##### 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 November 26, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 333-121479
COMMISSION FILE NUMBER 333-84294
 AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  DELAWARE
DELAWARE
(State or other jurisdiction of incorporation or
organization)
    
    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 þ
 o þ




---



##### 



FOR THE QUARTERLY PERIOD ENDED NOVEMBER 26, 2005
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements and NotesCondensed Consolidated Balance Sheets (unaudited)  As of
November 26, 2005 and August 27, 2005
    
    
    3Condensed Consolidated Statements of Operations (unaudited) 
For the Three Months Ended November 26, 2005 and For the Three
Months Ended November 27, 2004
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited) 
For the Three Months Ended November 26, 2005 and For the Three
Months Ended November 27, 2004
    
    
    5Condensed Consolidated Statements of Stockholders Equity
(unaudited)  For the Three Months Ended November 26, 2005
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7-18Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    19-26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  Explanatory Note




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 
 AAC Group Holding Corp.
    
    
    American Achievement CorporationNovember 26,
    
    
    August 27,
    
    
    November 26,
    
    
    August 27,2005
    
    
    2005
    
    
    2005
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,512
    
    
    $
    4,324
    
    
    $
    8,279
    
    
    $
    4,093Accounts receivable, net
    
    
    40,259
    
    
    
    40,639
    
    
    
    40,259
    
    
    
    40,639Inventories, net
    
    
    23,604
    
    
    
    21,913
    
    
    
    23,604
    
    
    
    21,913Deferred tax asset
    
    
    6,760
    
    
    
    6,760
    
    
    
    6,760
    
    
    
    6,760Prepaid expenses and other current assets, net
    
    
    19,808
    
    
    
    22,180
    
    
    
    19,808
    
    
    
    22,180Total current assets
    
    
    98,943
    
    
    
    95,816
    
    
    
    98,710
    
    
    
    95,585Property, plant and equipment, net
    
    
    75,166
    
    
    
    75,943
    
    
    
    75,166
    
    
    
    75,943Goodwill
    
    
    184,026
    
    
    
    184,026
    
    
    
    184,026
    
    
    
    184,026Other intangible assets, net
    
    
    149,813
    
    
    
    153,265
    
    
    
    146,771
    
    
    
    150,112Other assets
    
    
    3,726
    
    
    
    3,809
    
    
    
    3,726
    
    
    
    3,809Total assets
    
    $
    511,674
    
    
    $
    512,859
    
    
    $
    508,399
    
    
    $
    509,475LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    7,903
    
    
    $
    3,730
    
    
    $
    7,903
    
    
    $
    3,730Accounts payable
    
    
    7,705
    
    
    
    13,959
    
    
    
    7,705
    
    
    
    13,959Customer deposits
    
    
    27,462
    
    
    
    17,762
    
    
    
    27,462
    
    
    
    17,762Accrued expenses
    
    
    25,490
    
    
    
    26,263
    
    
    
    25,479
    
    
    
    26,252Accrued interest
    
    
    4,556
    
    
    
    7,370
    
    
    
    4,556
    
    
    
    7,370Current portion of long-term debt
    
    
    1,409
    
    
    
    1,409
    
    
    
    1,409
    
    
    
    1,409Total current liabilities
    
    
    74,525
    
    
    
    70,493
    
    
    
    74,514
    
    
    
    70,482Long-term debt, net of current portion
    
    
    386,451
    
    
    
    384,367
    
    
    
    287,359
    
    
    
    287,711Deferred income taxes
    
    
    22,334
    
    
    
    25,331
    
    
    
    26,368
    
    
    
    28,126Other long-term liabilities
    
    
    8,055
    
    
    
    8,377
    
    
    
    8,022
    
    
    
    8,344Total liabilities
    
    
    491,365
    
    
    
    488,568
    
    
    
    396,263
    
    
    
    394,663Commitments and contingencies
Stockholders equity:Common stock
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    16,491
    
    
    
    16,491
    
    
    
    102,046
    
    
    
    102,046Accumulated earnings
    
    
    4,769
    
    
    
    8,751
    
    
    
    11,046
    
    
    
    13,722Accumulated other comprehensive loss
    
    
    (956
    )
    
    
    (956
    )
    
    
    (956
    )
    
    
    (956
    )Total stockholders equity
    
    
    20,309
    
    
    
    24,291
    
    
    
    112,136
    
    
    
    114,812Total liabilities and stockholders equity
    
    $
    511,674
    
    
    $
    512,859
    
    
    $
    508,399
    
    
    $
    509,475
  3




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 
 AAC Group Holding Corp.
    
