##### 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 27, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission
file numbers 333-121479 and 333-84294
 AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  DELAWARE
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
    
    20-1854833
13-4126506
(I.R.S. Employer
Identification Number)
 7211 CIRCLE S ROAD
AUSTIN, TEXAS 78745
 (Address of Principal Executive Offices)
    
    (Zip Code)
 :
   o þ
 þ o
 o þ
 þ o
 o
 o þ
 o þ




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 27, 2005
 INDEX
 PagePART IItem 1. Business
    
    
    2Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. Submission of Matters to a Vote of Security Holders
    
    
    10PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    10Item 6. Selected Financial Data
    
    
    10Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    56Item 9A. Controls and Procedures
    
    
    56PART IIIItem 10. Directors and Executive Officers of the Registrants
    
    
    56Item 11. Executive Compensation
    
    
    58Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    60Item 13. Certain Relationships and Related Transactions
    
    
    61Item 14. Principal Accountant Fees and Services
    
    
    62PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    62Signatures
    
    
    65Statement re: Computation of Ratios of Earnings to Fixed ChargesSubsidiariesCertification of Donald J. Percenti Pursuant to Section 302Certification of Sherice P. Bench Pursuant to Section 302Certification of Donald J. Percenti Pursuant to Section 906Certification of Sherice P. Bench Pursuant to Section 906
   2




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##### Table of Contents



Item 1. Business
 Registrants
  General
 Whos Who The National Deans List
 Company Background
    Products
 Class Rings.
 3




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##### Table of Contents



Yearbooks.
 Graduation Products.
 Achievement Publications.
 Recognition and Affinity Jewelry.
 Our Product Business Segments
  ($ in thousands)
    
    Fiscal Year EndedSegment
    
    2005
    
    
    2004*
    
    
    2003Class Rings
    
    $
    120,662
    
    
    $
    122,525
    
    
    $
    127,624Yearbooks
    
    
    112,432
    
    
    
    111,345
    
    
    
    105,038Graduation Products
    
    
    40,854
    
    
    
    39,666
    
    
    
    34,736Achievement Publications
    
    
    20,110
    
    
    
    19,956
    
    
    
    20,122Other
    
    
    21,570
    
    
    
    20,579
    
    
    
    20,911Total
    
    $
    315,628
    
    
    $
    314,071
    
    
    $
    308,431
 
 *
    
    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. 4




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##### Table of Contents



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 Family 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 marketing
 Class Rings
    5




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##### Table of Contents



Yearbooks
   Graduation Products
   Achievement Publications
  o
    
    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 current 38th edition
honors approximately 600,000 students, from freshmen through seniors. Nominees
represent over 21,000 of the nations 23,000 private, public and parochial high schools
on the basis of academic achievement, class rank and extracurricular activites.o
    
    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 current third edition of this publication
honors approximately 45,000 students from 2,400 high schools.o
    
    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 28thedition honors almost 240,000 high-achieving students,
representing in excess of 2,500 colleges and universities throughout the country.o
    
    Whos Who Among Americas Teachers.First published in 1990, this publication pays
tribute to the countrys most inspiring high school teachers, who are nominated for
inclusion by current or former Whos Who honorees. The 9th edition was
published in 2005 and honored over 235,000 outstanding teachers.o
    
    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.
 6




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Other
  o
    
    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 American 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.o
    
    Personalized Family Jewelry.Our family 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 family jewelry business in fiscal 1997 and, by the end of fiscal
2005, had grown this business to $9.2 million in net sales by leveraging our existing
distribution channels. We intend to further grow our family jewelry business through
product extensions, including baby rings for scrapbooks, grandmothers products such as
pins and pendants, daughters rings and Sweet 16 memorabilia. We provide personalized
family jewelry under our Celebrations of Life, Generations of Love and Namesake brand
names.o
    
    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.o
    
    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 1999 Japanese World Series ring. We provide
sports championship jewelry under the Balfour brand.
 Sales and Marketing
    7




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Intellectual Property
    Competition
   Raw Material and Suppliers
   Backlog
  8




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Employees
   
 Item 2. Properties
   Approximate Location
    
    Type of Property
    
    Leased or Owned
    
    Square FootageAustin, TX
    
    Corporate headquarters
    
    Owned
    
    
    23,000Austin, TX
    
    Jewelry manufacturing and
    
    Owned
    
    
    108,000administrationAustin, TX
    
    Warehouse facility
    
    Leased
    
    
    38,600Austin, TX
    
    Achievement publication
    
    Leased
    
    
    6,100administrationDallas, TX
    
    Yearbook administration and
    
    Owned
    
    
    327,000manufacturingEl Paso, TX
    
    Yearbook pre-press
    
    Leased
    
    
    50,000El Paso, TX
    
    Jewelry manufacturing
    
    Leased
    
    
    20,000Lubbock, TX
    
    Jewelry administration
    
    Leased
    
    
    300San Angelo, TX
    
    Yearbook pre-press, press,
    
    Leased
    
    
    55,000binderyLouisville, KY
    
    Graduation products
    
    Leased
    
    
    100,000manufacturingManhattan, KS
    
    Graduation products
    
    Leased
    
    
    10,000manufacturingJuarez, Mexico
    
    Jewelry manufacturing
    
    Leased
    
    
    20,000
 
 Item 3. Legal Proceedings
   9




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Environmental
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  
 Item 6. Selected Financial Data
    10




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AAC GroupHolding Corp.
    
    
    American Achievement CorporationSuccessor
    
    
    PredecessorFiscal Year
    
    
    Fiscal YearEnded
    
    
    Ended
    
    
    
    
    
    
    
    
    
    
    Fiscal Year EndedThe period fromThe period from
    
    
    August 31, 2003March 26, 2004
    
    
    toAugust 27,
    
    
    August 27,
    
    
    to August 28,
    
    
    March 25,
    
    
    August 30,
    
    
    August 31,
    
    
    August 25,2005
    
    
    2005
    
    
    2004(1)
    
    
    2004(2)
    
    
    2003
    
    
    2002(3)
    
    
    2001(4)Statement of Operations
Data:Net sales
    
    $
    315,628
    
    
    $
    315,628
    
    
    $
    167,350
    
    
    $
    146,721
    
    
    $
    308,431
    
    
    $
    304,378
    
    
    $
    281,053Cost of sales
    
    
    134,998
    
    
    
    134,998
    
    
    
    83,521
    
    
    
    59,857
    
    
    
    139,170
    
    
    
    146,898
    
    
    
    142,164Gross profit
    
    
    180,630
    
    
    
    180,630
    
    
    
    83,829
    
    
    
    86,864
    
    
    
    169,261
    
    
    
    157,480
    
    
    
    138,889Selling, general and
administrative expenses
    
    
    144,882
    
    
    
    144,882
    
    
    
    62,647
    
    
    
    74,992
    
    
    
    129,423
    
    
    
    129,734
    
    
    
    119,972Loss (gain) on
extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,650
    
    
    
    Operating income
    
    
    35,748
    
    
    
    35,748
    
    
    
    21,182
    
    
    
    11,872
    
    
    
    39,838
    
    
    
    22,096
    
    
    
    18,917Interest expense
    
    
    31,271
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    16,455
    
    
    
    28,940
    
    
    
    26,026
    
    
    
    22,846Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,783
    
    
    
    Income (loss) before
income taxes
    
    
    4,477
    
    
    
    12,251
    
    
    
    10,925
    
    
    
    (4,583
    )
    
    
    10,898
    
    
    
    (6,713
    )
    
    
    (3,929
    )Benefit (provision) for
income taxes
    
    
    (2,192
    )
    
    
    (4,995
    )
    
    
    (4,459
    )
    
    
    
    
    
    
    (132
    )
    
    
    1,171
    
    
    
    1,443Cumulative effect of
change in accounting
principleloss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,835Net income (loss)
    
    $
    2,285
    
    
    $
    7,256
    
    
    $
    6,466
    
    
    $
    (4,583
    )
    
    $
    10,766
    
    
    $
    (5,542
    )
    
    $
    (4,321
    )Balance Sheet Data (at
end of period):Total assets
    
    $
    512,859
    
    
    $
    509,475
    
    
    $
    530,986
    
    
    $
    553,589
    
    
    $
    395,501
    
    
    $
    401,626
    
    
    $
    384,971Total debt(5)
    
    
    392,222
    
    
    
    308,250
    
    
    
    320,337
    
    
    
    319,985
    
    
    
    233,805
    
    
    
    246,509
    
    
    
    228,223Total stockholders equity
    
    
    24,291
    
    
    
    114,812
    
    
    
    108,512
    
    
    
    102,046
    
    
    
    71,843
    
    
    
    65,254
    
    
    
    70,828Other Data:EBITDA(6)
    
    
    61,029
    
    
    
    61,029
    
    
    
    31,526
    
    
    
    20,402
    
    
    
    53,987
    
    
    
    39,025
    
    
    
    34,668Capital expenditures
    
    
    12,795
    
    
    
    12,795
    
    
    
    3,665
    
    
    
    12,793
    
    
    
    11,243
    
    
    
    14,247
    
    
    
    7,499Depreciation and
amortization
    
    
    25,281
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    8,530
    
    
    
    14,149
    
    
    
    19,712
    
    
    
    17,586
 
 (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)
    
    Includes the results of operations for Educational Communications, Inc., or ECI, from March
30, 2001, the date of our acquisition of ECI. ECI sales are highly seasonal, with most
shipments during the first four months of our fiscal year.(5)
    
    Total debt includes all borrowings outstanding under notes, credit facilities, bank
overdrafts and capital lease obligations.(6)
    
    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. 11




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AAC GroupHolding Corp.
    
