##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED AUGUST 26, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
 Commission file numbers 333-137067, 333-121479, and 333-84294
 AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  DELAWARE 
DELAWARE 
DELAWARE
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-4833998
20-1854833
13-4126506
(I.R.S. Employer
Identification Number)
 7211 CIRCLE S ROAD
AUSTIN, TEXAS 78745
 :
   o þ
 þ o
 þ o
 þ o
 o þ
 o
  o o o
 o þ




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##### 



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 26, 2006
INDEX
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    10Item 1B.
Unresolved SEC Comments
    
    
    14Item 2. Properties
    
    
    14Item 3. Legal Proceedings
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    16Item 6. Selected Financial Data
    
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 8. Financial Statements and Supplementary Data
    
    
    35Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    84Item 9A. Controls and Procedures
    
    
    84PART IIIItem 10. Directors and Executive Officers of the Registrants
    
    
    84Item 11. Executive Compensation
    
    
    87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    90Item 13. Certain Relationships and Related Transactions
    
    
    91Item 14. Principal Accountant Fees and Services
    
    
    91PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    92Signatures
    
    
    95Employment Agreement - Carol Lynn MartensEmployment Agreement - Norman C. SmithFirst Amendment to Employment Agreement - Norman C. SmithSecond Amendment to Employment Agreement - Norman C. SmithStatement re: Computation of Raios of Earnings to Fixed ChargesSubsidiariesCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  Explanatory Note
   2




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PART I
 
 Item 1. Business
 Registrants
  General
 Whos Who The National Deans List
 Company Background
     3




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Products
 Class Rings.
 Yearbooks.
 Graduation Products.
 Achievement Publications. Whos Who Among American High School Students Whos Who Among American
High School StudentsSports Edition The National Deans List Whos Who Among Americas Teachers The Chancellors List
 Recognition and Affinity Jewelry.
 4




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Our Product Business Segments
  ($ in thousands)
    
    Fiscal Year EndedSegment
    
    2006
    
    
    2005
    
    
    2004(1)Class Rings
    
    $
    119,451
    
    
    $
    119,658
    
    
    $
    122,525Yearbooks
    
    
    114,883
    
    
    
    112,432
    
    
    
    111,345Graduation Products
    
    
    43,940
    
    
    
    40,018
    
    
    
    39,666Achievement Publications
    
    
    20,974
    
    
    
    20,110
    
    
    
    19,956Other
    
    
    21,662
    
    
    
    21,570
    
    
    
    20,579Total
    
    $
    320,910
    
    
    $
    313,788
    
    
    $
    314,071
 
 (1)
    
    Fiscal year ended 2004 represents the combined periods of August
31, 2003 to March 25, 2004 (date of the Merger) and March 26,
2004 to August 28, 2004.  Product Lines
    
    Brand Names
    
    Distribution ChannelHigh School Class Rings:
    
    ArtCarved
    
    Independent jewelry storesJewelry chainsBalfour
    
    On-campusKeystone Class Rings
    
    Mass merchandisersMaster Class Rings
    
    Mass merchandisersR. Johns
    
    Mass merchandisersIndependent jewelry storesCollege Class Rings:
    
    ArtCarved
    
    College bookstoresBalfour
    
    College bookstoresDirect marketingYearbooks:
    
    Taylor Publishing
    
    On-campusHigh School Graduation Products:
    
    Balfour
    
    On-campusCollege Graduation Products:
    
    ArtCarved
    
    College bookstoresBalfour
    
    Direct marketingCollege bookstoresAchievement Publications:
    
    Whos Who
    
    Direct marketingThe National Deans List
    
    Direct marketingAffinity Group Jewelry:
    
    Keepsake
    
    Direct marketingR. Johns
    
    Direct marketingBalfour
    
    Direct marketingPersonalized Fashion Jewelry:
    
    Celebrations of Life
    
    Independent jewelry storesJewelry chainsGenerations of Love
    
    Mass merchandisersNamesake
    
    Mass merchandisersFan Affinity Sports Jewelry:
    
    Balfour Sports
    
    Mass merchandisersCataloguesProfessional Sports Championship Jewelry:
    
    Balfour
    
    Direct marketingCommercial Printing:
    
    Taylor Publishing
    
    Direct sales force
 5




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Class Rings
    Yearbooks
   Graduation Products
   6




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Achievement Publications
  
    
    Whos Who Among American High School Students.First
published in 1967, this annual publication is the
largest academic achievement publication in the nation
honoring high-achieving high school students. The
1st edition recognized
approximately 13,000 students from approximately 4,000
high schools. The most recent 40th
published edition honors approximately 368,000
students, from freshmen through seniors. Nominees
represent over 15,000 of the nations 23,000 private,
public and parochial high schools on the basis of
academic achievement, class rank and extracurricular
activities.
    
    Whos Who Among American High School StudentsSports
Edition.Introduced in 2002, this annual publication,
which recognizes high-achieving high school athletes,
represented 50% of its market in 2003. The most recent fifth edition of this publication honors approximately
35,000 students from 7,100 high schools.
    
    The National Deans List.First published in 1978, this
publication is the largest annual recognition
publication in the nation honoring exceptional college
students. The 1st edition
recognized over 25,000 students from approximately 700
universities. The most recent 29th
published edition honors almost 158,000
high-achieving students, representing in excess of
2,800 colleges and universities throughout the country.
    
    Whos Who Among Americas Teachers.First published in
1990, this publication pays tribute to the countrys
most inspiring teachers, who are nominated for
inclusion by current or former Whos Who honorees.
The 10th edition was published in
2006 and honored over 156,000 outstanding teachers.
    
    The Chancellors List.First published in 2005, this
publication provides recognition for the positive
academic achievements of qualified graduate level
students. The inaugural edition recognized over 30,000
students from approximately 700 universities. The
2nd edition was published in
2006.
  Other
  
    
    Affinity Group Jewelry.Affinity group jewelry is sold
to members of large groups and associations. The
jewelry features emblems of, and otherwise commemorates
accomplishments within, the group. For example, through
our Keepsake brand, we provide affinity ring awards to
the United States Bowling Congress, including recognition
rings for bowlers who score a perfect 300 game.
Through our Balfour brand, we provide affinity rings to
military personnel that recognize affiliation and
completion of specialized training ranging from basic
training to special forces.
    
    Personalized Fashion Jewelry.Our personalized fashion
jewelry products include rings commemorating childrens
birth dates, which feature a level of personalization,
such as birthstones and names, that distinguishes us
from our competitors. We also sell other personalized
jewelry, such as necklaces and bracelets, designed to
commemorate family events. We started our personalized
fashion jewelry business in fiscal 1997 and, by the end
of fiscal 2006, had grown this business to $11.7
million in net sales by leveraging our existing
distribution channels. We provide
personalized family jewelry under our Celebrations of
Life, Generations of Love and Namesake brand names.
 7




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
    
    Fan Affinity Sports Jewelry.We produce a variety of
sports team affiliation products. For example, we
manufacture Balfour Sports brand National Football
League rings, pendants, paperweights and coasters
reflecting team logos, mascots and colors.
    
    Professional Sports Championship Jewelry.We provide
sports championship jewelry for professional teams and
their members and have, for example, produced several
World Series, Super Bowl and Stanley Cup rings,
including all of the rings for the New York Yankees 26
championships, as well as the 2006 Carolina Hurricanes championship
ring. We provide sports championship jewelry
under the Balfour brand.
    
    Commercial Printing.We provide a variety of printing
products for the commercial market. We provide these
products under the Taylor Publishing brand.
 Sales and Marketing
     Intellectual Property
    8




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Competition
   Raw Material and Suppliers
   Seasonality
   Backlog
  Employees
  9




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Item 1A. Risk Factors
  Risks Related to Our Business
 Our substantial indebtedness could adversely affect our financial health and prevent us from
fulfilling our financial obligations.
   
    
    make it more difficult for us to satisfy our obligations with respect to our indebtedness;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of
our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our
cash flow to fund working capital, capital
expenditures, research and development efforts and
other general corporate purposes;
    
    limit our flexibility in planning for, or reacting
to, changes in our business and the industry in which
we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less debt; and
    
    limit our ability to borrow additional funds.
  If we are unable to maintain our business or further implement our business strategy, our business
and financial condition could be adversely affected.
   10




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We face significant competition from other national competitors.
  Increased prices for raw materials or finished goods used in our products could adversely affect
our profitability or revenues.
  Currency exchange rate fluctuations may adversely affect our results of operations.
  We are vulnerable to fluctuations in the price of gold, which could adversely affect our results of
operations.
  Many of our products or components of our products are provided by a limited number of third-party
suppliers.
  11




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Investigations involving certain sources of nominations to our achievement publications may impact
our business if those sources become unavailable.
 Whos Who Among American High School Students
    Our future operating results are dependent on maintaining our relationships with our sales
representatives.
  Our performance may fluctuate with the financial condition of, or loss of, our retail customers.
  The seasonality of our sales may have an adverse effect on our operations and our ability to
service our debt.
  We are subject to environmental laws and regulations that could impose substantial costs upon us
and may adversely affect our financial results.
  12




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Our business could be adversely affected by unforeseen economic and political conditions.
  We rely on proprietary rights which may not be adequately protected.
  We depend on numerous complex information systems, and any failure to successfully maintain those
systems or implement new systems could materially harm our operations.
  Our
results of operations are dependent on certain principal production facilities.
  To service our indebtedness, we require a significant amount of cash. Our ability to generate cash
depends on many factors beyond our control.
   13




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Restrictions in the indentures governing the 12.75% senior PIK notes, the 10.25% senior
discount notes, the 8.25% senior subordinated notes, and the existing senior secured credit
facility may prevent us from taking actions that we believe would be in the best interest of our
business.
  
    
    incurring additional indebtedness and issuing preferred stock;
    
    granting liens on our assets;
    
    making investments;
    
    consolidating or merging with, or acquiring, another business;
    
    selling or otherwise disposing of our assets;
    
    paying dividends and making other distributions
with respect to our capital stock, or purchasing,
redeeming or retiring our capital stock;
    
    entering into transactions with our affiliates; and
    
    entering into sale and leaseback transactions.
  Our
stockholders interests may conflict with interests of our other
investors.
  Item 1B.
Unresolved SEC Comments
  
 Item 2. Properties
   Approximate Location
    
    Type of Property
    
    Leased or Owned
    
    Square FootageAustin, TX
    
    Corporate headquarters
    
    Owned
    
    
    23,000Austin, TX
    
    Jewelry manufacturing and
administration
    
    Owned
    
    
    108,000Austin, TX
    
    Warehouse facility
    
    Leased
    
    
    38,600Austin, TX
    
    Achievement publication
administration
    
    Leased
    
    
    6,100Dallas, TX
    
    Yearbook administration and
manufacturing
    
    Owned
    
    
    327,000El Paso, TX
    
    Yearbook pre-press
    
    Leased
    
    
    50,000San Angelo, TX
    
    Yearbook pre-press, press,
bindery
    
    Leased
    
    
    55,000Louisville, KY
    
    Graduation products
manufacturing
    
    Leased
    
    
    100,000Manhattan, KS
    
    Graduation products
manufacturing
    
    Leased
    
    
    10,000Juarez, Mexico
    
    Jewelry manufacturing
    
    Leased
    
    
    20,000
 14




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Item 3. Legal Proceedings
  th
   Environmental
  
 Item 4. Submission of Matters to a Vote of Security Holders
  15




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  
 Item 6. Selected Financial Data
     Parent Holdings
    
    
    Intermediate HoldingsFiscal Year Ended
    
    
    Fiscal Year EndedAugust 26, 2006
    
    
    August 26, 2006
    
    
    August 27, 2005Statement of Operations
Data:Net sales
    
    $
    320,910
    
    
    $
    320,910
    
    
    $
    313,788Cost of sales
    
    
    134,258
    
    
    
    134,258
    
    
    
    134,375Gross profit
    
    
    186,652
    
    
    
    186,652
    
    
    
    179,413Selling, general and
administrative expenses
    
    
    144,129
    
    
    
    144,129
    
    
    
    144,592Operating income
    
    
    42,523
    
    
    
    42,523
    
    
    
    34,821Interest expense
    
    
    39,331
    
    
    
    34,246
    
    
    
    31,271Income before income taxes
    
    
    3,192
    
    
    
    8,277
    
    
    
    3,550Provision for income taxes
    
    
    (2,216
    )
    
    
    (3,985
    )
    
    
    (1,738
    )Net income
    
    $
    976
    
    
    $
    4,292
    
    
    $
    1,812Balance Sheet Data (at
end of period):Total assets
    
    $
    511,276
    
    
    $
    501,773
    
    
    $
    512,936Total debt(4)
    
    
    537,937
    
    
    
    376,240
    
    
    
    392,222Total stockholders equity
    
    
    (114,786
    )
    
    
    36,714
    
    
    
    23,818Other Data:EBITDA(5)
    
    $
    67,618
    
    
    $
    67,618
    
    
    $
    60,102Capital expenditures
    
    
    12,511
    
    
    
    12,511
    
    
    
    12,795Depreciation and
amortization
    
    
    25,095
    
    
    
    25,095
    
    
    
    25,281
 16




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AACSuccessor
    
    
    
    PredecessorThe period from
    
    
    
    The period fromFiscal Year Ended
    
    
    March 26, 2004
    
    
    
    August 31, 2003
    
    
    Fiscal Year EndedAugust 26,
    
    
    August 27,
    
    
    to
    
    
    
    to
    
    
    August 30,
        
    August 31,2006
    
    
    2005
    
    
    August 28, 2004(1)
    
    
    
    March 25, 2004(2)
    
    
    2003
    
    
    2002(3)Statement of
Operations Data:Net sales
    
    $
    320,910
    
    
    $
    313,788
    
    
    $
    167,350
    
    
    
    $
    146,721
    
    
    $
    308,431
    
    
    $
    304,378Cost of sales
    
    
    134,258
    
    
    
    134,375
    
    
    
    83,521
    
    
    
    
    59,857
    
    
    
    139,170
    
    
    
    146,898Gross profit
    
    
    186,652
    
    
    
    179,413
    
    
    
    83,829
    
    
    