    
    American Achievement CorporationFor the three
    
    
    For the threemonths ended
    
    
    months endedNovember 26,
    
    
    November 27,
    
    
    November 26,
    
    
    November 27,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    61,990
    
    
    $
    63,282
    
    
    $
    61,990
    
    
    $
    63,282Cost of sales
    
    
    26,084
    
    
    
    27,316
    
    
    
    26,084
    
    
    
    27,316Gross profit
    
    
    35,906
    
    
    
    35,966
    
    
    
    35,906
    
    
    
    35,966Selling, general and administrative
expenses
    
    
    34,334
    
    
    
    35,603
    
    
    
    34,334
    
    
    
    35,603Operating income
    
    
    1,572
    
    
    
    363
    
    
    
    1,572
    
    
    
    363Interest expense
    
    
    8,551
    
    
    
    6,118
    
    
    
    6,006
    
    
    
    5,716Loss before income taxes
    
    
    (6,979
    )
    
    
    (5,755
    )
    
    
    (4,434
    )
    
    
    (5,353
    )Benefit for income taxes
    
    
    (2,997
    )
    
    
    (2,499
    )
    
    
    (1,758
    )
    
    
    (2,141
    )Net loss
    
    $
    (3,982
    )
    
    $
    (3,256
    )
    
    $
    (2,676
    )
    
    $
    (3,212
    )
  4




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 
 AAC Group Holding Corp.
    
    
    American Achievement CorporationFor the three
    
    
    For the threemonths ended
    
    
    months endedNovember 26, 2005
    
    
    November 27, 2004
    
    
    November 26, 2005
    
    
    November 27, 2004Cash flows from operating activities:Net loss
    
    $
    (3,982
    )
    
    $
    (3,256
    )
    
    $
    (2,676
    )
    
    $
    (3,212
    )Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    6,416
    
    
    
    6,316
    
    
    
    6,416
    
    
    
    6,316Deferred income taxes
    
    
    (2,997
    )
    
    
    (2,239
    )
    
    
    (1,758
    )
    
    
    (1,881
    )Amortization of debt discount and
deferred financing fees
    
    
    2,921
    
    
    
    779
    
    
    
    374
    
    
    
    377Provision (recovery) for doubtful
accounts
    
    
    (330
    )
    
    
    (97
    )
    
    
    (330
    )
    
    
    (97
    )Changes in assets and liabilities:Accounts receivable
    
    
    710
    
    
    
    1,320
    
    
    
    710
    
    
    
    1,320Inventories, net
    
    
    (1,691
    )
    
    
    (2,489
    )
    
    
    (1,691
    )
    
    
    (2,489
    )Prepaid expenses and other current
assets, net
    
    
    2,372
    
    
    
    2,084
    
    
    
    2,372
    
    
    
    2,084Other assets
    
    
    83
    
    
    
    (5,311
    )
    
    
    83
    
    
    
    (1,822
    )Customer deposits
    
    
    9,700
    
    
    
    7,082
    
    
    
    9,700
    
    
    
    7,082Deferred revenue
    
    
    
    
    
    
    2,023
    
    
    
    
    
    
    
    2,023Accounts payable, accrued expenses,
and other long-term liabilities
    
    
    (10,163
    )
    
    
    (7,573
    )
    
    
    (10,163
    )
    
    
    (7,573
    )Net cash provided by (used in)
operating activities
    
    
    3,039
    
    
    
    (1,361
    )
    
    
    3,037
    
    
    
    2,128Cash flows from investing activities:Purchases of property, plant and
equipment
    
