    
    41,855Goodwill
    
    
    115,074
    
    
    
    46,985
    
    
    
    162,059Other intangible assets, net
    
    
    17,465
    
    
    
    2,482
    
    
    
    19,947Segment assets
    
    
    318,834
    
    
    
    87,459
    
    
    
    406,293Six Months Ended February 28, 2004Net sales
    
    $
    106,096
    
    
    $
    20,350
    
    
    $
    126,446Interest expense, net
    
    
    12,508
    
    
    
    1,390
    
    
    
    13,898Depreciation and amortization
    
    
    6,642
    
    
    
    738
    
    
    
    7,380Segment operating income
    
    
    5,748
    
    
    
    4,746
    
    
    
    10,494Capital expenditures
    
    
    9,368
    
    
    
    1,906
    
    
    
    11,274Trademarks
    
    
    24,708
    
    
    
    17,147
    
    
    
    41,855Goodwill
    
    
    119,021
    
    
    
    47,423
    
    
    
    166,444Other intangible assets, net
    
    
    14,966
    
    
    
    1,728
    
    
    
    16,694Segment assets
    
    
    327,053
    
    
    
    91,604
    
    
    
    418,657Six Months Ended March 1, 2003Net sales
    
    $
    107,398
    
    
    $
    27,044
    
    
    $
    134,442Interest expense, net
    
    
    13,089
    
    
    
    1,454
    
    
    
    14,543Depreciation and amortization
    
    
    6,572
    
    
    
    730
    
    
    
    7,302Segment operating income
    
    
    3,683
    
    
    
    7,950
    
    
    
    11,633Capital expenditures
    
    
    6,289
    
    
    
    717
    
    
    
    7,006Trademarks
    
    
    24,708
    
    
    
    17,147
    
    
    
    41,855Goodwill
    
    
    115,074
    
    
    
    46,985
    
    
    
    162,059Other intangible assets, net
    
    
    17,465
    
    
    
    2,482
    
    
    
    19,947Segment assets
    
    
    318,834
    
    
    
    87,459
    
    
    
    406,293
 The Companys reportable segments are strategic business units that offer
products to different consumer segments. Each segment is managed separately
because each business requires different marketing strategies. The Company
evaluates the performance of each segment based on the profit or loss from
operations before income taxes, excluding nonrecurring gains or losses. 14




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed
Consolidated Financial Statements  (Continued)
(Dollars in thousands)
(unaudited) 12. Recent Accounting Pronouncements In May 2003, SFAS No. 150 (SFAS 150), Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, was issued,
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
Company adopted SFAS 150 beginning in September 2003. The adoption of this
standard did not have a significant impact on its financial statements. In January 2003, the FASB issued FIN No. 46 Consolidation of Variable
Interest Entities, an Interpretation of ARB 51. In December 2003, the FASB
revised FIN No. 46 to reflect decisions it made regarding a number of
implementation issues. FIN No. 46, as revised, requires that the primary
beneficiary of a variable interest entity (VIE) consolidate the entity even
if the primary beneficiary does not have a majority voting interest. This
Interpretation applies to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support. This Interpretation also identifies
those situations where a controlling financial interest may be achieved through
arrangements that do not involve voting interests. The Interpretation also
establishes additional disclosures which are required regarding an enterprises
involvement with a VIE when it is not the primary beneficiary. The requirements
of this Interpretation are required to be applied to any VIE created after
January 31, 2003. The Company adopted FIN 46 beginning in the first quarter of
fiscal year 2004. The adoption of this standard did not have a significant
impact on its financial statements. In December 2003, the FASB amended SFAS No. 132, Employers Disclosures
about Pensions and Other Postretirement Benefits. The amendment revised
employers disclosures about pension plans and other post retirement benefit
plans to require additional disclosures to those in the original SFAS No. 132
about the assets, obligations, cash flows, and net periodic benefit cost of
defined pension plans and other defined benefit postretirement plans. The
Company will adopt the additional disclosure requirements in the third quarter
of 2004. 13. Subsequent Event On December 24, 2003, the Company entered into a merger agreement with AAC
Acquisition Corp. (Acquisition) and AAC Holding Corp. (Holdings), each
Delaware corporations formed at the direction of Fenway Partners Capital Fund
II, L.P. (Fenway Partners). On March 25, 2004, as contemplated by the merger
agreement Acquisition was merged with and into the Company, with the Company
continuing as the surviving corporation and a wholly owned subsidiary of
Holdings (the Merger). Upon consummation of the Merger, substantially all of
the equity interests in Holdings were held by an investor group led by Fenway
Partners. The Merger was financed by a cash equity investment in Holdings by an
investor group led by Fenway Partners of $102.0 million, the borrowing by the
Company of $155.0 million under a seven-year term loan and $2.0 million under a
six-year revolving loan, each under the Companys new senior secured credit
facility, the issuance by the Company of $150.0 million aggregate principal
amount of its 8.25% senior subordinated notes due 2012, and the untendered Unsecured Notes of $6.1 million. Proceeds of these
financing arrangements were used to redeem the outstanding Series A Preferred
Stock, refinance the Companys existing indebtedness, including the redemption
of the outstanding Senior Notes and completion of a debt tender offer to
acquire all of the existing Unsecured Notes, and pay transaction costs and
expenses. Pursuant to the debt tender offer, the Company retired $170.9
million of outstanding Unsecured Notes for an aggregate $193.8 million and
eliminated substantially all of the restrictive covenants associated with such
notes. In addition, as part of the Merger, the Company terminated its existing
Senior Secured Credit Facility and terminated its management contract with the
Manager. The Company also entered into a new gold consignment agreement, which has substantially the same terms as the previous
agreement with the exception that it renews automatically unless a 60-day termination notice is given by either party, and entered into a new management
agreement with an affiliate of Fenway Partners pursuant to which the Company,
among other things, agreed to pay such affiliate an annual fee equal to the
greater of $3.0 million or 5% of the previous fiscal years EBITDA. The Merger will be accounted for under the purchase method of accounting. 15