    
    American Achievement CorporationSuccessor
    
    
    PredecessorFiscal Year
    
    
    Fiscal YearEnded
    
    
    Ended
    
    
    
    
    
    
    
    
    
    
    Fiscal Year EndedThe period
    
    
    The periodfrom March
    
    
    from August26, 2004 to
    
    
    31, 2003 toAugust 27,
    
    
    August 27,
    
    
    August 28,
    
    
    March 25,
    
    
    August 30,
    
    
    August 31,
    
    
    August 25,2005
    
    
    2005
    
    
    2004(a)
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Net income (loss)
    
    $
    2,285
    
    
    $
    7,256
    
    
    $
    6,466
    
    
    $
    (4,583
    )
    
    $
    10,766
    
    
    $
    (5,542
    )
    
    $
    (4,321
    )Interest expense, net
    
    
    31,271
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    16,455
    
    
    
    28,940
    
    
    
    26,026
    
    
    
    22,846Provision (benefit) for income taxes
    
    
    2,192
    
    
    
    4,995
    
    
    
    4,459
    
    
    
    
    
    
    
    132
    
    
    
    (1,171
    )
    
    
    (1,443
    )Depreciation and amortization expense
    
    
    25,281
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    8,530
    
    
    
    14,149
    
    
    
    19,712
    
    
    
    17,586EBITDA
    
    $
    61,029
    
    
    $
    61,029
    
    
    $
    31,526
    
    
    $
    20,402
    
    
    $
    53,987
    
    
    $
    39,025
    
    
    $
    34,668Changes in assets and liabilities
    
    $
    (4,770
    )
    
    $
    (1,306
    )
    
    $
    (24,939
    )
    
    $
    35,227
    
    
    $
    (92
    )
    
    $
    1,808
    
    
    $
    (6,761
    )Deferred income taxes
    
    
    1,975
    
    
    
    4,770
    
    
    
    4,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    (31,271
    )
    
    
    (23,497
    )
    
    
    (10,257
    )
    
    
    (16,455
    )
    
    
    (28,940
    )
    
    
    (26,026
    )
    
    
    (22,846
    )Income tax (provision) benefit
    
    
    (2,192
    )
    
    
    (4,995
    )
    
    
    (4,459
    )
    
    
    
    
    
    
    (132
    )
    
    
    1,171
    
    
    
    1,443Amortization of debt discount
and deferred financing fees
    
    
    1,882
    
    
    
    1,527
    
    
    
    629
    
    
    
    1,197
    
    
    
    2,051
    
    
    
    145
    
    
    
    1,534Accretion of interest on 10.25%
senior discount notes
    
    
    7,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for doubtful accounts
    
    
    (107
    )
    
    
    (107
    )
    
    
    (236
    )
    
    
    (144
    )
    
    
    (376
    )
    
    
    1,355
    
    
    
    383Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,650
    
    
    
    Unrealized loss on free-standing
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,835Net cash provided by (used in) operating
activities
    
    $
    33,933
    
    
    $
    37,421
    
    
    $
    (3,427
    )
    
    $
    40,227
    
    
    $
    26,498
    
    
    $
    23,310
    
    
    $
    10,256
 
 (a)
    
    During the period from March 26, 2004 to August 28, 2004, we recognized in our
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,
respectively, as compared to our historical basis of accounting prior to the Merger.   12




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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
  General
 Whos Who The National Deans List
   13




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Company Background
     14




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Purchase price
    
    $
    419,200Assets acquired
    
    
    197,714Liabilities assumed
    
    
    (125,731
    )Net assets acquired
    
    
    71,983Excess purchase price over net assets acquired
    
    $
    347,217
  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
   Critical Accounting Policies
  Sales Returns and Allowances.
 Allowance for Doubtful Accounts and Reserve on Sales Representative Advances.
 15




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Goodwill and Other Intangible Assets
  Long-lived Tangible and Intangible Assets with Definite Lives.
  16




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Results of Operations
  Fiscal Year Ended August 27, 2005 Compared to Pro Forma Fiscal Year Ended August 28, 2004
 AAC Group Holding Corp.
    
    
    American Achievement Corporation(Successor)
    
    
    
    
    
    
    
    (Predecessor)For the periodMarch 26,
    
    
    
    August 31,% of
    
    
    
    
    
    
    % of
    
    
    2004 
    
    
    
    2003 
    
    
    Pro Forma
    
    
    % of
    
    
    Fiscal year
    
    
    % ofFiscal year ended
    
    
    Net
    
    
    Fiscal year ended
    
    
    Net
    
    
    August 28,
    
    
    
    March 25,
    
    
    Fiscal Year Ended
    
    
    Net
    
    
    ended August 30,
    
    
    NetAugust 27, 2005
    
    
    Sales
    
    
    August 27, 2005
    
    
    Sales
    
    
    2004
    
    
    
    2004
    
    

August 28, 2004
    
    
    Sales
    
    
    2003
    
    
    SalesNet sales
    
    $
    315.6
    
    
    
    100.0
    %
    
    $
    315.6
    
    
    
    100.0
    %
    
    $
    167.4
    
    
    
    $
    146.7
    
    
    $
    315.1
    
    
    
    100.0
    %
    
    $
    308.4
    
    
    
    100.0
    %Cost of sales
    
    
    135.0
    
    
    
    42.8
    %
    
    
    135.0
    
    
    
    42.8
    %
    
    
    83.5
    
    
    
    
    59.9
    
    
    
    144.0
    
    
    
    45.7
    %
    
    
    139.2
    
    
    
    45.1
    %Gross profit
    
    
    180.6
    
    
    
    57.2
    %
    
    
    180.6
    
    
    
    57.2
    %
    
    
    83.9
    
    
    
    
    86.8
    
    
    
    171.1
    
    
    
    54.3
    %
    
    
    169.2
    
    
    
    54.9
    %Selling, general
and administrative expenses
    
    
    144.8
    
    
    
    45.9
    %
    
    
    144.8
    
    
    
    45.8
    %
    
    
    62.7
    
    
    
    
    74.9
    
    
    
    143.9
    
    
    
    45.7
    %
    
    
    129.4
    
    
    
    42.0
    %Operating income
    
    
    35.8
    
    
    
    11.3
    %
    
    
    35.8
    
    
    
    11.4
    %
    
    
    21.2
    
    
    
    
    11.9
    
    
    
    27.2
    
    
    
    8.6
    %
    
    
    39.8
    
    
    
    12.9
    %Interest expense
    
    
    31.3
    
    
    
    9.9
    %
    
    
    23.5
    
    
    
    7.5
    %
    
    
    10.2
    
    
    
    
    16.5
    
    
    
    24.1
    
    
    
    7.6
    %
    
    
    28.9
    
    
    
    9.4
    %Income (loss)
before income taxes
    
    
    4.5
    
    
    
    1.4
    %
    
    
    12.3
    
    
    
    3.9
    %
    
    
    11.0
    
    
    
    
    (4.6
    )
    
    
    3.1
    
    
    
    1.0
    %
    
    
    10.9
    
    
    
    3.5
    %Provision for
income taxes
    
    
    2.2
    
    
    
    0.7
    %
    
    
    5.0
    
    
    
    1.6
    %
    
    
    4.5
    
    
    
    
    
    
    
    
    1.2
    
    
    
    0.4
    %
    
    
    0.1
    
    
    
    
    %Net income (loss)
    
    $
    2.3
    
    
    
    0.7
    %
    
    $
    7.3
    
    
    
    2.3
    %
    
    $
    6.5
    
    
    
    $
    (4.6
    )
    
    $
    1.9
    
    
    
    0.6
    %
    
    $
    10.8
    
    
    
    3.5
    %
 Net Sales.
  Class Rings.
 Yearbooks.
 17




---



##### Table of Contents



Graduation Products.
 Achievement Publications. Whos Who Among Americas Teachers The National Deans List
 Other.
 Gross Profit.
 Selling, General and Administrative Expenses.
  Operating Income (Loss).
 Interest Expense, Net.
  Provision for Income Taxes.
 18




---



##### Table of Contents



Net Income.
 AAC  For the Period March 26, 2004 to August 28, 2004 (Successor)
  AAC  For the Period August 31, 2003 to March 25, 2004 (Predecessor)
  AAC  For the Pro Forma Year Ended August 28, 2004 (unaudited) Compared to Year Ended August
30, 2003
 Net Sales.
  Class Rings.
 Yearbooks
 Graduation Products.
 Achievement Publications.
 Other.
 19




---



##### Table of Contents



Gross Profit.
 Selling, General and Administrative Expenses.
  Operating Income.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 20




---



##### Table of Contents



Liquidity and Capital Resources
 Operating Activities.
   Investing Activities.
 Financing Activities.
  Capital Resources.
    21




---



##### Table of Contents



Off Balance-Sheet Obligations
 Gold Consignment Agreement.
  Contractual Obligations
  Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    

    Total8.25% Senior
subordinated debt
(principal)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150,000
    
    
    $
    150,00010.25% Senior discount
notes (principal)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,500
    
    
    
    131,500Interest on
fixed rate debt(a)
    
    
    12,375
    
    
    
    12,375
    
    
    
    12,375
    
    
    
    12,375
    
    
    
    12,375
    
    
    
    19,594
    
    
    
    81,469Term loan(b)
    
    
    11,098
    
    
    
    10,999
    
    
    
    10,901
    
    
    
    10,802
    
    
    
    10,704
    
    
    
    137,468
    
    
    
    191,972Operating
leases(c)
    
    
    2,101
    
    
    
    1,577
    
    
    
    1,063
    
    
    
    514
    
    
    
    376
    
    
    
    1,887
    
    
    
    7,518Capital
leases(d)
    
    
    1,349
    
    
    
    1,332
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,855Management
agreement(e)
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    11,200
    
    
    
    26,200Postretirement plans
    
    
    1,108
    
    
    
    1,111
    
    
    
    1,147
    
    
    
    1,173
    
    
    
    1,189
    
    
    
    6,149
    
    
    
    11,877Employment agreements
    
    
    663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    663Total
    
    $
    31,694
    
    
    $
    30,394
    
    
    $
    28,660
    
    
    $
    27,864
    
    
    $
    27,644
    
    
    $
    457,798
    
    
    $
    604,054
 
 (a)
    
    Represents interest payments due on the 8.25% Senior
Subordinated Notes.(b)
    
    Assumes an interest rate on the term loan of 7%.(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 27, 2005 and August
28, 2004, with accumulated depreciation of $839 and $284, respectively.(e)
    
    In addition, AAC and AAC Holding Corp. 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
  22