    
    86,864
    
    
    
    169,261
    
    
    
    157,480Selling, general
and administrative
expenses
    
    
    144,129
    
    
    
    144,592
    
    
    
    62,647
    
    
    
    
    74,992
    
    
    
    129,423
    
    
    
    129,734Loss on
extinguishment of
debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,650Operating income
    
    
    42,523
    
    
    
    34,821
    
    
    
    21,182
    
    
    
    
    11,872
    
    
    
    39,838
    
    
    
    22,096Interest expense
    
    
    23,289
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    
    16,455
    
    
    
    28,940
    
    
    
    26,026Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,783Income (loss)
before income taxes
    
    
    19,234
    
    
    
    11,324
    
    
    
    10,925
    
    
    
    
    (4,583
    )
    
    
    10,898
    
    
    
    (6,713
    )Benefit
(provision) for
income taxes
    
    
    (7,907
    )
    
    
    (4,617
    )
    
    
    (4,459
    )
    
    
    
    
    
    
    
    (132
    )
    
    
    1,171Net income (loss)
    
    $
    11,327
    
    
    $
    6,707
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )
    
    $
    10,766
    
    
    $
    (5,542
    )Balance Sheet Data
(at end of period):Total assets
    
    $
    498,542
    
    
    $
    509,552
    
    
    $
    530,986
    
    
    
    $
    553,589
    
    
    $
    395,501
    
    
    $
    401,626Total debt(4)
    
    
    269,423
    
    
    
    295,566
    
    
    
    320,337
    
    
    
    
    319,985
    
    
    
    233,805
    
    
    
    246,509Total
stockholders equity
    
    
    133,546
    
    
    
    114,263
    
    
    
    108,512
    
    
    
    
    102,046
    
    
    
    71,843
    
    
    
    65,254Other Data:EBITDA(5)
    
    $
    67,618
    
    
    $
    60,102
    
    
    $
    31,526
    
    
    
    $
    20,402
    
    
    $
    53,987
    
    
    $
    39,025Capital
expenditures
    
    
    12,511
    
    
    
    12,795
    
    
    
    3,665
    
    
    
    
    12,793
    
    
    
    11,243
    
    
    
    14,247Depreciation and
amortization
    
    
    25,095
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    
    8,530
    
    
    
    14,149
    
    
    
    19,712
 
 (1)
    
    During the period from March 26, 2004 to August 28, 2004, AAC recognized in its consolidated
statement of operations approximately $6.4 million of excess purchase price allocated to inventory
as cost of sales and approximately $4.3 million of additional amortization expense of intangible
assets as selling, general and administrative expenses, as compared to its historical basis of
accounting prior to the Merger.(2)
    
    Includes the results of C-B Graduation Announcements from January 30, 2004, the date of our
acquisition of C-B Graduation Announcements.(3)
    
    Includes the results of operations for Milestone Marketing Incorporated, or Milestone, from
July 15, 2002, the date of our acquisition of Milestone.(4)
    
    Total debt includes all borrowings outstanding under notes, credit facilities, bank overdrafts,
and capital lease obligations.(5)
    
    EBITDA represents net income (loss) before interest expense, income taxes, depreciation and
amortization. EBITDA does not represent net income or cash flows from operations, as these terms
are defined under generally accepted accounting principles, and should not be considered as an
alternative to net income as an indicator of our operating performance or to cash flows as a
measure of liquidity. 17




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Parent Holdings
    
    
    Intermediate HoldingsFiscal Year Ended
    
    
    Fiscal Year EndedAugust 26,
    
    
    August 26,
    
    
    August 27,2006
    
    
    2006
    
    
    2005Net income
    
    $
    976
    
    
    $
    4,292
    
    
    $
    1,812Interest
expense, net
    
    
    39,331
    
    
    
    34,246
    
    
    
    31,271Provision for
income taxes
    
    
    2,216
    
    
    
    3,985
    
    
    
    1,738Depreciation
and amortization
expense
    
    
    25,095
    
    
    
    25,095
    
    
    
    25,281EBITDA
    
    $
    67,618
    
    
    $
    67,618
    
    
    $
    60,102Changes in
assets and
liabilities
    
    $
    (14,955
    )
    
    $
    (15,623
    )
    
    $
    (335
    )Deferred
income taxes
    
    
    2,061
    
    
    
    3,824
    
    
    
    1,521Interest
expense, net
    
    
    (39,331
    )
    
    
    (34,246
    )
    
    
    (31,271
    )Income tax
provision
    
    
    (2,216
    )
    
    
    (3,985
    )
    
    
    (1,738
    )Amortization
of debt discount
and deferred
financing fees
    
    
    2,269
    
    
    
    1,959
    
    
    
    1,882Accretion of
interest on 10.25%
senior discount
notes
    
    
    10,161
    
    
    
    10,161
    
    
    
    7,387Accretion of
12.75% PIK Notes
    
    
    4,197
    
    
    
    
    
    
    
    Provision for
doubtful accounts
    
    
    (464
    )
    
    
    (464
    )
    
    
    (107
    )Loss on sales
of plant, property
and equipment
    
    
    79
    
    
    
    79
    
    
    
    Net cash
provided by
operating
activities
    
    $
    29,419
    
    
    $
    29,323
    
    
    $
    37,441
 18




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AACSuccessor
    
    
    
    PredecessorFiscal Year
    
    
    Fiscal Year
    
    
    The Period from
    
    
    
    The Period from
    
    
    Fiscal YearEnded
    
    
    Ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 
    
    
    EndedAugust 26,
    
    
    August 27,
    
    
    August 28,
    
    
    
    March 25,
    
    
    August 30,
    
    
    August 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004
    
    
    2003
    
    
    2002Net income (loss)
    
    $
    11,327
    
    
    $
    6,707
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )
    
    $
    10,766
    
    
    $
    (5,542
    )Interest
expense, net
    
    
    23,289
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    
    16,455
    
    
    
    28,940
    
    
    
    26,026Provision
(benefit) for income
taxes
    
    
    7,907
    
    
    
    4,617
    
    
    
    4,459
    
    
    
    
    
    
    
    
    132
    
    
    
    (1,171
    )Depreciation and
amortization expense
    
    
    25,095
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    
    8,530
    
    
    
    14,149
    
    
    
    19,712EBITDA
    
    $
    67,618
    
    
    $
    60,102
    
    
    $
    31,526
    
    
    
    $
    20,402
    
    
    $
    53,987
    
    
    $
    39,025Changes in
assets and liabilities
    
    $
    (16,010
    )
    
    $
    (379
    )
    
    $
    (23,970
    )
    
    
    $
    35,227
    
    
    $
    (92
    )
    
    $
    1,808Deferred income
taxes
    
    
    7,737
    
    
    
    4,392
    
    
    
    4,309
    
    
    
    
    
    
    
    
    
    
    
    
    Interest
expense, net
    
    
    (23,289
    )
    
    
    (23,497
    )
    
    
    (10,257
    )
    
    
    
    (16,455
    )
    
    
    (28,940
    )
    
    
    (26,026
    )Income tax
(provision) benefit
    
    
    (7,907
    )
    
    
    (4,617
    )
    
    
    (4,459
    )
    
    
    
    
    
    
    
    (132
    )
    
    
    1,171Amortization of
debt discount and
deferred financing
fees
    
    
    1,498
    
    
    
    1,527
    
    
    
    629
    
    
    
    
    1,197
    
    
    
    2,051
    
    
    
    1,355Provision for
doubtful accounts
    
    
    (464
    )
    
    
    (107
    )
    
    
    (236
    )
    
    
    
    (144
    )
    
    
    (376
    )
    
    
    145Loss on
extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,650Unrealized loss
on free-standing
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Loss on sales of
plant, property and
equipment
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash
provided by (used in)
operating activities
    
    $
    29,262
    
    
    $
    37,421
    
    
    $
    (2,458
    )
    
    
    $
    40,227
    
    
    $
    26,498
    
    
    $
    23,310
 19




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our financial condition and results of operations should be read
together with our consolidated financial statements and the accompanying notes included elsewhere
in this report. For ease of comparison purposes, pro forma adjustments for the Merger and the C-B
Graduation Announcements acquisition have been added to financial data for the periods August 31,
2003 through March 25, 2004 and March 26, 2004 to August 28, 2004, to arrive at a fiscal year pro
forma period ended August 28, 2004. This period may be referred to herein as the pro forma year
ended August 28, 2004, or the pro forma fiscal 2004. The consolidated financial statements, and
the notes thereto, have been prepared in accordance with U.S. GAAP. In reviewing this comparative
financial information, readers should remember that Predecessor period results of operations do not
reflect the effects of the Merger and the application of purchase accounting. All amounts are in
U.S. dollars except otherwise indicated.
 Uncertainty of Forward Looking Statements and Information
   Basis of Presentation
   20




---



##### Table of Contents



General
 Whos Who The National Deans List
      21




---



##### Table of Contents



Company Background
      Current assets
    
    $
    123,407Property, plant and equipment
    
    
    78,301Goodwill
    
    
    181,361Intangible assets
    
    
    157,928Other assets
    
    
    15,390Current liabilities
    
    
    (116,102
    )Deferred income taxes
    
    
    (12,043
    )Other long-term liabilities
    
    
    (9,042
    )Total purchase price
    
    $
    419,200
   22




---



##### Table of Contents



Critical Accounting Policies
  Sales Returns and Allowances.
 Allowance for Doubtful Accounts and Reserve on Sales Representative Advances.
 23




---



##### Table of Contents



Goodwill and Other Intangible Assets
  Long-lived Tangible and Intangible Assets with Definite Lives.
  Revenue Recognition.
   24




---



##### Table of Contents



Results of Operations
  Fiscal Year Ended August 26, 2006 Compared to Fiscal Year Ended August 27, 2005
 Parent Holdings
    
    Intermediate HoldingsFiscal year ended
    
    % of
    
    Fiscal year ended
    
    % of
    
    Fiscal year ended
    
    % ofAugust 26, 2006
    
    Net Sales
    
    August 26, 2006
    
    Net Sales
    
    August 27, 2005
    
    Net Sales($ in millions)Net sales
    
    $
    320.9
    
    
    
    100.0
    %
    
    $
    320.9
    
    
    
    100.0
    %
    
    $
    313.8
    
    
    
    100.0
    %Cost of sales
    
    
    134.3
    
    
    
    41.8
    %
    
    
    134.3
    
    
    
    41.8
    %
    
    
    134.4
    
    
    
    42.8
    %Gross profit
    
    
    186.6
    
    
    
    58.2
    %
    
    
    186.6
    
    
    
    58.2
    %
    
    
    179.4
    
    
    
    57.2
    %Selling, general and
administrative expenses
    
    
    144.1
    
    
    
    44.9
    %
    
    
    144.1
    
    
    
    44.9
    %
    
    
    144.6
    
    
    
    46.1
    %Operating income
    
    
    42.5
    
    
    
    13.3
    %
    
    
    42.5
    
    
    
    13.3
    %
    
    
    34.8
    
    
    
    11.1
    %Interest expense
    
    
    39.3
    
    
    
    12.3
    %
    
    
    34.2
    
    
    
    10.7
    %
    
    
    31.3
    
    
    
    10.0
    %Income before income taxes
    
    
    3.2
    
    
    
    1.0
    %
    
    
    8.3
    
    
    
    2.6
    %
    
    
    3.5
    
    
    
    1.1
    %Provision for income taxes
    
    
    (2.2
    )
    
    
    (0.7
    )%
    
    
    (4.0
    )
    
    
    (1.3
    )%
    
    
    (1.7
    )
    
    
    (0.5
    )%Net income
    
    $
    1.0
    
    
    
    0.3
    %
    
    $
    4.3
    
    
    
    1.3
    %
    
    $
    1.8
    
    
    
    0.6
    %
 25




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##### Table of Contents



AAC(Successor)
    
    
    
    (Predecessor)For the period
    
    
    
    For the period
    
    
    Pro FormaFiscal year
    
    
    
    
    
    
    Fiscal year
    
    
    
    
    
    
    March 26,
    
    
    
    August 31,
    
    
    Fiscal yearended
    
    
    
    
    
    
    ended
    
    
    
    
    
    
    2004 
    
    
    
    2003 
    
    
    endedAugust 26,
    
    
    % of
    
    
    August 27,
    
    
    % of
    
    
    August 28,
    
    
    
    March 25,
    
    
    August 28,
    
    
    % of2006
    
    
    Net Sales
    
    
    2005
    
    
    Net Sales
    
    
    2004
    
    
    
    2004
    
    
    2004
    
    
    Net Sales($ in millions)Net sales
    
    $
    320.9
    
    
    
    100.0
    %
    
    $
    313.8
    
    
    
    100
    %
    
    $
    167.4
    
    
    
    $
    146.7
    
    
    $
    315.1
    
    
    
    100
    %Cost of sales
    
    
    134.3
    
    
    
    41.8
    %
    
    
    134.4
    
    
    
    42.8
    %
    
    
    83.5
    
    
    
    
    59.9
    
    
    
    144.0
    
    
    
    45.7
    %Gross profit
    
    
    186.6
    
    
    
    58.2
    %
    
    
    179.4
    
    
    
    57.2
    %
    
    
    83.9
    
    
    
    
    86.8
    
    
    
    171.1
    
    
    
    54.3
    %Selling, general and
administrative expenses
    
    
    144.1
    
    
    
    44.9
    %
    
    
    144.6
    
    
    
    46.1
    %
    
    
    62.7
    
    
    
    
    74.9
    
    
    
    143.9
    
    
    
    45.7
    %Operating income
    
    
    42.5
    
    
    
    13.3
    %
    
    
    34.8
    
    
    
    11.1
    %
    
    
    21.2
    
    
    
    
    11.9
    
    
    
    27.2
    
    
    
    8.6
    %Interest expense
    
    
    23.3
    
    
    
    7.3
    %
    
    
    23.5
    
    
    
    7.5
    %
    
    
    10.2
    
    
    
    
    16.5
    
    
    
    24.1
    
    
    
    7.6
    %Income (loss) before
income taxes
    
    
    19.2
    
    
    
    6.0
    %
    
    
    11.3
    
    
    