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS The following discussion of our consolidated financial condition and results of
operations should be read in conjunction with the information contained in our
consolidated financial statements and the notes thereto. The following
discussion includes forward-looking statements that involve certain risks and
uncertainties. See Special Note Regarding Forward-Looking Statements. Overview We are one of the leading manufacturers and suppliers of class rings,
yearbooks, graduation products, achievement publications and recognition and
affinity jewelry in the United States. Our two principal business segments are
scholastic products and recognition and affinity products. The scholastic
products division, which serves the high school, college and, to a lesser
extent, elementary and junior high school markets, accounted for approximately
90% and 84% of our net sales for the three months and six months ended February
28, 2004, respectively. Our scholastic product segment produces, markets, and
sells class rings, yearbooks and graduation products, the last of which
includes fine paper products and graduation accessories. The recognition and
affinity products segment accounted for approximately 10% and 16% of our net
sales for the three months and six months ended February 28, 2004,
respectively. This segment produces, markets, and sells publications that
recognize the academic achievement of top students at the high school and
college levels, as well as the nations most inspiring teachers, jewelry
commemorating family events such as the birth of a child, fan affinity jewelry
and related products and professional sports championship rings such as World
Series rings. On December 24, 2003, we entered into a merger agreement with AAC Acquisition
Corp. (Acquisition) and AAC Holding Corp. (Holdings), each Delaware
corporations formed at the direction of Fenway Partners Capital Fund II, L.P.
(Fenway Partners). On March 25, 2004, as contemplated by the merger
agreement Acquisition was merged with and into our company, with our company
continuing as the surviving corporation and a wholly owned subsidiary of
Holdings (the Merger). Upon consummation of the Merger, substantially all of
the equity interests in Holdings were held by an investor group led by Fenway
Partners. The Merger was financed by a cash equity investment in Holdings by an investor
group led by Fenway Partners of $102.0 million, the borrowing by us of $155.0
million under a seven-year term loan and $2.0 million under a six-year
revolving loan, each under our new senior secured credit facility, the
issuance by us of $150.0 million aggregate principal amount of our 8.25% senior
subordinated notes due 2012, and the untendered Unsecured Notes of $6.1 million. Proceeds of these financing arrangements were
used to redeem our outstanding Series A preferred stock, refinance our existing
indebtedness, including the redemption of the outstanding 11% senior notes of
our subsidiary, Commemorative Brands, Inc. (CBI) and completion of a debt
tender offer to acquire all of our existing unsecured notes, and pay
transaction costs and expenses. Pursuant to the debt tender offer, the Company
retired $170.9 million of outstanding 11 5/8% unsecured senior notes for an
aggregate $193.8 million and eliminated substantially all of the restrictive
covenants associated with such notes. In addition, as part of the Merger, we
terminated our existing senior secured credit facility and terminated our
management contract with an affiliate of our majority stockholder. We also
entered into a new gold consignment agreement, which has substantially the same terms as the previous agreement with the exception that it renews automatically unless a 60-day
termination notice is given by either party, and entered into a new management agreement with an
affiliate of Fenway Partners pursuant to which we, among other things, agreed
to pay such affiliate an annual fee equal to the greater of $3.0 million of 5%
of the previous fiscal years EBITDA. The Merger will be accounted for under the purchase method of accounting. Company Background CBI was initially formed in March 1996 for the purpose of acquiring
substantially all of the ArtCarved operations of CJC Holdings, Inc. and the
Balfour operations of L. G. Balfour Company, Inc. These acquisitions were
consummated on December 16, 1996. Until such date, CBI engaged in no business
activities other than in connection with the completion of the acquisitions and
the financing thereof. Our company was formed on June 27, 2000 to serve as a
holding company for the CBI operations and future acquisitions. Upon formation,
each share of CBIs issued and outstanding common stock was converted into one
share of our common stock, and each share of CBIs issued and outstanding
series B preferred stock was converted into one share of our Series A Preferred
Stock. The original holders of CBIs series A preferred stock continued to hold
such shares. We changed our name to American Achievement Corporation on January
23, 2002. Taylor Acquisition.On February 11, 2000, one of our stockholders, acquired
Taylor for a purchase price of approximately $30.0 million, whose primary
business is the designing and printing of student yearbooks. On July 27, 2000,
we acquired all issued and outstanding shares of Taylor Senior Holding Corp
(TSHC), Taylors parent, through the issuance of 320,929 shares of our common
stock and 393,482 shares of our series A preferred stock (the Taylor
Acquisition). The Taylor Acquisition was accounted for under the purchase
method of accounting. 16