---



##### Table of Contents



Item 7A. Quantitative And Qualitative Disclosures About Market Risk
 Interest Rate Risk.
 Semi-Precious Stones.
 Gold.
 Recent Accounting Pronouncements
     23




---



##### Table of Contents



Item 8. Financial Statement and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  /s/ DELOITTE & TOUCHE LLP
 
 24




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  .
  /s/ DELOITTE & TOUCHE LLP
 
 25




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AAC GroupHolding Corp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,324
    
    
    $
    4,093
    
    
    $
    3,038Accounts receivable, net of allowance for doubtful
accounts of $2,794 and $2,862, respectively
    
    
    40,639
    
    
    
    40,639
    
    
    
    43,321Inventories, net
    
    
    21,913
    
    
    
    21,913
    
    
    
    23,023Deferred tax asset
    
    
    6,760
    
    
    
    6,760
    
    
    
    10,165Prepaid expenses and other current assets, net
    
    
    22,180
    
    
    
    22,180
    
    
    
    26,230Total current assets
    
    
    95,816
    
    
    
    95,585
    
    
    
    105,777Property, plant and equipment, net
    
    
    75,943
    
    
    
    75,943
    
    
    
    76,565Goodwill
    
    
    184,026
    
    
    
    184,026
    
    
    
    182,080Other intangible assets, net
    
    
    153,265
    
    
    
    150,112
    
    
    
    163,473Other assets
    
    
    3,809
    
    
    
    3,809
    
    
    
    3,091Total assets
    
    $
    512,859
    
    
    $
    509,475
    
    
    $
    530,986LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank overdraft
    
    $
    3,730
    
    
    $
    3,730
    
    
    $
    5,733Accounts payable
    
    
    13,959
    
    
    
    13,959
    
    
    
    9,842Customer deposits
    
    
    17,762
    
    
    
    17,762
    
    
    
    17,807Accrued expenses
    
    
    26,263
    
    
    
    26,252
    
    
    
    29,814Accrued
management feerelated party
    
    
    
    
    
    
    
    
    
    
    500Deferred revenue
    
    
    
    
    
    
    
    
    
    
    5,503Accrued interest
    
    
    7,370
    
    
    
    7,370
    
    
    
    7,334Current portion of long-term debt
    
    
    1,409
    
    
    
    1,409
    
    
    
    1,550Total current liabilities
    
    
    70,493
    
    
    
    70,482
    
    
    
    78,083Long-term debt, net of current portion
    
    
    384,367
    
    
    
    287,711
    
    
    
    309,108Deferred income taxes
    
    
    25,331
    
    
    
    28,126
    
    
    
    25,844Other long-term liabilities
    
    
    8,377
    
    
    
    8,344
    
    
    
    9,439Total liabilities
    
    
    488,568
    
    
    
    394,663
    
    
    
    422,474Commitments and contingenciesStockholders equity:Common stock, AAC Group Holding Corp.  $.01 par
value, 1,250,000 shares authorized, 505,460 shares
issued and outstanding; American Achievement
Corporation  $.01 par value, 1,000 shares authorized,
100 shares issued and outstanding
    
    
    5
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    16,491
    
    
    
    102,046
    
    
    
    102,046Accumulated earnings
    
    
    8,751
    
    
    
    13,722
    
    
    
    6,466Accumulated other comprehensive loss
    
    
    (956
    )
    
    
    (956
    )
    
    
    Total stockholders equity
    
    
    24,291
    
    
    
    114,812
    
    
    
    108,512Total liabilities and stockholders equity
    
    $
    512,859
    
    
    $
    509,475
    
    
    $
    530,986
  26




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AAC GroupHolding Corp.
    
    
    American Achievement Corporation(Successor)
    
    
    
    (Predecessor)For the period
    
    
    
    For the periodFor the year
    
    
    For the year
    
    
    March 26, 2004 -
    
    
    
    August 31, 2003 -ended
    
    
    ended
    
    
    August 28,
    
    
    
    March 25,
    
    
    For the year endedAugust 27, 2005
    
    
    August 27, 2005
    
    
    2004
    
    
    
    2004
    
    
    August 30, 2003(Dollars in thousands)Net sales
    
    $
    315,628
    
    
    $
    315,628
    
    
    $
    167,350
    
    
    
    $
    146,721
    
    
    $
    308,431Cost of sales
    
    
    134,998
    
    
    
    134,998
    
    
    
    83,521
    
    
    
    
    59,857
    
    
    
    139,170Gross profit
    
    
    180,630
    
    
    
    180,630
    
    
    
    83,829
    
    
    
    
    86,864
    
    
    
    169,261Selling, general and
administrative expenses
    
    
    144,882
    
    
    
    144,882
    
    
    
    62,647
    
    
    
    
    74,992
    
    
    
    129,423Operating income
    
    
    35,748
    
    
    
    35,748
    
    
    
    21,182
    
    
    
    
    11,872
    
    
    
    39,838Interest expense, net of
interest income
    
    
    31,271
    
    
    
    23,497
    
    
    
    10,257
    
    
    
    
    16,455
    
    
    
    28,940Income (loss)
before provision for
income taxes
    
    
    4,477
    
    
    
    12,251
    
    
    
    10,925
    
    
    
    
    (4,583
    )
    
    
    10,898Provision for income
taxes
    
    
    (2,192
    )
    
    
    (4,995
    )
    
    
    (4,459
    )
    
    
    
    
    
    
    
    (132
    )Net income (loss)
    
    
    2,285
    
    
    
    7,256
    
    
    
    6,466
    
    
    
    
    (4,583
    )
    
    
    10,766Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )
    
    
    (1,200
    )Net income
(loss) applicable to
common stockholders
    
    $
    2,285
    
    
    $
    7,256
    
    
    $
    6,466
    
    
    
    $
    (5,283
    )
    
    $
    9,566
  27




---



##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AccumulatedAdditional
    
    
    otherCommon Stock
    
    
    Paid-in
    
    
    comprehensive
    
    
    AccumulatedAAC Group Holding Corp.
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    income (loss)
    
    
    earnings
    
    
    Total(Dollars in thousands)Balance, August 28, 2004 (Successor)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock, $.01 par value, 1,250,000 shares
authorized
    
    
    1,015,426
    
    
    
    10
    
    
    
    102,036
    
    
    
    
    
    
    
    
    
    
    
    102,046Carryover of accumulated earnings from AAC
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,466
    
    
    
    6,466Distribution to stockholders
    
    
    (509,966
    )
    
    
    (5
    )
    
    
    (85,545
    )
    
    
    
    
    
    
    
    
    
    
    (85,550
    )Comprehensive
incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,285
    
    
    
    2,285Adjustment to minimum pension liability (net of tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    
    
    
    
    (956
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    2,285
    
    
    
    1,329Balance, August 27, 2005 (Successor)
    
    
    505,460
    
    
    $
    5
    
    
    $
    16,491
    
    
    $
    (956
    )
    
    $
    8,751
    
    
    $
    24,291
 AccumulatedAdditional
    
    
    other
    
    
    AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    comprehensive
    
    
    earningsAmerican Achievement Corporation
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    income (loss)
    
    
    (deficit)
    
    
    Total(Dollars in thousands)Balance, August 31, 2002 (Predecessor)
    
    
    1,006,847
    
    
    $
    10
    
    
    
    809,351
    
    
    $
    8
    
    
    $
    95,310
    
    
    $
    (2,133
    )
    
    $
    (27,941
    )
    
    $
    65,254Comprehensive
incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,766
    
    
    
    10,766Adjustment to minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,017
    )
    
    
    
    
    
    
    (3,017
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,017
    )
    
    
    10,766
    
    
    
    7,749Accrued dividends on minority interest
in CBI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,200
    )
    
    
    (1,200
    )Issuance of stock
    
    
    519
    
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40Balance, 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
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    102,046
    
    
    
    
    
    
    
    
    
    
    
    102,046Effect of purchase accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,110
    
    
    
    23,658
    
    
    
    28,768Balance, March 25, 2004 (Predecessor)
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    
    
    
    $
    
    
    
    $
    102,046Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,466
    
    
    $
    6,466Balance, August 28, 2004 (Successor)
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    
    
    
    $
    6,466
    
    
    $
    108,512Comprehensive income-Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,256
    
    
    
    7,256Adjustment to minimum pension
liability (net of tax impact)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    
    
    
    
    (956
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )
    
    
    7,256
    
    
    
    6,300Balance, August 27, 2005
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    
    
    
    $
    102,046
    
    
    $
    (956
    )
    
    $
    13,722
    
    
    $
    114,812
  28




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 AAC GroupHolding Corp.
    
    
    American Achievement Corporation(Successor)
    
    
    
    (Predecessor)For the period
    
    
    
    For the periodMarch 26, 2004 
    
    
    
    August 31, 2003 For the year ended
    
    
    For the year ended
    
    
    August 28,
    
    
    
    March 25,
    
    
    For the year endedAugust 27, 2005
    
    
    August 27, 2005
    
    
    2004
    
    
    
    2004
    
    
    August 30, 2003(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    2,285
    
    
    $
    7,256
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )
    
    $
    10,766Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    25,281
    
    
    
    25,281
    
    
    
    10,344
    
    
    
    
    8,530
    
    
    
    14,149Deferred income taxes
    
    
    1,975
    
    
    
    4,770
    
    
    
    4,309
    
    
    
    
    
    
    
    
    Amortization of debt discount and deferred financing fees
    
    
    1,882
    
    
    
    1,527
    
    
    
    629
    
    
    
    
    1,197
    
    
    
    2,051Accretion of interest on 10.25% senior discount notes
    
    
    7,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for doubtful accounts
    
    
    (107
    )
    
    
    (107
    )
    
    
    (236
    )
    
    
    
    (144
    )
    
    
    (376
    )Changes in assets and liabilities:Accounts receivable
    
    
    2,750
    
    
    
    2,750
    
    
    
    (1,506
    )
    
    
    
    2,758
    
    
    
    2,469Inventories, net
    
    
    1,110
    
    
    
    1,110
    
    
    
    26,266
    
    
    
    
    (18,963
    )
    
    
    2,117Income tax receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    738Prepaid expenses and other current assets, net
    
    
    4,050
    
    
    
    4,050
    
    
    