    3.6
    %
    
    
    11.0
    
    
    
    
    (4.6
    )
    
    
    3.1
    
    
    
    1.0
    %Provision for income taxes
    
    
    (7.9
    )
    
    
    (2.5
    )%
    
    
    (4.6
    )
    
    
    (1.5
    )%
    
    
    (4.5
    )
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (0.4
    )%Net income (loss)
    
    $
    11.3
    
    
    
    3.5
    %
    
    $
    6.7
    
    
    
    2.1
    %
    
    $
    6.5
    
    
    
    $
    (4.6
    )
    
    $
    1.9
    
    
    
    0.6
    %
 Parent Holdings  Fiscal Year Ended August 26, 2006
  Intermediate Holdings and AAC  Fiscal Year Ended August 26, 2006 Compared to Fiscal Year Ended
August 27, 2005
 Net Sales.
  Class Rings.
 Yearbooks.
 26




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##### Table of Contents



Graduation Products.
 Achievement Publications. Whos Who Among American High School Students
 Other.
 Gross Profit.
 Selling, General and Administrative Expenses.
  Operating Income (Loss).
 Interest Expense, Net.
  Provision for Income Taxes.
 27




---



##### Table of Contents



Net Income.
 Intermediate Holdings and AAC  Fiscal Year Ended August 27, 2005 Compared to Pro Forma Fiscal
Year Ended August 28, 2004
 Net Sales.
  Class Rings.
 Yearbooks.
 Graduation Products.
 Achievement Publications. Whos Who Among Americas Teachers The National Deans List
 Other.
 Gross Profit.
 Selling, General and Administrative Expenses.
 28




---



##### Table of Contents



Operating Income (Loss).
 Interest Expense, Net.
  Provision for Income Taxes.
  Net Income.
 AAC  For the Period March 26, 2004 to August 28, 2004 (Successor)
  29




---



##### Table of Contents



AAC  For the Period August 31, 2003 to March 25, 2004 (Predecessor)
  Liquidity and Capital Resources
 Operating
Activities.
   Investing Activities.
 Financing Activities.
   Capital Resources.
  30




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##### Table of Contents



Off Balance-Sheet Obligations
 Gold Consignment Agreement.
  31




---



##### Table of Contents



Contractual Obligations
  Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total12.75% PIK Notes
(principal)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150,000
    
    
    $
    150,00012.75% PIK Notes
(PIK interest)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,705
    
    
    
    121,705Mandatory
Redeemable
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    7,500Mandatory
Redeemable
Preferred Stock
(dividends)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,162
    
    
    
    12,16210.25% Notes
(principal)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,500
    
    
    
    131,5008.25% Senior
Subordinated Debt
(principal)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    150,000Interest on fixed
rate debt(a)
    
    
    12,375
    
    
    
    12,375
    
    
    
    19,114
    
    
    
    25,854
    
    
    
    25,854
    
    
    
    93,217
    
    
    
    188,789Term loan
(principal)
    
    
    1,090
    
    
    
    1,090
    
    
    
    1,090
    
    
    
    1,090
    
    
    
    102,150
    
    
    
    
    
    
    
    106,510Term loan
(interest)(b)
    
    
    8,477
    
    
    
    8,390
    
    
    
    8,303
    
    
    
    8,216
    
    
    
    4,064
    
    
    
    
    
    
    
    37,450Revolver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,300
    
    
    
    
    
    
    
    
    
    
    
    9,300Operating leases(c)
    
    
    1,609
    
    
    
    1,144
    
    
    
    602
    
    
    
    383
    
    
    
    263
    
    
    
    1,855
    
    
    
    5,856Capital leases(d)
    
    
    1,332
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,506Management
agreement(e)
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    7,749
    
    
    
    22,749Postretirement plans
    
    
    983
    
    
    
    1,018
    
    
    
    1,042
    
    
    
    1,057
    
    
    
    1,077
    
    
    
    5,638
    
    
    
    10,815Total
    
    $
    28,866
    
    
    $
    27,191
    
    
    $
    33,151
    
    
    $
    48,900
    
    
    $
    136,408
    
    
    $
    681,326
    
    
    $
    955,842
 
 (a)
    
    Represents interest payments due on the 12.75% PIK Notes, 10.25% Notes and 8.25% Notes.(b)
    
    Assumes an interest rate on the term loan of 8%.(c)
    
    Some of our rental property leases contain options to renew the leased space for periods up
to an additional ten years.(d)
    
    The total balance of gross capital lease assets is $5,022 as of August 26, 2006 and $5,022
as of August 27, 2005, with accumulated depreciation of $1,470 and $839, respectively.(e)
    
    AAC and Intermediate Holdings have entered into a management agreement with an affiliate of
Fenway Partners Capital Fund II, L.P. pursuant to which they, 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 (as defined in the agreement). This agreement has a 10-year minimum
term. See Certain Relationships and Related Transactions. Seasonality
   32




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Recent Accounting Pronouncements
      33




---



##### Table of Contents



Item 7A. Quantitative And Qualitative Disclosures About Market Risk
 Interest Rate Risk.
 Semi-Precious Stones.
 Gold.
 34




---



##### Table of Contents



Item 8. Financial Statement and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  /s/ DELOITTE & TOUCHE LLP
 35




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  /s/ DELOITTE & TOUCHE LLP
 36




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  /s/ DELOITTE & TOUCHE LLP
 37




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 Parent HoldingsAugust 26, 2006(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,404Accounts receivable, net of allowance for
doubtful accounts of $2,330
    
    
    40,226Inventories, net
    
    
    31,438Deferred tax asset
    
    
    5,582Prepaid expenses and other current
assets, net
    
    
    13,944Total current assets
    
    
    94,594Property, plant and equipment, net
    
    
    76,054Goodwill
    
    
    184,565Other intangible assets, net
    
    
    148,595Other assets
    
    
    7,468Total assets
    
    $
    511,276LIABILITIES
AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Bank overdraft
    
    $
    2,147Accounts payable
    
    
    13,585Customer deposits
    
    
    11,392Accrued expenses
    
    
    23,382Deferred revenue
    
    
    2,617Accrued interest
    
    
    5,997Current portion of long-term debt
    
    
    1,090Total current liabilities
    
    
    60,210Long-term debt, net of current portion
    
    
    525,734Mandatory
redeemable preferred stock, $.01 par value, 15,000 shares authorized, 7,500 shares issued and outstanding
    
    
    7,500Deferred tax liabilities
    
    
    25,760Other long-term liabilities
    
    
    6,858Total liabilities
    
    
    626,062Commitments
and contingenciesStockholders equity
(deficit)Common stock, $.01 par value, 1,250,000
shares authorized, 505,460 shares issued
and outstanding
    
    
    5Additional paid-in capital
    
    
    (124,045
    )Accumulated earnings
    
    
    9,254Total stockholders equity (deficit)
    
    
    (114,786
    )Total liabilities and stockholders equity (deficit)
    
    $
    511,276
  38




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate HoldingsAugust 26, 2006




August 27, 2005(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,904
    
    
    $
    4,324Accounts receivable, net of allowance for
doubtful accounts of $2,330 and $2,794,
respectively
    
    
    40,226
    
    
    
    39,803Inventories, net
    
    
    31,438
    
    
    
    22,221Deferred tax asset
    
    
    5,582
    
    
    
    6,760Prepaid expenses and other current
assets, net
    
    
    13,944
    
    
    
    22,785Total current assets
    
    
    94,094
    
    
    
    95,893Property, plant and equipment, net
    
    
    76,054
    
    
    
    75,943Goodwill
    
    
    184,565
    
    
    
    184,026Other intangible assets, net
    
    
    139,592
    
    
    
    153,265Other assets
    
    
    7,468
    
    
    
    3,809Total assets
    
    $
    501,773
    
    
    $
    512,936LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    2,147
    
    
    $
    3,730Accounts payable
    
    
    13,585
    
    
    
    13,959Customer deposits
    
    
    11,392
    
    
    
    17,762Accrued expenses
    
    
    23,292
    
    
    
    26,263Deferred revenue
    
    
    2,617
    
    
    
    1,004Accrued interest
    
    
    5,997
    
    
    
    7,370Current portion of long-term debt
    
    
    1,090
    
    
    
    1,409Total current liabilities
    
    
    60,120
    
    
    
    71,497Long-term debt, net of current portion
    
    
    371,537
    
    
    
    384,367Deferred tax liabilities
    
    
    27,523
    
    
    
    24,877Other long-term liabilities
    
    
    5,879
    
    
    
    8,377Total liabilities
    
    
    465,059
    
    
    
    489,118Commitments and
contingenciesStockholders
equity:Common stock, $.01 par value, 1,000
shares authorized, 100 shares issued and
outstanding
    
    
    
    
    
    
    5Additional paid-in capital
    
    
    24,144
    
    
    
    16,491Accumulated earnings
    
    
    12,570
    
    
    
    8,278Accumulated other comprehensive gain
(loss)
    
    
    
    
    
    
    (956
    )Total stockholders equity
    
    
    36,714
    
    
    
    23,818Total liabilities and stockholders equity
    
    $
    501,773
    
    
    $
    512,936
  39




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AACAugust 26, 2006
    
    
    August 27, 2005(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,381
    
    
    $
    4,093Accounts receivable, net of allowance for
doubtful accounts of $2,330 and $2,794,
respectively
    
    
    40,226
    
    
    
    39,803Inventories, net
    
    
    31,438
    
    
    
    22,221Deferred tax asset
    
    
    5,582
    
    
    
    6,760Prepaid expenses and other current assets, net
    
    
    13,944
    
    
    
    22,785Total current assets
    
    
    93,571
    
    
    
    95,662Property, plant and equipment, net
    
    
    76,054
    
    
    
    75,943Goodwill
    
    
    184,565
    
    
    
    184,026Other intangible assets, net
    
    
    136,884
    
    
    
    150,112Other assets
    
    
    7,468
    
    
    
    3,809Total assets
    
    $
    498,542
    
    
    $
    509,552LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    2,147
    
    
    $
    3,730Accounts payable
    
    
    13,585
    
    
    
    13,959Customer deposits
    
    
    11,392
    
    
    
    17,762Accrued expenses
    
    
    23,290
    
    
    
    26,252Deferred revenue
    
    
    2,617
    
    
    
    1,004Accrued interest
    
    
    5,997
    
    
    
    7,370Current portion of long-term debt
    
    
    1,090
    
    
    
    1,409Total current liabilities
    
    
    60,118
    
    
    
    71,486Long-term debt, net of current portion
    
    
    264,720
    
    
    
    287,711Deferred tax liabilities
    
    
    34,307
    
    
    
    27,748Other long-term liabilities
    
    
    5,851
    
    
    
    8,344Total liabilities
    
    
    364,996
    
    
    
    395,289Commitments and contingenciesStockholders equity:Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    109,046
    
    
    
    102,046Accumulated earnings
    
    
    24,500
    
    
    
    13,173Accumulated other comprehensive gain (loss)
    
    
    
    
    
    
    (956
    )Total stockholders equity
    
    
    133,546
    
    
    
    114,263Total liabilities and stockholders equity
    
    $
    498,542
    
    
    $
    509,552
  40




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 Parent HoldingsFor the year endedAugust 26, 2006(Dollars in thousands)Net sales
    
    $
    320,910Cost of sales
    
    
    134,258Gross profit
    
    
    186,652Selling, general and administrative
expenses
    
    
    144,129Operating income
    
    
    42,523Interest expense, net of interest income
    
    
    39,331Income before provision for income taxes
    
    
    3,192Provision for income taxes
    
    
    (2,216
    )Net income
    
    $
    976
  41




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate HoldingsFor the year endedAugust 26, 2006
    
    
    August 27, 2005(Dollars in thousands)Net sales
    
    $
    320,910
    
    
    $
    313,788Cost of sales
    
    
    134,258
    
    
    
    134,375Gross profit
    
    
    186,652
    
    
    
    179,413Selling, general and administrative
expenses
    
    
    144,129
    
    
    
    144,592Operating income
    
    
    42,523
    
    
    
    34,821Interest expense, net of interest
income
    
    
    34,246
    
    
    
    31,271Income before provision for income
taxes
    
    
    8,277
    
    
    
    3,550Provision for income taxes
    
    
    (3,985
    )
    
    
    (1,738
    )Net income
    
    $
    4,292
    
    
    $
    1,812
  42




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AAC(Successor)
    
    
    
    (Predecessor)For the period
    
    
    
    For the periodFor the year ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 August 26, 2006
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004(Dollars in thousands)Net sales
    
    $
    320,910
    
    
    $
    313,788
    
    
    $
    167,350
    
    
    
    $
    146,721Cost of sales
    
    
    134,258
    
    
    
    134,375
    
    
    
    83,521
    
    
    
    
    59,857Gross profit
    
    
    186,652
    
    
    
    179,413
    
    
    
    83,829
    
    
    
    
    86,864Selling, general and
administrative expenses
    
    
    144,129
    
    
    
    144,592
    
    
    
    62,647
    
    
    
    
    74,992Operating income
    
    
    42,523
    
    
    
    34,821
    
    
    
    21,182
    
    
    
    
    11,872Interest expense, net of
interest income
    
    
    23,289
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    
    16,455Income (loss) before
provision for income
taxes
    
    
    19,234
    
    
    
    11,324
    
    
    
    10,925
    
    
    
    
    (4,583
    )Provision for income taxes
    
    
    (7,907
    )
    
    
    (4,617
    )
    
    
    (4,459
    )
    
    
    
    Net income (loss)
    
    
    11,327
    
    
    
    6,707
    
    
    
    6,466
    
    
    
    
    (4,583
    )Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )Net income
(loss) applicable to common stockholders
    
    $
    11,327
    
    
    $
    6,707
    
    
    $
    6,466
    
    
    
    $
    (5,283
    )
  43




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 AccumulatedAdditional
    
    
    other
    
    
    AccumulatedCommon Stock
    
    
    Paid-in
    
    
    comprehensive
    
    
    earningsParent Holdings
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    income (loss)
    
    
    (deficit)
    
    
    Total(Dollars in thousands)Balance at incorporation, May 30, 2006
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of stock to Parent Holdings stockholders in
exchange for transfer of Intermediate Holdings stock
    