---



##### Table of Contents



ECI Acquisition.On March 30, 2001, we acquired all of the capital stock of ECI
for a purchase price of approximately $58.7 million (the ECI Acquisition).
ECI has been in the academic achievement publication business since 1967 and
publishes such well-known titles as, Whos Who Among American High School
Students, The National Deans List and Whos Who Among Americas Teachers. The
ECI Acquisition was accounted for under the purchase method of accounting. Milestone Acquisition.Effective July 15, 2002, we acquired all the outstanding
stock and warrants of Milestone for a total purchase price of $16.3 million
(the Milestone Acquisition). The Milestone Acquisition was accounted for
using the purchase method of accounting. Milestone is a specialty marketer of
class rings and other graduation products to the college market. Effective
December 31, 2002, Milestone merged into CBI, with CBI as the surviving entity.
In conjunction with the merger, for each share of Milestone common stock held
by us, we received one share of CBI common stock. The existing common stock
and warrants of Milestone were cancelled in connection with this transaction. C-B Announcement Acquisition.Effective January 30, 2004, we acquired the
assets of C-B Graduation Announcements, LLC, a producer of personalized
graduation announcements and related accessories (the C-B Announcements
Acquisition). The maximum purchase price payable in connection with this
acquisition is approximately $5.9 million in cash, of which approximately $5.0
million was paid at closing (including $1.0 million placed in escrow), with the
escrowed amount and balance of the purchase price to be paid pending a
post-closing purchase price adjustment. The C-B Announcements Acquisition was
accounted for using the purchase method of accounting. Critical Accounting Policies We prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. As such, we are
required to make certain estimates, judgments and assumptions that we believe
are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the periods presented. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following: Revenue Recognition.We recognize revenue when the earnings process is
complete, evidenced by an agreement between the customer and us, delivery and
acceptance has occurred, collectibility is reasonably assured and pricing is
fixed and determinable. In accordance with the Securities and Exchange
Commissions Staff Accounting Bulletin No. 101, the recognition of revenue and
related gross profit on sales to independent sales representatives, along with
commissions to independent sales representatives that are directly related to
the revenue, are deferred until the independent sales representative delivers
the product and title passes to our end customer. Provisions for sales returns
and warranty costs are recorded at the time of sale based on historical
information and current trends. Sales Returns and Allowances.We make estimates of potential future product
returns related to current period product revenue. We analyze historical
returns, current economic trends and changes in customer demand and acceptance
of our products when evaluating the adequacy of the sales returns and
allowances. Significant management judgments and estimates must be made and
used in connection with establishing the sales returns and allowances in any
accounting period. Material differences could result in the amount and timing
of our revenue for any period if we made different judgments or utilized
different estimates. Allowance for Doubtful Accounts and Reserve on Sales Representative Advances.
We make estimates of potentially uncollectible customer accounts receivable and
receivables arising from sales representative draws paid in excess of earned
commissions. Our reserves are based on an analysis of customer and salesperson
accounts and historical write-off experience. Our analysis includes the age of
the receivable, customer or salesperson creditworthiness and general economic
conditions. We believe the results could be materially different if historical
trends do not reflect actual results or if economic conditions worsened. Goodwill and Other Intangible Assets.We account for our long-lived assets with
indefinite lives under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142), which addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible
assets subsequent to their acquisition. SFAS No. 142 also provides that
intangible assets with finite useful lives be amortized and that goodwill and
intangible assets with indefinite lives will not be amortized, but will rather
be tested for impairment upon adoption and on an annual basis thereafter. Long-lived Tangible and Intangible Assets with Definite Lives.We test our
long-lived tangible and intangible assets with definite lives for impairment
under Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which requires us to review
long-lived tangible and intangible assets with definite lives whenever events
or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. Recoverability of these assets is measured by comparison of its
carrying amount to future undiscounted cash flows the assets are expected to
generate. If long-lived assets are considered to be impaired, the impairment
to be recognized equals the amount by which the carrying value of the assets
exceeds its fair market value and is recorded in the period the determination
is made. 17