    (16,262
    )
    
    
    
    2,573
    
    
    
    (2,296
    )Other assets
    
    
    (6,172
    )
    
    
    (2,664
    )
    
    
    810
    
    
    
    
    (959
    )
    
    
    (1,043
    )Deferred revenue
    
    
    (5,503
    )
    
    
    (5,503
    )
    
    
    2,615
    
    
    
    
    (2,235
    )
    
    
    (1,392
    )Accounts payable, accrued expenses, and other long-term
liabilities
    
    
    (1,005
    )
    
    
    (1,049
    )
    
    
    (36,862
    )
    
    
    
    52,053
    
    
    
    (685
    )Net cash provided by (used in) operating activities
    
    
    33,933
    
    
    
    37,421
    
    
    
    (3,427
    )
    
    
    
    40,227
    
    
    
    26,498Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (12,795
    )
    
    
    (12,795
    )
    
    
    (3,665
    )
    
    
    
    (12,793
    )
    
    
    (11,243
    )Acquisitions of businesses, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,406
    )
    
    
    Net cash used in investing activities
    
    
    (12,795
    )
    
    
    (12,795
    )
    
    
    (3,665
    )
    
    
    
    (122,199
    )
    
    
    (11,243
    )Cash flows from financing activities:Proceeds from revolver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    47,500Payments on revolver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,500
    )
    
    
    (63,175
    )Proceeds of common stock issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,046
    
    
    
    40Proceeds from term loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,000
    
    
    
    Payments on term loan
    
    
    (15,493
    )
    
    
    (15,493
    )
    
    
    (387
    )
    
    
    
    
    
    
    
    Proceeds from 8.25% senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    Proceeds from credit facility revolver
    
    
    33,450
    
    
    
    33,450
    
    
    
    5,000
    
    
    
    
    2,000
    
    
    
    Payments on credit facility revolver
    
    
    (33,450
    )
    
    
    (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
    )
    
    
    (6,075
    )
    
    
    
    
    
    
    
    (170,925
    )
    
    
    Proceeds from 10.25% senior discount notes
    
    
    89,269
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Distribution to stockholders
    
    
    (85,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in bank overdraft
    
    
    (2,003
    )
    
    
    (2,003
    )
    
    
    3,252
    
    
    
    
    (2,396
    )
    
    
    553Net cash provided by (used in) financing
activities
    
    
    (19,852
    )
    
    
    (23,571
    )
    
    
    865
    
    
    
    
    89,502
    
    
    
    (15,082
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,286
    
    
    
    1,055
    
    
    
    (6,227
    )
    
    
    
    7,530
    
    
    
    173Cash and cash equivalents, beginning of period
    
    
    3,038
    
    
    
    3,038
    
    
    
    9,265
    
    
    
    
    1,735
    
    
    
    1,562Cash and cash equivalents, end of period
    
    $
    4,324
    
    
    $
    4,093
    
    
    $
    3,038
    
    
    
    $
    9,265
    
    
    $
    1,735Supplemental disclosureCash paid during the period for:Interest
    
    $
    21,966
    
    
    $
    21,966
    
    
    $
    2,567
    
    
    
    $
    18,873
    
    
    $
    26,790Income taxes
    
    $
    224
    
    
    $
    224
    
    
    $
    88
    
    
    
    $
    178
    
    
    $
    133Supplemental Disclosure of noncash financing
activitiesAccrued preferred stock dividends
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    700
    
    
    $
    1,200
  29




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 1. Summary of Organization and Significant Accounting Policies
 Consolidation
      30




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Basis of Presentation and Comparability
  Fiscal Year-End
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts
   Balanceat
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    
    
    
    
    End ofAAC Group Holding Corp.
    
    of Period
    
    
    Expenses
    
    
    Other
    
    
    Write-offs
    
    
    PeriodAllowance for doubtful accounts and product returnsYear ended August 27, 2005
    
    $
    2,862
    
    
    $
    3,964
    
    
    $
    99
    
    
    $
    (4,131
    )
    
    $
    2,794
 Balanceat
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    
    
    
    
    End ofAmerican Achievement Corporation
    
    of Period
    
    
    Expenses
    
    
    Other
    
    
    Write-offs
    
    
    PeriodAllowance for doubtful accounts and product returnsYear ended August 27, 2005 (Successor)
    
    $
    2,862
    
    
    $
    3,964
    
    
    $
    99
    
    
    $
    (4,131
    )
    
    $
    2,794March 26, 2004-August 28, 2004 (Successor)
    
    
    3,098
    
    
    
    3,790
    
    
    
    124
    
    
    
    (4,150
    )
    
    
    2,862August 31, 2003-March 25, 2004 (Predecessor)
    
    
    3,242
    
    
    
    3,445
    
    
    
    (160
    )
    
    
    (3,429
    )
    
    
    3,098Year ended August 30, 2003 (Predecessor)
    
    
    3,525
    
    
    
    7,178
    
    
    
    145
    
    
    
    (7,606
    )
    
    
    3,242
 Inventories
  31




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Sales Representative Advances and Related Reserve
    Balanceat
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    End ofAAC Group Holding Corp.
    
    of Period
    
    
    Expenses
    
    
    Write-offs(1)
    
    
    PeriodReserve on sales representative advancesYear ended August 27, 2005
    
    $
    2,383
    
    
    $
    1,794
    
    
    $
    (1,641
    )
    
    $
    2,536
 Balanceat
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    End ofAmerican Achievement Corporation
    
    of Period
    
    
    Expenses
    
    
    Write-offs(1)
    
    
    PeriodReserve on sales representative advancesYear ended August 27, 2005 (Successor)
    
    $
    2,383
    
    
    $
    1,794
    
    
    $
    (1,641
    )
    
    $
    2,536March 26, 2004-August 28, 2004 (Successor)
    
    
    2,254
    
    
    
    1,205
    
    
    
    (1,076
    )
    
    
    2,383August 31, 2003-March 25, 2004 (Predecessor)
    
    
    2,516
    
    
    
    813
    
    
    
    (1,075
    )
    
    
    2,254Year ended August 30, 2003 (Predecessor)
    
    
    2,843
    
    
    
    2,335
    
    
    
    (2,662
    )
    
    
    2,516
 
 (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 25 yearsTools and dies
    
    8 yearsMachinery and equipment
    
    2 to 10 yearsLeasehold improvements
    
    Shorter of useful life or term of lease
 Goodwill and Other Intangible Assets
  32




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Impairment of Long-lived Assets
  Customer Deposits
  Income Taxes
  Fair Value of Financial Instruments
  Stock-Based Compensation
  33




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  (Predecessor)For the period
    
    
    For the yearAugust 31, 2003 -
    
    
    endedMarch 25,
    
    
    August 30,2004
    
    
    2003Net income (loss)
    
    $
    (4,583
    )
    
    $
    10,766Less: stock-based compensation
expense, net of related taxes
    
    
    11
    
    
    
    30Net income (loss)-pro forma
    
    $
    (4,594
    )
    
    $
    10,736
   (Predecessor)For theperiodAugust 31,
    
    
    For the2003 to
    
    
    Year EndedMarch 25,
    
    
    August 30,2004
    
    
    2003Risk-free interest rate
    
    
    3.93
    %
    
    
    3.93
    %Expected life
    
    10 years
    
    10 yearsVolatility
    
    
    25
    %
    
    
    25
    %Dividend yield
    
    
    
    
    
    
    
 Revenue Recognition and Warranty Costs
     34




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  Charged toBalance at
    
    
    Costs andBeginning
    
    
    Expenses
    
    
    
    
    
    
    Balance at EndAAC Group Holding Corp.
    
    of Period
    
    
    (accruals)
    
    
    Claims
    
    
    of PeriodAccrued ring repair liabilityYear ended August 27, 2005
    
    $
    1,210
    
    
    $
    808
    
    
    $
    (836
    )
    
    $
    1,182
 Charged toBalance at
    
    
    Costs andBeginning
    
    
    Expenses
    
    
    
    
    
    
    Balance at EndAmerican Achievement Corporation
    
    of Period
    
    
    (accruals)
    
    
    Claims
    
    
    of PeriodAccrued ring repair liabilityYear ended August 27, 2005 (Successor)
    
    $
    1,210
    
    
    $
    808
    
    
    $
    (836
    )
    
    $
    1,182March 26, 2004-August 28, 2004 (Successor)
    
    
    1,500
    
    
    
    347
    
    
    
    (637
    )
    
    
    1,210August 31, 2003-March 25, 2004 (Predecessor)
    
    
    1,500
    
    
    
    461
    
    
    
    (461
    )
    
    
    1,500Year ended August 30, 2003 (Predecessor)
    
    
    1,520
    
    
    
    706
    
    
    
    (726
    )
    
    
    1,500
 Seasonality
   Concentration of Credit Risk
  Shipping and Handling Fees
  Supplier Concentration
  Advertising
  35




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
   Use of Estimates
  Recent Accounting Pronouncements
     2. Merger
  36




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
     Purchase price
    
    $
    419,200Assets acquired
    
    
    197,714Liabilities assumed
    
    
    (125,731
    )Net assets acquired
    
    
    71,983Excess purchase price over net assets acquired
    
    $
    347,217
  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
   37




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 3. Comprehensive Income (Loss)
  AAC Group HoldingCorp.
    