    
    505,460
    
    
    
    5
    
    
    
    16,491
    
    
    
    (956
    )
    
    
    8,278
    
    
    
    23,818Dividend distribution to stockholders
    
    
    
    
    
    
    
    
    
    
    (140,536
    )
    
    
    
    
    
    
    
    
    
    
    (140,536
    )Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    976
    
    
    
    976Adjustment to minimum pension liability (net of
tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    
    
    
    
    956Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    976
    
    
    
    1,932Balance, August 26, 2006
    
    
    505,460
    
    
    $
    5
    
    
    $
    (124,045
    )
    
    $
    
    
    
    $
    9,254
    
    
    $
    (114,786
    )
  44




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##### Table of Contents



AAC GROUP HOLDING CORP.
 AccumulatedAdditional
    
    
    other
    
    
    AccumulatedCommon Stock
    
    
    Paid-in
    
    
    comprehensive
    
    
    earningsIntermediate Holdings
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    income (loss)
    
    
    (deficit)
    
    
    Total(Dollars in thousands)Balance at incorporation, November 8, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock
    
    
    1,015,426
    
    
    
    10
    
    
    
    102,036
    
    
    
    
    
    
    
    6,466
    
    
    
    108,512Distribution to stockholders through repurchase
of common stock
    
    
    (509,966
    )
    
    
    (5
    )
    
    
    (85,545
    )
    
    
    
    
    
    
    
    
    
    
    (85,550
    )Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,812
    
    
    
    1,812Adjustment to minimum pension liability
(net of tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    
    
    
    
    (956
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    1,812
    
    
    
    856Balance, August 27, 2005
    
    
    505,460
    
    
    $
    5
    
    
    $
    16,491
    
    
    $
    (956
    )
    
    $
    8,278
    
    
    $
    23,818Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292
    
    
    
    4,292Adjustment to minimum pension liability (net of
tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    
    
    
    
    956Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    4,292
    
    
    
    5,248Capital contribution from Parent Holdings
    
    
    
    
    
    
    
    
    
    
    7,648
    
    
    
    
    
    
    
    
    
    
    
    7,648Exchange of Intermediate Holdings stock for stock in
Parent Holdings
    
    
    (505,360
    )
    
    
    (5
    )
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Balance, August 26, 2006
    
    
    100
    
    
    $
    
    
    
    $
    24,144
    
    
    $
    
    
    
    $
    12,570
    
    
    $
    36,714
  45




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AccumulatedAdditional
    
    
    Other
    
    
    AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    comprehensive
    
    
    earningsAAC
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    income (loss)
    
    
    (deficit)
    
    
    Total(Dollars in thousands)Balance, August 30,
2003 (Predecessor)
    
    
    1,007,366
    
    
    $
    10
    
    
    
    809,775
    
    
    $
    8
    
    
    $
    95,350
    
    
    $
    (5,150
    )
    
    $
    (18,375
    )
    
    $
    71,843Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,583
    )
    
    
    (4,583
    )Adjustment to
minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    40Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    (4,583
    )
    
    
    (4,543
    )Accrued dividends on
minority interest in
CBI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )
    
    
    (700
    )Repurchase of common
and preferred stock
    
    
    (1,007,366
    )
    
    
    (10
    )
    
    
    (809,775
    )
    
    
    (8
    )
    
    
    (95,350
    )
    
    
    
    
    
    
    
    
    
    
    (95,368
    )Effect of purchase
accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,110
    
    
    
    23,658
    
    
    
    28,768Issuance of common
stock (Successor)
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    102,046
    
    
    
    
    
    
    
    
    
    
    
    102,046Balance, March 26, 2004
(Successor)
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    
    
    
    $
    
    
    
    $
    102,046Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,466
    
    
    $
    6,466Balance, August 28,
2004 (Successor)
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    
    
    
    $
    6,466
    
    
    $
    108,512Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,707
    
    
    
    6,707Adjustment to
minimum pension
liability (net of
tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    
    
    
    
    (956
    )Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    6,707
    
    
    
    5,751Balance, August 27, 2005
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    (956
    )
    
    $
    13,173
    
    
    $
    114,263Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,327
    
    
    
    11,327Adjustment to
minimum pension
liability (net of
tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    
    
    
    
    956Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956
    
    
    
    11,327
    
    
    
    12,283Capital contribution
from Intermediate
Holdings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    7,000Balance, August 26, 2006
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    109,046
    
    
    $
    
    
    
    $
    24,500
    
    
    $
    133,546
  46




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
 Parent HoldingsFor the year endedAugust 26, 2006(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    976Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    25,095Deferred income taxes
    
    
    2,061Amortization of debt discount and deferred financing fees
    
    
    2,269Accretion of interest on 10.25% senior discount notes
    
    
    10,161Accretion of 12.75% PIK notes
    
    
    4,197Loss on sales of property, plant and equipment
    
    
    79Provision for doubtful accounts
    
    
    (464
    )Changes in assets and liabilities:Accounts receivable
    
    
    41Inventories, net
    
    
    (9,217
    )Prepaid expenses and other current assets, net
    
    
    7,325Other assets
    
    
    (2,143
    )Deferred revenue
    
    
    1,613Accounts payable, accrued expenses, customer deposits
and other long-term liabilities
    
    
    (12,574
    )Net cash provided by operating activities
    
    
    29,419Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (12,511
    )Final payment for business acquired
    
    
    (539
    )Proceeds from sales of property, plant and equipment
    
    
    104Net cash used in investing activities
    
    
    (12,946
    )Cash flows from financing activities:Payments on term loan
    
    
    (32,610
    )Proceeds from credit facility revolver
    
    
    35,050Payments on credit facility revolver
    
    
    (25,750
    )Proceeds from preferred stock issuance
    
    
    7,500Proceeds from 12.75% PIK notes
    
    
    150,000Distribution to stockholders
    
    
    (140,536
    )Deferred financing fees
    
    
    (9,464
    )Change in bank overdraft
    
    
    (1,583
    )Net cash used in financing activities
    
    
    (17,393
    )Net decrease in cash and cash equivalents
    
    
    (920
    )Cash and cash equivalents, beginning of period
    
    
    4,324Cash and cash equivalents, end of period
    
    $
    3,404Supplemental disclosureCash paid during the period for:Interest
    
    $
    23,449Income taxes
    
    $
    703Supplemental non-cash investing and financing activities
disclosureTransfer of preferred stock and accumulated dividends
from Intermediate Holdings to Parent Holdings
    
    $
    7,648
  47




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##### Table of Contents



AAC GROUP HOLDING CORP.
 Intermediate HoldingsFor the year endedAugust 26, 2006
    
    
    August 27, 2005(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    4,292
    
    
    $
    1,812Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    25,095
    
    
    
    25,281Deferred income taxes
    
    
    3,824
    
    
    
    1,521Amortization of debt discount and deferred financing fees
    
    
    1,959
    
    
    
    1,882Accretion of interest on 10.25% senior discount notes
    
    
    10,161
    
    
    
    7,387Loss on sales of property, plant and equipment
    
    
    79
    
    
    
    Provision for doubtful accounts
    
    
    (464
    )
    
    
    (107
    )Changes in assets and liabilities:Accounts receivable
    
    
    41
    
    
    
    3,586Inventories, net
    
    
    (9,217
    )
    
    
    802Prepaid expenses and other current assets, net
    
    
    7,325
    
    
    
    3,445Other assets
    
    
    (2,143
    )
    
    
    (2,664
    )Deferred revenue
    
    
    1,613
    
    
    
    (4,499
    )Accounts payable, accrued expenses, customer deposits
and other long-term liabilities
    
    
    (13,242
    )
    
    
    (1,005
    )Net cash provided by operating activities
    
    
    29,323
    
    
    
    37,441Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (12,511
    )
    
    
    (12,795
    )Final payment on business acquired
    
    
    (539
    )
    
    
    Proceeds from sales of property, plant and equipment
    
    
    104
    
    
    
    Net cash used in investing activities
    
    
    (12,946
    )
    
    
    (12,795
    )Cash flows from financing activities:Payments on term loan
    
    
    (32,610
    )
    
    
    (15,493
    )Proceeds from credit facility revolver
    
    
    35,050
    
    
    
    33,450Payments on credit facility revolver
    
    
    (25,750
    )
    
    
    (33,450
    )Proceeds from preferred stock issuance
    
    
    7,500
    
    
    
    Redemption of 11.625% senior unsecured notes
    
    
    
    
    
    
    (6,075
    )Proceeds from 10.25% senior discount notes
    
    
    
    
    
    
    89,269Distribution to stockholders
    
    
    
    
    
    
    (85,550
    )Deferred financing fees
    
    
    (404
    )
    
    
    (3,508
    )Change in bank overdraft
    
    
    (1,583
    )
    
    
    (2,003
    )Net cash used in financing activities
    
    
    (17,797
    )
    
    
    (23,360
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,420
    )
    
    
    1,286Cash and cash equivalents, beginning of period
    
    
    4,324
    
    
    
    3,038Cash and cash equivalents, end of period
    
    $
    2,904
    
    
    $
    4,324Supplemental disclosureCash paid during the period for:Interest
    
    $
    23,449
    
    
    $
    21,966Income taxes
    
    $
    703
    
    
    $
    224Supplemental non-cash investing and financing activities
disclosureTransfer of preferred stock and accumulated dividends
from Intermediate Holdings to Parent Holdings
    
    $
    7,648
    
    
    $
    
  48




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##### Table of Contents



AMERICAN ACHIEVEMENT CORPORATION
 AACFor the period
    
    
    
    For the periodFor the year ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 August 26, 2006
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    11,327
    
    
    $
    6,707
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    25,095
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    
    8,530Deferred income taxes
    
    
    7,737
    
    
    
    4,392
    
    
    
    4,309
    
    
    
    
    Amortization of debt discount and
deferred financing fees
    
    
    1,498
    
    
    
    1,527
    
    
    
    629
    
    
    
    
    1,197Loss on sales of property, plant and
equipment
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for doubtful accounts
    
    
    (464
    )
    
    
    (107
    )
    
    
    (236
    )
    
    
    
    (144
    )Changes in assets and liabilities:Accounts receivable
    
    
    41
    
    
    
    3,586
    
    
    
    (1,506
    )
    
    
    
    2,758Inventories, net
    
    
    (9,217
    )
    
    
    802
    
    
    
    26,266
    
    
    
    
    (18,963
    )Prepaid expenses and other current
assets, net
    
    
    7,325
    
    
    
    3,445
    
    
    
    (16,262
    )
    
    
    
    2,573Other assets
    
    
    (2,143
    )
    
    
    (2,664
    )
    
    
    1,779
    
    
    
    
    (959
    )Deferred revenue
    
    
    1,613
    
    
    
    (4,499
    )
    
    
    2,615
    
    
    
    
    (2,235
    )Accounts payable, accrued expenses,
customer deposits and other long-term
liabilities
    
    
    (13,629
    )
    
    
    (1,049
    )
    
    
    (36,862
    )
    
    
    
    52,053Net cash provided by (used in) operating
activities
    
    
    29,262
    
    
    
    37,421
    
    
    
    (2,458
    )
    
    
    
    40,227Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (12,511
    )
    
    
    (12,795
    )
    
    
    (3,665
    )
    
    
    
    (12,793
    )Final payment for business acquired
    
    
    (539
    )
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from sales of fixed assets
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisitions of businesses, net of cash
acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,263
    )Net cash used in investing activities
    
    
    (12,946
    )
    
    
    (12,795
    )
    
    
    (3,665
    )
    
    
    
    (112,056
    )Cash flows from financing activities:Proceeds from revolver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Payments on revolver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,500
    )Proceeds of common stock issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,046Proceeds from term loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,000Payments on term loan
    
    
    (32,610
    )
    
    
    (15,493
    )
    
    
    (387
    )
    
    
    
    Proceeds from 8.25% senior subordinated
notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000Proceeds from credit facility revolver
    
    
    35,050
    
    
    
    33,450
    
    
    
    5,000
    
    
    
    
    2,000Payments on credit facility revolver
    
    
    (25,750
    )
    
    
    (33,450
    )
    
    
    (7,000
    )
    
    
    
    Redemption of common and preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95,368
    )Redemption of 11% senior subordinated
notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,355
    )Redemption of 11.625% senior unsecured
notes
    
    
    
    
    
    
    (6,075
    )
    
    
    
    
    
    
    
    (170,925
    )Capital contribution
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred financing fees
    
    
    (135
    )
    
    
    
    
    
    
    (969
    )
    
    
    
    (10,143
    )Change in bank overdraft
    
    
    (1,583
    )
    
    
    (2,003
    )
    
    
    3,252
    
    
    
    
    (2,396
    )Net cash provided by (used in) financing
activities
    
    
    (18,028
    )
    
    
    (23,571
    )
    
    
    (104
    )
    
    
    
    79,359Net increase (decrease) in cash and cash
equivalents
    
    
    (1,712
    )
    
    
    1,055
    
    
    
    (6,227
    )
    
    
    
    7,530Cash and cash equivalents, beginning of
period
    
    
    4,093
    
    
    
    3,038
    
    
    
    9,265
    
    
    
    
    1,735Cash and cash equivalents, end of period
    
    $
    2,381
    
    
    $
    4,093
    
    
    $
    3,038
    
    
    
    $
    9,265Supplemental disclosureCash paid during the period for:Interest
    
    $
    23,449
    
    
    $
    21,966
    
    
    $
    2,567
    
    
    
    $
    18,873Income taxes
    
    $
    703
    
    
    $
    224
    
    
    $
    88
    
    
    
    $
    178Supplemental non-cash financing
activities disclosureAccrued preferred stock dividends
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    700
  49




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 1. Summary of Organization and Significant Accounting Policies
 Registrants
  Description of Business
  Consolidation
     50




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Basis of Presentation and Comparability
  Fiscal Year-End
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts
   Allowance for doubtful accounts and product returns
 Balance atBeginning of
    
    Charged to Costs
    
    
    
    
    
    
    
    
    
    Balance at End ofPeriod
    
    and Expenses
    
    Other
    
    Write-offs
    
    PeriodParent HoldingsYear ended August 26, 2006
    
    $
    2,794
    
    
    $
    6,923
    
    
    $
    
    
    