---



##### Table of Contents



Results of Operations The following table sets forth selected information from our condensed
consolidated statements of operations expressed on an actual basis and as a
percentage of net sales: THREE MONTHS ENDED
    
    SIX MONTHS ENDEDFEBRUARY 28, 2004
    
    MARCH 1, 2003
    
    FEBRUARY 28, 2004
    
    MARCH 1, 2003% OF NET
    
    
    
    
    
    % OF NET
    
    
    
    
    
    % OF NET
    
    
    
    
    
    % OF NET(IN THOUSANDS)
    
    ACTUAL
    
    SALES
    
    ACTUAL
    
    SALES
    
    ACTUAL
    
    SALES
    
    ACTUAL
    
    SALESNet sales
    
    $
    58,518
    
    
    
    100.0
    %
    
    $
    59,407
    
    
    
    100.0
    %
    
    $
    126,446
    
    
    
    100.0
    %
    
    $
    134,442
    
    
    
    100.0
    %Cost of sales
    
    
    21,538
    
    
    
    36.8
    %
    
    
    23,955
    
    
    
    40.3
    %
    
    
    51,582
    
    
    
    40.8
    %
    
    
    57,772
    
    
    
    43.0
    %Gross profit
    
    
    36,980
    
    
    
    63.2
    %
    
    
    35,452
    
    
    
    59.7
    %
    
    
    74,864
    
    
    
    59.2
    %
    
    
    76,670
    
    
    
    57.0
    %Selling, general and
administrative expenses
    
    
    31,910
    
    
    
    54.5
    %
    
    
    31,427
    
    
    
    52.9
    %
    
    
    64,370
    
    
    
    50.9
    %
    
    
    65,037
    
    
    
    48.4
    %Operating income (loss)
    
    
    5,070
    
    
    
    8.7
    %
    
    
    4,025
    
    
    
    6.8
    %
    
    
    10,494
    
    
    
    8.3
    %
    
    
    11,633
    
    
    
    8.6
    %Interest expense, net
    
    
    6,917
    
    
    
    11.8
    %
    
    
    7,171
    
    
    
    12.1
    %
    
    
    13,898
    
    
    
    11.0
    %
    
    
    14,543
    
    
    
    10.8
    %Loss before income taxes
    
    
    (1,847
    )
    
    
    (3.1
    )%
    
    
    (3,146
    )
    
    
    (5.3
    )%
    
    
    (3,404
    )
    
    
    (2.7
    )%
    
    
    (2,910
    )
    
    
    (2.2
    )%Income tax benefit
    
    
    
    
    
    
    0.0
    %
    
    
    (18
    )
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Net loss
    
    $
    (1,847
    )
    
    
    (3.1
    )%
    
    $
    (3,128
    )
    
    
    (5.3
    )%
    
    $
    (3,404
    )
    
    
    (2.7
    )%
    
    $
    (2,910
    )
    