    
    American Achievement Corporation(Successor)
    
    
    
    
    
    
    
    
    
    
    
    (Predecessor)For the year
    
    
    For the year
    
    
    (Successor)
    
    
    
    (Predecessor)
    
    
    For the yearended
    
    
    ended
    
    
    For the period
    
    
    
    For the period
    
    
    endedAugust 27,
    
    
    August 27,
    
    
    March 26, 2004 -
    
    
    
    August 31, 2003 -
    
    
    August 30,2005
    
    
    2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004
    
    
    2003Net income (loss)
    
    $
    2,285
    
    
    $
    7,256
    
    
    $
    6,466
    
    
    
    $
    (4,583
    )
    
    $
    10,766Adjustment in
minimum pension
liability (net of tax
impact)
    
    
    (956
    )
    
    
    (956
    )
    
    
    
    
    
    
    
    40
    
    
    
    (3,017
    )Total
comprehensive income
(loss)
    
    $
    1,329
    
    
    $
    6,300
    
    
    $
    6,466
    
    
    
    $
    (4,543
    )
    
    $
    7,749
  4. Significant Acquisitions
  5. Inventories, Net
  AAC Group HoldingCorp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004Raw materials
    
    $
    9,022
    
    
    $
    9,022
    
    
    $
    8,853Work in process
    
    
    6,306
    
    
    
    6,306
    
    
    
    7,380Finished goods
    
    
    6,790
    
    
    
    6,790
    
    
    
    6,978Less-Reserves
    
    
    (205
    )
    
    
    (205
    )
    
    
    (188
    )$
    21,913
    
    
    $
    21,913
    
    
    $
    23,023
  38




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  6. Prepaid Expenses and Other Current Assets, Net
  AAC Group HoldingCorp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004Sales representative advances
    
    $
    12,705
    
    
    $
    12,705
    
    
    $
    12,247Less-reserve on sales representative advances
    
    
    (2,536
    )
    
    
    (2,536
    )
    
    
    (2,383
    )Deferred publication and ring costs
    
    
    4,212
    
    
    
    4,212
    
    
    
    7,174Prepaid advertising and promotional materials
    
    
    3,578
    
    
    
    3,578
    
    
    
    5,276Other
    
    
    4,221
    
    
    
    4,221
    
    
    
    3,916$
    22,180
    
    
    $
    22,180
    
    
    $
    26,230
  7. Property, Plant and Equipment, Net
  AAC Group HoldingCorp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004Land
    
    $
    9,550
    
    
    $
    9,550
    
    
    $
    9,550Buildings and improvements
    
    
    8,184
    
    
    
    8,184
    
    
    
    7,752Tools and dies
    
    
    21,933
    
    
    
    21,933
    
    
    
    20,216Machinery and equipment
    
    
    49,145
    
    
    
    49,145
    
    
    
    40,091Construction in progress
    
    
    5,864
    
    
    
    5,864
    
    
    
    4,357Total
    
    
    94,676
    
    
    
    94,676
    
    
    
    81,966Less-accumulated depreciation
    
    
    (18,733
    )
    
    
    (18,733
    )
    
    
    (5,401
    )Property, plant and equipment, net
    
    $
    75,943
    
    
    $
    75,943
    
    
    $
    76,565
  39




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  8. Goodwill and Other Intangible Assets
 Goodwill
   August 27, 2005Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementAAC Group Holdings Corp.
    
    Rings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalBalance 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
 August 27, 2005 (Successor)Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementAmerican Achievement Corporation
    
    Rings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalBalance 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
 For the Period March 26, 2004 to August 28, 2004 (Successor)Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementAmerican Achievement Corporation
    
    Rings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalBalance at beginning of period
    
    $
    65,780
    
    
    $
    60,610
    
    
    $
    17,915
    
    
    $
    10,576
    
    
    $
    11,563
    
    
    $
    166,444Purchase price adjustments
    
    
    5,253
    
    
    
    3,941
    
    
    
    5,081
    
    
    
    993
    
    
    
    368
    
    
    $
    15,636Balance at end of period
    
    $
    71,033
    
    
    $
    64,551
    
    
    $
    22,996
    
    
    $
    11,569
    
    
    $
    11,931
    
    
    $
    182,080
 For the Period August 31, 2003 to March 25, 2004 (Predecessor)Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementAmerican Achievement Corporation
    
    Rings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalBalance at beginning of period
    
    $
    65,630
    
    
    $
    57,420
    
    
    $
    17,862
    
    
    $
    10,297
    
    
    $
    10,850
    
    
    $
    162,059Goodwill acquired during the period
    
    
    150
    
    
    
    3,190
    
    
    
    53
    
    
    
    279
    
    
    
    713
    
    
    $
    4,385Balance at end of period
    
    $
    65,780
    
    
    $
    60,610
    
    
    $
    17,915
    
    
    $
    10,576
    
    
    $
    11,563
    
    
    $
    166,444
 40




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 Other Intangible Assets
  Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetAAC Group Holding Corp.
    
    Useful Life
    
    Asset
    
    
    Amortization
    
    
    AssetAt August 27, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    7 to 8 years
    
    
    14,620
    
    
    
    (2,475
    )
    
    
    12,145Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (629
    )
    
    
    6,688Customer lists and distribution contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (16,179
    )
    
    
    84,337$
    172,548
    
    
    $
    (19,283
    )
    
    $
    153,265
 Estimated
    
    Gross
    
    
    Accumulated
    
    
    NetAmerican Achievement Corporation
    
    Useful Life
    
    Asset
    
    
    Amortization
    
    
    AssetAt August 27, 2005Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    7 to 8 years
    
    
    11,112
    
    
    
    (2,120
    )
    
    
    8,992Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (629
    )
    
    
    6,688Customer lists and distribution contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (16,179
    )
    
    
    84,337$
    169,040
    
    
    $
    (18,928
    )
    
    $
    150,112At August 28, 2004Trademarks
    
    Indefinite
    
    $
    50,095
    
    
    $
    
    
    
    $
    50,095Deferred financing costs and other
    
    7 to 8 years
    
    
    11,112
    
    
    
    (624
    )
    
    
    10,488Patents
    
    14 to 17 years
    
    
    7,317
    
    
    
    (185
    )
    
    
    7,132Customer lists and distribution contracts
    
    3 to 12 years
    
    
    100,516
    
    
    
    (4,758
    )
    
    
    95,758$
    169,040
    
    
    $
    (5,567
    )
    
    $
    163,473
    41




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 9. Accrued Expenses
  AAC GroupHolding Corp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004Commissions and royalties
    
    $
    7,896
    
    
    $
    7,896
    
    
    $
    9,005Compensation and related costs
    
    
    6,683
    
    
    
    6,683
    
    
    
    7,744Accumulated pension and postretirement benefit cost
    
    
    4,984
    
    
    
    4,984
    
    
    
    4,875Accrued sales and property taxes
    
    
    1,332
    
    
    
    1,332
    
    
    
    1,795Accrued workmans compensation and medical claims
    
    
    1,058
    
    
    
    1,058
    
    
    
    1,751Capital lease obligations, short term
    
    
    1,250
    
    
    
    1,250
    
    
    
    1,230Other
    
    
    3,060
    
    
    
    3,049
    
    
    
    3,414$
    26,263
    
    
    $
    26,252
    
    
    $
    29,814
 10. Long-term Debt
  AAC GroupHolding Corp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    200410.25% Senior discount notes due 2012 (net of unamortized discount of
$34,844)
    
    $
    96,656
    
    
    $
    
    
    
    $
    8.25% Senior subordinated notes due 2012
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,00011.625% Senior unsecured notes due 2007 (net of unamortized discount of $30)
    
    
    
    
    
    
    
    
    
    
    6,045Senior secured credit facilityRevolving credit facility due 2010
    
    
    
    
    
    
    
    
    
    
    Term loan due 2011
    
    
    139,120
    
    
    
    139,120
    
    
    
    154,613Total
    
    
    385,776
    
    
    
    289,120
    
    
    
    310,658Less current portion of long-term debt
    
    
    (1,409
    )
    
    
    (1,409
    )
    
    
    (1,550
    )Total long-term debt
    
    $
    384,367
    
    
    $
    287,711
    
    
    $
    309,108
 10.25% Senior Discount Notes
    42




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  8.25% Senior Subordinated Notes
     11.625% Senior Unsecured Notes
   43




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  11% Senior Subordinated Notes
  Senior Secured Credit Facility
        44




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  AmericanAAC Group
    
    
    AchievementHolding Corp.
    
    
    CorporationAmount
    
    
    AmountFiscal year ending
    
    maturing
    
    
    maturing2006
    
    $
    1,409
    
    
    $
    1,4092007
    
    
    1,409
    
    
    
    1,4092008
    
    
    1,409
    
    
    
    1,4092009
    
    
    1,409
    
    
    
    1,4092010
    
    
    1,409
    
    
    
    1,409Thereafter
    
    
    378,731
    
    
    
    282,075Total
    
    
    385,776
    
    
    
    289,120Less current portion of long-term debt
    
    
    (1,409
    )
    
    
    (1,409
    )$
    384,367
    
    
    $
    287,711
    11. Commitments and Contingencies
 Leases
  OperatingFiscal Year Ending
    
    Expense
    
    
    Capital2006
    
    $
    2,101
    
    
    $
    1,3492007
    
    
    1,577
    
    
    
    1,3322008
    
    
    1,063
    
    
    
    1742009
    
    
    514
    
    
    
    2010
    
    
    376
    
    
    
    Thereafter
    
    
    1,887
    
    
    
    Interest
    
    
    
    
    
    
    (139
    )$
    7,518
    
    
    $
    2,716
   45




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  Pending Litigation
    Employment Contracts
  46




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
 12. Employee Compensation and Benefits
 Postretirement Pension and Medical Benefits
   AAC Group Holding Corp.
    