    
    (2,672
    )
    
    
    (4,676
    )
    
    
    (2,672
    )
    
    
    (4,676
    )Net cash used in investing activities
    
    
    (2,672
    )
    
    
    (4,676
    )
    
    
    (2,672
    )
    
    
    (4,676
    )Cash flows from financing activities:Payments on revolver
    
    
    (11,050
    )
    
    
    
    
    
    
    (11,050
    )
    
    
    Proceeds from credit facility revolver
    
    
    11,050
    
    
    
    5,400
    
    
    
    11,050
    
    
    
    5,400Payments on term loan
    
    
    (352
    )
    
    
    (387
    )
    
    
    (352
    )
    
    
    (387
    )Proceeds from 10.25% notes
    
    
    
    
    
    
    89,269
    
    
    
    
    
    
    
    Distribution to stockholders
    
    
    
    
    
    
    (85,550
    )
    
    
    
    
    
    
    Change in bank overdraft
    
    
    4,173
    
    
    
    (587
    )
    
    
    4,173
    
    
    
    (587
    )Net cash provided by financing
activities
    
    
    3,821
    
    
    
    8,145
    
    
    
    3,821
    
    
    
    4,426Net increase in cash and cash
equivalents
    
    
    4,188
    
    
    
    2,108
    
    
    
    4,186
    
    
    
    1,878Cash and cash equivalents, beginning
of period
    
    
    4,324
    
    
    
    3,038
    
    
    
    4,093
    
    
    
    3,038Cash and cash equivalents, end of
period
    
    $
    8,512
    
    
    $
    5,146
    
    
    $
    8,279
    
    
    $
    4,916




---



##### Table of Contents



AAC Group Holding Corp.
    
    
    American Achievement CorporationFor the three
    
    
    For the threemonths ended
    
    
    months endedNovember 26, 2005
    
    
    November 27, 2004
    
    
    November 26, 2005
    
    
    November 27, 2004Supplemental disclosureCash paid during the period for:Interest
    
    $
    8,486
    
    
    $
    8,771
    
    
    $
    8,486
    
    
    $
    8,771Income taxes
    
    $
    230
    
    
    $
    28
    
    
    $
    230
    
    
    $
    28
  5




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 
 AccumulatedAdditional
    
    
    
    
    
    
    otherCommon Stock

    
    Paid-in
    
    
    Accumulated
    
    
    ComprehensiveAAC Group Holding Corp.
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    earnings
    
    
    income (loss)
    
    
    Total(Dollars in thousands)Balance, August 27, 2005
    
    
    505,460
    
    
    $
    5
    
    
    $
    16,491
    
    
    $
    8,751
    
    
    $
    (956
    )
    
    $
    24,291Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,982
    )
    
    
    
    
    
    
    (3,982
    )Adjustment to minimum pension
liability (net of tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,982
    )
    
    
    
    
    
    
    (3,982
    )Balance, November 26, 2005
    
    
    505,460
    
    
    $
    5
    
    
    $
    16,491
    
    
    $
    4,769
    
    
    $
    (956
    )
    
    $
    20,309
 AccumulatedAdditional
    
    
    
    
    
    
    otherCommon Stock

    
    Paid-in
    
    
    Accumulated
    
    
    comprehensiveAmerican Achievement Corporation
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    earnings
    
    
    income (loss)
    
    
    Total(Dollars in thousands)Balance, August 27, 2005
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    13,722
    
    
    $
    (956
    )
    
    $
    114,812Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,676
    )
    
    
    
    
    
    
    (2,676
    )Adjustment to minimum pension
liability (net of tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,676
    )
    
    
    
    
    
    
    (2,676
    )Balance, November 26, 2005
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    11,046
    
    
    $
    (956
    )
    
    $
    112,136
  6




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 
 1. Summary of Significant Accounting Policies
 Consolidation
      7




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  Use of Estimates
  Stock-Based Compensation
  2. Comprehensive Income (Loss)




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 3.
Inventories, Net
 AAC Group Holding Corp.
American Achievement Corporation
 November 26, 2005
    