    
    (2.2
    )%
 Three Months Ended February 28, 2004 Compared to Three Months Ended March 1,
2003 Net Sales.Net sales decreased $0.9 million, or 1.5%, to $58.5 million for
the three months ended February 28, 2004 from $59.4 million for the three
months ended March 1, 2003. The decrease in net sales was the result of timing
differences for college ring shipments and a decline in retail high school
class ring sales. The following details the changes in net sales during such periods by business
segment. Scholastic Products.Net sales decreased $0.7 million to $52.5 million for
the three months ended February 28, 2004 from $53.2 million for the three
months ended March 1, 2003. The decrease in net sales was the result of
timing differences for college ring shipments and a decline in retail high
school class ring sales, partially offset by increased on-campus high school
ring shipments and timing differences in graduation products. Recognition and Affinity Products.Net sales decreased $0.2 million to $6.0
million for the three months ended February 28, 2004 from $6.2 million for
the three months ended March 1, 2003. The decrease was primarily the result
of lower collateral sales from the ECI high school publication. Gross Profit.Gross margin represents gross profit as a percentage of net
sales. Gross margin was 63.2% for the three months ended February 28, 2004, a
3.5 percentage point increase from 59.7% for the three months ended March 1,
2003. The overall increase was the result of improvements in Taylor yearbooks
margins. The improvements in yearbook margins were a result of continued
efficiency gains in the pre-press and press areas due to the investments made
in page production software and printing equipment. Selling, General and Administrative Expenses.Selling, general and
administrative expenses increased $0.5 million, or 1.5%, to $31.9 million for
the three months ended February 28, 2004 from $31.4 million for the three
months ended March 1, 2003. As a percentage of net sales, selling, general and
administrative expenses increased 1.6 percentage points in the three months
ended February 28, 2004, compared to the three months ended March 1, 2003.
Included in selling, general and administrative expenses are two
sub-categories: selling and marketing expenses and general and administrative
expenses. Selling and marketing expenses increased $0.5 million to $23.6
million, or 40.3% of net sales, for the three months ended February 28, 2004
from $23.1 million, or 38.9% of net sales, for the three months ended March 1,
2003. The increase in selling and marketing expenses as a percentage of net
sales was a result of the timing of expenses across all divisions. General and
administrative expenses for the three months ended February 28, 2004 were $8.3
million, or 14.2% of net sales, as compared to $8.3 million, or 14.0% of net
sales, for the three months ended March 1, 2003. Operating Income (Loss).As a result of the foregoing, operating income was
$5.1 million, or 8.7% of net sales, for the three months ended February 28,
2004, as compared with operating income of $4.0 million, or 6.8% of net sales,
for the three months ended March 1, 2003. The scholastic products segment
reported operating income of $5.0 million for the three months ended February
28, 2004, compared to operating income of $4.1 million for the three months
ended March 1, 2003. The recognition and affinity products segment reported
operating income of $0.1 million for the three months ended February 28, 2004,
compared to an operating loss of $0.1 million for the three months ended March
1, 2003. 18




---



##### Table of Contents



Interest Expense, Net.Net interest expense was $6.9 million for the three
months ended February 28, 2004 and $7.2 million for the three months ended
March 1, 2003. The average debt outstanding for the three months ended February
28, 2004 and the three months ended March 1, 2003 was $226 million and $236
million, respectively. The weighted average interest rate of debt outstanding
for the three months ended February 28, 2004 and the three months ended March
1, 2003 was 12.1% and 12.4%, respectively. Provision (Benefit) for Income Taxes.For the three months ended February 28,
2004 and March 1, 2003, the Company recorded an income tax provision of $0 and
an income tax benefit of $18,000, respectively, which represents an effective
tax rate of 0% for each period. For the three months February 28, 2004 and
March 1, 2003, no net federal income tax benefit is reflected in the statement
of operations for net operating losses to be carried forward since realization
of the potential benefit of net operating loss carry-forwards is not considered
to be more likely than not. Although state taxes are expected for the year
ended 2004, no benefit has been recorded for the three months ended February
28, 2004 due to the valuation allowance. For the three months ended March 1,
2003, the effective tax rate reflects the state tax expense expected for the
year. Net Loss.As a result of the foregoing, we reported a net loss of $1.8
million for the three months ended February 28, 2004 as compared to a net loss
of $3.1 million for the three months ended March 1, 2003. Six Months Ended February 28, 2004 Compared to Six Months Ended March 1, 2003 Net Sales.Net sales decreased $8.0 million, or 5.9%, to $126.4 million for
the six months ended February 28, 2004 from $134.4 million for the six months
ended March 1, 2003. This decrease in net sales was primarily due to lower
sales volumes in recognition and affinity products. The following details the changes in net sales during such periods by business
segment. Scholastic Products.Net sales decreased $1.3 million to $106.1 million for
the six months ended February 28, 2004 from $107.4 million for the six months
ended March 1, 2003. The decrease in net sales was the result of timing
differences for college ring shipments and a decline in retail high school
class ring sales, partially offset by increased on-campus high school ring
shipments, price increases and an increase in yearbook and graduation product
shipments. Recognition and Affinity Products.Net sales decreased $6.7 million to
$20.3 million for the six months ended February 28, 2004 from $27.0 million
for the six months ended March 1, 2003. The decrease was primarily the result
of a $2.8 million decrease in sales related to our not having published ECI
teachers publication in the six months ended February 28, 2004, and lower
overall sales volumes of ECIs high school publications and collateral due to
order timing coinciding with the beginning of the United States-Iraqi
conflict. ECI teachers publication has historically been produced once
every two years. Beginning August 2004, this publication will be published
annually. Gross Profit.Gross margin represents gross profit as a percentage of net
sales. Gross margin was 59.2% for the six months ended February 28, 2004, a 2.2
percentage point increase from 57.0% for the six months ended March 1, 2003.
The overall increase was the result of an increase in margins in all areas of
the business. The major improvement was a result of Taylor yearbook efficiency
gains in the pre-press and press areas due to the investments made in page
production software and printing equipment. Selling, General and Administrative Expenses.Selling, general and
administrative expenses decreased $0.6 million, or 1.0%, to $64.4 million for
the six months ended February 28, 2004 from $65.0 million for the six months
ended March 1, 2003. As a percentage of net sales, selling, general and
administrative expenses increased 2.5 percentage points in the six months ended
February 28, 2004, compared to the six months ended March 1, 2003. Selling and
marketing expenses decreased $0.8 million to $47.2 million, or 37.4% of net
sales, for the six months ended February 28, 2004 from $48.0 million, or 35.7%
of net sales, for the six months ended March 1, 2003. The decrease in selling
and marketing expenses is primarily the result of lower marketing expenses at
ECI due to one less publication being sold in the six months ended February 28,
2004. General and administrative expenses for the six months ended February
28, 2004 were $17.1 million, or 13.5% of net sales, as compared to $17.0
million, or 12.6% of net sales, for the six months ended March 1, 2003. The
increase in general and administrative expenses was primarily the result of an
increase in the use of third-party professional services. Operating Income.As a result of the foregoing, operating income was $10.5
million, or 8.3% of net sales, for the six months ended February 28, 2004 as
compared with operating income of $11.6 million, or 8.6% of net sales, for the
six months ended March 1, 2003. The scholastic products segment reported
operating income of $5.8 million for the six months ended February 28, 2004,
compared to operating income of $3.7 million for the six months ended March 1,
2003. The recognition and affinity products segment reported operating income
of $4.7 million for the six months ended February 28, 2004, compared to
operating income of $7.9 million for the six months ended March 1, 2003. 19