    
    American Achievement CorporationAugust 27, 2005
    
    
    August 27, 2005
    
    
    August 28, 2004Taylor
    
    
    CBI
    
    
    Taylor
    
    
    CBI
    
    
    Taylor
    
    
    CBIpension
    
    
    post-retirement
    
    
    pension
    
    
    post-retirement
    
    
    pension
    
    
    post-retirementChange in benefit obligation:Obligation beginning of the year
    
    $
    13,664
    
    
    $
    7,186
    
    
    $
    13,664
    
    
    $
    7,186
    
    
    $
    14,216
    
    
    $
    4,703Service cost
    
    
    78
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    86
    
    
    
    Interest cost
    
    
    835
    
    
    
    152
    
    
    
    835
    
    
    
    152
    
    
    
    834
    
    
    
    274Actuarial loss (gain)
    
    
    212
    
    
    
    (2,680
    )
    
    
    212
    
    
    
    (2,680
    )
    
    
    (1,348
    )
    
    
    2,816Benefit payments
    
    
    (607
    )
    
    
    (332
    )
    
    
    (607
    )
    
    
    (332
    )
    
    
    (649
    )
    
    
    (607
    )Change in discount rate
    
    
    2,181
    
    
    
    
    
    
    
    2,181
    
    
    
    
    
    
    
    525
    
    
    
    Obligation, end of year
    
    $
    16,363
    
    
    $
    4,326
    
    
    $
    16,363
    
    
    $
    4,326
    
    
    $
    13,664
    
    
    $
    7,186Change in fair value of plan assets:Fair value of plan assets, beginning of year
    
    $
    10,201
    
    
    $
    
    
    
    $
    10,201
    
    
    $
    
    
    
    $
    9,461
    
    
    $
    Actual return of plan assets
    
    
    782
    
    
    
    
    
    
    
    782
    
    
    
    
    
    
    
    762
    
    
    
    Employer contributions
    
    
    745
    
    
    
    332
    
    
    
    745
    
    
    
    332
    
    
    
    627
    
    
    
    607Benefit payments
    
    
    (607
    )
    
    
    (332
    )
    
    
    (607
    )
    
    
    (332
    )
    
    
    (649
    )
    
    
    (607
    )Fair value of plan assets, end of year
    
    $
    11,121
    
    
    $
    
    
    
    $
    11,121
    
    
    $
    
    
    
    $
    10,201
    
    
    $
    Funded status:Unfunded accumulated benefit
obligation in excess of plan assets
    
    $
    (5,241
    )
    
    $
    (4,326
    )
    
    $
    (5,241
    )
    
    $
    (4,326
    )
    
    $
    (3,692
    )
    
    $
    (7,185
    )Unrecognized net loss (gain)
    
    
    1,567
    
    
    
    (2,395
    )
    
    
    1,567
    
    
    
    (2,395
    )
    
    
    (877
    )
    
    
    Contributions from measurement date
to period end
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    230
    
    
    
    Accumulated postretirement benefit cost,
current and long-term
    
    $
    (3,549
    )
    
    $
    (6,721
    )
    
    $
    (3,549
    )
    
    $
    (6,721
    )
    
    $
    (4,339
    )
    
    $
    (7,185
    )
 47




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
  AAC Group Holding Corp.August 27, 2005CBITaylor
    
    
    post -pension
    
    
    retirementService costs, benefits attributed to Service during the period
    
    $
    78
    
    
    $
    Interest cost
    
    
    835
    
    
    
    152Expected return on assets
    
    
    (833
    )
    
    
    Amortization of unrecognized net loss (gain)
    
    
    
    
    
    
    (284
    )Amortization of unrecognized net prior service costs
    
    
    
    
    
    
    Net periodic postretirement benefit cost
    
    $
    80
    
    
    $
    (132
    )
 American Achievement Corporation(Successor)
    
    
    
    (Predecessor)For the period
    
    
    
    For the period(Successor)
    
    
    March 26, 2004 -
    
    
    
    August 31, 2003 -
    
    
    (Predecessor)August 27, 2005
    
    
    August 28, 2004
    
    
    
    March 25, 2004
    
    
    August 30, 2003CBI
    
    
    
    
    
    
    CBI
    
    
    
    
    
    
    
    CBI
    
    
    
    
    
    
    CBITaylor
    
    
    post -
    
    
    Taylor
    
    
    post-
    
    
    
    Taylor
    
    
    post-
    
    
    Taylor
    
    
    post-pension
    
    
    retirement
    
    
    pension
    
    
    retirement
    
    
    
    pension
    
    
    retirement
    
    
    pension
    
    
    retirementService costs,
benefits attributed to
Service during the
period
    
    $
    78
    
    
    $
    
    
    
    $
    21
    
    
    $
    
    
    
    
    $
    65
    
    
    $
    
    
    
    $
    397
    
    
    $
    Interest cost
    
    
    835
    
    
    
    152
    
    
    
    207
    
    
    
    104
    
    
    
    
    627
    
    
    
    170
    
    
    
    781
    
    
    
    282Expected return on assets
    
    
    (833
    )
    
    
    
    
    
    
    (195
    )
    
    
    
    
    
    
    
    (631
    )
    
    
    
    
    
    
    (814
    )
    
    
    Amortization of
unrecognized net loss
(gain)
    
    
    
    
    
    
    (284
    )
    
    
    
    
    
    
    9
    
    
    
    
    162
    
    
    
    83
    
    
    
    68
    
    
    
    33Amortization of
unrecognized net prior
service costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    291Net periodic
postretirement benefit
cost
    
    $
    80
    
    
    $
    (132
    )
    
    $
    33
    
    
    $
    129
    
    
    
    $
    223
    
    
    $
    407
    
    
    $
    432
    
    
    $
    606
  AAC Group Holding Corp.
    
    
    American Achievement CorporationAugust 27, 2005
    
    
    August 27, 2005
    
    
    August 28, 2004Taylor
    
    
    CBI
    
    
    Taylor
    
    
    CBI
    
    
    Taylor
    
    
    CBIpension
    
    
    post-retirement
    
    
    pension
    
    
    post-retirement
    
    
    pension
    
    
    post-retirementAccumulated benefit liability
    
    $
    3,549
    
    
    $
    6,721
    
    
    $
    3,549
    
    
    $
    6,721
    
    
    $
    4,339
    
    
    $
    7,185Accumulated other comprehensive
loss (net of tax impact)
    
    $
    956
    
    
    
    
    
    
    $
    956
    
    
    
    
    
    
    
    
    
    
    
    Accrued benefit cost
    
    $
    (5,241
    )
    
    $
    (6,721
    )
    
    $
    (5,241
    )
    
    $
    (6,721
    )
    
    $
    (4,569
    )
    
    $
    (7,185
    )Accumulated other
comprehensive
income (loss)
    
    
    1,567
    
    
    
    
    
    
    
    1,567
    
    
    
    
    
    
    
    
    
    
    
    Contributions from
measurement date to
period end
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    230
    
    
    
    Net amount recognized
    
    $
    (3,549
    )
    
    $
    (6,721
    )
    
    $
    (3,549
    )
    
    $
    (6,721
    )
    
    $
    (4,339
    )
    
    $
    (7,185
    )
 48




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
       49




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  Asset Category
    
    2005
    
    
    2004
    
    
    TargetEquity securities
    
    
    71.0
    %
    
    
    66.0
    %
    
    
    40.0  60.0
    %Debt securities
    
    
    29.0
    %
    
    
    34.0
    %
    
    
    30.0  55.0
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   ExpectedCostsWithout
    
    
    ExpectedMedicare
    
    
    MedicareSubsidy
    
    
    Subsidy
    
    
    Expected Net Costs2006
    
    $
    486
    
    
    $
    38
    
    
    $
    4482007
    
    
    488
    
    
    
    58
    
    
    
    4302008
    
    
    483
    
    
    
    58
    
    
    
    4252009
    
    
    472
    
    
    
    57
    
    
    
    4152010
    
    
    456
    
    
    
    55
    
    
    
    4012011-2015
    
    
    1,914
    
    
    
    236
    
    
    
    1,678
  2006
    
    $
    6602007
    
    
    6812008
    
    
    7222009
    
    
    7582010
    
    
    7882011-2015
    
    
    4,471
  50




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AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 American Achievement Corporation 401(K) Plan
  13. Income Taxes
  AAC Group HoldingCorp.
    
    
    American Achievement Corporation(Successor)
    
    
    (Successor)
    
    
    
    (Predecessor)
    
    
    (Predecessor)For the Period Ended
    
    
    
    For the Period EndedFiscal Year Ended
    
    
    Fiscal Year Ended
    
    
    March 26, 2004 -
    
    
    
    August 31, 2003 -
    
    
    Fiscal Year EndedAugust 27,
    
    
    August 27,
    
    
    August 28,
    
    
    
    March 25,
    
    
    August 30,2005
    
    
    2005
    
    
    2004
    
    
    
    2004
    
    
    2003FederalCurrent
    
    $
    40
    
    
    $
    48
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Deferred
    
    
    1,773
    
    
    
    4,281
    
    
    
    3,867
    
    
    
    
    
    
    
    
    StateCurrent
    
    
    177
    
    
    
    177
    
    
    
    150
    
    
    
    
    
    
    
    
    132Deferred
    
    
    202
    
    
    
    489
    
    
    
    442
    
    
    
    
    
    
    
    
    $
    2,192
    
    
    $
    4,995
    
    
    $
    4,459
    
    
    
    $
    
    
    
    $
    132
  AAC Group HoldingCorp.
    
    
    American Achievement Corporation(Successor)
    
    
    (Successor)
    
    
    
    (Predecessor)
    
    
    (Predecessor)For the Period Ended
    
    
    
    For the Period EndedFiscal Year Ended
    
    
    Fiscal Year Ended
    
    
    March 26, 2004 -
    
    
    
    August 31, 2003 -
    
    
    Fiscal Year EndedAugust 27,
    
    
    August 27,
    
    
    August 28,
    
    
    
    March 25,
    
    
    August 30,2005
    
    
    2005
    
    
    2004
    
    
    
    2004
    
    
    2003Computed tax
provision at statutory rate
    
    $
    1,567
    
    
    $
    4,288
    
    
    $
    3,824
    
    
    
    $
    1,605
    
    
    $
    3,705State taxes,
net of federal
benefit
    
    
    219
    
    
    
    619
    
    
    
    592
    
    
    
    
    272
    
    
    
    87Non-deductible
interest on
high-yield debt
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in
valuation allowance
and other
    
    
    187
    
    
    
    88
    
    
    
    43
    
    
    
    
    (1,877
    )
    
    
    (3,660
    )Total
income tax provision
    
    $
    2,192
    
    
    $
    4,995
    
    
    $
    4,459
    
    
    
    
    
    
    
    $
    132
 51




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
  AAC Group HoldingCorp.
    