    $
    (7,387
    )
    
    $
    2,330Intermediate HoldingsYear ended August 26, 2006
    
    $
    2,794
    
    
    $
    6,923
    
    
    $
    
    
    
    $
    (7,387
    )
    
    $
    2,330Year ended August 27, 2005
    
    
    2,862
    
    
    
    7,050
    
    
    
    99
    
    
    
    (7,217
    )
    
    
    2,794AACYear ended August 26, 2006
    
    $
    2,794
    
    
    $
    6,923
    
    
    $
    
    
    
    $
    (7,387
    )
    
    $
    2,330Year ended August 27, 2005
    
    
    2,862
    
    
    
    7,050
    
    
    
    99
    
    
    
    (7,217
    )
    
    
    2,794March 26, 2004  August 28, 2004
    
    
    3,098
    
    
    
    3,790
    
    
    
    124
    
    
    
    (4,150
    )
    
    
    2,862August 31, 2003  March 25, 2004
(Predecessor)
    
    
    3,242
    
    
    
    3,445
    
    
    
    (160
    )
    
    
    (3,429
    )
    
    
    3,098
 51




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Inventories
  Sales Representative Advances and Related Reserve
    Reserve on sales representatives advances
 Balance atBeginning of
    
    Charged to Costs
    
    
    
    
    
    Balance at End ofPeriod
    
    and Expenses
    
    Write-offs(1)
    
    PeriodParent HoldingsYear ended August 26, 2006
    
    $
    2,536
    
    
    $
    1,867
    
    
    $
    (2,348
    )
    
    $
    2,055Intermediate HoldingsYear ended August 26, 2006
    
    $
    2,536
    
    
    $
    1,867
    
    
    $
    (2,348
    )
    
    $
    2,055Year ended August 27, 2005
    
    
    2,383
    
    
    
    1,794
    
    
    
    (1,641
    )
    
    
    2,536AACYear ended August 26, 2006
    
    $
    2,536
    
    
    $
    1,867
    
    
    $
    (2,348
    )
    
    $
    2,055Year ended August 27, 2005
    
    
    2,383
    
    
    
    1,794
    
    
    
    (1,641
    )
    
    
    2,536March 26, 2004  August 28, 2004
    
    
    2,254
    
    
    
    1,205
    
    
    
    (1,076
    )
    
    
    2,383August 31, 2003  March 25, 2004
(Predecessor)
    
    
    2,516
    
    
    
    813
    
    
    
    (1,075
    )
    
    
    2,254
 
 (1)
    
    Represents principally write-offs of terminated sales representative
amounts and forgiveness of amounts by the Company Property, Plant and Equipment
  Description
    
    Useful lifeBuildings and improvements
    
    10 to 33 yearsTools and dies
    
    8 yearsMachinery and equipment
    
    2 to 10 yearsLeasehold improvements
    
    Shorter of useful life or term of lease
 52




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Goodwill and Other Intangible Assets
  Impairment of Long-lived Assets
  Customer Deposits
  Income Taxes
  Fair Value of Financial Instruments
  Stock-Based Compensation
  53




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  (Predecessor)For the periodAugust 31, 2003 March 25, 2004Net loss
    
    $
    (4,583
    )Less: stock-based compensation expense, net of related taxes
    
    
    11Net loss-pro forma
    
    $
    (4,594
    )
   (Predecessor)For the PeriodAugust 31, 2003 March 25, 2004Risk-free interest rate
    
    
    3.93
    %Expected life
    
    10 yearsVolatility
    
    
    25
    %Dividend yield
    
    
    
 Revenue Recognition and Warranty Costs
     54




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Accrued ring repair liability
 Balance at
    
    Charged to CostsBeginning of
    
    and Expenses
    
    
    
    
    
    Balance at End ofPeriod
    
    (accruals)
    
    Claims
    
    PeriodParent HoldingsYear ended August 26, 2006
    
    $
    1,182
    
    
    $
    348
    
    
    $
    (414
    )
    
    $
    1,116Intermediate HoldingsYear ended August 26, 2006
    
    $
    1,182
    
    
    $
    348
    
    
    $
    (414
    )
    
    $
    1,116Year ended August 27, 2005
    
    
    1,210
    
    
    
    808
    
    
    
    (836
    )
    
    
    1,182AACYear ended August 26, 2006
    
    $
    1,182
    
    
    $
    348
    
    
    $
    (414
    )
    
    $
    1,116Year ended August 27, 2005
    
    
    1,210
    
    
    
    808
    
    
    
    (836
    )
    
    
    1,182March 26, 2004  August 28, 2004
    
    
    1,500
    
    
    
    347
    
    
    
    (637
    )
    
    
    1,210August 31, 2003  March 25, 2004
(Predecessor)
    
    
    1,500
    
    
    
    461
    
    
    
    (461
    )
    
    
    1,500
 Seasonality
   Concentration of Credit Risk
  Shipping and Handling Fees
  Supplier Concentration
  Advertising
  55




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
    Use of Estimates
  Recent Accounting Pronouncements
     56




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  2. Merger
     Current assets
    
    $
    123,407Property, plant and equipment
    
    
    78,301Goodwill
    
    
    181,361Intangible assets
    
    
    157,928Other assets
    
    
    15,390Current liabilities
    
    
    (116,102
    )Deferred income taxes
    
    
    (12,043
    )Other long-term liabilities
    
    
    (9,042
    )Total purchase price
    
    $
    419,200
   57




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 3. Comprehensive Income (Loss)
  For the year endedAugust 26, 2006Parent HoldingsNet income
    
    $
    976Adjustment in minimum pension liability (net of tax
impact)
    
    
    956Total comprehensive income
    
    $
    1,932
 For the year endedAugust 26, 2006
    
    
    August 27, 2005Intermediate HoldingsNet income
    
    $
    4,292
    
    
    $
    1,812Adjustment in minimum pension
liability (net of tax impact)
    
    
    956
    
    
    
    (956
    )Total comprehensive income
    
    $
    5,248
    
    
    $
    856
 (Successor)
    
    
    
    (Predecessor)For the year ended
    
    
    For the period
    
    
    
    For the periodAugust 26,
    
    
    August 27,
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 2006
    
    
    2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004AACNet income (loss)
    
    $
    11,327
    
    
    $
    6,707
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )Adjustment in
minimum pension
liability (net of
tax impact)
    
    
    956
    
    
    
    (956
    )
    
    
    
    
    
    
    
    40Total comprehensive
income (loss)
    
    $
    12,283
    
    
    $
    5,751
    
    
    $
    6,466
    
    
    
    $
    (4,543
    )
  4. Significant Acquisitions
  58




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 5. Inventories, Net
  August 26, 2006Parent HoldingsRaw materials
    
    $
    17,759Work in process
    
    
    6,473Finished goods
    
    
    7,400LessReserves
    
    
    (194
    )$
    31,438August 26, 2006
    
    
    August 27, 2005Intermediate
Holdings and AACRaw materials
    
    $
    17,759
    
    
    $
    9,022Work in process
    
    
    6,473
    
    
    
    6,306Finished goods
    
    
    7,400
    
    
    
    7,098LessReserves
    
    
    (194
    )
    
    
    (205
    )$
    31,438
    
    
    $
    22,221
   59




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 6. Prepaid Expenses and Other Current Assets, Net
  August 26, 2006Parent HoldingsSales representative advances
    
    $
    7,830Lessreserve on sales representative advances
    
    
    (2,055
    )Deferred publication and ring costs
    
    
    364Prepaid advertising and promotional materials
    
    
    2,254Prepaid management fees  related party
    
    
    250Other
    
    
    5,301$
    13,944August 26, 2006
    
    
    August 27, 2005Intermediate
Holdings and AACSales representative advances
    
    $
    7,830
    
    
    $
    12,705Lessreserve on sales
representative advances
    
    
    (2,055
    )
    
    
    (2,536
    )Deferred publication and
ring costs
    
    
    364
    
    
    
    4,212Prepaid advertising and
promotional materials
    
    
    2,254
    
    
    
    3,578Prepaid management fees
 related party
    
    
    250
    
    
    
    3,578Other
    
    
    5,301
    
    
    
    4,826$
    13,944
    
    
    $
    22,785
  60




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 7. Property, Plant and Equipment, Net
  August 26, 2006Parent HoldingsLand
    
    $
    9,550Buildings and improvements
    
    
    8,884Tools and dies
    
    
    23,622Machinery and equipment
    
    
    61,335Construction in progress
    
    
    4,435Total
    
    
    107,826Less-accumulated depreciation
    
    
    (31,772
    )Property, plant, and equipment, net
    
    $
    76,054August 26, 2006
    
    
    August 27, 2005Intermediate
Holdings and AACLand
    
    $
    9,550
    
    
    $
    9,550Buildings and improvements
    
    
    8,884
    
    
    
    8,184Tools and dies
    
    
    23,622
    
    
    
    21,933Machinery and equipment
    
    
    61,335
    
    
    
    49,145Construction in progress
    
    
    4,435
    
    
    
    5,864Total
    
    
    107,826
    
    
    
    94,676Less-accumulated depreciation
    
    
    (31,772
    )
    
    
    (18,733
    )Property, plant, and
equipment, net
    
    $
    76,054
    
    
    $
    75,943
   Fiscal Year Ending
    
    Capital2007
    
    $
    1,3322008
    
    
    1742009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Interest
    
    
    (40
    )$
    1,466
   61




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##### Table of Contents



8. Goodwill and Other Intangible Assets
 Goodwill
  AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Fiscal year ended August 26, 2006Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementRings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalParent
Holdings, Intermediate Holdings and AACBalance at beginning of period
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,242
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,026Post closing purchase price
adjustment on C-B Graduation
Announcement acquisition
    
    
    
    
    
    
    
    
    
    
    539
    
    
    
    
    
    
    
    
    
    
    $
    539Balance at end of period
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,781
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,565
 Fiscal year ended August 27, 2005Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementRings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalIntermediate
Holdings and AACBalance at beginning of period
    
    $
    71,033
    
    
    $
    64,551
    
    
    $
    22,996
    
    
    $
    11,569
    
    
    $
    11,931
    
    
    $
    182,080Finalization of previously
estimated taxes and transaction
costs associated with
professional services in
connection with the Merger
    
    
    759
    
    
    
    690
    
    
    
    246
    
    
    
    124
    
    
    
    127
    
    
    $
    1,946Balance at end of period
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,242
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,026
 62




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Other Intangible Assets
  Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    Asset
    
    
    Amortization
    
    
    AssetParent HoldingsAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing
costs and other
    
    7 to 8 years
    
    
    24,084
    
    
    
    (4,745
    )
    
    
    19,339Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and
distribution
contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    $
    182,012
    
    
    $
    (33,417
    )
    
    $
    148,595
 Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    Asset
    
    
    Amortization
    
    
    AssetIntermediate HoldingsAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing
costs and other
    
    7 to 8 years
    
    
    14,755
    
    
    
    (4,419
    )
    
    
    10,336Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and
distribution
contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    $
    172,683
    
    
    $
    (33,091
    )
    
    $
    139,592
 Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    Asset
    
    
    Amortization
    
    
    AssetIntermediate HoldingsAt 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
    )
    
    
    84,337Total
    
    
    
    $
    172,548
    
    
    $
    (19,283
    )
    
    $
    153,265
 Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    Asset
    
    
    Amortization
    
    
    AssetAACAt August 26, 2006Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing
costs and other
    
    7 to 8 years
    
    
    11,247
    
    
    
    (3,619
    )
    
    
    7,628Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (1,072
    )
    
    
    6,245Customer lists and
distribution
contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (27,600
    )
    
    
    72,916Total
    
    
    
    $
    169,175
    
    
    $
    (32,291
    )
    
    $
    136,884
 Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetUseful Life
    
    Asset
    
    
    Amortization
    
    
    AssetAACAt 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
    )
    
    
    84,337Total
    
    
    
    $
    169,040
    
    
    $
    (18,928
    )
    
    $
    150,112
 63




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
    9. Accrued Expenses
  August 26, 2006Parent HoldingsCommissions and royalties
    
    $
    8,653Compensation and related costs
    
    
    5,795Accumulated pension and
postretirement benefit cost
    
    
    3,379Accrued sales and property taxes
    
    
    1,492Accrued workmans compensation and
medical claims
    
    
    906Capital lease obligations, short term
    
    
    1,293Accrued expenses  related party
    
    
    90Other
    
    
    1,774$
    23,382August 26, 2006
    
    
    August 27, 2005Intermediate HoldingsCommissions and royalties
    
    $
    8,653
    
    
    $
    7,896Compensation and related costs
    
    
    5,795
    
    
    
    6,683Accumulated pension and
postretirement benefit cost
    
    
    3,379
    
    
    
    4,984Accrued sales and property taxes
    
    
    1,492
    
    
    
    1,332Accrued workmans compensation and
medical claims
    
    
    906
    
    
    
    1,058Capital lease obligations, short term
    
    
    1,293
    
    
    
    1,250Accrued expenses  related party
    
    
    90
    
    
    
    Other
    
    
    1,684
    
    
    
    3,060$
    23,292
    
    
    $
    26,263
 August 26, 2006
    
    
    August 27, 2005AACCommissions and royalties
    
    $
    8,653
    
    
    $
    7,896Compensation and related costs
    
    
    5,795
    
    
    
    6,683Accumulated pension and
postretirement benefit cost
    
    
    3,379
    
    
    
    4,984Accrued sales and property taxes
    
    
    1,492
    
    
    
    1,332Accrued workmans compensation and
medical claims
    
    
    906
    
    
    
    1,058Capital lease obligations, short term
    
    
    1,293
    
    
    
    1,250Accrued expenses  related party
    
    
    90
    
    
    
    Other
    
    
    1,682
    
    
    
    3,049$
    23,290
    
    
    $
    26,252
 64




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 10. Long-term Debt
  August 26, 2006Parent Holdings12.75% Senior PIK Notes (including
$4,197 PIK interest)
    
    $
    154,19710.25% Senior discount notes due 2012
(net of unamortized discount of
$24,683)
    