---



##### Table of Contents



Interest Expense, Net.Net interest expense was $13.9 million for the six
months ended February 28, 2004 and $14.5 million for the six months ended March
1, 2003. The average debt outstanding for the six months ended February 28,
2004 and the six months ended March 1, 2003 was $230 million and $245 million,
respectively. The weighted average interest rate of debt outstanding for the
six months ended February 28, 2004 and the six months ended March 1, 2003 was
11.9% and 11.7%, respectively. Provision (Benefit) for Income Taxes.For the six months ended February 28,
2004 and March 1, 2003, the Company recorded an income tax provision of $0 for
each period, which represents an effective tax rate of 0%. For the six months
February 28, 2004 and March 1, 2003, no net federal income tax benefit is
reflected in the statement of operations for net operating losses to be carried
forward since realization of the potential benefit of net operating loss
carry-forwards is not considered to be more likely than not. Although state
taxes are expected for the years ended 2004 and 2003, no benefit has been
recorded for the six months ended February 28, 2004 and March 1, 2003 due to
the valuation allowance. Net Loss.As a result of the foregoing, we reported a net loss of $3.4
million for the six months ended February 28, 2004 as compared to a net loss of
$2.9 million for the six months ended March 1, 2003. Seasonality Our scholastic product sales tend to be seasonal. Class ring sales are highest
during October through December, with most orders made for delivery to students
before the winter holiday season. Sales of fine paper products are
predominantly made during February through April for graduation in April and
June. Yearbook sales are highest during the months of May through June, as
yearbooks are typically shipped to schools prior to summer break. Our
recognition and affinity product line sales are also seasonal. A majority of
achievement publication orders ship in November and August of each year. The
remaining recognition and affinity product line sales are highest during the
winter holiday season and in the period leading up to Mothers Day. As a result of the foregoing, we have historically experienced operating losses
during our fourth fiscal quarter, which includes the summer months when school
is not in session thus reducing related shipments of products. In addition,
our working capital requirements tend to exceed our operating cash flows from
April through August. Liquidity and Capital Resources Operating Activities.Operating activities provided cash of $34.1 million for
the six months ended February 28, 2004 as compared with $28.3 million for the
six months ended March 1, 2003. The $5.8 million increase in cash provided by
operating activities was primarily attributable to increases in customer
deposits, partially offset by an increase in inventories and a decrease in
prepaid expenses and other current assets. Investing Activities.Capital expenditures for the six months ended February
28, 2004 and March 1, 2003 were $11.2 million and $7.0 million, respectively.
Our projected capital expenditures for 2004 are expected to be approximately
$17.0 million. The acquisition of CB Announcements was $5.0 million during the
six months ended February 28, 2004. Financing Activities.Net cash used in financing activities was $10.4 million
for the six months ended February 28, 2004 and was $19.6 million for the six
months ended March 1, 2003. For the six months ended February 28, 2004,
cash was generated from operating activities and used to pay down $9.5 million
of the revolver facility. Capital Resources.As of August 30, 2003, we had $9.5 million outstanding
under our existing senior secured credit facility. As of February 28, 2004, no
amounts were outstanding under our existing senior secured credit facility. Our liquidity needs relate primarily to debt service, working capital, capital
expenditure and general corporate requirements. Historically, cash generated
from operating activities and borrowing under our existing senior secured
credit facility and prior credit facilities have been our principal sources of
liquidity. Following consummation of the Merger, we expect that cash generated
from operating activities and availability under our new senior secured credit
facility will be our principal sources of liquidity. Based on upon current
operations and our anticipated costs savings and operational improvements, we
believe our cash flow from operations, available cash and available borrowings
under our new senior secured credit facility, will be adequate to meet our
liquidity needs for at least the next twelve months. We cannot assure you,
however, that our business will generate sufficient cash flows from operations,
that currently anticipated costs savings and operational improvements will be
realized on schedule or that future borrowings will be available to us under
our new senior secured credit facility in an amount sufficient to enable us to
fund our liquidity needs. 20