    
    American Achievement CorporationAugust 27,
    
    
    August 27,
    
    
    August 28,2005
    
    
    2005
    
    
    2004Deferred tax assetsAllowances and reserves
    
    $
    2,304
    
    
    $
    2,304
    
    
    $
    1,947Net operating loss carryforwards
    
    
    41,998
    
    
    
    41,832
    
    
    
    44,638Accrued interest
    
    
    2,636
    
    
    
    
    
    
    
    Accrued liabilities and other
    
    
    5,106
    
    
    
    5,113
    
    
    
    8,632Total deferred tax assets
    
    
    52,044
    
    
    
    49,249
    
    
    
    55,217Less valuation allowance
    
    
    
    
    
    
    
    
    
    
    Net deferred tax assets
    
    $
    52,044
    
    
    $
    49,249
    
    
    $
    55,217Deferred tax liabilitiesDepreciation
    
    
    11,633
    
    
    
    11,633
    
    
    
    11,511Amortization of intangibles
    
    
    58,715
    
    
    
    58,715
    
    
    
    58,971Prepaids and other
    
    
    267
    
    
    
    267
    
    
    
    414Total deferred tax liabilities
    
    
    70,615
    
    
    
    70,615
    
    
    
    70,896Net deferred tax assets (liabilities)
    
    $
    (18,571
    )
    
    $
    (21,366
    )
    
    $
    (15,679
    )Short-term deferred tax assets
    
    $
    6,760
    
    
    $
    6,760
    
    
    $
    10,165Long-term deferred tax liabilities
    
    
    (25,331
    )
    
    
    (28,126
    )
    
    
    (25,844
    )Net deferred tax assets (liabilities)
    
    $
    (18,571
    )
    
    $
    (21,366
    )
    
    $
    (15,679
    )
   14. Stockholders Equity
  Stock-based Compensation Plan
   52




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##### Table of Contents



AAC
GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 
   (Predecessor)
    
    
    (Predecessor)August 30, 2003 toMarch 25, 2004
    
    
    August 30, 2003Weighted
    
    
    
    
    
    
    WeightedShares of
    
    
    Average
    
    
    Shares of
    
    
    AverageCommon
    
    
    Exercise
    
    
    Common
    
    
    ExerciseStock
    
    
    Price
    
    
    Stock
    
    
    PriceOutstanding at beginning of period
    
    
    97,792
    
    
    $
    4.50
    
    
    
    72,083
    
    
    $
    3.86Granted
    
    
    
    
    
    
    
    
    
    
    29,559
    
    
    
    6.22Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (1,138
    )
    
    
    3.39
    
    
    
    (3,850
    )
    
    
    3.18Conversion of options at Merger
    
    
    (96,654
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of period
    
    
    
    
    
    $
    
    
    
    
    97,792
    
    
    $
    4.50Options exercisable at period-end
    
    
    
    
    
    $
    
    
    
    
    58,413
    
    
    $
    5.08Weighted average fair value of options
granted during the period
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2.64
  15. Related-Party Transactions
    53




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 16. Business Segments
  AAC Group Holding Corp.Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementRings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalYear Ended August 27, 2005Net sales
    
    $
    120,662
    
    
    $
    112,432
    
    
    $
    40,854
    
    
    $
    20,110
    
    
    $
    21,570
    
    
    $
    315,628Interest 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
    
    
    10,761
    
    
    
    16,613
    
    
    
    3,720
    
    
    
    4,871
    
    
    
    (217
    )
    
    $
    35,748Capital 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
    
    
    201,528
    
    
    
    174,787
    
    
    
    65,242
    
    
    
    37,687
    
    
    
    33,615
    
    
    $
    512,859
 American Achievement Corporation(Successor)Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementRings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalYear Ended August 27, 2005Net sales
    
    $
    120,662
    
    
    $
    112,432
    
    
    $
    40,854
    
    
    $
    20,110
    
    
    $
    21,570
    
    
    $
    315,628Interest 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)
    
    
    10,761
    
    
    
    16,613
    
    
    
    3,720
    
    
    
    4,871
    
    
    
    (217
    )
    
    $
    35,748Capital 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
    
    
    200,208
    
    
    
    173,587
    
    
    
    64,815
    
    
    
    37,472
    
    
    
    33,393
    
    
    $
    509,475
 American Achievement Corporation(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
    
    
    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
 54




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##### Table of Contents



AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
 American Achievement Corporation(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
 (Predecessor)Class
    
    
    
    
    
    
    Graduation
    
    
    AchievementRings
    
    
    Yearbooks
    
    
    Products
    
    
    Publications
    
    
    Other
    
    
    TotalYear Ended August 30, 2003Net sales
    
    $
    127,624
    
    
    $
    105,038
    
    
    $
    34,736
    
    
    $
    20,122
    
    
    $
    20,911
    
    
    $
    308,431Interest expense, net
    
    
    11,975
    
    
    
    9,856
    
    
    
    3,259
    
    
    
    1,888
    
    
    
    1,962
    
    
    $
    28,940Depreciation and amortization
    
    
    4,124
    
    
    
    7,445
    
    
    
    1,122
    
    
    
    667
    
    
    
    791
    
    
    $
    14,149Segment operating income
    
    
    16,421
    
    
    
    10,165
    
    
    
    3,783
    
    
    
    8,716
    
    
    
    753
    
    
    $
    39,838Capital expenditures
    
    
    3,941
    
    
    
    5,500
    
    
    
    1,073
    
    
    
    19
    
    
    
    710
    
    
    $
    11,243
 55




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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
   
 PART III
 
 Item 10. Directors and Executive Officers of the Registrants
  Name
    
    Age
    
    PositionDonald J. Percenti
    
    
    48
    
    
    President, Chief Executive Officer and Director of AACSherice P. Bench
    
    
    45
    
    
    Chief Financial Officer, Secretary and TreasurerCharlyn A. Daugherty*
    
    
    57
    
    
    Senior Vice PresidentManufacturing OperationsParke H. Davis*
    
    
    62
    
    
    Senior Vice PresidentRetail ProductsPeter Lamm
    
    
    54
    
    
    Director of Group Holdings and AACMac LaFollette
    
    
    40
    
    
    Director of Group Holdings and AACW. Gregg Smart
    
    
    45
    
    
    Director of Group Holdings and AACSanjay Morey
    
    
    34
    
    
    Director of Group Holdings and AACDavid G. Fiore
    
    
    58
    
    
    Director of AAC
 
 *
    
    In September 2005, the Company informed Ms. Daugherty and Mr. Davis that it would not be renewing their respective employment
agreements on December 15, 2005. We have not yet hired replacements for Ms. Daugherty or Mr. Davis. Donald J. Percenti
 Sherice P. Bench
 Charlyn A. Daugherty
 Parke H. Davis
 56




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##### Table of Contents



David G. Fiore
 Peter Lamm
 Mac LaFollette
 W. Gregg Smart
 Sanjay Morey
 Board Committees
    57




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##### Table of Contents



Code of Ethics
  Director Compensation
  
 Item 11. Executive Compensation
  Annual Compensation
    
    
    Long-Term CompensationName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted
    
    
    Securities
    
    
    
    
    
    
    All otherPrincipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    
    Stock
    
    
    Underlying
    
    
    LTIP
    
    
    CompensationPosition
    
    Year(1)
    
    
    Salary
    
    
    Bonus(2)
    
    
    Compensation(3)
    
    
    Awards
    
    
    Options(#)
    
    
    Payouts
    
    
    (4)(5)(Dollars in Thousands)Donald J.
Percenti
    
    
    2005
    
    
    $
    277,500
    
    
    $
    139,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    President and Chief
    
    
    2004
    
    
    $
    258,200
    
    
    $
    780,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    241,132Executive Officer
    
    
    2003
    
    
    $
    236,847
    
    
    $
    141,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sherice P. Bench
    
    
    2005
    
    
    $
    230,478
    
    
    $
    82,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial
    
    
    2004
    
    
    $
    230,195
    
    
    $
    740,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250,262Officer
    
    
    2003
    
    
    $
    196,538
    
    
    $
    115,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Charlyn A.
Daugherty(6)
    
    
    2005
    
    
    $
    205,962
    
    
    $
    67,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice
    
    
    2004
    
    
    $
    209,616
    
    
    $
    685,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    241,132President
    
    
    2003
    
    
    $
    191,154
    
    
    $
    105,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Manufacturing OperationsParke H. Davis(6)
    
    
    2005
    
    
    $
    225,577
    
    
    $
    58,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice
    
    
    2004
    
    
    $
    230,285
    
    
    $
    615,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    241,132President
    
    
    2003
    
    
    $
    207,308
    
    
    $
    108,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retail SalesDavid G. Fiore(6)
    
    
    2005
    
    
    $
    450,558
    
    
    $
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Director of AAC
    
    
    2004
    
    
    $
    426,731
    
    
    $
    2,772,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    953,5942003
    
    
    $
    378,847
    
    
    $
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Our 2005 fiscal year ended on August 27, 2005. Fiscal year 2004 ended on August 28, 2004
and fiscal year 2003 ended on August 30, 2003. Executive compensation for 2005, 2004, and 2003
is for the twelve months ended December 31 of each year and based on current compensation.(2)
    
    Amounts in 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; Ms. Daugherty: $120,000; Mr. Davis $110,000; Mr. Fiore:
$300,000. 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; Ms. Daugherty: $280,000; Mr. Davis:
$280,000; Mr. Fiore: $1,772,000. Amounts in 2004 also include a special bonus paid as follows:
Mr. Percenti: $350,000; Ms. Bench: $325,000; Ms. Daugherty: $285,000; Mr. Davis: $225,000; Mr.
Fiore: $700,000. Amounts in 2003 include payments under the Management Incentive bonus
program.(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 2005, 2004 or 2003.(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 2005, 2004 and 2003 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 2005, 2004, and 2003. 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. 58




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##### Table of Contents



(6)
    
    Mr. Fiore served as our President and Chief Executive Officer on August 27, 2005 and retired
in September 2005. Mr. Fiore was replaced by Mr. Percenti. As previously noted, in September
2005, the Company informed Mr. Davis and Ms. Daugherty that it would not be renewing their
employment agreements on December 15, 2005. Employment Agreements
 David G. Fiore.
  Donald J. Percenti.
   Sherice P. Bench.
  Other Employment Agreements.
 59




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Shares
    
    
    PercentageAmerican Achievement Holdings LLC(1)
    
    
    429,851
    
    
    
    85.0c/o Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019Investors advised by J.P.Morgan Investment Management Inc.(2)
    
    
    73,170
    
    
    