    
    106,8178.25% Senior subordinated notes due
2012
    
    
    150,000Senior secured credit facility
Revolving credit facility due 2010
    
    
    9,300Term loan due 2011
    
    
    106,510Total
    
    
    526,824Less current portion of long-term
debt
    
    
    (1,090
    )Total long-term debt
    
    $
    525,734August 26, 2006
    
    
    August 27, 2005Intermediate Holdings10.25% Senior discount notes due 2012
(net of unamortized discount of
$24,683 and $34,844, respectively)
    
    $
    106,817
    
    
    $
    96,6568.25% Senior subordinated notes due
2012
    
    
    150,000
    
    
    
    150,000Senior secured credit facility
Revolving credit facility due 2010
    
    
    9,300
    
    
    
    Term loan due 2011
    
    
    106,510
    
    
    
    139,120Total
    
    
    372,627
    
    
    
    385,776Less current portion of long-term
debt
    
    
    (1,090
    )
    
    
    (1,409
    )Total long-term debt
    
    $
    371,537
    
    
    $
    384,367
 August 26, 2006
    
    
    August 27, 2005AAC8.25% Senior subordinated notes due
2012
    
    $
    150,000
    
    
    $
    150,000Senior secured credit facility
Revolving credit facility due 2010
    
    
    9,300
    
    
    
    Term loan due 2011
    
    
    106,510
    
    
    
    139,120Total
    
    
    265,810
    
    
    
    289,120Less current portion of long-term
debt
    
    
    (1,090
    )
    
    
    (1,409
    )Total long-term debt
    
    $
    264,720
    
    
    $
    287,711
 12.75% Senior PIK Notes
  65




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
       Mandatory Redeemable Preferred Stock
   10.25% Senior Discount Notes
  66




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
     8.25% Senior Subordinated Notes
 pari passu
    67




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Senior Secured Credit Facility
         68




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Parent
    
    
    IntermediateHoldings
    
    
    Holdings
    
    
    AACAmount
    
    
    Amount
    
    
    AmountFiscal year ending
    
    Maturing
    
    
    maturing
    
    
    Maturing2007
    
    $
    1,090
    
    
    $
    1,090
    
    
    $
    1,0902008
    
    
    1,090
    
    
    
    1,090
    
    
    
    1,0902009
    
    
    1,090
    
    
    
    1,090
    
    
    
    1,0902010
    
    
    10,390
    
    
    
    10,390
    
    
    
    10,3902011
    
    
    102,150
    
    
    
    102,150
    
    
    
    102,150Thereafter
    
    
    418,514
    
    
    
    256,817
    
    
    
    150,000Total
    
    $
    534,324
    
    
    $
    372,627
    
    
    $
    265,810
     11. Commitments and Contingencies
 Leases
  OperatingFiscal Year Ending
    
    Expense2007
    
    $
    1,6092008
    
    
    1,1442009
    
    
    6022010
    
    
    3832011
    
    
    263Thereafter
    
    
    1,855Interest
    
    
    $
    5,856
   69




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Pending Litigation
 th
   Employment Contracts
  Plant
Closure
  70




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 12. Employee Compensation and Benefits
 Postretirement Pension and Medical Benefits
    August 26, 2006
    
    
    August 27, 2005Taylor pension
    
    
    CBI post-retirement
    
    
    Taylor pension
    
    
    CBI post-retirementChange in benefit obligation:Obligation beginning of the year
    
    $
    16,363
    
    
    $
    4,326
    
    
    $
    13,664
    
    
    $
    7,186Service cost
    
    
    98
    
    
    
    
    
    
    
    78
    
    
    
    Interest cost
    
    
    844
    
    
    
    139
    
    
    
    835
    
    
    
    152Actuarial loss (gain)
    
    
    (2,785
    )
    
    
    (583
    )
    
    
    212
    
    
    
    (2,680
    )Benefit payments
    
    
    (649
    )
    
    
    (423
    )
    
    
    (607
    )
    
    
    (332
    )Amendment
    
    
    
    
    
    
    (1,067
    )
    
    
    
    
    
    
    Change in discount rate
    
    
    
    
    
    
    
    
    
    
    2,181
    
    
    
    Obligation, end of year
    
    $
    13,871
    
    
    $
    2,392
    
    
    $
    16,363
    
    
    $
    4,326Change in fair value of plan
assets:Fair value of plan assets,
beginning of year
    
    $
    11,121
    
    
    $
    
    
    
    $
    10,201
    
    
    $
    Actual return of plan assets
    
    
    1,051
    
    
    
    
    
    
    
    782
    
    
    
    Employer contributions
    
    
    566
    
    
    
    423
    
    
    
    745
    
    
    
    332Benefit payments
    
    
    (649
    )
    
    
    (423
    )
    
    
    (607
    )
    
    
    (332
    )Fair value of plan assets, end
of year
    
    $
    12,089
    
    
    $
    
    
    
    $
    11,121
    
    
    $
    Funded status:Unfunded accumulated benefit obligation in excess of plan
assets
    
    $
    (1,781
    )
    
    $
    (2,392
    )
    
    $
    (5,241
    )
    
    $
    (4,326
    )Unrecognized net loss (gain)
    
    
    (1,377
    )
    
    
    (2,662
    )
    
    
    1,567
    
    
    
    (2,395
    )Unrecognized prior service cost
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    Contributions from measurement
date to period end
    
    
    182
    
    
    
    
    
    
    
    125
    
    
    
    Accumulated postretirement
benefit cost, current and
long-term
    
    $
    (2,976
    )
    
    $
    (6,059
    )
    
    $
    (3,549
    )
    
    $
    (6,721
    )
 71




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  For the Period Ended
    
    
    
    For the Period EndedFiscal Year Ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 August 26, 2006
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004Taylor pension
    
    
    CBI post-retirement
    
    
    Taylor pension
    
    
    CBI post-retirement
    
    
    Taylor pension
    
    
    CBI post-retirement
    
    
    
    Taylor pension
    
    
    CBI post-retirementService costs, benefits
attributed to Service
during the period
    
    $
    98
    
    
    $
    
    
    
    $
    78
    
    
    $
    
    
    
    $
    21
    
    
    $
    
    
    
    
    $
    65
    
    
    $
    Interest cost
    
    
    844
    
    
    
    139
    
    
    
    835
    
    
    
    152
    
    
    
    207
    
    
    
    104
    
    
    
    
    627
    
    
    
    170Expected return on assets
    
    
    (892
    )
    
    
    
    
    
    
    (833
    )
    
    
    
    
    
    
    (195
    )
    
    
    
    
    
    
    
    (631
    )
    
    
    Amortization of
unrecognized net loss
(gain)
    
    
    
    
    
    
    (316
    )
    
    
    
    
    
    
    (284
    )
    
    
    
    
    
    
    9
    
    
    
    
    162
    
    
    
    83Amortization of
unrecognized net prior
service costs
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    154$
    50
    
    
    $
    (239
    )
    
    $
    80
    
    
    $
    (132
    )
    
    $
    33
    
    
    $
    129
    
    
    
    $
    223
    
    
    $
    407
  August 26, 2006
    
    
    August 27, 2005Taylor pension
    
    
    CBI post-retirement
    
    
    Taylor pension
    
    
    CBI post-retirementAccumulated benefit liability
    
    $
    2,976
    
    
    $
    6,059
    
    
    $
    3,549
    
    
    $
    6,721Accumulated other
comprehensive loss (net of
tax impact)
    
    $
    
    
    
    $
    
    
    
    $
    956
    
    
    $
    Accrued benefit cost
    
    $
    (3,158
    )
    
    $
    (6,059
    )
    
    $
    (5,241
    )
    
    $
    (6,721
    )Accumulated other
comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    1,567
    
    
    
    Contributions from
measurement date to period
end
    
    
    182
    
    
    
    
    
    
    
    125
    
    
    
    Net amount recognized
    
    $
    (2,976
    )
    
    $
    (6,059
    )
    
    $
    (3,549
    )
    
    $
    (6,721
    )
    72




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
       Asset Category
    
    2006
    
    2005
    
    TargetEquity securities
    
    
    73.0
    %
    
    
    71.0
    %
    
    
    10.0  70.0
    %Debt securities
    
    
    22.0
    %
    
    
    29.0
    %
    
    
    10.0  50.0
    %Other
    
    
    5.0
    %
    
    
    0.0
    %
    
    
    0.0  20.0
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   2007
    
    $
    2582008
    
    
    2552009
    
    
    2502010
    
    
    2422011
    
    
    2322012-2015
    
    
    968
  73




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 2007
    
    $
    7252008
    
    
    7632009
    
    
    7922010
    
    
    8152011
    
    
    8452012-2016
    
    
    4,670
  American Achievement Corporation 401(K) Plan
  74




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 13. Income Taxes
  Fiscal Year EndedAugust 26, 2006Parent HoldingsFederalCurrent
    
    $
    325Deferred
    
    
    1,301StateCurrent
    
    
    441Deferred
    
    
    149$
    2,216
 Fiscal Year EndedAugust 26, 2006
    
    
    August 27, 2005Intermediate HoldingsFederalCurrent
    
    $
    331
    
    
    $
    40Deferred
    
    
    2,883
    
    
    
    1,319StateCurrent
    
    
    441
    
    
    
    177Deferred
    
    
    330
    
    
    
    202$
    3,985
    
    
    $
    1,738
 For the Period Ended
    
    
    
    For the Period EndedFiscal Year Ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 August 26, 2006
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004AACFederalCurrent
    
    $
    340
    
    
    $
    48
    
    
    $
    
    
    
    
    $
    Deferred
    
    
    6,395
    
    
    
    3,903
    
    
    
    3,867
    
    
    
    
    StateCurrent
    
    
    441
    
    
    
    177
    
    
    
    150
    
    
    
    
    Deferred
    
    
    731
    
    
    
    489
    
    
    
    442
    
    
    
    
    $
    7,907
    
    
    $
    4,617
    
    
    $
    4,459
    
    
    
    $
    
 75




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Fiscal Year EndedAugust 26, 2006Parent HoldingsComputed tax provision at
statutory rate
    
    $
    1,117State taxes, net of federal benefit
    
    
    590Non-deductible interest on high
yield debt
    
    
    448Other
    
    
    61Total income tax provision
    
    $
    2,216
 Fiscal Year EndedAugust 26, 2006
    
    
    August 27, 2005Intermediate HoldingsComputed tax provision at
statutory rate
    
    $
    2,897
    
    
    $
    1,113State taxes, net of federal benefit
    
    
    770
    
    
    
    219Non-deductible interest on high
yield debt
    
    
    251
    
    
    
    219Other
    
    
    67
    
    
    
    187Total income tax provision
    
    $
    3,985
    
    
    $
    1,738
 For the Period Ended
    
    
    
    For the Period EndedFiscal Year Ended
    
    
    March 26, 2004 
    
    
    
    August 31, 2003 August 26, 2006
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004AACComputed tax provision at
statutory rate
    
    $
    6,732
    
    
    $
    3,910
    
    
    $
    3,824
    
    
    
    $
    1,605State taxes, net of federal benefit
    
    
    1,172
    
    
    
    619
    
    
    
    592
    
    
    
    
    272Non-deductible interest on high
yield debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    3
    
    
    
    88
    
    
    
    43
    
    
    
    
    (1,877
    )Total income tax provision
    
    $
    7,907
    
    
    $
    4,617
    
    
    $
    4,459
    
    
    
    $
    
 76




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  August 26, 2006Parent HoldingsDeferred tax assetsAllowances and reserves
    
    $
    1,956Net operating loss carryforwards
    
    
    35,740Deferred revenue (net of commissions
expense)
    
    
    1,023Accrued interest
    
    
    8,176Accrued liabilities and other
    
    
    3,958Total deferred tax assets
    
    $
    50,853Deferred tax liabilitiesDepreciation
    
    
    10,640Amortization of intangibles
    
    
    59,795Prepaids and other
    
    
    596Total deferred tax liabilities
    
    
    71,031Net deferred tax assets (liabilities)
    
    $
    (20,178
    )Short-term deferred tax assets
    
    $
    5,582Long-term deferred tax liabilities
    
    
    (25,760
    )Net deferred tax assets (liabilities)
    
    $
    (20,178
    )August 26, 2006
    
    
    August 27, 2005Intermediate HoldingsDeferred tax assetsAllowances and reserves
    
    $
    1,956
    
    
    $
    2,304Net operating loss carryforwards
    
    
    35,619
    
    
    
    41,998Deferred revenue (net of commissions
expense)
    
    
    1,023
    
    
    
    454Accrued interest
    
    
    6,528
    
    
    
    2,636Accrued liabilities and other
    
    
    3,964
    
    
    
    5,106Total deferred tax assets
    
    $
    49,090
    
    
    $
    52,498Deferred tax liabilitiesDepreciation
    
    
    10,640
    
    
    
    11,633Amortization of intangibles
    
    
    59,795
    
    
    
    58,715Prepaids and other
    
    
    596
    
    
    
    267Total deferred tax liabilities
    
    
    71,031
    
    
    
    70,615Net deferred tax assets (liabilities)
    
    $
    (21,941
    )
    
    $
    (18,117
    )Short-term deferred tax assets
    
    $
    5,582
    
    
    $
    6,760Long-term deferred tax liabilities
    
    
    (27,523
    )
    
    
    (24,877
    )Net deferred tax assets (liabilities)
    
    $
    (21,941
    )
    
    $
    (18,117
    )
 August 26, 2006
    
    
    August 27, 2005AACDeferred tax assetsAllowances and reserves
    
    $
    1,956
    
    
    $
    2,304Net operating loss carryforwards
    
    
    35,445
    
    
    
    41,832Deferred revenue (net of commissions
expense)
    
    
    1,023
    
    
    
    378Accrued interest
    
    
    
    
    
    
    Accrued liabilities and other
    
    
    3,973
    
    
    
    5,113Total deferred tax assets
    
    $
    42,397
    
    
    $
    49,627Deferred tax liabilitiesDepreciation
    
    
    10,640
    
    
    
    11,633Amortization of intangibles
    
    
    59,886
    
    
    
    58,715Prepaids and other
    
    
    596
    
    
    
    267Total deferred tax liabilities
    
    
    71,122
    
    
    