    
    August 27, 2005Raw materials
    
    $
    9,433
    
    
    $
    9,022Work in process
    
    
    6,340
    
    
    
    6,306Finished goods
    
    
    8,321
    
    
    
    6,790Less  Reserves
    
    
    (490
    )
    
    
    (205
    )$
    23,604
    
    
    $
    21,913
  4. Prepaid Expenses and Other Current Assets, Net
  5. Goodwill and Other Intangible Assets
 Goodwill
 AAC Group Holding Corp.
American Achievement Corporation
 November 26, 2005
    
    
    August 27, 2005Class Rings
    
    $
    71,792
    
    
    $
    71,792Yearbooks
    
    
    65,241
    
    
    
    65,241Graduation Products
    
    
    23,242
    
    
    
    23,242Achievement Publications
    
    
    11,693
    
    
    
    11,693Other
    
    
    12,058
    
    
    
    12,058Total
    
    $
    184,026
    
    
    $
    184,026




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Other Intangible Assets
  Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt November 26, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    
    7 to 8 years
    
    
    
    14,620
    
    
    
    (2,961
    )
    
    
    11,659Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (739
    )
    
    
    6,578Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (19,035
    )
    
    
    81,481$
    172,548
    
    
    $
    (22,735
    )
    
    $
    149,813At August 27, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    
    7 to 8 years
    
    
    
    14,620
    
    
    
    (2,475
    )
    
    
    12,145Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (629
    )
    
    
    6,688Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (16,179
    )
    
    
    84,337$
    172,548
    
    
    $
    (19,283
    )
    
    $
    153,265
   Estimated
    
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    
    Asset
    
    
    Amortization
    
    
    AssetAt November 26, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    
    7 to 8 years
    
    
    
    11,112
    
    
    
    (2,495
    )
    
    
    8,617Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (739
    )
    
    
    6,578Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (19,035
    )
    
    
    81,481$
    169,040
    
    
    $
    (22,269
    )
    
    $
    146,771At August 27, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    
    7 to 8 years
    
    
    
    11,112
    
    
    
    (2,120
    )
    
    
    8,992Patents
    
    
    14 to 17 years
    
    
    
    7,317
    
    
    
    (629
    )
    
    
    6,688Customer lists and distribution contracts
    
    
    3 to 12 years
    
    
    
    100,516
    
    
    
    (16,179
    )
    
    
    84,337$
    169,040
    
    
    $
    (18,928
    )
    
    $
    150,112




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  6. Long-term Debt
  AAC Group Holding Corp.
 November 26, 2005
    
    
    August 27, 200510.25% Senior discount notes due 2012 (net of
unamortized discount of $32,408 and $34,844)
    
    $
    99,092
    
    
    $
    96,6568.25% Senior subordinated notes due 2012
    
    
    150,000
    
    
    
    150,000Senior secured credit facility:Revolving credit facility due 2010
    
    
    
    
    
    
    Term loan due 2011
    
    
    138,768
    
    
    
    139,120Total
    
    
    387,860
    
    
    
    385,776Less current portion of long-term debt
    
    
    (1,409
    )
    
    
    (1,409
    )Total long-term debt
    
    $
    386,451
    
    
    $
    384,367
 American Achievement Corporation
 November 26, 2005
    
    
    August 27, 20058.25% Senior subordinated notes due 2012
    
    $
    150,000
    
    
    $
    150,000Senior secured credit facility:Revolving credit facility due 2010
    
    
    
    
    
    
    Term loan due 2011
    
    
    138,768
    
    
    
    139,120Total
    
    
    288,768
    
    
    
    289,120Less current portion of long-term debt
    
    
    (1,409
    )
    
    
    (1,409
    )Total long-term debt
    
    $
    287,359
    
    
    $
    287,711
 10.25% Senior Discount Notes




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
    8.25% Senior Subordinated Notes




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Senior Secured Credit Facility




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
   7. Commitments and Contingencies
 Pending Litigation
   Gold Consignment Agreement




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 8. Income Taxes
  9. Stockholders Equity
  10. Postretirement Pension and Medical Benefits
   For the three months ended
    