---



##### Table of Contents



Off Balance-Sheet Obligations Gold Consignment Agreement.In fiscal 2000, we signed a gold consignment
financing agreement with The Bank of Nova Scotia. Under this agreement, we
have an ability to have on consignment gold with aggregate value less than or
equal to the lowest of: (i) the dollar value of 27,000 troy ounces of gold,
(ii) $10.1 million and (iii) a borrowing base, calculated based on a percentage
of the value of gold held at our facilities and other approved locations, as
specified by the agreement. Under the terms of this arrangement, we do not own
the consigned gold nor do we have risk of loss related to such inventory until
we pay The Bank of Nova Scotia for quantities purchased. Accordingly, we do
not reflect the value of consigned gold in our inventory, nor do we reflect the
corresponding liability for financial statement purposes. As of February 28,
2004 and August 30, 2003, the Company held approximately 17,170 ounces and
17,780 ounces, respectively, of gold valued at $6.9 million and $6.7 million,
respectively, on consignment. Contractual Obligations As of February 28, 2004, the due dates and amounts of our contractual
obligations are as follows (in thousands): Fiscal
    
    Fiscal
    
    Fiscal
    
    Fiscal
    
    Fiscal2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    Thereafter
    
    TotalSenior secured creditfacility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217,351
    
    
    
    
    
    
    
    
    
    
    
    217,351Operating leases(a).
    
    
    1,062
    
    
    
    1,822
    
    
    
    1,511
    
    
    
    1,124
    
    
    
    817
    
    
    
    2,719
    
    
    
    9,055Capital leases
    
    
    741
    
    
    
    1,409
    
    
    
    1,363
    
    
    
    1,339
    
    
    
    219
    
    
    
    
    
    
    
    5,071Total
    
    $
    1,803
    
    
    $
    3,231
    
    
    $
    2,874
    
    
    $
    219,814
    
    
    $
    1,036
    
    
    $
    2,719
    
    
    $
    231,477
  (a)
    
    Some of our rental property leases contain options to renew the
leased space for periods up to an additional ten years. Recent Accounting Pronouncements In May 2003, SFAS No. 150 (SFAS 150), Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, was issued,
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. We
adopted SFAS 150 beginning in September 2003. The adoption of this standard did
not have a significant impact on our financial statements. In January 2003, the FASB issued FIN No. 46 Consolidation of Variable Interest
Entities, an Interpretation of ARB 51. In December 2003, the FASB revised FIN
No. 46 to reflect decisions it made regarding a number of implementation
issues. FIN No. 46, as revised, requires that the primary beneficiary of a
variable interest entity (VIE) consolidate the entity even if the primary
beneficiary does not have a majority voting interest. This Interpretation
applies to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support. This Interpretation also identifies those
situations where a controlling financial interest may be achieved through
arrangements that do not involve voting interests. The Interpretation also
establishes additional disclosures which are required regarding an enterprises
involvement with a VIE when it is not the primary beneficiary. The requirements
of this Interpretation are required to be applied to any VIE created after
January 31, 2003. We adopted FIN 46 beginning in the first quarter of fiscal
year 2004. The adoption of this standard did not have a significant impact on
our financial statements. In December 2003, the FASB amended SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits. The amendment revised employers
disclosures about pension plans and other post retirement benefit plans to
require additional disclosures to those in the original SFAS No. 132 about the
assets, obligations, cash flows, and net periodic benefit cost of defined
pension plans and other defined benefit postretirement plans. We will adopt the
additional disclosure requirements in the third quarter of 2004. 21