    70,615Net deferred tax assets (liabilities)
    
    $
    (28,725
    )
    
    $
    (20,988
    )Short-term deferred tax assets
    
    $
    5,582
    
    
    $
    6,760Long-term deferred tax liabilities
    
    
    (34,307
    )
    
    
    (27,748
    )Net deferred tax assets (liabilities)
    
    $
    (28,725
    )
    
    $
    (20,988
    )
 77




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
    14. Stockholders Equity
       78




---



##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Stock-based Compensation Plan
   15. Related-Party Transactions
    79




---



##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 16. Business Segments
   Parent HoldingsClass
    
    
    
    
    
    GraduationRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalYear Ended August
26, 2006Net sales
    
    $
    119,451
    
    
    $
    114,883
    
    
    $
    43,940
    
    
    $
    20,974
    
    
    $
    21,662
    
    
    $
    320,910Interest expense,
net
    
    
    15,036
    
    
    
    14,010
    
    
    
    5,091
    
    
    
    2,506
    
    
    
    2,688
    
    
    $
    39,331Depreciation and
amortization
    
    
    8,614
    
    
    
    9,904
    
    
    
    2,917
    
    
    
    2,086
    
    
    
    1,574
    
    
    $
    25,095Segment operating
income
    
    
    13,469
    
    
    
    23,812
    
    
    
    3,324
    
    
    
    1,571
    
    
    
    347
    
    
    $
    42,523Capital expenditures
    
    
    3,713
    
    
    
    6,072
    
    
    
    1,257
    
    
    
    758
    
    
    
    711
    
    
    $
    12,511As of August 26,
2006Goodwill
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,781
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,565Segment assets
    
    
    204,763
    
    
    
    173,145
    
    
    
    66,828
    
    
    
    32,510
    
    
    
    34,030
    
    
    $
    511,276
 Intermediate HoldingsClass
    
    
    
    
    
    GraduationRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalYear Ended August
26, 2006Net sales
    
    $
    119,451
    
    
    $
    114,883
    
    
    $
    43,940
    
    
    $
    20,974
    
    
    $
    21,662
    
    
    $
    320,910Interest expense,
net
    
    
    13,092
    
    
    
    12,199
    
    
    
    4,433
    
    
    
    2,182
    
    
    
    2,340
    
    
    $
    34,246Depreciation and
amortization
    
    
    8,614
    
    
    
    9,904
    
    
    
    2,917
    
    
    
    2,086
    
    
    
    1,574
    
    
    $
    25,095Segment operating
income
    
    
    13,469
    
    
    
    23,812
    
    
    
    3,324
    
    
    
    1,571
    
    
    
    347
    
    
    $
    42,523Capital expenditures
    
    
    3,713
    
    
    
    6,072
    
    
    
    1,257
    
    
    
    758
    
    
    
    711
    
    
    $
    12,511As of August 26,
2006Goodwill
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,781
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,565Segment assets
    
    
    201,056
    
    
    
    169,776
    
    
    
    65,628
    
    
    
    31,906
    
    
    
    33,407
    
    
    $
    501,773
 80




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 Intermediate HoldingsClass
    
    
    
    
    
    GraduationRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalYear Ended August
27, 2005Net sales
    
    $
    119,658
    
    
    $
    112,432
    
    
    $
    40,018
    
    
    $
    20,110
    
    
    $
    21,570
    
    
    $
    313,788Interest expense,
net
    
    
    12,199
    
    
    
    11,086
    
    
    
    3,950
    
    
    
    1,987
    
    
    
    2,049
    
    
    $
    31,271Depreciation and
amortization
    
    
    8,695
    
    
    
    10,269
    
    
    
    2,814
    
    
    
    1,977
    
    
    
    1,526
    
    
    $
    25,281Segment operating
income (loss)
    
    
    10,362
    
    
    
    16,613
    
    
    
    3,192
    
    
    
    4,871
    
    
    
    (217
    )
    
    $
    34,821Capital expenditures
    
    
    3,273
    
    
    
    7,585
    
    
    
    1,060
    
    
    
    198
    
    
    
    679
    
    
    $
    12,795As of August 27,
2005Goodwill
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,242
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,026Segment assets
    
    
    202,133
    
    
    
    174,787
    
    
    
    64,714
    
    
    
    37,687
    
    
    
    33,615
    
    
    $
    512,936
 AAC(Successor)Class
    
    
    
    
    
    GraduationRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalYear Ended August
26, 2006Net sales
    
    $
    119,451
    
    
    $
    114,883
    
    
    $
    43,940
    
    
    $
    20,974
    
    
    $
    21,662
    
    
    $
    320,910Interest expense,
net
    
    
    8,903
    
    
    
    8,296
    
    
    
    3,014
    
    
    
    1,484
    
    
    
    1,592
    
    
    $
    23,289Depreciation and
amortization
    
    
    8,614
    
    
    
    9,904
    
    
    
    2,917
    
    
    
    2,086
    
    
    
    1,574
    
    
    $
    25,095Segment operating
income
    
    
    13,469
    
    
    
    23,812
    
    
    
    3,324
    
    
    
    1,571
    
    
    
    347
    
    
    $
    42,523Capital expenditures
    
    
    3,713
    
    
    
    6,072
    
    
    
    1,257
    
    
    
    758
    
    
    
    711
    
    
    $
    12,511As of August 26,
2006Goodwill
    
    $
    71,792
    
    
    $
    65,241
    
    
    $
    23,781
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,565Segment assets
    
    
    199,795
    
    
    
    168,631
    
    
    
    65,220
    
    
    
    31,700
    
    
    
    33,196
    
    
    $
    498,542
 81




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##### Table of Contents



AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AAC(Successor)Class
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalYear Ended August
27, 2005Net sales
    
    $
    119,658
    
    
    $
    112,432
    
    
    $
    40,018
    
    
    $
    20,110
    
    
    $
    21,570
    
    
    $
    313,788Interest expense,
net
    
    
    9,167
    
    
    
    8,330
    
    
    
    2,968
    
    
    
    1,493
    
    
    
    1,539
    
    
    $
    23,497Depreciation and
amortization
    
    
    8,695
    
    
    
    10,269
    
    
    
    2,814
    
    
    
    1,977
    
    
    
    1,526
    
    
    $
    25,281Segment operating
income (loss)
    
    
    10,362
    
    
    
    16,613
    
    
    
    3,192
    
    
    
    4,871
    
    
    
    (217
    )
    
    $
    34,821Capital expenditures
    
    
    3,273
    
    
    
    7,585
    
    
    
    1,060
    
    
    
    198
    
    
    
    679
    
    
    $
    12,795As of August 27,
2005Goodwill
    
    
    71,792
    
    
    $
    65,241
    
    
    $
    23,242
    
    
    $
    11,693
    
    
    $
    12,058
    
    
    $
    184,026Segment assets
    
    
    200,813
    
    
    
    173,587
    
    
    
    64,287
    
    
    
    37,472
    
    
    
    33,393
    
    
    $
    509,552
 AAC(Successor)Class
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalFor the Period
March 26,
2004August 28,
2004Net sales
    
    $
    45,980
    
    
    $
    91,109
    
    
    $
    12,315
    
    
    $
    8,266
    
    
    $
    9,680
    
    
    $
    167,350Interest expense,
net
    
    
    4,001
    
    
    
    3,636
    
    
    
    1,296
    
    
    
    652
    
    
    
    672
    
    
    $
    10,257Depreciation and
amortization
    
    
    3,407
    
    
    
    4,402
    
    
    
    1,103
    
    
    
    823
    
    
    
    609
    
    
    $
    10,344Segment operating
income (loss)
    
    
    1,552
    
    
    
    19,465
    
    
    
    (16
    )
    
    
    1,884
    
    
    
    (1,703
    )
    
    $
    21,182Capital expenditures
    
    
    1,645
    
    
    
    947
    
    
    
    533
    
    
    
    279
    
    
    
    261
    
    
    $
    3,665As of August 28,
2004Goodwill
    
    
    71,033
    
    
    
    64,551
    
    
    
    22,996
    
    
    
    11,569
    
    
    
    11,931
    
    
    $
    182,080Segment assets
    
    
    213,220
    
    
    
    176,097
    
    
    
    69,028
    
    
    
    37,323
    
    
    
    35,318
    
    
    $
    530,986
 82




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##### Table of Contents



AAC(Predecessor)Class
    
    
    
    
    
    Graduation
    
    AchievementRings
    
    Yearbooks
    
    Products
    
    Publications
    
    Other
    
    TotalFor the Period
August 31,
2003March 25,
2004Net sales
    
    $
    76,545
    
    
    $
    20,236
    
    
    $
    27,351
    
    
    $
    11,690
    
    
    $
    10,899
    
    
    $
    146,721Interest expense,
net
    
    
    6,558
    
    
    
    5,607
    
    
    
    2,124
    
    
    
    1,074
    
    
    
    1,092
    
    
    $
    16,455Depreciation and
amortization
    
    
    2,784
    
    
    
    3,977
    
    
    
    902
    
    
    
    359
    
    
    
    508
    
    
    $
    8,530Segment operating
income (loss)
    
    
    10,278
    
    
    
    (6,870
    )
    
    
    3,854
    
    
    
    4,175
    
    
    
    435
    
    
    $
    11,872Capital expenditures
    
    
    2,002
    
    
    
    8,880
    
    
    
    648
    
    
    
    729
    
    
    
    534
    
    
    $
    12,793
 83




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Internal Control  Integrated Framework.
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrants
  Name
    
    Age
    
    PositionDonald J. Percenti
    
    
    50
    
    
    President, Chief Executive Officer and DirectorSherice P. Bench
    
    
    47
    
    
    Chief Financial Officer, Secretary and TreasurerMatthew Gase
    
    
    47
    
    
    General ManagerCBICarol Lynn Martens
    
    
    48
    
    
    General ManagerECINorman C. Smith
    
    
    57
    
    
    Vice President of Information TechnologyAACPeter Lamm
    
    
    55
    
    
    DirectorMac LaFollette
    
    
    42
    
    
    DirectorW. Gregg Smart
    
    
    46
    
    
    DirectorJean Ann McKenzie
    
    
    47
    
    
    DirectorMyles Kleeger
    
    
    31
    
    
    DirectorAlan J. Bowers
    
    
    51
    
    
    DirectorAndrea Geisser
    
    
    63
    
    
    DirectorDavid G. Fiore
    
    
    59
    
    
    Director
 Donald J. Percenti
 Sherice P. Bench
 Matthew
Gase
 84




---



##### Table of Contents



Carol Lynn Martens
 Norman C. Smith
 Peter
Lamm
 Mac LaFollette
 W. Gregg Smart
 Jean
Ann McKenzie
 Myles
Kleeger
 Alan
J. Bowers
 85




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##### Table of Contents



Andrea
Geisser
 David G.
Fiore
 Board Committees
   Code of Ethics
  Director Compensation
  86




---



##### Table of Contents



Item 11. Executive Compensation
  Long-Term CompensationAnnual Compensation
    
    Restricted
    
    Securities
    
    
    
    
    
    All otherOther Annual
    
    Stock
    
    Underlying
    
    LTIP
    
    CompensationName and Principal Position
    
    Year(1)
    
    Salary
    
    Bonus(2)
    
    Compensation(3)
    
    Awards
    
    Options(#)
    
    Payouts
    
    (4)(5)Donald J. Percenti
    
    
    2006
    
    
    $
    347,116
    
    
    $
    37,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    President and Chief
    
    
    2005
    
    
    $
    277,500
    
    
    $
    139,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Officer
    
    
    2004
    
    
    $
    258,200
    
    
    $
    780,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    241,132Sherice P. Bench
    
    
    2006
    
    
    $
    241,329
    
    
    $
    36,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial
    
    
    2005
    
    
    $
    230,478
    
    
    $
    82,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer
    
    
    2004
    
    
    $
    230,195
    
    
    $
    740,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250,262Matthew Gase (6)
    
    
    2006
    
    
    $
    221,538
    
    
    $
    67,200
    
    
    $
    36,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General Manager 
    
    
    2005
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CBI
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Carol Lynn Martens (6)
    
    
    2006
    
    
    $
    67,308
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General Manager 
    
    
    2005
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ECI
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Norman C. Smith
    
    
    2006
    
    
    $
    197,086
    
    
    $
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vice President 
    
    
    2005
    
    
    $
    191,154
    
    
    $
    64,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Information Technology
    
    
    2004
    
    
    $
    188,846
    
    
    $
    322,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    76,212
 
 (1)
    
    Our 2006 fiscal year ended on August 26, 2006. Fiscal year 2005 ended on August 27, 2005
and fiscal year 2004 ended on August 28, 2004. Executive compensation for 2006, 2005, and 2004 is
for the twelve months ended December 31 of each year and based on current compensation for such
years.(2)
    
    Amounts in 2006 and 2005 include payments under the Management Incentive bonus program. Amounts
in 2004 include payment under the Management Incentive bonus program as follows: Mr. Percenti:
$150,000; Ms. Bench: $135,000; Mr. Smith: $67,000. Amounts in 2004 also include a success bonus
paid as of the date of the Merger as follows: Mr. Percenti: $280,000; Ms. Bench: $280,000; Mr.
Smith: $105,000. Amounts in 2004 also include a special bonus paid as follows: Mr. Percenti:
$350,000; Ms. Bench: $325,000; Mr. Smith: $150,000.(3)
    
    The prerequisites and other personal benefits, securities or property received by the named
executive officers did not exceed $50,000 or 10% of the total annual salary and bonus reported for
the named executive officers in cash for the years ended 2006, 2005 or 2004, unless otherwise
provided. Other annual compensation for Mr. Gase in 2006
included relocation expenses.(4)
    
    Each of the named executive officers had term life insurance policies equal to two times their
base salary (maximum of $500,000) in the years 2006, 2005 and 2004 with a benefit payable to a
beneficiary selected by the named executive officer upon his or her death. We paid the annual
premiums on such policies in each of 2006, 2005, and 2004. The annual premium amount has not
exceeded $910 for any named executive officer. No named executive officer is entitled to any cash
surrender value in such policies.(5)
    