    
    For the three months endedNovember 26, 2005
    
    
    November 27, 2004CBI post-
    
    
    
    
    
    
    CBI post-Taylor pension
    
    
    retirement
    
    
    Taylor pension
    
    
    retirementService costs, benefits
attributed to Service
during the period
    
    $
    24
    
    
    $
    
    
    
    $
    19
    
    
    $
    Interest cost
    
    
    211
    
    
    
    38
    
    
    
    209
    
    
    
    37Expected return on assets
    
    
    (223
    )
    
    
    
    
    
    
    (208
    )
    
    
    Amortization of
unrecognized net
loss (gain)
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    (74
    )Amortization of
unrecognized net prior
service costs
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    Net periodic
postretirement
benefit cost
(income)
    
    $
    12
    
    
    $
    (77
    )
    
    $
    20
    
    
    $
    (37
    )




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 11. Related-Party Transactions
  12. Business Segments
  AAC Group Holding Corp.SegmentOperatingIncome
    
    SegmentThree Months Ended November 26, 2005
    
    Net Sales
    
    (Loss)
    
    AssetsClass Rings
    
    $
    35,503
    
    
    $
    6,111
    
    
    $
    208,524Yearbooks
    
    
    12,848
    
    
    
    (3,577
    )
    
    
    166,273Graduation Products
    
    
    3,735
    
    
    
    (1,188
    )
    
    
    67,507Achievement Publications
    
    
    6,656
    
    
    
    1,032
    
    
    
    34,996Other
    
    
    3,248
    
    
    
    (806
    )
    
    
    34,374Total
    
    $
    61,990
    
    
    $
    1,572
    
    
    $
    511,674
 American Achievement CorporationSegmentOperatingIncome
    
    SegmentThree Months Ended November 26, 2005
    
    Net Sales
    
    (Loss)
    
    AssetsClass Rings
    
    $
    35,503
    
    
    $
    6,111
    
    
    $
    207,246Yearbooks
    
    
    12,848
    
    
    
    (3,577
    )
    
    
    165,112Graduation Products
    
    
    3,735
    
    
    
    (1,188
    )
    
    
    67,093Achievement Publications
    
    
    6,656
    
    
    
    1,032
    
    
    
    34,788Other
    
    
    3,248
    
    
    
    (806
    )
    
    
    34,160Total
    
    $
    61,990
    
    
    $
    1,572
    
    
    $
    508,399




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 AAC Group Holding Corp.SegmentOperatingIncome
    
    SegmentThree Months Ended November 27, 2004
    
    Net Sales
    
    (Loss)
    
    AssetsClass Rings
    
    $
    34,851
    
    
    $
    5,646
    
    
    $
    223,374Yearbooks
    
    
    12,951
    
    
    
    (5,496
    )
    
    
    169,615Graduation Products
    
    
    2,958
    
    
    
    (1,750
    )
    
    
    72,315Achievement Publications
    
    
    8,799
    
    
    
    2,732
    
    
    
    33,663Other
    
    
    3,723
    
    
    
    (769
    )
    
    
    36,584Total
    
    $
    63,282
    
    
    $
    363
    
    
    $
    535,551
 American Achievement CorporationSegmentOperatingIncome
    
    SegmentThree Months Ended November 27, 2004
    
    Net Sales
    
    (Loss)
    
    AssetsClass Rings
    
    $
    34,851
    
    
    $
    5,646
    
    
    $
    221,931Yearbooks
    
    
    12,951
    
    
    
    (5,496
    )
    
    
    168,304Graduation Products
    
    
    2,958
    
    
    
    (1,750
    )
    
    
    71,848Achievement Publications
    
    
    8,799
    
    
    
    2,732
    
    
    
    33,428Other
    
    
    3,723
    
    
    
    (769
    )
    
    
    36,342Total
    
    $
    63,282
    
    
    $
    363
    
    
    $
    531,853
 13. Recent Accounting Pronouncements




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Basis of Presentation
  General
 Whos Who The National Deans List
    19




---



##### Table of Contents



Company Background
   Critical Accounting Policies
  Sales Returns and Allowances.