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk.We have market risk exposure relating to changes in
interest rates on our variable rate debt. Our policy is to manage interest
rate exposure through the use of a combination of fixed and floating rate debt
instruments. Our senior secured credit facility and gold consignment agreement
are variable rate arrangements. The interest rates are based on a floating
benchmark rate (such as LIBOR or the Federal Funds rate) plus a fixed spread.
Other financial instruments subject to interest rate risk consist of long-term
debt. As of February 28, 2004, these financial instruments represented a net
liability of $6.9 million. Each quarter point change in interest rates would
result in a $0.1 million change in annual interest expense on the senior
secured credit facility, assuming the entire revolving loan were drawn. Semi-Precious Stones.We purchase the majority of our semi-precious stones
from a single source supplier in Germany. We believe that all of our major
competitors purchase their semi-precious stones from this same supplier. The
prices for these products are denominated in Euros. In order to hedge market
risk, we have from time-to-time purchased forward currency contracts. During
the six months ended February 28, 2004, we did not purchase any Euro forward
contracts and did not have any such contracts outstanding. Gold. We purchase all of our gold from The Bank of Nova Scotia through our
existing gold consignment agreement described above. We consign the majority
of our gold and pay for gold as our products are shipped to customers and as
required by the terms of our gold consignment agreement. As of February 28,
2004, we had hedged most of our gold requirements for fiscal 2004 through the
purchase of gold options. Paper. We purchase our paper from multiple suppliers at market prices. We
purchase paper on an annual commitment basis so that we are able to estimate
yearbook costs with greater certainty. 22




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES We carried out an evaluation, under the supervision and with the participation
of our management, including our President and Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure control and procedures pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end
of the period covered by this quarterly report. Based upon this evaluation,
our President and Chief Executive Officer and our Chief Financial Officer
concluded that, as of April 12, 2004, our disclosure controls and procedures
were adequate to ensure that information required to be disclosed by us in the
reports filed or submitted by us under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms. Additionally, our President and Chief Executive Officer and Chief Financial
Officer determined that there were no significant changes in our internal
controls or in other factors that could significantly affect our internal
controls during the period covered by this quarterly report. DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS This report includes forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Although management
believes that the expectations reflected in such forward looking statements are
based upon reasonable assumptions, the Company can give no assurance that these
expectations will be achieved. Any change in or adverse development, including
the following factors may impact the achievement of results in or accuracy of
forward-looking statements: the price of gold and precious, semiprecious and
synthetic stones; the Companys access to students and consumers in schools;
the seasonality of the Companys business; regulatory and accounting rules; the
Companys relationship with its independent sales representatives; fashion and
demographic trends; general economic, business, and market trends and events,
especially during peak buying seasons for the Companys products; the Companys
ability to respond to customer change orders and delivery schedules;
development and operating costs; competitive pricing changes; successful
completion of management initiatives designed to achieve operating
efficiencies; the Companys cash flows; and the Companys ability to draw down
funds under its current bank financings and to enter into new bank financings.
The foregoing factors are not exhaustive. New factors may emerge or changes may
occur that impact the Companys operations and businesses. Forward-looking
statements herein are expressly qualified on the foregoing or such other
factors as may be applicable. 23




---



##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company is a party
or to which any of its property is subject. The Company monitors all claims,
and the Company accrues for those, if any, which management believes may be
adversely decided against the Company and result in money damages to a third
party. On February 11, 2004, Frederick Goldman, Inc. (the Licensee) filed an
arbitration claim against CBI alleging, among other things, that CBI had
improperly attempted to convert an exclusive license CBI granted to the
Licensee to a non-exclusive license. In addition, on February 10, 2004, the
Licensee commenced a lawsuit in federal district court in New York against CBI
alleging that CBI breached the license agreement by granting third parties
rights in violation of the Licensees exclusive rights under the license
agreement. The district court claim seeks injunctive and monetary relief. No
discovery has been conducted to date, therefore, at this time, it is not
possible to predict with certainty the outcome of these unresolved legal
matters or the range of possible loss or recovery. However, the Company
intends to defend itself vigorously in these proceedings. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1
    
    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
 (b) Reports on Form 8-K A Form 8-K dated January 27, 2004 for Item 5. Other Events and Required FD
Disclosure, with a copy of the press release dated January 27, 2004 attached
(announcing Castle Harlan signs agreement to sell American Achievement). A Form 8-K dated March 1, 2004 for Item 5. Other Events and Item 9. Required FD
Disclosure, with a copy of the press release dated March 1, 2004 attached
(announcing American Achievement Corporations proposed offering under Rule
144A and Regulation S of $150 million principal amount of senior subordinated
notes due 2012). A Form 8-K dated March 4, 2004 for Item 9. Regulation FD Disclosure with pro
forma financial information (in connection with the proposed offering under
Rule 144A and Regulation S of $150 million principal amount of senior
subordinated notes). 24




---



##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION 
 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. Date: April 12, 2004 AMERICAN ACHIEVEMENT CORPORATIONBy:
    /s/ DAVID G. FIOREDavid G. FioreCHIEF EXECUTIVE OFFICER By:
    /s/ SHERICE P. BENCHSherice P. BenchCHIEF FINANCIAL OFFICER 25