    Amounts in 2004 include cancellation of stock options in connection with the Merger.(6)
    
    Mr. Gase began employment as General Manager  CBI in February 2006 and Ms. Martens began
employment as General Manager  ECI in August 2006. 87




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##### Table of Contents



Employment Agreements
 Donald J. Percenti.
   Sherice P. Bench.
  Matthew Gase.
  Carol Lynn Martens.
 88




---



##### Table of Contents



Norman C.
Smith.
   Cash Incentive Plan
  89




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Percentage
    
    
    
    
    
    PercentageOwnership
    
    
    
    
    
    OwnershipInterest in
    
    
    
    
    
    Interest InCommon
    
    Common
    
    Preferred
    
    PreferredStock
    
    Stock
    
    Stock
    
    StockAmerican Achievement Holdings LLC(1)
    
    
    415,510
    
    
    
    82
    %
    
    
    
    
    
    
    c/o Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019Investors advised by J.P. Morgan Investment Management
Inc.(2)
    
    
    70,729
    
    
    
    14
    %
    
    
    
    
    
    
    c/o J.P.Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036Carlyle Mezzanine Partners, L.P.
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    100
    %1001 Pennsylvania Avenue
Washington, D.C. 20004-2505Sherice P. Bench
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alan Bowers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David G. Fiore
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matthew Gase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrea Geisser
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Myles Kleeger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mac LaFollettePeter Lamm(3)
    
    
    415,510
    
    
    
    82
    %
    
    
    
    
    
    
    Carol Lynn Martens
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jean Ann McKenzie
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Donald A. Percenti
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    W. Gregg Smart
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Norman C. Smith
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    All executive officers and directors as a group (13 persons)
    
    
    415,510
    
    
    
    82
    %
    
    
    
    
    
    
    
 
 (1)
    
    All of the voting interests of American Achievement Holdings LLC are held by Fenway
Partners Capital Fund II, L.P., FPIP, LLC and FPIP Trust, LLC, each of which are affiliates of
Fenway Partners, Inc. Accordingly, such entities may be deemed to beneficially own the shares of
common stock held by American Achievement LLC. Each of such entities disclaims beneficial ownership
of such shares except to the extent of its pecuniary interest therein.(2)
    
    The investors are J.P.Morgan U.S. Direct Corporate Finance Institutional Investors II LLC
(CFII I), which holds 67,715 shares of common stock, J.P. Morgan U.S. Direct Corporate Finance
Private Investors II LLC (CFII P), which holds 2,660 shares of common stock, and 522 Fifth Ave
Fund, L.P. (522), which holds 354 shares of common stock. J.P. Morgan Investment Management Inc.,
a registered investment advisor, controls the voting and disposition of these shares as the owner
of the managing member of CFII I and CFII P and as investment advisor to 522.(3)
    
    Mr. Lamm is a founder of Fenway Partners, Inc. a managing member of Fenway Partners II
LLC, the general partner of Fenway Partners Capital Fund II, L.P., and is a managing member of each
of FPIP, LLC and FPIP Trust, LLC. Accordingly, Mr. Lamm may be deemed to beneficially own the
shares of common stock held by American Achievement Holdings LLC. Mr. Lamm disclaims beneficial
ownership of such shares except to the extent of his pecuniary interests therein. 90




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Item 13. Certain Relationships and Related Transactions
 Arrangements with Our Investors
  Management Agreement
  Other Transactions
  Stockholders Agreement
  
 Item 14. Principal Accountant Fees and Services
  % of ServicesFiscal Year Ended
    
    
    Fiscal Year EndedAugust 26, 2006
    
    
    August 27, 2005
    
    
    August 26, 2006
    
    
    August 27, 2005Audit fees
    
    $
    443,000
    
    
    $
    351,000
    
    
    
    38
    %
    
    
    58
    %Audit-related fees
    
    
    260,000
    
    
    
    91,000
    
    
    
    22
    %
    
    
    15
    %Tax fees
    
    
    140,000
    
    
    
    114,000
    
    
    
    12
    %
    
    
    19
    %All other fees
    
    
    322,000
    
    
    
    47,000
    
    
    
    28
    %
    
    
    8
    %Total fees
    
    $
    1,165,000
    
    
    $
    603,000
    
    
    
    100
    %
    
    
    100
    %
   91




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
      92




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Designation3.1
    
    
    Certificate of Incorporation of American Achievement Group
Holding Corp. (incorporated by reference to Exhibit 3.1 to
American Achievement Group Holdings Corp.s Form S-4 as filed on
September 1, 2006).3.2
    
    
    Bylaws of American Achievement Group Holding Corp. (incorporated
by reference to Exhibit 3.2 to American Achievement Group
Holdings Corp.s Form S-4 as filed on September 1, 2006)3.3
    
    

Amended
and Restated Certificate of Incorporation of AAC Group Holding Corp.
(incorporated by reference to Exhibit 3.1 to AAC Group Holding
Corp.s Form 8-K as filed on January 24, 2006).3.4
    
    
    Bylaws of AAC Group Holding Corp. (incorporated by reference to
Exhibit 3.2 to AAC Group Holding Corp.s Form S-4 as filed on
December 21, 2004).3.5
    
    
    Certificate of Incorporation of American Achievement Corporation
(incorporated by reference to Exhibit 3.1 to American Achievement
Corporations Form S-4/A as filed on March 14, 2002).3.6
    
    
    Bylaws of American Achievement Corporation (incorporated by
reference to Exhibit 3.2 to American Achievement Corporations
Amended Form S-4 as filed on April 5, 2002).4.1
    
    
    Indenture, dated as of June 12, 2006, among the American
Achievement Group Holding Corp. and U.S. Bank National
Association, as Trustee (incorporated by reference to Exhibit 4.1
to American Achievement Group Holdings Corp.s Form S-4 as filed
on September 1, 2006).4.2
    
    
    Form of 12.75% Senior PIK Note due October 1, 2012 (incorporated
by reference to Exhibit 4.2 to American Achievement Group
Holdings Corp.s Form S-4 as filed on September 1, 2006).4.3
    
    
    Exchange and Registration Rights Agreement, dated June 12, 2006,
among American Achievement Group Holding Corp., Goldman, Sachs &
Co. and Lehman Brothers Inc. (incorporated by reference to
Exhibit 4.3 to American Achievement Group Holdings Corp.s Form
S-4 as filed on September 1, 2006)4.4
    
    
    Indenture, dated as of November 16, 2004, among the AAC Group
Holding Corp. and U.S. Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.7 to AAC Group Holding
Corp.s Form S-4 as filed on December 21, 2004).4.5
    
    
    Form of 10.75% Senior Discount Note due October 1, 2012
(incorporated by reference to Exhibit 4.8 to AAC Group Holding
Corp.s Form S-4 as filed on December 21, 2004).4.6
    
    
    Indenture, dated as of March 25, 2004, among The Bank of New
York, as Trustee, and the Guarantors (incorporated by reference
to Exhibit 4.1 to American Achievement Corporations Report on
Form 10-Q, dated July 13, 2004).4.7
    
    
    Form of 8.25% Senior Subordinated Notes due April 1, 2012
(incorporated by reference to Exhibit 4.2 to American Achievement
Corporations Quarterly Report on Form 10-Q as filed on July 13,
2004).10.1
    
    
    Credit and Guaranty Agreement, dated March 25, 2004, by and among
American Achievement Corporation, the Guarantors, Goldman Sachs
Credit Partners L.P. and the other lender parties thereto
(incorporated by reference to Exhibit 10.2 American Achievement
Corporations Quarterly Report on Form 10-Q as filed on July 13,
2004).10.2
    
    
    Amendment to Credit Agreement and Guaranty Agreement, dated
August 17, 2006, by and among American Achievement Corporation,
the Guarantors, Goldman Sachs Credit Partners L.P., and such
other lender parties thereto (incorporated by reference to
Exhibit 10.1 American Achievement Corporations Current Report on
Form 8-K as filed on August 18, 2006).10.3
    
    
    Pledge and Security Agreement between the Guarantors and Goldman
Sachs Credit Partners, L.P., dated March 25, 2004 (incorporated
by reference to Exhibit 10.3 of American Achievement
Corporations Quarterly Report on Form 10-Q as filed on July 13,
2004).10.4
    
    
    Intercreditor Agreement between Goldman Sachs Credit Partners
L.P., the Secured Parties and The Bank of Nova Scotia, dated
March 25, 2004 (incorporated by reference to Exhibit 10.4 of
American Achievement Corporations Quarterly Report on Form 10-Q
as filed on July 13, 2004).10.5
    
    
    First Amended and Restated Letter Agreement for Fee Consignment
and Purchase of Gold between Commemorative Brands, Inc. and The
Bank of Nova Scotia, dated March 25, 2004 (incorporated by
reference to Exhibit 10.5 of American Achievement Corporations
Quarterly Report on Form 10-Q as filed on July 13, 2004).
 93




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##### Table of Contents



ExhibitNumber
    
    Designation10.6
    
    
    Letter Agreement for Addition of Approved Inventory Locations
between Commemorative Brands, Inc. and The Bank of Nova Scotia,
dated June 9, 2004 (incorporated by reference to
Exhibit 10.6 of
American Achievement Corporations Quarterly Report on Form 10-Q
as filed on July 13, 2004).10.7
    
    
    Management Advisory Agreement by and between AAC Holding Corp.,
American Achievement Corporation, and Fenway Partners, Inc.,
dated March 25, 2004 (incorporated by reference to
Exhibit 10.7
of American Achievement Corporations Quarterly Report on Form
10-Q as filed on July 13, 2004).10.8
    
    
    Employment Agreement, dated as of December 16, 1996 by and
between Commemorative Brands, Inc. and Donald J. Percenti
(incorporated by reference to Exhibit 10.11 of American
Achievement Corporations Form S-4/A as filed on April 5, 2002).10.9
    
    
    First Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and Donald J. Percenti dated April 9,
2004 (incorporated by reference to Exhibit 10.16 of American
Achievement Corporations Form S-4 as filed on July 22, 2004).10.10
    
    
    Employment Agreement, dated as of December 16, 1996 by and
between Commemorative Brands, Inc. and Sherice P. Bench, as
amended (incorporated by reference to Exhibit 10.12 of American
Achievement Corporations Form S-4/A as filed on April 5, 2002)10.11
    
    
    First Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and Sherice P. Bench, dated July 2,
1999 (incorporated by reference to Exhibit 10.13 of American
Achievement Corporations Form S-4 as filed on July 22, 2004).10.12
    
    
    Second Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and Sherice P. Bench dated April 9,
2004 (incorporated by reference to Exhibit 10.14 of American
Achievement Corporations Form S-4 as filed on July 22, 2004).10.13
    
    
    Employment Agreement dated as of February 1, 2006 between
Commemorative Brands, Inc. and Matthew Gase (incorporated by
reference to Exhibit 10.1 to American Achievement Corporations
Current Report on Form 8-K as filed on June 5, 2006).10.14
    
    
    Employment Agreement dated as of August 21, 2006 by and between
Educational Communications, Inc. and Carol Lynn Martens.10.15
    
    
    Employment Agreement dated as of January 14, 2000 by and between
Commemorative Brands, Inc. and Norman C. Smith.10.16
    
    
    First Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and Norman C. Smith, dated April 12,
2004.10.17
    
    
    Second Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and Norman C. Smith, dated May 12,
2004.10.18
    
    
    Employment Agreement, dated as of July 13, 1999 by and between
Commemorative Brands, Inc. and David G. Fiore (incorporated by
reference to Exhibit 10.8 of American Achievement Corporations
Form S-4/A as filed on April 5, 2002).10.19
    
    
    First Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and David G. Fiore dated February 1,
2002 (incorporated by reference to Exhibit 10.9 of American
Achievement Corporations Form S-4/A as filed on April 5, 2002).10.20
    
    
    Second Amendment to the Employment Agreement by and between
American Achievement Corporation and David G. Fiore, dated
December 23, 2003 (incorporated by reference to Exhibit 10.9 of
American Achievement Corporations Form S-4 as filed on dated
July 22, 2004).10.21
    
    
    Third Amendment to the Employment Agreement by and between
American Achievement Corporation and David G. Fiore, dated
October 21, 2004 (incorporated by reference to Exhibit 10.19 to
American Achievement Corporations Annual Report on Form 10-K as
filed on November 5, 2004).10.22
    
    
    Fourth Amendment to the Employment Agreement by and between
American Achievement Corporation and David G. Fiore, dated
November 19, 2004 (incorporated by reference to
Exhibit 10.21 to
AAC Group Holding Corp.s Form S-4/A as filed May 3, 2005).12.1
    
    
    Statement regarding Computation of Ratios of Earnings to Fixed
Charges21.1
    
    
    Subsidiaries of American Achievement Group Holding Corp.31.1
    
    
    Certification by Donald J. Percenti pursuant to Rule 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by Sherice P. Bench pursuant to Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification by Donald J. Percenti pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification by Sherice P. Bench pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
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Signatures
  AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
(Registrant)AAC GROUP HOLDING CORP.
(Registrant)AMERICAN ACHIEVEMENT CORPORATION
(Registrant)/s/ Donald J. Percenti
    
    /s/ Sherice P. BenchDonald J. Percenti
    
    Sherice P. BenchChief Executive Officer
    
    Chief Financial Officer
  Signatures
    
    Title/s/ Donald J. Percenti
    
    President and Chief Executive Officer
(Principal Executive Officer) and
Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationDonald J. Percenti/s/ Sherice P. Bench
    
    Chief Financial Officer, Treasurer and
Secretary (Principal Financial Officer
and Accounting Officer) of American
Achievement Group Holding Corp., AAC
Group Holding Corp., and American
Achievement CorporationSherice P. Bench/s/ Mac LaFollette
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationMac LaFollette/s/ Peter Lamm
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationPeter Lamm/s/ W. Gregg Smart
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationW. Gregg Smart/s/ Alan J. Bowers
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationAlan J. Bowers/s/ Jean Ann McKenzie
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationJean Ann McKenzie/s/ Myles Kleeger
    
    Director of American Achievement Group
Holding Corp., AAC Group Holding Corp.,
and American Achievement CorporationMyles Kleeger
 95