---



##### Table of Contents



Allowance for Doubtful Accounts and Reserve on Sales Representative Advances.
 Goodwill and Other Intangible Assets
  Long-lived Tangible and Intangible Assets with Definite Lives.




---



##### Table of Contents



Results of Operations
 Three Months Ended November 26, 2005 Compared to Three Months Ended November 27, 2004
  AAC Group Holding Corp.
    
    
    
    American Achievement CorporationFor the Three
    
    
    % of
    
    
    For the Three
    
    
    % of
    
    
    For the Three
    
    
    % of
    
    
    For the Three
    
    
    % ofMonths Ended
    
    
    Net
    
    
    Months Ended
    
    
    Net
    
    
    Months Ended
    
    
    Net
    
    
    Months Ended
    
    
    NetNovember 26, 2005
    
    
    Sales
    
    
    November 27, 2004
    
    
    Sales
    
    
    November 26, 2005
    
    
    Sales
    
    
    November 27, 2004
    
    
    SalesNet sales
    
    $
    61,990
    
    
    
    100.0
    %
    
    $
    63,282
    
    
    
    100.0
    %
    
    $
    61,990
    
    
    
    100.0
    %
    
    $
    63,282
    
    
    
    100.0
    %Cost of sales
    
    
    26,084
    
    
    
    42.1
    %
    
    
    27,316
    
    
    
    43.2
    %
    
    
    26,084
    
    
    
    42.1
    %
    
    
    27,316
    
    
    
    43.2
    %Gross profit
    
    
    35,906
    
    
    
    57.9
    %
    
    
    35,966
    
    
    
    56.8
    %
    
    
    35,906
    
    
    
    57.9
    %
    
    
    35,966
    
    
    
    56.8
    %Selling, general and
administrative
expenses
    
    
    34,334
    
    
    
    55.4
    %
    
    
    35,603
    
    
    
    56.3
    %
    
    
    34,334
    
    
    
    55.4
    %
    
    
    35,603
    
    
    
    56.3
    %Operating income
    
    
    1,572
    
    
    
    2.5
    %
    
    
    363
    
    
    
    0.5
    %
    
    
    1,572
    
    
    
    2.5
    %
    
    
    363
    
    
    
    0.5
    %Interest expense
    
    
    8,551
    
    
    
    13.8
    %
    
    
    6,118
    
    
    
    9.6
    %
    
    
    6,006
    
    
    
    9.7
    %
    
    
    5,716
    
    
    
    9.0
    %Loss before income
taxes
    
    
    (6,979
    )
    
    
    (11.3
    )%
    
    
    (5,755
    )
    
    
    (9.1
    )%
    
    
    (4,434
    )
    
    
    (7.2
    )%
    
    
    (5,353
    )
    
    
    (8.5
    )%Benefit for
income taxes
    
    
    (2,997
    )
    
    
    (4.8
    )%
    
    
    (2,499
    )
    
    
    (4.0
    )%
    
    
    (1,758
    )
    
    
    (2.9
    )%
    
    
    (2,141
    )
    
    
    (3.4
    )%Net loss
    
    $
    (3,982
    )
    
    
    (6.5
    )%
    
    $
    (3,256
    )
    
    
    (5.1
    )%
    
    $
    (2,676
    )
    
    
    (4.3
    )%
    
    $
    (3,212
    )
    
    
    (5.1
    )%
 Net Sales.
  Class Rings.
 Yearbooks.




---



##### Table of Contents



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




---



##### Table of Contents



Benefit for Income Taxes.
  Net Income.
  Liquidity and Capital Resources
 Operating Activities.
  Investing Activities.
 Financing Activities.
  Capital Resources.




---



##### Table of Contents



Off Balance-Sheet Obligations
 Gold Consignment Agreement.
 Seasonality




---



##### Table of Contents



Recent Accounting Pronouncements




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk.
 Semi-Precious Stones.
 Gold
 27




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
   28




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 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
 29




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 SIGNATURES
   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)
 30