    14.5c/o J.P.Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036Mac LaFollette
    
    
    
    
    
    
    Peter Lamm(3)
    
    
    429,851
    
    
    
    85.0W. Gregg Smart
    
    
    
    
    
    
    Sanjay Morey
    
    
    
    
    
    
    David G. Fiore
    
    
    
    
    
    
    Sherice P. Bench
    
    
    
    
    
    
    Charlyn A. Daugherty
    
    
    
    
    
    
    Parke H. Davis
    
    
    
    
    
    
    Donald J. Percenti
    
    
    
    
    
    
    All executive officers and directors as a group (9 persons)
    
    
    429,851
    
    
    
    85.0
 
 (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. Peter Lamm and Richard Dresdale are the
founders of Fenway Partners, Inc. and each is a managing member of Fenway Partners II LLC, the
general partner of Fenway Partners Capital Fund II, L.P., and each is a managing member of
each of FPIP, LLC and FPIP Trust, LLC.(2)
    
    The investors are J.P.Morgan U.S. Direct Corporate Finance Institutional Investors II LLC
(CFII-I), which holds 70,052 shares of common stock, J.P. Morgan U.S. Direct Corporate
Finance Private Investors II LLC (CFII-P), which holds 2,752 shares of common stock, and 522
Fifth Ave Fund, L.P. (522), which holds 366 shares of common stock. J.P. Morgan Investment
Management, Inc., a registered investment advisor and a wholly-owned subsidiary of J.P. Morgan
Chase & Co., controls the voting and disposition of these shares as the investment advisor to
CFII-I, CFII-P and 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. 60




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions
 Arrangements with Our Investors
  Management Agreement
  Stockholders Agreement
  61




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  Percentage of ServicesFor the Year
    
    
    For the Period
    
    
    For the Period
    
    
    For the Year
    
    
    For the Period
    
    
    For the PeriodEnded
    
    
    March 26, 2004 to
    
    
    August 31, 2003 to
    
    
    Ended
    
    
    March 26, 2004 to
    
    
    August 31, 2003 toAugust 27, 2005
    
    
    August 28, 2004
    
    
    March 25, 2004
    
    
    August 27, 2005
    
    
    August 28, 2004
    
    
    March 25, 2004Audit fees
    
    $
    351,000
    
    
    $
    205,000
    
    
    $
    194,000
    
    
    
    58
    %
    
    
    48
    %
    
    
    82
    %Audit-related fees
    
    
    91,000
    
    
    
    84,000
    
    
    
    
    
    
    
    15
    %
    
    
    20
    %
    
    
    Tax fees
    
    
    114,000
    
    
    
    137,000
    
    
    
    31,000
    
    
    
    19
    %
    
    
    32
    %
    
    
    13
    %All other fees
    
    
    47,000
    
    
    
    
    
    
    
    11,000
    
    
    
    8
    %
    
    
    
    
    
    
    5
    %Total fees
    
    $
    603,000
    
    
    $
    426,000
    
    
    $
    236,000
    
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
   
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
      62




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Designation* 3.1
    
    Certificate of Incorporation of AAC Group Holding Corp.* 3.2
    
    Bylaws of AAC Group Holding Corp.* 4.1
    
    Indenture, dated as of February 20, 2002, among American Achievement Corporation,
The Bank of New York, as Trustee, and the Guarantors (incorporated by reference to
the corresponding Exhibit number of American Achievement Corporations Amended
Registration Statement on Form S-4/A, dated April 5, 2002).* 4.2
    
    First Supplemental Indenture, dated as of July 17, 2003, among American Achievement
Corporation, The Bank of New York, as Trustee, and the Additional Guarantors
(incorporated by reference to the corresponding Exhibit number of American
Achievement Corporations Report on Form 10-K, dated November 17, 2003).* 4.3
    
    Second Supplemental Indenture, dated as of December 24, 2002, among American
Achievement Corporation, The Bank of New York, as Trustee, and the Additional
Guarantors (incorporated by reference to the corresponding Exhibit number of
American Achievement Corporations Report on Form 10-K, dated November 17, 2003).* 4.4
    
    Third Supplemental Indenture, dated as of March 15, 2004, among American
Achievement Corporation, the Guarantors, and The Bank of New York (incorporated by
reference to Exhibit 4.3 to American Achievement Corporations Report on Form 10-Q,
dated July 13, 2004).* 4.5
    
    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).* 4.6
    
    Form of 8.25% Senior Subordinated Notes due April 1, 2012 (included in Exhibit 4.5).* 4.7
    
    Indenture, dated as of November 16, 2004, among the Registrant and U.S. Bank
National Association, as Trustee.* 4.8
    
    Form of 10.25% Senior Discount Note due October 1, 2012 (included in Exhibit 4.7).* 4.9
    
    Exchange and Registration Rights Agreement, dated November 16, 2004, among AAC
Group Holding Corp. and Goldman, Sachs & Co.* 5.1
    
    Opinion of Ropes & Gray LLP*10.1
    
    Purchase Agreement, dated November 16, 2004, among AAC Group Holding Corp. and
Goldman, Sachs & Co.*10.2
    
    Credit Agreement, dated March 25, 2004, by and among American Achievement
Corporation, the Guarantors, Goldman Sachs Credit Partners L.P., Deutsche Bank
A.G., Cayman Islands Branch, and Deutsche Bank Securities Inc. (incorporated by
reference to the corresponding Exhibit number of American Achievement Corporations
Report on form 10-Q, dated July 13, 2004).*10.3
    
    Pledge and Security Agreement between the Guarantors and Goldman Sachs Credit Partners, L.P., dated March 25, 2004
(incorporated by reference to the corresponding Exhibit number of American Achievement Corporations Report on Form 10-Q, dated
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 the corresponding Exhibit number of American Achievement Corporations Report on
form 10-Q, dated 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 the corresponding Exhibit number of American
Achievement Corporations Report on Form 10-Q, dated July 13, 2004).*10.6
    
    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 the corresponding Exhibit number of American Achievement Corporations Report
on form 10-Q, dated 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 the corresponding Exhibit number of American Achievement Corporations
Report on form 10-Q, dated July 13, 2004)*10.8
    
    Employment Agreement, dated as of July 13, 1999 by and between Commemorative Brands, Inc. and David G.
 63




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##### Table of Contents



ExhibitNumber
    
    DesignationFiore (incorporated by
reference to the corresponding Exhibit number of American Achievement Corporations Amended Registration Statement on Form
S-4/A, dated April 5, 2002)*10.9
    
    First Amendment to the Employment Agreement by and between Commemorative Brands, Inc. and David G. Fiore dated February 1, 2002
(incorporated by reference to the corresponding Exhibit number of American Achievement Corporations Amended Registration
Statement on Form S-4/A, dated April 5, 2002)*10.10
    
    Second Amendment to the Employment Agreement by and between American Achievement Corporation and David G. Fiore, dated December
23, 2003 (incorporated by reference to the corresponding Exhibit number of American Achievement Corporations Registration
Statement on Form S-4, dated July 22, 2004).*10.11
    
    Employment Agreement, dated as of December 16, 1996 by and between Commemorative Brands, Inc. and Sherice P. Bench, as amended
(incorporated by reference to the corresponding Exhibit number of American Achievement Corporations Amended Registration
Statement on Form S-4/A, dated April 5, 2002)*10.12
    
    First Amendment to the Employment Agreement by and between Commemorative Brands, Inc. and Sherice P. Bench, dated July 2, 1999
(incorporated by reference to the corresponding Exhibit of American Achievement Corporations Registration Statement on Form
S-4, dated July 22, 2004).*10.13
    
    Second Amendment to the Employment Agreement by and between Commemorative Brands, Inc. and Sherice P. Bench dated April 9, 2004
(incorporated by reference to the corresponding Exhibit of American Achievement Corporations Registration Statement on Form
S-4, dated July 22, 2004).*10.14
    
    Employment Agreement, dated as of August 10, 2005 by and between American Achievement Corporation and Donald J. Percenti.*10.15
    
    Employment Agreement, dated as of December 16, 1996 by and between Commemorative Brands, Inc. and Charlyn A. Cook (incorporated
by reference to Exhibit number 10.12 of American Achievement Corporations Amended Registration Statement on Form S-4/A, dated
April 5, 2002)*10.16
    
    First Amendment to the Employment Agreement by and between Commemorative Brands, Inc. and Charlyn Daugherty dated April 9, 2004
(incorporated by reference to Exhibit number 10.17 of American Achievement Corporations Registration Statement on Form S-4,
dated July 22, 2004).*10.17
    
    First Amendment to the Employment Agreement by and between Commemorative Brands, Inc. and Parke Davis dated April 9, 2004
(incorporated by reference to Exhibit number 10.18 of American Achievement Corporations Registration Statement on Form S-4,
dated July 22, 2004).*10.18
    
    Employment Agreement, dated as of December 16, 1996 by and between Commemorative Brands, Inc. and Parke H. Davis.*10.19
    
    Employment Agreement Amendment, dated October 21, 2004 between American Achievement Corporation and David G. Fiore.*10.20
    
    Employment Agreement Amendment dated November 19, 2004 between American Achievement Corporation and David G. Fiore.12.1
    
    Statement regarding Computation of Ratios of Earnings to Fixed Charges21.1
    
    Subsidiaries of AAC Group Holding Corp. and American Achievement Corporation31.1
    
    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.
 
 *
    
    Previously filed. 64




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##### Table of Contents



Signatures
  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) andDonald J. Percenti
    
    Director of AAC/s/ Sherice P. Bench
    
    Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer andSherice P. Bench
    
    Accounting Officer)/s/ Mac LaFollette
    
    Director of AAC Group Holding Corp. and American Achievement CorporationMac LaFollette/s/ Peter Lamm
    
    Director of AAC Group Holding Corp. and American Achievement CorporationPeter Lamm/s/ Sanjay Morey
    
    Director of AAC Group Holding Corp. and American Achievement CorporationSanjay Morey/s/ W. Gregg Smart
    
    Director of AAC Group Holding Corp. and American Achievement CorporationW. Gregg Smart/s/ David G. Fiore
    
    Director of American Achievement CorporationDavid G. Fiore
 65